Bath & Body Works To See More Comfort In Second Half Numbers With Further Improvement: Analysts

Zinger Key Points
  • Analysts anticipate Bath & Body Works' rebound in the second half, buoyed by robust product innovation and category expansion.
  • Despite a Q1 FY24 inventory increase, analysts maintain positive outlooks, with price targets reflecting confidence in growth.

Bath & Body Works, Inc. BBWI recently reported its first-quarter FY24 results, in which inventories increased 5.6% year over year to $814 million.

Here’s a glimpse into analysts’ reactions to the company’s quarterly performance:

  • Goldman Sachs analyst Kate McShane reiterated a Buy rating with a price forecast of $60.
  • BMO Capital Market analyst Simeon Siegel reiterated the Outperform rating, raising the price forecast to $55 from $50.
  • JP Morgan analyst Matthew R. Boss reiterated a Neutral rating with a price forecast of $53.
  • BofA Securities analyst Lorraine Hutchinson reiterated Buy rating, with a price objective of $54.

Goldman Sachs: According to the analyst, the top line came in above expectations, driven by continued newness. However, category trends were mixed, with strength in body care.

McShane reiterated the Buy rating even with a weighted guidance for the second half of the year, given the number of initiatives the company has for growth, including its robust pipeline of product ideas and newness and the rollout of category adjacencies.

BMO: Analyst Siegel highlighted questions surrounding the revenue decline the company would face as it laps its incredible pandemic strength.

However, the analyst said Bath & Body Works is progressing exactly as one would hope a turn would look, providing more comfort in 2H numbers and further improvement.

This continues to suggest that the company is under-earning and its valuation trough should increase into the double-digit PE range.

JP Morgan: Analyst Matthew R. Boss highlighted the combination of normalizing same-store-sales relative to pre-pandemic, coupled with high-single-digit comp growth.

In addition, management confirmed May AURs tracking “on plan” for Flat AUR expectations.

BofA Securities: Following the quarterly results, the analyst trimmed the FY24 EPS estimate by 3% to $3.24 but modeled no change to the FY25 estimate of $4.

Product newness is working, with body care growing LSD driven by men’s, travel, lip, and Fine Fragrance Mist.

Fine Fragrance Mist was a test and will now roll out to the entire fleet in the second half, the analyst adds.

Continued growth in core categories and expansion in new adjacencies should drive positive total sales growth by the third quarter, Hutchinson adds.

Price Action: BBWI shares are trading higher by 3.74% to $46.86 at last check Wednesday.

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