Bath & Body Works Q1 2024 Financial Report

Date: June 5, 2024

Company: Bath & Body Works, Inc. (Ticker: BBWI, NYSE)

Sector: Consumer Cyclical

Industry: Specialty Retail

Overview of Q1 2024 Financial Performance

Bath & Body Works, Inc. (BBWI) reported its financial results for the first quarter of fiscal 2024, showcasing a better-than-expected performance in both sales and earnings. The company generated net sales of $1.38B, a slight decrease of 0.9% compared to the prior year, but above the high end of the company’s guidance. Despite the marginal decrease in sales, the company achieved significant growth in earnings per diluted share (EPS), reporting $0.38, an increase of 15% compared to the previous year's adjusted EPS.

Operational Highlights

Sales Performance

The decline in net sales was limited to 0.9% year-over-year. This outcome was driven by several new product introductions and strategic marketing initiatives, which effectively offset broader market challenges.

Key drivers of sales included successful product categories such as lip care, men's grooming, and a new collaboration with Netflix for the Bridgerton series, which represented 4% of the shop's sales during the launch period.

Despite macroeconomic pressures, the Home Fragrance category experienced a year-over-year decline consistent with the prior quarter, meaning the recent normalization in candles has steadied.

Gross Profit & Margins

The gross profit for Q1 2024 was $606M, with a gross profit margin of 43.79%, representing an improvement of 110 basis points over the prior year. This was primarily driven by lower transportation costs and a favorable product mix.

Expenses & Operating Income

The operating expenses for the quarter were $419M, resulting in an operating income of $187M. The operating profit margin was 13.51%, which marks a healthy increase and signifies effective cost management alongside improved gross margins.

Financial Health and Liquidity

Balance Sheet

At the end of the first quarter, Bath & Body Works had total assets amounting to $5.22B. The company's cash and cash equivalents stood at $855M. However, the balance sheet reflected a total shareholders' equity of -$1.68B, influenced by significant liabilities.

Debt Management

Bath & Body Works continued to prioritize debt deleveraging, reducing its long-term debt to $4.28B. Total current liabilities were reported at $1.22B.

Cash Flow

The net cash provided by operating activities was $76M. Capital expenditures for the quarter were $46M, leaving a free cash flow of $30M. Cash at the end of the period amounted to $855M.

Strategic Initiatives and Market Position

Bath & Body Works embarked on strategic marketing initiatives that increased customer engagement and broadened the brand’s reach. The company intensified its focus on enhancing the omnichannel experience, loyalty programs, and introducing innovative products.

In international markets, despite pressures from geopolitical conflicts, Bath & Body Works continued expanding, with significant openings in South Korea and London. The company plans to add at least 35 net new international stores by the end of the year.

Guidance and Outlook

For fiscal year 2024, Bath & Body Works revised its guidance, predicting net sales to range between a decrease of 2.5% and flat year-over-year. The company remains optimistic about achieving net sales growth in the second half of the year, driven by new marketing initiatives and a strong product lineup.

The full-year EPS is projected to range between $3.05 and $3.35, showcasing confidence in continued profitability enhancements and strategic investments. This outlook reflects a prudent approach amidst a dynamic consumer spending environment.

Conclusion

Bath & Body Works delivered a strong performance in the first quarter of 2024, demonstrating resilience and effective execution of strategic initiatives. With ongoing investments in marketing, technology, and product innovation, the company is well-positioned for sustained growth and profitability in the coming quarters.

Report Link: SEC Filing

Accept Date: June 4, 2024