Bath & Body Works, Inc.

BBWI Details

Bath & Body Works, Inc. (NYSE: BBWI) is a specialty home fragrance and aromatic body care shop operating under the brands of Bigelow and White Barn. It has roughly 1,755 outlets and e-commerce sites in the United States and Canada. It also has the franchise, licensing, and wholesale arrangements in place in about 35 other countries, with over 338 stores and 27 e-commerce sites. The company's products are marketed under Bath & Body Works, White Barn, Aromatherapy, and other brand names.

Latest News:

• Share Repurchase Program: In Q1 FY22, BBWI retired 13.6 million shares under their accelerated share buyback programme. It also used the remaining USD 500 million in share buyback authorization to repurchase and retire 4.7 million shares for a total cost of USD 235.2 million.
• Dividend Announcement: BBWI declared a dividend of USD 0.20 per share on May 13, 2022, which will be paid on June 17, 2022, to shareholders of record at the close of business on June 3, 2022.

Q1 FY22 Results:

• Slight Decrease in Revenue Despite Macro Headwinds: The company's net sales for Q1 FY22 were USD 1.450 billion, down 1% from USD 1.469 billion the previous year. Royalties and other partner revenue increased international net sales by 5% to USD 73.2 million in Q1 FY22.
• Inventory Planning: In terms of the balance sheet, total inventory ended the quarter up 29% y-o-y, which was in line with expectations. On a dollar basis, finished goods retail inventory is up 18%, well-positioned to sustain future sales. Component and in-transit inventory account for roughly one-third of total inventory growth, owing to proactively pulling forward delivery of items like candle lids, accessories, and soap pumps from Asia to avoid global supply chain and distribution network disruptions.
• Bottom-Line Performance and Capex Plan: In Q1 FY22, net income from continuing operations was USD 154.91 million, up from USD 90.26 million in Q1 FY21, resulting increase in net income per diluted share of USD 0.64 and USD 0.32 respectively. In Q1 FY22, the company invested USD 88.38 million, up from USD 45.24 million in Q1 FY21.

FY 2022 Outlook:

(Source: Company Filings)

Key Risks:

• Production Risk: According to BBWI, the recent spin-off of Victoria's Secret's business and related actions may negatively influence the firm. Furthermore, any liabilities emerging from the sale of such a company might impair BBWI's financials and operating results. This spin-off might hurt BBWI's credit rating, lower profits per share, distract management's focus and have other financial and accounting implications. Furthermore, BBWI may not be qualified for tax-free status under US federal tax law.

Valuation Methodology: EV/Sales Multiple based Relative Valuation

(Source: Analysis by Kalkine Group)

Stock Recommendation:

BBWI will continue to improve its performance by utilizing brand power, developing tight customer relationships, and offering exciting products and experiences at great value. BBWI’s stock price has fallen 49.81% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 82.00 to USD 35.46.

Considering decent revenue performance, FY22 outlook, strong brand value, increased bottom-line, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the current market price of USD 36.45, as of June 07, 2022, at 07:08 AM PDT.

1 Year Technical Price Chart (as of June 07, 2022, at 07:08 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

Technical Summary Analysis

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.