Bath & Body Works (BBWI): Earnings Note

Shares of this specialty retailer (home fragrance, body care, and soaps and sanitizer products) ripped 25% higher after announcing better-than-expected quarterly numbers (whereby they beat earnings and revenue estimates and raised guidance). We are currently long shares in our Income Equity Portfolio, and we have increased our “Buy Under” price following the announcement.

Specifically, BBWI delivered Q3 GAAP EPS of $0.40 (beating expectations by $0.21) on revenue of $1.6B (-4.8% Y/Y) beating expectations by $40M. Further, for fiscal 2022, the company is now forecasting earnings from continuing ops/ diluted share of $3.00 to $3.20, compared to its prior full year forecast of $2.70 to $3.00, and vs. a consensus estimate of $2.89.

Trading at only 12.6 times forward earnings, and with healthy gross margins (44.8%) and net margins (12.5%), the shares are worth considering from a value standpoint and an income standpoint (the annual dividend of $0.80 is well covered, and the current dividend yield is over 2.0%).

If you don’t know, BBWI is the top retailer for specialty home fragrances (40% of sales), body care and fragrance (35% of sales), and hand soap and hand sanitizer (20% of sales) in the US.

BBWI has more than 1,700 locations, and plans to remodel 50% of its stores (to improve sales and efficiency) over the next several years (including those changed to the White Barn format). Further, the company’s customer loyalty app is having success in increasing sales.

We are currently long shares of this specialty retailer (home fragrance, body care, and soaps and sanitizer products) in our Income Equity Portfolio.\, and we are updating our “buy under” price to $50.