Bath & Body Works Analyst Cautious Ahead Of Q3 Print: Retail Sentiment Deflates

Expectations are muted as Bath & Body Works, Inc. ($BBWI), a retailer of personal care and home fragrance products, prepares to report its third-quarter results before the market opens on Monday.

Analysts, on average, expect the Columbus, Ohio-based company to report third-quarter adjusted earnings per share (EPS) of $0.47 on net sales of $1.58 billion. This compares to the year-ago numbers of $0.48 and $1.56 billion, respectively. The company guided to flat to a 2.5% increase in net sales, translating to $1.56-$1.6 billion. 

Ahead of the results, Citigroup said it expects above-consensus adjusted EPS due to a slightly stronger gross margin and lower spending, the Fly reported. While conceding that the third quarter was another difficult quarter to drive sales, due to consumers remaining price-sensitive and the lack of big promotions to drive traffic, the firm said the second-half guidance is conservative enough. 

Citi believes that the fourth quarter is the best opportunity for the company to deliver upside to sales guidance this year. The firm has a Neutral rating and $35 price target for the stock. The risk/reward is skewed positive, going into the print, it said.

Last week, JPMorgan analysts reduced its price target for the shares from $39 to $35.

In early November, Bath & Body Works announced a regular quarterly cash dividend of $0.20, payable on Dec. 6, to shareholders at the close of business on Nov. 22.

The running quarter’s guidance is important, as it encompassed the holiday season. The forecast for this year’s industry-wide holiday sales is bright, with Bain & Company noting a 5.4% year-on-year increase in October compared to September's 3.1% growth. 

"Santa’s sleigh has kicked into high gear for the start of the season," the firm said. Online sales grew 9.4%, in line with expectations, while in-store sales climbed a better-than-expected 4%, it added.

Bath & Body Works currently expects full-year net sales to fall by 2%-4%, with the 53rd week in 2023 representing a 100-basis-point headwind, and adjusted EPS of $3.02-$3.26. 

Bath & Body Works shares have fallen about 27.33% for the year-to-date period.

The average analysts’ price target for Bath & Body Works stock is $41.20, suggesting roughly 34% upside potential.

On Stocktwits, retail sentiment was ‘neutral’ (49/100), a deterioration from the ‘bullish’ mood that prevailed a day ago, while message volume was ‘normal.’

The stock ended Friday’s session up 0.52% at $30.71.

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