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Bath & Body Works has announced a forecast for its full-year profit that largely falls below market expectations and anticipates a decline in annual sales.
The Ohio-based beauty and skincare company cited subdued demand for its scented candles and body care products amidst ongoing inflation as key factors.
Market Reaction and Quarterly Performance:
Following the announcement, shares of Bath & Body Works dropped 8.8% in premarket trading. The company also projected a second-quarter profit below analyst estimates, reflecting the continued impact of constrained consumer budgets on sales of non-essential items.
Consumer Spending Trends:
Amid persistent inflation, consumers are hesitant to spend on expensive non-essential products like home goods while showing a preference for smaller discretionary purchases such as trendy clothing and accessories.
This trend was echoed in the recent financial results of big-box retailer Target, which indicated that shoppers are delaying purchases and allocating more of their budget towards out-of-home activities.
Revised Sales and Earnings Forecast:
Bath & Body Works now expects its net sales for 2024 to decline by 2.5% to flat, compared to the previous forecast of a 3% to flat decline. Analysts had anticipated a 0.37% drop in sales.
The company projects full-year adjusted earnings per diluted share to be between $3.05 and $3.35, slightly adjusting from the earlier projection of $3.00 to $3.35. According to LSEG data, analysts had expected earnings to be around $3.31 per share.
Second Quarter Outlook:
For the second quarter, Bath & Body Works forecasts adjusted earnings per diluted share to range between 31 and 36 cents, below the market expectation of 39 cents. The company anticipates that second-quarter net sales will decline by 2% to flat, with the mid-point of this range being better than the estimated 1.41% drop.
Despite the challenging market conditions, Bath & Body Works has intensified its promotional activities, ramped up marketing efforts, and introduced new products to attract customers.
These initiatives are part of the company’s strategy to drive store traffic and mitigate the impact of decreased consumer spending.
Recent Financial Performance:
In the quarter ended May 4, Bath & Body Works’ net sales decreased by 0.9% to $1.38 billion, slightly surpassing expectations of $1.37 billion.
Excluding certain items, the company earned 38 cents per share, which exceeded the expected 33 cents per share.
