Company Reports

Under new leadership, Bath & Body Works is pursuing an extensive turnaround plan to restore customer engagement and raise brand awareness. Despite weak recent demand trends, BBW has carved out solid share in the sizable addressable markets in which it operates, evidenced by its leading position in bath and shower and candle air freshener industries, facilitated by its evolving response to consumer trends. However, these categories remain competitive and have low switching costs, underpinning our no-moat rating. While the firm is set to deliver a 35% average return on invested capital including goodwill over the next decade, we think this is a function of a largely asset-light model rather than a competitive edge.

Under new leadership, Bath & Body Works is pursuing an extensive turnaround plan to restore customer engagement and raise brand awareness. Despite weak recent demand trends, BBW has carved out solid share in the sizable addressable markets in which it operates, evidenced by its leading position in bath and shower and candle air freshener industries, facilitated by its evolving response to consumer trends. However, these categories remain competitive and have low switching costs, underlying our no-moat rating. While the firm is set to deliver a 35% average return on invested capital including goodwill over the next decade, we think this is a function of a largely asset-light model rather than a competitive edge.

Bath & Body Works' second-quarter sales fell 2.3% to $1.5 billion, beating guidance for a 3%-5% decline. Adjusted diluted EPS of $0.62 exceeded the $0.20-$0.25 outlook, aided by $80 million in tariff refunds, which will offset ongoing trade pressures and fund strategic investments in the back half.

Bath & Body Works reported first-quarter sales of $1.4 billion (down 3%) and adjusted earnings per share of $0.32. Adjusted operating margin of 11% was pressured by tariffs, inflation, and investments. BBW held its 2026 outlook for a net sales decline of 4.5%-2.5% and adjusted EPS of $2.40-$2.65.

Under new leadership, Bath & Body Works is pursuing an extensive turnaround plan to restore customer engagement and raise brand awareness. Despite weak recent demand trends, BBW has carved out solid share in the sizable addressable markets in which it operates, evidenced by its leading position in bath and shower and candle air freshener industries, facilitated by its evolving response to consumer trends. However, these categories remain competitive and have low switching costs, underlying our no-moat rating. While the firm is set to deliver a 35% average return on invested capital including goodwill over the next decade, we think this is a function of a largely asset-light model rather than a competitive edge.

Under new leadership, Bath & Body Works is pursuing an extensive turnaround plan to restore customer engagement and elevate its brand intangible asset, the basis of our narrow-moat rating. Despite weak recent demand trends, Bath & Body Works has carved out a competitive edge in the sizable addressable markets in which it operates, evidenced by its leading market share position in bath and shower and candle air freshener industries, which has facilitated by BBW’s evolving response to consumer trends. Quantitatively, its moat is reinforced by a 35% average return on invested capital including goodwill that we expect the firm to generate over the next decade, well ahead of our 8% weighted average cost of capital estimate.

Bath & Body Works' fourth-quarter sales fell 2% to $2.7 billion, better than guidance for a high-single-digit decline. Fourth-quarter operating margin fell roughly 230 basis points to 22%. A robust investment plan to reinvigorate the brand is set to hold operating margin around 13% in 2026.

Under new leadership, Bath & Body Works is pursuing an extensive turnaround plan to restore customer engagement and elevate its brand intangible asset, the basis of our narrow-moat rating. Despite weak recent demand trends, Bath & Body Works has carved out a competitive edge in the sizable addressable markets in which it operates, evidenced by its leading market share position in bath and shower and candle air freshener industries, which has facilitated by BBW’s evolving response to consumer trends. Quantitatively, its moat is reinforced by a 32% average return on invested capital including goodwill that we expect the firm to generate over the next decade, well ahead of our 8% weighted average cost of capital estimate.

Under new leadership, Bath & Body Works is pursuing an extensive turnaround plan to restore customer engagement and elevate its brand intangible asset, the basis of our narrow-moat rating. Despite weak recent demand trends, Bath & Body Works has carved out a competitive edge in the sizable addressable markets in which it operates, evidenced by its leading market share position in bath and shower and candle air freshener industries, which has facilitated by BBW’s evolving response to consumer trends. Quantitatively, its moat is reinforced by a 32% average return on invested capital including goodwill that we expect the firm to generate over the next decade, well ahead of our 8% weighted average cost of capital estimate.

Bath & Body Works' third-quarter sales fell 1% and adjusted earnings per share came in at $0.35. The firm announced a transformation plan, Consumer First Formula, to restore top-line and profit growth, focusing on product newness, brand elevation, elevated reach, and cost improvement.

We believe Bath & Body Works has carved out a solid competitive edge in the sizable addressable markets in which it operates. The company’s strong brand intangible asset is supported by its leadership position across the bath and shower and candle air freshener industries in recent years, which has been bolstered by BBW’s quick response to consumer trends. Quantitatively, the narrow moat is reinforced by a 34% average return on invested capital excluding goodwill that we expect the business to generate over the next decade, well ahead of our 8% weighted average cost of capital estimate.

Bath & Body Works reported second-quarter sales of $1.5 billion, up 1.5%, and adjusted EPS of $0.37. Factoring in tariff impacts, the firm has narrowed its fiscal 2025 revenue guidance to 1.5%-2.7% from 1%-3%, while raising the low end of its $3.25-$3.60 EPS guidance to $3.35.

We believe Bath & Body Works has carved out a solid competitive edge in the sizable addressable markets in which it operates. The company’s strong brand intangible asset is supported by its leadership position across the bath and shower and candle air freshener industries in recent years, which has been bolstered by BBW’s quick response to consumer trends. Quantitatively, the narrow moat is reinforced by a 34% average return on invested capital excluding goodwill that we expect the business to generate over the next decade, well ahead of our 8% weighted average cost of capital estimate.

Bath & Body Works previously reported first-quarter sales of $1.4 billion and EPS of $0.49 on May 19, while holding its 2025 outlook for 1%-3% sales growth and $3.25-$3.60 in EPS. Gross margin improved 160 basis points, to 45.1%, on higher merchandise margin, mix, and occupancy leverage.

Bath & Body Works disclosed that Daniel Heaf would become the new CEO, replacing Gina Boswell. At the same time, the firm reported limited first-quarter results of $1.4 billion in sales and $0.49 in EPS, in line with our sales outlook but handily surpassing our $0.39 EPS estimate.

We believe Bath & Body Works has carved out a solid competitive edge in the sizable addressable markets in which it operates. The company’s strong brand intangible asset is supported by its leadership position across the bath and shower and candle air freshener industries in recent years, which has been bolstered by BBW’s quick response to consumer trends. Quantitatively, the narrow moat is reinforced by a 37% average return on invested capital excluding goodwill that we expect the business to generate over the next decade, well ahead of our 8% weighted average cost of capital estimate.

Despite a fourth-quarter sales decline of 4.3%, to $2.8 billion, Bath & Body Works posted operating margin expansion of 40 basis points, to 24.3%. However, even with a projected return to 1%-3% sales growth in 2025, the firm's full-year operating margin is expected to be stuck at 17%.

We believe Bath & Body Works has carved out a solid competitive edge in the sizable addressable markets in which it operates. The company’s strong brand intangible asset is supported by its leadership position across the bath and shower and candle air freshener industries in recent years, which has been bolstered by BBW’s quick response to consumer trends. Quantitatively, the narrow moat is reinforced by a 37% average return on invested capital excluding goodwill that we expect the business to generate over the next decade, well ahead of our 8% weighted average cost of capital estimate.

Shares of narrow-moat Bath & Body Works popped 16% during Nov. 25 trading, as the business surfaced improving trends in its third-quarter results. Notably, a 3% increase in sales, to $1.6 billion, marked the first quarter of positive growth since the third quarter of 2021, a trend we believe will be restored in 2025. Positive store traffic and conversion as well as a normalization in candle demand supported low-single-digit growth across all three segments (body care, home fragrance, and soaps and sanitizers) in both the quarter and year-to-date period, signaling demand BBW may have finally bottomed out. Additionally, operating margin performance of 13.5% was slightly better than the 13% we had forecast, as some marketing expense shifted closer to the holidays. Although 2024's fourth quarter is set for a top-line decline, lapping a 14-week quarter last year, it appears the operating margin should remain flat, benefiting from pricing (AUR improvement and flat merchandise margin), buying and occupancy prowess, and supply chain improvements.

We believe Bath & Body Works has carved out a solid competitive edge in the sizable addressable markets in which it operates. The company’s strong brand intangible asset is supported by its leadership position across the bath and shower and candle air freshener industries in recent years, which has been bolstered by BBW’s quick response to consumer trends. Quantitatively, the narrow moat is reinforced by a 37% average return on invested capital excluding goodwill that we expect the business to generate over the next decade, well ahead of our 8% weighted average cost of capital estimate.