Bath & Body Works Inc. recently released its fourth-quarter earnings report, which showcased impressive numbers in terms of net income and sales. However, the company’s disappointing guidance for fiscal 2024 overshadowed these positive results, leading to an 8% drop in the company’s stock.
In the fourth quarter, Bath & Body Works reported a net income of $579 million, or $2.55 per share, compared to $434 million, or $1.89 per share, in the same period last year. These figures exceeded expectations and were boosted by a strong holiday performance. Sales also experienced growth, reaching $2.912 billion, up from $2.889 billion the previous year.
It is important to note that the reported profit number included certain exceptional items such as a tax benefit, impairment charge, and gain on the early extinguishment of debt. Excluding these items, the adjusted earnings per share (EPS) came in at $2.06, surpassing the FactSet consensus of $1.88.
Despite these impressive results, Bath & Body Works provided a disappointing outlook for fiscal 2024. The company expects earnings to decline during this period, which caused investors to react negatively. The guidance suggests that sales may range from down 3% to flat, while adjusted EPS is projected to be between $3.00 and $3.35. In comparison, the FactSet consensus implies sales growth of approximately 8% and an EPS of $3.36.
One factor that may impact sales growth in 2024 is the absence of a 53rd week, which occurred in 2023 but will not be repeated. This presents a headwind of about 100 basis points to sales growth, according to the company.
Looking ahead to the first quarter of fiscal 2024, Bath & Body Works anticipates a decline in sales ranging from 4.5% to 2.0%, with EPS expected to be between 28 cents and 33 cents. This is a decrease from the 35 cents reported in the first quarter of the previous year. The FactSet consensus, on the other hand, predicts a sales decline of just 1.1% and an EPS of 39 cents.
To address these challenges and maintain shareholder confidence, Bath & Body Works’ board has approved a new buyback program of up to $500 million. This move aims to repurchase shares in the market, signaling the company’s belief in its long-term prospects.
Despite the recent drop in stock price due to the disappointing guidance, Bath & Body Works has seen significant growth over the past year. The company’s stock has gained 18% in the last 12 months, while the S&P 500 index has gained 27.7%.
In conclusion, Bath & Body Works’ fourth-quarter earnings report showcased strong financial performance, with net income and sales exceeding expectations. However, the company’s disappointing guidance for fiscal 2024 led to a decline in stock price. While challenges lie ahead, the approval of a new buyback program demonstrates the company’s commitment to its long-term success. Investors will be closely monitoring Bath & Body Works’ future performance to assess its ability to overcome obstacles and continue its growth trajectory.
