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Bath & Body Works BBWI posted fourth-quarter fiscal 2024 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Revenues improved and earnings declined year over year.

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The company delivered better-than-expected performances, driven by product innovation, strong execution and an exceptional customer experience. Growth continues to be supported by innovation, enhanced marketing, technology investments, category expansion and international growth. Despite challenges in the retail sector, the company ended the year strong and remains optimistic about sustaining momentum in fiscal 2025.

Bath & Body Works, Inc. Price, Consensus and EPS Surprise

Bath & Body Works, Inc. price-consensus-eps-surprise-chart | Bath & Body Works, Inc. Quote

BBWI’s Quarterly Performance: Key Metrics & Insights

The company reported adjusted earnings of $2.09 per share in the fiscal fourth quarter and beat the Zacks Consensus Estimate of $2.04. Also, the figure increased 1.5% from adjusted earnings of $2.06 in the year-ago quarter.

Revenues decreased 4.3% year over year to $2,788 million and surpassed the Zacks Consensus Estimate of $2,772 million. Fiscal fourth-quarter revenues faced a headwind of approximately 500 basis points due to the shifted fiscal calendar, which included an extra week in 2023.

Revenues for Stores - U.S. and Canada declined 2.4% year over year to $2.11 billion, which surpassed the Zacks Consensus Estimate of $2.07 billion. Direct - U.S. and Canada revenues tumbled 9.4% to $595 million, missing the consensus estimate of $616.3 million. Also, International operations’ revenues declined 10.1% to $84 million, which came below the Zacks Consensus Estimate of $87.2 million.

Buy online pick up in store demand grew 45% year over year in the quarter, accounting for approximately 25% of total digital demand.

Sneak Peek Into BBWI’s Margins

The gross profit decreased 2.7% year over year to $1.30 billion. However, the gross margin expanded 80 basis points to 46.7% in the quarter under review, driven by cost savings, distribution productivity and the timing of certain costs. General, administrative and store operating expenses decreased 2.8% to $623 million.

Bath & Body Works reported an operating income of $678 million in fourth-quarter fiscal 2024, down 2.6% from the year-ago quarter. BBWI’s operating margin increased 40 basis points to 24.3% in the quarter.

Adjusted net income was $453 million, down 3.4% from $469 million in the year-ago quarter.

Bath & Body Works’ Store Update

The company ended the quarter with 1,895 stores, wherein it operated 1,782 stores in the United States and 113 in Canada. During 12 months of fiscal 2024, it opened 106 stores in total and closed 61.

BBWI Stock Past Six-Month Performance

BBWI’s Financial Health Snapshot

Bath & Body Works ended the quarter with cash and cash equivalents of $674 million, long-term debt of $3.88 billion, and long-term operating lease liabilities of $883 million. In fiscal 2024, the company provided $886 million in net cash for operating activities.

Bath & Body Works’ FY25 Outlook

For fiscal 2025, net sales growth is expected between 1% and 3%, with North American square footage expanding 2-3% and international net sales returning to growth.

The gross margin is projected at 44%, supported by cost discipline, while SG&A is expected to be 27%, including continued marketing investments at 3.5% of sales and increased technology spending. Net non-operating expenses are forecast at $255 million, reflecting lower interest expenses due to debt reduction in 2024.

Full-year earnings per share are projected to be $3.25-$3.60 versus the $3.61 reported in fiscal 2024. Adjusted earnings are expected to be $3.29 per share. In terms of capital allocation, the company plans to invest $250-$270 million in capital expenditure, primarily in real estate and technology, with some supply-chain projects shifting from 2024 to 2025.

The free cash flow is projected between $750 million and $850 million, including working capital improvements from the Fuel for Growth initiatives. The annual dividend is expected to be 80 cents per share, with $300 million in share repurchases planned for the year.

BBWI’s Q1 Guidance

For the first quarter of fiscal 2025, net sales growth is expected between 1% and 3%, with international retail sales increasing in the high-single digits and reported net sales growing in the double digits due to shipment timing. The gross margin is projected at 43.3%, implying a 50-basis-point decline due to a higher mix of international sales.

SG&A is expected to be 30.2%, in line with the prior year. Fiscal first-quarter net non-operating expenses are forecast at $65 million. Earnings per share for the fiscal first quarter are anticipated to be 36-43 cents, whereas it reported 38 cents in the first quarter of fiscal 2024.

Shares of this Zacks Rank #2 (Buy) company have gained 15.7% in the past six months compared with the industry’s growth of 3.3%.

Other Key Picks

We have highlighted three other top-ranked stocks, namely, Deckers Outdoor Corporation DECK, Ulta Beauty Inc. ULTA and Arhaus Inc. ARHS.

Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. It sports a Zacks Rank of 1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for DECK’s fiscal 2025 earnings and sales indicates growth of 21.2% and 15.6%, respectively, from the fiscal 2024 reported levels. Deckers has a trailing four-quarter average earnings surprise of 36.8%.

Ulta Beauty is a leading beauty retailer in the United States. It currently carries a Zacks Rank #2.

The consensus estimate for ULTA’s fiscal 2025 earnings and sales indicates a decline of 8.2% and an increase of 0.6%, respectively, from the fiscal 2024 reported levels. Ulta Beauty has a trailing four-quarter average earnings surprise of 6.2%.

Arhaus is a lifestyle brand and omni-channel retailer of premium home furnishings. The company offers an assortment of heirloom quality products. It currently has a Zacks Rank of 2.

The Zacks Consensus Estimate for ARHS’s current financial-year earnings and sales indicates growth of 12.5% and 8.4%, respectively, from the 2024 reported levels. Arhaus has a trailing four-quarter average earnings surprise of 119.3%.

This article originally published on Zacks Investment Research (zacks.com).

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(13:35 GMT) Arhaus Price Target Cut to $12.00/Share From $15.00 by Piper Sandler