Bath and Body Works stock surged after surpassing earnings expectations for the fiscal first quarter and raising its guidance. Although sales and net income declined year over year, the retailer now projects higher earnings per share for full year 2023, with a range of $2.70 to $3.10, compared to the previous range of $2.50 to $3.00. Adjusted earnings per share are expected to range from $2.68 to $3.08 for the year.
In the quarter ending April 29, the company's net income dropped to $81 million (35 cents per share) from $155 million (64 cents per share) in the year-ago quarter. Sales also declined to $1.40 billion, down 4% from $1.45 billion last year. For the next quarter, the retailer expects earnings per share of 27 to 32 cents, compared to the estimated 32 cents. Sales are projected to decline in the low to mid single digits, compared to the estimated 3% decrease.
Why it matters
Bath and Body Works experienced a decline in margins as consumers grew more cautious and retail discounts increased in a challenging macroeconomic environment. Margins dropped by approximately 3.5 percentage points to 42.7% compared to the previous year's quarter when it was 46.1%. However, the margins were better than the 41.2% anticipated by analysts, as highlighted by Simeon Siegel, a retail analyst for BMO Capital Markets.