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Bath & Body Works (BBWI) Q2 Earnings Top Estimates, Sales Up

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Bath & Body Works, Inc. (BBWI - Free Report) posted second-quarter fiscal 2021 results. The top- and bottom-line metrics improved year on year, gaining from strong business momentum. Quarterly earnings surpassed the Zacks Consensus Estimate. Second-quarter total results issued by the company include results from Victoria’s Secret & Co. (VSCO - Free Report) .

Bath & Body Works and Victoria’s Secret were formerly parts of L Brands Inc., which split itself into two separate publicly-traded companies to thrive better in an evolving retail landscape. The spin off was completed on Aug 3, subsequent to the completion of the second quarter.

Management highlighted Bath & Body Works business is well positioned for growth in the forthcoming periods, backed by its strong product offerings and customer base. As a standalone company, Bath & Body Works will continue to execute on its long-term growth strategies and boost shareholders’ value.  Management provided its earnings view for third-quarter fiscal 2021.

Shares of the company gained 4.3% during the after-market trading session on Aug 18.

Quarterly Discussion

For second-quarter fiscal 2021, adjusted earnings per share amounted to $1.34, which surpassed the Zacks Consensus Estimate for earnings of 75 cents. In the year-ago quarter, the company reported a loss of 18 cents per share. On an adjusted basis earnings amounted to 25 cents in the prior-year quarter. The year-on-year bottom line growth was driven by stronger sales and margins at both Bath & Body Works and Victoria’s Secret.

Net sales of $3,317.5 million were up 43% on a year-over-year basis. Management highlighted that in the year-ago quarter, the company’s performance was adversely impacted by store closures due to the pandemic. The top line increased 14.3% from second-quarter fiscal 2019 levels.

Comparable sales declined 16%, while comparable store sales fell 9% year on year.

Gross profit amounted to $1,498 million during the quarter, up from $711.5 million in the year-ago period. Gross margin came in at 45.2%, up 1,110 basis points (bps) year on year. Gross margin improved 1,130 bps from second-quarter fiscal 2019 levels, driven by growth in the merchandise margin rate as well as buying and occupancy expense leverage.

Operating income amounted to $599.1 million, rising from $44 million in the year-ago quarter.

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


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

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


Sales in Detail

Bath & Body Works’ total sales increased 36% year over year to $1,703.7 million. Compared with year-ago levels, the company saw strong growth in home fragrance, fragrant body care, and gifting. However, soaps and sanitizers witnessed a declined from last year’s levels. Compared with second-quarter fiscal 2019, Bath & Body Works’ sales increased 53.9%, backed by growth in transactions and average dollar sale for both stores and direct. The company witnessed balanced growth of nearly 35% across all merchandising categories compared with levels in the same period in fiscal 2019.

Bath & Body Works’ comparable sales fell 22% during the second quarter, while comparable store sales declined 23% on a year-over-year basis.

Sales in Bath & Body Works U.S. and Canada stores amounted to $1,229 billion, up 39% from second-quarter fiscal 2019 levels. Direct sales during the second quarter increased 128% from the figure in the same period in fiscal 2019.

Moving on to Victoria’s Secret, sales surged 51.3% year on year to $1,613.8 million. Sales in this business declined 9.6% compared with second-quarter fiscal 2019’s level, due to the closures of 240 stores.

Victoria’s Secret comparable sales fell 9% year on year, while comparable store sales improved 16%. Comparable sales went up 5% from second-quarter fiscal 2019 figures. Direct sales increased 26% year on year, while comparable store sales declined 3%. Sales at Victoria’s Secret International were $108 million, which declined 40% from the same period in fiscal 2019.

Store Update

As of Jul 31, 2021, total stores were 2,692, comprising 1,766 Bath & Body Works and 926 Victoria's Secret stores. Total Victoria's Secret stores include 695 Victoria’s Secret, 143 PINK, 24 Victoria’s Secret Canada, two PINK Canada, 36 Victoria’s Secret Beauty and Accessories as well as 26 Victoria’s Secret China stores.

Total partner-operated stores were 767, including 305 Bath & Body Works, 106 Victoria’s Secret, 17 PINK and 195 Victoria’s Secret Beauty & Accessories. Partner-operated stores comprised 144 and 19 Travel Retail stores of Victoria’s Secret Beauty & Accessories and Bath & Body Works, respectively.

Speaking specifically for Bath & Body Works, the company completed 45 real estate projects in North America during the second quarter, including 20 off-mall stores and 25 remodels. Year to date, the company has closed 11 stores. It expects to close about 20-40 stores during fiscal 2021, mainly in malls. It also anticipates opening 55 new off-mall store locations in North America. As a result, by the end of the year, the company anticipates 47% of its stores to be in off-mall locations and 58% will be in White Barn store design.

In respect of Bath & Body Works international, the company currently operates 305 stores and 24 online sites across 35 countries. During the second quarter, the company opened eight new international stores and one new online site, while it closed two stores. For the rest of fiscal 2021, it expects to open another 35-40 new stores, leading to an annual increase of about 20%.

Key Financial Metrics

The company ended second-quarter fiscal 2021 with cash and cash equivalents of $1,987.8 million, inventories of $1,472.9 million, long-term debt of $5,937.6 million and shareholder deficit of $1,187.8 million.

During the second quarter, the company purchased 14.4 million shares $1.03 billion. Year to date, the company bought back 17 million shares for $1.19 billion. It has shares worth $770 million remaining under the $1.5 billion share repurchase program.

For fiscal 2021, the company expects capital expenditures in the bracket of $345-$370 million. Bath & Body Works as a standalone company expects capital expenditures in the range of $275-$300 million.

Zacks Investment ResearchImage Source: Zacks Investment Research


Bath & Body Works, as a standalone company, expects third-quarter fiscal 2021 earnings in the range of 55-60 cents per share. This excludes one-time costs related to the spin-off of Victoria’s Secret. Earnings per share from continuing operations amounted to 83 cents in 2020 and 20 cents in 2019. The Zacks Consensus Estimate for third-quarter fiscal 2021 earnings is currently pegged at 55 cents per share.

The company expects third-quarter fiscal 2021 sales to rise in the bracket of 40-45% from third-quarter fiscal 2019 levels. Quarterly gross margin re expected to rise 100-150 bps from third-quarter fiscal 2019 tally.

Price Performance

This Zacks Rank #5 (Strong Sell) company’s shares have declined 11.7% in the past three months compared with the industry’s fall of 14.9%

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