Bath & Body Works, a prominent personal-care retailer, is experiencing a significant downturn on Wednesday due to its revised guidance, joining the ranks of retailers adjusting expectations amid evolving consumer spending patterns.
Prior to market opening, Bath & Body Works (ticker: BBWI) issued updated guidance for the second quarter, revealing a lowered earnings per share range of 40 to 42 cents. This revision marked a stark decline from the previous range of 60 to 65 cents and fell short of analysts’ projected 60 cents.
Additionally, the company cautioned that its year-end sales would witness a mid- to high-single-digit decline compared to the same period last year. This revised outlook starkly contrasts with the earlier projection of a low single-digit increase. The current consensus anticipates a modest 0.8% rise in sales, reaching $7.95 billion in the fiscal year.
Further insight into Bath & Body Works’ financial standing is expected when the company discloses its second-quarter results on August 17. The repercussions of this update have driven the company’s shares down by 8.6%, settling at $27.53.
During the first quarter, when Bath & Body Works reported its results in mid-May, the company had already presented guidance for the second quarter and the full year. Even then, its EPS forecasts for both periods were trailing behind market consensus.
Bath & Body Works’ situation is by no means isolated, as various retailers such as Target (TGT), Kohl’s (KSS), and RH (RH) have also released mid-quarter updates reflecting a more challenging consumer landscape. Consumers are retreating from discretionary purchases, particularly items they stockpiled during the pandemic. The escalating essentials’ costs have prioritized essential purchases, leaving less budget for non-essential spending. Moreover, consumers are channeling their resources towards activities such as dining out and travel that were on hiatus in recent years.
Investors may also be apprehensive that the forthcoming August update on full-year earnings is likely to be unfavorable, given the recent trends.
Bath & Body Works has experienced a decline of over 50% in its value this year, significantly underperforming its counterparts tracked by the SPDR S&P Retail (XRT) exchange-traded fund, which is down by 30%. The S&P 500 has also dipped by 18%.
