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Bath & Body Works: Candle Flickers as Inflation Affects Consumers

Thomas Paulson
Jul 22, 2022
Bath & Body Works: Candle Flickers as Inflation Affects Consumers

Key Bath & Body Works Metrics

Bath & Body Works lowered its full-year outlook this week with the release noting, "The company currently expects full year sales to be down mid-to high single-digits compared to last year versus its previous guidance of a low-single-digit percent increase compared to 2021. The company currently estimates the full-year operating income rate as a percentage of sales to be in the mid-teens [compared to 25.5% last year]." CEO Sara Nash added, "Our business continues to perform at levels significantly above pre-pandemic, although we are navigating a challenging operating and macroeconomic environment with inflationary pressure affecting our customers and our business."

  • A sales decline in the mid-to high single-digits can quickly lead to expense deleverage. "Inflationary pressure" indicates that its less affluent customers are cutting back, and it implies that the company’s ability to offset higher product costs has been tapped out. Additionally, margins have been impacted by increased promotional activity, which is expected to last till year end. This renders 2023 a rebuilding year.
  • Placer.ai data shows that June and July have been a challenge traffic-wise, which is likely the culprit of the intra-quarter update.

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Thomas Paulson

Director of Research and Business Development, Placer.ai

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more.

He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

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