BBWI: Margins Will Strengthen As Digital And Distribution Efforts Gain Traction

Analysts have lowered their average price target for Bath & Body Works by nearly $1 to approximately $37. They cite recent challenges with digital improvements, increased discounting, and limited progress in reducing promotions as key factors influencing their outlook.

Analyst Commentary

Analysts have offered a range of opinions following recent developments at Bath & Body Works, reflecting both cautious sentiment and pockets of optimism regarding the company's future performance.

Bullish Takeaways

• Some analysts increased their price targets on the stock, citing steady post-earnings performance and a generally resilient business model despite challenging headwinds.
• There is a belief that Bath & Body Works remains well positioned in its product category, with tariff impacts expected to be manageable and largely reflected in inventory in upcoming quarters.
• Current ratings from selected analysts remain positive, with an expectation of eventual benefits from digital, product, and distribution improvements, even if these will take time to materialize.

Bearish Takeaways

• Bears highlight that growth is expected to fall short of longer-term potential, as operational enhancements are not projected to drive significant short-term gains.
• Discounting and promotional activity have increased both online and in stores, raising concerns about ongoing margin pressure and the company's ability to reduce reliance on price cuts.
• Slow progress in shifting away from frequent sales and promotional events, especially as new product launches have not gained the expected traction, affects the near-term sales and profit outlook.
• Macro uncertainty and a less impactful rollout of new partnerships have also contributed to downward pressure on near-term valuation and have led to price target reductions by more cautious analysts.

What's in the News

• Revised guidance narrows full-year 2025 net sales growth expectations to a range of 1.5% to 2.7%. Earnings per diluted share are now forecast between $3.28 and $3.53, down from $3.61 in fiscal 2024 (Key Developments).
• Third quarter 2025 net sales are projected to increase by 1% to 3% over the prior year. Third quarter earnings per diluted share are expected at $0.37 to $0.45, compared to $0.49 in the third quarter of 2024 (Key Developments).
• Bath & Body Works repurchased 4,142,000 shares between May and August 2025, totaling $120.92 million. The company has now completed 8,006,891 shares bought back under the current buyback program for $238.71 million (Key Developments).

Valuation Changes

• Fair Value Estimate has decreased slightly from $37.77 to $36.96 per share.
• Discount Rate has risen moderately from 10.70% to 11.22%.
• Revenue Growth projection has increased marginally from 2.95% to 2.99%.
• Net Profit Margin estimate has edged down from 10.41% to 10.36%.
• Future Price-to-Earnings Ratio (P/E) has declined modestly from 10.83x to 10.79x.