Update shared on 04 Dec 2025
Fair value Decreased 36%Analysts have sharply reduced their price target on Bath & Body Works, cutting fair value from approximately $37 to about $24 as they factor in weaker near term revenue growth, modest margin pressure, and lower future earnings multiples amid broad downgrades and reset expectations through 2026.
Analyst Commentary
Recent Street research reflects a sharp turn in sentiment on Bath & Body Works, with multiple firms cutting ratings and price targets following a disappointing Q3 print and weaker Q4 outlook. While most commentary is cautious, there are still some constructive elements supporting a longer term recovery case.
Bullish Takeaways
- Bullish analysts argue that Bath & Body Works remains a well known brand with a loyal customer base, providing a valuable foundation for eventual revenue stabilization and renewed growth once product and marketing strategies are recalibrated.
- Some see the current earnings reset, including 2026 framed as an investment and transformation year, as an opportunity to reposition the business for more sustainable margins and a higher quality earnings mix over time.
- Certain optimistic views highlight the new leadership team and strategic transformation plan as potential catalysts for gradual multiple re rating if early signs of product improvement, more disciplined promotions, and digital enhancements emerge through 2026.
- More constructive forecasts anticipate that Q4 could mark the trough for sales trends, with progress in assortment, merchandising, and channel productivity supporting a return to modest top line and margin improvement beyond the current downturn.
Bearish Takeaways
- Bearish analysts emphasize that the string of Q3 earnings and sales misses, combined with a materially reduced Q4 outlook, undermines near term confidence in execution and raises the risk that revenue declines persist longer than previously modeled.
- Several notes point to structural sales headwinds and elevated investment needs, suggesting that consistent growth above low single digits and sustained margin expansion look increasingly difficult, which may limit upside to valuation multiples.
- Weaker recent innovations, including the underperforming Disney Villains collaboration, and rising promotional intensity in stores and online are seen as signs that pricing power is eroding and that brand heat is softer than expected.
- Major firms such as JPMorgan and Goldman now frame 2026 as more of a reset than an acceleration year, and they warn that the company’s current strategies may not translate into meaningful top line re acceleration in the medium term, which they view as justification for lower price targets and more neutral stances.
What's in the News
- Issued new fourth quarter 2025 guidance calling for net sales to decline high single digits from the $2,788 million generated in the fourth quarter of 2024, reflecting continued weak consumer sentiment and tariff impacts (company guidance).
- Projected fourth quarter 2025 earnings per diluted share of at least $1.70, down from $2.09 in the prior year period, signaling ongoing margin pressure and softer holiday performance (company guidance).
- Revised full year 2025 net sales outlook from prior growth of 1.5% to 2.7% to a low single digit decline versus $7,307 million in fiscal 2024, indicating a more protracted top line slowdown than previously expected (company guidance).
- Lowered full year 2025 earnings per diluted share forecast to at least $2.83, down from $3.61 in fiscal 2024, incorporating the drag from tariffs and weaker demand into a significantly reduced profit trajectory (company guidance).
Valuation Changes
- Fair Value: reduced significantly from approximately $37.00 to about $24.00 per share, reflecting weaker growth and earnings expectations.
- Discount Rate: risen slightly from roughly 11.2% to about 11.8%, implying a modestly higher perceived risk profile.
- Revenue Growth: lowered sharply from around 3.0% to roughly 0.3% annually, signaling expectations for broadly flat top line performance.
- Net Profit Margin: trimmed modestly from about 10.4% to roughly 9.9%, incorporating some ongoing margin pressure.
- Future P/E: reduced meaningfully from approximately 10.8x to about 7.8x, indicating lower anticipated valuation multiples on forward earnings.
Disclaimer
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