Summary

• Bath & Body Works, Inc. is an American company focused on home fragrance, body care and soaps and sanitizer products operating under the Bath & Body Works, White Barn and other brand names.
• As of January 28, 2023, BBWI operates a substantial number of Company-operated retail stores. In the United States, BBWI manages 1,693 retail stores. In Canada, they have 109 stores, compared to 104 in the previous year, culminating in a total of 1,802 Company-operated stores across the U.S. and Canada.
• Approximately 4.49% of Bath & Body Works' sales are from the international market, with the local market (U.S. and Canada) contributing around 92.05% of their total sales. The majority of Bath & Body Works' sales are concentrated in the local U.S. and Canadian markets
• In the financial year 2022, the company experienced a decline in sales, with total sales reaching $7,560 million. This marked a decrease of $321.51 million or 4.08% compared to the sales figure of $7,881.51 million in 2021.
• The company's gross profit for the financial year 2022 amounted to $3,255 million, reflecting a difference of $600.35 million or 15.59% from the gross profit of $3,855.35 million in the previous year, 2021.
• Its operating profit decreased in 2022, totaling $1,376 million, which was lower by $633.12 million or 31.52% compared to the operating profit of $2,009.12 million in 2021. The net profit for the year 2022 was $800 million, representing a decrease of $533.48 million or 40% compared to the net profit of $1,333.48 million in 2021.
• The diluted earnings per share (EPS) for 2022 were reported as $3.43, which showed a decrease of $1.45 or 29.69% compared to the diluted EPS of $4.88 in 2021.

Brief Company Overview

Bath & Body Works, Inc. (NYSE:BBWI) is an American company focused on home fragrance, body care and soaps s and sanitizer products operating under the Bath & Body Works, White Barn and other brand names. The company was founded in 1963 in Columbus, Ohio as an apparel-based specialty retailer. Now as of January 28, 2023, the company's merchandise are sold through 1,802 company-operated stores and e-commerce sites in the United States of America ("U.S.") and Canada, and in 427 stores and 31 e-commerce sites in more than 45 other countries operating under franchise, license and wholesale arrangements. 

BBWI's in-store design, visual marketing, storytelling, fixtures, scents, and music are employed to create a unique shopping experience.¹ In-store sales represent a significant source of revenue for the company. Furthermore, in addition to enhancing the in-store experience, BBWI strives to create a customer-centric digital platform that integrates the digital and physical brand experience to boost sales. BBWI manages these operations through a domestic, vertically integrated supply chain. The company's supplier base comprises third-party vendors, with the majority of products being manufactured at Beauty Park, a business park housing several key vendors in close proximity to its distribution centers in Columbus, Ohio. While the company-owned distribution centers in central Ohio serve as the control center for operations, BBWI also utilizes third-party distribution centers located across North America to position inventory geographically closer to its customers. Additionally, they make use of third-party-operated direct channel fulfillment centers and pop-up fulfillment facilities throughout North America to meet their peak demand requirements.

As of October 2023, the company's 52-week share price ranged from $30.03 to $49.55. The company's financial metrics are as follows: a trailing P/E (Price-to-Earnings) ratio of 10 times, a price-to-sales ratio (ttm) of 0.93 times, a profit margin of 9.47%, an operating margin of 16.42%, a return on assets (ttm) of 15.14%, and diluted earnings per share (ttm) of $3.02. The aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $8.1 billion. Number of shares outstanding of the registrant’s Common Stock as of March 10, 2023: 228,766,151.

Recent Developments

• In the year 2022, the company expanded a service or system known as "buy online-pickup in store" (often abbreviated as BOPIS) in more than 800 stores that are owned and operated by the company itself.
• During 2022, BBWI opened 95 new, off-mall stores and permanently closed 48 stores, principally in malls, in North America, resulting in net square footage growth of 5% for the year.²
• In August 2022, the company launched a nationwide loyalty program in the U.S. as part of its investment in customer experience, aiming to attract more customers to the loyalty program. This involved integrating the program across social, physical, and digital interactions and planning for future program enhancements, such as accelerators and flexible rewards. Since its launch in August 2022, this loyalty program has represented approximately two-thirds of U.S. sales.
• In February 2022, the Board authorized a new $1.5 billion share repurchase program (the "February 2022 Program").³ As part of the February 2022 Program, the Company entered into an accelerated share repurchase program ("ASR") under which the Company repurchased $1 billion of its own outstanding common stock.

Financial Performance Highlights

Q2 2023 Highlights

In the second quarter of 2023, the company reported sales of $1,559 million, reflecting a decrease of $58.50 million or 3.62% compared to the second quarter of 2022, which had sales of $1,617.50 million. Despite this decline in revenue, the net profit for the second quarter of 2023 was $99 million, showing a reduction of $21 million or 17.5% when compared to the net profit of $120 million in the second quarter of 2022. Furthermore, the company's diluted earnings per share (EPS) for the second quarter of 2023 decreased to $0.43, a change of $0.09 or 17.31% compared to the diluted EPS of $0.52 in the second quarter of 2022.

Annual Performance Highlights

Bath & Body Works, Inc.’s fiscal year ends on the Saturday nearest to January 31. As used herein, “2022,” refer to the 52-week periods ended January 28, 2023. In the financial year 2022, the company experienced a decline in sales, with total sales reaching $7,560 million. This marked a decrease of $321.51 million or 4.08% compared to the sales figure of $7,881.51 million in 2021. The company's gross profit for the financial year 2022 amounted to $3,255 million, reflecting a difference of $600.35 million or 15.59% from the gross profit of $3,855.35 million in the previous year, 2021. Additionally, the company's operating profit decreased in 2022, totaling $1,376 million, which was lower by $633.12 million or 31.52% compared to the operating profit of $2,009.12 million in 2021. The net profit for the year 2022 was $800 million, representing a decrease of $533.48 million or 40% compared to the net profit of $1,333.48 million in 2021. Moreover, the diluted earnings per share (EPS) for 2022 were reported as $3.43, which showed a decrease of $1.45 or 29.69% compared to the diluted EPS of $4.88 in 2021.

In 2022, net sales decreased in the stores channel by $233 million, or 4%. This decrease was primarily due to a decline in average dollar sales, although it was partially offset by the incremental net sales originating from new stores. Direct net sales also saw a decrease of $145 million, or 8%, primarily as a result of a decline in orders. The drop in direct orders can be attributed to last year's strong results and a continued preference among customers for BBWI's "buy online-pick up in store" option (recognized as store net sales). This decrease was partially offset by increased net sales in the Canada Direct business, which was launched in the third quarter of 2021. International net sales, on the other hand, increased by $56 million, or 20%, primarily due to the growth in partner-operated stores and e-commerce sites.

In terms of category performance, net sales for home fragrance and sanitizers were down compared to 2021, reflecting a shift in customer preferences and needs following the COVID-19 pandemic. While total body care net sales were also down, there was growth in our Men's collection. These declines were partially offset by improvements in the gifting business.

For 2022, the gross profit rate decreased to 43.1% from 48.9%. Gross profit decreased primarily due to a significant decline in the merchandise margin rate, driven by increased product costs resulting from ongoing inflationary pressures in raw materials, transportation, and labor, as well as incremental promotions aimed at boosting sales. The company estimated that inflationary cost pressures totaled approximately $225 million in 2022. The decline in net sales and a $52 million increase in Buying and Occupancy Expenses, primarily driven by higher distribution costs and investments in store real estate, also contributed to the decrease in gross profit. The gross profit rate decreased due to the significant decline in the merchandise margin rate, the increase in Buying and Occupancy Expenses, and deleverage resulting from lower net sales.

Net cash provided by operating activities in 2022 was $1144 million, including net income of $800 million (which included Income from Discontinued Operations, Net of Tax of $6 million). Net income included depreciation of $221 million, share-based compensation expense of $38 million and deferred income tax expense of $17 million. Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital. The most significant items in working capital were the $44 million increase associated with Accounts Payable, Accrued Expenses and Other and the $39 million increase associated with Income Taxes Payable.

Net cash used for investing activities in 2022 was $328 million related to capital expenditures. The capital expenditures included approximately $164million related to new, off-mall stores and remodels of existing stores. The remaining capital expenditures were primarily related to new Company-operated direct channel fulfillment center and various IT projects primarily supporting the separation of our IT systems from Victoria's Secret & Co.'s ITsystems.

Net cash used for financing activities in 2022 was $1562 million consisting of $1312 million in payments for share repurchases, including the payment of $1 billion related to accelerated share repurchase program ("ASR"), dividend payments of $0.80 per share, or $186 million, tax payments of $32million related to share-based awards and net payments of $25 million to Victoria's Secret & Co. related to the Separation.

Business Overview

Bath & Body Works, Inc. is an Omni channel retailer that sells merchandise through its Company-operated retail stores in the United States of America ("U.S.") and Canada, and through its websites and other channels, under the Bath & Body Works, White Barn and other brand names.The Company's international business is primarily conducted through franchise, license and wholesale partners.⁴ The Company operates as and reports single segment that includes all of its continuing operations. They offer wide range of products include:

Body Care (Bath & Shower):

• All Bath & Shower: Bath and shower products designed for a refreshing and cleansing experience.
• Body Wash & Shower Gel: A variety of shower gels with different scents and formulations.
• Body Scrub: Exfoliating scrubs to rejuvenate the skin.
• Hair Care: Hair care products designed to promote healthy and nourished hair.

Moisturizers:

• Body Lotion: Lotions with various scents and formulations to keep the skin moisturized.
• Body Cream: Rich, creamy body creams for intensive hydration.
• Lip Care: Products to care for and moisturize the lips.

Fragrance:

• Body Sprays & Mists: A collection of scented body sprays and mists.
• Perfume & Cologne: High-quality perfumes and colognes with various fragrances.

Candles:

• 14.5 oz 3-Wick Candles: Large, three-wick candles in a variety of scents.
• 8 oz Signature Single Wick Candles: Single-wick candles with signature fragrances.
• 7 oz Mason Single Wick Candles: Single-wick candles in Mason jar-style containers.
• Candle Holders & Accessories: A range of accessories and holders for candles.

Wallflowers & Air Fresheners:

• Wallflowers Plugs: Plug-in air fresheners available in various designs.
• Auto Refresh Wallflowers: Car air fresheners for a pleasant driving experience.
• Room Sprays & Mists: Sprays and mists to freshen up living spaces.
• Car Fragrance: Products designed to keep your car smelling delightful.

Hand Soaps & Sanitizers:

• Hand Soaps: A variety of hand soaps, including foaming and gel soaps.
• Hand Soap Refills: Convenient refill options to reduce waste.
• Soap Holders: Stylish and functional holders for hand soaps.
• Hand Sanitizers: Pocket-sized and spray hand sanitizers, along with holders.

Men's Care:

• Body Wash & Shower Gel: Men's body wash and shower gels.
• Moisturizers: Skin moisturizers specifically designed for men.
• Body Spray & Cologne: Fragrance options tailored for men.
• Grooming: Grooming products to help men look and feel their best.
• Home Fragrance: Fragrance products for the home.
• Hand Soaps & Sanitizers: Hand care products for men.
• Men's Collection: A collection of products tailored to men's grooming needs.

Laundry Care:

• Laundry Detergent: Laundry detergents with unique scents.
• Fragrance Boosters: Products to enhance the freshness of your laundry.

Top Fragrances:

• A selection of popular and beloved fragrances including Luminous, Vampire Blood, Leaves, Pumpkin Pecan Waffles, Japanese Cherry Blossom, Eucalyptus Spearmint, Champagne Toast, Mahogany Teakwood, Gingham, Ocean, and Into the Night.

Bath & Body Works, Inc. (BBWI) is a retail company that manages a diversified store portfolio and global partnerships, shaping its presence and impact in the personal care and home fragrance industry. As of January 28, 2023, BBWI operates a substantial number of Company-operated retail stores. In the United States, BBWI manages 1,693 retail stores. In Canada, they have 109 stores, compared to 104 in the previous year, culminating in a total of 1,802 Company-operated stores across the U.S. and Canada.

In 2022, Bath & Body Works recorded total net sales of $7.56 billion. Net sales from in-store sales in the U.S. and Canada amounted to $5.48 billion, constituting the largest share of the company's sales, accounting for approximately 72.37% of the total sales. Direct sales in the U.S. and Canada totaled $1.75 billion, while international market sales in 2022 reached $339 million. Therefore, approximately 4.49% of Bath & Body Works' sales were from the international market, with the local market (U.S. and Canada) contributing around 92.05% of their total sales. The majority of Bath & Body Works' sales are concentrated in the local U.S. and Canadian markets, while international sales still represent a relatively smaller portion of their overall revenue. The Company’s Net Sales outside of the U.S. include sales from Company-operated stores and its e-commerce site in Canada, royalties associated with franchised stores and wholesale sales. Certain of these sales are subject to the impact of fluctuations in foreign currency. Revenue generated through franchise and license arrangements primarily comprises royalties earned upon the sale of merchandise by franchise and license partners to retail customers. Under wholesale and sourcing arrangements, revenue recognition occurs when the title to products is transferred to the partner. BBWI's unique blend of Company-operated stores and international partnerships underscores its ability to provide its products and brand experience to a global customer base while optimizing its operational and financial strategies.

BBWI's store portfolio reflects a strategic diversification across venue tiers and types, with a considerable portion of its stores situated off-mall. Notably, these off-mall locations contribute significantly to the company's overall sales. An interesting facet of BBWI's retail strategy is the growth experienced by its White Barn stores. White Barn locations, known for their convenience for off-mall customers, are key drivers of BBWI's retail success.

Furthermore, BBWI extends its global reach through a network of partners in over 45 countries, employing a franchise, license, and wholesale model. This asset-light approach allows BBWI to define operational standards, including product assortment, pricing, promotions, store designs, and real estate approval, while leveraging the expertise of its local partners in areas like real estate, personnel, and practices. As of January 28, 2023, the international presence of BBWI's partners encompasses 427 stores. These partners operate 31 international e-commerce sites, reflecting the company's presence to a multi-channel presence and expansion.

 Other Business Information

During 2022, BBWI purchased merchandise from approximately 120 vendors, primarily located in the U.S. Their largest vendor supplied approximately 13% of the total merchandise purchases during 2022, while no other single vendor provided more than 10% of merchandise purchases. The five largest vendors supplied approximately 38% of total merchandise purchases on a combined basis during 2022.

Most of BBWI's merchandise is produced in the U.S. and is shipped to its distribution centers in the Columbus, Ohio area. In addition to Company-operated distribution centers, it also utilizes third-party logistics providers to warehouse and distribute products throughout North America.

Its management information systems consist of a full range of retail, financial, and merchandising systems. The systems include applications related to point-of-sale, e-commerce, merchandising, planning, sourcing, logistics, inventory management, data security, and support systems, including human resources and finance systems. Victoria's Secret & Co. currently administers and maintains operations of most existing technology and serves as a principal technology service provider to the company under a transition services agreement entered into in connection with the Separation ("TSA"). During the first quarter of 2022, it elected to accelerate the work of establishing separate information technology capabilities for the Company.

Operations of the company are seasonal in nature and consist of two principal selling seasons: Spring (the first and second quarters) and fall (the third and fourth quarters). The fourth quarter, including the holiday season, typically accounts for approximately one-third of net sales and is most profitable quarter. Accordingly, cash requirements are highest in the third quarter as inventories build in advance of the holiday season.

BBWI funds business operations through a combination of available cash and cash equivalents and cash flows generated from operations. In addition, credit facility is available for additional working capital needs and investment opportunities.

Company History

Bath & Body Works, Inc., a household name renowned for its fragrances and personal care products, has a storied history that traces its origins back to the entrepreneurial spirit of Bella Cabakoff and the evolution of its parent company, L Brands, Inc. The journey begins with Bella Cabakoff, a native of Williamsburg, Brooklyn, who moved to Columbus, Ohio, at a young age. In 1951, she and her husband, Harry Wexner, embarked on a business venture by opening a women's clothing store named Leslie's. The name of this store was an homage to their son, Leslie "Les" Wexner, who would later play a pivotal role in the company's development.

In 1963, Les Wexner borrowed a combined $10,000 from his aunt and a bank, setting the stage for the establishment of a store at the Kingsdale Shopping Center in Upper Arlington, Ohio. This store, aptly named "The Limited," was revolutionary in its focus on clothing for younger women, contrasting with the general merchandise offered by his parents' store. A year later, Bella and Harry decided to shutter their own store to join their son in this promising retail venture.

With a core team consisting of the three Wexner family members and their close friend Jim Waldron, who served as Senior Vice President, The Limited began to flourish. Bella Wexner, who served as secretary until her death in 2001, contributed her expertise to the company. Harry Wexner served as chairman until his passing in 1975, and Leslie Wexner, who assumed the role of CEO from the inception of the company, later succeeded his father as chairman.

In 1969, a significant milestone was reached when The Limited Brands went public, and 47,600 shares were sold at $7.25 per share. The year 1977 marked the relocation of The Limited Brands' headquarters to Morse Road in Columbus, where L Brands, as it is known today, still operates from. In 1982, another pivotal moment occurred when The Limited was listed on the New York Stock Exchange, solidifying its presence in the retail industry.

The 1980s brought a wave of acquisitions for L Brands. Notably, in 1982, the company acquired the iconic Victoria's Secret brand, store, and catalogue from Roy Raymond for a mere $1 million. Simultaneously, 207 Lane Bryant stores were brought into the L Brands fold. Subsequently, in 1985, the company expanded by purchasing the exclusive Henri Bendel store on Fifth Avenue in New York City for $10 million, as well as 798 Lerner stores for $297 million. In 1988, 25 Abercrombie & Fitch stores were acquired for $46 million.

In 1996, L Brands decided to spin off Abercrombie & Fitch into a publicly traded company. The 1990s saw the development of multiple successful brands under the L Brands umbrella, including Limited Too, Bath & Body Works, Structure, and Victoria's Secret Beauty. In a strategic move to diversify, several Bath & Body Works stores were converted into The White Barn Candle Company stores in 1998, paving the way for a home fragrance brand.

However, the journey was not without its twists and turns. In 2007, Limited Brands made the decision to sell 75% of its flagship store, The Limited, to Sun Capital Partners, Inc. The remaining 25% of shares were also acquired by Sun Capital in 2010. This marked a significant transformation for the company, leading to a change in its name from Limited Brands to L Brands, reflecting the shifting focus.

In 2017, L Brands closed all of its physical stores for The Limited, but continued its online retail operation for a period. Unfortunately, the online presence eventually filed for bankruptcy and ceased all services.

The company underwent further leadership changes in 2021, with the announcement of the retirement of CFO Stuart Burgdoerfer, to be replaced by Martin Waters, CEO of Victoria's Secret.

In 2023, Bath and Body Works made a significant decision to relocate its entire production system to the outskirts of Columbus, Ohio. This strategic move involved ten of the company's suppliers agreeing to make the shift to the United States, resulting in the addition of 5,000 employees and an increase in annual revenue by $2 billion. The primary motivation for this relocation was the frustration caused by shipping delays, which required a lengthy three-month lead time, as opposed to the more efficient 21 days when production was situated in Ohio.

One of the most significant turning points came in February 2020 when L Brands announced its intention to sell the Victoria's Secret division to Sycamore Partners, a private equity firm. Under the terms of the agreement, Sycamore Partners was to acquire a 55% controlling stake in Victoria's Secret for approximately $525 million, leaving L Brands with a 45% stake and Bath & Body Works as the potential sole business. However, this agreement fell through in May 2020, leading to a mutual termination and related litigation.

At the virtual shareholders meeting in May 2020, Les Wexner, the founder, CEO, and board chair, stepped down. Bath & Body Works CEO Andrew Meslow ascended to the role of CEO of L Brands and joined the board. Simultaneously, the company revealed its plans to spin off Victoria's Secret as a stand-alone company and to close 250 Victoria's Secret stores and 50 Bath and Body Works stores.

On September 14, 2020, L Brands announced its decision to sell the majority stake in its Victoria's Secret UK business to Next Plc, forming a new joint venture, the financial details of which were not disclosed.

In 2021, L Brands announced a pivotal restructuring. Victoria's Secret and Bath & Body Works were recast into two separate publicly traded companies. This transition was successfully completed by August 3, 2021, marking a significant transformation in the corporate landscape. Andrew Meslow assumed the role of CEO of Bath & Body Works, while Martin Waters took the helm at Victoria's Secret after the split.

On August 3, 2022, the official split into two independent companies took effect, with Victoria's Secret and Bath & Body Works beginning to trade individually on the New York Stock Exchange. The era of L Brands was officially behind them, and the company officially changed its name to Bath & Body Works.

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2. ^ https://www.retaildive.com/news/bath-body-works-loyalty-program-members-three-quarters-sales-earnings/691637/
3. ^ https://www.marketwatch.com/story/bath-body-works-shares-rise-after-record-sales-15-billion-share-buyback-program-dividend-hike-2022-02-02
4. ^ https://markets.ft.com/data/equities/tearsheet/profile?s=LTD0:FRA