Bath and Body Works BBWI Q1 Earnings Report 2023

Bath and body workThe stock rose more than 10% in premarket trading Thursday after beating earnings expectations for the fiscal first quarter and raising its guidance.

While revenue and net income declined year over year, the retailer now expects full-year 2023 earnings per share to be in the range of $2.70 to $3.10, compared to the prior quarter’s range of $2.50 to $3.00. Adjusted earnings per share for the year are expected to be between $2.68 and $3.08.

The longtime mall known for its lotions, hand sanitizer and soaps attributed the rosier guidance to “better-than-expected” earnings and the impact of a first-quarter debt prepayment.

“We delivered first-quarter revenue in line with our expectations, while our earnings per share were better than expected as we saw benefits from our work to improve merchandise margin as well as early-stage benefits from our cost optimization initiatives,” CEO Gina Boswell said in a Explanation.

The company’s fiscal 2023 will have a 53rd week and its outlook includes that extra week, which is estimated to impact earnings by 7 cents per share, the company added.

Here’s how Bath and Body Works compared to Wall Street expectations for the fiscal first quarter, based on a Refinitiv analyst poll:

• Earnings per share: 33 cents adjusted vs. 26 cents expected
• Revenue: $1.40 billion versus $1.40 billion expected

The company’s net income for the three-month period ended April 29 was $81 million, or 35 cents a share, about half of the $155 million, or 64 cents a share, reported in the year-ago quarter.

Revenue fell to $1.40 billion, down 4% from $1.45 billion a year earlier.

The retailer expects earnings per share of 27 to 32 cents in the next quarter, compared to an estimate of 32 cents per share. Sales are expected to decline in the low- to mid-single digits, compared to an estimated 3% decline.

The company reiterated its full-year sales guidance of flat to a mid-single-digit decline in net sales.

As consumers become more cautious and retail discounts and promotions increase amid a challenging macro backdrop, Bath and Body Works’ margins declined. They fell about three and a half percentage points to 42.7%, compared to 46.1% in the same quarter last year.

It’s not clear why margins fell, but they were better than the 41.2% analysts were expecting, according to a research note from Simeon Siegel, a retail analyst at BMO Capital Markets. The margins were also above the level before Corona, Siegel noted.