By Michael Elkins
Bank of America reiterated a Buy rating and $50.00 price target on Bath & Body Works (NYSE:BBWI) as analysts believe the company’s guidance leaves room for upside from estimate revisions when cost pressures subside beginning in 2Q.
Results from a recent customer survey indicate strong brand strength, positive reception to its new loyalty program, and great response to new scents, assortment, and accessories.
The analysts wrote in a note, "We conducted surveys in early March 2020 and again at the same time this year. The results show that only 4% of respondents are unaware of the brand (down from 5% prepandemic), and 15% liked the brand more than last year, citing good fragrances, quality, and promotions. The most fervent BBWI customer over-indexes in the Southeast, and over-indexes within the Gen X and Gen Z age cohorts. 29%/25%/27% of respondents intend to purchase more than last year in candles/hand & body lotion/soaps & sanitizers categories respectively; about half of respondents intend to purchase the same amount as they did last year in each of these categories."
Bank of America is modeling F23 margins (225bp) to 16% (vs. 25.6% in F21 and 19.2% in F19) but think 20% is achievable once sales return to growth and outsized cost pressures subsides. The analysts expect BBWI to return to sales growth over time by introducing new products, re-launching improved formulations, and continuing the productive remodel program.
Shares of BBWI are up 0.82% in pre-market trading on Tuesday.