On Monday, Citi analysts adjusted their outlook on Bath & Body Works Inc. (NYSE:BBWI), reducing the price target to $36 from the previous $48, while still maintaining a Buy rating on the shares. The revision comes as the company grapples with the uncertainties of higher tariffs and their impact on profitability.
During investor meetings in New York City with Bath & Body Works’ CFO Eva Boratto, CTO Thilina Gunasinghe, and IR Claire O’Donnell, management shared insights into the company’s sourcing and production strategies. While 80% of Bath & Body Works’ sourcing is domestic, with international sourcing including 10% from China and Mexico and 7% from Canada, the company is now evaluating the potential effects of tariffs on domestically sourced products that may rely on international inputs.
Citi analysts have revised their estimates to reflect the potential impact of higher tariffs and a weakening consumer environment. They predict that average unit retail (AUR) prices for Bath & Body Works will face downward pressure in fiscal year 2025 as consumer spending softens. The firm’s models suggest second-half comparable sales in fiscal year 2025 could decline in the mid-single digits, with EBIT margins anticipated to decrease by 200 basis points.
Despite these challenges, the analysts point to Bath & Body Works’ relatively lower exposure to higher tariffs compared to other specialty retailers. Additionally, the company’s robust free cash flow profile was highlighted as a key factor in maintaining the Buy rating. The analysts’ commentary underscores the efforts Bath & Body Works is making to navigate a complex retail landscape amid evolving trade policies and consumer trends.
In other recent news, Bath & Body Works has reaffirmed its financial guidance for the first quarter and full fiscal year of 2025. The company expects net sales growth to range from 1% to 3% for both periods, with earnings per diluted share projected between $0.36 and $0.43 for the first quarter and $3.25 to $3.60 for the full year. This announcement was made as the company participated in the Bank of America (NYSE:BAC) Consumer & Retail Conference. Additionally, Goldman Sachs (NYSE:GS) maintained its Buy rating on Bath & Body Works with a price target of $49, noting the success of its digital engagement and promotional strategies. The firm highlighted the company’s collaboration with Disney (NYSE:DIS) Princess as a key driver of customer interest. Meanwhile, Bath & Body Works’ CEO, Gina Boswell, has taken a temporary medical leave for scheduled surgery, as disclosed in a recent SEC filing. The filing did not specify the interim leadership structure during her absence. These developments reflect the company’s current strategic and operational activities.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.