By Dhirendra Tripathi
Investing.com – Bath & Body Works (NYSE:BBWI) stock fell 7.3% in premarket trading Thursday after its guidance disappointed amid the retailer’s warning of inflationary pressures.
The escalating crisis in Europe due to Russia's invasion of Ukraine adds further pressure on BBWI stock.
The company plans to incur a capital expenditure of $400 million in the current year, almost double the amount ($205 million) it spent in 2021. There will be separate selling, general and administrative expenses with additional inflationary costs. All this will pressure margins, as it goes about setting up its own IT function and a new fulfillment center as well as new stores, the company said.
“In 2022, we are investing in the business to support long-term growth, and there are macro factors such as inflation that will impact our results,” the maker of fragrances and sanitizers said in its fourth quarter commentary.
The company is facing increased inflationary costs in raw materials, transportation, and wage rates and is countering that with price increases and “carefully managing promotional activity” but said it is going to be “thoughtful” about the former.
Gross margins in 2022 could thus be 3 to 4 percentage points lower than the recent year’s 49%. Sales are seen flat to 4% up on 2021 revenue of $7.9 billion.
Net sales in the fourth quarter ended January 29 rose 11% to top $3 billion. Adjusted profit per share was $2.27 compared to $1.96 a year ago and beat estimates.
Current quarter profit per share is seen between 47 cents and 55 cents. Sales could fall by low to mid-single digits, the company said.