Investing.com -- Bath & Body Works Inc. (NYSE:BBWI) saw its issuer credit rating upgraded to 'BB+' from 'BB' by S&P Global Ratings, according to an announcement made on April 11, 2025. The upgrade is a result of the company's strong performance, favorable growth prospects, and significant debt reduction.
S&P Global Ratings also raised the issue-level ratings for BBWI's unsecured notes, both with and without subsidiary guarantees. The company's consistent performance is attributed to its strong product innovation and operating execution, which resulted in better-than-expected top and bottom-line results through the fourth quarter of fiscal 2024, which ended in February 2025.
BBWI has built a reliable track record as an independent entity following its split from Victoria’s Secret & Co. in August 2021. The company's sales grew by 45% during fiscal years 2020 and 2021, driven by increased demand for soaps and sanitizers during the pandemic. Since then, the company has only lost 7% of sales through fiscal 2024, which is significantly better than expected.
BBWI has maintained its market leader position in its core home fragrance and soaps and sanitizers categories, with an estimated market share of around 20%. S&P Global Ratings expects the company to sustain adjusted leverage of mid-2x over the next 12 months, despite a challenging macroeconomic environment.
The ratings agency forecasts above-average adjusted EBITDA margins of low-20% and low-single-digit percent revenue growth over the next 12 months. For fiscal 2025, it anticipates a decline in adjusted EBITDA margins up to roughly 300 basis points to about 22%, which is expected to remain around this level through fiscal 2026. This decline is largely due to increased product costs, investments in real estate and product innovation, and strategic allocations toward technology and marketing.
BBWI's adjusted EBITDA margins improved 50 basis points to 25.3% in fiscal 2024, largely due to the company’s cost optimization program. The program delivered about $155 million of cost savings in fiscal 2024 and two-year cumulative savings of over $300 million.
S&P Global Ratings also expects low-single-digit percent sales growth in fiscal years 2025 and 2026. Despite inflationary pressure from tariffs leading to lower consumer discretionary spending, the company’s strong product innovation, targeted marketing initiatives, and technology investments are expected to support better retention rates and improved customer acquisition metrics.
BBWI is expected to generate about $650 million in free operating cash flow while maintaining adjusted leverage of around 2.5x over the next 12 months. In fiscal 2024, the company generated $660 million of free operating cash flow, which it used for share repurchases, dividends, and debt reduction. Over the past two years, the company repurchased about $1 billion of senior notes, achieving its target gross adjusted debt to EBITDA ahead of expectations.
The stable outlook reflects BBWI’s commitment to its conservative financial policy, good free operating cash flow generation, and liquidity position of roughly $1.2 billion. This is expected to support the company’s ability to manage through a challenging operating environment.
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