On Thursday, Piper Sandler adjusted its outlook on shares of Bath & Body Works Inc. (NYSE: NYSE:BBWI), lowering the price target to $39 from the previous $47, while keeping a Neutral rating on the stock.
The revision reflects concerns over the company's revenue and profit margins, as recent data suggests a downturn in consumer sentiment and a drop in summer sale period traffic compared to last year. The firm noted that while there is potential for improvement in gross margins, the current consumer sentiment doesn't show significant positive changes.
Bath & Body Works has seen its shares decline, losing the gains it had made following its first fiscal quarter results. This downturn is attributed to renewed worries about the company's top-line growth and margins.
Piper Sandler pointed out that some investors are optimistic about the gross margin percentage, especially if promotional activities remain unchanged and there is an improvement in the product mix and input costs do not increase.
However, the firm also highlighted the challenges faced by Bath & Body Works, including lower year-over-year traffic during the key summer sale period, as reported by placer.ai. Moreover, there are indications from Home and Personal Care (HPC) industry peers that input costs may start to rise again. With only two months into the quarter, Piper Sandler suggests that the concerns raised by bearish investors may have merit.
Looking beyond the second fiscal quarter, Piper Sandler expressed uncertainty regarding the company's expectations for modest average unit retail (AUR) expansion. The firm anticipates that it could take time for Bath & Body Works to realize more cost efficiencies, particularly with the volatility in promotional and input costs. Consequently, this may limit the company's earnings potential and the possibility for share price appreciation in the near term.
In other recent news, Bath & Body Works has reported significant developments. The company's first-quarter earnings for fiscal 2024 exceeded expectations, with earnings per diluted share (EPS) rising to $0.38, a 15% increase from the previous year. Net sales reached $1.4 billion, despite a marginal decline of 0.9%, surpassing company forecasts.
The firm BMO (TSX:BMO) Capital maintained its Outperform rating on Bath & Body Works, with a steady price target of $55.00, indicating confidence in the company's direction and future performance. TD (TSX:TD) Cowen also upheld its Buy rating for Bath & Body Works, highlighting the company's successful emphasis on new products.
Bath & Body Works made amendments to its corporate bylaws and held its annual stockholder meeting, during which ten directors were elected to the company's board, and Ernst & Young LLP was ratified as the independent registered public accounting firm for the fiscal year 2024. These are the latest updates in the company's recent developments.
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