Bath & Body Works Pops 4.3% after Upbeat Q2 Results

Shares of Bath & Body Works, Inc. (BBWI), the American specialty retailer formerly known as L Brands, jumped almost 4.3% in Wednesday’s extended trading session after the company delivered robust second-quarter results.

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The current quarter marks the first quarterly results for Bath & Body Works after it announced its split from Victoria’s Secret (VSCO) earlier this month. The current quarter, however, includes the results of both the companies.

Adjusted earnings of $1.34 per share significantly beat analysts’ expectations of $0.83 per share and more than quadrupled from the adjusted earnings of $0.25 per share reported in the prior-year period. (See Bath & Body Works stock charts on TipRanks)

Additionally, net sales jumped 43.5% year-over-year to $3.32 billion and exceeded consensus estimates of $1.68 billion. Notably, the prior-year quarter’s results were impacted by store closures for half of the quarter due to the COVID-19 outbreak.

On a stand-alone basis, Bath & Body Works’ net sales grew 36% to $1.704 billion compared to $1.253 billion in the prior-year quarter. Notably, net sales grew 54% versus pre-pandemic levels in the second quarter of FY2019.

Bath & Body Works CEO Andrew Meslow commented, “Anchored by our leadership position spanning key product categories, combined with our continued strong performance across channels and our growing, loyal customer base, Bath & Body Works is well positioned to continue delivering growth and profitability.”

Meslow further added, “As we look to the remainder of the year, we will continue to focus on executing our long-term growth strategy as a standalone business and driving value for shareholders.”

Looking ahead, the company provided guidance for the third quarter. Adjusted earnings are forecast in the range of $0.55 to $0.60 per share, while the consensus estimate is pegged at $0.58 per share.

Following the Q2 results, UBS analyst Jay Sole decreased the price target on Bath & Body Works from $111 to $90 (51.8% upside potential) but reiterated a Buy rating.

Sole takes into consideration the impact of the Victoria’s Secret separation and updated estimates into his model. However, he believes that the company will deliver better-than-expected earnings growth in the coming quarters, which is likely to lead to P/E expansion.

Overall, the stock has a Moderate Buy consensus rating based on 12 Buys, 3 Holds, and 1 Sell. The average Bath & Body Works price target of $81.56 implies 37.6% upside potential from current levels.