Bath & Body Works reported mixed second-quarter results as sales declined, but CEO Daniel Heaf said early signs suggest their turnaround strategy is beginning to gain traction.
The company’s net sales for the 13 weeks ended August 1 fell 2.3 per cent to $1.51 billion from $1.55 billion a year earlier. Operating income increased to $216 million from $157 million, while net income rose to $118 million from $64 million.
Heaf said results exceeded the company’s expectations, driven by stronger profitability and improved brand visibility.
“Underlying business trends remain pressured, but we are seeing further evidence that elements of the Consumer First Formula are beginning to work,” he said.
“We delivered sequential improvement in body care, product innovation, improved brand discoverability, and continued momentum across our marketplace partnerships.”
The retailer is also expanding beyond its own stores through partnerships with Amazon and Ulta, a strategy that GlobalData MD Neil Saunders said could help revive growth after demand normalized following the pandemic.
“The solution is to widen the appeal beyond the core shopper, which is something the management team is now sensibly focused on,” he said.
“We are already seeing this play out across several initiatives such as expanded distribution on Amazon and a curated range at Ulta stores.”
However, Saunders said broader distribution alone will not be enough to return the retailer to sustainable growth.
He recommends Bath & Body Works refresh its core product range, arguing its products have changed little in their overall look and feel, creating “a bit of staleness in the range”.
Saunders pointed to the recently launched Fruit Fusion collection as an example of how the retailer could modernize its assortment through updated packaging and presentation.
Although the collection launched late in the quarter and had little impact on sales, he said it offers a blueprint for how the brand could overcome its longer-term growth challenges.
Looking ahead, Bath & Body Works narrowed its full-year sales outlook to a decline of between 4 per cent and 2.5 per cent, compared with sales of $7.29 billion last year. It expects third-quarter sales to decline between 5 per cent and 2.5 per cent year on year.
“Our priority remains improving the trajectory of the business while continuing to build the product, brand, and marketplace capabilities that we believe will position Bath & Body Works for sustainable, durable growth next year,” Heaf concluded.
