Bath & Body Works says its sales were better than expected in the first fiscal quarter, but an analyst believes the brand is still far from a full recovery.

The company’s net sales slid 3 per cent $1.378 billion during the quarter ended May 2.

Net income soared 74.3 per cent, mainly driven by an exceptional gain from the settlement of interchange fee litigation. Without this, net income would be down by around 9.5 per cent.  

While GlobalData MD Neil Saunders agreed with the company’s management on the fact that the numbers exceeded previous guidance, he stressed that sales are still tracking in the wrong direction.

“All this underlines the fact that while the brand is starting to stabilize performance, it remains some way off a full recovery,” he said.

Saunders noted that Bath & Body Works is not a terrible company but rather a “victim of its own success”.

The company has such a high market share in some of its categories that it not only struggles to expand but also suffers as rival brands nibble away at its sales, he said.

“For example, the number of small candle companies on platforms like Amazon and TikTok Shop is enormous. And their growth is highly impressive – and some of it has come from BBW customers diverting spend,” Saunders explained.

“Given the diffuse nature of the competition, this is a challenging issue to resolve – especially at a time when consumer spending on discretionary goods like candles is a little tighter than it once was,” he added.

The analyst said Bath & Body Works’ launch of its own store on Amazon was a partial solution to this, as it gives the brand visibility alongside smaller rivals.

Another challenge for the brand, according to Saunders, is to increase the pace of change across core product lines. He suggested the brand lean more heavily into technical and scientific innovations in areas such as product efficacy, clean formulations, and how scents are delivered in the home.  

“It is important that the company seizes the opportunity as it will allow a better fight-back against some of the smaller brands and it opens new pockets of opportunity that are not currently being exploited,” he said.

For the full year, the company expects net sales to decline 2.5-4.5 per cent.

Last year, Bath & Body Works’ net sales were down 0.2 per cent to $7.29 billion, and net income dropped 18.6 per cent to $649 million.