Bath & Body Works has reported a 2.1 per cent decrease in sales for the second quarter, which an analyst described as a “modest disappointment” amid a challenging market and heightened competition.
The company’s net sales for the quarter ended August 3 were down to $1.526 billion. The decline also came off the back of a 3.6 per cent drop in the prior year.
GlobalData MD Neil Saunders said the company is now back in the territory of a more substantial decline in sales after a better performance over the last two quarters.
“This comes as a modest disappointment as there was previously a sense that Bath & Body Works was seeing the bottom of its period of decline,” he remarked.
While it is reasonable to see the continued moderation after a boom period, there is no doubt that the numbers are worsened by a challenging external market and heightened competition, Saunders elaborated.
Within the US and Canada, sales from stores were virtually flat at -0.3 per cent, while direct sales fell 9.7 per cent. According to the analyst, some of this is down to the outsized growth Bath & Body Works had online during the pandemic.
In store, the retailer’s performance remains solid with high standards of merchandising and customer service, Saunders said. The company also does a fantastic job of showcasing new products and fragrances which entices customers into bulk buying and spending, he added.
However, replicating this magic is far more difficult online, as the competitive set online is far wider with a vast array of specialists, the analyst said. Another problem is the inability to smell and sample products, which is an important part of the dynamic in store.
Saunders added that the general consumer market remains soft with very shallow growth in home fragrances, posing another challenge for the retailer.
Despite a lower top line, Bath & Body Works still managed to increase its net income by 53.5 per cent. However, it is mostly down to lower interest expense and the sale of some investments.
For the full year, the company expects net sales to decrease 2-4 per cent, with the 53rd week in FY23 representing a headwind of approximately 100 basis points.
