Scent of trouble? Bath & Body Works forecasts disappointing year amid economic headwinds

Bath & Body Works is bracing for a challenging year ahead, forecasting annual sales and profit below expectations as the company faces a confluence of economic headwinds.

The retailer is citing the impact of US tariffs on Chinese imports, as well as persistent weakness in consumer spending on its signature fragrances and scented candles, as key factors impacting its outlook.

Shares of the Ohio-based company fell 4% in premarket trading on Thursday, reflecting investor concerns about the company’s prospects.

High interest rates, lingering economic uncertainty, and years of elevated inflation have prompted Americans to tighten their purse strings, impacting discretionary spending on non-essential items like home fragrances.

Retail sales in the US dropped the most in nearly two years in January, underscoring the broader pressures facing the retail sector.

Compounding these challenges, some customers are opting for cheaper, private-label alternatives, further eroding Bath & Body Works’ market share.

Bath & Body Works is forecasting fiscal 2025 net sales growth of 1% to 3%, falling short of analysts’ estimates for a 2.8% rise, according to data compiled by LSEG.

The company also expects full-year 2025 earnings per share of $3.25 to $3.60, compared with expectations of $3.62.

The company forecasts reflect the impact of tariffs enacted by the US on goods imported from China, but excludes other potential tariff changes.

Despite the downbeat outlook, the company’s holiday-quarter results exceeded expectations, thanks to targeted marketing and promotion efforts aimed at attracting younger consumers.

This targeted marketing proves it can prove that a focused effort can have positive short term results, which they should continue to take advantage of.

On an adjusted basis, Bath & Body Works posted a profit of $2.09 per share for the quarter ended February 3, surpassing estimates of $2.05 per share.

Its third-quarter sales also edged past expectations, falling 4.3% to $2.79 billion from a year ago, narrowly beating estimates of $2.78 billion.

Soothing investors: $500 million share buyback

In an effort to reassure investors amidst the challenging outlook, Bath & Body Works announced a share repurchase program of up to $500 million.

This strategic financial maneuver aims to boost investor confidence as well as increase shareholder return as the company works through a difficult period.

While Bath & Body Works is facing significant headwinds from tariffs and a cautious consumer environment, the company’s strong holiday-quarter performance and share repurchase announcement suggest that it is taking steps to manage these challenges and position itself for future growth.

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