Updated Feb. 29 2:51 p.m. EST
Bath & Body Works beat Wall Street forecasts in its fourth-quarter fiscal 2023 earnings, but 2024 is set to be more challenging amid continued weak demand for candles, its biggest product category.
The retailer reported net sales of $2.9 billion for the 14-week fourth quarter ended Feb. 3, an increase of 0.8 percent compared to a year earlier, beating Wall Street forecasts for $2.84 billion.
Net income was $579 million, compared to $428 million last year. Adjusted earnings per diluted share was $2.06, once again beating analysts’ estimates for $1.88.
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However, fiscal year 2024 is unlikely to match last year’s performance, according to the company’s full-year forecast. Bath & Body Works is forecasting net sales to range between a decline of 3 percent to flat. Full-year earnings per diluted share is expected to be between $3 and $3.35, compared to $3.84 in 2023.
“We had a strong holiday. We are well positioned for a strong spring and summer together with all the newness to come, and we are cautiously optimistic about customer spending for the year. However, we are seeing macroeconomic pressures continue, and our largest product category, candles, continues to normalize,” said chief executive officer Gina Boswell during a call with analysts.
“Taking headwinds and tailwinds into consideration, we expect net sales and operating income to be down on a year-over-year basis as we begin the year,” Boswell added. “We then expect to see net sales inflect and begin to grow during the second half of the year. Importantly, the high end of our outlook contemplates holding operating income margins in line with 2023, even as we continue to reinvest in the business.”
Candles soared in popularity during the pandemic when consumers were stuck at home, but since then demand has waned. Home fragrance was down low-single digits in the fourth quarter compared to last year, as anticipated.
To combat this, Bath & Body Works has been working on diversifying its assortment, launching hair, laundry and men’s grooming products. In particular, the latter continues to be its fastest-growing category in body care.
The retailer has also doubled down on lip products, which have attracted new, younger customers. To capture this opportunity, it relaunched its in-store assortment and the visual presentation of its lip products across 380 stores, and the goal is to complete the rollout of this fixture and expanded assortment to all North American stores by July of this year.