Retailer Bath & Body Works Boosts Income by Reducing Expenses, Forcing Mall Exodus
In the dynamic world of retail, Bath & Body Works is navigating through a period of change. According to industry analyst Neil Saunders, the direct-to-consumer part of the body care market may be less developed, but several brands are making progress. This comes as Bath & Body Works prepares for a challenging year, with muted guidance for margins and sales adding to the pressure from activist investor Third Point.
New CEO Gina Boswell, who took over about three months ago, is prioritizing a plan to achieve $200 million of annual cost savings across the company. To achieve this, Bath & Body Works has hired external advisers to assist in a top-to-bottom review of the business.
Last year, the retailer closed 48 mall-based stores permanently while opening 95 new off-mall stores in North America. This shift in strategy, focusing on off-mall locations, aligns with the advice from GlobalData Managing Director Neil Saunders, who suggests that Bath & Body Works needs to seek growth outside of traditional malls.
The expansion into new areas is not limited to geographical shifts. Bath & Body Works is also considering expanding into new adjacent categories to counter increased competition. The growth opportunities identified include the expansions of men's offerings, international operations, and new adjacent categories.
However, the path forward is not without challenges. Third Point, an activist investor, has criticized excessive compensation, stagnation, and other issues within Bath & Body Works' board. The investor intends to nominate new members during the upcoming shareholders meeting.
Despite this, Neil Saunders believes that Third Point's views are an overreaction and that Bath & Body Works is a well-run business that gets most of the fundamentals of retailing right. He suggests that even small movements in the market are unhelpful for Bath & Body Works in the current environment.
Bath & Body Works' Q4 net income decreased by 26.9% to $434 million, and the net sales for the quarter saw a 4.6% decrease, reaching $2.9 billion. Excluding a $9.4 million write-off of tornado-damaged inventory, the adjusted net income from continuing operations reached $599.7 million.
As Bath & Body Works moves forward, it will be interesting to see how the company balances the pressure from investors with its strategic growth plans. The retailer's focus on off-mall locations and new product categories could provide a path to success, but only time will tell.
- Bath & Body Works, with a focus on cost savings and strategic growth, has hired external advisers to review the business, aiming to achieve $200 million in annual savings, a move that aligns with GlobalData's advice to seek growth outside of traditional malls.
- As the retailer prepares for a challenging year, with muted guidance for margins and sales adding to the pressure from activist investor Third Point, AI and finance industries might play crucial roles in helping Bath & Body Works navigate through the obstacles and make informed decisions.
- In the ever-evolving retail environment, Bath & Body Works is expanding into new areas beyond geographical shifts, considering the expansion of men's offerings, international operations, and new adjacent categories, and it will be fascinating to observe how these growth strategies impact the company's success in the future.
