Bath & Body Works (BBWI)

Andrew Meslow CEO
Wendy Arlin CFO
Amie Preston SVP, IR
Kimberly Greenberger Morgan Stanley
Matthew Boss JP Morgan
Sydney Wagner Jefferies
Roxanne Meyer MKM Partners
Omar Saad Evercore
Susan Anderson B. Riley
Ike Boruchow Wells Fargo
Call transcript
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Good morning. My name is Cedric, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bath & Body Works Second Quarter 2021 Earnings Conference Call. Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to turn today’s call over to Ms. Officer & Financial Works. Chief Arlin, at Body Bath Wendy Wendy, begin. you may

Wendy Arlin

July to morning, call Body ending first excited earnings Good & on you. the Works’ you Bath be for XXXX. with to and period call conference Thank my earnings CFO. welcome & today I’m quarter Works’ the Bath as XX, Body second

harbor our today As forward-looking statements any filings a you are to our remind subject that press matter in of to formality, statement our in and safe may SEC I make found need releases. we

our call me on All are Joining the results items and Meslow; press SVP discuss in the we Investor the call Preston. release. today Amie exclude CEO, are adjusted special and Andrew Relations, today on of XXXX results described

results offer business. this Our million purchase over disclosed And call up include our previously debt Secret Thank the today. tender to million, of now to to notes, XXXX, $XXX and the you. I’ll a with to Victoria’s intention turn announced Andrew. XXXX Consistent reduce outstanding by XXXX which $XXX commences our we second morning, quarter

Andrew Meslow

Thanks, Welcome good morning, first our call a and stand-alone company. to as public Wendy, earnings everyone.

reached the company. to track so have and of and Body channels and of our successful of behalf I across spin-off base, grateful Victoria’s company. on for key this stand-alone to to loyal business their to Victoria’s launch they wish poised team as the Bath we Body On a associates all and are all I’d opportunities highly like and management of performance the a to and business to Works. & capturing the & our success strong Bath categories, the Secret extend We the hard journey product as associates embark contributions of continue of to thrilled remains to industry-leading profitability. customer look associates am the their on we Board, record Secret. growth who at public growing our appreciation are leadership ahead, forward our as and Works across positions have our worked stand-alone a we well foundation as milestone Innovation the And with sincere

second done quarter line could margin We’d of to of our and increase activity like Body or growth All without hard earnings $X.XX an and million, versus demand results, operating results, work both the Turning $X.XX per efforts. earnings record partners. continued results sales commitment were and express and their of strong and to we better-than-expected record bottom We compared appreciation by not performance. adjusted our We delivered deep reported dedication so our and for second share of Bath of quarter share driven year. all & have These associates to per at last rates allow continued deliver sales or promotional on XXXX. & second we achieved compared Works’ of pull Works Body to to with back & continue XX% At XXX% income $XXX solid to million the to record The last was us and quarter growth, $XX compared million categories XXXX XX% compared to segment in Victoria’s Works, an Secret. Bath year. $XXX XXXX. Body Bath increase of and strong sales to continued

both SG&A and margin points leverage quarter to in compared buying operating basis occupancy and on rate Our the sales high XX.X% XXX and for driven income the expansion rate increased merchandise XXXX, growth. of by

environment world, that the be easy remainder business results. real as evolve of we as will extraordinary the We expect XXXX XXXX and continue our and to not lap the

growth. manner and our in I Preston. our operate very our disciplined ability over to COVID we plans phase execute related our of and a accelerate turn do safe management Amie and of to and it will product smart associates. holiday to you against customers and We to of can next and continued proactively business, With assortment know Thank to continued we are persist, the channels our online. continue optimistic about much, for I’ll our stores fall in and our Risks both

Amie Preston

Andrew. it to prepared be you join time, might questions earnings shortly in call. to concludes Thanks. any comments. I’ll end We that to happy Instructions] Thanks, take That this before the you X:XX Secret [Operator operator. our Victoria’s the back order At to over to And call turn have. plan we’d allow this


first with question Greenberger comes Morgan Stanley. That from Kimberly

Kimberly Greenberger

ask Very should forward, about and you And nice think great. sort into financials. look about the could, congratulations QX helpful. be about we Okay, and of started, about quarter, and separation. to way if the wanted thought the stand-alone business QX that us for we any any and have I the would -- on very QX if to you how how comment think

Amie Preston

We’ll Kimberly. Thanks, go to Andrew.

Andrew Meslow

thanks for Kimberly, question. the

those weeks, that’s been quarter incorporated the to our to the similar started remarks, quarter, we So quite part and in your forecast. seen with, weeks Again, second third in the in for first we performance we’ve our results has terms the we’ve said our question, seeing prepared quarter. those the guidance the of as of gotten momentum and August, satisfied of how couple second were of very are in first X

at the and to X upside are to up So those we’ve that XX% relative of But small out XX% overall relatively guided weeks quarter. that again, X. weeks XX will quarter the potentially to imply weeks

wasn’t a the point. provided your for up guidance of sure So at question. a again, very we’ve that part is basis X-year of QX that on XX% XX% forecast first this feel to at about we that I good

going around structure You business financial forward? of the the questions had

Kimberly Greenberger

stand-alone additional great. now incremental could getting overhead SG&A color on you the the of that us that of expense and company, the would past all-in give separation, we’re Just be the any or interest sort burden

Amie Preston


Kimberly. So we’ll to for Wendy go that,

Wendy Arlin


in X as about go-forward So have remarks, our we talked will the company pieces.

per last reported segment. we’ll extensively the the And But historically. guidance quarter previously reported overhead. as that corporate that was So corporate segment in the so the segment of It included SG&A, we disclosed, we’ve in overhead all-inclusive majority BBW we’ve so expense. and $XX of million SG&A. we’ll the about those The million night & pieces, Bath operating other shared $XX it Body of have also, vast Works is X be is will have

do million costs other in incur The multiyear go is point that we’ve look be multiyear will also disclosed sure that over make both separate Victoria’s I and period we we’ll technology would period. make, businesses, and way will to separate the That we X the of guidance working that into expense. area. capital key with disrupt be be will forward, as we incorporated areas in of that, of $XXX $XXX our go to deleverage, a doesn’t the the is a that into focus to be million We will we anticipate the as business technology forth XXXX. one minimizes but either a And that

Amie Preston

Kimberly. Thanks,


next question with Our comes from JP Matthew Boss Morgan.

Matthew Boss

a on quarter. Congrats nice Great.

think And So revenue mid- my top the revenue embedded show, and the the year? third continue that beyond? guidance half as preventing on growth what you algorithm, year trend the year, outlined, high gross as a of and and and beyond you more there that gross we promotional we quarter back Andrew, the consistency single-digit margin, from think anything about on is this for Wendy, growth guess question you line, in near then, to to is, I have next about just backdrop term margin

Amie Preston

We’ll those actually to both Matt. go for Thanks, Andrew questions.

Andrew Meslow

Thanks, Matt.

as or So again, provided last X-year shows XXXX, as of part month much top we with be meeting targets to interesting investor Obviously, that those so. we we on line X- like and road the growth will an results. the extraordinary aspect, XXXX, comfortable feel very the year lap over

provided. look next very exactly year. comfortable mid- But hard it’s quarter-to-quarter revenue those growth to what rate to high So in again, feel like a that might targets single-digit long-term little predict we we

to year. of read-and-react whether our decrease is, results And to the to constant we promotional or intending with opportunity say our how side, from activity into what go the would we with what On prior analysis conservative testing essentially promotion. then we or not around a there is season, need to similar plan, have levels we capability in-season increase anniversary every a promotional use I hope we determine season plan consistent and of

in activity, record-low promotional of mode last chase half the in we very that’s back activity, of had you’ll for the were promotional little year, and levels and As entire lapping. remember, time we’re frame what

both as we of pressures So a what last assume that to in embedded well. our environment forecast seeing are does margin as remarks, our we inflationary guidance. will And also promotional year. more those in impact we have are prepared slightly our Both would factors than some delineated our return experienced a

Amie Preston

Matt. Thanks, Great.


with Next comes Wissink Steph The Jefferies. question from

Sydney Wagner

stores of internal Bath & regarding just of how for then My QX is as just in expectations. you follow-up, versus in results the And Sydney terms to we on a kind what’s some rebalancing sanitization on guidance in Works. for saw This core across provide wondering color sales digital the the of question the assumed categories? compared could is that Steph. Body I’m spend

Amie Preston

Thanks, Sydney. Andrew?

Andrew Meslow


question was with, the second our channel our on versus your slightly both. results -- with again, quarter expectations expectations. total to So above more line mix slightly to above the our or within I digital for say, perform expectations direct stores or in or more strong in line and quarter less would our continuing performance less sales our But expectations, of out again,

a to close our better to That in in QX, in second and was reminder, quarter slightly XXXX. it QX. performance up what achieved As were stores in was we XXX% saw digital the on basis a the our business very around actually up X-year XX% than QX,

X-year as decline In think year. it soap business, in mentioned we on that, remarks, prepared as QX in and sanitizer terms we the our of this a did about of basis

a to the expected, year, business ago, years than at growth. it strongly, higher X basis, to ago. as was continued XX% Again, total up declined X-year year-over-year, on last it’s which where, XX% be X explosive to it up was up experiencing However, years

see we’ll forecast, assume some on Our to year-over-year in business basis. forward, that a softening that go does continue

and of we highlight even quarters than would X expect total more about that, offset articulated. were the business, seen the total, last as But our normalize the the We growth we in total the again, business, had it XX% that business up that As other prior and we’ve expected, we softened would out X-year about of with I able first somewhere leading growth what as is pleased mid-teens, will that year. to year, talked the XX% gotten consistent at end overcome to were of we strong of soaps from in the categories, that, in that’s through that very be time to of roughly what sanitizer, with here frame. the year-over-year,

Amie Preston

Thank you, Sydney. Great.


question from comes with MKM next Partners. The Meyer Roxanne

Roxanne Meyer


strong grown quarter, separation. cash My I’m congrats cash over years. really expect just a Let you’re the got flow. you’ve has generate? sense a And the but just me on and it on if add thinking on Bath free us the going that cash Works past what buyback today, alone to my off you Obviously, you How congratulations wondering few just of question free deploy & debt is Body the excess announced give generally, could flow what to how forward? you’re looking about. much

Amie Preston

Roxanne. Thanks, Wendy?

Wendy Arlin

Sure, cash mean, flow, our Roxanne. commented you Yes, business know about you I well.

seasonal business. are a We

typically, best our fourth into cash usage us so quarter we a to of important looks QX, The as And is build the quarter. fourth as extremely period this us it’s I’m And business grown going to inventory guide for basis. not over business in sure, as history at generation. terms here, you it the look just much the is has given multiyear a of so flow that cash

what go we’ll say, to at is do generate flow, and We cash we’re about to forward. through the I’d -- what XXXX, period get important So means we’ll quarter allocation calendar will capital and look the to as think fourth we cash. we flip our planning that

our terms we the offer the In fall $XXX -- plans tender season, executing as announced for million. we for we’re a today, of

we authorization In addition, in July. we have that our billion $X.X remaining announced about on $XXX million

end work we as Board is allocation balanced we’ll $XXX with million over execute to a intent the the fall our to in Directors holiday prospectively. period, of to way. So And our the get of again, determine that capital season

Amie Preston

Thanks, Roxanne. Great.


Our comes next Evercore. from question Omar Saad,

Omar Saad

maybe discussion, home I bit category detail more a around wanted to the little follow up on fragrance. get

attracted? any consumer sanitizers How especially what down, sticky? business, shop at back-to-school category? world the of Some that to are doing soaps well. Especially customers as the that’s and that staying the reopens, and And if the seeing in you’re are home return-to-office is really the on and new continuing customer obviously, fragrance in signs trends they’re franchise

Amie Preston

Andrew? Omar. Thanks,

Andrew Meslow

Omar. Thanks,

continues category, fragrance on a well, base. X-year was heart question as seen as it’s we of where relative care, be our prior-to-pandemic the through how strong around really think the though, compare the growth infer that think right which of the terms your as to in that decline on soaps big quarter, the gets, point there and to other seeing of what side, existing has we’ve growth sanitizers, I good out, category news actually customers is basis that think, important to well obviously, in have pandemic a are true. I So to behavior second and customer home strong. the to you’re year-over-year body the their couple I points. we And do And in our very that saw gained

had in closure seen in all prior in in seeing So a year first the of a customer actually row of than stores our XXXX, of one, we the XX-day XXXX have half fewer quarters saw X we we of now because year growth. of the where after customers

willingness we’ve to customers. prior very to spending existing basis, And customers a And Investor finished And terms to as would on customers, Works, year be about appear their gained we’ve rolling in the of do their news improvement in major up say in and their well engagements obviously, in-store, so in significantly both see that channels, along to where journey, now categories. X on we Body the as of historical the customers talked & XXXX. we’ve all across in performing our habits across shop X and, profile our shop those customers, terms Days, our while and behavior early calls pretty to new to digital XX the we’re in of XXXX is had of I in as our that good that Bath similarly continued and with new the in

customer ratios and higher So our significantly a we’ve again, single-channel we occurs, either than single-category higher in performing see spend those that higher customer. as of ways. shared, when continue X to customers And a or is

see terms through So very that so far to of pleased here with what we move able experiencing as we’re in behavior XXXX. we’ve been the customer in

Amie Preston

Great. Thanks, Omar.


question comes Anderson B. Riley. Susan Your from with next

Susan Anderson

and particularly talk you other you as to in also then wondering if maybe And relates was in versus expansion would about expanding the could quarter. I’m beauty not I AUR category it maybe into beauty sales product the then expect categories. you to mentioned BBW, when start if at unit more also, sure

Amie Preston

Thanks, Andrew? Susan.

Andrew Meslow


our we have be So of multiyear Bath categories talked all our we over than as we’re the not well. historically, to on cells of a We’ll over which business as where $XX as to have category on first next been part store pipeline as may a test Investor strong billion to a will yet-to-be-determined new the would out Works of your said, ideas & question, driver different seeing really Day, laid from we different a to the emerge driving about X test things pretty That X reliant our have testing years, groups. lots path Body looking thoroughly that in become be we small in the also digital looking of several to business that in product And online years. next standpoint, we done growth.

the hair the gamut products, further talked getting business, into run cleaning the into home extensions or skin about, cetera. those the line care that’s et care we’ve into business, As at looking from products potentially ideas getting whether business, laundry within

of are, different in that ideas pipeline. again, lots So the

those organic discussed that those, prior, categories sell which as Body testing in. as third-party both brands something we Works’ has as to customer way & with most might our to understand We the well a development the partnering of stores, Bath internal will in emerge as in had be interest

beyond. describing So again, XXXX the this will a things and the in half up of I’m little lots ramping in those more more Most bit of but pipeline. year, different in much be tests that back of

of terms In question AUR. your on

expansion a year, So we basis, a more basis. XX%, units basis. still units of with, over a up out stores but was similar, AUR and up comparable On to that X-year on slightly see helps. X-year a business, line, basis, the a having more closed obviously, AUR, up last on in Hopefully year. on been last did amount X-year for the X-year

Amie Preston



from Boruchow, comes question next Our Ike Fargo. Wells

Irwin Boruchow

of for The $XX Or or kind ones. kind I’m just embedding from -- what any going just the are guided flowing quick kind on what’s curious escrow, embedding that offset pricing anything? cost I’m costs you in and of you there? explain cash on And million inflation into the just perspective. Two $XX to P&L? Wendy, million. curious, then, you are margin are you $XXX how you’re just can is a the business the million just exactly of planning those

Amie Preston

Thanks. go first. Okay. Andrew to We’ll

Andrew Meslow

Ike. Thanks,

the will increases the hard range, inflation can. that much as to a and So pressure range -- of why on part But working will it’s as reason be we real forecast they it of pressure, supply to is obviously the costs offset there we’re mitigate pressure, to input wage that business the to are product faces, run -- will and from cost transportation pressure. there be and gamut

the our promotional work do product hard we that strategy we’ll increases. and rest to On this And our strategies, again the try historically, to certainly input year. try on portion, cost offset very to of quarter ticketing this and

coming activity already, more I where base in one to the challenging. from was more promotional even curtailing think history much the will that is much there last it’s so that year be that which important activity understand, we’re less though, promotional

line. come actually a margin So assume that a forecasts quite bottom that our inflationary to that through of way to do will say long-winded the pressure bit

Amie Preston

Thanks, Andrew. Wendy?

Wendy Arlin

million. the $XXX Yes,

debt, the and prior was spin they to quarter Secret issued million $XXX end. actually as and $X completed of disclosed, has to it prior billion of So Victoria’s issued

look essentially balance a our it’s -- consolidated So sheet, if it’s up. essentially you reported gross at

cash the on and in it’s sheet. bank, So proceeds went the then But to the long-term so items as debt. basis, balance we cash of since from have restricted we a on part and consolidated speak, the spin. Secret the end, the the had the Both sitting offset the both those sitting Victoria’s to issuance at down -- quarter in at of escrow is

Amie Preston

Body all Thanks. Bath we’d the morning, continuing we that’s to like Works. Unfortunately, have you thank & for interest but Great. your this in time


conference. you. today’s that Thank concludes And

disconnect may time. You at this