Bath & Body Works Inc at Evercore ISI Consumer & Retail Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Warren Cheng - Evercore ISI - Analyst : So Eva just wanted to first start with your top line outlook. You're expecting a return to sales growth in the second-half. Two of the big drivers there being a pretty big step up in marketing, which started in December as well as some major new product launches. Can you give us an update on the impact you're seeing from those thus far and how those initiatives and other drivers later on to that sales outlook as we get into the second-half?

Question: Warren Cheng - Evercore ISI - Analyst : Got it. And you just talked about how Beauty Park allows you to test and learn. I think one of the things that sets Bath & Body Works apart is it also allows you to read and react at a speed that other retailers can't. So how quickly can you react if something isn't working? And can you maybe just walk us through an example of a time recently that, if a product or collection wasn't working, how that read and react capability kicked in?

Question: Warren Cheng - Evercore ISI - Analyst : Thanks. That's a really useful color. And then if we just pivot to promotions and some of the new tools you've gained since you've launched your loyalty program, it's ramped up to 80% sales penetration in less than 2 years. Can you just talk about how that's changed your approach and capabilities with promotions? What's changed? What's still to come? And what are your expectations around promotional pressure for the year?

Question: Warren Cheng - Evercore ISI - Analyst : Great. And maybe if we switch to AUR for a second. In 1Q, it was just a touch lighter than you guided the quarter before. It was a couple points better. I know it's hard to be too precise here because there's just a lot of factors that feed into AUR. I think your latest thinking is for some improvement in the second half. How should we think about the biggest headwinds and tailwinds to AUR as we think about the second half of the year playing out?

Question: Warren Cheng - Evercore ISI - Analyst : Got it. Okay, so AUR is going to be one component of the merge margin algorithm in the second half. So if I just zoom out, you're lapping some pretty tough merge margin compares starting in the third quarter. Your guidance implies still some expansion in the second half, something along the lines of 30 basis points, 50 basis points. Can you just parse out for us, other than AURs, some of the other moving pieces that are driving that merge margin outlook as we get into the second half of the year?

Question: Warren Cheng - Evercore ISI - Analyst : Got it. And your latest guidance, or I think the latest long-term guidance you've given implies there's still some margin opportunity relative to, I think the latest goal is 45% gross, 20% EBIT. Is that still your latest thinking in terms of the margin structure that the business can maintain here? And can you walk us through the multi-year path from here to there?

Question: Warren Cheng - Evercore ISI - Analyst : Okay. So that was actually the next question I had was just on that cost savings plan. So it was originally $250 million last year. I think that came in a little bit faster than expected. You added on another $100 million. You're almost halfway through that in the first quarter. How should we think about cost efficiencies as a driver of margin going forward? Could this be a normalized component of the algorithm as we look ahead?

Question: Warren Cheng - Evercore ISI - Analyst : Got it. And maybe we could just shift to the store opportunity. One thing that stands out about your story, there's a very healthy new store component of the algorithm the last couple of years. Can you just give an update there? Where are you building these new stores that are still driving such solid returns? And how much runway do you see from here?

Question: Warren Cheng - Evercore ISI - Analyst : Got it. And then as you approach that two-thirds off-mall goal over time, can you talk about how much of that is going to be a shift from existing mall location? How much is going to be greenfields? I think today it's about half and half. So as I think about progression is there a big net opportunity? How much closure is closures are embedded in that algorithm?

Question: Warren Cheng - Evercore ISI - Analyst : Got it. And then maybe we'll shift to higher level question what's your assessment of the overall health of your core consumer? And maybe you could just add a category lens to that, which categories do you think are most discretionary, which are more stable -- not value-seeking environment -- consumer environment here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 11, 2024 / 3:00PM, BBWI.N - Bath & Body Works Inc at Evercore ISI Consumer & Retail Conference

Question: Warren Cheng - Evercore ISI - Analyst : So maybe we can just double click on loyalty. And you say you're at 37 million new members. You've talked about before, 80% penetration, even though it's only launched less than two years ago. Can you talk about what's you're most excited about in terms of the loyalty program looking forward? I think you've kind of -- a really good job at, step one, increasing their penetration and usage of the loyalty program. But as you roll out the capabilities and look to drive engagement, change the processes, what are you most excited about?

Question: Warren Cheng - Evercore ISI - Analyst : Thank you. And then we'll just shift to international. For the international consumer, how different is the brand positioning? And if we look at the last results, obviously the conflict in the Middle East had a huge impact. Is there a way to parse out the impact there? Is there a way to look at kind of what the ad retail sales trends look like, excluding the Middle East?

Question: Warren Cheng - Evercore ISI - Analyst : Got it. That's very, very helpful. And can we just talk a little bit about the new categories? First, how did you kind of calibrate these were the correct categories or these were the right categories to pilot? And you've now a few months in stores for some new categories like laundry and hair. Can you talk a little bit about what you're learning about the purchase behavior there? How would you score customers extending the basket versus new customers?

Question: Warren Cheng - Evercore ISI - Analyst : Great. And just as a reminder, if anyone has any questions, feel free to put them in the chat box. So we'll go to a couple of audience questions here. The first one, just to follow up on your earlier comments that the second half outlook embeds some normalization, candles and sanitizers. How much further normalization might we see from here? And can you talk about the plan for managing the floorspace as some of these new categories come online? So I guess the floor space for candles and sanitizers. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 11, 2024 / 3:00PM, BBWI.N - Bath & Body Works Inc at Evercore ISI Consumer & Retail Conference

Question: Warren Cheng - Evercore ISI - Analyst : Another question that came in is on a couple of components of the cost structure here, freight and labor. There were some big investments in labor early last year. What are you seeing in terms of wage pressures? What's embedded in the guidance? So the question there is on both freight and labor pressures in the second half.

Question: Warren Cheng - Evercore ISI - Analyst : Got it. And I think we just have time for one more question. This question is on the technology investments. So you made some heavy technology investments in the last year. What are the capabilities gained? How should we think about the technology investments this year versus last year? And how do you measure the returns on this investment?

Question: Warren Cheng - Evercore ISI - Analyst : Perfect. That's all the time we have. This sounds like a perfect starting point. Thanks, Eva, for all the great insights. Have a nice day, everyone.