Bath & Body Works Inc Q3 2024 Earnings Call Transcript

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

Question: Lorraine Hutchinson - BofA Global Research (US) - Analyst : Good morning. You said on the slide deck that you don't expect candle normalization to have a material impact on the business in 2025 and beyond. Is this a change? And what drives your confidence that this pressure is behind you?

Question: Lorraine Hutchinson - BofA Global Research (US) - Analyst : Thank you.

Question: Mark Altschwager - Robert W. Baird & Co. Incorporated - Analyst : Good morning. Thank you. I wanted to ask on gross margin. I think this was the first quarter in quite some time where you didn't deliver upside to the gross margin guidance and even with some of the outperformance in the fuel for growth initiative. So hoping you can just talk us through some of the puts and takes there. And then just bigger picture, guidance implies about 17% EBIT margin this year. Is that the right level for this business? Or do you think the sustainable top-line growth will require higher levels of investment moving forward? Thank you.

Question: Matthew Boss - J.P. Morgan Securities LLC - Analyst : Great. Thanks. So Gina, could you elaborate on category trends versus plan that you saw in the third quarter and maybe the cadence of traffic that you saw as the quarter progressed, what you're seeing so far in November? And then for Eva, just on gross margin, if you could maybe bridge the 40 basis points gross margin expansion in the fourth quarter, just maybe walk through the drivers. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2024 / 2:00PM, BBWI.N - Q3 2024 Bath & Body Works Inc Earnings Call

Question: Alex Straton - Morgan Stanley & Co. LLC - Analyst : Perfect. Thanks so much. Just first on revenue, it looks like when you adjust out the 53rd week dynamics, you actually are delivering that growth you hoped for in the back half. Do you see it that way? And then what's holding you back from the mid-single digit to high-single digit hopes you have longer term? And then one quick final one is just on anything you can provide on the margin profile of the adjacencies as they become a bigger part of the revenue base. Thanks a lot.

Question: Paul Lejuez - Citi Investment Research (US) - Analyst : Hey. Thanks, guys. Sorry if I missed it, but what was the third-quarter merch margin and what is your plan for merch margin in 4Q? And anything you could share on AUR on like-for-like and what's driving that mix? The AUR being up 1%, what is driving that higher? Thanks.

Question: Simeon Siegel - BMO Capital Markets - Analyst : Thanks. Hey. Good morning, everyone. Nice to see the progress. Eva, how much was marketing as a percent of sales? How are you thinking about that going forward? And then, Gina, just can you -- maybe to dig into the collab learnings a little bit. I know it's still relatively early, but you have a few in place. I know you're great with data. So I'm just curious how you would frame the learnings and the benefits maybe you're seeing so far. Would you characterize them as driving new customers, driving greater frequency of existing, boosting the current shopper's annual spend? Did it smooth out otherwise seasonal purchases? I'm just trying to think through if you could share -- it seems like you're creating catalysts as opposed to relying on what had been specific holidays or seasons do that for you. So any color there would be helpful. Thank you.

Question: Kate McShane - Goldman Sachs & Co. LLC - Analyst : Hi. Good morning. Thanks for taking our question. Last quarter, you mentioned that the adjacent categories were performing well, particularly with existing customers, but it was taking some time to build the brand awareness and generate a greater number of new-to-brand customers. I don't think we've heard similar language today and just wondered if anything has changed there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2024 / 2:00PM, BBWI.N - Q3 2024 Bath & Body Works Inc Earnings Call

Question: Jonna Kim - TD Securities (USA) LLC - Analyst : Thanks for taking my question. Obviously, you had some nice momentum with newness this year. Could you talk about how much of the sales is driven by newness now and, as we think about next year, if you plan to ramp that up? And just also wanted to get some color around the cadence of newness as well as far as you can provide some color around it. Thank you so much.

Question: Ike Boruchow - Wells Fargo Securities, LLC - Analyst : Hey. Good morning, everyone. Eva, maybe first one for you, just on the international side, maybe excluding the calendar shifts, what's the expectation for 4Q and the timing of return to growth, given the headwinds there? And then the follow-up for Gina, it doesn't sound like it, especially based on your tone and your Q4 outlook, but just because of the gross margin, the lack of robust upside you guys have been putting up, but also the revenue upside, just trying to understand, is there any kind of strategic shift REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2024 / 2:00PM, BBWI.N - Q3 2024 Bath & Body Works Inc Earnings Call in your view where you need to give up a little bit more of the gross margin to drive more productivity and more market share gains? It doesn't sound like that's what you're trying to message, but I just want to double-click into that. Thanks.

Question: Olivia Tong - Raymond James & Associates, Inc. - Analyst : Great. Thanks. Good morning. I wanted to ask you about loyalty as it's continued to gain some really nice momentum and what your thoughts are from here, how much more opportunities there to leverage your program, learnings that you've made from them. And then in terms of the manufacturing, great to hear about the 85% that is in the US. I was wondering if you could just discuss your competition, if there's any color that you can provide on how much exposure your competition has to overseas manufacturing. That would be very helpful. Thank you.

Question: Krisztina Katai - Deutsche Bank Securities Inc. - Analyst : Hi. Good morning, and thank you for taking the question. I wanted to ask about your recent launch of TikTok Shop and then just building on that early success. Can you share maybe what the plans are to further leverage this platform to reach younger demographics, particularly during the holiday season? And then secondly, within that, just what are some of the key metrics that you are using to measure the effectiveness of these campaigns? Thank you.

Question: Dana Telsey - Telsey Advisory Group - Analyst : Hi. Good morning. Nice to see the progress. As you think about the increase in store traffic that you mentioned, off-mall versus on-mall, were there regional trends to that? And following on the digital performance, what did you see in BOPIS?

Question: Marni Shapiro - The Retail Tracker - Analyst : Hi, guys. Congratulations on a nice quarter. Could you talk a little bit about something I've noticed? I can't remember the exact name of it, but I think it's called Scent-Scriptions. I'm curious, when you rolled that out, if there's been good uptake and is it across all the products? It was on a bunch of the ones I clicked through once I found it. I was curious about that.

Question: Korinne Wolfmeyer - Piper Sandler & Co. - Analyst : Hey. Good morning. Thanks for taking the question. So AUR is trending nicely, it seems like, primarily due to mix. Can you just speak a little bit on how you're viewing the AUR opportunity, both in the near and longer term? How much more room do you have to drive up those price points from a mix standpoint? And then from just general pricing actions, how much more flexibility do you think you have there? Thanks.