Bath & Body Works (BBWI) Q1 2025 earnings summary

Executive summary

• Q1 2024 net sales were $1.384 billion, down 0.9% year-over-year but above guidance, driven by strong U.S. store growth and new product launches, while international sales declined due to Middle East disruptions.

• Diluted EPS was $0.38, up 15% year-over-year on an adjusted basis, exceeding guidance, supported by cost optimization and fulfillment efficiencies.

• Operating income rose to $187 million, with operating margin improving to 13.5% from 12.9% year-over-year.

• Customer engagement and loyalty reached new highs, with active loyalty members up 18% to 37 million, driving 80% of U.S. sales.

• Strong execution on innovation, omni-channel investments, and viral product launches drove outperformance and brand engagement.

Financial highlights

• Gross margin improved to 43.8% (up 110 bps year-over-year), aided by lower transportation costs and improved merchandise margin.

• SG&A expense rate was 30.3% of net sales, up 60 bps year-over-year, reflecting higher marketing and wage costs, partially offset by $40 million in cost savings.

• Operating income was $187 million, or 13.5% of net sales.

• Cash and cash equivalents at quarter-end were $855 million.

• Interest expense decreased to $82 million from $89 million year-over-year.

Outlook and guidance

• FY 2024 net sales expected to range from down 2.5% to flat, with growth anticipated in the second half as new marketing and product launches scale.

• FY 2024 EPS guidance is $3.05–$3.35, raised at the midpoint.

• Q2 2024 net sales expected to decline 2% to flat; EPS guidance $0.31–$0.36.

• Capital expenditures for 2024 are planned at $300–$325 million, focused on stores and technology.

• Full-year free cash flow guidance is $675 million–$775 million.