Updated Nov. 16 4:39 p.m. EST
Bath & Body Works beat Wall Street forecasts on the top and bottom lines in the third quarter, but the crucial holiday season is not looking so strong as consumer demand for candles burns out.
The retailer reported net sales of $1.56 billion for the third quarter ended Oct. 28, a decrease of 2.6 percent compared to a year ago, but above Wall Street estimates for $1.55 billion. Net income was $119 million, up from $91 million in 2022. Adjusted earnings per diluted share was 48 cents, again beating analysts’ forecasts for 35 cents.
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During the quarter, sales of soaps and wallflowers increased, body care sales were flat and candles and sanitizers declined as expected.
Candles soared in popularity during the pandemic when consumers were stuck at home, but since then demand has waned and Bath & Body Works president Julie Rosen does not know when it will pick up again.
“As far as the candle normalization, I really cannot circle a date on the calendar. And in fact, no one can. That being said, we are innovating in these categories. We are still the market leader as we hold our dominant market share in candles and we gained market share in sanitizers year to date. And we are also working very hard to diversity our sales mix,” she said during an analysts’ call.
That diversification includes lips, which it is using to target younger shoppers.
To capture this opportunity, it has relaunched its in-store assortment and the visual presentation of lip products across a limited number of stores.
Then there’s men’s grooming, which launched last quarter. So far, products have been performing well, according to Rosen. Hair and laundry have been introduced too.
However, the company downgraded its full-year sales forecast. It now expects net sales to decline 2.5 percent to 4 percent. Previously it had forecast a drop of between 1.5 percent and 3.5 percent.
The company expects fourth-quarter net sales to decline 1 percent to 5 percent compared to $2.89 billion in the fourth quarter of 2022.
Gina Boswell, chief executive officer of Bath & Body Works, said, “As we close out the year, our team remains focused on delivering a great holiday assortment and omnichannel experience for customers while leveraging our agility to chase demand. Amidst the ongoing macroeconomic pressures affecting consumers, we continue to execute against our strategic initiatives to drive growth and create long-term value.”
Its share price closed down around 7 percent to $30.10.