Bath & Body Works is ready to go international after a bruising year saw its stock fall 40%

Bath & Body Works reported a strong Q1 2025, with net sales up 2.9% to $1.4 billion and earnings per diluted share increasing 29% to $0.49, driven partly by a new Disney collaboration. Newly appointed CEO Daniel Heaf, formerly of Nike and Burberry, announced plans to expand the retailer's international presence, which currently accounts for approximately 5% of the business, with at least 30 net new international store openings planned for 2025. Despite the positive results, the company's stock is down 40% since May 2024, and it was removed from the S&P 500 earlier this year due to a reduced market capitalization.

Analysis

Bath & Body Works (BBWI) reported a robust start to fiscal 2025, with first-quarter net sales increasing 2.9% year-over-year to $1.4 billion and earnings per diluted share jumping 29% to $0.49, surpassing internal projections. This performance was partly attributed to a successful new Disney collaboration. The company has appointed Daniel Heaf as its new CEO, who, despite being only 10 days into the role, has outlined a strategy focused on significant international expansion, drawing on his prior experience at Nike and Burberry. International sales currently constitute approximately 5% of BBWI's business, and Heaf aims to scale this segment, planning at least 30 net new international store openings in 2025; 14 were opened in the last quarter, alongside 19 closures, mainly in the US. This strategic pivot occurs against a challenging backdrop: BBWI's stock has declined over 40% since May 2024, and the company was removed from the S&P 500 after its market capitalization fell to $6.6 billion, below the then-required $18 billion. The company previously cited uncertainty around tariffs for forecasting annual sales below predictions. Despite these headwinds and the anticipated financial effects of the CEO transition, Bath & Body Works has maintained its full-year 2025 guidance for 1% to 3% growth in net sales.

Key Decisions for Investors

• Investors should closely monitor the execution of the new CEO's international expansion strategy, specifically tracking new store productivity and the growth rate of the international sales segment.
• Given the stock's substantial decline and removal from the S&P 500, the current valuation should be weighed against the risks of the turnaround, including tariff impacts and the execution challenges of the new global strategy.
• The company's ability to sustain recent positive earnings momentum and achieve its maintained full-year guidance, despite acknowledged tariff impacts and transition costs, will be critical in assessing the viability of a longer-term recovery.