Bath & Body Works Reports Mixed Q2 Results with Decreased Sales and Increased Net Income

Bath & Body Works, Inc. reported its financial results for the second quarter and year-to-date ending August 3, 2024, revealing a mixed performance compared to the previous fiscal period.

Net sales for the second quarter of 2024 were $1,526 million, a decrease of $33 million (2.1%) from $1,559 million in the second quarter of 2023. Year-to-date net sales also declined, totaling $2,910 million, down from $2,955 million in the same period last year. The decline in sales was primarily attributed to a $32 million drop in direct sales in North America, reflecting reduced website traffic and fulfilled orders. However, international sales saw a slight increase, rising to $89 million from $86 million year-over-year.

Despite the decrease in sales, gross profit for the second quarter increased to $626 million, up from $622 million in the prior year, driven by a higher merchandise margin rate. The gross profit margin improved to 41.0%, compared to 39.9% in the second quarter of 2023. Operating income for the quarter was $183 million, down from $188 million, while year-to-date operating income remained stable at $370 million.

Net income for the second quarter surged to $152 million, compared to $99 million in the same quarter of 2023, with net income per diluted share rising to $0.68 from $0.43. Year-to-date net income also increased to $239 million from $180 million in the previous year. The effective tax rate significantly decreased to 0.9% from 21.9% in the prior year, largely due to a tax benefit from the release of a valuation allowance on a deferred tax asset.

On the balance sheet, total current assets decreased to $1,666 million from $2,115 million at the beginning of the fiscal year. Total liabilities increased to $1,497 million, while long-term debt was reduced to $3,881 million from $4,388 million. Total shareholders’ equity showed a deficit of $(1,719) million, slightly worsening from $(1,627) million.

Strategically, the company has focused on cost optimization, achieving $40 million in cost savings in the second quarter and targeting an annual savings of $280 million. Additionally, Bath & Body Works sold its interests in Easton Town Center and Easton Gateway, generating $50 million in cash proceeds and recognizing a pre-tax gain of $39 million.

The company continues to navigate a challenging retail environment, emphasizing core product categories and new market expansions while managing operational costs effectively.