Goldman Sachs analyst Kate McShane reiterated the Buy rating on Bath & Body Works, Inc. (NYSE:BBWI), with a price forecast of $52.

The company’s third-quarter adjusted earnings per share of 49 cents beat the analyst consensus of 47 cents. Quarterly sales of $1.610 billion, a growth of 3.1% year-over-year, came above the street view of $1.579 billion.

The gross margin was 43.5%, down 20 bps YoY, and the operating margin was 13.5% compared to 14.2% YoY.

The analyst projects the company well-positioned to offer affordable luxury products. McShane sees customers spending more in 2025.

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The company has many growth initiatives, such as new products, collaborations, and personalized marketing.

The analyst highlights the company’s sales forecast might be too low due to strong business momentum and increased spending in the fourth quarter.

The company is now guiding an adjusted EPS of $3.15 – 3.28 (vs. $3.06 – 3.26 prior). The company raised fiscal 2024 guidance and expects net sales to decline 2.5% – 1.7% (prior view: decline of 4% – 2%), including a 100-basis-point headwind from the 53rd week in 2023. 

In the analyst’s view, the company’s top line guidance could prove conservative given the momentum of the business.

Looking to the remainder of FY24, the analyst sees less upside to gross margins as the company continues to focus on value, which should help drive the top line more effectively.

McShane raised the FY24 net sales growth estimate to -1.7% (from -2.5%), slightly increased the gross margin estimate to 44.1% (from 44.0%), and revised the FY24 EPS estimate to $3.23 from $3.11.

Additionally, the analyst increased the FY25 and FY26 EPS estimates by 4.9% and 1.4%, respectively, to $3.67 and $4.03.

Price Action: BBWI shares are trading lower by 0.72% to $35.52 at last check Tuesday.

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