Hutchinson Maintains Buy Rating On Bath & Body Works, Sees Continued Growth

Bank of America analyst Lorraine Hutchinson reiterated a Buy rating on Bath & Body Works, Inc. BBWI and maintained its $45 price target.

The Details: Hutchinson, in the note, explains that investors are often concerned that Average Unit Retail (AUR) will weaken as the company relies on promotions to drive sales.

However, the analyst argues that Bath & Body Works will continue using a mix of strategies in 2025 to generate positive conversion trends and modest AUR growth. In the past, the company has used strategic price increases on fragrances, higher traffic through store remodels, and a mix of other methods to achieve this.

The analyst believes positive growth will continue due to the company’s Netflix collaboration and new product launches. Specifically, Hutchinson highlights the launch of new adjacencies, including Men's, Hair, Lip and Laundry.

Among these new categories, Men's grooming stands out as the largest. Despite its relatively low awareness, it demonstrates strong potential driven by early momentum from increased marketing and a new fragrance launch in the third quarter.

The analyst also believes that candle sales, which spiked during COVID and then tapered off as trends normalized, will no longer hinder Bath & Body Works' overall sales. Although candle sales have yet to return to pre-COVID growth levels, the decline has slowed, and the analyst does not expect it to negatively impact 2025 sales.

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BBWI Price Action: At the time of writing, Bath & Body Works shares are trading 0.4% lower at $37.12, according to data from Benzinga Pro.

Image: Courtesy of Bath & Body Works, Inc.