Bath & Body Works Undervalued: Goldman Sachs Sees Upside Amid Strong Candle Day Performance

Goldman Sachs analyst Kate McShane reiterated a Buy rating on the shares of Bath & Body Works Inc. BBWI with a price target of $52.00.

Bath & Body Works recently wrapped up its annual Candle Day sale, which took place on December 7-8, 2024. The sale offered 3-wick candles at $9.95 each, maintaining a steady price point from the previous year, noted the analyst.

While this year’s event mirrored the setup of 2023, it lasted a bit longer than previous years, particularly 2021, which had no early access, said the analyst.

The promotion, according to the analyst, also differed in its approach, as all sales for this year were held both online and in stores, compared to a fully in-store experience in 2023.

The store allowed customers to purchase up to 24 candles during the event, consistent y/y, but up from previous limits of 15 to 18 in prior years.

The company, the analyst quipped, continued to offer various incentives to loyalty members, reflecting their significance in boosting customer retention. For instance, the loyalty program has been linked to over 80% of BBWI’s U.S. sales.

As of the third quarter of 2024, the company had around 38 million active loyalty members, the analyst noted. Additionally, the retailer’s app downloads peaked in December 2024, with BBWI surpassing Sephora in the number of downloads.

The analyst said BBWI’s app download trends suggest that the company’s loyalty program remains a strong driver of engagement and customer loyalty.

While free shipping was available on four out of five days during November and December 2024, it was only offered on two days in December 2023. This year, Cyber Monday fell in December, which may have contributed to the increased shipping offers, suggested the analyst.

According to the analyst’s survey, BBWI’s Net Promoter Score sequentially improved since March 2024.

The analyst notes that the stock remains undervalued, and there will be an upside potential when the company likely starts to post sustainable top-line growth over the next few quarters.

Price Action: BBWI shares are trading lower by 1.88% at $37.00 at the last check Monday.