Dan Loeb Pulls Plug On Bath & Body Works Stake As Sales Decline

Billionaire Dan S. Loeb, the founder of Third Point, exited his stake in Bath & Body Works, Inc. BBWI in the fourth quarter of 2024.

Details: As of the third quarter of 2024 filings, the investor had 11,785,000 shares in the company.

Notably, Loeb has been cutting stakes in Bath & Body Works in the last couple of quarters. Earlier, he held 11,975,000 shares as of the second quarter of 2024, 12,850,000 shares as of the first quarter of 2024 and 13,850,000 shares as of the fourth quarter of 2023.

• In February, the company reported a fourth-quarter sales decline of 4.3% year-on-year to $2.788 billion, beating the analyst consensus estimate of $2.777 billion and adjusted EPS of $2.09 exceeded the consensus estimate of $2.05.
• Also, Bath & Body Works provided guidance for FY25 EPS of $3.25 – $3.60, with an estimate of $3.60 and net sales growth of 1% – 3%.
• The company sees first-quarter FY25 EPS of $0.36 – $0.43 against an estimate of $0.44, and expects net sales growth of 1% – 3%.
• S&P Dow Jones Indices disclosed that Bath Body Works will be removed from S&P SmallCap 600 and added to S&P MidCap 400 Index on March 24, 2025.

Analysts Views

• Telsey Advisory analyst Dana Telsey writes that the earnings guidance “appears prudently conservative,” as it reflects the impact of U.S. tariffs on China and continued macro uncertainty.
• JPMorgan analyst Matthew Boss upgraded the rating from Neutral to Overweight and raised the price forecast from $41 to $47. The analyst cited that the new collaboration with Walt Disney Co may lead to an inflection on both revenues and profits in fiscal 2025.
• Goldman Sachs analyst Kate McShane says 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.
• Bank of America analyst Lorraine Hutchinson comments that investors are often concerned that Average Unit Retail (AUR) will weaken as the company relies on promotions to drive sales. However, she 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 last year, Bath Body Works has declined around 33.2%. It underperformed the Invesco S&P SmallCap Consumer Discretionary ETF PSCD, which fell about 8.0% over the same time frame.

Also, the company significantly lagged compared to its closest peers Tractor Supply Company TSCO, which rose roughly 29.6%, and Dick’s Sporting Goods Inc DKS, which grew approximately 15.8% in the last one year.

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