Bath & Body Works cuts sales forecast as inflation hurts demand

What's going on here?

Bath & Body Works cut its annual Sales Forecast, citing lower demand for premium items such as perfumes and scented candles at high inflation.

What does this mean?

Inflation is causing shoppers to prioritize essentials like food and medicine, leaving less room in their budgets for non-essentials. Despite new promotions and product lines – including additions to men's fragrances and personal care products – Bath & Body Works saw sales decline in its key markets in the U.S. and Canada. The Ohio-based company now expects net sales to decline 2% to 4% in 2024, a sharper decline than the 2.5% to flat decline it had previously expected. The company also reduced its annual adjusted benefit The forecast was now $3.06 to $3.26 per share, compared to the previous estimate of $3.05 to $3.35 per share.

Why should I care?

For markets: Uncertain ground for luxury.

Larger competitors such as Estee Lauder and Elf Beauty are also experiencing similar downturns as cautious consumer The spending is on high-end beauty products and “affordable luxuries” such as lipsticks and perfumes. Bath & Body Works reported a 9.7% drop in direct-to-consumer sales in the U.S. and Canada for the second quarter, worse than the 6.8% decline in the previous quarter. Net sales in the second quarter were $1.53 billion, just below the $1.54 billion analyst estimate compiled by LSEG.

The overall picture: Managing the ripple effects of inflation.

Economic challenges are dramatically changing consumer priorities, as seen in many industries. Companies that depend on discretionary spending are navigating turbulent times, underscoring the critical need for adaptability. Bath & Body Works managed to slightly beat earnings in the second quarter thanks to cost-cutting measures and reduced transportation costs, reporting adjusted earnings of 37 cents per share versus 36 cents expected. However, total earnings were 37 cents per share, versus 36 cents expected. trend shows that companies that rely on non-essential goods must constantly innovate to stay afloat in this inflation-ridden environment.