BBWI - Earnings call 4 2024 | Bath & Body Works, Inc.

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Operator

Good morning, my name is Paul, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bath & Body Works Fourth Quarter 2023 Earnings Conference Call. Please be advised that today's conference is being recorded. [Operator Instructions]

I will now turn the call over to Mike McGuire, Interim Head of Investor Relations. begin. may you Mike,

Michael McGuire

Good Quarter welcome XXXX Paul. Body Bath Works Fourth Earnings morning, you, to and & Thank Conference Call.

the Rosen, Eva on Executive me call Gina are Joining Boswell, Officer; Julie Chief President Boratto, and Retail; Financial Officer. today Chief

guidance. this prepared call posted presentation as and additional remarks website as to our release, the summarizes figures slide press operating facts in well addition we morning's regarding performance In information on that this have a in and our our some

may statements this forward-looking and press factors forward-looking call factors expectations. cause actual Please Works release risk that events Today's to future for the Body results contain related the Form & refer morning's in these to statements. XX-K could from XXXX differ to Bath and materially

certain GAAP refer including Today's measure. release disclosures non-GAAP morning's press for Please comparable supplemental measures, regarding such financial most this financial measures. and the to materials important to call reconciliations contains

we full over Additionally, are to and call the continuing fourth Gina. the on quarter earnings year shared basis. I'll turn a today operations now results XXXX

Gina Boswell

us and Thank joining you for everyone. Thank Mike, good morning, you, today.

job we a our I on Before strategic our and terrific distribution experience to outstanding great center initiatives. begin, associates. thank customers a do and our especially to They teams, want executing store our delivering

a Our our exceeded both that as fourth expectations. strongly, of example and is quarter that earnings we generating performance just great ended sales the year

as Body drivers, in XXXX. been and since delivering It's & growth the X joined team Works the key at I beginning CEO, year has just over significant against a the Bath outlined made of progress I

more we I made, we've work headway that the with pleased been ahead us. of we've have While know

outlook. we drove share prior of in quarter of grew adjusted strong quarter billion nearly the compared of This This an quarter. from as diluted driven of the merchandise was earnings points prior outperformance year-over-year. fourth XX-week by above the was better result XX-week up our than X.X% and end XXX XX% basis $X.X high fourth the net Fourth $X.XX anticipated year's to margin of XXXX, was per the sales quarter year. fourth In improvement

extra driven by Overall, As by a expected, year. events our activities the Average X%, same quarters is strategy. in we during of had last AUR from growth saw about EPS thoughtfully than $X.XX. all comparable benefited year, in unit to week promotional planned of but to duration, was This pricing slightly go greater retails we were the by deep. which didn't the as longer need number we previous that the was increase grew

and were our the to successfully to a to great event see During omnichannel of period. love we holiday were access members. X weekend single-digit with category our general it pleased Friday for holiday, our Christmas even strategy in Candle traditional longer Candle responding adjusting of and forward period, customers time their critical for along in Thanksgiving gifting increase an BOPIS given the after look exclusive low we our Day successful Black favorites. example week amplified day It's holiday our customers Notably, brand our event delivered to that positively and we was with and and action. our a sales Both core and merchandise loyalty

to category. beginning We are decisions Candle pleased we've the that benefits made the we're within see the of

that recognize still impacting normalization we However, is business. the

sample addition stars months. assortment than our less an college X/X ever featuring new football large-scale products. in with men of of grow from was This enabled our growth products and to continues Shop the influencer professional new and supported of first by X further tour, thousands category which hundreds experiential coming program Men's of Our to

into customer acquisition. and to awareness this We category continue increased to lean drive

and laundry care, hair our well the were collection in roll we'll out continue these newest our to categories such fragrance we as expanded And year. and positioned throughout lip

While dual manage early customers external and into size and Consistent experienced we conversion. that channel has which market during with January, period, their traffic spending, basket through continued see holiday continuing February. carefully to softness pressured the data, up was we are

to me key X drivers. Let our now turn growth

to innovation First, loyalty elevating adjacencies with operational customer reach omnichannel seamless product and the upgrades; and focus international finally, enabling to take and a technology innovation personalization; each a and click time a category is drivers brand the these technology excellence is these for of a enhancing and third, deeper great Other initiatives, second, of this through and enhanced through growth the delivering and morning. I'd support elements and creation to customer fostering efficiency. Foundational for new on through our down products are extending growth; fourth, marketing engaging drive greater the those our to experience; customers. critical connection into newness our program, like

existing of number long-term customers grow First, our as spend as achieve well need us marketing. $XX that We we the know sales shop customers with order each net year. to grow to in target our billion, with who of

the further invested invest in to and XXX year U.S. drive and the to continue who have penetration. reach marketing We products of million multiple into each higher market of types consumers will in buy fragrance

and Our scaled that shortly. an our we program quickly I'll plays that talk high-value more important loyalty role also have efforts, in about

and likelihood programs, levels are brand Come that the into greater called reason to such as more fourth increase this developed new team campaign, the frequency, channels we Back program giving also full to Senses, our more more expanding to consumers brand we As pop-up experiences brand our influencer campaign and drive new loyalty. Last seeing brand to are launched quarter. people connected out-of-home. our collaborations. marketing continuing We're through working top campaign of fall, funnel during make TV Your and conversion a designed deepen other a we purchase, was mind, more to We're reach and our consider campaigns, high of engagement. This at new we're executing and

machine our using year marketing impressions and personalized as segments growth our paid search, full drive have we the learning lower in generated the messaging efforts, to billion our urgency. Notably, about better develop in customer fourth earlier core segmentation understanding the customer to marketing marketing speaking biggest both these doubling designed us media first-party and segmentation opportunities. funnel recall customers our X delivering to such may and retarget more campaigns investments channels, analysis, You more of and made year-over-year. Leveraging funnel impressions other investments push in in data new quarter, than a

of retention customers Our we our in quarter. marketing scaling drive and the in full X% funnel model the customer fourth helped retained increase predictive the saw

our to technology initiatives. Turning

build Victoria's the time, the our over Secret, we past the summer. and largely same priority this experience we of for was capabilities was our customers. needed growth. There to the we to separation loyalty also At support our begun support more to tools strengthen evolve foundational Our completed in table continue investing to first are year have deliver and order future omnichannel the advanced which program, stakes must systems IT from systems in analytics

up we digital XX% BOPIS the to In increased the like recommendations evolve compared features order personalized continue our year the fourth quarter, total include conversion social increase product proven which prior the enhanced experience approximately prior to fulfillment fourth was quarter in X% versus and to the conversion. proofing digital in year. has enhancements, QX to trend and been BOPIS

provide in about XX% even on still enrollment we're technology I revenue like loyalty the the excited have initiatives our launch with pages, more content are past year. to and The fragrance our out digital this of XXXX. In who as success. back our a U.S. continue from I'd how Looking and of and immersive new update over finder pace and engagement with loyalty the forward, in critical with through technology of discussion AI-driven initiatives, introduction we half Nearly and spend long-term team year, personalized marketing in there since an our brand. investments are marketing program to connection be adding has is we proven our August been our landing ahead and of excited redeem our of the our strong more those our The rolled customers. the to drive in flows the pleased rewards now the about opportunity am been program. to XXXX has also to investments implemented this opportunities

year-over-year. generated Candle which and accelerators throughout leveraging high XXXX enrolled from Day program the and access helping The to of Day goal our Care redeem early plan more rates. Of We is loyalty XX to quarter customers Body additional over XX enhancements levels the at and omnichannel the the introduced by we frequently, and the X% with million more days. end sales third the active in record helped million additional of including enrollment, fourth were member-only than members, drive penetration quarter our big events XX% approximately especially loyalty-only test point Holiday access and year, bring events. up for early of

anniversaried active launch, the members Now metric the that program we is track. to have right

Importantly, XX% our we pleased the new loyalty are very members to in new brand. of were quarter that

I holiday. more outlook like We our for will XXXX, to speak Eva to the Before details. and turn strong over Julie, briefly a call to I'd provide then had

optimistic to We come, are summer the are and we spending the year. cautiously and well positioned for spring about together with all a strong customer newness for

begin on and pressures and be normalize. the year. We year. macroeconomic and during of basis see operating consideration, second we then grow product the tailwinds to the seeing headwinds as our Candles, category, are into year-over-year we a inflect to continue net to we sales Taking begin net and to down continues However, largest expect expect half sales income

operating as reinvest to outlook continue income even Importantly, the with our we in business. holding high end in line contemplates XXXX the of margins

business, focused to This and in Finally, initiatives in these our to expect to and in in good progress are year, cash on made strategic we continue efficiencies so shareholders. to return creating XXXX. do leverage all areas our our addition reduce continuing we to past more and executing we

shares. With authorization announce I'm Board recently million this, a outstanding that, to $XXX over to up of part repurchase call As to approved turn of pleased Julie. new that the to I'll our

Julie Rosen

echo and I to the for holiday an Gina. exceptional during Thank delivering experience for tireless their customers you, to thanking Gina our work and teams like season. would our

of are well all As success, summer a and and to a newness positioned strong the we for result their come. spring

covetable collections, coupled how quarter, including Holiday celebrate to Evergreen year, core such very quarter, the seasonal fragrances, placed strong Toast, exceeding as sales. by front to several shop expanded business forms, our and offerings and our presented the and easy gifting and including high led and price a gift Mint, our Lane. Customers which new record Traditions to was points providing strength by with seamless we at This and expectations and points. Eucalyptus price drivers fourth year results In gift at and the range a season key of the turn sets of destination all Champagne in we in Teakwood strategically Mahogany fourth prior set returning us to responded holiday our performance with supported

resulted a We our web shop floor which repeat also yielded focused that on storybook stores successful set a in trips and and transactions. theme,

Turning and to our our customers to as of excited we very about younger, our performance, to continue be the more it Men's diverse the business slightly growth new of introduces a category brand attracts attention customer.

care, our new marketing our deodorant. In the earlier quarter, amplifying this with principally and resonating newness collection, forms Care our I as this media The and in to and in out our Though able growth. digits infused the we such been we're of category, sales course, grew which, driven market the core our introduced sanitizer Our exceeding expected, into in influencers resulting category, outperformed position low We've social continues our and part fastest-growing just fueling a as are customer and of pandemic. to strong discussed. leadership activations, expectations, the fragrances business. category single in continue be seeing surged growth maintain see to antiperspirant grooming men, which in and Body business in shift we we body during shops our strong this fourth new by seasonal pop-up expectations. the quarter year, the

December. in for our our Body collection by to of affinity the evidenced customers strength Body their Care Our as continue Days Care show

Travel, due year low to transactions. products to to on last availability adding grew single outpaced other categories these and customers year-over-year strong which also Fragrance was digits inventory Home quarter anticipated. as the in their down compared

steady dual and had access up demonstrating for increased the we and desirability a in way sales Omni weekend our first-ever Bulbs meaningful showed candles. channel highest our Day to continue and loyalty driven category strong ever. However, day U.S. strong our giftability of early a Wallflowers posting Customers Candle our by single-digit event growth Wallflower units. Fragrance with be selling Holiday low and

be new to Day we're spring, Turning Valentine's and and of which fresh to and our continue new This Tropidelic. both such drivers collection compelling as Sweet Heart key newness, and merchandising. scents, across innovation Cherry, our products delivering

planned also Day and later We summer Brightest year. introducing Bloom, have fragrance Mother's for launches are and the for new our in

As that and part of form and expanded reuse their have offerings enable is our soap to containers. customers sustainability decanters quickly, our to continued and soap this looking growing we our scents and initiatives, we're new This expanding refill conveniently year. forward cartons

of care the We're announce rollout assortment of Bath our Additionally, and thrilled customers work, and North body to customer & XX% hair to Works category brand. Body has made excited the American attracted care new hard we're after to our new fully to sulfate is haircare now completing fragrance years about fragrance This line our has fleet. with of a that without been total parabens. reformulated

lip across stores the of goal presentation to attracted an this July XXX we of have our expand have North rollout year. base. the by capture this and our all new stores of this assortment to is and customer to younger our customers the and in-store our American relaunched visual opportunity to brand represent opportunity, products To and products expanded assortment complete Lip fixture

customer Our the and those and our expanded discussed our number limited new fragrances fixture interaction supports Last we stores doubling best-selling in sales and very of quarter, of is line laundry which assortment, encourages lip a and launch lip online. stores.

Like half routine. With other rolled positive, new the since brand have has exciting been I'll the in continue plans fleet laundry and XXX our it to turn have to to to laundry daily feedback expand that, stores the U.S. another fragrance fall. customers out new new has roughly add to We categories, attracted and to that their to over to just this their is noting and of and yet over way lifestyle Eva. their

Eva Boratto

good Julie, everyone. morning, Thank you, and

allocation. financial fourth Before I and to our our quarter XXXX, jump year into on I approach results the want capital focus review first of fiscal to

the top profitable Our long-term priority invest growth. sustainable, is in to drive business to

that, for and In stores operating experience will the projects of fiscal provide XXXX, us. these fiscal our brand important shopping to and million the million see are to will we generated company both to customers. part make focus million we you in free our priorities of areas After will real $XXX primarily technology. in investments technology allowing and better and cash which omnichannel believe our to invested And estate projects will discussed for we've Ultimately, them. in experience. Gina balance flow investments Brick-and-mortar investments sheet, capital deleverage us continue business, $XXX in a for growth on continue us to that are generate ecosystem of we flow. profitable an related made of and the XXXX return cash $XXX shareholders in we cash into in earlier generated

million ratio amount fiscal notes repurchased As $XXX principal our EBITDA. a we for leverage to gross to to debt $XXX adjusted a approximately million. reminder, we reduce In have XXXX, goal senior X.Xx of

capital common the we average to goal at projects down million in $XXX on X.Xx, $XXX is prioritize continue XXXX, and price per result, $XX.XX ago. million year. stock a made repurchase our shares million invest able progress for $XXX during we an to of paying year million year in expect in were a ending we $XXX from for good which and the X.Xx X.X during dividends between we investments will After XXXX, million of the business, share. In to As

our share put generate that priorities to and flow repurchase of $XXX to and $XXX million expect cash of million dividend, We free towards deleveraging.

an Leveraging our new the the the intention as approximately of And will repurchase we expectation share to continue market our dividend subject XXXX. share $XXX to authorization, conditions. dividend repurchases the increase to includes outlook per throughout debt increase. fiscal consider time with to of earnings repurchase expect opportunistic over million shares We annual $X.XX finally, spread

diluted adjusted our share to we diluted moving to earnings Now per reported share. exceeding outlook statement. per $X.XX of quarter, XX-week fourth In the income $X.XX of $X.XX, the

million asset. associated million tax the $X exclude deferred an impairment of An partial of results investment $X pretax extinguishment debt and million benefit a foreign charge adjusted from quarter. the the repurchases with on allowance Our release tax a pretax gain on $XXX in equity valuation the method a on early

X.X% driven The strong Our quarter per earnings outperformance margin added sales in top rate. extra XXXX diluted line. Net also the net and tax Adjusted in to from week were compared XXXX. outperformance. our was benefited by the billion merchandise primarily and approximately for sales share $XX million grew a $X.X quarter to lower

net the declined driven quarters prior did a sale sales in versus was of an on and traffic conversion by XX-week The decrease So see period. decline by a year-over-year average year. X% We in year-over-year. improvement basis, comparable in holiday the dollar outside

quarter. In $X.X previously, XX-week of As and were compared quarter fourth prior X% the in Canadian X% and in Gina direct billion, a to increased direct year. net our X% million, increase $XXX quarter decline X% last declined for fourth mentioned net quarter. stores, sales fourth AURs Reported totaled U.S. demand sales Adjusted of versus the year. the an BOPIS,

reflecting to As and marking sales quarter. International a were $XX of our during the net and challenges reminder, Middle net be versus East. all store first sales, rollout the declined are completion of million BOPIS we'll the X% BOPIS sales in U.S. net as recognized stores the last anniversary year

collected the franchise to retail As product franchise a international reminder, and by there sell revenue we partners. from sales to our wholesale are our sales, net X royalties generated components

quarter, profit the rate and fourth areas up the declined teens of the points quarter Middle improvement our was total improvement in costs. increase low gross transportation and by XX.X%, affected product sequential in system-wide and an basis points retail Merchandise benefiting the compared XXX quarter third sales year-over-year points mid-single outside approximately AUR from margin million to the increases prior war of rate versus the consecutive of basis basis Our international driven digits A second were East. Fourth in XXX of improved XXX quarter year. year. the year-over-year, by of prior the deflation $XX

partially was expansion partially expense product and store margin margin to continue merchandise and growth. packaging costs This increased due occupancy Improvements brand. in associated reformulation by in primarily buying offset as occupancy the new by investment were continued offset with innovation deleverage, elevate we to

by and SG&A quarter fourth year points driven cost in XXX optimization Total marketing our investments offset basis initiatives. deleveraged last benefits by versus partially of technology, by the

SG&A associated with million severance. included Additionally, our $XX initiatives, of our reduction cost approximately expense is primarily in

Our cost optimization SG&A and and approximately in across profit spans $XX million work quarter, in benefits with gross both delivered our outlook. the of line

We of total total of goal have quarter sales. net initial was our million operating exceeding of $XXX delivered approximately million all into for XX.X% million. or Taking income this savings fourth of $XXX XXXX consideration, $XXX

income full of the operating was For net sales. year, XX.X%

Moving on to inventory.

about flat in We efficiently quarter inventory total fourth to manage a ending continue compared to the saw quarter dollars last growth. sales inventory, that our with year

levels into feel As we we appropriately head positioned. spring, the our are inventory

Turning to real estate.

Our stores levels. and XX% of extremely profitable portfolio the pre-pandemic significantly with fleet healthy remains outperforming

more locations. off-mall As in is a than reminder, fleet our half

our penetration made during progress quarter. additional off-fall the We increasing

For closed the full year, North we permanently opened XX stores. stores and new American mall XX off-mall

full store stores grew partners of As internationally, net our by net XXX X% during and stores. for quarter the square net openings footage with XX year we a the new the year. opened our ended about result remodels, And and

our through Now XXXX walk financial fiscal outlook. let me

added with comparisons million week diluted to the include I to net said and our XXrd approximately providing outlook as that sales $X.XX XXXX earlier, to $XX are EPS. XXXX We which,

XXrd up range expect basis points in for flat representing the growth. down week week sales with to down net our X% expect XXXX to extra net between of to results XXX to the we X% a we about headwind year, X% range year-over-year. XXXX, the between to Adjusting For sales

capabilities the growth. Our sales launching to outlook drive products building of reflects acquisition designed the and customer of net and

include our are marketing investments customer enhancements loyalty as marketing drive retention. to We well increasing our of to program. This will variety acquisition and programs as a

Shop, growth levels initiative our through of our recently and program extension rollout We adjacencies. These and to technology comparable continuing awareness the product the and hair in more focus fragrant greater building our experience while drive loyalty XXXX, core. these creating the completed are include laundry support plan seamless to of We on a rollout care which at investing while will marketing lip of Men's overall. to

efforts continue, moderate to we provide our to We margin we expect category and continue accretive to year. growth the international normalization within business. healthy as move through but will expansion And

the we scaled build as As the to and benefits are on second sales in net expect these last through we of capabilities year, quarter's growth the turn call. noted half positive year,

of is approximately approximately million, goal from million. previous Our now million We up expect total year. $XXX savings $XXX $XXX now optimization incremental cost cost goal this our

AUR year range, and approximately full gross a margin, of expansion our improvement midpoint at XX.X% expect product of by the in margin continued rate We merchandise representing driven cost declines. modest

and buying in of a year, estate. real expect slightly deleverage driven occupancy the to percent store for our full investments expense sales We by net as our

by Our as full XX.X%, partially marketing reduction both well approximately year outlook as initiatives. assumes with an SG&A which investments higher rate offset by we to cost expect driven of wage deleverage our of inflation,

to We and expect effective XX% year $X.XX. $XXX million inputs, tax diluted outstanding are be of of average nonoperating expense these Considering weighted earnings full rate an million. share year approximately diluted $X we between all shares XXX per approximately and of of forecasting approximately net full

the our quickly but details the provide slide in of numbers quarter, you outlook For on first can the presentation, the here. commentary I'll find

outlook net X%. Our down down to sales includes X.X%

expected We flat. be quarter the margin rate are expect quarter gross in AURs to first approximately first be XX.X%. to

We quarter expect approximately be to sales. rate our first net of SG&A XX.X%

first outstanding $XX earnings first a to share $X.XX nonoperating approximately shares we We with and million. diluted average quarter approximately of XXX quarter approximately weighted Considering tax are net XX% diluted of these forecasting all $X.XX. expect of rate of per million inputs, expense of

turn to for I'll remarks. Gina now call the And closing back some

Gina Boswell

Eva. you, Thank

awareness are are ready pleased allows exceptional our be model serve product Body inventory with shop chain & foundation and assortment top trends. Works omnichannel supply leverage has our advantage customers competitive to associates vertically brand Bath integrated who a able a leading to position, want. enter compelling an As we changing a to and that that market to clean us they to quickly we store our strong in respond allows share, however to and experience XXXX, whenever with

have healthy sheet, cash balance and generation capital allocation a flow We plans. balanced free strong

outlook headwinds we the first mix Longer I'll quarter remain discussed Eva expect ability tailwinds our continue of XXXX our margin net year that our The and ranges through confident as and consideration XX% billion operating the the turn for term, into that, sales full to over to execute targets. And strategic initiatives. we take to it with in $XX achieve income of and Mike for questions. we

Michael McGuire

Thank you, Gina.

our responses that limit one session, For participants and question Q&A we ask their follow-up. to one

we'll now the So to move session. Paul? Q&A

Operator

Instructions] from Lorraine Our Bank Hutchinson with is America. of [Operator question first

Lorraine Maikis

drivers fourth the in of Can the for X%? then And up you key go for reasons talk XQ why flat year? that? to the from about up AURs quarter are would What AUR the

Gina Boswell

Lorraine. I'll chime first. you, can Great in Thank to that hear ask with from if you. question she Julie

Julie Rosen

well. you hope I are Lauren,

and balancing meaningful engagement our levels model in as with to promotional constantly a allows to have or a traffic test increase need keep well pricing are strong to for we increase operating us decrease the desire outcomes. agile that to as way So very

So to AURs. our raise we've price XXXX in select increases taken

assortments faceted be more seasonal power, differentiated lids, see bottles. waffle, that You X-wick really whether that our pricing drive in new it single-wick

our on AUR expected thoughtful than constant strategy and really basis. X% a up to were better manage levers and and pricing and have a planned very we that AURs we pull Our

take slightly to you in to year. is we meeting added were them of events very We promotional have at, engagement. they and where we had we constantly in opportunities. we price-conscious are a events, the what the year that side create using so bundles, around other consumer we longer, They model We noticed for not more big ensuring testing number this that the probably agile as very take are we them on we're but same were while operating that do were events. our options. We do of we just And Some deep. did best other where our is last not between have than others some are

going robust the strategies our testing manage AUR all time. So we on have and robust to

Operator

Our McShane with next question Goldman Kate is Sachs. from

Katharine McShane

level maybe was there -- if this and could newness wondered or level 'XX versus of previous level quantify can year? see fiscal you your expect year we stores I what the innovation in that of we online that a innovation to way in saw

Gina Boswell

that newness adjacencies speak would you we that to in over the we the prepared might but have seasonal and the question, those build the -- Thank to the for have remarks, also she's clearly, Julie time. new and already Kate. start say storytelling and we so I done have

awareness. still Men's and you As one a is know, low fairly

that And that's X/X new saw so of from coming 'XX. the we've built will out in those and assortment further, why you sort and growth of products continue

building as hair even will be and in Our also SKUs. both is further -- distribution well as

serves customers, the in So within which is other some and itself, and more attracting new there's but role Lip, things. that newness expanded the as SPF of further well. And then our beautiful is lip assortment, expansion fixture there's which

little I'm next laundry one. say. leaving Julie to as But the well very is

to So it. Julie, close you're

Julie Rosen

very of are excited know, our in you as about, our are So adjacent adjacencies. categories, these various rollout stages of and we we

fueled shops younger rolled out fuel growth that Men's antiperspirant or extra and know grooming also deodorant. being some a some to well. new by merchandising as that pop-up our marketing the Men's really of customer and in we and fully new is is this is attracting helping is year past that and you our We Shop slightly an Men's products, influencers added our have to stores. we customer here. diverse more so all And added Maybe some a saw

way is a daily very them because we routine. rolled of And we their that about So has on that the half a the market the the year, opportunity probably the excited feedback a that's an our market. from early business the and little layer about to XXX of the middle it's have while the positive detergent out to is The for stores. we into scents from favorite laundry be adjacency. Laundry, $XX incredibly customers. another are in And size speculate way business, know They now is been just billion great their most to furthest the along fleet. laundry by will

As we this XX% Gina learned is of all to line are customers but ready the comment leadership point not another in have & fragrance have care prize, rollout Works. quite stores we first to care of to with mentioned, on of we that Body Bath confident that spring. finished And new fragrant to yet fragrant attracting customers differentiation. new the this hair our are brand. the positioning Again, of hair size as our very our our is

we finally, our have Lip. then And

to the consistently get are are as brand, doing that we and well. new into younger is Lip and we customers this So looking also seeing

upgrading and all visual will stores as and expanding well this our relaunching our been we've QX. in-store by presentation, in and assortment So as be

but are categories Body and these We we we & Works. they're growing all roll. Bath test, optimize, at like So launches small,

a be around lines. So are you lot different new this testing of the pricing, of But will marketing. out it around it whether us gate, see whether be about merchandising things these or year, we excited

Operator

Our with Advisory from next comes Group. Telsey Dana question Telsey

Dana Telsey

does it you promotions, about think you're about accelerated margin, and basis it margin. And compared year when continued pricing by some you expecting to and of improvement think as merchandise merchandise should like up how points, about the the XXX differently you and differ talk year? this which of about last test level drivers the think Can we As sounds it in category?

Gina Boswell

start you question? would with Eva, that

Eva Boratto

for reduction as we've that as basis that the And last initiative. pleased overall, margins the think last does Sure. -- made margin, as continued year, cost expand merchandise outlook deflation the the look progress couple I quarters. several XX well And we at to improving about expect our really you the reflect the of Dana, with points. we're

Now and soaps made changes restage We're reformulation. Care we will that year. reinvest and to to annualizing and we continue Body the this

So that will us. continue to impact

would to margin we you look to merchandise is at inflated that's XXXX, costs able guidance, for pandemic. have estate pleased offsetting our margin. given Now year, But to real that pretty what the continuing our and quarter continue And we on here in note with progress first were our I B&O just our deleverage we're as merchandise despite deliver be the investment. really since to comparable

Gina Boswell

extra and margin also over that thing in I would to the of the new post-launch merch Julie improves spoke contributing add of one so product with even ways the And profile time adjacencies these forth as bigger to, those is margin. scales some

Operator

BMO Markets. Siegel question Capital next is from Simeon Our with

Simeon Siegel

Really, the quarter. nice in job

about the great Men's hear strength. So to

the buying is about occupancy? off and exiting And point should move So or mall? gave I the leverage innovation? get the new forward? malls necessarily to you we you transport need that and and Did product how Men's . And then Maybe products long is. goes was or bringing Just in packaging you logistics how off Eva, we if missed the adjacencies better say how term. Julie where mid- it the should what think to the reformulations, from? just How think were Sorry much large expense going you're it. we up rent with at this Does that about other then in not better do going given the forward? the investment mall then as point which

Gina Boswell

say And to relatively small sales, as with percent Men's, Great well, of I as but $XX from ample report we a new commented single-digit of I as billion. distribution of exact, so would to is addressable our with headroom Julie and still lots well don't Simeon. the Thanks, hear respect market it SKUs. large as said you. the on

B&O comment will that. relates ask to Eva leverage please it I to reformulation, on and the As

Eva Boratto

Sure, Simeon.

mall On the sales I from is it a say benefit to X% B&O. us. moving take would to of you're And B&O to leverage, would leverage about growth off-mall X% right, for

to mix and AURs. drive the investment reformulation and in get levels we'll the for that work our paid always first On reformulation,

is as annualizing great think 'XX, you investments our me. margin impact we're aren't it in the the impacts than was to as in in on less and the excuse reformulation -- 'XX As 'XX, of about XX, 'XX

Operator

next Our Stanley. is question Alex Straton with Morgan from

Alexandra Straton

from couple me a Just here.

year-over-year it sales worsened. XXrd quarter, like The declines the the If is seems I compared look that fourth week, the on it you're quarter to first guidance. sales the first embedding week at ex XXrd

So you lower what the Or assume the January think that continues quarter? February how does trend rest do informed or that? of the about for

second nearly year, guidance the the just so quarter, trouble having I'm with that for XX.X% on flat. margin, this for XX% then guide is this And gross the reconciling question XX%. long-term hitting

now? would can So just That helpful. through margin what's gross me be if you on right weighing walk super

Gina Boswell

Alex. Thank you,

On the first quarter, the... to Eva, if you can speak

Eva Boratto

it. Let me take

end of The We're of cautious right? down consumer. the guide. first speak me worse. assuming It the have high to about end to guide get Let the a continue high X%, we doesn't

you Day of XX-week introduction partnerships. response Mother's comparable and the our to and performance on said, Good assortment As trends XX-week are line a in basis. with product to QX

low our traffic the end, reflecting potentially February, weaker thinking saw our assortment that of we Mother's had or response right. but we the where coming you does more On into assume about guide and Day, the our low end to trends pressure were that weaker

year, the -- margin question for or on margin the was for On Alex? your QX

Alexandra Straton

gross year For full please? margin, the

Eva Boratto

So XXXX. year benefits a we're gross for margin, of you as lot that achieved the the annualizing throughout can full deflation appreciate, we

in cause basis reflecting outlook annualization those mentioned you to the I modestly, margin the merch does up does we B&O get of points improvement, costs right, while our as Our restage well get continued are deleverage include as investments previously XX margin deleverage. growth, the that dollars reformulation. Until

that's gross on margin. summary the So

Operator

Our Boss next JPMorgan. from is Matthew question with

Matthew Boss

to any the quarterly down there traffic that's I what to softer beyond you're trends at through elaborate way Eva, half, Gina, could first positive help on conversion. or February? you you top back And seeing -- the maybe quarter, best category sales supporting is revenue see rank about Candle walk visibility through turn line that you think the could cited growth to in year? think drivers on just to stabilization? And midpoint? so basket the impacting improvement the in Any and order X% just how

that, on elaborating think, be any I great. would Just

Gina Boswell

a This Matt. you, Thank question. is X-part

But Julie Candle then stated, together, as if overall, finish block the things macro to X I'll in say, end control also growth with that with that it there half. I think So and built second off the of building you there's half. full that sentiment. but the you would high return category, are a were zoom outlook we including our of building can year by when execution our and it back the our drive guidance, speak our our of to variety the and consumer scenarios was put low if And considered block. then Eva out start to from things I to what really initiatives, entirely, we that are -- in

that that so you moderating, touched sanitizers is of First an candles decline. of we'll on easing and seeing effectively market one the talk to the normalization

The newness seasonal and growth the categories, through. spoke to and second comes core some where of storytelling that is that's from the Julie our

our the and rollout of is third new adjacencies, they're small. The continued

year the As fall a digital I to hair, chain the today, shop ramp in going the we're full we capabilities. personalized about cetera. And even We've that of about, whether as those laundry engaged fourth, distribution in mentioned, the men's, our talked point in stores loyal lip got from loyalty and et Men's enhanced then talking through We've laundry, more based driving got on half lip, percent are and but XXX investments. Those our funnel and and experiences. the customers. marketing build

throughout as line to And top out it so the the that's piece the growth plays overall sort of year.

on So that Candle? you second was question had

Julie Rosen

guidance spend sanitizers. And and our post normalize unit this our Yes. able QX and an more so And normalization it Candles. market versus of Eva XXXX it, back half we've for the a I than to candles to know industry reminder, sanitizers at hold even but from and leading as just do mindset shops. actually to calls home both rest same candles of mentioned less so those our remain with industry the time levels, say in inflection pandemic. continues again, share been Matt, share in adjust and elevated gained their in the to candles level. improved trends. level, We At business normalization industry continue know also at customers continue to mirrored and exact QX an to sanitizers We've

Eva Boratto

Yes.

back, Matt, half of the point. on to going back I'll up follow year, the So Julie's

factors affect hurdling Christmas at Thanksgiving the a the of we in can number QX, look week that that QX. remind are to outlook. we'll look business. for if -- the at expecting we QX to inflection, and would we inflect and are you in growth there you As return And look at and as that I we one year, between that be have particularly less that

we So toward and expand the we're seeing programs. that out our QX adjacencies inflection driving roll as

On pressured traffic comment February, February. I'll was coming into just --

of quickly brought store. didn't newness to initial and the we the wanted set and in and that our we front some Our new and perform pivoted as had adjusted it floor our to, we year Tropidelic fragrance approach the

Operator

Tong is James. from with Our question next Raymond Olivia

Olivia Tong Cheang

year sounds And which for to pricing year? pricing is January I into improvements, have plans talk balance actions yet already wanted efficiency expect to be versus about you of And ask that and than how your just that if build February. then like softness expected increase for between much you a implemented bigger to pricing with achieving full new the could taken? continued about in have AUR the the that you been has improvement promo what that

hold So promo to you were that and on risk the your about your can able achieve to peers about versus that QX? talk in can levels you how to you think those improvements

Gina Boswell

AUR the first Well, moderate assumptions the and were on for our for Olivia. year. quarter full you, Thank to start, flat

agile very very of a Julie deals want a I it's to mean, new model price speak everyday at sort look taken, terms and In of -- we might those actions to. it's and so we've that bundles where forth.

question, last do the in you I that? exactly, to on. part of chime Eva think I'm I would trying ask your have to And remember

Eva Boratto

sure. Sure,

overall, As into reducing mail. reliance you think about and said on this the we've times, remind mix direct few personalization. leaning on you, we our a increasing loyalty more right? pricing the I'd We're are

for us factors confidence are year. the we the that modest that give increases can So have all there

landscape. top landscape, volume. competitive And product assortment us terms respond our margin it of we're competitive and both is line to our overall and while balance model agile the In a -- enables

Julie Rosen

we took our for at In XXXX, one added X products we prices. raised from add lot of X $XX, soaps $X.XX. raised for Wallflowers all for did of endings We X least would on all just for for $X. couple forms we $XX, things. $XX that $XX. X to We a in, the all a invested I So more we our more raised or We

testing this agile over pricing an every where be testing out for don't single AUR. have figure garner to model, business promotional we weekend, more more to say I can time. when We So we alternative we're plan

celebrate this customer loves in products affordable we So they're our we used loves and tell we meant nobody do often. to that are emotional seasons, on clear and I else all believe We holidays, these And way be stories. luxuries, And that sure know can can believe replenished can. transportive newness. our that fragrances that want to we're a make that that. We to daily

celebrations the it's use to traffic increase promo I believe operating drive to Again, saying, newness that to that's the model, our right? decrease promotion. as or stores. we and I the So keep along with going

sharpening So our promotions approach data driver on hopefully our we're with technology personalized We're and analytics, targeted messages, be we'll some for and in business, a will and which hoping by and right broad-based spends to but traffic deliver increase reliance trips will engagement leverage the place. going while reducing promos. more

Operator

Citi. with next is Paul Our Lejuez question from

Paul Lejuez

perform the line in sales that? above XQ, above end think then into can change saw on the you What of to month talk what F I about to opportunity about of Can traffic drove And separate in and specifically and there's below any beginning pressured just I coming said on from the February, wanted you And clarify came leverage talk if just February. month? if your you to that plan? SG&A you the and 'XX was what expectations? the February SG&A

Eva Boratto

is Thanks question. for This Eva. the

had the reduction a as million we charge Also referenced, cost SG&A, $XX our On outperformed. severance I with initiatives. about of sales associated

had related Could that. other So we you additional to to repeat related your question? costs --

Paul Lejuez

February traffic.

Eva Boratto

you. Thank traffic. February

the we and said, adjusted I pressured. set that that, in has floor during February, referenced reflected perform range traffic that our initial It's We provided. the improved expectations. to We outlook our as we overall, month. into So guidance didn't our performance was came

Paul Lejuez

performance that improved by Was that during Is month driven the the promotions. message?

Eva Boratto

our and of message. not we promotions and to set always floor is was changed my but adapting Overall, I apologize. customers. No, we're That adjusting our strategy, part our

Gina Boswell

With in quarter. first of AUR the flat guidance the

time I please. more have for question, think one we

Operator

with is question Adrienne last Barclays. Yih Our from

Adrienne Yih-Tennant

of end nice Very the year.

elevation or coming particularly which about on quarter. and/or premiumization can cetera? through an and acquire. it it then Gina are categories seen the elevation packaging? statistics sort does through talk demographic elevation age you you Julie, that that, I've do congrats of or you any carry on innovation, that price or Is When in to optimal that? packaging, in formulations, that strategy? et sort is, the through, associated So of fourth the is see with candle And do for the

Gina Boswell

segment price to even the that relates And just you of about and well, the as of the mindset. sort we the we the overall, it important and think the connotes there in But at as customer's which some masstige. sweet sort of -- of categories, of an we the being elevation beautiful value reformulations products. if As the I of from have that of beveling is look that what the in proposition spot those as pricing you're mean, masstige laundry the sort there and operate sort that other categories, then many of like right, are things package

we overall, of terms to all because In would and the elevate, want sure mindset but overall, customers raise -- always will necessarily the entirely, Julie sure so we say their not -- chime increase categories I'm usage. to of in, have they make meet right, opportunities our I and

highly are replenishable We a business.

down are seeing age seen. we're we I the discernible well. our sure And or in seeing based that assortment by we of with trial of we're respect trade things any was get we not income as So to say in which terms actually need. But all your make on changes and that question, that the not what the seeing that we've want to I would part other think of cohort,

Julie Rosen

going market design I elevated And the from up, soaps is response world, are perspective, candles, looking nice think to both collection, from across very Yes. of scanning we which sort an the seeing to for an do teams just trends and see My neutral and follow are job our excellent what and on. elevation merchandising products.

our that there we we on the hit that things of multiple times to those. on all mindsets try having think try is hit are I of one at the and store in to customer is

relaunched shower upgraded Champagne new Toast we bottles. Men's, at look our you gels, in just we if So packaging on our the faceted

of it ensure that constantly pretty like and We products enough about And as really customers. we do are is colored some agile we still have responding we and in but to we're seeing customers a because out So but balance. those go an looking, and model, have fun, as of able with that. we're more in neutral, brightly react elevation some have

Adrienne Yih-Tennant

the Julie, very just look sophisticated and feedback-wise, neutrals lovely.

that. of Best luck. congrats So on

Julie Rosen

on that pass I'll you. team. the Thank to

call. Over our I So Mike. to want you, to you call. thank joining for that today's concludes

Michael McGuire

any for available So on our here. & interest in contact XX Bath a us anybody your Thanks days replay website. will has be Thanks. If again Body for questions, Works.

Operator

concludes today's conference. This

your disconnect you may You lines this Thank time. participation. for at your

Bath & Body Works (BBWI) 29 Feb 242024 Q4 Earnings call transcript