Bath & Body Works declared in August 2022 that its organizational structure was simplifying. They planned to eliminate about 130 posts. Out of that, the majority of which were leadership positions. Chris Cramer, the company’s chief operating officer, left his post “to pursue other opportunities.” The position will not be filled by Bath & Body Works. Other members of the organization’s management team will assume the position’s duties.
Like many other businesses, Bath & Body Works rejects its roots in shopping malls. The commentary was released before the company’s fourth-quarter earnings call on February 23. It claims that the company will close over 50 mall stores this year. Let us view the business in detail in this article.
Overview of the company
Bath & Body Works is a world leader in personal care and home fragrance. It is the source of many of America’s favorite perfumes. This American retail chain offers candles, soaps, lotions, and scents. It started in New Albany, Ohio, in 1990, and since then, it has spread to six continents. The company’s supply network, mostly in the United States, is powered by agility and innovation. This allows it to deliver high-quality, in-style luxury at affordable prices.
Bath & Body Works offers its clients inviting in-store experiences at more than 1,800 company-operated Bath & Body Works locations in the U.S. and Canada. Also, there are more than 425 franchisee sites worldwide and an online marketplace.
Bath & Body Works will cut 130 jobs
Bath & Body Works is firing 130 employees as part of a cost-cutting measure. The layoffs are the most recent job reductions made by a Columbus-based business. It also affected its former sister companies, Victoria’s Secret, OhioHealth, Olive, and auto insurance firm Root.
The company recently restructured and streamlined its operating structure. It was done “as part of efforts to better set the business for long-term growth and create organizational efficiencies,” the retailer stated. Most of the 130 roles that were eliminated due to these actions were positions of leadership.
According to Executive Chair and Interim CEO Sarah Nash, “Bath & Body Works is currently working to enhance its financial performance and set up the business for long-term growth.”
The business did not account for severance and other expenditures of around $6 million in its third quarter linked to the organizational changes. But Bath & Body Works anticipates that the cuts will result in savings of about $30 million in the year’s second half.
At its corporate offices in Reynoldsburg, Victoria’s Secret said in July 2022 that it was firing 160 employees, largely in management. OhioHealth announced in July 2022 that it was firing 637 employees as part of an effort it claims is required to improve patient care. In the meantime, 450 employees of the tech business Olive were let go, and Root cut 330 positions at the start of 2022.
L. Brands once included Bath & Body Works and Victoria’s Secret. A year ago, they split into two companies. After initially intending to sell a 55% stake in Victoria’s Secret for $500 million in February 2020, L Brands decided to proceed with a split in May. The epidemic forced the cancellation of such an agreement. L Brands is no longer in use; Bath & Body Works, Inc. has taken its place.
The business recorded net sales of $1.6 billion in the second quarter of 2022, a 5% year-over-year decline. Operating income was $241.8 million, a 37% decrease. Compared to the same period in 2021, the business’s net profit for the quarter was $120 million, a 68% decrease.
Bath & Body Works is launching “organizational changes, extra cost control actions, and merchandise margin enhancement opportunities,” the business claims.
“We remain focused on customer-facing initiatives. This includes the near launch of our loyalty program across the U.S.,” the statement reads. “While we are taking active action to manage costs and enhance efficiencies, ” Nash said. Even though clients are still dealing with inflation, he claimed that business performance is better than before the pandemic.
What went wrong?
Neil Saunders is the managing director of GlobalData. According to him, the second quarter’s earnings figures result from consumers cutting back on free time and gains the company earned during the epidemic. Bath & Body Works is seeing greater competition from other retailers in its product categories. This includes upscale body care at Target and Kohl’s due to their Sephora shop-in-shops.
“This nibbles at Bath & Body Works instead of taking big chunks of share away from them, but in this more limited market, even small moves are very unhelpful,” Saunders said in comments via email.
Analysts at Wells Fargo referred to the second quarter results as a “non-event.” It’s particularly relevant in light of the company’s July guidance reduction announcement.
According to Wells Fargo analysts, the company’s upcoming new loyalty program could have a favorable effect. It was scheduled to go live in August 2022. Additionally, they mentioned that traffic had stabilized. Also, the business increased promotions during the quarter and eliminated extra inventory. Thus, it is “entering the 3Q/Fall selling season in a healthy situation.”
Likewise, Bath & Body Works In terms of the second half of the year, Nash stated, “
Our expected Fall and Holiday assortments are well-positioned to connect with our customers. Also, our inventories are clean and forward-looking.”
Bath & Body Works increases sales and profits by cutting costs
In February 2023, Bath & Body Works announced that Q4 net sales dropped 4.6% to $2.9 billion, while net income dropped 26.9% to $434 million. A $9.4 million write-off for inventory destroyed by a tornado was excluded from the revised net income from ongoing operations. It came to $599.7 million.
The business plans to drop approximately 50 mall-based stores and establish 90 off-mall locations this year. Thus, the retailer is shifting its footprint away from malls. According to executives speaking on a conference call, 95 new off-mall locations debuted in North America last year, compared to 48 permanently closed stores.
According to reports, Wendy Arlin, chief financial officer at Bath & Body Works, blamed inflation, lessening demand, and rising wages. Rising wages also contribute to inflation because businesses must charge more for their goods to pay their employees.
The outlet said that due to Bath & Body Works’ financial performance, one of its investors, Third Point, is putting “pressure” on the company. According to the letter submitted to the board of directors, Third Point owns a 6 percent stake in Bath & Body Works. Bath & Body Works stated that it “strongly disagrees” with the hedge fund’s plans to suggest individuals for the board of directors in another announcement.
Gina Boswell, the CEO of Bath & Body Works, assumed her position recently. She is prioritizing a plan to save the company $200 million annually in costs.
Half of that will be reached this year. “A significant amount of the remaining savings” will be realized next year. These were done with the help of external advisers engaged to aid in “a top-to-bottom review of the business,” according to Boswell during the call.
She added, “While we concentrate on improving the core business in the near term, we’ll also continue to investigate longer-term opportunities. Thus, we will add new related categories to provide growth opportunities.
According to GlobalData Managing Director Neil Saunders, the retailer needs to diversify into other categories to keep up with the rising competition from companies like Target.
Particularly outside of conventional malls, he remarked in comments sent through email. “The body care direct-to-consumer segment of the business is a little less developed, although many brands are doing well.
The company provided cautious sales and margin expectations. Saunders added that doing so feeds the fire being stoked by Third Point, acting as a useless distraction.
While acknowledging that Third Point’s opinions had some merit, he added, “We think they are somewhat over the top and ignore the fact that, from a retail point of view, Bath & Body Works is a very well-run company that gets most of the basic concepts of retailing correct.”
Bath & Body Works will close about 50 locations in 2023
The Bath & Body Works chain is a mainstay in malls. The most popular candles right now are the single-wick and three-wick varieties from Bath & Body Works. Yet, if you get your seasonal scented candles from a nearby mall, you should know that the merchant has announced it will close about 50 locations in 2023.
No more information was given about which stores are closing and when they will start closing. According to a presentation during the conference call, Bath & Body Works had roughly 1,802 shops as of February 2023.
The firm began its statement by mentioning the closures and stated that it is “investing in our technology, distribution, and logistical capabilities to promote our long-term growth.”
If you often shop at Bath & Body Works, you might be concerned that you won’t have a location to visit in person. After all, trying different smells on the spot makes deciding which ones you prefer much simpler.
Rest assured, though, that the mall closures are only a small component of a broader real estate project. The business has 115 projects planned in total. This includes renovating 25 White Barn Candle Company stores (a Bath & Body Works sister brand) and developing roughly 90 “new off-mall stores.”
After accounting for the closures, the corporation is increasing its total square footage by 4%.
Conclusion
Bath & Body Works recruited a group of “external advisors to assist in a top-to-bottom review of the business.” They also helped the shop find methods to reduce spending by $200 million in 2023 and 2024. This is according to a press statement from the company.
In the call, CEO Gina Boswell said, “While we will concentrate in the near term on improving the core business, we’ll keep looking at longer-term opportunities,” including goods for men. Boswell added in the press release that Bath & Body Works wants to improve its general reputation as a retailer of personal care products.
“We are actively seeking opportunities for growth and margin expansion. Meanwhile, we also focus on expanding our customer base and bringing innovative new products to market. Thus, we are realizing the full potential of our omnichannel model,” Boswell added. I have great confidence in our future and our capacity to expand our company profitably and create long-term shareholder value.