Bath & Body Works (BBWI) may be uniquely positioned to weather potential tariff increases under a new presidential administration. CEO Gina Boswell recently revealed to Yahoo Finance that approximately 85% of the company’s manufacturing takes place within the United States, primarily at its Beauty Park facility in New Albany, Ohio. This strategic location, near the company’s Columbus headquarters, provides significant advantages.
This “near-shoring” strategy, implemented years ago, minimizes exposure to potential trade disruptions and allows for greater flexibility and speed in product development and delivery. Boswell emphasized the company’s ability to get products into stores within weeks, rather than months, a key differentiator in the fast-paced retail landscape. This agility could prove crucial in navigating potential tariff headwinds.
Recent political pronouncements have suggested the possibility of significant tariff increases on imports from China, Mexico, and Canada. While roughly 10% of Bath & Body Works’ production originates from these countries, Boswell expressed confidence in the company’s ability to mitigate any additional costs through supplier negotiations and potentially modest price adjustments.
The company has faced challenges recently, with its stock price down significantly year-to-date, reflecting a broader slowdown in the post-pandemic beauty boom. Despite beating earnings estimates in the third quarter, Bath & Body Works anticipates sales declines in the fourth quarter and has projected a slight decline in net sales for fiscal 2024. Adjusted earnings per share are expected to remain relatively stable.
To address these challenges and position the company for long-term growth, Bath & Body Works is focusing on several key strategic initiatives. These include elevating core products, expanding into adjacent markets such as men’s grooming, hair care, and laundry products, bolstering digital sales with in-store pickup options, and enhancing operational efficiency. Boswell highlighted the sequential improvement in top-line sales throughout 2024, adjusting for the 53rd week in fiscal 2023 and the shorter holiday shopping season.
Analysts are divided on the company’s prospects. Some view Bath & Body Works as a well-positioned retailer with a strong blend of staple and discretionary products, a built-in replenishment cycle, and healthy margins on core offerings. Others express concern about the company’s vulnerability to consumer trade-downs in the current macroeconomic environment, citing potential resistance to higher price points.
Boswell acknowledged the challenging economic backdrop and the increasing prevalence of value-conscious consumers. However, she emphasized the company’s broad range of price points and its successful navigation of similar economic conditions in recent quarters. The company’s domestic manufacturing base could provide a crucial advantage in mitigating potential tariff impacts and maintaining competitive pricing. This strategic advantage may be a key factor in Bath & Body Works’ ability to navigate the challenges ahead and capitalize on future opportunities.
