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Why Bath & Body Works Shot Nearly 11% Higher Today

By Eric Volkman – Aug 19, 2021 at 5:35PM

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The company notched huge Q2 beats, but a now-gone asset played a big part in this.

What happened

A day after reporting its second-quarter earnings after market hours, retailer Bath & Body Works' (BBWI 3.30%) shares rose by 10.5% Thursday thanks to the estimates-crushing numbers the company posted.

So what

For the quarter, Bath & Body Works' revenue landed just shy of $3.32 billion, which was a powerful 43% higher year over year. On the bottom line, the retailer -- previously known as L Brands -- flipped dramatically into the black with a profit of nearly $374.2 million ($1.34 per share) against the year-ago loss of almost $50 million.

A person carrying shopping bags while walking in a mall.

Image source: Getty Images.

Both headline figures were miles ahead of analyst estimates. On average, these prognosticators modeled that Bath & Body Works would earn merely $1.68 billion in revenue and a per-share net profit of $0.83.

As with other retailers, the company was operating from a low base; in the year-ago period many of its stores endured mandatory shutdowns. Regardless, its far-better-than-expected growth was admirable.

However, we should bear in mind that a formerly crucial business unit -- the storied Victoria's Secret (VSCO -2.62%) lingerie retailer -- has been spun off, and its results will no longer be consolidated into the onetime parent's business. In Q2, Victoria's Secret was responsible for almost half of Bath & Body Works' total sales. 

Now what

Q3 might not end up being as much of a blowout as the just-reported quarter. Bath & Body Works is forecasting $0.55 to $0.60 per share for net income, a tally that doesn't include one-time costs associated with the Victoria's Secret spinoff. Collectively, analysts tracking the stock are expecting $0.58 per share. No revenue estimate was provided by the company.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Bath & Body Works, Inc. Stock Quote
Bath & Body Works, Inc.
BBWI
$43.54 (3.30%) $1.39
Victoria's Secret & Co. Stock Quote
Victoria's Secret & Co.
VSCO
$44.99 (-2.62%) $-1.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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