BBWI – Market expectations are for Uniform ROA to compress, and management may have concerns about pricing and SG&A expenses

April 22, 2022

  • Bath & Body Works (BBWI) currently trades below corporate and historical averages relative to Uniform earnings, with a 12.8x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to compress to 12%, accompanied by 3% Uniform asset growth.

  • However, analysts expect Uniform ROA to improve to 22% by 2023, accompanied by 19% Uniform asset shrinkage.

  • If sustained going forward, these levels would imply a stock price closer to $22, representing significant potential equity downside for the firm.

  • Moreover, the firm’s most recent earnings call suggests management may have concerns about pricing and SG&A expenses.

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