The paragraph is an introduction to Bath and Body Works' third quarter 2024 earnings conference call. The call is hosted by Melissa, the operator, who introduces Luke Long, the Vice President of Investor Relations. Luke welcomes participants and outlines the agenda, which includes presentations by CEO Gina Boswell and CFO Eva Boratto. He emphasizes the availability of a slide presentation on their website that complements the call and highlights that the discussion will include forward-looking statements and non-GAAP financial measures. He also notes that fiscal 2023 was a fifty-three-week year, and explains that sales and metrics will be discussed on a comparable thirteen-week calendar basis.

In the paragraph, Gina Boswell discusses the company's strong third-quarter results, highlighting a 3% increase in net sales to $1.6 billion and earnings per diluted share of $0.49, both exceeding guidance. Consequently, the company has raised its full-year guidance. She attributes this success to positive customer responses to seasonal merchandise, effective storytelling, and strategic investments that enhance retail experience and drive growth. Each product category saw year-over-year growth, and store traffic surpassed benchmarks. Their strategic initiatives, particularly the five E strategy, are propelling long-term profitable growth.

The paragraph outlines the progress made by Bath and Body Works in executing their strategy focused on the five Es: elevating the brand, expanding into new markets, engaging customers innovatively, enhancing omnichannel experiences, and improving operational efficiency. The company enhanced its product quality through innovation in ingredients, packaging, and fragrances, particularly in their candle business, which saw growth supported by strategic marketing and promotional events. Despite a competitive market and a normalization in the candle sector, they maintained market leadership by emphasizing product quality and value. Moreover, they achieved significant growth in body care through successful fragrance offerings and the North American debut of their everyday luxuries. The brand remains committed to adapting to consumer demands and sustaining long-term business growth.

The paragraph discusses Everyday Luxury's strategy to engage younger customers and drive future growth through single fragrance launches and a new cross-category fragrance. It highlights the success in the soaps and sanitizers category, particularly with new products. The importance of collaborations is emphasized, which helps increase brand awareness and cultural relevance. Notable collaborations include a successful Stranger Things home fragrance launch and an Emily in Paris event, with a full launch imminent. Additionally, the company is focusing on extending its reach by exploring new product categories, expanding store locations, and growing internationally to diversify and attract new customers.

The article highlights the strong performance and growth potential of various business sectors, including men's body care, lip products, and laundry, which collectively account for about 10% of the business. Men's body care is the largest growth area, with successful new fragrance launches like Vanilla Noir. In lip care, new products such as gloss and lipstick are set to attract younger customers. The full U.S. rollout of the laundry category is complete, expected to leverage the company's fragrance expertise for long-term growth. The company is reshaping its real estate portfolio by moving more stores to off-mall locations, currently representing 55% of its North American stores. International markets, representing 5% of net sales, are expanding despite challenges in some regions due to ongoing conflict in the Middle East. Notably, the company opened its 500th international store in London and is on track for about 50 new partner stores this year.

The paragraph discusses a company's focus on engaging customers through a seamless omnichannel experience, which includes improvements in marketing, loyalty programs, and technology to drive long-term growth. During Q3, the company achieved record customer retention, growth in new-to-brand customers, and expanded its "fragrance fashionistas" customer segment. The loyalty program, which significantly contributes to sales and has high satisfaction ratings, saw a 4% increase in active members to 38 million. Technological enhancements are on track, supporting new customer engagement capabilities and facilitating cross-channel shopping experiences. The company also launched its everyday luxuries line on TikTok, aiming to connect with Gen Z customers for the holiday season, while maintaining focus on operational efficiency and cost discipline.

The company is progressing well with its growth plan, expecting $150 million in cost savings by year-end, exceeding initial targets with a two-year total of $300 million. With 85% of its products made in North America, the company is strategically positioned against tariff fluctuations. The strong quarter performance is highlighted as they approach the key holiday season, with fulfillment centers ready and an omnichannel shopping experience in place. Their strategy aims for sustainable profitable growth and shareholder value. Eva Boratto reports exceeding earnings guidance with $0.49 per diluted share and a 3% increase in net sales to $1.6 billion, driven by product innovation and cost discipline.

In the quarter, net sales benefited by approximately 200 basis points due to a calendar shift. US and Canadian store sales increased by 4.4% to $1.2 billion, while direct net sales rose 1.5% to $321 million. Focused demand, adjusted for BOPUS, outperformed store sales and accounted for about 25% of digital demand year-to-date. International sales decreased by 11.1% to $69 million, mainly due to conflict in the Middle East, negatively impacting Q3 net sales growth by 70 basis points. The gross profit rate was 43.5%, aided by cost savings but affected by planned promotions. AURs rose 1% due to mix, while SG&A as a percentage of net sales was 30%, beating expectations due to disciplined cost management and changes in spending timing. There was also a 100 basis point increase in year-over-year marketing investment consistent with prior quarters.

In the third quarter, the company achieved $35 million in cost optimization benefits, contributing to an upgraded 2024 "fuel for growth" forecast of $150 million. Despite a 1.3% decrease in total operating income, inventory levels are well-managed for the holiday season. The company opened new stores while closing others, improving its store positioning. For Q4, sales are adjusted for calendar shifts and expected to decline by 4.5% to 6.5% compared to the prior year. Gross profit is anticipated to improve by 40 basis points, while SG&A expenses will increase due to marketing investments. The expected tax rate is 26.4%, with 229 million weighted average diluted shares outstanding.

The company forecasts fourth-quarter earnings per diluted share between $1.94 and $2.07. For fiscal year 2024, they expect net sales to decrease by 1.7% to 2.5%, partly due to a calendar shift. They project a gross margin of approximately 44% and an SG&A rate of 27%. Full-year adjusted earnings per diluted share guidance is raised to $3.15 to $3.28. Capital investments have reached around $250 million so far this year, with $44 million in dividends paid out in the quarter and $134 million year-to-date. A $0.20 per share dividend is set for December 6, with plans to grow the annual dividend of $0.80 over time. The company repurchased 3.2 million shares for $99 million this quarter and plans a total of $400 million for the year, with a current debt to EBITDA ratio of 2.7 times.

The company repurchased $200 million of senior notes this year and has $314 million of debt maturing next July. They expect to generate $675 million to $775 million in full-year adjusted free cash flow, which will go towards dividends and share repurchases. They will not provide 2025 guidance until their Q4 2024 results. They are pleased with the business momentum heading into the holiday season. Gina Boswell thanked the team for exceeding Q3 sales and earnings expectations, raised full-year guidance, and emphasized their strategic focus and execution heading into Q4. She expressed confidence in navigating near-term volatility and achieving sustainable growth in 2025. The call then opens to a Q&A session, with the first question from Lorraine Hutchinson regarding the impact of candle normalization, to which Boswell responds positively.

The paragraph details a discussion on the candle market and a following Q&A session. The company, a leader in the candle category, has been focusing on quality messaging and collaborations, like with "Stranger Things," to drive growth and increase market share. They do not expect further market normalization impacts beyond 2024. In a subsequent Q&A, Mark Oltschwager from Baird asks about the company's gross margin, noting that they didn't exceed their guidance for the first time in a while. He inquires about the sustainability of their EBIT margin at 17% amid future growth. Eva Boratto responds that they met expectations due to cost savings and lapping improvements from the previous year, which saw a 140 basis point expansion in gross margin.

The article paragraph discusses the company's financial performance, particularly its progress in achieving its target gross margins of 45%, with current guidance suggesting approximately 44% for the year. The company's strategically planned promotions have been successful, contributing positively to both top-line and bottom-line results, and the company remains focused on improving margins. Following this, there is a question about category trends in the third quarter and traffic patterns, to which Gina Boswell responds by highlighting growth in body care, home fragrance, and soaps and sanitizers. She notes positive customer response to seasonal merchandise and new product launches. Eva Boratto is then expected to address specifics regarding the 40 basis points expansion in gross margin for the fourth quarter.

In the paragraph, the speaker discusses the company's gross margin expansion and positive traffic trends for the quarter. Key drivers include benefits from direct fulfillment optimization and cost reductions, along with successful product launches like fall candles and a Halloween collaboration with "Stranger Things," which increased store traffic. A subsequent question from Alex Drayton of Morgan Stanley asks about revenue growth considering the impact of a fifty-third week and the margin profile of expanding business areas. Eva Boratto responds by emphasizing the company's continued growth when adjusted for calendar shifts, with Gina set to address the margin aspect.

The paragraph discusses the company's performance in the fourth quarter, noting the impact of calendar shifts, including a fifty-third week and a shorter shopping period between Thanksgiving and Christmas. They express satisfaction with their momentum entering the quarter. The focus is on adjacencies, which make up about 10% of the business and aim to expand reach and diversify the portfolio. Both core and adjacency categories are driving growth, with improvements expected in core categories and continued growth in adjacencies. The paragraph concludes with a question from Paul Lejuez regarding merchant margins and AUR (Average Unit Retail), which Eva Boratto acknowledges.

The paragraph discusses the financial performance and strategic initiatives of a company. The company experienced a stable merchandise margin compared to the previous year, attributing improvements to cost efficiency initiatives, mix driving average unit retail (AUR) up by 1%, and a diverse product mix. The focus is on enhancing customer value and innovation. Simeon Siegel from BMO Capital Markets asks about the proportion of marketing expenses relative to sales and the learnings from collaborations. He is particularly interested in whether these collaborations are attracting new customers, increasing purchase frequency, boosting annual spend, or smoothing out seasonal purchases, suggesting that the company is creating catalysts instead of just relying on traditional shopping seasons.

In the paragraph, Eva Boratto discusses the company's marketing investment, which is about 3.5% of their annual sales, noting a recent increase compared to last year. Gina Boswell highlights the successful strategy of collaborations, such as with Netflix series like "Stranger Things" and "Emily in Paris," to drive growth and brand relevancy, particularly targeting the 18 to 34-year-old demographic. These collaborations not only increase traffic and brand awareness but also enhance cultural relevancy. The company plans to continue a selective approach to collaborations, citing the success of past projects like "Bridgerton," which has led to more partnership opportunities. The conversation then opens for a question from Kate McKhey of Goldman Sachs.

In the paragraph, Gina Boswell discusses the performance of adjacent product categories, noting that they are delivering as expected and contributing well alongside the core categories. She mentions strong repeat rates and varying levels of new customer penetration across different sectors like men's hair, lip, and laundry. Despite differing degrees of market penetration, the contribution from these adjacencies is positive. Jonah Kim from TD Securities asks about the impact of new product introductions on sales and their future plans. Gina explains that the company focuses on core categories and adjacencies, with "newness" playing a role in their product strategy, contributing to sales alongside the core categories.

The paragraph discusses a company's focus on maintaining innovation and newness as key drivers in their business strategy, similar to past successful periods like those of Bath and Body Works. It highlights the intent to continue this approach despite no planned increase in newness for the next year, seeing new products as essential to the company's success. In a Q&A section, Ike Boruchow from Wells Fargo inquires about the international business outlook amidst headwinds and a possible strategic shift affecting gross margins. Eva Boratto responds by sharing positive sales growth in non-war-affected regions and discusses ongoing pressures in regions impacted by war, which constitute about half of their business.

The paragraph discusses the company's sales outlook and strategic focus. Despite some relief from war-related challenges, sales are expected to decline in the fourth quarter. The company aligns with previous forecasts and sees international markets as promising for future growth. Gina Boswell emphasizes maintaining gross margins by leveraging the company's agile supply chain. The company prioritizes four key areas: scalable new products, competitive value, demand-driving investments, and supply chain agility. Following this, Olivia Tong from Raymond James asks about the company's loyalty program and potential opportunities for growth.

The paragraph discusses the company's strong focus on its loyalty program, which boasts a 93% satisfaction rate and contributes to over 80% of US sales. The program has approximately 38 million active members, with a 4% increase from the previous year. The company aims to enhance member engagement by encouraging frequent earning and redemption of points. This strategy, referred to as the "loyalty flywheel," leads to increased reward redemptions, higher sales attached to the loyalty program, and greater engagement and spending by new app-enrolled members. On manufacturing, Gina Boswell notes that 85% of the company's operations are based in North America, providing a competitive advantage, while Eva Boratto highlights efforts to reduce overseas exposure and enhance operational agility.

In the paragraph, Christina Catai from Deutsche Bank asks about the company's recent launch of TikTok shop and plans to leverage it during the holiday season to reach younger demographics. Gina Boswell responds, explaining that they are using TikTok shop and other social media platforms like Instagram and YouTube as part of their holiday marketing strategy to enhance brand awareness. The company measures the effectiveness of these campaigns through metrics such as return on ad spend and customer demographics. Gina emphasizes the importance of achieving certain metric thresholds before continuing their spending, expressing optimism about the current investment levels and ROI.

In the paragraph, Eva Boratto discusses the performance of off-mall versus mall-based stores, noting that off-mall stores performed better in traffic and conversion, without regional variance. BOPIS (Buy Online, Pick Up In-Store) grew 40% year-over-year and now accounts for 25% of digital demand, with about a third of BOPIS customers making additional purchases in-store. Marni Shapiro then asks about Senscriptions, which Gina Boswell explains is an auto-replenishment service initially offered for wallflower bulbs, now expanded to a wide range of products. The service, rebranded from "auto replenish," has performed well and offers a couple hundred products.

In the paragraph, the discussion centers around providing a seamless and convenient shopping experience for customers, emphasizing the introduction of "Senscription" as a valued service. Karin Wolfmeier from Piper Sandler asks about the Average Unit Retail (AUR) trends and flexibility in pricing strategies. Gina Boswell explains that the AUR is influenced by an agile business model aimed at meeting customer needs while optimizing financial performance. She highlights the importance of maintaining a flexible pricing strategy, testing promotions to ensure profitability, and utilizing a "good, better, best" strategy to offer a variety of price points. The aim is to drive top and bottom line growth by strategically leveraging the business model and promotional capabilities.

Gina Boswell discusses the concept of "everyday luxuries" at Bath and Body Works, focusing on offering desirable fragrances at affordable prices. The line, especially popular with younger customers, includes both scent dupes and proprietary fragrances crafted by high-quality fragrance houses. This strategy has contributed to a boost in sales during the quarter. The conference call, led by Luke Long, concluded with Thanksgiving wishes and information on accessing a replay.

This summary was generated with AI and may contain some inaccuracies.