The paragraph is an introduction to the Bath & Body Works Fourth Quarter 2024 Earnings Conference Call. Melissa, the conference call operator, opens the call and hands it over to Luke Long, the Vice President of Investor Relations. Luke introduces the key participants on the call, including Gina Boswell, CEO, and Eva Boratto, CFO. The call will discuss fourth quarter and full year fiscal 2024 earnings, and related slides are available on their website. The call may include forward-looking statements and non-GAAP financial measures, with relevant disclosures provided in the morning's press release. It is noted that fiscal 2023 was a 53-week year, and differing results reporting bases are explained for clarity.

In the call, Gina Boswell reviews Bath & Body Works' key achievements in 2024, including fourth-quarter results and 2025 expectations. The company has focused on building momentum and a strong foundation for long-term growth by executing strategic initiatives. These include collaborations with popular brands like Netflix, launching the Everyday Luxuries line, increasing loyalty membership by 6%, expanding into new categories, and achieving significant cost savings through the Fuel for Growth program. Boswell thanks the team for creating a positive customer experience during the holiday season.

In Q4, the company achieved strong financial performance with net sales of $2.8 billion, surpassing guidance, and earnings per diluted share of $2.09, which also exceeded expectations. Sales improved sequentially throughout 2024, despite calendar shifts and a shorter holiday season. The company focused on three strategic priorities: accelerating top-line growth through product innovation, marketing, and technology; enhancing operational excellence and efficiency; and investing in growth while returning value to shareholders. The success was attributed to increased traffic and conversion rates, strong holiday sales, and the launch of innovative products in core categories such as body care, home fragrance, and soaps.

The paragraph discusses the performance and strategic developments of various product categories in 2024 and plans for 2025. Body care maintained market leadership with low-single-digit growth, boosted by successful fragrance launches and expanding the "everyday luxuries" line, attracting a younger and more diverse customer base. The new fragrances, Platinum and Perfect in Pink, aligned well with fashion trends. Home fragrance saw a slight decline in performance due to shifted promotional strategies but improved in the year's second half. The focus remains on innovation and sustaining customer interest, with plans to expand the product pipeline in 2025. Wallflowers, a fragrance plug-in, performed well.

The article highlights the popularity of fresh fragrances and the growth of soaps and sanitizers due to seasonal cleaning and a demand surge in Q4. The brand's collaborations, such as with Emily in Paris and Sweethearts, have enhanced brand awareness and cultural relevance, with a highly anticipated Disney Princess collaboration launching with significant success on social media. The company is committed to improving customer experiences both in-store and online and has transitioned to a majority off-mall retail presence, with plans to expand further in response to consumer preferences. There is also excitement about new product launches anticipated for 2025.

The paragraph discusses the company's success in enhancing customer retention and attracting new customers through its marketing, technology, and loyalty program efforts. It highlights that loyalty members perform better than non-members, leading to increased spending and engagement, with 39 million active members and a rising reward redemption rate. Future enhancements to the loyalty program are planned for 2025. The company's technology advancements aim for more personalization and seamless customer interactions. Additionally, there has been growth in adjacent categories and international markets, particularly in men's products, which are performing well and represent potential for future expansion. Plans are underway to further develop these categories, including launching new men's fragrances and expanding the Everyday Luxuries platform to men's products.

The body care business, particularly the Lip category, experienced significant growth, with plans to launch new products quarterly in 2025. The Laundry platform, part of home fragrance, shows promise for long-term growth due to its unique fragrances and attractive packaging, with plans to introduce additional products. International expansion is a key strategy, offering substantial future opportunities, as it currently accounts for 5% of net sales. Despite challenges in the Middle East, overall retail sales rose nearly 10% in the quarter. The company's growth strategy is centered on product innovation, marketing, technology, and international expansion, leading to a return to growth in 2024. Operational efficiency improvements and cost-saving initiatives have exceeded targets, resulting in $155 million in savings in 2024 and over $300 million over two years.

The paragraph discusses the company's financial performance and strategic outlook. In 2024, the company generated significant operating cash flow of nearly $900 million, which it is reinvesting into the business and returning to shareholders via dividends and share buybacks. Looking towards 2025, the company anticipates a 1% to 3% increase in net sales and expects diluted earnings per share to range from $3.25 to $3.60. It plans to drive growth through product innovation, marketing, technology, and international expansion. In the fourth quarter, the company exceeded earnings per share guidance with $2.09, due to higher-than-expected net sales, cost management, and a lower tax rate, resulting in net sales of $2.8 billion, despite a 4% year-over-year decrease impacted by calendar shifts.

In the fourth quarter, net sales growth increased when adjusted for certain factors, with US and Canadian stores reporting $2.1 billion in sales, a 2% decrease from the previous year. Direct net sales were $595 million, down 9%, but Buy Online, Pickup In Store (BOPIS) demand rose 45%, comprising 25% of digital demand. International sales were $84 million, a 10% decline. Adjusted for an extra week, net sales decreased in mid-single digits as expected. The gross profit rate exceeded expectations at 46.7%, benefiting from cost savings and distribution efficiency, while SG&A was 22.3% of net sales. The Fuel for Growth initiative saved $40 million in the quarter and $155 million for the year. Operating income reached $678 million, 24.3% of net sales. Inventory increased 3%, aligning with expectations, and the real estate portfolio remains strong, with 57% of stores in off-mall locations.

In the past year, the company opened 106 new North American stores, mainly in off-mall locations, and closed 61 stores in malls, increasing square footage by 3%. Internationally, 44 new stores were opened, ending the year with 529 stores. For 2025, the company aims to boost top-line growth through innovation, marketing, technology, and international expansion, enhance operational efficiency, and strategically manage cash flow to invest in growth and return value to shareholders. They anticipate net sales growth of 1% to 3%, with North American square footage increasing by 2% to 3%, and expect international sales growth. The gross profit rate is expected to be around 44%, with SG&A at 27%. Marketing investments will be about 3.5% of sales, with increased technology spending planned for the latter half of the year. They foresee benefits from previous cost-saving measures and aim to offset technological investments and wage inflation with efficiency improvements. Expected full-year net non-operating expenses are around $255 million due to reduced interest expenses from debt paydown.

The company anticipates an effective tax rate of 26% and diluted shares outstanding at around $213 million for the full year, with $300 million allocated for share repurchases. They forecast earnings per diluted share to range between $3.25 and $3.60. For Q1, they expect net sales growth of 1% to 3% and a gross profit rate of approximately 43.3%, with a 50 basis points decline primarily due to a higher international sales mix. The Q1 SG&A rate is projected at 30.2%, similar to the prior year, with net non-operating expenses around $65 million and a tax rate of 29%. Weighted-average diluted shares for Q1 are expected to be about $217 million, forecasting Q1 earnings per diluted share between $0.36 and $0.43. The guidance includes the impact of China tariffs but excludes other potential tariff impacts due to uncertainty. For 2025, net sales growth is expected to be consistent across quarters, with inventory planned to increase mid-single digits in the first half to support holiday inventory builds. The company will continue monitoring and strategizing around tariff impacts and supply chain optimizations.

In fiscal year 2024, the company focused on generating strong cash flow and achieving long-term profitable growth through strategic investments, spending around $245 million on capital projects. They generated $725 million in adjusted free cash flow, enabling them to return approximately $577 million to shareholders through dividends and share repurchases, and repaid $514 million in senior notes. For 2025, they plan to invest $250-$270 million in capital expenditures, primarily in real estate and technology, and expect to generate $750-$850 million in free cash flow. The company aims to repurchase $300 million in shares and maintain an annual dividend of $0.80 per share. The leadership expresses confidence in their strategic direction and momentum going into 2025.

The paragraph features a Q&A session where Ike Boruchow from Wells Fargo asks Gina Boswell about her excitement for the future, particularly heading into 2025, and about a collaboration with Disney. Gina responds by expressing satisfaction with their Q4 performance, noting sequential improvements throughout 2024, and excitement for their innovation pipeline, especially in fragrance and adjacent categories. She highlights the positive start to Q1 and urges people to visit stores to see the excitement generated by the Disney collaboration.

In the paragraph, executives from Bath & Body Works discuss their confidence in the company's growth prospects for 2025, attributing it to a strong portfolio, product appeal, customer experience, and effective marketing strategies. Matthew Boss from J.P. Morgan questions them about the drivers behind recent revenue growth, particularly the increased customer traffic in the last two quarters, and the sustainability of these trends. Gina Boswell highlights successful collaborations with brands like Disney and Emily in Paris as key factors in driving traffic. Eva Boratto explains that to achieve operating margin expansion, the company requires 2-3% sales growth on the B&O line and 2.5-3.5% on the SG&A line. Boswell emphasizes the importance of compelling and trendy products, citing their holiday performance as evidence.

The paragraph discusses the company's marketing strategies, emphasizing the success of achieving virality and engaging with various customer groups through platforms like TikTok. It highlights the use of technology and personalization to enhance customer loyalty and drive traffic, such as through early access offers. The company is confident in sustainable growth heading into 2025. Eva Boratto expresses satisfaction with the start of the quarter, mentioning successful collaborations like those with Disney and emphasizing innovation's role in customer engagement. Lorraine Hutchinson from Bank of America asks about the conservative nature of the company's full-year sales guidance despite various positive factors, to which Eva responds that they aim to meet or exceed their expectations by carefully considering their assumptions.

The paragraph discusses expectations and outcomes for sales trends, emphasizing a consistent trajectory based on Q4 results. Despite no assumed improvements in macro trends or consumer sentiment, the company remains positive about innovations and potential collaborations, such as with Disney, contributing to sales acceleration. The agile supply chain is highlighted as a means to capitalize on any momentum gains. Gina Boswell addresses questions about the winter semi-annual sale, noting it met expectations, but lean inventories after the holidays affected sales. Despite these factors, the company ended the year with a clean inventory position and Q4 sales exceeding guidance projections.

The paragraph focuses on the importance of collaborations (collabs) for a company, which serve as a unique storytelling opportunity that drives traffic, excitement, and brand engagement. The company plans to incorporate learnings from past experiences into their strategy for 2025. Although specific future collaborations are not disclosed, these are included in the company's guidance. The paragraph also includes an exchange during a Q&A session. Alex Straton from Morgan Stanley congratulates the company on a successful quarter and asks about customer demographics and sales guidance for 2025. Gina Boswell responds, highlighting the importance of attracting younger customers and emphasizing the brand's broad household presence. Straton's second question about sales volume assumptions for 2025 sales guidance remains unanswered in the excerpt.

The paragraph discusses Bath & Body Works' strategy to attract a more youthful customer base by enhancing brand perception, leveraging social media and cultural relevance, and offering high-quality and trendy products. It highlights the success of reaching young customers through platforms like TikTok, influences, and collaborations. The emphasis on product reformulations and Everyday Luxuries is also noted as appealing to this demographic. Additionally, the company is focused on a volume-led approach rather than increasing promotional activities in order to drive both growth and profitability. Eva Boratto mentions the importance of staying agile to align with customer preferences.

In the paragraph, Mark Altschwager asks about the expected return to growth for international sales this year and the impact on gross margins, particularly noting a headwind in the first quarter. Eva Boratto responds by indicating that, while the full-year growth is expected to be in the mid-single-digit range, the margin will not be significantly affected. She highlights that the first quarter will have a disproportionate impact on both the top line and margin due to anticipated double-digit growth and timing issues. Following this, Paul Lejuez inquires about the company's tariff exposure by country and growth assumptions for adjacent categories, to which Eva begins to respond.

The paragraph discusses a company's supply mix, noting that 10% comes from China and 7% combined from Canada and Mexico. The company is monitoring the Canadian market closely and preparing strategies to mitigate potential impacts. Gina Boswell mentions that adjacencies have grown above the shop and are expected to become a larger percentage of the mix by 2025, with a focus on categories like men's products, lip, laundry, and hair, which are large addressable markets. She emphasizes the potential for men's products to become a core segment. The paragraph ends with a question from Krisztina Katai of Deutsche Bank about the company's product pipeline for 2025, highlighting product newness, the expansion of Everyday Luxuries, body creams, washes, and collaborations like the Disney launch.

In the paragraph, Gina Boswell discusses Bath & Body Works' focus on newness in their product offerings, emphasizing the importance of innovation and staying on-trend in the industry. She highlights the company's strategy of developing new product platforms and leveraging existing fragrances across various products. This approach not only aims to appeal to existing customers but also to attract new ones across different age groups. Boswell also mentions plans for introducing more lip products quarterly and expresses excitement about the offerings planned for 2025. Following her remarks, the conversation shifts to Dana Telsey from Telsey Advisory Group, who inquires about the growth of Bath & Body Works' loyalty program, which increased by 6%, and asks about the characteristics of newly captured customers.

Gina Boswell discusses the success of their loyalty program, highlighting a 6% year-over-year growth in active members, improved customer trends, and increased customer retention, particularly among the "Fragrance Fashionista" segment. The loyalty program enhancements and effective marketing are credited with these improvements. Eva Boratto then addresses cost savings, expressing satisfaction with the $300 million in incremental savings achieved between 2023 and 2024, and emphasizes the importance of continuing to identify additional opportunities for cost efficiency, including value engineering programs.

The paragraph discusses the company's focus on maintaining a strong customer experience while seeking efficiencies that don't impact their top line. During a Q&A, Olivia Tong asks about Q1 growth expectations, noting external challenges like tough weather in January. Eva Boratto responds, saying that although January was lighter, the company's performance was in line with the market. They performed well in November and December during the holiday season and are optimistic about the rest of the quarter as they approach key occasions like Mother's Day and Easter. Additionally, Tong asks about fiscal 2025 margins, and though flattish margins are expected, there are various factors influencing this, including tariffs.

The article discusses the outlook on gross margins for the year, highlighting the benefits of last year's cost reduction initiatives. It mentions that tariffs have a minimal impact due to a limited focus on China, and there's some pressure on merchandise margins because of new product lines that start with lower margins but improve with scale. The outlook is positive overall. Eva Boratto notes that changes in ocean freight rates have little material impact on margins since significant savings have been achieved in transportation areas over the past two years. Korinne Wolfmeyer inquires about SG&A guidance, which is expected to be flat as a percent of sales, seeking insights on potential leverage and spending patterns throughout the year.

Eva Boratto discusses the company's projected sales growth and increased investment in technology for 2025 as part of their ongoing modernization initiative. Ashley Helgans asks about expectations for the fragrance industry, given some companies report normalization. Gina Boswell responds that despite industry changes, the fragrance market remains strong, and they see the category as appealing due to its transportive qualities and consumer sentiment appeal. She highlights their strategic position in both mass and prestige markets and mentions a Disney collaboration as an example of making fragrance accessible, indicating a positive outlook for the industry.

In the paragraph, Marni Shapiro from The Retail Tracker asks about the Scent-Scription program and which Disney Princess merchandise is selling the best. Gina Boswell and Ashley Helgans from the company respond. They explain that the Scent-Scription program, designed to facilitate easy reordering of their products, is currently small but growing. The program offers a broader assortment now, including laundry items, and though early, they are optimistic about its potential. Regarding the Disney Princess merchandise, it's still early days to determine the best-seller, but Gina mentions that Tiana is performing well based on her personal observation.

The paragraph concludes a conference call for Bath & Body Works, noting that the Q&A session has ended. Luke Long thanks participants for joining and mentions that a replay of the call will be available on the company's website for 90 days. The operator then concludes the call, and participants are invited to disconnect.

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