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Bath & Body Works (BBWI) is taking a step today that investors hope will turn the company's fortunes around. It named Daniel Heaf as its new CEO, effective immediately. In addition, the company offered encouraging Q1 (Apr) guidance with upside EPS and in-line revenue. It also reaffirmed full-year EPS and revenue guidance.

• Heaf comes over from Nike (NKE), where he drove significant growth in retail and digital sales channels during a time of massive upheaval in the marketplace. Most recently, he was Nike's Chief Strategy and Transformation Officer, where he delivered productivity gains by refocusing resources and investment. Before that, he was Head of Nike Direct. Before Nike, Heaf worked at Burberry, where he helped reposition the brand as a digital innovator.
• Bath & Body Works is a bit of a different animal as one of the world's largest specialty retailers of fragrances for the body (fragrance mist, body lotion, body cream) and home (candles, fragrance diffusers, soap). But the hope is he can turn this struggling brand around. A big issue for BBWI is that consumers have become more value-conscious. Also, BBWI's merchandise in general is highly discretionary.
• BBWI concedes the market for candles, a core category for BBWI, has become a lot more competitive with a value-conscious consumer. In response, BBWI recently launched collaborations with big names and pop culture through partnerships with companies like Netflix. It also successfully rolled out Everyday Luxuries, its prestige-inspired line of fine fragrance mist, which is resonating with younger customers.
• In 2025, BBWI expects to build on platforms launched in 2024, including Everyday Luxuries and Collaborations. It also expects to extend its reach through adjacencies and international expansion. BBWI is expanding its Everyday Luxuries collection with additional fragrances and forms, including body cream and body wash. It's also expanding into adjacent categories like Men's, Hair, Lip and Laundry.
• A key strategy for BBWI has been to move away from malls. Today, 57% of its North American stores are in off-mall locations with a plan to increase this to 75% over time. Also, international markets represent only 5% of sales, but BBWI sees potential in growing international sales.

The stock is trading lower today despite the CEO news. We think the overall weakness in the stock market is the main reason. However, the lack of upside tells us that investors may be taking a wait-and-see approach to see how a Nike executive could turn around a candle/fragrance brand. The businesses are quite different, but we should get some initial insight when BBWI reports earnings next week (May 29 before the open). On a final note, we wanted to mention that BBWI was added to our YIELD rankings on Friday. BBWI repurchased $400 mln in shares in 2024, a good amount for a company with a $7.1 bln market cap, plus it pays a 2.4% dividend yield.