Morgan Stanley Downgrades Bath & Body Works Inc. (BBWI) to Equalweight

Morgan Stanley analyst Alex Straton downgraded Bath & Body Works Inc. (NYSE: BBWI) from Overweight to Equalweight with a price target of $18.00 (from $43.00).

The analyst comments: "We downgrade BBWI to Equal-weight with an $18 PT (vs. $16 currently), reflective of reduced out-year & steady-state growth & profitability forecasts.
The 3Q print/guidance & newly-announced strategic plan confirm our YTD concerns that BBWI’s path to consistent >LSD % growth & margin expansion is not only elongated, but also potentially permanently out of reach. Recall we’ve left each quarter this year incrementally negative on BBWI (more here, here, & here). More specifically, we’ve taken the view that a consistent return to >LSD % growth (key catalyst for the stock) & subsequent margin expansion could take longer than we previously expected given 1) the introduction of a new mgmt. team (more here & here), 2) a potential multi-year investment cycle required to address revenue headwinds/ignite growth acceleration in excess of +LSD % levels (more here & here), & 3) a challenging macro backdrop. Unfortunately, today’s 3Q underperformance, FY guidance reduction, & newly-released strategic plan confirm those concerns, unveiling 1) the drivers of BBWI’s recent +LSD % topline trend have been unhealthy (collaborations, promotions, etc.), & 2) that it will require more time & investment to course-correct the topline & profitability to improved levels. Put differently – the path to improved fundamentals is elongated, & in our view, potentially permanently out of reach."

For an analyst ratings summary and ratings history on Bath & Body Works Inc. click here. For more ratings news on Bath & Body Works Inc. click here.

Shares of Bath & Body Works Inc. closed at $15.82 yesterday.

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