Why Bath & Body Works Shot Nearly 11% Higher Today

What happened

A day after reporting its second-quarter earnings after market hours, retailer Bath & Body Works’ (NYSE:BBWI) shares rose by 10.5% Thursday thanks to the estimates-crushing numbers the company posted.

So what

For the quarter, Bath & Body Works’ revenue landed just shy of $3.32 billion, which was a powerful 43% higher year over year. On the bottom line, the retailer — previously known as L Brands — flipped dramatically into the black with a profit of nearly $374.2 million ($1.34 per share) against the year-ago loss of almost $50 million.

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Both headline figures were miles ahead of analyst estimates. On average, these prognosticators modeled that Bath & Body Works would earn merely $1.68 billion in revenue and a per-share net profit of $0.83.

As with other retailers, the company was operating from a low base; in the year-ago period many of its stores endured mandatory shutdowns. Regardless, its far-better-than-expected growth was admirable.

However, we should bear in mind that a formerly crucial business unit — the storied Victoria’s Secret (NYSE:VSCO) lingerie retailer — has been spun off, and its results will no longer be consolidated into the onetime parent’s business. In Q2, Victoria’s Secret was responsible for almost half of Bath & Body Works’ total sales.

Now what

Q3 might not end up being as much of a blowout as the just-reported quarter. Bath & Body Works is forecasting $0.55 to $0.60 per share for net income, a tally that doesn’t include one-time costs associated with the Victoria’s Secret spinoff. Collectively, analysts tracking the stock are expecting $0.58 per share. No revenue estimate was provided by the company.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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