December 6, 2021 | 11:30 AM by Jay Kunstman | jkunstman@jaguaranalytics.com

Bath & Body Works (BBWI) – Candle-Monium

This morning in Conversations, I highlighted how last Friday, Bath & Body Works (BBWI) kicked off its annual Candle Day tradition. Specifically, it began on Friday, December 3rd both online and in stores. Then, on Saturday, December 4th, it was in stores only. So what is Candle Day you ask? According to Bath & Body Works:

“Pardon the pun, but it’s pure candle-monium. For one day online and two days in stores, we sell all our world famous 3-wicks for a super-amazing price. There’s no better time to stock up for yourself (and the gift list). Speaking of better, that’s the name of the game this year. If you shop online, you might find yourself in a virtual line so your candle hauling’s as easy (and awesome!) as possible.”

JPMorgan analyst Matt Boss put out a note highlighting that for the Candle Day event, store doors opened at 5-6AM varying by location (vs. 4-5AM in 2020 and 7AM in 2019), translating to potential SG&A leverage opportunity Y/Y on less hourly store labor. More importantly, he stated that his fieldwork points to outsized store traffic across both off-mall, top-tier (i.e., A-grade malls), and lower-tier/regional malls (C-malls) during the event with balanced channel engagement (with customer spend up high 20s vs. 2019, supported by a meaningful increase in the number of cross-category shoppers, who historically spend over 3x more than a single category purchasing customer). Moving on to the digital channel, he said that customers faced “virtual queues” waiting in some cases over 30 minutes to enter the digital site, suggesting ongoing website traffic strength (with direct sales +92% vs. 2019 in Q3 and their Q4 forecast +78% vs. 2019).

Switching to the topic of pricing power real quick, on the company’s Q3 earnings call, CEO Andrew Meslow would say, “As I mentioned and Wendy reaffirmed, our current guidance is a very similar approach to last year. So, if we were able to be a little bit more aggressive in terms of pricing than that, that could potentially result in some upside.”

As you will see in the chart below, JPMorgan did find that a couple of products did see price increases vs 2020 and 2019 levels. They would add that the Candle Day event is running at +3% higher AUR this year with three-wick candles selling for $10.25 (vs. $9.95 in 2020 and $9.50 in 2019) with 2020’s broader AUR increases across the assortment maintained YTD – matching management’s commentary for a more “selective” approach to price action in 2021 in response to raw materials increase (soy as the single largest contributor). Looking forward, JPMorgan sees upside to their multi-year gross profit dollar assumptions supported by AUR increases (and demand > supply), strategic promotional activity, BBW’s channel agnostic (digital vs. stores) profitability profile, and read/react testing capabilities on both promotions and pricing.

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