Bath & Body Works, Inc.

Good morning. My name is Melissa, and I will be your conference call operator today. At this time, I would like to welcome everyone to Bath & Body Works' third quarter 2024 earnings conference call. Please be advised that today's conference is being recorded. During the question and answer portion, you may ask a question from the phone by pressing star 1. I will now turn the call over to Luke Long, Vice President of Investor Relations. Luke, you may begin.

Good morning and welcome to Bath and Body Works' third quarter 2024 earnings conference call. Joining me on the call today are Gina Boswell, Chief Executive Officer, and Eva Barado, Chief Financial Officer. In addition to this call and this morning's press release, we have posted a slide presentation on our website that summarizes the information in these prepared remarks, in addition to providing some related facts and figures regarding our operating performance and guidance. As a reminder, Some of the comments today may include forward-looking statements related to future events and expectations. For factors that could cause the actual results to differ materially from these forward-looking statements, please refer to this morning's press release, as well as the risk factors in Bath & Body Works 2023 Form 10-K and our quarterly report on Form 10-Q, which will be filed this week. Today's call also contains certain non-GAAP financial measures. Please refer to this morning's press release and supplemental materials for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measure. Fiscal 2023 was a 53-week year. To provide the best understanding of the business, all category sales results, year-to-date market share data, loyalty metrics, and selling metrics discussed during the call were on a comparable calendar basis. which is the 13 weeks ended November 2, 2024 versus the 13 weeks ended November 4, 2023. All other results discussed are on a reported basis, which is the 13 weeks ended November 2, 2024 versus the 13 weeks ended October 28, 2023. With that, I'll turn the call over to Gina.

Thank you, Luke, and good morning, everyone. We appreciate you joining us. I'll start with a high-level review of our third quarter results, including the customer behavior we're observing, the actions we're taking to drive growth, and the progress we've made against our strategic priorities. Then Eva will walk through our financials in more detail. We delivered a strong quarter. Net sales were $1.6 billion, up 3% versus the prior year, and earnings per diluted share were 49 cents. We beat our guidance on both the top and bottom line, and we are raising our full year guidance to fully reflect this outperformance. I've spent a lot of time in our stores over the past few months, and I've seen firsthand how customers are responding positively to our seasonal merchandise and storytelling. Witnessing our beautifully arranged floor sets along with our store associates' unique ability to meet our customers' needs is always a great reminder of the strength of our retail experience and the team that enables it. Our continued product innovation coupled with improved demand generation, the compelling value of our products, and our team's strong execution drove positive store traffic and conversion for the quarter. our store traffic exceeded the third-party benchmarks we track. Each of our categories, body care, home fragrance, and soaps and sanitizers grew low single digits year over year, and year to date we maintained our overall leading unit market share. And with this quarter's results, our net sales performance adjusted for calendar shifts has sequentially improved each quarter during 2024. Our strategic investments and focused execution of our 5E strategy are driving momentum toward long-term profitable growth. As a reminder, the 5Es of our strategy are elevating the Bath & Body Works brand and core products, extending our reach to new adjacencies and markets, engaging with customers in new ways, enabling a more seamless omnichannel experience, and finally, enhancing operational excellence and efficiency. All of this is underpinned by the hard work of our talented associates. We made progress on each of the five E's in the quarter, starting with elevating the brand and core products. We are innovating across our portfolio and are continually raising the quality of our products, including updating the ingredients, packaging, and fragrances to meet and create customer demand. Our home fragrance performance in the quarter was fueled by growth in the candle business. as we drove targeted marketing investments coupled with a successful new promotional event. The team strategically timed this new event to align with this year's holiday calendar. We executed well and met the customer mindset. As we noted when we reported our Q2 results, it is a competitive market with a value-conscious consumer, a trend that has continued. And as the category leader in home fragrance, we are reasserting our differentiation as America's most loved candle brand, through storytelling that conveys the quality and value of our products, through a compelling assortment at a range of price points, and by utilizing our speed and agility to meet the market where it is, driving unit share gains in the quarter. And while normalization of the candle market has impacted us this year, on a unit basis, it has moderated each quarter, and we do not expect it to have a material impact on our business in 2025 and beyond. Fragrance is core to who we are, and we drove growth in body care by delivering compelling fragrances. For example, customers responded positively to the full North American rollout of Everyday Luxuries. This helped drive double digit growth in fine fragrance myths during the quarter. Everyday Luxuries is connecting with a younger customer, and as a platform, it has the potential to drive growth for years to come. Body Care also benefited from our on-trend single fragrance launches of Vanilla Romance and Platinum. And we're excited about the launch of our latest cross-category fragrance, Perfect in Pink, which we debuted in the final week of the third quarter. Soaps and sanitizers growth was driven by strength in core sanitizers, moisturizing sanitizer forms, and a new one-ounce spray. I also want to spend a moment on collaborations. As a reminder, collaborations are a key element of our strategy to drive growth in our core products. They deliver highly differentiated storytelling that generates top-of-mind brand awareness with existing customers and attracts new customers. Our selective approach to collaborations not only drives traffic, it also enhances our brand's cultural relevancy. In the third quarter, we launched part two of our Stranger Things collaborations. This was primarily focused on the home fragrance category and generated buzz around our Halloween floor set, which exceeded last year. We also announced our Emily in Paris cross-category collaboration. This kicked off with a successful early access event at the start of Q4, and the full launch is just around the corner. On the second pillar of our 5B strategy, extending our reach, We are growing our new category adjacencies, opening additional store locations, and expanding in international geographies to drive growth. Adjacencies are an opportunity to expand and diversify our product portfolio, applying our fragrance expertise to large addressable markets. We evaluate adjacent category performance based on their incrementality to the basket, repeat purchase rates, and ability to attract new customers. Our adjacent categories of men's hair, lip, and laundry continue to perform well and year-to-date represent approximately 10% of our business, with potential to become a larger percentage of our mix in 2025 and beyond. I'll share a few of the highlights from the quarter. Today, men's, which is included in our body care business, is our largest adjacency, and we see significant opportunity as we continue to increase awareness. Momentum in the men's business remains strong this quarter as we continue to evolve our marketing and launch new fragrances. For example, customers responded well to our new Vanilla Noir fragrance. In lip, which is also included in our body care business, you can expect to see additional launches of exciting products like gloss and lipstick, which we're confident will continue to excite younger customers. In laundry, which is included in home fragrance, we completed the full U.S. rollout in September. We believe it is an exciting platform for long-term growth that capitalizes on our differentiated fragrance expertise. Moving to real estate, we continue to reshape the portfolio and move stores off-mall. Approximately 55% of our North American stores are in off-mall locations, and the portfolio remains very healthy. International markets are an attractive pillar of our strategy. International represents approximately 5% of our net sales, and there's significant long-term opportunity as we enter new markets and expand in existing markets. System-wide retail sales grew double digits in Q3 in the areas not affected by the war in the Middle East. While our business continues to be pressured in the regions affected by the war, where we saw system-wide retail sales decline double digits, the year-over-year impact began to moderate in October. At the end of the third quarter, we celebrated the opening of our 500th international store in London. Our partner store openings this year remain on track with approximately 50 net new stores this year. Next is our focus on engaging with customers and enabling a seamless omnichannel experience. Our teams have made strides in marketing, loyalty, and technology. We are employing multi-year strategies in these areas that are key enablers of sustainable long-term growth. And these efforts are already having a positive impact on the business. For example, during Q3, we achieved record-high customer retention rates and an improvement in attracting new-to-brand customers. We're especially encouraged by the strong growth within our highest-value customer segment called the Fragrance Fashionistas. This group, which purchases up to 30 fragrances a year, has grown every quarter this year. We also continue to advance our loyalty program, which has industry-leading satisfaction ratings and represents over 80% of our sales. In Q3, we had approximately 38 million active loyalty members, up 4% compared to the prior year. Loyalty customers visit us more frequently, spend more, have higher cross-channel and cross-category purchase behavior, and higher retention rates than those outside the program. Our technology roadmap is on track. We are building the foundational tools and systems to support long-term growth and enabling new capabilities to increase customer engagement and provide a more seamless cross-channel shopping experience. In Q3, we successfully launched our Everyday Luxuries line on TikTok Shop, allowing us to reach younger customers where they are. According to Fiverr, nearly 54% of Gen Z customers will discover holiday gifts on TikTok this season. We intend to continue to leverage this important platform to connect with this audience using highly engaging content to boost brand awareness throughout the holiday period. Finally, enhancing operational excellence and efficiency. While we execute initiatives to engage our customers and drive top-line growth, we continue to be focused on cost discipline. Our Fuel for Growth plan is progressing, and we now expect to deliver $150 million of incremental cost savings by year-end, bringing the two-year total to $300 million, significantly exceeding our initial targets. Additionally, our beauty part continues to be a significant competitive advantage, driving speed and operational agility. With around 85% of our products manufactured in North America, we believe we are relatively well positioned for any potential tariff fluctuations. To summarize the quarter, I'm pleased with our strong performance and the momentum we're building. As we enter Q4, our key holiday selling season, we're poised to drive strong demand and are excited to offer compelling products with gifts available at a wide range of price points. Our fulfillment centers and stores are fully staffed and ready to deliver an exceptional retail experience, while our omnichannel approach ensures customers can shop seamlessly, wherever and whenever they choose. Over the long term, our strategy and the actions we're taking position the company to return to sustainable, profitable growth, driving meaningful shareholder value creation. Before I turn the call over to Eva, I'd like to thank our teams for their outstanding execution, for delivering against our strategic priorities, and for consistently providing great service to our customers. With that, I'll turn it over to Eva.