The coronavirus outbreak is evolving into a serious threat to the global economy. But at least one major U.S. retailer is seeing a boost from the COVID-19 crisis: Bath & Body Works.
The beauty products chain, which sells products like highly scented lotions and candles, gets about 5% of its annual sales from hand sanitizers. That would translate to $260 million based on Bath & Body Works’ 2019 revenue of $5.34 billion. And that business is booming right now, Stuart Burgdoerfer, the chief financial officer of its parent company L Brands, told Wall Street analysts on Thursday.
“It is presently growing at a very high rate for reasons we would all understand,” Burgdoerfer said. According to an investor presentation last week, Bath & Body Works is the top U.S. retailer for hand sanitizers as well as products like shower gel and liquid hand soap.
There is much debate about whether hand sanitizers are effective against coronavirus. The Center for Disease Control advises people to wash their hands with soap and water as the first option for avoiding contagion. If those are not available, the CDC recommends a sanitizer high in alcohol.
Regardless of the medical merits, Bath & Body Works’ growth is under more scrutiny than usual at the moment. The chain’s health will become even more important to L Brands following the upcoming spin-off of its much larger sibling Victoria’s Secret. L Brands said last week it was selling a 55% stake in the struggling lingerie chain to a private equity firm.
Once that is done, Bath & Body Works will be L Brands’ only major business. Andrew Meslow, Bath & Body Works’ operations chief, will become L Brands’ new CEO, replacing Lex Wexner.
Bath & Body Works’ financial performance has shielded L Brands to a large degree from Victoria’s Secret’s staggering implosion since 2015. The retailer, which operates 1,700 North American stores (including under its White Barn banner) and 260 overseas, had an operating income of $1.1 billion last fiscal year. Meanwhile, Victoria’s Secret lost $877 million on sales of $7.5 billion. (The brand’s peak came in 2016, when it rang up sales of $8.26 billion.)
L Brands’ stock market value at its apex in 2015 was $29 billion; on Thursday was around $6 billion.
On Thursday Burgdoerfer CFO talked up Bath & Body Works prospects. One key opportunity: more international expansion, given sales outside North America rose 30% in 2019 over the previous year.
Another key are for growth: new stores that will be located in strip malls, rather than the traditional malls where most of its stores are located, and where Victoria’s Secret has long been a fixture. Those stores will also help the chain compete more directly with rivals like Target and Ulta.
Burgdoerfer said off-mall Bath & Body Works stores were more successful than those inside malls at getting shoppers to actually make purchases and not just browse. And with a lower cost structure, those off-mall stores are far more financially attractive. “The off-mall opportunity is a big one,” he said.
What’s more, Burgdoerfer said, Bath & Body Works has “a lot of flexibility” with landlords to get the locations it wants and negotiate leases, including getting out of poor locations earlier. And with that, it hopes, avoid some of the problems that have brought low its soon-to-be-former sibling, Victoria’s Secret.
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