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Bath & Body Works lowers Q2 outlook amid declining foot traffic

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Yahoo Finance Live anchors discuss Bath & Body Works cutting its second-quarter earnings guidance as the retailer faces heavy discounting, inflation, and other headwinds.

Video Transcript

- Also, let's talk about shares of Bath & Body Works. Seems like not a day goes by where we got to talk about BBWI here. They are moving lower, though, right now by about 4% this morning after issuing a downward revision of full year guidance here. And for Bath & Body Works, I mean, when we've been talking about everything from scented candles all the way to how they're going to move this business forward with the number of or the amount of inventory that they still have to move through, like many of their competitors in this category, if you will, I think it's still an extremely kind of murky scenario, regardless of how long-lasting those candles might be, even if stored in inventory for a long period of time.

- Yes. Cinnamon candles, folks, are not recession proof clearly because I'm also reading at the pre-released commentary they put out alongside this release from them. So, essentially, Bath & Body Works warning by, I'd say, about $0.20. But what is really alarming, they're saying that they experienced declines in traffic trends compared to the first quarter. They're also noting a picked up pace of discounting.

So here's another retailer. Now this is, what, midway through July suggesting increased levels of discounting. Perhaps things getting a little worse than what we heard from Target about a month and a half ago, which really set this whole retail train wreck in motion.

- We're talking about Bath & Body Works, and all of a sudden I'm smelling, like, maybe it's my hairspray. Maybe it's, like, Pavlovian. I hear Bath & Body Works and I start-- no, I think we've talked about this before. Maybe you weren't here, when I walk into these kinds of stores I start sneezing. I can't. It's just a little too strong for me.

But be that as it may, this reminds me of what we talked about with Mickey Drexler and this discounting cycle that is now going to come back to the fore when it comes to retail. So it seems like-- I mean, he was talking mostly with apparel because that's what he knows, but clearly that is happening in other areas as well.

- And real quick, I'll add too, I wouldn't be too surprised if in this pre-record release they tease more store closures. They noted that they're looking at ways to cut costs in an inflationary environment. Whenever I hear a retailer suggest something like that, it suggests that they're looking at more ways to, obviously, cut costs, but also close stores.

- All right. We're going to be continuing to watch shares of BBWI as we move on throughout the rest of today's trading session.