Jefferies sees limited growth opportunities for Bath & Body Works

Bath & Body Works, Inc. (NYSE:) was cut to Hold from Buy at Jefferies in a note Thursday, with analysts reducing the firm’s price target for the stock to $30 from $45 per share.

Analysts told investors that the risk/reward for the stock is now more balanced, while the firm is also becoming more selective.

“We are downgrading to Hold as we see limited growth opptys. Our data across social, foot traffic, & share suggest a slowing of trends for BBWI,” the analysts wrote.

“During recessionary periods, prestige bodycare is one of the worst performing subcategories in prestige beauty (-6% vs. total cat. -3%). While BBWI’s mix isn’t perceived as prestige, the pricing is much more comparable to prestige than mass. Key risk is that a recession results in consumer trade-down to mass, lending to downside drag on ests,” they added.

While the firm likes the retailer, they note that the product mix is not recession-resistant, price points are high, current trends in bodycare vary from BBWI’s core offering, and they believe the company’s sales levels still need to come off COVID highs. In addition, the Jefferies analysts note that promos continue to tick higher and will likely impact BBWI margins.