Taking Stock of Bath & Body Works’ Risk Factors

Shares of specialty retailer Bath & Body Works, Inc. (BBWI) have exploded 124% over the past 12 months. BBWI recently delivered a better-than-expected performance for the third quarter, driven by strong customer response to its merchandise assortment, and an increasing and loyal customer base.

Additionally, BBWI now has 1,775 company-operated stores and 312 partner-operated stores. With these developments in mind, let us take a look at the changes in BBWI’s key risk factors that investors should know.

Risk Factors

According to the TipRanks Risk Factors tool, BBWI’s top risk category is Production, contributing 24% to the total 37 risks identified. In its recent quarterly report, the company has changed one key risk factor under the Finance & Corporate risk category.

BBWI highlighted that its recent spin-off of the Victoria’s Secret business and related operations could have an adverse impact on its business. Further, contingent liabilities from the divestiture of such business could negatively impact BBWI’s financials and results of operations. (See Insiders’ Hot Stocks on TipRanks)

This spin-off may impact BBWI’s credit rating, dilute its earnings per share, distract its management, and have other financial and accounting impacts. Additionally, BBWI may not receive tax-free treatment for U.S. federal income tax purposes.

Furthermore, there is the risk of key employees departing due to uncertainty about their roles. Finally, there is uncertainty regarding the company’s ability to achieve full strategic and financial benefits that are expected to materialize from this spin-off.

Compared to a sector average of 17%, BBWI’s Production risk factor is at 24%.

Wall Street’s Take

Consensus on the Street is a Strong Buy based on 13 Buys and 3 Holds for the stock. The average Bath & Body Works price target of $88.81 implies a potential upside of 21.7% for the stock.

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