Billionaire investors Dan Loeb’s Third Point LLC plans to pursue a proxy fight against Bath & Body Works (NYSE:BBWI). Ahead of today’s earnings, the alternative investment firm raised concerns over BBWI’s corporate governance and decision-making processes. Moreover, it intends to nominate candidates for election at the company’s Board of Directors.
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Third Point, which owns more than 6% stake in BBWI, listed executive compensation, capital allocation, succession planning, and the company’s weak financial performance as significant concerns.
Highlighting the compensation of Sarah Nash, the Chair of the Board of Bath & Body Works, Third Point said she received an exorbitant payment of nearly $18 million for serving as the Executive Chair and Interim CEO in 2022.
It was in excess of the $700K she was already getting annually to serve as Board Chair. This is significantly higher than what Ms. Nash’s counterparts get in rival firms, the Third Point letter noted.
Highlighting the company’s poor capital allocation plan, Third Point said BBWI repurchased shares at a higher price. It said the company bought $1.3 billion worth of its stock at an average price of about $50 in the first part of 2022. However, BBWI could have been more disciplined in buying back shares as multiple earnings guidance cuts by the company in the latter part of the year drove its stock to as low as $25.
In response, the specialty retailer of personal care and home fragrance products said that its Board “strongly disagrees” with Third Point’s view and is focused on serving the best interests of its shareholders. Meanwhile, BBWI’s Board will review and consider Third Point’s nominated candidates.
Is BBWI a Good Stock?
Soft sales and a decline in profit have weighed on BBWI stock. It has received eight Buy and four Hold recommendations for a Moderate Buy consensus rating. Further, analysts’ average price target of $50.42 implies 20.36% upside potential.
BBWI is reporting earnings later today. After five consecutive earnings beats, it remains to be seen whether the company can again rise above.
