Question: How would you respond if you owned Bath & Body Works stock (NYSE: BBWI) and it lost over 60% of its value in the coming months? While that might sound extreme, it has happened before and could potentially happen again. The personal care and home fragrance retailer’s stock is already down 27% year-to-date, significantly lagging the S&P 500’s 10% decline. In Q4 2024, the company posted a 4% drop in net sales and an 18% decline in earnings per diluted share, attributing this to a shifted fiscal calendar and weaker consumer demand. Moving forward, BBWI is under pressure from new U.S. tariffs on Chinese imports, sluggish discretionary spending, and rising competition from cheaper private-label brands. Ongoing high interest rates and economic uncertainty continue to reduce consumer demand for non-essential items like fragrances and candles, putting further strain on the company’s outlook.
Here’s the point: BBWI stock could see considerable losses in a downturn. In 2020, BBWI stock shed about 63% of its value over just a few quarters, and it experienced a 64% peak-to-trough drop during the inflation shock of 2022—performing far worse than the S&P 500. This raises a critical question: if similar challenges resurface, could the stock fall to $11 from its current price of $28? Naturally, individual stocks tend to be more volatile than diversified portfolios. If you’re seeking growth with less volatility, the High-Quality portfolio has historically outperformed the S&P 500 with returns exceeding 91% since inception.
Why Is It Relevant Now?
The newly imposed U.S. tariffs may inflate BBWI’s supply chain costs and compress margins. These include a 25% tariff on imports from Canada and Mexico and a substantial 145% tax on Chinese imports, together impacting around 17% of the company’s supply chain. Such cost pressures could limit earnings growth, heightening investor anxiety and contributing to recent volatility in the stock.
That said, BBWI’s primarily U.S.-focused supply chain offers some insulation from global trade risks. This domestic concentration may serve as a competitive edge if international trade tensions worsen, especially compared to peers more reliant on global sourcing.
How resilient is BBWI stock during a downturn?
BBWI stock has underperformed the broader S&P 500 in previous downturns. While investors hope for a soft landing for the U.S. economy, the risk of a deeper recession lingers. Our dashboard How Low Can Stocks Go During A Market Crash explores how major stocks fared in the last six market crashes.
Inflation Shock (2022)
• BBWI stock declined 63.9% from a high of $76.47 on December 10, 2021, to $27.62 on July 1, 2022, compared to a 25.4% drop in the S&P 500
• The stock has not regained its pre-crisis high
• The highest since then was $51.94 on June 2, 2024, and it currently trades at about $28
Covid Pandemic (2020)
• BBWI stock dropped 62.9% from a peak of $19.77 on February 12, 2020, to $7.33 on March 23, 2020, versus a 33.9%fall in the S&P 500
• The stock fully recovered its pre-crisis peak by July 29, 2020
Valuation
At its current share price of around $28, BBWI trades at roughly 8x the projected 2025 earnings, which is attractive compared to its three-year average multiple of 12x. Analysts have a price target of $44, suggesting about 57% upside. Still, the company has issued cautious guidance for 2025. Management expects 1–3% revenue growth and EPS between $3.25 and $3.60, with the midpoint slightly below 2024 levels. Consensus forecasts call for approximately 2% revenue growth in FY’25 and 3% in FY’26, indicating tempered expectations amid macro and business challenges.
With slowing growth and economic headwinds, ask yourself: Will you hold onto BBWI stock, or will you sell if it drops to $25, $20, or lower? Holding a falling stock is tough. Trefis partners with Empirical Asset Management, a Boston-based wealth advisor, whose asset allocation strategies generated gains during the 2008–09 crash while the S&P fell over 40%. Empirical integrates the Trefis HQ Portfolio in its investment framework to provide improved returns with lower risk—offering a smoother ride, as highlighted in the HQ Portfolio performance metrics.
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