Investment Thesis
Bath & Body Works is technically insolvent with negative stockholders' equity of -$1.1B against $3.6B in debt, creating an unsustainable capital structure despite current profitability. While the company generates positive operating cash flow ($244M) and maintains adequate margins, declining diluted EPS (-13.9% YoY) amid flat revenue combined with weak interest coverage (3.3x) indicates deteriorating fundamentals with limited financial flexibility for covenant violations or adverse business shocks.
Strengths
- Positive operating cash flow of $244M and free cash flow of $195M demonstrate continued debt service capacity
- Solid profitability margins (Gross 42.6%, Operating 16.8%, Net 13.3%) indicate operational efficiency within the retail sector
- Cash position of $820M provides near-term liquidity buffer
Risks
- Negative stockholders' equity (-$1.1B) indicates technical insolvency and an unsustainable balance sheet requiring either significant deleveraging or sustained high profitability
- Diluted EPS declining 13.9% year-over-year with flat revenue suggests margin compression and deteriorating business quality
- Interest coverage ratio of 3.3x is dangerously low, leaving minimal room for operational decline or debt refinancing stress
Key Metrics to Watch
- Operating cash flow sustainability and debt reduction progress
- Revenue growth acceleration and gross margin trends
- Debt covenant compliance and refinancing activity
Financial Metrics
Revenue
1.4B
Net Income
183.0M
EPS (Diluted)
$0.90
Free Cash Flow
195.0M
Total Assets
5.0B
Cash
820.0M
Profitability Ratios
Gross Margin
42.6%
Operating Margin
16.8%
Net Margin
13.3%
ROE
N/A
ROA
3.7%
FCF Margin
14.2%
Balance Sheet & Liquidity
Current Ratio
1.38x
Quick Ratio
0.81x
Debt/Equity
N/A
Debt/Assets
0.0%
Interest Coverage
3.35x
Long-term Debt
3.6B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-29T07:39:03.413418 |
Data as of: 2026-05-02 |
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