The Expectation

An analyst from Evercore indicated that Bath & Body Works would likely see an increase in its sales of these products, benefiting financially from the outbreak. The idea is that there will be an increase in demand for these items since people want to stay healthy and protect themselves. That will result in a surge in sales.

Using H1N1 as an Example

The Evercore analyst pointed to the H1N1 outbreak in 2009 as an example of what could happen this time around. At the time, L Brands, the owner of Bath & Body Works, indicated that the anti-bacterial business had gained, mainly from its PocketBac hand sanitizer. At the time, L Brands reported that overall hand sanitizer sales increased. Bath & Body Works was able to stand out from the competition thanks to the range of fragrances available.

Current Figures and Estimates

Evercore also put L Brands on the “Tactical Outperform” list, indicating an $18 per share price target. The explanation was that the scaled hand sanitizer and anti-bacterial soap business would benefit from the alarm related to coronavirus.

At the moment, Evercore estimates that around 20 percent of L Brands’ overall sales include sanitizers and soaps. The expected increase in demand for those two items could increase the percentage by 2 to 4 points, in terms of same-store sales growth.

To put this in perspective, L Brands’ shares Monday afternoon was at about $20.14, down more than 2.5 percent. The market cap of the company is $5.6 billion, and the stock has fallen a bit over 26 percent in the past 12 months.

Bath & Body Works Has Not Responded

Although analysts point to the past evidence and have precise predictions regarding sales for soaps and hand sanitizers at Bath & Body Works, the company has not commented on it. Neither has L Brands, the parent company. This is likely due to the negative imagery associated with any business attempting to profit off a disaster like the coronavirus.

The analysis from the experts at Evercore makes logical sense, especially given the increase in purchases of soap and hand sanitizer with similar outbreaks in the past.

Sources:

https://www.cnbc.com/2020/01/27/bath-body-works-could-see-soap-sales-surge-as-coronavirus-spreads.html

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