Bath & Body Works, Inc. (NYSE:BBWI) Q3 2022 Earnings Call Transcript

Matthew Boss: Great. Thanks. So, Wendy, a number of moving parts in this year’s P&L. I guess is there a way to help quantify the costs that you see as more one-time or more contained to this year? If we think about CEO transition, separation costs versus maybe the IT investments in SG&A, and we have the elevated transportation and the loyalty deferral. I guess I am just trying to see if there is any way you can help to provide maybe as it relates €“ as we think about opportunity into next year versus costs or investments that you see as more ongoing? Any help would be great.

Wendy Arlin: Sure. Well, I wish I had perfect visibility to the next year, but I will try and help you out as much as I can. So, you heard my conversation a few minutes ago on raw materials. I am just kind of working my way down the P&L. Raw materials, like I said, they continue to be challenging, and it’s a volatile market. And as I have said, we will continue to try and mitigate those costs as best we can. Transportation, we are seeing some favorability in transportation. I am optimistic that, that will continue into 2023. But TBD on that, but we are seeing some signs that transportation is peaking and potentially will abate in 2023. You mentioned IT, so you have quantified the IT investments. The thing as we look forward to IT spend is we are currently focused on separation.

That work will continue this year into next, with the goal of being separated from Victoria’s in 2023. We are working on a roadmap beyond separation. So, right now, we are spending money on separation. We will not spend that money again once we are done. But we really want to be thoughtful about our technology spend. We see a lot of areas of opportunity where we can make investments in the customer experience or in omni capabilities or in our loyalty program or in POS at stores. I mean we see many areas in the business where we can use technology to improve our customer experience. So, we are working on roadmaps and thinking about that currently. And so when we get to February, we will give a little bit more color on how we are thinking about spending money and technology.

But that will be an area we want to continue to invest because at the end of the day, we want to continue to grow this company. You mentioned loyalty. I would say it’s a loyalty, as we €“ essentially, it will peak the impact, peaks essentially in Q4 in terms of that deferred revenue impact that we have talked about. And then once we lap the program in the summer of next year, you won’t see that impact. And then I guess the last thing that comes to mind is people. I mean a lot of our structure is people. So, in SG&A, about two-thirds of our SG&A expenses are stores. And we want to continue to pay the wages that are appropriate to attract great talent. And that’s been a dynamic space, and we continue to think about what wage rates are appropriate.