Third Point could see big returns from small changes at Bath & Body
A shopper browses inside a Bath & Body Works store in Las Vegas, Nevada, U.S., on Sunday, Nov. 7, 2021.
Bridget Bennett | Bloomberg | Getty Images
Company: Bath & Body Works (BBWI)
Business: Bath & Body Works is a specialty retailer of home fragrance, body care, soaps and sanitizer products. In August 2021, Bath & Body Works (formerly known as L Brands) completed the separation of its Victoria’s Secret business.
Stock Market Value: $9.2B ($40.31 per share)
Activist: Third Point
Percentage Ownership: 6.02%
Average Cost: $38.16
Activist Commentary: Third Point is a multistrategy hedge fund founded by Dan Loeb that selectively takes activist positions. Loeb is one of the true pioneers in the field of shareholder activism and definitely one of a handful of activists who shaped what has become modern day shareholder activism. He invented the poison pen letter in a time when a poison pen was often necessary, and as times have changed, he has transitioned from the poison pen to the power of the argument. Third Point has amicably gotten board representation at companies like Baxter and Disney, but also will not hesitate to launch a proxy fight if they are being ignored.
What’s happening?
Behind the scenes
BBWI is a solid company and brand that has a long history of good performance and years of delivering 20%+ operating margins. During the Covid pandemic, the company gained customers and did well, but this year the tides have turned. The company has been in a leadership transition phase, and is facing a tough macroeconomic environment and made a series of execution missteps.
On May 12, Andrew Meslow stepped down as CEO and board chair Sarah Nash was appointed as interim CEO. On Aug. 15, Chris Cramer resigned from the COO role and the company announced that it would not fill the position.
Nash was awarded an astronomical $18 million compensation to serve as interim CEO despite her having been paid $700,000 annually to serve as chair. The president’s salary was increased by 15% to $1 million and the company signed retention agreements with the president, CFO and head of human resources where they were paid an additional combined $4.2 million in equity. This is what Third Point was talking about in its 13D filing when it said it is concerned about executive compensation and excessive awards being made.
To put it into context, one of BBWI’s larger peers, Ulta Beauty, pays its CEO $8.5 million and its highest paid nonemployee director $300,312.
On top of the leadership issues, the company bought back $1.3 billion in stock at about $49 per share prior to making multiple cuts in earnings guidance, which then sent the stock to $30 per share. And through this all, the company could have been communicating better to the market, as it does not even have an internal investor relations executive, which is unusual for a company of this size — particularly one whose stock price is struggling.
On a positive note, on Dec. 1, Gina Boswell took over as the new CEO, after what seemed…
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