© Reuters. FILE PHOTO: Products are displayed in L Brands Inc., Bath & Body Works retail store in Manhattan, New York, U.S., May 13, 2016. REUTERS/Brendan McDermid
(Reuters) – Bath & Body Works (NYSE:) on Wednesday warned of a steeper decline in annual sales as Americans deferred purchasing its pricier home fragrances and personal care products amid still-high inflation pinching household budgets.
Shares of the Ohio-based company fell about 2% in premarket trading after the retailer forecast current-quarter sales and profit below Street expectations.
A rise in costs of living and credit repayments at higher borrowing costs in the U.S. have prompted consumers to cut down on purchasing non-essential items. This has led to a slowdown in demand for products such as home fragrances and beauty and skincare.
The company’s results come in line with specialty retailer Estee Lauder (NYSE:) and department store chain Macy’s (NYSE:), which have warned of weak consumer spending through the remainder of the year.
Bath & Body Works now expects annual net sales to decline between 1.5% and 3.5%, compared with its previous forecast of flat net sales to a mid-single-digit percentage decline.
To fend off a hit on margins from surging labor and production costs, the retailer resorted to price hikes on its products that further discouraged demand from inflation-weary Americans.
The company’s second-quarter sales fell 3.6% to $1.56 billion, largely in line with Street expectations, according to Refinitiv IBES data.
Excluding items, it earned 40 cents per share in the quarter, topping analysts’ expectations of a profit of 33 cents per share.
It also raised its annual profit forecast to adjusted earnings per share now expected to range between $2.80 and $3.10, compared with $2.68 and $3.08 previously expected.