Summary of Bath & Body Works (BBWI) Q2 2026 Earnings Call

1Key Financial Results and Metrics

Net Sales: $1.5 billion, a decline of 2.3% year-over-year, better than the guidance of down 5% to down 3%.

Adjusted Earnings Per Diluted Share: $0.62, exceeding guidance of $0.20 to $0.25. Excluding a one-time benefit from $80 million in tariff refunds, adjusted EPS would have been $0.31.

Gross Profit Rate: 45.7%, boosted by tariff refunds; without this, it would be 40.4%.

Inventory: Decreased by 10% year-over-year, with clean forward inventories.

Store Performance: U.S. and Canadian store sales down 5.4%, impacted by lower clearance inventory and a shift to digital sales.

2Strategic Updates and Business Highlights

Consumer First Formula: The company is focused on a multi-year transformation strategy aimed at sustainable growth, with early signs of progress in product innovation and brand engagement.

Product Launches: Successful introduction of the Fruit Fusion body care franchise, which exceeded sales expectations and is expected to expand with new fragrances in the future.

Digital Growth: The digital segment returned to growth, up 3% year-over-year, attributed to improved customer engagement and marketing efforts.

Expanded Distribution: Significant growth in sales through Amazon and the launch of products in Ulta Beauty stores, with Amazon sales tripling from Q1.

Store Experience Enhancements: A merchandising reset across stores has received positive feedback, aimed at improving consumer engagement.

3Forward Guidance and Outlook

Full Year Net Sales Guidance: Narrowed to a decline of 4% to 2.5%, raising the low end based on Q2 performance.

Adjusted Earnings Per Diluted Share Guidance: Increased to $2.60 to $2.80 for the full year.

Q3 Expectations: Anticipated net sales decline of 5% to 2.5%, with a gross profit rate around 40% due to lower sales and increased SG&A investments.

4Bad News, Challenges, or Points of Concern

Overall Business Pressure: The underlying business remains pressured, with store traffic continuing to decline, impacting sales.

Promotional Strategy: The company is cautious about increasing promotional activities, which could hinder long-term health despite being a traditional sales driver.

Market Environment: Ongoing macroeconomic challenges are not expected to improve, which could affect consumer spending.

Body Care Performance: While there was sequential improvement, body care remains below expectations despite new product launches.

5Notable Q&A Insights

Sales Expectations: Management acknowledged that while there are signs of improvement, the overall business trajectory has not yet changed significantly, and they are focused on broader, more consistent growth.

Tariff Refund Utilization: The $80 million tariff refund will be partially offset by forward tariff pressures and increased investments in marketing.

Digital and Store Dynamics: Digital growth is seen as sustainable, but management is also focused on improving store traffic and consumer engagement in physical locations.

Long-term Growth Strategy: Management emphasized that returning to growth is a priority, with a strategic focus on product innovation and brand health as key drivers for future revenue growth. Overall, while Bath & Body Works showed signs of improvement in certain areas, challenges remain in store traffic and overall business performance, necessitating continued focus on strategic initiatives to drive growth.