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Bath & Body Works, Inc. (BBWI)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 2026 revenue was $1.424B (+2.9% y/y) and diluted EPS was $0.49 (+29% y/y), coming in at the high end for sales and above the high end for EPS; gross profit rate expanded 160 bps to 45.4% driven by merchandise margin and buying/occupancy leverage .
  • Versus S&P Global consensus, EPS beat ($0.49 vs $0.47*) while revenue was essentially in line ($1.424B vs $1.424B*); management maintained FY 2025 guidance (sales +1–3%, EPS $3.25–$3.60) and introduced Q2 EPS guidance of $0.33–$0.38* .
  • Key drivers: Disney Princess collaboration, strong innovation across Body Care/Home/Soaps, loyalty program engagement, and agility of a predominantly U.S.-based supply chain; direct channel was down (reported) but outperformed stores when adjusted for BOPIS .
  • Guidance embeds tariffs at current levels; management indicated lower-half EPS if tariffs persist, upper-half if they moderate; CEO transition impact (~$0.05 EPS) is excluded from guidance, and capital returns remain active ($300M buybacks planned) .

Values with * retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • EPS exceeded the high end of guidance on a 3% sales increase, with gross margin expansion of 160 bps to 45.4% from stronger merchandise margins and flat B&O dollars leveraging higher sales .
  • Disney collaboration delivered outsized demand and traffic, with customers lining up in stores and 1.8B online impressions; Body Care, Home Fragrance, and Soaps each grew low-single digits supported by innovation (e.g., Everyday Luxuries, Sweetest Song) .
  • Loyalty base ~39M active (+4% y/y) drove higher spend and trips; BOPIS represented ~30% of digital demand and direct (adjusted for BOPIS) outperformed stores; CEO emphasized a consumer-centric growth strategy and omnichannel upgrades (“fewer, bolder priorities”) .

What Went Wrong

  • Reported direct net sales declined 4.3% y/y (channel mix effect due to BOPIS recognition in stores); SG&A rate was slightly higher than expectations on incremental marketing and store training investments .
  • Inventory up 7% y/y and expected to remain elevated in 1H (about +10%) due to tariff-related costs and strategic pull-forward for holiday builds; international reported net sales timing will pressure Q2 .
  • Tariff uncertainty remains a headwind; management maintained FY guidance but noted EPS skew to lower/upper half depending on tariff path; gross margin to be roughly flat y/y in Q2 as tariffs offset underlying strength .

Financial Results

Summary Metrics vs Prior Year and Prior Quarter

MetricQ1 2025Q4 2025Q1 2026
Revenue ($USD Millions)$1,384 $2,788 $1,424
Diluted EPS ($USD)$0.38 $2.09 $0.49
Gross Profit ($USD Millions)$606 $1,301 $646
Operating Income ($USD Millions)$187 $678 $209
Net Income ($USD Millions)$87 $453 $105

Margins

MetricQ1 2025Q4 2025Q1 2026
Gross Profit Rate (%)—46.7% 45.4%
Operating Margin (%)—24.3% 14.7%

Channels (Q1 Comparison)

Channel Net Sales ($USD Millions)Q1 2025Q1 2026% Change
Stores – U.S. & Canada$1,065 $1,110 +4.3%
Direct – U.S. & Canada$261 $250 -4.3%
International$58 $64 +10.1%
Total$1,384 $1,424 +2.9%

KPIs

KPIQ1 2026 Value
Active loyalty customers (millions)~39 (+4% y/y)
Off-mall percent of fleet57%
BOPIS share of digital demand~30%
Inventory change y/y+7%
International net sales ($MM)$64
Capital expenditures ($MM)$37
Share repurchases4.3M shares; $135M; avg $31.24
FY 2025 free cash flow outlook$750–$850MM

Consensus vs Actual and Guidance

MetricQ1 2026 ConsensusQ1 2026 ActualOutcomeQ2 2026 ConsensusQ2 2026 Guidance
Revenue ($USD)$1,424.3MM*$1,424.0MM In line$1,554.7MM*Flat to +2% vs $1,526MM PY
EPS ($USD)$0.471*$0.49 Beat$0.377*$0.33–$0.38

Values with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (Q4 2025)Current Guidance (Q1 2026)Change
Net sales growthFY 2025+1% to +3% +1% to +3% Maintained
Diluted EPSFY 2025$3.25–$3.60 $3.25–$3.60 Maintained
Free Cash FlowFY 2025$750–$850MM $750–$850MM Maintained
Share repurchasesFY 2025~$300MM ~$300MM (opportunistic) Maintained
Capital expendituresFY 2025$250–$270MM $250–$270MM Maintained
Net sales growthQ2 2025—Flat to +2% vs $1,526MM PY New this quarter
Diluted EPSQ2 2025—$0.33–$0.38 New this quarter
Gross profit rateQ2 2025—~41% (flat y/y incl. tariffs) New detail
SG&A rateQ2 2025—~30% New detail
Net non-operating expenseQ2 2025—~$65MM New detail
Tax rateQ2 2025—~29% New detail
Diluted sharesQ2 2025—~212MM New detail
CEO transition EPS impact (excluded)FY/Q2 2025—~$(0.05) EPS excluded New detail

Earnings Call Themes & Trends

TopicQ3 2025 (Nov 2024)Q4 2025 (Feb 2025)Q1 2026 (May 2025)Trend
AI/technology & digitalLaunched Everyday Luxuries on TikTok Shop; building personalization foundations Tech roadmap advancing; planned 2025 enhancements to loyalty/personalization CEO prioritizing digital refresh; enhanced site functionality and storytelling Increasing focus
Supply chain agility85% NA manufacturing; agile model; cost savings in transport Distribution productivity supported margins; strong operating cash flow Predominantly U.S.-based; agility amid tariffs; limited China exposure (~10%) Stable strength
Tariffs/macroValue-seeking consumer; candle normalization moderating FY25 guide includes China tariffs; Q1 EPS $0.36–$0.43 (prior) FY25 maintained; EPS lower/upper half depending on tariffs; Q2 margin flat incl. tariffs Ongoing headwind
Product performanceCore categories grew low-single digits; Stranger Things collab boosted Halloween Holiday collections strong; Everyday Luxuries expanded; collabs drove traffic Disney Princess exceeded expectations; Body Care/Home/Soaps up LSD Positive
Regional/internationalPressure in Middle East; double-digit growth in unaffected markets; 500th store in London System-wide retail +~10% (calendar-adjusted); international to contribute in 2025 International net sales +10.1% on shipped timing; plans for 30 net new partner stores in 2025 Improving ex-ME
Regulatory/legal——Guidance excludes CEO transition EPS impact; CEO appointment effective May 16 One-off transition
Loyalty & R&D/health features38M active; high satisfaction; Everyday Luxuries resonating ~39M active; reward redemption rising; packaging/ingredients improving ~39M active (+4% y/y); relaunches made without sulfates/parabens/phthalates/dyes Strengthening

Management Commentary

  • “Our strongest underlying sales growth since 2021… innovation again this quarter… Disney collaboration was an undeniable success.” – CFO Eva Boratto .
  • “We will accelerate growth by putting the consumer at the center… fewer, bolder priorities… digital refresh, packaging/labeling, alternative distribution, and international.” – CEO Daniel Heaf .
  • “Gross profit rate of 45.4%… up 160 bps; merch margin +100 bps from low-single-digit mix-adjusted AUR increases; B&O leverage with flat dollars.” – CFO .
  • “Our predominantly U.S.-based supply chain is a source of competitive advantage… limited China exposure (~10%).” – CFO .
  • “We returned $43M via dividends and repurchased 4.3M shares for $135M in Q1; assume ~$300M in buybacks for the year.” – CFO .

Q&A Highlights

  • Tariffs and guidance skew: If tariffs persist at current levels, EPS likely at lower half; moderate/reduce → upper half; absent tariff changes, they would have raised guidance .
  • Semi-annual sale (SaaS) plan: Later start to amplify Father’s Day and align with market timing; stronger product and marketing; duration slightly shorter .
  • Category growth expectations: Body Care to grow >LSD over time with market; candle market pressured but share modestly increased; continued innovation to drive Home .
  • Capital allocation: ~$300M repurchases reiterated; CEO to focus on priority growth investments without seeking more capital, emphasizing “edit to amplify” .
  • Store format: Gingham Plus outperforming with comparable build costs; further iteration for services/engagement; all new/remodeled stores to adopt format .

Estimates Context

  • Q1 2026 EPS beat consensus ($0.49 vs $0.47*), while revenue was effectively in line ($1.424B vs $1.424B*). Given the maintained FY guide and tariff uncertainty, Street models may shift EPS distribution toward the lower/upper ends based on tariff trajectory and Q2 gross margin guidance (~41%, flat y/y including tariffs) .

Values with * retrieved from S&P Global.

Key Takeaways for Investors

  • Q1 quality beat on EPS with margin expansion and broad-based category growth; innovation and collabs are demonstrably driving traffic and conversion .
  • Guidance prudently maintained amid tariff uncertainty; model FY 2025 EPS toward lower half if tariffs persist; upside if moderation occurs; Q2 margins flat y/y including tariffs .
  • Mix and AUR management plus B&O leverage continue to be effective levers; watch SG&A cadence (marketing/tech investments) and direct vs store mix via BOPIS .
  • Loyalty flywheel and off-mall fleet shift (57%) remain structural advantages; monitor digital refresh timing (app features in Aug; broader aesthetic changes “coming quarters”) for conversion lift .
  • International expansion is re-accelerating ex-Middle East; shipped timing boosted Q1; expect net sales shape noise in Q2 but long-term positive contributor .
  • Near-term trading: EPS beat and maintained FY guide are supportive; tariff headlines and SaaS execution are key swing factors into Q2; collab/seasonal drops (e.g., Summerween) may provide demand catalysts .
  • Medium-term thesis: Consumer-centric strategy under new CEO, focus on digital/brand storytelling, fewer/bolder priorities, and adjacencies (Men, Lip, Laundry) should sustain top-line growth with margin discipline and strong FCF supporting buybacks/dividends .