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Bath & Body Works, Inc. (BBWI)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 delivered at the high end of guidance on revenue and adjusted EPS: net sales $1.549B (+1.5% YoY), GAAP EPS $0.30, adjusted EPS $0.37; full-year adjusted EPS guidance low end raised to $3.35–$3.60 while narrowing sales growth to 1.5%–2.7% .
  • Wall Street consensus was essentially met on EPS and gross margin, with a modest revenue shortfall; EPS came in ~$0.37 vs ~$0.377, revenue $1.549B vs ~$1.555B, gross margin 41.3% vs ~41.17% [Values retrieved from S&P Global].
  • Management flagged tariff headwinds concentrated in Q3 ($40M) and increased FY25 share repurchases to $400M (from $300M), maintaining free cash flow guidance of $750M–$850M .
  • Strategic “no-regret” moves accelerated (digital platform upgrades, product efficacy messaging, and expanded distribution like campus bookstores), with Disney Villains and “Summerween” driving engagement into Q3; these are key catalysts for near-term stock narrative .

What Went Well and What Went Wrong

What Went Well

  • High-end delivery vs guidance: “net sales up 1.5% to $1.5 billion” and “adjusted EPS $0.37 at the high end of the guidance range”; raised low end of full-year adjusted EPS guidance .
  • Consumer engagement and newness: Semi-Annual Sale execution improved; “Summerween” collection early drop sold out on TikTok Shop in one day; sanitizer category outperformed, men’s and True Blue Spa relaunch positive .
  • Strategy with clear growth levers: CEO emphasized three no-regret moves—elevate digital, amplify product efficacy, expand distribution (“in more than 600 campus stores” reaching ~7M young consumers) .

What Went Wrong

  • SG&A deleverage and health-care costs: adjusted SG&A rate rose to 30.2% (+110 bps YoY) on selling expense, new stores, and higher health-care costs; SG&A expected ~31.5% in Q3 .
  • Body care softness outside sale windows: category down low single digits; Mother’s Day underperformed due to insufficient newness (a priority to fix) .
  • Tariffs are a meaningful drag: FY25 gross profit headwind ~$85M (with ~$40M concentrated in Q3), disproportionately impacting Q3 margins; mix effects and timing add pressure .

Financial Results

Quarterly Trend (GAAP and Adjusted)

MetricQ4 2025Q1 2026Q2 2026
Revenue ($USD Billions)$2.788 $1.424 $1.549
EPS (GAAP, $)$2.09 $0.49 $0.30
EPS (Adjusted, $)$2.09 $0.49 $0.37
Gross Margin (%)46.7% 45.4% 41.3%
Operating Income ($USD Millions)$678 $209 $157
Operating Income (Adjusted, $USD Millions)$678 $209 $172
Net Income ($USD Millions)$453 $105 $64
Net Income (Adjusted, $USD Millions)$453 $105 $78

Channel/Segment Net Sales

Segment ($USD Millions)Q1 2026Q2 2026
Stores – U.S. & Canada$1,110 $1,196
Direct – U.S. & Canada$250 $267
International$64 $86
Total$1,424 $1,549

Notes: Direct demand pressure in Q2 (-10% YoY), but adjusting for BOPIS reclassification to stores, Direct was down ~3%; underlying international system-wide retail sales grew ~9% despite reported net sales timing effects .

KPIs and Operational Metrics

KPIQ1 2026Q2 2026
Active Loyalty Members (Millions)~39 ~39 (+5% YoY)
Off-mall Mix of Fleet (%)57% 58%
NA Store Openings / Closures (Net)13 / 8 → +5 20 / 16 → +4
International Stores (End of Period)524 537
Inventory YoY Change+7% +13% (includes tariffs and strategic pull-forward)
FY25 Share Repurchase Plan ($USD Millions)$300 $400
FY25 Free Cash Flow Guidance ($USD Millions)$750–$850 $750–$850

Actual vs Wall Street Consensus (S&P Global)

MetricQ2 2026 ConsensusQ2 2026 ActualQ1 2026 ConsensusQ1 2026 Actual
EPS ($)0.377*0.37*0.471*0.49*
Revenue ($USD Billions)1.555*1.549*1.424*1.424*
EBITDA ($USD Millions)246*221*276*273*
Gross Margin (%)41.17%*41.32%*44.19%*45.37%*

Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales Growth (%)FY 20251%–3% 1.5%–2.7% Narrowed; low end raised
EPS (GAAP, $)FY 2025$3.25–$3.60 $3.28–$3.53 Narrowed
EPS (Adjusted, $)FY 2025$3.25–$3.60 $3.35–$3.60 Low end +$0.10
Gross Profit Rate (%)FY 2025≈44% ≈44% Maintained
SG&A Rate (%)FY 2025≈27% ≈27.7% Raised
Share Repurchases ($)FY 2025≈$300M ≈$400M Raised
Free Cash Flow ($)FY 2025$750–$850M $750–$850M Maintained
Net Sales Growth (%)Q3 2025n/a+1%–3% New
EPS ($)Q3 2025n/a$0.37–$0.45 New
Gross Profit Rate (%)Q3 2025n/a≈42.2% (incl. ~$40M tariffs) New
SG&A Rate (%)Q3 2025n/a≈31.5% New
Interest & Other ($)Q3 2025n/a≈$65M New
Tax Rate (%)Q3 2025n/a≈25% New

Earnings Call Themes & Trends

TopicQ4 2025 (Q-2)Q1 2026 (Q-1)Q2 2026 (Current)Trend
Digital/TechnologyTech roadmap; loyalty enhancements; off-mall strategy Digital refresh plan; exited 3rd-party FC to cut costs and improve CX New POS completed; app relaunch Sept; mobile web relaunch Oct Accelerating execution
Supply Chain/TariffsChina tariffs included in FY25 outlook Expect to absorb tariffs at current levels; mitigation underway FY25 tariffs ~$85M headwind; Q3 ~$40M; Canada retaliatory tariffs removed from Sept 1 Elevated Q3 headwind, mitigation ongoing
Product PerformanceCollabs (Emily in Paris, Sweethearts); Disney upcoming Disney Princess success; category growth across core “Summerween” drove strong engagement; sanitizer above shop; men’s strong; body care soft ex-sale Sustained newness; mixed category
InternationalSystem-wide sales up ~10%; return to growth expected Net sales +10.1% (timing) Reported -3% (timing), system-wide retail +9% Improving underlying, timing volatility
Real Estate57% off-mall; remodels/new formats (Gingham Plus) 57% off-mall; ongoing openings off-mall 58% off-mall; 20 opens / 16 closures Gradual shift off-mall

Management Commentary

  • CEO: “We will accelerate growth by putting the consumer at the center… elevating our digital platform, amplifying product efficacy, and expanding distribution to meet consumers where they are” .
  • CEO on distribution: “As back to school season kicks off, we're in more than 600 campus stores with access to 7,000,000 young consumers” .
  • CFO: “Adjusted SG&A rate… 30.2%, representing 110 bps deleverage… driven by selling expense… new stores and higher health care costs” .
  • CFO: “We expect tariffs… to negatively impact gross profit by approximately $85M with $40M of that impact in Q3” .

Q&A Highlights

  • Digital acceleration: New app in September and mobile web relaunch in October; multi-horizon plan (3/6/9/12 months) to drive brand relevance and sales across channels .
  • Tariffs detail: Q3 gross margin impacted ~240 bps by ~$40M tariffs; Q4 impact ~100 bps; FY25 gross margin ≈44% despite headwinds .
  • Body care and pricing: Body care down low-single digits; plan to increase newness and efficacy messaging; mix-adjusted AUR up low single digits; less promotional reliance over time .
  • Off-mall productivity: Off-mall stores outperform mall stores on conversion; both formats have strong four-wall economics .
  • Wholesale/alternative distribution: Campus bookstores included in guidance; strategic exploration of new channels to reach younger consumers .

Estimates Context

  • Q2 2026 results were broadly in line with consensus: EPS ~$0.37 vs ~$0.377, gross margin ~41.3% vs ~41.17%; revenue modestly missed ($1.549B vs ~$1.555B); EBITDA missed (actual ~$221M vs ~$246M), reflecting SG&A deleverage and tariff impacts concentrated in inventory receipts earlier in the quarter [Values retrieved from S&P Global].
  • Q1 2026 showed EPS beat ($0.49 vs ~$0.47), gross margin beat (45.4% vs ~44.2%), revenue in line, EBITDA slightly below consensus [Values retrieved from S&P Global].
  • Near-term estimate risk: Q3 gross margin/EBITDA likely pressured by ~$40M tariffs; FY25 SG&A rate guidance lifted to ~27.7% may temper operating margin expectations; however, digital upgrades, collabs, and elevated ceramic candle launch could support revenue trajectory .

Key Takeaways for Investors

  • Solid execution with high-end delivery vs internal guidance and raised low end of adjusted EPS; sales growth narrowed but balanced with increased buybacks—supportive of EPS durability in FY25 .
  • Expect a transitory step-down in Q3 profitability vs Q2 given concentrated tariff impacts; Q4 should improve as tariff headwinds moderate per management .
  • The narrative is shifting to growth investments: rapid digital platform improvements, efficacy-centric packaging and messaging, and new distribution—keys to attracting younger/new customers and reducing promotional dependency .
  • Engagement engines remain strong: Disney Villains, Summerween, and men’s portfolio fueling traffic; sanitizer momentum continues; watch body care newness cadence around events (e.g., Mother’s Day) .
  • Capital allocation is shareholder-friendly: buybacks increased to $400M; free cash flow $750–$850M intact—supports medium-term return profile despite tariff headwinds .
  • Stock narrative near term hinges on Q3 margin delivery vs tariff drag and evidence of digital conversion uplift; medium-term thesis depends on sustained new customer growth and margin protection via reduced promotion and operational efficiencies .

Notes: All document-based figures and quotes cited from BBWI filings and transcripts. Estimates are values retrieved from S&P Global.