The Investor
26 Aug 2026, 15:09
Bath & Body Works Rises 3.6% as Q2 Beats Guidance and Turnaround Shows Early Progress
Bath & Body Works (NYSE: BBWI) shares rose about 3.6% after the retailer reported fiscal second-quarter 2026 sales and earnings above its guidance and raised its full-year earnings outlook. The positive reaction comes despite continued sales pressure, suggesting investors are focusing on early signs that the company's turnaround strategy is beginning to gain traction.
Q2 Results Beat Expectations
Second-quarter net sales were $1.51 billion, down 2.3% year over year. While revenue remained under pressure, management said the result exceeded its guidance.
Adjusted EPS reached $0.62, compared with $0.37 a year earlier, while adjusted operating income increased to $225 million from $172 million.
However, the headline earnings improvement was heavily influenced by approximately $80 million of tariff refunds. Excluding that benefit, adjusted EPS would have been $0.31.
That distinction is important: the quarter was better than management expected, but the reported year-over-year earnings growth substantially overstates the improvement in the underlying business.
Turnaround Signals Support the Stock
The more encouraging development may be operational rather than purely financial.
Bath & Body Works reported its first quarter of direct net sales growth since 2021, which management attributed partly to improvements in its digital shopping experience. The company also cited sequential improvement in Body Care, stronger average unit retail on new product innovation and continued momentum through marketplace partnerships.
CEO Daniel Heaf said these developments provide early evidence that the company's "Consumer First Formula" strategy is working, although he acknowledged that underlying business trends remain pressured.
For investors, evidence that digital sales and key product categories are stabilizing could be particularly important after an extended period of weak growth.
Full-Year EPS Guidance Raised, But Sales Still Expected to Fall
Bath & Body Works raised fiscal 2026 GAAP EPS guidance to $3.13-$3.33 and adjusted EPS guidance to $2.60-$2.80. The company also expects approximately $650 million of free cash flow.
Sales guidance was narrowed to a decline of 2.5%-4%, indicating that management still expects revenue contraction for the year.
The near-term outlook also remains challenging. For Q3, sales are expected to decline 2.5%-5%, while adjusted EPS of $0.07-$0.12 would be substantially below $0.35 in the year-ago quarter.
The 3.6% rise in BBWI therefore appears to reflect a cautiously positive reaction rather than a clear return to growth. Q2 exceeded guidance, digital sales improved and management raised its earnings outlook, providing evidence that the transformation is making progress. Still, declining sales, weak Q3 earnings guidance and the large contribution from tariff refunds show that the underlying recovery remains at an early stage.
Bath & Body Works (NYSE: BBWI) shares rose about 3.6% after the retailer reported fiscal second-quarter 2026 sales and earnings above its guidance and raised its full-year earnings outlook. The positive reaction comes despite continued sales pressure, suggesting investors are focusing on early signs that the company's turnaround strategy is beginning to gain traction.
Q2 Results Beat Expectations
Second-quarter net sales were $1.51 billion, down 2.3% year over year. While revenue remained under pressure, management said the result exceeded its guidance.
Adjusted EPS reached $0.62, compared with $0.37 a year earlier, while adjusted operating income increased to $225 million from $172 million.
However, the headline earnings improvement was heavily influenced by approximately $80 million of tariff refunds. Excluding that benefit, adjusted EPS would have been $0.31.
That distinction is important: the quarter was better than management expected, but the reported year-over-year earnings growth substantially overstates the improvement in the underlying business.
Turnaround Signals Support the Stock
The more encouraging development may be operational rather than purely financial.
Bath & Body Works reported its first quarter of direct net sales growth since 2021, which management attributed partly to improvements in its digital shopping experience. The company also cited sequential improvement in Body Care, stronger average unit retail on new product innovation and continued momentum through marketplace partnerships.
CEO Daniel Heaf said these developments provide early evidence that the company's "Consumer First Formula" strategy is working, although he acknowledged that underlying business trends remain pressured.
For investors, evidence that digital sales and key product categories are stabilizing could be particularly important after an extended period of weak growth.
Full-Year EPS Guidance Raised, But Sales Still Expected to Fall
Bath & Body Works raised fiscal 2026 GAAP EPS guidance to $3.13-$3.33 and adjusted EPS guidance to $2.60-$2.80. The company also expects approximately $650 million of free cash flow.
Sales guidance was narrowed to a decline of 2.5%-4%, indicating that management still expects revenue contraction for the year.
The near-term outlook also remains challenging. For Q3, sales are expected to decline 2.5%-5%, while adjusted EPS of $0.07-$0.12 would be substantially below $0.35 in the year-ago quarter.
The 3.6% rise in BBWI therefore appears to reflect a cautiously positive reaction rather than a clear return to growth. Q2 exceeded guidance, digital sales improved and management raised its earnings outlook, providing evidence that the transformation is making progress. Still, declining sales, weak Q3 earnings guidance and the large contribution from tariff refunds show that the underlying recovery remains at an early stage.
