Bath & Body Works raised its profit forecast — but its stock sank on a weak sales outlook

Bath & Body Works issued a forecast on Wednesday signaling a wider-than-anticipated decline in sales for the current quarter, as the personal care retailer battles with poor store traffic at the outset of a turnaround campaign. The company announced it had raised its annual profit outlook, buoyed by refunds from tariffs and robust demand on its digital channels.

Bath & Body Works' shares dipped around 4% in early trading. Similar to many consumer firms, the brand is undergoing a transformation centered around product innovation and strengthening its digital presence under the leadership of CEO Daniel Heaf.

CEO Heaf acknowledged that while progress in the turnaround efforts is underway, it has yet to counterbalance the overall business downturn. He admitted that the company is experiencing a decline in store traffic and a broader weakness in mall traffic. To broaden its reach, Bath & Body Works has been extending its distribution beyond its own stores through third-party channels, collaborating with entities like Amazon and Ulta Beauty to attract affluent younger shoppers.

Cosmetics giant Coty recently forecasted current-quarter earnings below expectations, citing increasing consumer selectivity in spending and the impact of higher oil prices. The cosmetics maker projected a drop in third-quarter net sales ranging from 2.5% to 5%, which was slightly higher than analysts' estimates of a 2.9% decline.

Bath & Body Works anticipates adjusted earnings per share (EPS) between 7 cents and 12 cents for Q3, whereas analysts predict 26 cents. The retailer expects annual adjusted profit between $2.60 and $2.80 per share, up from its previous forecast of $2.40 to $2.65 per share. It has already received a benefit of approximately $80 million from tariff refunds during the second quarter, which reduced its earnings per share to 31 cents.

Analysts estimated the company's profit at 24 cents per share. Bath & Body Works reported second-quarter sales of $1.51 billion, slightly surpassing analysts' estimate of $1.50 billion, as per data sourced from LSEG.