Bath & Body Works Q2 net sales fall amid weak underlying demand

Bath & Body Works experienced a decline in Q2 net sales, despite an uptick in operating income and net income, as the company continues to tackle weak underlying demand. For the quarter ending August 1, the retailer reported $1.51 billion in net sales, a 2.3% decrease from the previous year. Operating income climbed to $216 million from $157 million, while net income rose to $118 million from $64 million.

Earnings per diluted share increased to $0.58 from $0.30, and adjusted earnings per share (EPS) expanded to $0.62 from $0.37.

Bath & Body Works CEO Daniel Heaf acknowledged that the quarter met the company's sales and EPS guidance, but expressed concern over persistent weak underlying business trends. He noted that the retailer was observing evidence of the Consumer First Formula starting to yield results. He pointed to positive developments in body care, improved average unit retail on new product innovations, enhanced brand discoverability, and ongoing momentum in marketplace partnerships as key factors driving the company's success.

One of the notable highlights of the quarter was the 3% growth in direct sales, reaching $275 million in the US and Canada, marking the first increase since 2021. This growth was attributed to the digital investments made by the company over the past year. However, store sales in the US and Canada fell by 5.4% to $1.13 billion, while international and other revenue increased by 24.9% to $108 million.

The company adjusted its full-year 2026 EPS outlook to a range of $3.13 to $3.33, up from the previous guidance of $3.00 to $3.25, and widened its adjusted EPS guidance to $2.60 to $2.80, from $2.40 to $2.65. The company also narrowed its full-year sales outlook to a decline of 4% to 2.5%, compared to its earlier forecast of a 4.5% to 2.5% decline.

Free cash flow is now anticipated to reach approximately $650 million. For the third quarter, the company expects sales to decline between 5% and 2.5%, with adjusted EPS projected to be between $0.07 and $0.12.