BBWI

Bath & Body Works, Inc. BBWI posted second-quarter fiscal 2026 adjusted earnings of 62 cents per share, up 67.6% year over year. The metric beat the Zacks Consensus Estimate of 24 cents per share. Net sales fell 2.3% year over year to $1,514 million but topped the consensus mark of $1,499 million.About $80 million in tariff refunds boosted results, while the underlying business improved sequentially. Direct sales returned to growth for the first time since 2021, product innovation gained traction and expanded distribution advanced, offering early proof points from the Consumer First Formula. Sales per average selling square foot fell 6.8% to $206. The company also raised its fiscal 2026 outlook. As a result, BBWI shares gained 7.5% yesterday. Bath & Body Works, Inc. price-consensus-eps-surprise-chart | Bath & Body Works, Inc. Quote Net sales for Stores - United States and Canada declined 5.4% year over year to $1.13 billion, which missed the Zacks Consensus Estimate of $1.15 billion. Lower clearance inventory entering the June semiannual sale created about one point of sales pressure across categories, while store traffic remained pressured.Direct - United States and Canada sales increased 3% to $275 million, which beat the Zacks Consensus Estimate of $258.9 million and was supported by improved digital conversion. International and Other sales jumped 24.9% to $108 million, topping the consensus estimate of $89.5 million and aided by expanded domestic wholesale distribution and higher international product sales. Within North America, Body Care declined in the mid-single digits, Home Fragrance fell in the low-single digits and Soaps & Sanitizers were flat. Fruit Fusion and Everyday Luxuries supported sequential improvement in Body Care. Gross profit increased 8.1% year over year to $692 million, while the gross margin expanded 440 basis points to 45.7%. About $80 million of tariff refunds contributed roughly 530 basis points to merchandise margin. Excluding the benefit, gross margin would have been 40.4%, down 90 basis points. Adjusted earnings excluding the refund would have been 31 cents per share, above the high end of management’s prior guidance.Adjusted selling, general and administrative (SG&A) expenses were flat at $467 million, while the rate increased 60 basis points to 30.8%. Adjusted operating income rose 30.4% to $225 million, with the adjusted operating margin expanding 370 basis points to 14.8%. Mix-adjusted average unit retail was flat. Bath & Body Works ended the fiscal second quarter with 1,937 company-operated North American stores. During the quarter, it opened 24 stores, primarily off-mall and closed 10, primarily in malls. Company-operated selling square footage reached 5.521 million square feet.International partners operated 596 locations at quarter-end after opening 17 stores during the period. Amazon net sales more than tripled sequentially from the fiscal first quarter, while the company launched at roughly 600 Ulta Beauty stores. Management completed a merchandising reset across its full store fleet. The company ended the quarter with cash and cash equivalents of $794 million, up from $364 million a year earlier. Inventories declined 9.6% year over year to $883 million, while long-term debt fell to $3.37 billion from $3.89 billion.Year-to-date operating cash flow increased to $316 million from $145 million. Capital expenditures totaled $98 million in the first half. Bath & Body Works paid $40 million in dividends during the quarter and redeemed $250 million of its 2029 notes on Aug. 19. For the third quarter of fiscal 2026, Bath & Body Works expects net sales to decline 5-2.5% from $1,594 million in the year-ago quarter. Adjusted earnings are projected at 7-12 cents per share compared with adjusted earnings of 35 cents a year ago. Earnings per share is expected to be in the range of 5 cents to 10 cents compared with 37 cents reported in the year-ago period. The company expects a gross profit rate of about 40% and the SG&A rate of about 34.8%. Roughly 70% of the approximately $35 million incremental Consumer First Formula investment is planned for the fiscal third quarter, primarily for marketing ahead of the holiday season. Bath & Body Works narrowed its fiscal 2026 net sales guidance to a decline of 4-2.5% from $7,291 million in fiscal 2025 compared with the prior range of down 4.5-2.5%. Adjusted earnings guidance was raised to $2.60-$2.80 per share from $2.40-$2.65 compared with $3.21 in fiscal 2025. The company has raised its fiscal 2026 earnings per share guidance to $3.13-$3.33 compared with $3.11 in fiscal 2025.The adjusted gross profit rate is expected to be about 43.3%, while the adjusted SG&A rate is forecasted at roughly 29.6%. Fuel for Growth savings are projected at about $200 million, above the prior $175 million target. Free cash flow is expected at approximately $650 million, up from $600 million, while capital expenditure guidance was reduced to about $240 million from $270 million. BBWI Stock Past Three-Month Performance Image Source: Zacks Investment Research Shares of this Zacks Rank #3 (Hold) company have lost 7.2% over the past three months compared with the industry’s 5.1% decline. We have highlighted three better-ranked stocks, namely, Victoria's Secret & Co. VSXY, Kohl’s Corporation KSS and Five Below, Inc. FIVE.Victoria's Secret is a specialty retailer of women's intimates, sleepwear, apparel, sport and swimwear, and prestige fragrances and body care. It currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank here.The Zacks Consensus Estimate for VSXY’s current fiscal-year sales and earnings indicates growth of 9.1% and 56.7%, respectively, from the year-ago reported numbers. The company delivered a trailing four-quarter earnings surprise of 81.9%, on average. Kohl’s offers moderately priced apparel, footwear and accessories for women, men and children, along with beauty and home products. The company carries a Zacks Rank #2 (Buy) at present. The Zacks Consensus Estimate for Kohl’s current fiscal-year earnings and sales suggests declines of 14.8% and 0.9%, respectively, from the year-ago actuals. KSS delivered a trailing four-quarter average earnings surprise of 69%.Five Below is a Pennsylvania-based specialty value retailer offering trend-right merchandise priced mostly at $5 and below, with a select range priced above $5. It carries a Zacks Rank #2 at present. The Zacks Consensus Estimate for Five Below’s current fiscal-year earnings and sales indicates growth of 36.7% and a decline of 15.1%, respectively, from the year-ago actuals. FIVE delivered a trailing four-quarter average earnings surprise of 70.1%. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bath & Body Works, Inc. (BBWI) : Free Stock Analysis Report Kohl's Corporation (KSS) : Free Stock Analysis Report Five Below, Inc. (FIVE) : Free Stock Analysis Report Victoria's Secret & Co. (VSXY) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Net Sales: $1.5 billion, a decline of 2.3% versus last year, exceeding the guidance range of down 5% to down 3%. Adjusted Earnings Per Diluted Share: $0.62, above the guidance range of $0.20 to $0.25, including a benefit from approximately $80 million in tariff refunds. Adjusted Gross Profit Rate: 45.7%, including the tariff refund benefit; excluding this, it would have been 40.4%, a decline of 90 basis points versus the prior year. Adjusted SG&A: $467 million, or 30.8% of net sales, better than expected due to incremental expense savings and discrete items. Adjusted Operating Income: $225 million, or 14.8% of net sales. Finance Category Sales: Declined mid-single digits, with sequential improvement from Q1. Home Fragrance Sales: Declined low single digits, driven by a strategic reduction in Halloween assortment and less clearance product. Soaps and Sanitizers Sales: Flat in the quarter. U.S. and Canadian Stores Net Sales: $1.1 billion, a decrease of 5.4% versus last year. Direct Channel Net Sales: $275 million, an increase of 3% versus last year. International and Other Net Sales: $108 million, an increase of 24.9% versus last year. Inventory: Ended the quarter down 10% versus last year. Store Count: Ended the quarter with 1,937 North American company-owned stores and 596 international locations; opened 24 stores and closed 10 in North America, while international partners opened 17 stores. Full-Year Net Sales Guidance: Narrowed to down 4% to down 2.5%. Full-Year Adjusted Earnings Per Diluted Share Guidance: Raised to $2.60 to $2.80. Third-Quarter Net Sales Guidance: Expected to be down 5% to down 2.5%. Third-Quarter Adjusted Earnings Per Diluted Share Guidance: Forecasted at $0.07 to $0.12. Capital Expenditures: Year-to-date totaled $98 million; full-year expected to be approximately $240 million. Free Cash Flow: Expected to be approximately $650 million, up from the prior guide of $600 million. Warning! GuruFocus has detected 4 Warning Signs with BBWI. Is BBWI fairly valued? Test your thesis with our free DCF calculator. Release Date: August 26, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Second-quarter net sales declined 2.3%, beating the guidance range of down 5% to down 3%, and adjusted EPS of $0.62 exceeded the $0.20-$0.25 guidance. Digital channel returned to growth, with a 3% increase in direct sales and a 4-point sequential improvement from Q1, driven by improved conversion and customer engagement. Expanded distribution channels showed strong momentum, with Amazon net sales more than tripling sequentially and Ulta Beauty launching in approximately 600 stores. New product innovation, such as the Fruit Fusion launch, exceeded sales expectations and achieved higher AUR, demonstrating the effectiveness of the Consumer First Formula. The company raised its full-year adjusted EPS guidance to $2.60-$2.80 and increased free cash flow expectations to approximately $650 million, reflecting improved profitability and disciplined cost management. International retail sales grew 9% year-over-year despite Middle East conflict, and the company exited home care to focus on higher-growth categories. Net sales still declined 2.3% year-over-year, and the company expects continued pressure with full-year sales guidance of down 4% to down 2.5%. Body Care category remains below expectations, with finance declining mid-single digits despite sequential improvement. Store traffic remains pressured, with U.S. and Canadian store sales down 5.4% in the quarter, and the company does not expect macro conditions to improve. The company faces forward tariff pressure and input cost inflation of approximately $30 million, plus incremental investments of $35 million, which will weigh on margins. Third-quarter guidance is weak, with adjusted EPS forecast of only $0.07-$0.12, reflecting continued sales deleverage and increased marketing investments. The exit from home care and lower clearance inventory levels created a 1-point headwind to second-quarter sales, and the company is not planning to become more promotional to drive growth. Q: Sales are down 2.3% in 2Q and comparisons ease in the third quarter. With the investments being made and the benefits of the Consumer First Formula building, why wouldn't 3Q be better than guided? Is anything working as an offset? A: Daniel Heaf (CEO) stated that while the team's execution is strong and evidence of progress is tangible (e.g., sequential improvement in Body Care, return to digital growth), the progress is not yet large enough to change the whole trajectory of the business. He noted that store traffic remains pressured and Body Care is still performing below its potential. He emphasized the company is not planning to become incrementally more promotional to drive the top line. Tom Javitch (Interim CFO) added that the guidance assumes the current consumer and macro environment continues, and a prudent approach is appropriate, though the agile model allows them to chase upside. Q: Can you talk about key learnings from Amazon and Ulta, and how do you ensure it's not cannibalizing your own stores and business sales? A: Daniel Heaf (CEO) reported strong progress on both Amazon and Ulta. Amazon net sales more than tripled in Q2, making them one of the largest candle brands on the platform, attracting a higher mix of new-to-brand consumers who skew younger and more affluent. Ulta launched in ~600 stores with encouraging early response, particularly with trial size and gifting. He emphasized they are not expanding distribution just to add doors but to go after new consumers, with Amazon focusing on convenience and Ulta on trial and discovery. Crucially, he stated that despite daily, weekly, and monthly monitoring, they have not observed any cannibalization in their own stores or website. Q: You had a lot of innovation hit in July. What are the key learnings from the Fruit Fusion launch and the campaign with Hilary Duff, and how does that inform decisions going forward? A: Daniel Heaf (CEO) described Fruit Fusion as the "Consumer First formula in action" and a repeatable go-to-market playbook. The launch exceeded sales expectations, with several forms selling out. He highlighted the success of combining trend-right fragrances with real skincare benefits and value, amplified by a celebrity partnership (Hilary Duff) and creator-led campaign that generated ~615 million impressions. He stressed the importance of "franchise management," noting Fruit Fusion is designed as an enduring franchise with new fragrances in September and form extensions in 2027, rather than a seasonal collection, to create durable growth. Q: Now that we're a few quarters into Free Ship 50, can you talk about the impact you've seen from both the sales and the margin perspective from this change? A: Tom Javitch (Interim CFO) explained that as expected, more consumers are choosing free ship versus options like BOPIS, causing an expected shift out of stores into digital. The loss of shipping revenue was planned for and is a modest headwind to merchandise margin, which should be fully lapped by Q4. Daniel Heaf (CEO) added that while Free Ship 50 is a driver, it is not the only one. The return to digital growth is also supported by improved conversion, search visibility, product storytelling, merchandising, and personalization, and he expects continued growth in digital in the back half and through 2027. Q: How much of the product offering is online and in stores, including SKU reduction and new launches? And as you go through the stores, how many are in the cleaner format and how many can you touch before the end of the year? A: Daniel Heaf (CEO) stated they are focused on hero categories where they have the right to win, and the exit from home care (laundry and kitchen) was due to it not reaching a commercial threshold. He clarified they are not chasing a specific SKU reduction number but are focused on growth in core categories. On store presentation, he noted the re-merchandising project was rolled out across the full fleet of ~1,900 stores, with positive consumer response and improved conversion. He acknowledged there is more to do to "earn the visit" through marketing and lease-line engagement, with plans to test eventing and lease-line disruption in hundreds of doors before rolling out to thousands. Q: How best to bridge the forecast for moderating revenues in the third quarter? Have you seen any change in behavior near-term? And what is the right operating margin multi-year given the changes, and what baseline revenue growth is needed to achieve annual operating margin expansion? A: Daniel Heaf (CEO) pointed to six strategic indicators (new-to-brand consumers, AUR on innovation, sequential Body Care improvement, digital growth, expanded distribution, and Fuel for Growth savings) as proof points. He does not expect a change in consumer behavior but is working to make the progress broader and more consistent, particularly in reducing store traffic pressure. Tom Javitch (Interim CFO) stated they are most focused on delivering the second half and not guiding beyond this year, but generally, they should be able to get margin expansion with positive sales growth in line with market growth (up mid-single-digits) and improved brand health that allows for AUR growth over time. Q: You said the June semiannual sale was impacted by having lower levels of clearance. Can you talk about how you see the role of the semiannual sale going forward? A: Daniel Heaf (CEO) confirmed they deliberately went into the semiannual sale with less distressed inventory because they are buying seasonal business correctly and protecting long-term growth franchises. While this was a headwind in Q2, he emphasized that promotions and markdowns remain an important driver of the business and they are not looking to pull them away. However, he stated the macro approach is that "you can't promote a business back to health," so they are leaning on brand marketing and product innovation to drive growth in the back half rather than becoming increasingly promotional. Q: Drilling down on the North America store business, how much of the one-time headwinds remain a drag into the back half? And what's the clearest KPI you're focused on to understand if that part of the business is inflecting? A: Daniel Heaf (CEO) acknowledged store traffic was pressured in Q2, attributing it to both company-specific and macro factors. He stated they are not using the macro as an excuse and believe they have levers to pull to address traffic softness. The management team's number one focus is reversing the traffic softness, with a list of initiatives to activate in the coming weeks. Tom Javitch (Inter For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Image source: The Motley Fool. Wednesday, Aug. 26, 2026 at 8:30 a.m. ET Chief Executive Officer - Daniel Heaf Interim Chief Financial Officer - Tom Javitch Vice President of Investor Relations - Luke Long Operator: Good morning. My name is Melissa, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Bath & Body Works Second Quarter 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. [Operator Instructions] I will now turn the call over to Luke Long, Vice President of Investor Relations. Luke, you may begin. Luke Long: Good morning, and welcome to Bath & Body Works Second Quarter 2026 Earnings Conference Call. Joining me on the call today are Daniel Heaf, Chief Executive Officer; and Tom Javitch, Interim Chief Financial Officer. In addition to this call and this morning's press release, we have posted a slide presentation on our website that summarizes the information in these prepared remarks and provides some related facts and figures regarding our operating performance and guidance. As a reminder, some of the comments today may include forward-looking statements related to future events and expectations. For factors that could cause the actual results to differ materially from these forward-looking statements, please refer to the risk factors in Bath & Body Works' 2025 Form 10-K. Today's call also contains certain non-GAAP financial measures. Please refer to this morning's press release and supplemental materials for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measure. With that, I'll turn the call over to Daniel. Daniel Heaf: Thank you, Luke, and good morning, everyone. Today, I'll review our second quarter performance, provide an update on the progress we're making against our Consumer First Formula and share how we're positioning the business for the second half of the year. Our second quarter results exceeded our expectations. Net sales declined 2.3%, ahead of our guidance range of down 5% to down 3% and adjusted earnings per diluted share was $0.62, above our guidance range of $0.20 to $0.25. Adjusted earnings per diluted share included the benefit from approximately $80 million of tariff refunds received in the quarter. Excluding this benefit, adjusted earnings per diluted share would have been $0.31, $0.06 above the high end of our guidance range. While the underlying business remains pressured and our performance is not yet where we want it to be, we are where we expect it to be, and our teams are moving at pace to execute our strategy. Last quarter, we described early evidence that the Consumer First Formula was beginning to work. This quarter, that evidence is becoming more tangible and quantifiable with sequential improvement in body care, a return to growth in digital and accelerated growth in expanded distribution. These proof points strengthen our confidence that our actions are gaining traction, but they are not yet broad enough to signal an inflection in the overall business. Based on our second quarter performance and our outlook for the balance of the year, we are narrowing our full year net sales guidance by raising the low end to down 4%, while maintaining the high end at down 2.5%. We are also raising our adjusted earnings per diluted share guidance to $2.60 to $2.80, reflecting our second quarter outperformance and latest view of the business. We have been clear since introducing the Consumer First Formula nine months ago that returning Bath & Body Works to sustainable growth is a multiyear transformation. 2026 remains an investment year. Building consideration and trust with new consumers requires sustained product innovation, continued investment in demand creation and consistent execution. Our priority in the back half is to continue to strengthen the underlying drivers of sustainable growth while closely tracking leading indicators to validate our actions are working ahead of our goal of revenue growth in 2027. With that context, let me turn to the progress we are making against our four strategic priorities. First, creating disruptive and innovative products. As we set out last quarter, we are bringing greater focus and discipline to how we develop and bring product innovation to market. We are concentrating resources behind our hero categories and franchises, where our leading market position and attractive category growth give us the greatest right to win. During the quarter, we launched Fruit Fusion, a new body care franchise designed as a hydration routine. It pairs distinctive fragrances with new dermatologist-approved formulas designed to layer hydration throughout the routine. We also introduced more functional packaging. For example, our moisturizing body wash now includes a pump and more products at the same price, delivering better functionality and greater value at a time when consumers are often being asked to pay more for less. The launch exceeded our sales expectations and achieved a higher AUR than our core fragrance body care assortment and drove strong customer engagement with several forms selling out. Importantly, Fruit Fusion is designed as an enduring franchise rather than a seasonal collection, and we plan to build on its success through additional fragrances in September and form extensions in 2027. The commercial response to Fruit Fusion gives us greater confidence in an integrated model that brings differentiated products, cultural relevance and coordinated demand creation together behind a focused launch. In the second half, consumers will see stronger innovation pipeline across our hero categories, combining proven franchises, modernized icons and new platforms for future growth. Everyday Luxuries will demonstrate how we can scale a proven franchise. After restoring 10 of its top fragrances during the second half, the franchise performed ahead of our expectations and contributed to the sequential improvement in body care. In the second half, we will build on that momentum with higher fragrance loads, a new eau de parfum form and five new fragrances. A Thousand Wishes will demonstrate how we are modernizing and extending our most iconic fragrances. In the second half, we will enhance fragrance performance, elevate packaging and expand the franchise with a new fragrance flanker, A Thousand Wishes Granted, designed to recruit new consumers while staying true to what customers love about the original. In Q3, we will also introduce new franchise platforms across body care and home fragrance. For example, the Reserve Collection, which launched on Monday, brings a more elevated design-led proposition to home fragrance, including a new 4-wick candle and Liquidless Reed Diffusers. These new platforms will begin at a seed scale, and they are not expected to materially affect our near-term financial results. They are designed to build brand equity, test new consumer propositions and establish the platform that will scale over time. Consumer response will help determine where we invest and which we scale in 2027. Finally, greater focus also means being clear about where we choose not to compete. We continually evaluate our portfolio and assortment against our strategy and each category's financial contribution. As part of that ongoing discipline, we have decided to exit Home Care, which includes our laundry and kitchen products. The category represents less than 1% of our annual sales and creates disproportionate product and operating complexity without generating the productivity or incremental demand required to justify the cost. Second, reigniting the brand. Bath & Body Works has always been grounded in a simple belief: Everybody deserves to feel good. Inspired by the optimism, want and creativity of the American spirit, we create sensorial products and experiences for everybody, giving the brand a distinctive and broadly relevant place in consumers' lives. The enduring emotional connection is guiding how we shape our products, tell our stories and show up in culture as we work to deepen consumer engagement and build stronger demand. To bring this brand promise to life more consistently, we are building a modern demand creation model that connects our most important product stories with relevant talent, creator content and culture. We are encouraged by the early signs that these efforts are beginning to resonate. Strong Net Promoter Scores, improving social sentiment and growing awareness amongst nonconsumers suggest that the brand is gaining cultural relevance and strengthening its opportunity to attract new consumers. Fruit Fusion provided our first example of this model in the second quarter. It was the first time Bath & Body Works teamed up with a celebrity at this scale with Hilary Duff serving as an ambassador and creative partner. As a long-time fan of Bath & Body Works with relevance across generations, she brought a genuine affinity for the brand to the partnership. We amplified the launch through coordinated creator-led campaign, another first for the brand. The campaign generated approximately 615 million impressions and contributed to over 50,000 new social followers, bringing Bath & Body Works into the cultural conversation with new audiences. Together with the strong commercial response, these results provide early evidence that greater cultural relevance and awareness can strengthen demand. The launch is also a repeatable playbook. We intend to continue to apply this demand creation model behind our most important product launches in the second half. One component of that playbook we are now scaling is creator activation. Creator interest in working with Bath & Body Works is strong, giving us an efficient way to tell our stories authentically. We have significantly expanded our creator network and expect to mobilize thousands of creators across a range of audience sizes to support our holiday campaigns. Looking ahead, consumers will see fewer, bigger and more coordinated brand moments that bring together product innovation, talent, creator content and seasonal storytelling. Third, winning in the marketplace. Across digital and expanded distribution, we continue to see some of the clearest signs of progress. Our owned digital business returned to growth in the quarter, improving 4 percentage points sequentially from Q1. We expected digital to be among the first areas where the Consumer First Formula would translate into measurable results. The return to growth, coupled with increases in new, existing and reactivated digital customers provides early evidence that stronger product storytelling, improved discovery, personalization and demand creation are beginning to work and helping us reach consumers beyond our existing customer base. This progress is particularly meaningful because we have not grown our e-commerce business since 2021, leaving a significant opportunity to capture a greater share of the category growth over time. Expanded distribution was another area of measurable progress in the quarter. Amazon continues to scale quickly with net sales more than tripling compared with the first quarter. We are now one of the largest candle brands on the platform. As more category spending shifts to Amazon over time, our presence allows us to meet consumers where they are already shopping and participate in that growth. The channel is attracting a higher mix of new-to-brand consumers who skew younger and more affluent while delivering a higher AUR than our own channels, reinforcing our confidence that Amazon can expand our reach and drive incremental growth. During the second quarter, we launched with Ulta Beauty across approximately 600 stores, creating new points of discovery for the brand within specialty beauty. While still early, the initial response has been encouraging and supports our belief that thoughtfully selected partnerships can help introduce Bath & Body Works to new consumers. Together, Amazon and Ulta expand discovery, broadening our reach and reinforcing a consistent brand experience across channels while maintaining the strength and distinctiveness of our owned channels. During the second quarter, we completed a merchandising reset across our full store fleet, the first in a series of improvements to the existing store experience. Clearer signage and more intuitive layouts organized by fragrance, format, franchise, are designed to make our assortment easier to understand and product easier to discover. Initial feedback from consumers and associates has been positive, and we will continue to evolve the store experience to improve new consumer acquisition, conversion and store productivity. International remains an attractive asset-light opportunity to expand the reach of Bath & Body Works globally. Despite continued conflicts in the Middle East, international retail sales increased 9% versus last year, and we are pleased with the early performance in Brazil, which opened in July. Finally, operating with speed and efficiency. Supporting all of this work is our continued focus on simplification, speed and disciplined execution. Through Fuel for Growth and broader operational improvements, we are creating capacity to reinvest behind innovation, marketing, digital capabilities and marketplace expansion while strengthening the long-term foundation of the business. Before I close, I want to thank our associates for their continued dedication to serving customers and advancing our strategy. The progress we are making is a reflection of their commitment and hard work. The second quarter provided evidence the Consumer First Formula is beginning to work with progress in digital, encouraging early reads from product innovation, growth in expanded distribution and continued improvement in several of our strategic indicators. As we move to the second half, we are focused on improving those outcomes while continuing to build the product, brand and marketplace capabilities that will support durable growth. We are confident in our strategic direction and focus on disciplined execution, advancing these initiatives together and at sufficient scale to change the trajectory of the business and build momentum throughout 2027. With that, I'll turn the call over to Tom to review our financial results and outlook. Tom Javitch: Thank you, Daniel, and good morning, everyone. Today, I will review our second quarter results and provide an update on our outlook for the third quarter and fiscal 2026. Beginning with the second quarter, net sales were $1.5 billion, a decline of 2.3% versus last year and above our guidance range of down 5% to down 3%. As Daniel discussed, underlying business performance remains pressured, but results exceeded our guidance and improved sequentially compared to Q1. We entered into our June semiannual sale with lower levels of clearance inventory than last year. While this was healthy for the overall brand and business, it represented approximately one point of headwind to second quarter sales with impacts across all categories. Body care declined mid-single digits. While performance improved sequentially from Q1, supported by strength in our Everyday Luxuries franchise and the Fruit Fusion launch, results remain below our expectations. We will continue to invest in product innovation while increasing focus on merchandising and marketing in this critical category. Home Fragrance declined low single digits. Performance was driven by a strategic reduction in Halloween assortment as well as less clearance product as referenced previously, partially offset by strength in single-wick candles and Wallflower heaters. Soaps and sanitizers were flat in the quarter. Innovation remains a source of strength within the category. Our newer moisturizing and revitalizing soap formulas continue to perform well, and we continue to drive strong AUR performance in those forms. In U.S. and Canadian stores, net sales were $1.1 billion, a decrease of 5.4% versus last year. Store sales were pressured by a few factors during the quarter. The introduction of free ship $50 in the fourth quarter of 2025 drove some expected channel shift to direct, while lower clearance inventory levels primarily impact stores. As a reminder, our semiannual sale is the largest portion of the quarter's revenue. Direct channel net sales were $275 million, an increase of 3% versus last year, benefiting from a reduction to our free ship threshold of $50 and improved digital conversion supported by our ongoing investments in digital capabilities and customer engagement. International and Other, inclusive of our expanded distribution wholesale revenues, net sales were $108 million, an increase of 24.9% to last year. International retail sales were up high single digits, in line with expectations and international net sales were up low double digits, above expectations as product shipments increased across our regions. Our second quarter gross profit rate was 45.7%. Results included approximately $80 million of tariff refunds, which contributed approximately 530 basis points to merchandise margin. Excluding this benefit, gross profit rate would have been 40.4%, slightly better than expected and a decline of 90 basis points compared to the prior year, driven primarily from deleverage in buying and occupancy expenses on the decline in net sales. Mix adjusted AUR was flat in the quarter. Adjusted SG&A dollars were $467 million and adjusted SG&A rate was 30.8%, better than expected due to incremental expense savings and discrete items. Bringing it all together, adjusted operating income was $225 million or 14.8% of net sales and adjusted earnings per diluted share was $0.62. Inventory ended the quarter down 10% versus last year. We ended the quarter with clean forward inventories, and our inventory is well positioned to deliver in the back half. Moving to real estate. During the quarter, we opened 24 stores, primarily off-mall and closed 10 stores primarily in malls. International partners opened 17 stores. We ended the quarter with 1,937 North American company-owned stores with approximately 60% of our fleet in off-mall locations and 596 international locations. We continuously review our real estate fleet performance and have a highly profitable store portfolio with virtually all stores generating 4-wall profit. Moving to full year guidance. Based on our second quarter performance and outlook for the balance of the year, we are narrowing our full year net sales guidance and raising our adjusted earnings per diluted share guidance. As we think about the balance of the year, the benefit of Q2 tariff refunds is being partially offset by forward tariff pressure and input cost inflation as of the end of the second quarter, representing an additional approximately $30 million or 40 basis points as well as incremental investments representing approximately $35 million into the Consumer First Formula, primarily into marketing efforts. Our approach allows us to continue investing in the long-term transformation of the business while also improving near-term profitability. Turning to the assumptions in our guidance. We now expect net sales to be down 4% to down 2.5%. This is an increase to the low end of our guidance while maintaining the high end of our prior guidance range. We now expect full year adjusted gross profit rate to be approximately 43.3%. This includes the tariff refund benefit recognized in the second quarter and assumes the approved tariffs and input cost environment as of the end of the second quarter remain in place through the balance of the year. Adjusted SG&A rate is now expected to be approximately 29.6%, driven by increased investments in the Consumer First Formula. We are tracking to exceed our 2026 full year Fuel for Growth goal of $175 million by approximately $25 million, totaling approximately $200 million. This progress has been critical to funding our investments into the Consumer First Formula and delivering bottom line results. Adjusted net nonoperating expense is now expected to be approximately $217 million, reflecting the interest benefit of the early partial redemption of $250 million of our 2029 bonds. Adjusted tax rate is now expected to be approximately 26.8% and weighted average diluted shares outstanding are expected to be approximately 203 million. Considering these inputs, we now expect full year adjusted earnings per diluted share of $2.60 to $2.80. Turning now to the third quarter. We expect third quarter net sales to be down 5% to down 2.5%. Gross profit rate is expected to be approximately 40%, driven primarily by deleverage in buying and occupancy expenses on lower sales. SG&A rate is expected to be approximately 34.8%, reflecting net sales deleverage and increased investments in the Consumer First Formula, primarily marketing. We believe these investments will strengthen consumer engagement heading into the holiday season and support performance across both Q3 and Q4. Adjusted net nonoperating expense is expected to be approximately $54 million, adjusted tax rate is expected to be approximately 26% and weighted average diluted shares outstanding are expected to be approximately 203 million. Considering these inputs, we are forecasting third quarter adjusted earnings per diluted share of $0.07 to $0.12. Now for a quick update on capital allocation. We remain a strong cash flow generating business. Year-to-date capital expenditures totaled $98 million, and now we expect capital expenditures of approximately $240 million for fiscal 2026, down from prior guidance, reflecting savings in real estate and other projects. We returned $40 million to shareholders through dividends during the quarter. We now expect free cash flow of approximately $650 million, up from our prior guide of $600 million, reflecting higher earnings expectations and lower capital expenditures. On August 19, we redeemed $250 million of our 2029 notes, of which the interest savings are reflected in our updated net nonoperating expense outlook. In closing, our second quarter performance exceeded expectations and reflected disciplined execution across the business. While we have significant work ahead to return Bath & Body Works to durable growth, we remain focused on strengthening the foundation of the business, supporting the actions outlined through the Consumer First Formula and returning the business to durable growth. We are encouraged by the progress we are seeing and remain committed to balancing disciplined investment with strong financial management. With that, I'll turn it over to the operator for questions. Operator: [Operator Instructions] Our first question comes from the line of Paul Lejuez with Citi. Paul Lejuez: Sales were down 2.3% in 2Q and comparisons ease in the third quarter. So I guess I'm curious with the investments that you're making and the benefits of the Consumer First Formula building, why you wouldn't expect 3Q to be a bit better than what you guided, just also considering the comparisons. Is there anything working the other way that is acting as an offset to some of the benefits that you're seeing as you think about that third quarter sales guide? Daniel Heaf: Paul, thanks for the question. So look, I'm really pleased with the team's execution and focus on our strategic priorities in the second Q. As I said in the prepared remarks, we're seeing more tangible evidence this quarter that the strategy that we laid out nine months ago is working. Sequential improvement in body care, stronger AUR on our innovative products. Tom mentioned moisturizing and revitalizing hand soap, but that is true on Fusion also, a return to growth in digital after many years of declining performance, improved brand discovery and sales acceleration across our expanded distribution marketplace partnerships. So the progress that we're seeing is real and it's quantifiable. But that progress at this point is not yet large enough to change the whole trajectory of the business. That is what we are focused on, and that is what we must change in the back half. At the same time, working against us, as you asked, the store traffic remains pressured. And body care, while a significant improvement helped by Fruit Fusion and Everyday Luxuries is still performing below its potential. Now also remember in November, when we set out the strategy, we said that the core had become too reliant on promotional activity. Promotions, as I'll emphasize, will remain an important way for us to create excitement and deliver compelling value to consumers, but we're not planning on becoming incrementally more promotional to drive the top line in the back half. So net-net, I'd say transforming a business the size of Bath & Body Works takes time. We laid out the strategy in November of last year. We're delivering against that strategy, and we are exactly where we expected to be at this stage. Q2 gave us greater confidence and more tangible evidence that we're on the right track, but we want to see these proof points become broader, more consistent and more durable before we really build them into our outlook. Tom Javitch: I would add, in terms of the guidance itself, the high end of the range is very consistent with our year-to-date trends. We're assuming current consumer and macro environment continues. And we believe a prudent approach is appropriate. We want to stay disciplined on managing the business as we continue to execute the Consumer First Formula. Importantly, our agile model allows us to chase upside. So we believe we are positioned to capture opportunities as they appear. Paul Lejuez: And then just one follow-up. On the tariff refund, you're spending some of that benefit. Can you just talk a little bit more about how you're spending that money and what the consumer might see? Tom Javitch: Yes, sure. So we did receive approximately $80 million in Q2, which is the substantial majority of what was outstanding. In our guidance for the second half, we are covering forward tariff and input cost pressures of approximately $30 million based on what we knew as of the end of Q2. So that specifically assumed Canada tariffs remain at 50% for the balance of the year. As a reminder, we do have production in Canada, primarily in candles that represents approximately 3% of our total cost of goods. We also have a large Canada retail business. So there is exposure to retaliatory tariffs if applied to our categories, and we're still evaluating this as new information is being released in real time. I will say we're continuing to work hard to mitigate those risks through sourcing, assortment and pricing opportunities. In addition to the forward tariffs, we've increased investment into the Consumer First Formula of about $35 million. That's primarily marketing to accelerate our transformation. The majority of that investment, about 70% is pointed to Q3 ahead of our holiday peak season, which should support both Q3 and Q4. We do view the highest upside to the business as investing in product and brand, areas that need more consistent elevated support. And we believe over time, we will create the most durable and consistent growth. Operator: Our next question comes from the line of Ike Boruchow with Wells Fargo. Irwin Boruchow: Daniel, I wanted to ask you, basically, you had a lot of innovation that hit in July. Just what are the key learnings from specifically the Fruit Fusion launch, the campaign with Hilary Duff. It's very different than what you guys have done in the past. So just kind of curious early learnings and how do you kind of use that to inform your decisions go forward? Daniel Heaf: Thanks for the question. As I said, Fruit Fusion is off to a strong start. It exceeded our sales expectations in the quarter. As you might have seen, several forms sold out and our supply chains are working hard to make sure that we replenish that inventory. The way I think about it is Fruit Fusion stands for more than just a single product launch. And I think that's what you're poking at, Ike. Fruit Fusion is really the Consumer First Formula in action. It demonstrates a repeatable go-to-market playbook that we're going to use time and time again as we go through the back half. It starts with product. We did what we said we were going to do in November. We took trend-right fragrances and real skin care benefits, and we gave more value to the consumer. We then built a bigger story around it in this instance with Fruit Fusion with Hilary Duff but improved social creators and then coordinated execution across our own channels, stores and digital and on Amazon. This is the playbook. Create products that people want, tell stories that people remember and make it easier to discover and buy. So that's the sort of playbook that we're going to be running from here on in. The other important point about Fruit Fusion, which is a big learning and I think a return to what Bath & Body Works used to do so well is franchise management. We are seeding these new franchises because we really believe that they can be durable drivers of growth over time. Fruit Fusion isn't in this floor there and out the next. We are really getting back to that disciplined franchise management that the business was known for. We're adding two new fragrances to Fruit Fusion in Q3. We have new additional forms in 2027. We will continue to support it through marketing investment because we believe that the franchises give consumers reasons to return and it allows us to extend ideas across multiple forms and then it creates value beyond the initial launch. So net-net, we're pleased with that first outing of the Consumer First Formula. Sales beat our expectations. It's a go-to-market playbook and franchises will be a source of durable growth over time, and we're launching and seeding more in the back half of the year. Irwin Boruchow: Got it. That's super helpful. And then if I can add one more, Daniel. I don't expect you to guide next year, but I do want to ask, I think you said in the prepared remarks, you expect revenue growth in '27 based on the improvements you're seeing. Any chance you could elaborate on that timing? Is there more specificity there? Is there something that you're kind of waiting to see? Just kind of curious if you can elaborate a little bit more on that comment that you gave earlier. Daniel Heaf: Yes. I'm obviously not surprised you're going to ask that question, Ike. Look, I'm going to go back to what I always say. Everybody at Bath & Body Works is working with incredible focus and urgency to return us back to growth as soon as possible. We believe that the Consumer First Formula is the strategy to do that, and we are seeing better growth or better -- more tangible results from that strategy, and we demonstrated that in the quarter. But as I said, we're not seeing that at the moment at a broad enough level and at a consistent enough level to be able to put it into our guidance. So our North Star is growth in 2027. That is a strategic North Star. But we're not giving financial guidance for '27 on this quarter. We'll do that in future quarters. But know that we are working to that mandate, and no one is more anxious to return to growth as soon as possible. We feel encouraged by the moves that we've made. And yes, we're on it. Operator: Our next question comes from the line of Lorraine Hutchinson with Bank of America. Lorraine Maikis: Can you talk about key learnings from Amazon and Ulta? And how do you ensure that it's not cannibalizing your own stores, these new sales? Daniel Heaf: Lorraine, yes, so -- alternative distribution is a key pillar of the Consumer First Formula. We're really pleased with the progress, both on Amazon and Ulta. But more importantly, what we learned in the quarter. We're exceptionally good at understanding the business in real time and reading and reacting. So we launched on Amazon in Q1 in February, as you'll recall, and the business, as I said in my prepared remarks, tripled in the quarter. We have a really experienced team in place managing this channel, and we have been methodical about learning it, including the customer behavior, pricing, AUR dynamics, and we have seen really strong sales growth as we increased our marketing investment while it continued to deliver attractive margins. We also, as I mentioned in the question from Ike, we simultaneously launched Fruit Fusion on Amazon as well as in our own channels, and that demonstrated how [ Ulta ] and Amazon can support a major product in introduction. But remember, it's only roughly about 10% of our assortment is available on Amazon. It is not the full expression of our brand. If you want the full Bath & Body Works experience, you want all of our seasonal products, you want our collabs, our own channels are still the places to go and get that. With regards to Ulta, it's early. Ulta is an absolutely best-in-class specialty beauty retailer. It is exactly the kind of strategic partner we need as we expand our presence. And the early response has been really encouraging. We've seen a strong consumer reaction to trial size and to gifting. That's what we expected. It is a channel where we are introducing the consumer to Bath & Body Works. So more to say there, but we have exciting plans with Ulta as we move into the holiday period. So what I'd say at the end of the day is that we're not expanding our distribution to just add more doors. We're really going after new consumers and each partnership has a distinctive strategic need. Amazon is about convenience and Ulta is about trial and discovery within a specialty beauty environment. Now the question that you asked really and the question we get a lot is about cannibalization. We have a lot of data under the hood on this subject. We monitor the impact of expanded distribution on our own channels on a daily, weekly, monthly basis. And on everything that we are seeing to date, we have not observed any cannibalization in our own stores or website. But rest assured, this is not something that we assume. It's something that we must continue to prove quarter in and quarter out. Tom Javitch: I would add in terms of our guidance, we're more or less tracking in line with expectations and expect the businesses to continue to build into the second half. Lorraine Maikis: And switching gears, now that we're a few quarters into free ship $50, can you talk about the impact you've seen from both the sales and the margin perspective from this change? Tom Javitch: Yes, sure. I would say in terms of revenue, as expected, there is more consumers choosing free ship versus options like BOPIS. So we are seeing some expected shift out of stores into digital, and that's very much in line with our expectations. In terms of the economics, it was planned for the loss of the shipping revenue, and that is also very much in line with what we think. And it's a modest headwind to merch margin, and we should have that fully lapped as we go into Q4. Daniel Heaf: Maybe I'll just jump in here and maybe we can talk a little bit about digital because we said since the very first earnings call I was on that digital is a huge opportunity for Bath & Body Works. We've seen material growth from competitors in the categories across e-commerce, and we have not fully participated in that. And this quarter, it is a return to growth for the first time in a long time for Bath & Body Works. And there's no doubt, Lorraine, that the free ship $50 is a driver, but it's absolutely not the only driver. We saw improvement in conversion, search visibility, product storytelling, merchandising and personalization. I think it's important to remember that as well that digital is not just a place to transact. It's a place to tell the story of our brand. And I think a better digital experience will, over time, drive traffic and conversion across all of our channels. So we're really pleased with the progress that we're making in digital. One quarter doesn't make a digital turnaround. We remain dissatisfied as always, but it's definitely evidence that the improvements that we've made over the last year are beginning to work. We have a really, really strong digital team in place. We have a road map of improvements through the back half and well into 2027, and we're going to continue to deliver on them. Operator: Our next question comes from the line of Simeon Siegel with Guggenheim Securities. Simeon Siegel: Daniel, maybe just to follow up on that a little bit. So you did call out digital as being one of the first areas of focus. You said it would be the first to turn, it did. One, how -- talk to us about how sustainable you think it is? It sounds like you think it is. Any other changes to digital we should see from here. But I'm also curious based on the learnings, how similar do you think as you diagnose the store dynamic, how similar is that going to track versus the changes you made to digital? Obviously, the nuance will be different, but maybe the confidence you have in the stores from that. And then if we can -- if you can elaborate a little bit more separately, if you can elaborate a little bit more on the underlying profitability drivers built into the new full year guide, excluding tariffs? Just trying to think through how you're thinking about long-term gross margin and EBIT margin opportunity. Daniel Heaf: Great. Yes. Thanks, Simeon. I hope you had a good summer also. So look, I'm really bullish on the digital opportunity for this business. I think we've taken important steps over the first year to improve the overall experience then 1 quarter of a return to growth and mid-single-digit growth. We're not taking victory laps over here, just so you know. But I think that underneath that, the improvement in new consumers, the improvement in existing consumers and the improvement in reactivated consumers gives us more confidence than the mid-single digit for a single quarter sort of portray. And we have a strong road map of continued improvements ahead. So we feel really good about where we're going. And it's certainly my expectation that we continue to see growth in digital in the back half and through 2027. Maybe now turning Tom to the point on margin. Tom Javitch: Yes. In terms of full year guidance, I'll start there. Gross profit is projected down slightly, and that's driven primarily by deleverage in B&O on lower sales. Within merchandise margin, I think there's a few important themes that I could hit on. One, AUR was flat in the first half of the year, and we're assuming about flat promotional environment in the second half of the year. Second, there is investment into product and transformation that will be a modest headwind to merchandise margin. Third, our wholesale businesses, international and expanded distribution are growing faster than the total. They do carry a lower merchandise margin rate, but they are accretive in OI rate and dollars. And then finally is the tariff and inflation environment of which I spoke about a little bit earlier in the call. In terms of SG&A, there is deleverage on the sales decline. All of the dollar growth in SG&A right now is pointed into marketing. Our Fuel for Growth efforts have offset all other investments, merit inflation, et cetera. Daniel Heaf: So I want to come back to your question on stores because I think it's an important strategic point here. What does digital teach us here? It teaches us that when we change the complete proposition, we add new product, we add new marketing and we improve the total proposition, which is I think what you see today, if you go on our website, we drive growth. We are improving stores at the same time. We completed the largest merchandising project -- remerchandising project in a decade in Bath & Body Works and the response has been good. We have more to do in our store experience in the back half to make sure that consumers can really feel that change, 10 feet out from the lease line and on the lease line. We're very aware that stores remain under pressure, and we don't expect it to just improve by putting new products in there. Like we have got to do more to earn a visit, and we have strong plans in the back half to get after that. Operator: Our next question comes from the line of Matthew Boss with JPMorgan. Matthew Boss: So Daniel, if you break down the box by category, how best to bridge in your forecast for moderating revenues that you're anticipating for the third quarter? Have you seen any change in behavior near term? Or what's driving the embedded sequential softening? And then, Tom, what do you see as the right operating margin multiyear given the changes that you're making and implementing to the model? And what's the baseline revenue growth needed to achieve annual operating margin expansion on an annual basis? Daniel Heaf: Matt, look, so I think I'll point back to our six strategic indicators. Those are the proof points that we are using to guide our strategic progress. We're looking for new-to-brand consumers, AUR on product innovation, sequential improvement in body care, digital growth, growth from expanded distribution and savings and Fuel for Growth. Those are all things that we're tracking to make sure that the strategy is on track. And I don't expect any change in behavior. What we are working hard to achieve as a team is to make the things that we're doing broader and more consistent as we go through the back half. So we would like to see our digital growth continue. We would like to see body care continue to grow. We absolutely have to do more to attract a new consumer, and we have to do more to reduce the pressure that we are seeing in store traffic. We've proven that we can do that in digital. It is now a question of making sure that we are attacking that in the back half of the year, and we've got plans to do it. Tom Javitch: I'll speak to the long-term model. I would say, right now, we are most focused on delivering the second half. So we're not guiding beyond this year. But in general, we should be able to get margin expansion with positive sales growth in line with market growth, let's say, up mid-single digits and with improved brand health that would allow us to realize AUR growth over time. Operator: Our next question comes from the line of Adrienne Yih with Barclays. Adrienne Yih-Tennant: And I'll just say that the DTC e-commerce, the website is so much cleaner, so much easier to shop. So I can totally see why the messaging there comes through. So I guess my first question is how much of the kind of the product offering as you envision it is online and in stores, including kind of SKU reduction and new launches. So where are we sort of in that journey of what you would be satisfied with as the full and correct presentation? And then secondly, we often see this kind of inflection in whether it's reg price selling or DTC, where you learn what's working there and then you kind of translate it into the stores. But it becomes -- it's much more difficult, right, to show that offering very clearly. So as you go through the stores, how many stores are in this cleaner format? And how many can you touch before the end of the year? Daniel Heaf: Yes, a lot in there. Let me start on the assortment. So the most important point is that we have an incredible innovation pipeline that goes all the way through the back half. We said that we had a stronger pipeline of innovation in Q2, we just saw Fruit Fusion, but we have more coming in body care, home fragrance and across our categories. So I feel good about the product pipeline. As it pertains to SKU reduction, I'll sort of go back to what I've always said, which is two things. Firstly, we are focused on our hero categories and the hero categories are where we are seeing growth in the marketplace, and we believe that we have an authority to win. So SKU reductions to a certain extent and the exit from laundry was both because it didn't reach a commercial threshold for us, but also because we want to focus our resources behind the places that we have the right to win. We're not chasing a SKU reduction number. What we're trying to get to is growth in our core categories, growth in the business overall and a cleaner environment in our stores. So it's not like we're not targeting a number. And I'd say we broadly are where we expect to be in terms of our overall SKU rationalization program. When it comes to store presentation, I'm very pleased with what the team did with the remerchandising project in the second half. As you noted in your question, rolling out that change across 1,900 stores is no mean feat, and the team executed it well and consumer response has been good and conversion is up in our stores. That said, we do have more to do, as I said previously, to earn -- I would say, to earn the visit is the way I think about it. And I think you're right that we need to do more to alert existing new lapsed consumers of the change that's taking place in Bath & Body Works. That is both through marketing, and we're seeing good early reads on the increased investment that we put into the business in July, but also we need to do more at the lease line, more to engage consumers, more within mall marketing, and that is something that we're focused on in the back half. It will start as it always does by testing and learning. We'll be testing eventing and lease line disruption in hundreds of doors. And when we get a positive role when we get a positive result, we will roll it out to thousands of doors. That's how this business has always operated, and we have a strong operating muscle in that regard. Operator: Our next question comes from the line of Alex Straton with Morgan Stanley. Alexandra Straton: Just drilling down on the North America store business a little bit more. It seems like there were some possibly onetime headwinds in the quarter. So I'm just wondering how much of those dynamics remain a drag into the back half? And maybe, Daniel, what's the clearest KPI you're focused on today to understand if that part of the business is actually inflecting? And just as a follow-up, maybe as you're thinking about investing in the store experience, do you have any updated views on just the North America store fleet in general, like how big it should be from here? Daniel Heaf: Yes, Great. So as we noted, store pressure -- store traffic was pressured in the second Q. And that's both a Bath & Body Works problem and a macro problem. So we don't expect the macro environment to improve, and that's obviously not built into our outlook. We do see our categories continue to grow. So we're not using the macro as an excuse. We believe we have to compete to win in our categories, and we believe we have to earn a right to a visit. So we're not looking at softer mall traffic as a reason why we shouldn't return to growth. And we believe that there are a lot of levers that we can pull to address the traffic softness that we saw in Q2, and I answered some of that in the back half. I would say we continue to be focused on the six strategic indicators of progress that I outlined in the previous question. And I would also say, obviously, we're focused on the retail equation. Like the #1 thing that we're talking about right now as a management team and really working on is making sure that we reverse that traffic softness that we saw in the second quarter. We understand the problem. We have a list of initiatives against it, and we're looking forward to activating those in the coming weeks. Tom Javitch: I might add in terms of our overall fleet, we have a very profitable fleet. Virtually all stores are profitable, and we view our store base as a competitive advantage and an important component of our overall marketplace strategy. We actively manage our real estate portfolio, opening new stores and new convenient venues, closing stores in declining or vulnerable malls and remodeling stores in critical centers. We will continue to study performance and optimize capital deployment and footage to meet the needs of the business over time. Operator: Our final question this morning comes from the line of Kate McShane with Goldman Sachs. Katharine McShane: You said the June semiannual sale was impacted by having lower levels of clearance. Can you just talk about how you see the role of the semiannual sale going forward? Daniel Heaf: Yes. Thanks, Kate. So it absolutely was. Tom mentioned in his prepared remarks that we deliberately went into SAS with a little bit less distressed inventory. That's because we're buying our seasonal business correctly. We aren't looking to buy large amounts of inventory that we can flush through in semiannual sales there are certain things, certain franchises, certain long-term drivers of growth that we want to protect. So that was a point of headwind in the second quarter. That said, SAS, January sales, promotions, markdowns are a very important driver of our business. We are not looking to pull them away from the business and from the consumer, but we don't intend to be increasingly promotional in the back half of the year versus the LY. My macro is you can't promote a business back to health. So we're using that lever less, and we're using brand marketing and product as the things that we are leaning on to drive growth in the back half. Operator: Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Long for final comments. Luke Long: Thank you for joining today's call. A replay will be available for 90 days on our website. Thank you for your interest in Bath & Body Works. Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation. Before you buy stock in Bath & Body Works, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Bath & Body Works wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $443,461!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,307,633!* That performance is why people listen. With a track record of beating the S&P 500 by nearly 5x, Stock Advisor offers a distinct advantage. 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Interested in Bath & Body Works, Inc.? Here are five stocks we like better. Q2 results exceeded expectations: Net sales fell 2.3% to $1.5 billion, but adjusted EPS reached $0.62, including an $80 million tariff refund. Excluding the refund, EPS was $0.31, still above the high end of guidance. Sales remain pressured despite strategic progress: U.S. and Canadian store sales declined 5.4%, while direct sales rose 3% and international and other revenue increased 24.9%. Product launches, digital improvements, Amazon expansion and the Ulta rollout showed traction, though management said gains were not yet broad enough to reverse the overall trend. Outlook and investments improved: Full-year sales guidance was narrowed to a 2.5%–4% decline, while adjusted EPS guidance increased to $2.60–$2.80. The company plans to invest an additional $35 million in its Consumer First Formula strategy, targets $200 million in 2026 savings and expects approximately $650 million in free cash flow. Bath & Body Works Stock Surged Despite Falling Sales—Here’s Why Bath & Body Works (NYSE:BBWI) reported second-quarter results that exceeded its prior outlook, though sales remained under pressure as the retailer invests in product innovation, marketing, digital capabilities and expanded distribution to support a planned return to revenue growth in 2027. Net sales for the second quarter totaled $1.5 billion, down 2.3% from a year earlier. The result was better than the company’s guidance for a decline of 3% to 5%. Adjusted earnings per diluted share were $0.62, above the prior outlook of $0.20 to $0.25. → What Rising Delivery Forecasts Say About Rivian's Stock Prospects Bath & Body Works Hits Multi-Year Lows: Bargain or Trap? The earnings figure included approximately $80 million in tariff refunds received during the quarter. Excluding that benefit, adjusted EPS would have been $0.31, or $0.06 above the high end of the company’s guidance range, according to Chief Executive Officer Daniel Heaf. Interim Chief Financial Officer Tom Javitch said the company entered its June semiannual sale with less clearance inventory than it had a year earlier. While the inventory position was healthier for the brand, it reduced second-quarter sales by about one percentage point and affected all categories. Body care sales declined by the mid-single digits, though the category improved sequentially from the first quarter. Home fragrance sales declined by the low single digits, reflecting a strategic reduction in Halloween assortment and reduced clearance product. Strength in single-wick candles and Wallflower heaters partly offset those pressures. Soaps and sanitizers were flat, with newer moisturizing and revitalizing soap formulas supporting performance. → NVIDIA Reveals $21 Billion SpaceX Stake: Signal of Confidence or Circular Financing? How Bath & Body Works Is a Perfect Example of a Value Stock U.S. and Canadian store sales were $1.1 billion, down 5.4% from the prior year. Javitch said store results were affected by lower clearance inventory and an expected shift toward direct sales following the introduction of free shipping on orders over $50 in the fourth quarter of 2025. Direct-channel sales rose 3% to $275 million, aided by the free-shipping threshold and improved digital conversion. International and other revenue, including expanded-distribution wholesale sales, increased 24.9% to $108 million. International retail sales rose by the high single digits, while international net sales increased by the low double digits due to increased product shipments. → Berkshire Boosts Its Bet: This AI Hyperscaler Is Now a Top-3 Holding Heaf said the company’s owned digital business returned to growth during the quarter, improving by four percentage points sequentially from the first quarter. He said gains in new, existing and reactivated customers indicated that investments in product storytelling, discovery, personalization and demand creation were beginning to gain traction. The company highlighted progress under its “Consumer First Formula,” a multiyear strategy focused on innovative products, brand demand creation, marketplace expansion, and operational efficiency. Heaf said the progress was “real and quantifiable,” but not yet broad or consistent enough to change the overall trajectory of the business. In body care, Bath & Body Works introduced Fruit Fusion, a hydration-focused franchise featuring dermatologist-approved formulas and more functional packaging. The launch exceeded the company’s sales expectations, achieved a higher average unit retail than its core fragrant body-care assortment and saw several forms sell out, Heaf said. The company partnered with Hilary Duff as an ambassador and creative partner for Fruit Fusion, supported by a creator-led campaign. Heaf said the campaign generated about 615 million impressions and added more than 50,000 social-media followers. Bath & Body Works plans to add fragrances to Fruit Fusion in September and introduce form extensions in 2027. The retailer also plans to expand its Everyday Luxuries franchise in the second half with higher fragrance loads, an eau de parfum offering and five new fragrances. It will update its A Thousand Wishes franchise with enhanced fragrance performance, new packaging and a new flanker called A Thousand Wishes Granted. Bath & Body Works said it will exit its home-care category, including laundry and kitchen products. The category represents less than 1% of annual sales but adds disproportionate product and operating complexity, according to Heaf. Expanded distribution was another area of growth. Amazon sales more than tripled from the first quarter, and Heaf said Bath & Body Works is now among the larger candle brands on the platform. The company offers roughly 10% of its assortment through Amazon, while its owned channels retain the broader seasonal and collaborative assortment. The company also launched in about 600 Ulta Beauty stores during the quarter. Heaf said the early response has been encouraging, particularly for trial-size and gifting products. He said the company had not observed cannibalization of its own stores or website from expanded distribution but would continue monitoring the issue. Bath & Body Works completed a merchandising reset across its store fleet, introducing clearer signage and layouts organized by fragrance, form and franchise. Heaf said consumer feedback was positive and store conversion had improved, though traffic remained pressured. The company plans to test additional lease-line marketing, events and other traffic-driving initiatives in hundreds of stores before scaling successful efforts more broadly. During the quarter, the company opened 24 North American stores, primarily in off-mall locations, and closed 10, primarily in malls. It ended the period with 1,937 North American company-owned stores, about 60% of which were off-mall, plus 596 international locations. International partners opened 17 stores, while Brazil opened in July. Bath & Body Works narrowed its full-year sales outlook to a decline of 2.5% to 4%, raising the low end of its previous range. It increased full-year adjusted EPS guidance to $2.60 to $2.80. For the third quarter, the company forecast sales to decline 2.5% to 5% and adjusted EPS of $0.07 to $0.12. Javitch said the outlook assumes the current consumer and macroeconomic environment continues and does not anticipate the company becoming more promotional to drive sales. The company expects approximately $30 million in forward tariff pressure and input-cost inflation in the second half, partly offsetting the second-quarter tariff refund. It also plans to invest about $35 million more in the Consumer First Formula, primarily in marketing, with roughly 70% of that incremental spending directed to the third quarter ahead of the holiday season. Bath & Body Works expects to generate about $200 million in 2026 savings through its Fuel for Growth program, exceeding its prior $175 million target. It lowered expected capital expenditures to approximately $240 million and raised projected free cash flow to about $650 million. The company also redeemed $250 million of its 2029 notes on Aug. 19, which Javitch said would reduce interest expense. Bath & Body Works, Inc is a leading specialty retailer focused on personal care, home fragrance and complementary products. Through its flagship Bath & Body Works brand, the company offers a diverse assortment of shower gels, lotions, fragrance mists, candles and home fragrance items. Its product portfolio also includes the White Barn Candle Co range of premium scented candles and diffusers. Bath & Body Works serves consumers through a combination of brick-and-mortar stores and e-commerce platforms, delivering seasonal collections, limited-edition releases and signature scent lines. Founded in 1990 as part of Limited Brands (now L Brands), Bath & Body Works opened its first store in New Albany, Ohio, and quickly expanded across the United States. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Bath & Body Works Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management attributes the Q2 sales beat to tangible progress in the 'Consumer First Formula,' specifically citing a return to digital growth and accelerated expanded distribution through Amazon and Ulta. The company is shifting from seasonal collections to enduring franchises, exemplified by the Fruit Fusion launch which exceeded expectations and achieved higher average unit retail (AUR) than core assortments. Strategic portfolio discipline led to the decision to exit the Home Care category (laundry and kitchen), as it represents less than 1% of sales and creates disproportionate operational complexity. Digital performance improved 4 percentage points sequentially, driven by enhanced storytelling, personalization, and a lower free shipping threshold of $50. Management noted that while underlying business remains pressured by store traffic, the brand is gaining cultural relevance through its first major celebrity partnership and expanded creator network. The company intentionally entered the June semiannual sale with lower clearance inventory to protect brand health, which created a one-point headwind to Q2 sales but improved overall inventory quality. Full-year guidance was narrowed by raising the low end, assuming current macro pressures persist while allowing the agile model to chase potential upside. Management reaffirmed 2026 as an investment year, with a strategic 'North Star' goal of returning to sustainable revenue growth in 2027. The company plans to reinvest $35 million of tariff refund benefits into marketing during the second half, with 70% allocated to Q3 to build momentum for the holiday season. Future innovation will focus on 'Everyday Luxuries' and modernizing icons like 'A Thousand Wishes' to recruit new consumers while maintaining core customer loyalty. Guidance assumes a flat promotional environment in the second half, as management believes the business cannot be 'promoted back to health' and must rely on product and brand strength. Q2 results included an $80 million benefit from tariff refunds, which significantly boosted adjusted earnings per share and merchandise margin. Management is monitoring potential retaliatory tariffs in Canada, where approximately 3% of cost of goods is produced, and has factored $30 million of forward pressure into guidance. The 'Fuel for Growth' program is expected to exceed targets by $25 million, totaling $200 million in savings to fund transformation initiatives. The company executed an early partial redemption of $250 million in 2029 bonds to reduce interest expense and optimize the balance sheet. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management expressed confidence in digital growth sustainability due to improvements in new and reactivated customer metrics, not just the shipping threshold change. To address store traffic, the company will test 'lease line disruption' and eventing in hundreds of doors before potential fleet-wide rollouts. Data to date shows no observed cannibalization of owned stores or websites; Amazon is viewed as a convenience play while Ulta serves trial and discovery. Amazon sales more than tripled sequentially, attracting younger and more affluent consumers with higher AUR than owned channels. The decline in store sales was partially due to a deliberate reduction in distressed inventory, as the company aims to buy seasonal business more accurately. Management clarified that while promotions remain a key excitement driver, they will not use incremental discounting to force top-line growth.

Bath & Body Works (BBWI) came out with quarterly earnings of $0.62 per share, beating the Zacks Consensus Estimate of $0.24 per share. This compares to earnings of $0.37 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +158.33%. A quarter ago, it was expected that this owner of Victoria's Secret, Bath & Body Works and other chain stores would post earnings of $0.29 per share when it actually produced earnings of $0.32, delivering a surprise of +10.34%. Over the last four quarters, the company has surpassed consensus EPS estimates three times. Bath & Body Works, which belongs to the Zacks Retail - Miscellaneous industry, posted revenues of $1.51 billion for the quarter ended July 2026, surpassing the Zacks Consensus Estimate by 1.03%. This compares to year-ago revenues of $1.55 billion. The company has topped consensus revenue estimates three times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Bath & Body Works shares have lost about 12.5% since the beginning of the year versus the S&P 500's gain of 12.2%. While Bath & Body Works has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Bath & Body Works was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.27 on $1.56 billion in revenues for the coming quarter and $2.63 on $7.11 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Retail - Miscellaneous is currently in the bottom 31% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Ulta Beauty (ULTA), another stock in the same industry, has yet to report results for the quarter ended July 2026. The results are expected to be released on August 27. This beauty products retailer is expected to post quarterly earnings of $6.20 per share in its upcoming report, which represents a year-over-year change of +7.3%. The consensus EPS estimate for the quarter has been revised 0.8% lower over the last 30 days to the current level. Ulta Beauty's revenues are expected to be $2.97 billion, up 6.5% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bath & Body Works, Inc. (BBWI) : Free Stock Analysis Report Ulta Beauty Inc. (ULTA) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

For the quarter ended July 2026, Bath & Body Works (BBWI) reported revenue of $1.51 billion, down 2.3% over the same period last year. EPS came in at $0.62, compared to $0.37 in the year-ago quarter. The reported revenue represents a surprise of +1.03% over the Zacks Consensus Estimate of $1.5 billion. With the consensus EPS estimate being $0.24, the EPS surprise was +158.33%. While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine their next move, some key metrics always offer a more accurate picture of a company's financial health. Since these metrics play a crucial role in driving the top- and bottom-line numbers, comparing them with the year-ago numbers and what analysts estimated about them helps investors better project a stock's price performance. Here is how Bath & Body Works performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: Total Company-Operated Stores - Total Bath & Body Works - Total - Stores (EOP): 1,937 compared to the 1,928 average estimate based on five analysts. Company-operated U.S. Store Data - Total Selling Square Feet: 5.52 million versus the four-analyst average estimate of 5.5 million. Total Company-Operated Stores - Total Bath & Body Works - Canada - Stores (EOP): 114 versus the three-analyst average estimate of 113. Total Company-Operated Stores - Total Bath & Body Works - United States - Stores (EOP): 1,823 versus the three-analyst average estimate of 1,815. Company-operated U.S. Store Data - Average Store Size (selling square feet): 2.85 million versus the two-analyst average estimate of 2.85 million. Total Partner-Operated Stores - Total International - International - Stores (EOP): 559 versus the two-analyst average estimate of 555. Total Partner-Operated Stores - Total International - Total - Stores (EOP): 596 versus 592 estimated by two analysts on average. Total Partner-Operated Stores - Total International - International - Travel Retail - Stores (EOP): 37 compared to the 37 average estimate based on two analysts. Geographic Net Sales- Stores - U.S. and Canada: $1.13 billion versus $1.15 billion estimated by four analysts on average. Compared to the year-ago quarter, this number represents a -5.4% change. Geographic Net Sales- International and Other: $108 million versus $89.54 million estimated by four analysts on average. Compared to the year-ago quarter, this number represents a +25.6% change. Geographic Net Sales- Direct - U.S. and Canada: $275 million compared to the $258.91 million average estimate based on four analysts. The reported number represents a change of +3% year over year. View all Key Company Metrics for Bath & Body Works here>>> Shares of Bath & Body Works have returned -14.2% over the past month versus the Zacks S&P 500 composite's +3.7% change. The stock currently has a Zacks Rank #3 (Hold), indicating that it could perform in line with the broader market in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bath & Body Works, Inc. (BBWI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research