Bath & Body Works Earnings Beat, Outlook Raised
Bath & Body Works earnings topped estimates as tariff refunds boosted margins and digital sales offset weak stores, prompting investor repricing.
KEY TAKEAWAYS
- Tariff refunds contributed about $80 million and materially boosted adjusted EPS and gross margin.
- Digital and international sales grew while U.S. store sales declined, showing channel mix shift.
- Company raised FY adjusted EPS guidance but set a cautious Q3 outlook below Street consensus.
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Bath & Body Works, Inc. (BBWI) reported second-quarter earnings on Aug. 26, 2026, that exceeded expectations and raised its full-year profit guidance. The company cited stronger digital and international demand that offset weak store traffic and included a significant tariff refund, while issuing a cautious outlook for the third quarter.
Quarter Results and Nonrecurring Items
Bath & Body Works filed a Form 8-K on Aug. 26, 2026, attaching a press release with unaudited second-quarter results and updated guidance for the third quarter and full year. Net sales for the quarter ended Aug. 1, 2026, were $1.514 billion, down 2.3% year over year. Reported diluted earnings per share (EPS) was $0.58, and adjusted diluted EPS was $0.62, well above the Street consensus near $0.24–$0.25. The company said adjusted EPS excluding an $80 million tariff refund would have been $0.31.
The gross profit rate rose 440 basis points to 45.7%, boosted by tariff refunds that contributed roughly 530 basis points. Excluding the refunds, gross margin would have been about 40.4%. Operating income increased to $216 million from $157 million a year earlier. Adjusted operating income, excluding $9 million of pre-tax transformation costs, was $225 million. Reported net income was $118 million, up from $64 million, and adjusted net income rose to $125 million from $78 million.
Channels and Transformation Progress
Sales from stores in the U.S. and Canada declined 5.4% to $1.131 billion. Digital (Direct) net sales grew 3.0% to $275 million, marking the first annual gain since 2021. International and other sales rose 24.9% to $108 million. The company attributed growth to strong demand for body-care and home-fragrance products, especially online, and described the quarter as continued progress on its transformation, highlighting improvements to the digital experience.
Despite gains in digital and international channels, management noted that brick-and-mortar store traffic remained soft, a factor influencing the cautious near-term outlook.
Guidance and Near-Term Outlook
Bath & Body Works raised its full-year GAAP EPS guidance to $3.13 to $3.33 per diluted share and adjusted EPS guidance to $2.60 to $2.80, up from a prior range of $2.40 to $2.65. It narrowed net sales guidance to a decline of 4.0% to 2.5% compared with the prior year. For the third quarter, the company set adjusted EPS guidance of $0.07 to $0.12, below Street consensus near $0.24 to $0.26, and forecast a wider-than-expected sales decline due to ongoing store traffic pressures.
The guidance incorporates the tariff refunds recorded in the second quarter and ongoing transformation costs. Management expects innovation, cost savings, and digital investments to support earnings as sales shift toward digital and international channels. The tariff benefit and digital growth have improved near-term sentiment, even as the cautious third-quarter outlook reflects continuing challenges in core in-store momentum.
“Delivered growth in Direct net sales, supported by ongoing enhancements to the digital experience over the past year,” the company said in its press release.
