Bath & Body Works, Inc.

What they do

Bath & Body Works sells body care products (fine fragrance mist, body cream, lotion, eau de parfum, body wash, hand soap, sanitizer) and home fragrance items, notably 3-wick candles. Products are sold through company-operated stores, e-commerce sites in the U.S., Canada and 34 other countries, as well as via Amazon and international franchise/license partners. The company is predominantly an off-mall retailer, with 60% of its North American fleet in off-mall locations as of January 31, 2026.

Revenue drivers

• North American retail stores — 1,927 company-operated stores in the U.S. and Canada generate the majority of net sales; sales declined $52 million in Q1 2026 due to lower transactions, partially offset by higher average dollar sales.
• Direct-to-consumer e-commerce — E-commerce sites in the U.S., Canada and 34 other countries, plus Amazon, provide an additional sales channel; International and Other net sales increased $6 million in Q1 2026.
• International and other — 573 international stores and 34 e-commerce sites in more than 45 countries, operated with franchise/license partners, contribute to net sales; this segment grew in Q1 2026.

Recent performance

Fiscal 2025 revenue was $7.29 billion, down from $7.31 billion in 2024, with net income of $649 million ($3.11 diluted EPS) versus $798 million ($3.61 EPS) in 2024. In Q1 2026, net sales fell 3.2% year-over-year to $1,378 million, but operating income rose 10.4% to $231 million, including an $88 million pre-tax gain from payment card interchange fee litigation. Adjusted EPS for Q1 2026 was $0.32, excluding the litigation gain, transformation costs, debt extinguishment loss, a non-core asset sale gain, and a tax benefit. Operating cash flow for fiscal 2025 was $1.10 billion, and the company ended Q1 2026 with $820 million in cash and $3.61 billion in long-term debt.

Strategy

The company launched the 'Consumer First Formula' in Q3 2025, a multi-year transformation focusing on four areas: creating disruptive/innovative products, reigniting the brand through marketing, winning in the marketplace via enhanced digital and in-store experiences, and operating with speed/efficiency. Management is investing to attract younger consumers and expects to expand off-mall store presence toward a 75% target mix. Leadership changes include a new CEO and an interim CFO appointment.

Risks

• Economic sensitivity — High inflation, tariffs, and consumer uncertainty have reduced discretionary spending, leading to lower sales and promotional pressure, which has negatively affected margins.
• Seasonal concentration — A significant portion of operating income and cash flows is realized in the fourth quarter holiday season, making results vulnerable to any sales or margin decline during that period.
• Transformation execution — The Consumer First Formula may require significant investment, could be dilutive to earnings in the short term, and success is not guaranteed.
• Leadership and labor — High retail turnover and potential shortages of qualified associates, plus leadership transitions (including the CFO departure), could disrupt operations.

Outlook

Management reaffirmed fiscal 2026 guidance of net sales declining 4.5% to 2.5% versus 2025, with GAAP EPS of $3.00-$3.25 and adjusted EPS of $2.40-$2.65. They forecast Q2 2026 net sales down 5% to 3% year-over-year, with EPS of $0.20-$0.25. The company expects free cash flow of approximately $600 million in 2026 and does not assume share repurchases or tariff refunds in its outlook.