Bath Body Works 2026 Q2 Earnings Misses Expectations as Net Income Drops 57.9%

Bath & Body Works reported its fiscal 2026 Q2 earnings on Aug 28th, 2025, showing a modest revenue increase but a significant drop in net income. The company’s results were at the high end of guidance, prompting a raised low end of its full-year adjusted EPS expectations. However, earnings per share fell sharply, missing expectations and raising concerns over the effectiveness of its earnings-based investment strategy.

Revenue
Bath & Body Works generated $1.55 billion in revenue during the second quarter of 2026, a 1.5% increase compared to $1.53 billion in the same period in 2025. This growth reflects a solid performance at the high end of the company's guidance range. U.S. and Canada company-operated stores contributed $1.196 billion, showing a 4.9% increase, while international operations brought in $86 million, a modest decline of 2.9%. Direct-to-consumer sales from the U.S. and Canada, however, declined by 10.1% to $267 million. The overall revenue performance highlights the company's strong in-store presence but points to ongoing challenges in its digital and international channels.

Earnings/Net Income
The company's earnings per diluted share fell 54.4% to $0.31 in 2026 Q2 from $0.68 in the prior year period, marking a significant decline in profitability. Net income also dropped to $64 million, a 57.9% decrease from $152 million in the previous year. This performance reflects a broader operational slowdown, with operating income falling to $157 million compared to $183 million in 2025 Q2. Adjusted earnings per diluted share were $0.37, matching the prior year’s figure. The drop in earnings, despite modest revenue growth, indicates a need for the company to address cost structures and operational efficiency.

Price Action
The stock price of Bath & Body Works edged up 0.14% during the latest trading day, but it fell 0.20% over the most recent full trading week and dropped 5.11% month-to-date. These mixed short-term results reflect investor uncertainty and a cautious market response to the earnings report.

Post-Earnings Price Action Review
The strategy of buying BBWI when earnings beat and holding for 30 days delivered moderate returns but underperformed the benchmark. The 30-day holding period limited the potential for further gains, with the strategy returning 60.65% versus the benchmark's 75.45%. The Sharpe ratio of 0.22 and maximum drawdown of 0% suggest the strategy managed risk effectively, yet its CAGR of 10.27% lags behind the benchmark's 14.80%. These figures indicate that while the strategy is relatively safe, it may not be optimal for long-term growth.

CEO Commentary
Daniel Heaf, CEO of Bath & Body Works, emphasized the company's strong Q2 results, with revenue and adjusted earnings at the high end of guidance. He highlighted strategic priorities including digital transformation, product efficacy messaging, and alternative distribution, such as college bookstores. Heaf acknowledged challenges in acquiring new customers and engaging younger demographics. Despite these hurdles, he expressed optimism about ongoing changes and the company's potential to return to durable revenue and profitable growth.

Guidance
Bath & Body Works raised its full-year 2025 adjusted EPS guidance to $3.35–$3.60 from $3.25–$3.60, while narrowing revenue growth expectations to 1.5%–2.7%. For Q3, the company forecasts net sales growth of 1%–3%, a gross profit margin of approximately 42.2%, and adjusted EPS of $0.37–$0.45. The company also expects $85 million in annual gross profit impact from tariffs, with $40 million anticipated in Q3. Capital expenditures are expected to remain between $250–$270 million, and share repurchases have increased to $400 million.

Additional News
In the weeks leading up to the earnings report, Bath & Body Works announced a $400 million increase in its share repurchase program, signaling confidence in its long-term value. The company also outlined plans for $250–$270 million in capital expenditures for 2025, primarily to support digital transformation and store modernization. Additionally, the CEO announced a strategic focus on expanding distribution channels, including college bookstores and e-commerce platforms. These moves aim to meet consumers where they shop and improve customer engagement.