Bath Body Works 2026 Q3 Earnings Misses Targets with Net Income Down 27.4%

Bath & Body Works reported third-quarter fiscal 2026 earnings that fell short of expectations, with revenue declining 1.0% to $1.59 billion and net income dropping 27.4% to $77 million. The company revised full-year guidance to a low single-digit sales decline, reflecting ongoing challenges and a strategic reset to reignite growth.

Revenue

The company’s total revenue for 2026 Q3 decreased by 1.0% to $1.59 billion, compared to $1.61 billion in the same period of 2025. This decline underscores persistent headwinds in core markets, with same-store sales and promotional strategies under scrutiny.

Earnings/Net Income

Bath & Body Works’s earnings per share (EPS) fell 22.4% to $0.38 in 2026 Q3, down from $0.49 in 2025 Q3. Net income also declined to $77 million, reflecting a 27.4% year-over-year drop. The earnings performance highlights the company’s struggle to maintain profitability amid shifting consumer demand and competitive pressures.

Price Action

The stock price of Bath & Body Works has experienced a sharp decline in recent months. Over the latest trading day, shares fell 0.25%, while the full trading week saw a 28.06% drop and a 40.01% decline month-to-date. Analysts attribute the volatility to the earnings miss and revised guidance, which signal prolonged challenges in restoring investor confidence.

Post-Earnings Price Action Review

Following the earnings report, Bath & Body Works’ stock faced immediate selling pressure, with shares plummeting 28.06% in the week and 40.01% month-to-date. The decline accelerated as analysts and investors digested the company’s weak performance and revised guidance. Despite CEO Daniel Heaf’s emphasis on strategic resets, the market remains skeptical, with Morgan Stanley downgrading the stock and reducing its price target to $18.00. The stock’s steep drop reflects broader concerns about the company’s ability to execute its transformation plan and attract younger consumers in a competitive retail landscape.

CEO Commentary

Daniel Heaf, CEO & Director, acknowledged the Q3 results fell short of expectations, citing underinvestment in core categories, overreliance on promotions, and operational inefficiencies. He outlined a strategic reset focused on four pillars: disruptive product innovation in body care and home fragrance, brand reignition through targeted marketing, marketplace expansion (including Amazon), and operational efficiency. Heaf emphasized 2026 as a year of foundational investments to attract younger consumers and reignite growth, expressing confidence in the brand’s long-term potential despite near-term challenges.

Guidance

Bath & Body Works revised its full-year 2026 net sales guidance to a low single-digit decline, down from prior expectations of 1.5%-2.7% growth. Adjusted EPS guidance was reduced to at least $2.87 from $3.35–$3.60. For Q4, the company expects revenue to fall in the high single digits year-over-year, with EPS of at least $1.70. Capital expenditures are targeted at $240 million, with free cash flow projected at ~$650 million.

Additional News

Morgan Stanley downgraded Bath & Body Works to Equalweight from Overweight, slashing its price target to $18.00 from $43.00, citing elongated growth challenges and unsustainable promotional strategies. The CEO announced a “Consumer First Formula” strategy to attract younger demographics, emphasizing product innovation and operational efficiency. Meanwhile, the company’s stock hit a five-year low, with shares trading below $20 for the first time since 2020 amid macroeconomic headwinds and revised earnings guidance.

The earnings report and strategic shift have sparked mixed reactions. While management remains optimistic about long-term growth, investors and analysts are cautious, with Morgan Stanley’s downgrade underscoring skepticism about the company’s ability to execute its plans effectively. The stock’s steep decline reflects these concerns, as the market weighs the risks of prolonged underperformance against the potential for a turnaround.