Bath & Body Works Inc. reported adjusted earnings per share of $0.62 for the second quarter, exceeding the Wall Street consensus of $0.24 by $0.38, or 158%. Revenue held steady at $1.5 billion, matching analyst expectations, though net sales declined 2.3% year-over-year—a smaller drop than the 3% to 5% decline management had previously guided.
The company attributed its earnings beat in part to approximately $80 million in tariff refunds, which lifted profitability. Excluding these refunds, adjusted EPS stood at $0.31. Gross profit rose to 45.7% of sales, including the tariff benefit, while the adjusted selling, general and administrative expense rate was 30.8%. Adjusted operating income totaled $225 million, or 14.8% of sales, with inventory down 10% from a year earlier.
Sales performance varied by channel. U.S. and Canadian store sales fell 5.4% to $1.1 billion, while direct channel sales grew 3% to $275 million. International retail sales increased 9%, aided by the July launch of operations in Brazil. The company also noted that its Amazon channel net sales more than tripled compared with the first quarter, positioning it among the platform’s top candle brands.
Management raised its full-year adjusted EPS guidance to a range of $2.60 to $2.80 from $2.10 to $2.35 and narrowed its net sales decline outlook to 4% to 2.5% from a previous range of 5% to 2.5%. Free cash flow is now expected to reach about $650 million, up from a prior estimate of $600 million, while capital spending is projected at roughly $240 million. The company also raised its 2026 fuel-for-growth savings target to approximately $200 million, exceeding the prior goal of $175 million by $25 million.
For the third quarter, Bath & Body Works guided to a net sales decline of 5% to 2.5% and adjusted EPS of $0.07 to $0.12. Gross profit is expected to be about 40% of sales, with the adjusted SGA rate around 34.8%. Despite the earnings beat, shares slipped 0.85% to $17.43, extending a seven-day decline of nearly 10%. The stock remains 11% above its 52-week low but 46% below its peak, while offering a dividend yield of 4.55% following 54 consecutive years of payouts.
CEO Daniel Heaf highlighted the quarter’s outperformance but acknowledged ongoing pressures in the underlying business. He emphasized the company’s strategic focus on growth in 2027, while interim CFO Tom Javitch noted that margin expansion should align with positive sales growth in line with market conditions.
