Bath & Body Works Q1 Earnings Call Highlights

Key Points

• Bath & Body Works beat first-quarter expectations, with net sales down 3% and adjusted EPS of $0.32, but management said the business is still under pressure and remains in a multi-year turnaround led by its Consumer First Formula strategy.
• Body care was the biggest weakness, falling in the mid-teens due to changes in the Everyday Luxuries assortment, though the company says restocking those fragrances has already improved results and second-quarter body care should be meaningfully better.
• The company highlighted early signs from product innovation and channel expansion, including stronger soap launches, successful collaborations, Amazon growth, and store/website upgrades aimed at improving conversion and brand relevance.

Bath & Body Works NYSE: BBWI reported first-quarter fiscal 2026 results that topped its internal expectations, but management said the company’s underlying business remains under pressure as it works through a multi-year turnaround plan.

Chief Executive Officer Daniel Heaf said net sales declined 3% in the quarter and adjusted earnings per share were $0.32, both ahead of expectations. However, he said the results “remain below the standard we expect of our brand” and reinforced the need for the company’s Consumer First Formula strategy, which is aimed at returning Bath & Body Works to sustainable, consistent growth.

“The work has moved from strategy to execution and from execution to early evidence,” Heaf said. He added that while there is “significant work ahead,” early proof points support the company’s confidence in its transformation plan.

Sales Decline Led by Body Care Weakness

Chief Financial Officer Eva Boratto said first-quarter net sales were $1.4 billion, down 3.2% from the prior year and ahead of the company’s guidance range. U.S. and Canadian store sales were $1.1 billion, down 4.3%, while direct channel sales were $246 million, down 1.5%. International and other net sales rose 9% to $70 million.

Body care was the weakest category, declining in the mid-teens and performing below both the overall business and company expectations. Boratto said the decline was largely driven by changes to the Everyday Luxuries assortment and a mix shift toward accessories in the Disney Princess Collection collaboration.

Heaf said the company “pulled back too substantially” on Everyday Luxuries but has already taken action. As of May, Bath & Body Works was back in stock with 10 Everyday Luxuries fragrances, including top sellers from last spring, in fine fragrance mist and body cream. He said the company is seeing improved results and expects second-quarter body care performance to be “meaningfully better.”

Home fragrance declined in the low single digits. Candles performed slightly above the overall business, helped by strategic pricing and strength in the White Barn Neutrals line, partially offset by softness in Wallflowers. Soaps and sanitizers grew in the low single digits, supported by sanitizers and new moisturizing and revitalizing soap formulas.

Innovation and Brand Strategy Show Early Signs

Management highlighted new hand soap formulas as an example of the company’s product strategy. Heaf said the products combined fragrance, clearer consumer benefits, upgraded packaging, focused marketing and better in-store and online presentation. Average unit retail and SKU productivity for the new soap formulas were both up double digits.

The company also pointed to collaborations as part of its effort to build relevance. Heaf said the Disney Princess Collection resonated with existing customers, particularly in accessories, while a limited Peeps collaboration quickly sold out and supported an Easter assortment that was up 9% from last year. A Vera Bradley collaboration supported Mother’s Day, which Boratto said performed well across the first and second quarters.

Heaf said the company plans additional product upgrades in the second half, including flat-back hand sanitizers, a pump on moisturizing body wash, higher fragrance loads and more modern packaging. He said those launches will be supported by bolder marketing, stronger social engagement and, in some cases, talent partnerships.

Bath & Body Works is also working to modernize its brand presentation. Heaf said the company expanded its creator network by hundreds of influencers during the Vera Bradley launch and Mother’s Day event. He also said White Barn Neutrals grew approximately 20% in the first quarter and attracted a younger consumer.

Marketplace Expansion Includes Amazon and Store Updates

The company said its global store base of approximately 2,500 locations remains a competitive advantage. About 60% of its North American fleet is now in off-mall locations. During the first quarter, Bath & Body Works opened 13 new North American stores, all off-mall, and closed 17 stores, primarily in malls. International partners opened eight stores and closed two, ending the quarter with 579 international locations.

Beginning in July, the company plans to roll out updates across its store fleet, including clearer signage and layouts organized by fragrance, form and franchise. Heaf said consumer research showed stores can feel overwhelming, and the changes are intended to improve navigation and conversion.

The company also plans to relaunch its website later this year with a mobile-first experience, stronger storytelling and a faster checkout path. Heaf said Bath & Body Works has seen approximately a 10% improvement in conversion among new digital consumers, though he said the experience is not yet where the company wants it to be.

Bath & Body Works launched on Amazon in February. Heaf said the business is seeing strong double-digit week-over-week growth, in line with expectations, and is attracting a higher mix of new-to-brand consumers who skew younger and more affluent. He said Amazon currently carries about 94 unique SKUs, or roughly 7% of the active in-store assortment, and is intended to be a “controlled, curated complement” to the company’s own channels.

Margins, Guidance and Capital Allocation

Adjusted gross margin was 42.7%, down 270 basis points from last year and slightly above expectations. Boratto said adjusted merchandise margin declined 210 basis points, primarily due to tariffs, inflation and crude oil impacts totaling about 130 basis points, along with category mix. Adjusted operating income was $151 million, or 11% of net sales.

Inventory ended the quarter down 10% from the prior year. Boratto said the company is confident in its inventory levels entering the second quarter.

Bath & Body Works reaffirmed its full-year fiscal 2026 guidance, calling for net sales to decline 4.5% to 2.5% and adjusted earnings per share of $2.40 to $2.65. The outlook does not include share repurchases or any benefit from potential tariff refunds. Boratto said the guidance assumes energy prices remain elevated and that tariffs and inflationary pressures are roughly neutral year over year.

For the second quarter, the company expects net sales to decline 5% to 3% and adjusted earnings per share of $0.20 to $0.25. International net sales are expected to decline in the low to mid-single digits, mainly due to lower shipped product sales to Middle East partners related to ongoing conflict, while international retail sales are expected to grow in the low double digits.

The company still expects approximately $270 million in capital expenditures in 2026 and approximately $600 million of free cash flow, including a $66 million after-tax benefit from an interchange fee litigation settlement recognized in the first quarter. It returned $40 million to shareholders through dividends in the quarter and redeemed $284 million of January 2027 notes.

CFO Transition Underway

Heaf also thanked Boratto for her contributions and said the company has begun a comprehensive search for its next chief financial officer. Tom Javitch, who has more than 16 years at Bath & Body Works and 25 years with L Brands, including as executive vice president of brand finance, will serve as interim CFO effective upon Boratto’s departure.

Heaf said the CFO transition does not change the company’s confidence in its full-year guidance, citing detailed operating plans, an experienced finance team and disciplined controls. Boratto emphasized the strength of the finance team and said she is confident they will continue supporting the Consumer First Formula strategy.

About Bath & Body Works NYSE: BBWI

Bath & Body Works, Inc is a leading specialty retailer focused on personal care, home fragrance and complementary products. Through its flagship Bath & Body Works brand, the company offers a diverse assortment of shower gels, lotions, fragrance mists, candles and home fragrance items. Its product portfolio also includes the White Barn Candle Co range of premium scented candles and diffusers. Bath & Body Works serves consumers through a combination of brick-and-mortar stores and e-commerce platforms, delivering seasonal collections, limited-edition releases and signature scent lines.

Founded in 1990 as part of Limited Brands (now L Brands), Bath & Body Works opened its first store in New Albany, Ohio, and quickly expanded across the United States.

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