Q2 2026 Bath & Body Works, Inc. Earnings Call Transcript
Key Points
- Second-quarter net sales declined 2.3%, beating the guidance range of down 5% to down 3%, and adjusted EPS of $0.62 exceeded the $0.20-$0.25 guidance.
- Digital channel returned to growth, with a 3% increase in direct sales and a 4-point sequential improvement from Q1, driven by improved conversion and customer engagement.
- Expanded distribution channels showed strong momentum, with Amazon net sales more than tripling sequentially and Ulta Beauty launching in approximately 600 stores.
- New product innovation, such as the Fruit Fusion launch, exceeded sales expectations and achieved higher AUR, demonstrating the effectiveness of the Consumer First Formula.
- The company raised its full-year adjusted EPS guidance to $2.60-$2.80 and increased free cash flow expectations to approximately $650 million, reflecting improved profitability and disciplined cost management.
- International retail sales grew 9% year-over-year despite Middle East conflict, and the company exited home care to focus on higher-growth categories.
- Net sales still declined 2.3% year-over-year, and the company expects continued pressure with full-year sales guidance of down 4% to down 2.5%.
- Body Care category remains below expectations, with finance declining mid-single digits despite sequential improvement.
- Store traffic remains pressured, with U.S. and Canadian store sales down 5.4% in the quarter, and the company does not expect macro conditions to improve.
- The company faces forward tariff pressure and input cost inflation of approximately $30 million, plus incremental investments of $35 million, which will weigh on margins.
- Third-quarter guidance is weak, with adjusted EPS forecast of only $0.07-$0.12, reflecting continued sales deleverage and increased marketing investments.
- The exit from home care and lower clearance inventory levels created a 1-point headwind to second-quarter sales, and the company is not planning to become more promotional to drive growth.
Good morning. My name is Melissa, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Bath & Body Works second-quarter 2026 earnings conference call. Please be advised that today's conference is being recorded. (Operator Instructions)
I'll now turn the call over to Luke Long, Vice President of Investor Relations. Luke, you may begin.
Good morning, and welcome to Bath & Body Works' second-quarter 2026 earnings conference call. Joining me on the call today are Daniel Heaf, Chief Executive Officer; and Tom Javitch, Interim Chief Financial Officer.
In addition to this call and this morning's press release, we have posted a slide presentation on our website that summarizes the information in these prepared remarks and provides some related facts and figures regarding our operating performance and guidance.
As a reminder, some of the comments today may include forward-looking statements related to future
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