Bath & Body Works, Inc.

First quarter net sales were $1.4 billion, down 3.2% year over year and ahead of guidance. Adjusted EPS was $0.32, also ahead of expectations. Adjusted gross profit rate was 42.7%, down 270 basis points, and adjusted operating income was $151 million, or 11% of net sales. Adjusted SG&A rate was 31.7%, up 100 basis points year over year. For the full year 2026, the company reaffirmed net sales guidance of down 4.5% to down 2.5% and adjusted EPS guidance of $2.40 to $2.65. For Q2, it expects net sales down 5% to down 3% and adjusted EPS of $0.20 to $0.25, with gross profit rate around 40% and SG&A rate around 31.8%.

Daniel Heaf framed the quarter as consistent with the early phase of a multiyear transformation, saying the company is moving from strategy to execution and beginning to see early proof points. He emphasized investment in innovation, brand rebuilding, marketplace execution and store/digital improvements, but also said the underlying business remains pressured and the company is not calling an inflection yet. His tone was confident but measured, with repeated comments that progress should become more visible in the back half of 2026 and into 2027.

Eva Boratto said Q1 adjusted gross profit rate was 42.7%, down 270 basis points, with merchandise margin down 210 basis points mainly from tariffs, inflation, crude oil and category mix. She noted adjusted SG&A dollars were flat and the rate was 31.7%, helped by incremental cost savings and timing, while adjusted operating income was $151 million and adjusted EPS was $0.32. On cash allocation, she said Q1 capex was $49 million, dividends returned $40 million, and the company redeemed $284 million of January 2027 notes; for 2026, capex is expected to be about $270 million and free cash flow about $600 million, including a $66 million after-tax litigation benefit. She also said guidance does not include share repurchases, tariff refunds, or a benefit from potential tariff refunds, and assumes elevated energy prices and roughly neutral tariff/inflation pressure year over year.

Analysts focused on body care weakness, Amazon, tariffs, promotional strategy, and whether sales inflection has been pushed into 2027. Management said body care underperformed because of Disney assortment mix and an overly reduced everyday luxury assortment, but that inventory has been restored with 10 fragrances and Q2 should be meaningfully better. On Amazon, management said the channel is growing week over week, bringing in younger and more affluent new-to-brand consumers, and is a controlled complement rather than a replacement for owned channels. On tariffs and promotions, the company said its full-year guide assumes tariffs and inflation are roughly neutral year over year, while promotions will stay broadly similar to last year rather than being sharply reduced.