Bath & Body Works, Inc.

Net sales were $1.5 billion, down 2.3% year over year. Adjusted EPS was $0.62, above guidance of $0.20 to $0.25; excluding about $80 million of tariff refunds, adjusted EPS would have been $0.31. Gross profit rate was 45.7%; excluding tariff refunds, gross profit rate would have been 40.4%, down 90 basis points year over year. Adjusted SG&A was $467 million, or 30.8% of sales, and adjusted operating income was $225 million, or 14.8% of sales. Full-year guidance was updated to net sales down 4% to down 2.5%, adjusted gross profit rate of about 43.3%, adjusted SG&A rate of about 29.6%, adjusted net nonoperating expense of about $217 million, adjusted tax rate of about 26.8%, weighted average diluted shares of about 203 million, and adjusted EPS of $2.60 to $2.80. Third-quarter guidance calls for net sales down 5% to down 2.5%, gross profit rate of about 40%, SG&A rate of about 34.8%, adjusted net nonoperating expense of about $54 million, adjusted tax rate of about 26%, and adjusted EPS of $0.07 to $0.12.

Daniel Heaf said the quarter provided more tangible evidence that the Consumer First Formula is starting to work, but stressed the company is still early in a multiyear transformation. He highlighted product innovation, brand reinvigoration, digital improvement, and expanded distribution as the key pillars, while saying store traffic remains pressured and the core business is not yet at an inflection point. His tone was confident but measured: he repeatedly said the company is where it expected to be, with 2026 still an investment year and 2027 as the goal for revenue growth.

Tom Javitch focused on the financial bridge and said Q2 beat expectations despite continued pressure in the underlying business. He noted the tariff refund benefit, the partial offset from roughly $30 million of forward tariff and input cost pressure, and about $35 million of incremental Consumer First Formula investment, mostly marketing, with about 70% of that spend in Q3. He also cited full-year Fuel for Growth savings of about $200 million, capex of about $240 million versus prior guidance, free cash flow of about $650 million, and the redemption of $250 million of 2029 notes, which lowers nonoperating expense. Inventory ended down 10% year over year, and he said the company remains a strong cash flow generator.

Analysts pressed on why Q3 sales guidance is not stronger given easier comparisons and improving strategy traction; management said store traffic is still pressured, body care remains below potential, and the company is not leaning on incremental promotions to drive growth. Questions also focused on the $80 million tariff refund and how much was being reinvested; management said the refund mostly offsets forward tariff/input pressure and funds about $35 million of added marketing. Analysts asked about Amazon, Ulta, and cannibalization, and management said no cannibalization has been observed so far, Amazon assortment is only about 10% of the brand, and Ulta is mainly for trial and discovery. Management also said digital growth looks sustainable, store remodels are helping, and the company is testing new lease-line and eventing ideas in hundreds of stores before scaling them.