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    BBWI
    Earnings call· Jan 2026(Q4 FY26)

    Bath & Body Works Q4 FY26 earnings call BBWI

    Mar 4, 2026 Source

    Executive summary

    Bath & Body Works Q4 FY26 — Consumer First Formula Drives Sequential Improvement

    Bath & Body Works is executing its "Consumer First Formula" to return to sustainable growth, with Q4 FY26 results showing sequential improvement despite macroeconomic pressures. The company is focused on product innovation, brand reignition, and marketplace expansion, including a successful Amazon launch, while managing costs through its "Fuel for Growth" program. The full financial impact is expected to build throughout 2026 and accelerate into 2027, positioning the company as a premier global brand.

    Highlights

    5

    • Net sales down 2% and adjusted EPS of $2.05, both ahead of expectations.

    • International net sales up 8.6% YoY, with system-wide retail sales growing 13%.

    • Inventory down 5% YoY, with clean levels heading into spring.

    • Successful launch of new moisturizing hand soap with strong consumer reviews and sell-through.

    • Amazon launch provides access to a broad customer base and elevates brand presentation.

    Concerns

    5

    • Net sales down 2.3% YoY and adjusted EPS down 2% YoY, indicating performance below company standards.

    • Body care declined mid-single digits due to underperformance in seasonal collections and predictable offerings.

    • Gross profit rate declined 100 bps YoY, primarily due to tariff impacts.

    • Adjusted SG&A rate increased 90 bps YoY, reflecting softer sales and investments.

    • 2026 expected to be an investment year with net sales projected to be down 4.5% to down 2.5%.

    Guidance & targets

    12
    CategoryTargetConfidence
    Full-year 2026 Net Sales
    down 4.5% to down 2.5%
    high materiality
    High
    Full-year 2026 Gross Profit Rate
    approximately 42.4%
    high materiality
    High
    Full-year 2026 Adjusted SG&A Rate
    approximately 29.2%
    medium materiality
    High
    Full-year 2026 Adjusted Earnings Per Diluted Share
    $2.40 to $2.65
    high materiality
    High
    Q1 2026 Net Sales
    down 6% to down 4%
    high materiality
    High
    Q1 2026 Gross Profit Rate
    approximately 42.5%
    medium materiality
    High
    Q1 2026 Adjusted SG&A Rate
    approximately 32.3%
    medium materiality
    High
    Q1 2026 Adjusted Earnings Per Diluted Share
    $0.24 to $0.30
    high materiality
    High
    Full-year 2026 Capital Expenditures
    approximately $270 million
    medium materiality
    High
    Full-year 2026 Free Cash Flow
    approximately $600 million
    high materiality
    High
    Annual Dividend
    $0.80 per share
    medium materiality
    High
    Gross Leverage Target
    2.5x
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    US and Canadian Stores
    Decrease to the prior year.
    		$2.1 billion-2.6%——
    Direct Channel
    Decrease to the prior year. When adjusted for buy online, pick up in store, digital outperformed stores.
    		$579 million-2.5%——
    International
    All geographies delivering growth and partners maintain healthy inventory positions. Approaching $1 billion in retail sales (system-wide).
    System-wide retail sales growth: 13%
    		$91 million8.6%——

    Operational metrics

    32
    Adjusted Gross Profit Rate
    45.7%down 100 bps YoY
    Q4 FY25
    Mix-Adjusted Average Unit Retail
    declined low single digits
    Q4 FY25

    Reflecting our strategies during holiday.

    Adjusted SG&A Rate
    23.2%increased 90 bps YoY
    Q4 FY25
    Adjusted Operating Income
    $614 million
    Q4 FY25
    Adjusted Earnings Per Share
    $2.05declined 2% YoY
    Q4 FY25
    Inventory
    down 5%YoY
    Q4 FY25

    With clean inventory levels headed into spring.

    Real Estate Portfolio Off-Mall Locations
    60%
    Q4 FY25

    Of our fleet in off-mall locations.

    North American New Store Openings
    21
    Q4 FY25
    North American Store Closures
    28
    Q4 FY25
    North American Net New Stores
    32
    FY25
    International Partner Store Openings
    36
    Q4 FY25
    International Partner Store Closures
    7
    Q4 FY25
    International Net New Stores
    44
    FY25
    Total International Locations
    573
    FY25 end
    Net Sales
    $7.3 billionflat YoY
    FY25
    Adjusted Earnings Per Share
    $3.21down 2% YoY
    FY25
    Fuel for Growth Cost Savings Target
    $250 million
    2 years
    Capital Expenditures
    $237 million
    FY25
    Capital Returned to Shareholders (Dividends)
    $167 million
    FY25
    Share Repurchases
    $400 million
    FY25
    Square Footage Growth
    approximately 1%
    FY26

    Resulting from reduced new store openings.

    International Business Share of Total Net Sales
    5%
    Current
    Middle East Share of International Portfolio
    40%down from a couple of years ago
    Current
    Rewards Program Members
    over 40 million
    Current
    Rewards Program Transaction Penetration
    over 80%
    Current
    SKU Reduction
    10%
    Recent

    To simplify and modernize the in-store experience.

    Free Shipping Threshold
    $50from $100
    Recent

    Aligning more closely with specialty retail standards.

    B&O Leverage Point
    2% to 3%
    Ongoing
    SG&A Leverage Point
    2.5% to 3.5%
    Ongoing
    Content Creators Leverage Increase
    roughly tenfold increase
    Future

    To show up in social media in a way that is modern and relevant.

    Moisturizing Hand Soap Productivity
    doublevs. hand gel soap it replaces
    Early

    Early proof point of real tangible benefits when product resonates with consumer.

    Expanded Distribution Contribution to Growth
    $50 million
    FY26

    Industry KPIs

    8
    MetricValueDetails
    Sg a OPEX ratio23.2%%
    Store count growth32 net new stores (North America), 44 net new stores (International)stores
    Gross margin drivers45.7%%
    Net debt to adjusted EBITDA2.5xx
    Share buyback capital return$400 millionUSD
    Inventory position markdown riskdown 5%%
    Same sku like for like inflation—
    Distribution supply chain cost economics—

    Product announcements

    5
    ProductTypeDetails
    New Moisturizing Hand Soaplaunch
    Moisturizing Body Wash Restageroadmap
    New Flatback Spray Hand Sanitizerroadmap
    Disney Princesses Collaborationlaunch
    PEEPS Collectionlaunch

    Deals & partnerships

    1
    AmazonDistribution partnership for curated assortment of beauty products.

    Launched on February 20. Curated assortment of 50 SKUs designed to attract new shoppers and provide convenient access for loyal consumers. Wholesale model.

    Risks & headwinds

    7
    Significant macroeconomic pressure impacting consumer demandQ4 FY25, continuing into FY26

    Contributed to a soft start in early November for Q4 FY25.

    Mitigation: Targeted promotional and operational adjustments (e.g., new Black Friday weekend event).

    Body care declined mid-single digits due to underperformance in seasonal collections (notably holiday traditions) and offerings becoming too predictable.Q4 FY25, ongoing

    Mid-single digit decline in Q4 FY25.

    Mitigation: Refocusing on consumer-right product innovation, elevating the brand, and disruptive, modern benefit-led innovation.

    Tariff impacts causing gross margin pressure.Q4 FY25, Q1 FY26, ongoing

    100 bps decline in Q4 FY25 gross profit rate primarily due to tariffs; approximately 150 bps headwind in Q1 FY26.

    Mitigation: Fuel for Growth initiatives partially offsetting, tariffs inclusive of product cost inflation assumed roughly neutral to earnings YoY for FY26.

    Softer sales and investments in technology/Consumer First Formula initiatives leading to SG&A rate increase and B&O deleverage.Q4 FY25, FY26

    SG&A rate increased 90 bps in Q4 FY25; B&O deleverage in Q4 FY25 and Q1 FY26; FY26 adjusted SG&A rate of approximately 29.2%.

    Mitigation: Fuel for Growth initiatives targeting $250 million in cost savings over 2 years ($175 million in 2026) to accelerate and fund strategic investments.

    Increasingly competitive landscape with other players leaning into content creators and elevated packaging.Ongoing

    Operating in innovative, youthful, fast-growing, high-margin categories that naturally attract strong interest and new entrants.

    Mitigation: Bold and disruptive product innovation, refreshed and reenergized brand, expanded distribution (Amazon), significant expansion of content creators (tenfold increase).

    Potential impact from current circumstances in the Middle East on international sales.Ongoing

    Middle East represents about 40% of the international portfolio (which is 5% of total net sales).

    Mitigation: Monitoring the situation, stores are open and functioning, strong diversified international portfolio, expanding markets.

    Past reliance on deeper and more frequent discounts to drive business, leading to brand erosion.Past, being addressed in FY26

    Promotional levels in Q4 FY25 were targeted; core business trending down about 3% when excluding promotional activity.

    Mitigation: Not building incremental promotional intensity into FY26 plan; expecting AUR improvements on innovative products in 2027 by getting paid for innovation.

    What to watch in Q1 FY27

    5

    New-to-brand customer growth

    As the year unfolds
    CurrentExpecting to see a trend break
    TargetAcceleration in new-to-brand customer growth

    Why it matters

    A key signpost for the success of the Consumer First Formula and attracting new, younger consumers.

    The most important signposts are very clear and measurable, and we expect to see an acceleration in new-to-brand customer growth.

    Q&A highlights

    7

    How is BBWI approaching the increasingly competitive landscape, especially with other players also using content creators and elevated packaging, and is BBWI positioned to compete effectively?

    Daniel acknowledged the competitive landscape but highlighted BBWI's strengths (scale, resources, 2,500 global stores, agile supply chain, value). He emphasized bold product innovation, a refreshed brand, and expanded distribution (Amazon). He noted a tenfold increase in leveraging content creators to become a "global brand" and operate with the agility of an insurgent brand.

    “what I love so much about this job and what I love so much about this company is where we sit. We're evolving so fast to adopt the playbooks used by these small insurgent competitive brands, but we do so from a position of strength and with what I believe are significant competitive advantages.”

    asked by Lorraine Maikis · answered by Daniel Heaf

    2 min read7 chapters

    Detailed Narrative

    01

    Consumer First Formula Progress

    The company is actively implementing its multi-year "Consumer First Formula" plan, focusing on execution with pace and discipline. This involves an enhanced go-to-market approach and collaboration across product, brand, and marketplace teams, with full financial impact expected to build through 2026 and accelerate into 2027.

    02

    Product Innovation and Evolution

    Strengthening hero categories and restarting the innovation engine is foundational. The 2026 product pipeline is grounded in consumer insights, with significant evolution expected in body care, home fragrance, and soap/sanitizer categories in H2 2026, including upgraded forms and vessels like a restaged moisturizing body wash and a new flatback spray hand sanitizer.

    03

    Brand Reignition and Modernization

    Bath & Body Works is modernizing its brand communication, shifting to more elevated storytelling and a consistent visual identity. This includes increased investment in upper-funnel media and higher-caliber influencers, aiming for a tenfold increase in content creator leverage to build a culturally relevant presence and attract new consumers.

    04

    Marketplace Expansion and Distribution

    The company is focused on meeting consumers across all channels. This includes simplifying the in-store experience by reducing SKUs by 10% and enhancing navigation. A major milestone was the February 20 launch on Amazon, designed to attract new and lapsed shoppers and expand distribution in strategic ways. International business is approaching $1 billion in retail sales, with partners accelerating new store openings in existing and new markets like Germany and Brazil.

    05

    Fuel for Growth Program

    The multi-year "Fuel for Growth" program targets $250 million in cost savings over two years, with approximately $175 million expected in 2026. These savings are earmarked to fund strategic investments in innovation, digital, and marketplace capabilities, demonstrating a commitment to efficiency while reinvesting for growth.

    06

    Q4 FY25 Performance and Challenges

    Q4 net sales were down 2.3% and adjusted EPS was $2.05, both ahead of expectations, reflecting improvement after a soft start due to macroeconomic pressures🌐. Body care declined mid-single digits, driven by underperformance in seasonal collections, while home fragrance and soaps/sanitizers saw low single-digit growth.

    07

    2026 as an Investment Year

    The company expects 2026 to be a year of disciplined investment, balancing cost control with targeted reinvestment. While not expecting growth in 2026, sequential improvement is anticipated as the Consumer First Formula initiatives ramp up, with the goal of returning to durable and profitable growth without relying on aggressive promotional strategies.

    AI-generated summary of the company’s earnings call. Not investment advice.