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Bath & Body Works (BBWI) Q4 FY26 earnings call: guidance and Q&A

Earnings call· Jan 2026 (Q4 FY26)· Consumer Discretionary· Mar 4, 2026

Source: earnings call transcript

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

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

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%——

BBWI operating KPIs by quarter

BBWI operating KPIs stated on its earnings calls, by fiscal quarter
KPIThis call Jan 2026 Q4 FY26 Apr 2026 Q1 FY27 Jul 2026 Q2 FY27Change vs prior quarter
New stores opened North America
21 In the quarter, we opened 21 new North American stores, all off-mall and closed 28 stores, primarily in malls. Source: earnings call transcript
13 And in the quarter, we opened 13 new North American stores, all off-mall; and closed 17 stores, primarily in malls. Source: earnings call transcript
—-38.1%
Stores closed North America
28 In the quarter, we opened 21 new North American stores, all off-mall and closed 28 stores, primarily in malls. Source: earnings call transcript
17 And in the quarter, we opened 13 new North American stores, all off-mall; and closed 17 stores, primarily in malls. Source: earnings call transcript
—-39.3%
New stores opened International
36 International partners opened 36 stores and closed 7 stores in Q4 with 44 net new stores in the year. Source: earnings call transcript
8 International partners opened 8 stores and closed 2 stores in the first quarter. Source: earnings call transcript
17 International partners opened 17 stores. Source: earnings call transcript
+112.5%
Stores closed International
7 International partners opened 36 stores and closed 7 stores in Q4 with 44 net new stores in the year. Source: earnings call transcript
2 International partners opened 8 stores and closed 2 stores in the first quarter. Source: earnings call transcript
—-71.4%
Stores International
573 We ended the year with 573 international locations. Source: earnings call transcript
579 We ended the quarter with 579 international locations. Source: earnings call transcript
596 We ended the quarter with 1,937 North American company-owned stores with approximately 60% of our fleet in off-mall locations and 596 international locations. Source: earnings call transcript
+2.9%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

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

Deals & partnerships

Amazon Distribution 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

Significant macroeconomic pressure impacting consumer demand Q4 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

New-to-brand customer growth

As the year unfolds
Current Expecting to see a trend break
Target Acceleration 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.

Find out whether BBWI delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 7 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.