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    BBWI
    Earnings call· Apr 2026(Q1 FY27)

    Bath & Body Works Q1 FY27 earnings call BBWI

    May 27, 2026 Source

    Executive summary

    Bath & Body Works Q1 FY27 — Transformation Progress Amidst Continued Pressure

    Bath & Body Works is executing its multi-year consumer-first formula transformation, with Q1 FY27 results ahead of expectations but still reflecting underlying business pressures. Early proof points in product innovation and expanded distribution channels are emerging, reinforcing confidence in the strategy. The company is focused on rebuilding product superiority, modernizing the brand, and expanding marketplace access to drive sustainable, long-term growth.

    Highlights

    6

    • Net sales declined 3% and adjusted EPS was $0.32, both ahead of expectations.

    • AUR and SKU productivity for new moisturizing and revitalizing body care formulations were up double digits.

    • White Barn Neutral collection grew approximately 20% in Q2 versus last year and attracted a younger consumer.

    • Amazon business is seeing consistent double-digit week-over-week growth, attracting younger, more affluent consumers with higher AURs.

    • International retail sales were up double digits in the quarter, representing a compelling opportunity.

    • Inventory ended the quarter down 10% to prior year, indicating confidence in levels going into Q2.

    Concerns

    6

    • Net sales declined 3.2% versus last year, and adjusted EPS of $0.32 remains below the company's expected standard.

    • Underlying business trends remain pressured and largely consistent with the past several quarters.

    • Body Care declined mid-teens, below expectations, primarily due to everyday luxury assortment changes and a mix shift towards accessories in Disney Princesses 2 collaboration.

    • Adjusted gross profit rate was 42.7%, a decline of 270 basis points, driven by tariffs, inflation, crude oil impact (130 bps), and category mix.

    • Adjusted SG&A rate increased 100 basis points versus last year due to sales decline, investments, inflation, and merit impacts.

    • International net sales are expected to be down low- to mid-single digits in Q2, primarily related to a decline in shipped product sales to the Middle East partner due to ongoing conflict.

    Guidance & targets

    10
    CategoryTargetConfidence
    Full-year 2026 Net Sales
    down 4.5% to down 2.5%
    high materiality
    High
    Full-year 2026 Adjusted Earnings Per Share
    $2.40 to $2.65
    high materiality
    High
    Q2 Net Sales
    down 5% to down 3%
    medium materiality
    High
    Q2 International Net Sales
    down low- to mid-single digits
    medium materiality
    Medium
    Q2 International Retail Sales
    grow low double digits
    medium materiality
    High
    Q2 Gross Profit Rate
    approximately 40%
    medium materiality
    High
    Q2 SG&A Rate
    approximately 31.8%
    medium materiality
    High
    Q2 Adjusted Earnings Per Diluted Share
    $0.20 to $0.25
    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

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Body Care
    Underperformed the broader business and expectations, driven by everyday luxury assortment changes and a mix shift towards accessories in Disney Princesses 2 collaboration. Underlying trends remain pressured, but actions taken to refocus on core and align with consumer expectations.
    		—declined mid-teens——
    Home Fragrance
    Candles performed slightly above expectations, supported by strategic pricing and solid results in the neutrals line, partially offset by softness in Wallflowers.
    		—declined low single digits——
    Soaps and Sanitizers
    Continued strength in sanitizers and solid performance in soaps, driven by new moisturizing and revitalizing formulas.
    		—grew low single digits——
    U.S. and Canadian Stores
    Net sales decreased compared to the prior year. Off-mall locations performed better than mall stores.
    		$1.1 billiondecrease of 4.3%——
    Direct Channel
    Benefited from a reduction to the free ship threshold to $50. Normalized for this change, digital and stores performed comparably.
    		$246 milliondecrease of 1.5%——
    International and Other
    Inclusive of domestic third-party wholesale revenues. International net sales were up 5%, in line with expectations.
    		$70 millionup 9%——

    Operational metrics

    17
    Adjusted EPS
    $0.32
    Q1 FY27

    Ahead of expectations but below the standard expected of the brand.

    Adjusted Gross Profit Rate
    42.7%decline of 270 basis points
    Q1 FY27

    Slightly above expectations.

    Adjusted Merchandise Margin Rate
    declined 210 basis points
    Q1 FY27

    Primary driver of gross profit rate decline.

    Mix-Adjusted AUR
    flatversus prior year
    Q1 FY27

    Company aims to grow AUR with innovation.

    B&O Dollars
    flat
    Q1 FY27

    Deleveraged as a result of sales decline.

    Adjusted SG&A Dollars
    flat
    Q1 FY27

    Rate of 31.7% was better than expected due to incremental cost savings and timing.

    Adjusted Operating Income
    $151 million
    Q1 FY27

    Result of Q1 financial performance.

    Capital Expenditures
    $49 million
    Q1 FY27

    Part of strategic investments in the business.

    Interchange Fee Litigation Settlement Benefit
    $66 million
    Q1 FY27

    Recognized in Q1, included in free cash flow guidance.

    Notes Redeemed
    $284 million
    Q1 FY27

    Part of capital allocation strategy.

    Store Fleet Off-Mall Percentage
    60%
    Q1 FY27

    Approximately 60% of the fleet is in off-mall locations.

    International Locations
    579
    Q1 FY27 end

    Total international locations at the end of the quarter.

    Digital Conversion Improvement (New Consumers)
    approximately 10%
    Q1 FY27

    Early signs of progress in the digital business.

    White Barn Neutral Collection Growth
    approximately 20%versus last year
    Q2 FY26

    Attracted a younger consumer, building on evolved brand expression.

    Spring Collection Growth
    up 9%versus last year
    Spring 2026

    Easter assortment contributed to strong spring collection performance.

    Tariff Cost (FY25)
    $80 million
    FY25

    Approximate cost in fiscal 2025, current guidance assumes neutral year-over-year impact.

    Amazon Unique SKUs
    94
    Q1 FY27

    Limited scale of Amazon offering compared to owned channels.

    Industry KPIs

    5
    MetricValueDetails
    Sg a OPEX ratio31.7%%
    Store count growth13 new North American stores opened, 17 closed; 8 international stores opened, 2 closedstores
    Gross margin drivers42.7%%
    Share buyback capital return$40 millionUSD
    Inventory position markdown riskdown 10%%

    Product announcements

    5
    ProductTypeDetails
    New Moisturizing and Revitalizing Body Carelaunch
    Disney Princesses 2 Collaborationupdate
    Vera Bradley Collaborationupdate
    Hero Categories Upgradesroadmap
    Website Relaunchroadmap

    Risks & headwinds

    6
    Underlying business trends remain pressuredOngoing

    Net sales declined 3.2% YoY; adjusted EPS $0.32, below standard.

    Mitigation: Execution of multi-year consumer-first formula transformation, focusing on product, brand, and marketplace.

    Body Care underperformanceQ1 FY27, expected improvement in Q2

    Declined mid-teens in Q1.

    Mitigation: Restocked 10 everyday luxury fragrances; bold innovation planned for H2 FY27; refocusing on core and aligning product with evolving consumer expectations.

    Tariffs, inflation, and crude oil impact on merchandise marginOngoing for FY26

    Approximately 130 basis points impact on merchandise margin rate decline of 210 bps in Q1.

    Mitigation: Fuel for Growth initiatives, incremental cost reductions; guidance assumes roughly neutral year-over-year impact from tariffs and inflation, but elevated energy prices remain a headwind.

    Sales decline leading to SG&A deleverageOngoing

    Adjusted SG&A rate increased 100 bps YoY in Q1.

    Mitigation: Fuel for Growth savings partially offsetting investments and inflation.

    International net sales decline due to Middle East conflictQ2 FY27

    Expected down low- to mid-single digits in Q2.

    Mitigation: Focus on long-term asset-light franchise growth outside North America; international retail sales expected to grow low double digits.

    Consumer value-seeking behaviorOngoing

    Mix-adjusted AUR flat in Q1.

    Mitigation: Rebuilding consumer proposition through product superiority, clearer benefits, and compelling reasons to buy; focusing on innovation to drive AUR increases.

    What to watch in Q2 FY27

    5

    Body Care Performance

    Q2 FY27
    CurrentDeclined mid-teens in Q1
    TargetMeaningfully better in Q2

    Why it matters

    Body Care is a key category, and its underperformance was a significant drag on Q1 results. Recovery is crucial for overall sales improvement.

    we expect Q2 to be meaningfully better in body care.

    Q&A highlights

    10

    Body Care declined mid-teens in Q1, representing a significant drag. What actions have been taken to address this, and how is Body Care expected to trend going forward?

    Daniel Heaf explained the underperformance was due to planned accessory mix in Disney collaboration and pulling back too much on everyday luxury assortment. They quickly restocked 10 everyday luxury fragrances and expect Q2 to be meaningfully better. He reiterated the strategic focus on innovation in Body Care for the back half of the year, emphasizing the category's long-term potential.

    “As of this month, we are back in stock with 10 fragrances, including the top sellers from last spring in both Fine Fragrance Smith and Body And we are already seeing improved results, and we expect Q2 to be meaningfully better in body care.”

    asked by Irwin Boruchow · answered by Daniel Heaf

    2 min read5 chapters

    Detailed Narrative

    01

    Consumer-First Formula Progress

    The company's multi-year consumer-first formula strategy, introduced in November, aims to return Bath & Body Works to sustainable growth by focusing on product, brand, and marketplace. Q1 performance, while pressured, showed early evidence that the strategy is working, with impacts expected to build through the year and become more visible in financials by 2027. Management expressed increased conviction in the opportunity and a sharper understanding of the work required for transformation.

    02

    Product Innovation and Body Care Strategy

    Restarting the innovation engine in Hero categories is foundational. New moisturizing and revitalizing products launched in Q1 saw double-digit AUR and SKU productivity increases, demonstrating consumer response to stronger product offerings. Body Care underperformed mid-teens due to everyday luxury assortment changes and a mix shift to accessories. The company quickly restocked 10 everyday luxury fragrances and expects meaningful improvement in Q2, with bold innovation planned for the back half of the year.

    03

    Brand Modernization and Digital Acceleration

    Efforts to reignite the brand include sharpening positioning, elevating creative expression, and leveraging influencers to build relevance. The White Barn Neutral collection grew approximately 20% in Q2 and attracted younger consumers through this approach. The company is also strengthening its digital presence, with a mobile-first website relaunch planned for later this year, aiming for faster checkout and improved storytelling. Early signs show a 10% improvement in conversion among new digital consumers.

    04

    Marketplace Expansion and Store Experience

    Bath & Body Works is focused on meeting consumers across all channels. Its global fleet of approximately 2,500 stores remains a competitive advantage, with updates to store navigation rolling out in July to simplify the in-store experience. The Amazon business, launched in February, is seeing consistent double-digit week-over-week growth, attracting younger, more affluent consumers with higher AURs. International retail sales were up double digits, despite near-term pressure📎 in the Middle East, highlighting a long runway for asset-light franchise growth.

    05

    Operational Efficiency and Financial Discipline

    The multi-year Fuel for Growth program is simplifying the business and reallocating resources to innovation, brand relevance, and digital acceleration. This helps fund investments while maintaining a strong financial foundation. The company expects to invest $270 million in capital expenditures and generate $600 million in free cash flow in 2026. Eva Boratto's departure as CFO was announced, with an interim CFO appointed and a search underway for a successor to help execute the next phase of transformation.

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