Key Takeaways:

• Bath & Body Works lifts full-year earnings outlook despite tariff pressures.
• Digital sales slump, prompting major app and mobile relaunch plans.
• Loyalty, Disney collaboration, and seasonal launches drive customer engagement.

Bath & Body Works (BBW) closed Q2 with results at the high end of expectations, reflecting resilient performance across seasonal collections and loyalty-driven sales, even as challenges in digital and bodycare weighed on momentum.

Q2 Snapshot

• Net sales $1.55 billion, up 1.5% year over year (YoY).
• Adjusted EPS $0.37, missing Wall Street prediction of $0.38.
• Gross profit rate 41.3%, up 30 basis points. 
• Operating income $172 million, down 6% YoY.
• Inventory up 13% YoY.
• International exposure remained modest, around 10% from China, and 7% from Canada and Mexico combined. 

The brand ended the quarter with 20 new store openings and 16 closures in North America, alongside 14 international openings that brought its global footprint to 537 stores.

Despite softer digital sales and tariff-related pressures, BBW raised its full-year adjusted EPS outlook to $3.35-$3.60 and narrowed revenue growth guidance to 1.5%-2.7%. The company also boosted its share repurchase program to $400 million and reaffirmed capital expenditure plans of $250-$270 million.

Growth Drivers and Headwinds

Seasonal collections, including summer and Halloween assortments, helped boost sales, as did the brand's recently announced multiyear partnership with Disney, which builds on the success of past collections. BBW loyalty program now counts 39 million active members, up 5% YoY, fuelling repeat purchases and consumer engagement.

At the same time, the company acknowledged ongoing challenges:

• Direct net sales fell 10% YoY.
• Category sales for Bodycare declined by low single digits, with an underwhelming performance during Mother's Day.
• Tariffs are anticipated to impact gross profit by $85 million for the year.
• Adjusted SG&A expenses delivered 110 basis points. 

“I’ve been at Bath & Body Works for just over 100 days and see even more opportunities to accelerate growth than I initially thought,” said CEO Daniel Heaf on the earnings call. “We’re making progress on elevating our digital platform, amplifying product efficacy, and expanding distribution.”

The company is set to launch a new mobile app in September and a reimagined mobile web experience in October as part of a broader effort to strengthen its digital engagement and attract younger consumers.

Heaf also pointed to new distribution experiments such as partnerships with college bookstores as part of a strategy to be “in the path of the consumer.”

BBW also plans to shift from a heavy reliance on promotions to a focus on storytelling and brand experiences. For the Disney Villains launch this fall, the company invested in upgraded photography, copy, and in-store storytelling, including window takeovers designed to deliver “bigger, bolder stories.”

Looking Ahead

While Q2 presented challenges in new customer acquisition and digital sales, BBW continues to position itself for mid-to-high-single-digit growth in the longer term. With robust loyalty engagement, innovation-driven launches, and new channel expansion, the company is betting on a more digitally fluent, emotionally resonant brand strategy to drive relevance with both core and emerging consumers.