A month has gone by since the last earnings report for Bath & Body Works (BBWI Quick QuoteBBWI - Free Report) . Shares have lost about 9.9% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Bath & Body Works due for a breakout? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Bath & Body Works, Inc. before we dive into how investors and analysts have reacted as of late.

BBWI Q2 Earnings Beat, Fiscal 2026 Outlook Raised

Bath & Body Works posted second-quarter fiscal 2026 adjusted earnings of 62 cents per share, up 67.6% year over year. The metric beat the Zacks Consensus Estimate of 24 cents per share. Net sales fell 2.3% year over year to $1,514 million but topped the consensus mark of $1,499 million.

About $80 million in tariff refunds boosted results, while the underlying business improved sequentially. Direct sales returned to growth for the first time since 2021, product innovation gained traction and expanded distribution advanced, offering early proof points from the Consumer First Formula. Sales per average selling square foot fell 6.8% to $206. The company also raised its fiscal 2026 outlook.

BBWI’s Quarterly Performance: Key Metrics & Insights

Net sales for Stores - United States and Canada declined 5.4% year over year to $1.13 billion, which missed the Zacks Consensus Estimate of $1.15 billion. Lower clearance inventory entering the June semiannual sale created about one point of sales pressure across categories, while store traffic remained pressured.

Direct - United States and Canada sales increased 3% to $275 million, which beat the Zacks Consensus Estimate of $258.9 million and was supported by improved digital conversion.

International and Other sales jumped 24.9% to $108 million, topping the consensus estimate of $89.5 million and aided by expanded domestic wholesale distribution and higher international product sales.

Within North America, Body Care declined in the mid-single digits, Home Fragrance fell in the low-single digits and Soaps & Sanitizers were flat. Fruit Fusion and Everyday Luxuries supported sequential improvement in Body Care.

Sneak Peek Into Bath & Body Works’ Margins

Gross profit increased 8.1% year over year to $692 million, while the gross margin expanded 440 basis points to 45.7%. About $80 million of tariff refunds contributed roughly 530 basis points to merchandise margin. Excluding the benefit, gross margin would have been 40.4%, down 90 basis points. Adjusted earnings excluding the refund would have been 31 cents per share, above the high end of management’s prior guidance.

Adjusted selling, general and administrative (SG&A) expenses were flat at $467 million, while the rate increased 60 basis points to 30.8%. Adjusted operating income rose 30.4% to $225 million, with the adjusted operating margin expanding 370 basis points to 14.8%. Mix-adjusted average unit retail was flat.

Bath & Body Works’ Store Update

Bath & Body Works ended the fiscal second quarter with 1,937 company-operated North American stores. During the quarter, it opened 24 stores, primarily off-mall and closed 10, primarily in malls. Company-operated selling square footage reached 5.521 million square feet.

International partners operated 596 locations at quarter-end after opening 17 stores during the period. Amazon net sales more than tripled sequentially from the fiscal first quarter, while the company launched at roughly 600 Ulta Beauty stores. Management completed a merchandising reset across its full store fleet.

BBWI’s Financial Health Snapshot

The company ended the quarter with cash and cash equivalents of $794 million, up from $364 million a year earlier. Inventories declined 9.6% year over year to $883 million, while long-term debt fell to $3.37 billion from $3.89 billion.

Year-to-date operating cash flow increased to $316 million from $145 million. Capital expenditures totaled $98 million in the first half. Bath & Body Works paid $40 million in dividends during the quarter and redeemed $250 million of its 2029 notes on Aug. 19.

BBWI’s Q3 Guidance

For the third quarter of fiscal 2026, Bath & Body Works expects net sales to decline 5-2.5% from $1,594 million in the year-ago quarter. Adjusted earnings are projected at 7-12 cents per share compared with adjusted earnings of 35 cents a year ago. Earnings per share is expected to be in the range of 5 cents to 10 cents compared with 37 cents reported in the year-ago period.

The company expects a gross profit rate of about 40% and the SG&A rate of about 34.8%. Roughly 70% of the approximately $35 million incremental Consumer First Formula investment is planned for the fiscal third quarter, primarily for marketing ahead of the holiday season.

Bath & Body Works Raises FY’26 Outlook

Bath & Body Works narrowed its fiscal 2026 net sales guidance to a decline of 4-2.5% from $7,291 million in fiscal 2025 compared with the prior range of down 4.5-2.5%. Adjusted earnings guidance was raised to $2.60-$2.80 per share from $2.40-$2.65 compared with $3.21 in fiscal 2025. The company has raised its fiscal 2026 earnings per share guidance to $3.13-$3.33 compared with $3.11 in fiscal 2025.

The adjusted gross profit rate is expected to be about 43.3%, while the adjusted SG&A rate is forecasted at roughly 29.6%. Fuel for Growth savings are projected at about $200 million, above the prior $175 million target. Free cash flow is expected at approximately $650 million, up from $600 million, while capital expenditure guidance was reduced to about $240 million from $270 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -58.65% due to these changes.

VGM Scores

At this time, Bath & Body Works has a great Growth Score of A, a score with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Bath & Body Works has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Bath & Body Works belongs to the Zacks Retail - Miscellaneous industry. Another stock from the same industry, Dick's Sporting Goods (DKS Quick QuoteDKS - Free Report) , has gained 1.1% over the past month. More than a month has passed since the company reported results for the quarter ended July 2026.

Dick's reported revenues of $5.59 billion in the last reported quarter, representing a year-over-year change of +53.2%. EPS of $3.53 for the same period compares with $4.38 a year ago.

For the current quarter, Dick's is expected to post earnings of $1.39 per share, indicating a change of -32.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -43.3% over the last 30 days.

Dick's has a Zacks Rank #5 (Strong Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.