Bath & Body Works Raises Full-Year Profit Outlook Despite Continued Sales Pressure

Bath & Body Works delivered better-than-expected second-quarter earnings Wednesday and increased its full-year profit forecast, even as declining store traffic continued to weigh on overall sales. Shares of BBWI initially traded lower as investors balanced improved profitability against a cautious near-term sales outlook.

The specialty retailer generated second-quarter net sales of approximately $1.51 billion, down 2.3% from the same period a year earlier. Despite the revenue decline, profitability improved substantially. Net income increased to $118 million from $64 million in the prior-year quarter, while diluted earnings reached 58 cents per share.

On an adjusted basis, earnings were 62 cents per share, considerably stronger than market expectations. The quarter included a meaningful benefit from tariff-related refunds. Excluding approximately $80 million associated with those refunds, adjusted earnings would have been about 31 cents per share.

The company's sales performance varied considerably by channel. Store sales declined approximately 5.4%, reflecting continued weakness in customer traffic at physical locations. Digital sales provided a brighter spot, increasing about 3%, while international sales climbed nearly 25%.

Management has been working to reposition the business and improve merchandise, marketing and the overall customer experience. Although the latest quarter provided evidence of progress in profitability, the continuing decline in store sales demonstrates that the turnaround remains a work in progress.

Bath & Body Works now expects full-year adjusted earnings of approximately $2.60 to $2.80 per share, up from its previous forecast of $2.40 to $2.65. The company also modestly improved its annual sales outlook, projecting a decline of approximately 2.5% to 4.5%.

The third-quarter forecast was less encouraging. Management expects sales for the period to decline between approximately 2.5% and 5%, while adjusted earnings are projected at only 7 to 12 cents per share. That outlook suggests weak traffic and other operating pressures will continue affecting results in the near term.

Investors will be watching closely to determine whether improving digital demand can compensate for weakness at physical stores. Online growth is particularly important because it could allow the company to maintain customer relationships while management works to improve the productivity and appeal of its store network.

International expansion represents another potential source of longer-term growth. The substantial increase in international sales during the quarter indicates that demand outside the company's core domestic market could become a more meaningful contributor if that momentum continues.

For investors in BBWI, Wednesday's report presents two competing narratives. Profitability is improving more rapidly than anticipated and management has raised its annual earnings forecast, but underlying sales remain under pressure and store traffic has yet to demonstrate a sustained recovery. The next several quarters should provide clearer evidence about whether the company's turnaround can ultimately restore consistent revenue growth.