Bath & Body Works’ Q2 results were met with a significant negative market reaction, reflecting concern over margin compression and earnings shortfall despite revenue meeting Wall Street expectations. Management cited more value-driven, cautious consumer behavior as a key theme, noting that shoppers prioritized affordability and well-being, contributing to selective purchasing patterns. CEO Daniel Heaf described the company as well positioned but acknowledged that new customer growth and engagement with younger consumers fell short of aspirations. As Heaf stated, “We have not achieved the new customer growth we aspire to, and we are not connecting deeply enough with the younger consumers who are driving growth in our industry.”
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Bath and Body Works (BBWI) Q2 CY2025 Highlights:
- Revenue: $1.55 billion vs analyst estimates of $1.55 billion (1.5% year-on-year growth, in line)
- EPS (GAAP): $0.30 vs analyst expectations of $0.37 (19.3% miss)
- Adjusted EBITDA: $236 million vs analyst estimates of $245.8 million (15.2% margin, 4% miss)
- Revenue Guidance for Q3 CY2025 is $1.64 billion at the midpoint, roughly in line with what analysts were expecting
- EPS (GAAP) guidance for Q3 CY2025 is $0.41 at the midpoint, missing analyst estimates by 17.2%
- Operating Margin: 10.1%, down from 12% in the same quarter last year
- Locations: 2,441 at quarter end, up from 2,369 in the same quarter last year
- Same-Store Sales were flat year on year (-3.5% in the same quarter last year)
- Market Capitalization: $6.30 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Bath and Body Works’s Q2 Earnings Call
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Matthew Boss (JPMorgan) asked about the relative opportunities for growth identified since joining as CEO. CEO Daniel Heaf responded that the company sees even greater potential for accelerating growth than previously anticipated, with a focus on digital, merchandising, and brand storytelling.
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Lorraine Hutchinson (Bank of America) inquired about the shift in marketing strategy away from promotions. Heaf explained that marketing is being elevated through improved digital experiences and in-store storytelling, with initial consumer response described as positive.
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Alex Straton (Morgan Stanley) questioned whether management still targets mid- to high-single-digit growth long term. Heaf confirmed this goal, emphasizing digital expansion and new distribution initiatives as key building blocks.
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Emily Ghosh (Goldman Sachs) asked about the drivers behind SG&A expense increases. CFO Eva Boratto cited investments in new stores, technology, and higher health care costs, which are expected to persist in the near term.
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Ike Boruchow (Wells Fargo) pushed for more detail on digital business improvements. Heaf outlined a phased approach to digital upgrades, beginning with app and web relaunches, and stressed that digital is central to attracting new consumers.
Catalysts in Upcoming Quarters
Looking forward, our team will focus on (1) the pace and effectiveness of digital platform enhancements, (2) evidence of new customer acquisition—especially among younger demographics—through alternative channels like college bookstores and collaborations, and (3) management’s progress in mitigating tariff-related margin pressures. The trajectory of core product innovation and the impact of these initiatives on same-store sales trends will also be closely monitored.
Bath and Body Works currently trades at $30.80, down from $31.52 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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