COLUMBUS, Ohio, August 28, 2026, 15:07 EDT – Bath & Body Works (BBWI) shares climbed 3.6% as an $80 million tariff reimbursement offset sluggish sales.
- Shares of Bath & Body Works climbed 3.6% to $19.33 as of 14:48 EDT.
- A reported gross margin increase of approximately 530 basis points was driven by an $80 million tariff refund.
- Adjusted earnings per share reached $0.62, dropping to $0.31 excluding the impact of the refund benefit.
- Adjusted EPS guidance for the third quarter ranges from $0.07 to $0.12, coming in below the consensus estimate of $0.26.
Shares of Bath & Body Works climbed on Friday, as investors focused on the core earnings outperformance rather than the headline gains boosted by refunds. The adjusted figures were more modest but still topped forecasts, with bottom-line profit surpassing estimates even as revenue declined.
Bath & Body Works was last at $19.33 at 14:48 EDT, gaining 3.6%. That rise increased its market capitalization by approximately $136 million, using an outstanding share count near 202 million.
The retailer posted adjusted earnings of $0.62 per share for the second quarter, surpassing analyst forecasts of $0.24. However, half of this outcome was attributed to an $80 million tariff refund.
Excluding the refund, adjusted EPS was $0.31. This result surpassed the consensus by roughly 29%, and topped the company’s earlier guidance range of $0.20–$0.25.
| Q2 measure | Reported | Underlying or comparison | Read-through |
|---|---|---|---|
| Net sales | $1.514 billion | -2.3% year over year | Topped $1.50 billion consensus |
| Adjusted EPS | $0.62 | $0.31 excluding refund | Core beat persisted |
| Gross margin | 45.7% | 40.4% excluding refund | Roughly 90 basis points lower than prior year |
| Operating income | $216 million | $157 million last year | Increase mostly attributed to refund |
Sales fell 2.3% to $1.514 billion, down from $1.549 billion. Net income increased, reaching $118 million compared to $64 million a year earlier. Operating income climbed 38% to $216 million company results.
The refund represented 37% of reported operating income and contributed approximately 530 basis points to the gross margin. Without the refund, gross margin stood at 40.4%, down by around 90 basis points from the previous year.
The subdued valuation is reflected in the numbers. The stock trades at about 5.1 times trailing earnings and is still down nearly 40% from its 52-week high, even after Friday’s increase.
The company achieved real operational gains. Direct sales rose, marking the first increase since 2021. Revenue from international and other segments climbed 24.9%, supported by growth in wholesale distribution.
Chief Executive Daniel Heaf said the turnaround is still in its initial phase. Both store and overall mall traffic continue to fall. The retailer is increasing its presence on Amazon and Ulta Beauty to attract younger consumers Reuters.
The company raised its full-year adjusted EPS forecast to $2.60–$2.80, up from its previous range of $2.40–$2.65. The midpoint is now higher by 6.9%. Management is also projecting approximately $650 million in free cash flow.
The outlook for the next quarter is weaker. Management forecasts a 2.5%–5% decline in sales. Projected adjusted EPS of $0.07–$0.12 is sharply under the $0.26 expected by analysts.
Analysts remain cautious on the stock. Out of 18 surveyed, five recommend Buy, 12 suggest Hold, and one advises Sell. The consensus price target averages $24.33, indicating a potential 26% upside. However, some firms lowered their targets following the earnings release analyst consensus.
Key risks relate to traffic, promotional activity, and margin strength. A weaker holiday period may weigh on inventory levels and drive further discounting. The advantages from refunds are not expected to persist indefinitely.
Friday’s market surge indicates a limited assessment. The turnaround resulted in a core earnings outperformance but has not yet led to consistent sales growth.
Related articles: Earnings
