Bath and Body Works Reports 1.5% Q2 Gain

Key Points

• - Revenue reached $1,549 million for the quarter, and up 1.5% year over year.

• - Adjusted earnings per share matched last year at $0.37, reflecting flat adjusted profits despite higher sales.

• - Digital and international sales declined, while inventories increased and operating income fell 14% year over year (GAAP).

• These 10 stocks could mint the next wave of millionaires ›

Bath & Body Works (NYSE:BBWI), a leading specialty retailer of body care, fragrances, and home products, released its second quarter 2025 earnings on Aug. 28, 2025. The company reported GAAP revenue of $1,549 million, and up modestly from Q2 fiscal 2024 GAAP net sales of $1,526 million. Adjusted earnings per share stood at $0.37, flat compared to the same period last year. While core store sales performed well, digital (Direct) and international segments declined, adjusted operating income dropped to $172 million from $183 million last year, and inventory levels increased notably. The quarter reflected stable but cautious progress, with management raising the low end of full-year adjusted earnings per share guidance.

Business model and current strategic focus

Bath & Body Works operates as a specialty retailer with a strong presence in the body care, fragrance, home fragrance, and personal care accessories market. Its business is powered by an expansive store network in the United States and Canada, complemented by a growing digital platform and international franchise operations. The company designs and sells products including scented candles, body lotions, and soaps, targeting broad demographics through a combination of innovation and brand loyalty.

Recent priorities have centered on strengthening its innovation pipeline in fragrance and body care products, enhancing both physical and digital retail experiences, and expanding distribution channels. Key success factors include maintaining a beloved brand identity, rapid product innovation, effective supply chain management, and driving customer engagement through its loyalty program, which counts roughly 39 million active members. Discipline in cost management and capital allocation also remains crucial as the company balances growth investments with shareholder returns.

Quarter in review: Key developments and results

Bath & Body Works achieved GAAP revenue at the top of its projected range, supported by resilient performance in U.S. and Canada stores. Store sales in these regions rose 4.9% to $1,196 million, offsetting a 10.1% drop in Direct (digital) sales and a 2.9% decline in international revenues. The overall revenue uptick in GAAP net sales was achieved despite continued softness in online and international channels. The physical store portfolio grew with a net addition of 9 new U.S. stores from Feb. 1 to Aug. 2, 2025, bringing the total company-operated count in North America to 1,904 locations as of Aug. 2, 2025.

These results show that cost inflation, higher selling and administrative expenses, and leadership transition costs are weighing on results. Gross profit (GAAP) increased 2.2% year over year to $640 million. General, Administrative and Store Operating Expenses rose to $483 million from $443 million, an increase of about 9% (GAAP), which was faster than sales growth. Pre-tax costs of $15 million tied to leadership changes were called out as a one-time item.

The product mix in the period was less reliant on major innovation launches compared to previous quarters. Management maintained its commitment to amplifying product efficacy and stressed a need for further investment in digital experiences. The company highlighted three "no regret" moves: improving digital platforms, boosting product effectiveness, and broadening distribution to meet consumers wherever they are. With ongoing investment in technology and site improvements underway, direct sales fell to $267 million.

Inventory levels rose 13% year over year to $977 million, reflecting factors such as tariff-related costs and additional holiday inventory builds. Free cash flow guidance (non-GAAP) was reiterated at $750–$850 million. The company also increased its expected cash deployment for share repurchases from $300 million to $400 million, reflecting ongoing commitment to capital returns.

Bath & Body Works products span three main areas: body care (lotions, creams, and mists), home fragrance (candles and plug-in air fresheners), and soaps and sanitizers, while online and international product sales remained weak.

Looking ahead: Guidance and investor considerations

Management narrowed full-year net sales growth guidance to between 1.5% and 2.7%, paring the high end compared to its prior outlook. Adjusted earnings per share guidance was raised at the low end, now set at $3.35 to $3.60. This adjustment signals cautious optimism for the remainder of the year, but even at the high end, guidance stops short of surpassing last year’s reported earnings. Free cash flow targets (non-GAAP) remain unchanged at $750–$850 million.

The company anticipates net sales growth of 1% to 3% for Q3 fiscal 2025 and adjusted earnings per share between $0.37 and $0.45, down from $0.49 in the prior year period. Investors may want to monitor digital sales trends, inventory management effectiveness, and the impact of planned investments in digital upgrades. Cost pressures, particularly in store expenses and wages, will likely remain areas to watch. The company declared a $400 million target for share repurchases, a $100 million increase over its prior authorization.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,069%* — a market-crushing outperformance compared to 185% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

See the stocks »

*Stock Advisor returns as of August 25, 2025

Motley Fool Markets Team is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. The Motley Fool takes ultimate responsibility for the content of these articles. Motley Fool Markets Team cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.