BBWI Q2 2026: EPS of $0.62 Beats $0.25 Estimate as Operating Income Jumps 37.6%

Bath & Body Works (NYSE: BBWI) reported second-quarter 2026 results for the period ended August 1, 2026, with adjusted EPS of $0.62 and GAAP EPS of $0.58, both exceeding the company's own guidance and handily topping the $0.25 consensus estimate. Net sales of $1.514 billion came in below the prior-year quarter's $1.549 billion, a 2.3% year-over-year decline, though bottom-line results improved substantially.

Q2 2026 Results

• Net sales: $1.514 billion, down 2.3% year-over-year from $1.549 billion in Q2 2025
• GAAP EPS: $0.58, up from $0.30 in Q2 2025; adjusted EPS: $0.62, up from $0.37 in Q2 2025
• GAAP operating income: $216 million, up 37.6% year-over-year; GAAP operating margin expanded 4.2 percentage points to 14.3%
• Direct (U.S. and Canada) net sales: $275 million, up 3.0% year-over-year, marking the first direct net sales growth since 2021
• International and Other net sales: $108 million, up 24.9% year-over-year; partner-operated international store count reached 596, up from 573 at fiscal year-start

What Drove the Results

Adjusted EPS of $0.62 beat the $0.25 consensus estimate by 148.0%. Cost of Goods Sold, Buying and Occupancy declined from $909 million to $822 million year-over-year, and General, Administrative and Store Operating Expenses fell from $483 million to $476 million, driving the operating margin improvement despite the top-line decline. Critically, results included approximately $80 million in tariff refunds received during the quarter; excluding that benefit, adjusted EPS would have been $0.31, roughly in line with the prior-year adjusted figure of $0.37.

GAAP net income of $118 million compared to $64 million a year ago, an 84.4% increase. The difference between GAAP and adjusted net income reflects $9 million in pre-tax business transformation costs ($7 million after tax), producing a $7 million gap between reported and adjusted figures for the quarter.

Year-to-date operating cash flow reached $316 million, up from $145 million in the same period last year. Capital expenditures for the first half totaled $98 million versus $93 million a year ago.

Guidance Raised

Bath & Body Works raised its full-year 2026 GAAP EPS guidance to a range of $3.13 to $3.33, up from the prior-year actual of $3.11, and its full-year adjusted EPS guidance to $2.60 to $2.80, compared to $3.21 in fiscal 2025. Full-year net sales guidance was narrowed to a decline of 4% to 2.5% versus $7.291 billion in fiscal 2025. The company projected full-year free cash flow of approximately $650 million, supported by forecasted capital expenditures of $240 million. No share repurchases are assumed in the outlook. For Q3 2026, the company guided to GAAP EPS of $0.05 to $0.10 and adjusted EPS of $0.07 to $0.12, compared to adjusted EPS of $0.35 in Q3 2025, with net sales expected to decline 5% to 2.5% versus $1.594 billion in the prior-year quarter.

Wall Street View

Several analyst firms trimmed their price targets following the results. Baird analyst Mark Altschwager maintained a Neutral rating and lowered his target from $25 to $23. Barclays analyst Adrienne Yih maintained an Equal-Weight rating and cut her target from $23 to $22. UBS analyst Jay Sole maintained a Neutral rating and reduced his target from $19 to $17. Wells Fargo analyst Ike Boruchow maintained an Overweight rating, lowering his target from $26 to $24. Shares fell 1.32% on Thursday, August 27, while the S&P 500 gained 0.66%.

Investor Takeaway

The Q2 beat is real but partially inflated: stripping out the $80 million in one-time tariff refunds brings adjusted EPS to $0.31, a figure that more accurately reflects the business's underlying trajectory amid continued store-level sales pressure. The Q3 guidance of $0.07 to $0.12 adjusted EPS versus $0.35 a year ago indicates a material step-down ahead, and the full-year free cash flow target of $650 million will be the key metric for investors assessing whether the company's cost discipline can offset ongoing top-line softness through fiscal year-end.