Bath & Body Works (BBWI) investor relations material

Executive summary

• Q1 2026 net sales were $1.4 billion, down 3.2% year-over-year, but exceeded expectations and guidance.

• Adjusted EPS was $0.32, down 34.7% year-over-year, while reported EPS was $0.90 due to non-recurring items.

• Operating income rose to $231 million from $209 million, driven by an $88 million pre-tax litigation settlement gain; adjusted operating income was $151 million.

• Net income increased to $183 million from $105 million, reflecting one-time gains.

• Transformation initiatives, including the Consumer First Formula and brand modernization, are underway, with full-year 2026 guidance reaffirmed.

Financial highlights

• Adjusted gross profit rate was 42.7%, down 270 basis points year-over-year, with gross profit at $587 million.

• Adjusted operating income was $151 million, representing 11% of net sales.

• Adjusted net income was $65 million, with adjusted EPS of $0.32.

• Inventory ended the quarter down 10% versus prior year.

• Free cash flow for 2026 expected to be approximately $600 million, including a $66 million after-tax benefit from a litigation settlement.

Outlook and guidance

• Full-year 2026 net sales expected to decline 4.5% to 2.5%; adjusted EPS guidance is $2.40–$2.65.

• Q2 2026 net sales expected to decline 5% to 3% year-over-year; EPS guidance $0.20–$0.25.

• Guidance assumes elevated energy prices, macroeconomic uncertainty, and no benefit from potential tariff refunds.

• International net sales in Q2 expected to be down low to mid single digits due to Middle East conflict, but international retail sales to grow low double digits.

• Free cash flow for 2026 projected at ~$600 million.