Bath & Body Works is heading into its second-quarter earnings report with sales momentum cooling, according to a new note from UBS. The investment bank expects the retailer to post mid-single-digit declines in US store sales for the quarter, even as it likely sticks to its longer-term profit forecast.
The company, known for its candles, soaps, and lotions, will report results before the market opens on August 26. UBS analysts believe earnings per share will come in roughly in line with expectations, but they see demand weakening as consumers pull back on discretionary spending.
What UBS is seeing
In a Tuesday note, UBS cited its consumer “evidence lab” and broader industry data to suggest that US store sales fell by mid-single digits in the second quarter. The bank also indicated that sales are down by double digits so far in the third quarter, pointing to continued pressure.
That softness is not unique to Bath & Body Works. Many retailers that sell non-essential goods have been grappling with cautious shoppers, who are prioritizing essentials and experiences over home fragrance and personal care items. The company’s products are often seen as affordable indulgences, but even those can be cut when budgets tighten.
Despite the sales slowdown, UBS expects Bath & Body Works to reaffirm its fiscal 2026 earnings per share guidance of $2.40 to $2.65. That suggests management sees the current weakness as manageable and believes cost controls or other measures can protect profitability.
Why the guidance matters
For investors, the key question is whether the company can hold its profit outlook even as sales slip. Reiterating guidance would signal that Bath & Body Works is confident in its ability to manage margins, possibly through tighter inventory management or promotional discipline.
However, if the company were to cut its outlook, that would be a red flag that the sales decline is deeper than expected. UBS’s view is that the guidance will hold, but the market will be watching closely for any change in tone.
The broader retail environment has been mixed. Some companies, like Home Depot, have managed to beat estimates thanks to resilient demand for home repair projects. Others, like Target, have raised their outlooks after price cuts and faster delivery boosted traffic. But those are often retailers with a stronger focus on necessities or value.
Bath & Body Works sits in a more discretionary category, which makes it more vulnerable to shifts in consumer confidence. The company has also faced competition from cheaper alternatives and a slowdown in the home goods boom that peaked during the pandemic.
What it means for investors
For everyday investors, the takeaway is that Bath & Body Works is likely to report a soft quarter, but the damage may be contained. If the company reiterates its fiscal 2026 EPS guidance, that could provide some reassurance that the business is not deteriorating rapidly.
Still, the double-digit decline in early Q3 sales is concerning. It suggests that the slowdown is not just a blip but a trend that could persist into the back half of the year. Investors should listen for any comments about how the company plans to revive sales, whether through new product launches, marketing, or store changes.
It’s also worth noting that Bath & Body Works has a loyal customer base and a strong brand, which has helped it weather downturns before. But in a tough consumer environment, even strong brands can see sales slip.
UBS’s note is just one analyst’s view, but it aligns with the broader picture of a cautious consumer. As other retailers report, we’re seeing a split between those selling essentials and those selling wants. Bath & Body Works falls into the latter camp, and that’s why its upcoming report will be closely watched.
For comparison, Walmart has seen its store sales growth cool but has leaned on its advertising business to keep profits up. Bath & Body Works doesn’t have that kind of high-margin side business, so it has to rely on its core retail operations.
Investors will also want to keep an eye on the company’s online sales, which have been a growth area in the past. If digital demand is holding up better than store traffic, that could offset some of the decline.
The bottom line
Bath & Body Works is likely to report a softer second quarter, with US store sales down mid-single digits. The company is expected to maintain its fiscal 2026 EPS guidance, but the early Q3 sales drop is a warning sign. The August 26 report will give investors a clearer picture of whether this is a temporary dip or a longer-term challenge.
As always, it’s important to remember that analyst estimates are just predictions. The actual results could differ. But for now, the mood around Bath & Body Works is cautious, and the market will be looking for signs that the company can turn things around.
