Bath & Body Works, Inc. (BBWI) had a rough Thursday. The stock cratered after the company reported weak quarterly results and offered guidance that left investors reaching for the exit.
The home fragrance retailer is navigating a tricky period marked by sluggish holiday demand and some notable product whiffs, even as new management works to reset the brand's trajectory.
The company reported third-quarter adjusted earnings of 35 cents per share, falling short of Wall Street's 40-cent expectation. Not exactly the kind of miss that inspires confidence heading into the critical holiday shopping season.
What the Analyst Sees
Bank of America Securities analyst Lorraine Hutchinson isn't abandoning ship just yet. She maintained her Buy rating on Bath & Body Works, though she did trim her price target from $40 down to $32—acknowledging the reality on the ground.
Hutchinson's view is that Bath & Body Works faces real challenges between product misfires and broader economic headwinds, but the company is leaning into substantial strategic changes that could pay off.
The third quarter and holiday outlook disappointed, sure. But she believes the new leadership team is steering the ship in the right direction, and early signs of a turnaround should start appearing through 2026 as the brand reset takes hold.
Following the results, Bath & Body Works lowered its full-year outlook significantly. The company now expects low-single-digit sales declines and slashed its adjusted EPS guidance to at least $2.87—a notable drop from the earlier $3.35 to $3.60 range and well below the $3.44 consensus estimate.
Light at the End of the Tunnel?
Here's where Hutchinson gets optimistic: she thinks fourth-quarter performance will likely mark the bottom for sales trends. More importantly, she believes the worst of the tariff-related pressure has now passed.
As earnings recover over time, she expects the stock's valuation multiple to expand again. That's why she's sticking with her Buy rating despite the near-term disappointment and brutal stock performance.
What went wrong recently? Shoppers showed limited enthusiasm for the Disney Villains collection, and holiday demand got off to a slow start. Those headwinds were partially offset by lower store labor expenses and reduced incentive compensation, but not enough to salvage the quarter.
For the fourth quarter, management's sales and earnings guidance both came in below consensus. The outlook assumes continued holiday softness and further gross margin pressure from tariffs and promotional activity—basically, more of the same pain before things improve.
Hutchinson did raise her 2026 EPS estimate modestly, from $3.44 to $3.45, signaling confidence that the company can work through its current challenges.
Price Action: BBWI shares were trading lower by 25.50% to $15.68 at last check Thursday.
