Personal care and home fragrance retailer Bath & Body Works (NYSE: BBWI) reported Q4 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 2.3% year on year to $2.72 billion. Guidance for next quarter’s revenue was better than expected at $1.35 billion at the midpoint, 0.6% above analysts’ estimates. Its GAAP profit of $1.99 per share was 14.2% above analysts’ consensus estimates.
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Bath and Body Works (BBWI) Q4 CY2025 Highlights:
- Revenue: $2.72 billion vs analyst estimates of $2.61 billion (2.3% year-on-year decline, 4.3% beat)
- EPS (GAAP): $1.99 vs analyst estimates of $1.74 (14.2% beat)
- Adjusted EBITDA: $668 million vs analyst estimates of $607.9 million (24.5% margin, 9.9% beat)
- Revenue Guidance for Q1 CY2026 is $1.35 billion at the midpoint, roughly in line with what analysts were expecting
- EPS (GAAP) guidance for the upcoming financial year 2026 is $3.13 at the midpoint, beating analyst estimates by 20.4%
- Operating Margin: 22%, down from 24.3% in the same quarter last year
- Free Cash Flow Margin: 29.9%, down from 32.1% in the same quarter last year
- Locations: 2,500 at quarter end, up from 2,424 in the same quarter last year
- Market Capitalization: $4.59 billion
Daniel Heaf, chief executive officer of Bath & Body Works, commented, “Our fourth quarter results exceeded the guidance we provided. Since launching the Consumer First Formula in the third quarter, we have moved with urgency to accelerate innovation in our hero categories, refresh and modernize our brand, expand distribution, and simplify our operating model. The earlier-than-planned launch on Amazon and the rollout of our new brand identity are clear examples of our team’s focused execution.”
Company Overview
Spun off from L Brands in 2020, Bath & Body Works (NYSE: BBWI) is a personal care and home fragrance retailer where consumers can find specialty shower gels, scented candles for the home, and lotions.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
With $7.29 billion in revenue over the past 12 months, Bath and Body Works is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.
As you can see below, Bath and Body Works’s demand was weak over the last three years. Its sales fell by 1.2% annually despite opening new stores. This implies its underperformance was driven by lower sales at existing, established locations.
This quarter, Bath and Body Works’s revenue fell by 2.3% year on year to $2.72 billion but beat Wall Street’s estimates by 4.3%. Company management is currently guiding for a 5% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to decline by 3.9% over the next 12 months, a slight deceleration versus the last three years. This projection is underwhelming and indicates its products will face some demand challenges.
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Store Performance
Number of Stores
The number of stores a retailer operates is a critical driver of how quickly company-level sales can grow.
Bath and Body Works sported 2,500 locations in the latest quarter. Over the last two years, it has opened new stores quickly, averaging 3.7% annual growth. This was faster than the broader consumer retail sector.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Same-Store Sales
The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales gives us insight into this topic because it measures organic growth for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year.
Bath and Body Works’s demand has been shrinking over the last two years as its same-store sales have averaged 1.6% annual declines. This performance is concerning - it shows Bath and Body Works artificially boosts its revenue by building new stores. We’d like to see a company’s same-store sales rise before it takes on the costly, capital-intensive endeavor of expanding its store base.
Note that Bath and Body Works reports its same-store sales intermittently, so some data points are missing in the chart below.
Key Takeaways from Bath and Body Works’s Q4 Results
We were impressed by Bath and Body Works’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this quarter featured some important positives. The stock traded up 2.5% to $23 immediately following the results.
Sure, Bath and Body Works had a solid quarter, but if we look at the bigger picture, is this stock a buy? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).
