BBWI's Q2 Net Income Plunges 58% Despite Modest Sales Growth

TL;DR

**BBWI's Q2 profit collapse is a red flag; sell before inventory bloat forces deeper discounts.**

AI Summary

Bath & Body Works, Inc. (BBWI) reported a mixed financial performance for the second quarter ended August 2, 2025. Net sales increased slightly to $1,549 million, up from $1,526 million in the prior-year quarter, representing a 1.5% increase. However, net income significantly declined to $64 million, a sharp 57.9% decrease from $152 million in the second quarter of 2024. This decline was primarily driven by a substantial increase in the provision for income taxes, which jumped from $1 million in Q2 2024 to $31 million in Q2 2025, and a decrease in Other Income, Net from $47 million to $6 million. Operating income also decreased by 14.2% to $157 million from $183 million. Year-to-date, net sales rose to $2,974 million from $2,910 million, a 2.2% increase, but net income fell by 29.3% to $169 million from $239 million. The company also saw a significant increase in inventories, rising to $977 million as of August 2, 2025, from $734 million at February 1, 2025, and $863 million at August 3, 2024, indicating potential inventory management challenges. Cash and cash equivalents decreased by $310 million year-to-date 2025, ending at $364 million.

Why It Matters

This filing reveals Bath & Body Works is struggling to translate modest sales growth into profit, a critical concern for investors. The significant drop in net income and operating income, coupled with rising inventory levels, suggests potential margin pressures and operational inefficiencies. For employees, this could signal a period of cost-cutting or slower growth. Customers might see less aggressive promotions if the company prioritizes profitability, but the inventory build-up could also lead to future discounts. In a competitive retail landscape, BBWI's inability to improve its bottom line while competitors like Ulta Beauty and Sephora continue to innovate could lead to market share erosion and investor skepticism.

Risk Assessment

Risk Level: high — The risk level is high due to the substantial 57.9% decrease in net income to $64 million in Q2 2025 compared to $152 million in Q2 2024, despite a 1.5% increase in net sales. Furthermore, inventories surged to $977 million as of August 2, 2025, from $734 million at February 1, 2025, representing a 33.1% increase year-to-date, which could lead to future write-downs or aggressive discounting, further impacting profitability.

Analyst Insight

Investors should consider reducing their exposure to BBWI given the significant profit decline and inventory build-up. Monitor future filings closely for signs of inventory reduction strategies and improved operating margins, as these are critical for a turnaround. Await clearer signs of sustainable profit growth before considering new positions.

Financial Highlights

debt To Equity

N/A

revenue

$1,549M

operating Margin

10.1%

total Assets

$4,814M

total Debt

$3,888M

net Income

$64M

eps

$0.30

gross Margin

41.3%

cash Position

$364M

revenue Growth

+1.5%

Revenue Breakdown

Key Numbers

• $1.549B — Net Sales (Up 1.5% from $1.526B in Q2 2024)
• $64M — Net Income (Down 57.9% from $152M in Q2 2024)
• $0.30 — Diluted EPS (Down from $0.68 in Q2 2024)
• $977M — Inventories (Up 33.1% from $734M at Feb 1, 2025)
• $31M — Provision for Income Taxes (Significantly up from $1M in Q2 2024)
• $157M — Operating Income (Down 14.2% from $183M in Q2 2024)
• $364M — Cash and Cash Equivalents (Down from $674M at Feb 1, 2025)
• $254M — Repurchases of Common Stock (Year-to-date 2025)

Key Players & Entities

• Bath & Body Works, Inc. (company) — global omnichannel retailer
• $1,549 million (dollar_amount) — Net Sales for Q2 2025
• $1,526 million (dollar_amount) — Net Sales for Q2 2024
• $64 million (dollar_amount) — Net Income for Q2 2025
• $152 million (dollar_amount) — Net Income for Q2 2024
• $977 million (dollar_amount) — Inventories as of August 2, 2025
• $734 million (dollar_amount) — Inventories as of February 1, 2025
• $31 million (dollar_amount) — Provision for Income Taxes in Q2 2025
• $1 million (dollar_amount) — Provision for Income Taxes in Q2 2024
• August 2, 2025 (date) — End of second fiscal quarter

FAQ

Risk Factors

• Inventory Build-up [high — financial]: Inventories increased significantly to $977 million as of August 2, 2025, up from $734 million at February 1, 2025, and $863 million at August 3, 2024. This represents a 33.1% increase from the start of the fiscal year and a 13.2% increase year-over-year, indicating potential challenges in inventory management and potential future markdowns.
• Declining Net Income and Profitability [high — financial]: Net income for Q2 2025 fell sharply by 57.9% to $64 million from $152 million in Q2 2024. This was exacerbated by a substantial increase in the provision for income taxes, from $1 million to $31 million, and a decrease in other income. Operating income also declined 14.2% to $157 million.
• Reduced Cash Position [medium — financial]: Cash and cash equivalents decreased by $310 million year-to-date 2025, ending at $364 million. This reduction from $674 million at February 1, 2025, suggests increased cash outflows or reduced cash generation.
• Supply Chain and Cost Management [medium — operational]: Costs of Goods Sold, Buying and Occupancy expenses increased slightly from $900 million to $909 million year-over-year for the quarter, while General, Administrative and Store Operating Expenses increased from $443 million to $483 million. These rising costs, coupled with lower net income, point to potential pressures on operational efficiency and cost control.
• Consumer Spending Sensitivity [medium — market]: As a retailer focused on personal care and home fragrance, the company's performance is sensitive to consumer discretionary spending. Economic slowdowns or shifts in consumer preferences could negatively impact sales and profitability.
• Tax Law Changes [medium — regulatory]: The significant jump in the provision for income taxes from $1 million to $31 million in Q2 2025 suggests potential changes in tax regulations, interpretations, or the company's tax planning strategies, which could impact future earnings.

Industry Context

Bath & Body Works operates in the highly competitive personal care and home fragrance retail sector. The industry is characterized by strong brand loyalty for established players but also faces disruption from emerging direct-to-consumer brands and changing consumer preferences towards natural or sustainable products. The sector is sensitive to discretionary spending, making it vulnerable to economic downturns.

Regulatory Implications

The significant increase in the provision for income taxes suggests potential scrutiny or changes in tax regulations, which could impact future profitability. Companies in the retail sector must also comply with consumer protection laws, product safety standards, and evolving data privacy regulations.

What Investors Should Do

1. Monitor Inventory Levels
2. Analyze Profitability Drivers
3. Assess Cash Flow Generation
4. Evaluate Operating Expense Management

Key Dates

• 2025-08-02: End of Second Quarter 2025 — Reported net sales of $1,549 million and net income of $64 million, reflecting a slight sales increase but a significant drop in profitability.
• 2025-02-01: End of Fiscal Year 2024 / Start of Fiscal Year 2025 — Inventories stood at $734 million and cash and cash equivalents at $674 million, providing a baseline for year-to-date changes.
• 2024-08-03: End of Second Quarter 2024 — Reported net sales of $1,526 million and net income of $152 million, serving as the prior-year comparison point for Q2 2025 results.

Glossary

Provision for Income Taxes

The amount of income tax expense recognized by a company for a given period. (A significant increase in this provision from $1 million to $31 million in Q2 2025 was a primary driver of the sharp decline in net income.)

Other Income, Net

Income generated from sources other than the company's primary business operations, such as interest income, gains on investments, or foreign currency exchange gains, net of related expenses. (A decrease in 'Other Income, Net' from $47 million to $6 million in Q2 2025 contributed to the lower net income.)

Operating Income

Profitability of a company's core business operations before accounting for interest and taxes. (A decrease in operating income to $157 million from $183 million in Q2 2024 indicates a weakening in the core business's profitability.)

Accumulated Other Comprehensive Income

The cumulative amount of unrealized gains and losses that have not been reported in net income but are reported in a separate section of the income statement. (This account reflects items like foreign currency translation adjustments and unrealized gains/losses on cash flow hedges, which can impact total equity.)

Retained Earnings (Accumulated Deficit)

The total cumulative net income of a company that has not been distributed to shareholders as dividends. (The company has a significant accumulated deficit of ($1,716 million) as of August 2, 2025, indicating that cumulative losses or dividends paid out have exceeded cumulative profits.)

Omnichannel Retailer

A retailer that integrates different channels of sales and marketing (e.g., online, physical stores, mobile) to provide a seamless customer experience. (Bath & Body Works operates as an omnichannel retailer, selling through stores and websites, which requires sophisticated inventory and customer management across all touchpoints.)

Year-Over-Year Comparison

Compared to the prior year's second quarter, Bath & Body Works reported a modest 1.5% increase in net sales to $1,549 million. However, profitability has significantly deteriorated, with net income plummeting 57.9% to $64 million, largely due to a substantial increase in the provision for income taxes and a decrease in other income. Operating income also saw a decline of 14.2%. Key balance sheet items show a concerning build-up in inventories, up 13.2% year-over-year to $977 million, and a significant reduction in cash and cash equivalents year-to-date.

Key Financial Figures

• $0.50 — ange on which registered Common Stock, $0.50 Par Value BBWI The New York Stock Excha

Filing Documents

• bbwi-20250802.htm (10-Q) — 1086KB
• bbwi-202582_ex101.htm (EX-10.1) — 8KB
• bbwi-202582_ex15.htm (EX-15) — 4KB
• bbwi-202582_ex22.htm (EX-22) — 5KB
• bbwi-202582_ex311.htm (EX-31.1) — 9KB
• bbwi-202582_ex312.htm (EX-31.2) — 9KB
• bbwi-202582_ex32.htm (EX-32) — 5KB
• 0000701985-25-000030.txt ( ) — 5086KB
• bbwi-20250802.xsd (EX-101.SCH) — 34KB
• bbwi-20250802_cal.xml (EX-101.CAL) — 57KB
• bbwi-20250802_def.xml (EX-101.DEF) — 133KB
• bbwi-20250802_lab.xml (EX-101.LAB) — 455KB
• bbwi-20250802_pre.xml (EX-101.PRE) — 311KB
• bbwi-20250802_htm.xml (XML) — 607KB

Financial Information

Part I. Financial Information

Financial Statements *

Item 1. Financial Statements * Consolidated Statements of Income (Unaudited) 3 Consolidated Statements of Comprehensive Income (Unaudited) 3 Consolidated Balance Sheets as of August 2 , 2025 (Unaudited), February 1, 2025 and August 3 , 2024 (Unaudited) 4 Consolidated Statements of Total Equity (Deficit) (Unaudited) 5 Consolidated Statements of Cash Flows (Unaudited) 7

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 8 Report of Independent Registered Public Accounting Firm 16 Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 17

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 17

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 27

Controls and Procedures

Item 4. Controls and Procedures 28

Other Information

Part II. Other Information 29

Legal Proceedings

Item 1. Legal Proceedings 29

Risk Factors

Item 1A. Risk Factors 29

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 29

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 29

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 29

Other Information

Item 5. Other Information 29

Exhibits

Item 6. Exhibits 30 Signature 31 * The Company's fiscal year ends on the Saturday nearest to January 31. As used herein, "second quarter of 2025" and "second quarter of 2024" refer to the thirteen-week periods ended August 2, 2025 and August 3, 2024, respectively. "Year-to-date 2025" and "year-to-date 2024" refer to the twenty-six-week periods ended August 2, 2025 and August 3, 2024, respectively. 2 Table of Contents

—FINANCIAL INFORMATION

PART I—FINANCIAL INFORMATION

FINANCIAL STATEMENTS

Item 1. FINANCIAL STATEMENTS BATH & BODY WORKS, INC. CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share amounts) (Unaudited) Second Quarter Year-to-Date 2025 2024 2025 2024 Net Sales $ 1,549 $ 1,526 $ 2,974 $ 2,910 Costs of Goods Sold, Buying and Occupancy ( 909 ) ( 900 ) ( 1,687 ) ( 1,677 ) Gross Profit 640 626 1,287 1,233 General, Administrative and Store Operating Expenses ( 483 ) ( 443 ) ( 920 ) ( 863 ) Operating Income 157 183 367 370 Interest Expense ( 68 ) ( 77 ) ( 139 ) ( 159 ) Other Income, Net 6 47 13 61 Income Before Income Taxes 95 153 241 272 Provision for Income Taxes ( 31 ) ( 1 ) ( 72 ) ( 33 ) Net Income $ 64 $ 152 $ 169 $ 239 Net Income per Basic Share $ 0.31 $ 0.68 $ 0.80 $ 1.07 Net Income per Diluted Share $ 0.30 $ 0.68 $ 0.79 $ 1.06 BATH & BODY WORKS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) (Unaudited) Second Quarter Year-to-Date 2025 2024 2025 2024 Net Income $ 64 $ 152 $ 169 $ 239 Other Comprehensive Income (Loss), Net of Tax: Foreign Currency Translation — ( 1 ) 6 ( 3 ) Unrealized Gain (Loss) on Cash Flow Hedges — 1 ( 3 ) 2 Reclassification of Cash Flow Hedges to Earnings — — ( 1 ) — Total Other Comprehensive Income (Loss), Net of Tax — — 2 ( 1 ) Total Comprehensive Income $ 64 $ 152 $ 171 $ 238 The accompanying Notes are an integral part of these Consolidated Financial Statements. 3 Table of Contents BATH & BODY WORKS, INC. CONSOLIDATED BALANCE SHEETS (in millions, except par value amounts) August 2, 2025 February 1, 2025 August 3, 2024 (Unaudited) (Unaudited) ASSETS Current Assets: Cash and Cash Equivalents $ 364 $ 674 $ 514 Accounts Receivable, Net 131 205 146 Inventories 977 734 863 Easton Assets Held for Sale 81 96 — Other 153 114 143 Total Current Assets 1,706 1,823 1,666 Property and Equipment, Net 1,124 1,127 1,166 Operating Lease Assets 984 949 1,043 Goodwill 628 628 628 Trade Name 165 165 165 Deferred Income Taxes 133 130 143 Other As

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Description of Business and Basis of Presentation Description of Business Bath & Body Works, Inc. (the "Company") is a global omnichannel retailer focused on personal care and home fragrance. The Company sells merchandise through its retail stores in the United States of America ("U.S.") and Canada, and through its websites and other channels, under the Bath & Body Works, White Barn and other brand names. The Company's international business is conducted through franchise, license and wholesale partners. Fiscal Year The Company's fiscal year ends on the Saturday nearest to January 31. As used herein, "second quarter of 2025" and "second quarter of 2024" refer to the thirteen-week periods ended August 2, 2025 and August 3, 2024, respectively. "Year-to-date 2025" and "year-to-date 2024" refer to the twenty-six-week periods ended August 2, 2025 and August 3, 2024, respectively. References to "quarter" and "year" each refer to the fiscal calendar period. Basis of Consolidation The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company accounts for investments in unconsolidated entities where it exercises significant influence, but does not have control, using the equity method. Under the equity method of accounting, the Company recognizes its share of the investee's net income or loss. Losses are only recognized to the extent the Company has positive carrying value related to the investee. Carrying values are only reduced below zero if the Company has an obligation to provide funding to the investee. The Company's share of net income or loss of all unconsolidated entities is included in Other Income, Net in the Consolidated Statements of Income. The Company's equity method investments are required to be reviewed for impairment when it is determined there may be an

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