Bath & Body Works Q2 Earnings Meet Estimates, Gross Margin Rises Y/Y

Core Insights - Bath & Body Works (BBWI) reported second-quarter fiscal 2025 results with net sales growth of 1.5% year over year to $1,549 million, which fell short of the Zacks consensus estimate of $1,554 million, while adjusted earnings per share remained flat at 37 cents [1][3][8] - The company experienced positive store traffic, with U.S. and Canada store sales increasing by 4.9% to $1.20 billion, exceeding the Zacks consensus estimate of $1.17 billion, while direct sales declined by 10.1% to $267 million, missing the estimate [4][8] - BBWI's gross margin improved to 41.3%, despite a $16 million impact from tariffs, driven by better management of buying and occupancy expenses [5][8] Financial Performance - Gross profit rose by 2.2% year over year to $640 million, while operating income decreased by 14.2% to $157 million, leading to a decline in operating margin to 10.1% [6][8] - Net income fell by 57.9% to $64 million compared to $152 million in the previous year [6] - The company ended the quarter with cash and cash equivalents of $364 million and long-term debt of $3.89 billion [9] Store Operations - BBWI operated 1,904 stores at the end of the quarter, with 1,791 in the U.S. and 113 in Canada, having opened 20 new stores and closed 16 [7] - Internationally, the company ended with 537 stores, with plans for at least 30 net new store openings in fiscal 2025 [7] Future Outlook - For the third quarter of fiscal 2025, BBWI expects net sales growth of 1-3% and anticipates a gross margin of 42.2, factoring in a $40 million tariff impact [11][12] - The company has narrowed its fiscal 2025 net sales growth outlook to 1.5-2.7% and raised its earnings per share guidance to $3.35-$3.60 [16][17] - Capital expenditure is planned at $250-$270 million, focusing on real estate and technology, with expected free cash flow of $750-$850 million [18] Shareholder Returns - BBWI increased its share repurchase plan from $300 million to $400 million and returned $42 million to shareholders through dividends [10][19]