BBWI's Weak Q3 Earnings Prompt Analyst Forecast Cuts and Guidance Reduction

What happened

Bath & Body Works reported disappointing third-quarter earnings, missing analyst expectations with a 1% year-over-year sales decline and adjusted EPS of $0.35. Management subsequently slashed its full-year 2025 outlook, now projecting low single-digit sales declines and EPS of at least $2.87, down from prior guidance. This underperformance aligns with the DeepValue report's highlighted risks, including macro consumer pressures and tariff impacts that have dampened purchase intent. Analysts have responded by reducing their forecasts, reflecting heightened concerns over the company's near-term trajectory amid ongoing challenges. The news underscores the difficulty in executing the Consumer First Formula transformation while navigating external headwinds.

Implication

The Q3 earnings shortfall and lowered guidance signal that BBWI is grappling with deeper-than-expected macro and tariff headwinds, which could lead to further analyst downgrades and share price declines. This development weakens the near-term bull case, as it validates the DeepValue report's watch items on sales stabilization and cost-savings execution, now appearing more critical. While the company's loyal customer base and integrated supply chain provide some defense, the increased uncertainty around FY2025 targets demands closer monitoring of the $250 million cost-savings program and MoCRA compliance. Long-term investors might view this as a potential entry point if they trust the transformation plan, but the heightened risk profile necessitates a more cautious approach. Ultimately, the stock's appeal hinges on visible progress in reversing sales trends and delivering on cost efficiencies over the next few quarters.

Thesis delta

The BUY thesis is now under greater pressure due to the Q3 earnings miss and guidance reduction, which confirm the report's flagged risks around sales performance and macro headwinds. While core advantages like the loyalty program and supply chain durability persist, the increased execution uncertainty and external challenges suggest a shift toward a more guarded stance until evidence of stabilization emerges.