Digital channels grow but weak store traffic limits turnaround
- Q2 2026 saw the digital business return to growth, rising 3.0 percent year over year.
- Wholesale expansion is accelerating with Amazon sales tripling and a new launch in 600 Ulta Beauty locations.
- Store traffic remains a major problem, driving a 5.4 percent sales decline in the physical channel.
- Total sales still fell 2.3 percent in the second quarter.
- The company exited the small Home Care category to focus resources on its core products.
A brand trying to fix its core
Bath & Body Works still has real strengths. It owns a well-known brand, has about 39 million active loyalty members, and can launch new scents and formats quickly. That helps explain why the stock is not only a broken retailer story.
The turnaround plan, called the Consumer First Formula, finally delivered tangible proof points in Q2 2026. The direct online channel grew for the first time since 2021, and new wholesale partnerships are working. Amazon sales tripled from the first quarter, and the company launched in 600 Ulta Beauty stores. These moves are successfully reaching younger and more affluent shoppers.
The problem is that the core physical store fleet is still shrinking. North American store sales fell 5.4 percent in Q2 due to weak traffic. Body Care, the largest product area, showed sequential improvement but still declined mid-single digits.
The bear case remains simple. Small digital and wholesale wins do not yet offset a deep drop in store traffic, and total Q2 sales still fell 2.3 percent. Finn's middling valuation and performance scores reflect this tension. The stock may be priced for some pain, but the business has not shown a broad turn yet.
Stores, loyalty, and fast product drops
BBWI makes money by selling personal care and home fragrance products through U.S. and Canada stores, its direct online channel, and international franchise, license, and wholesale partners. In Q2 2026, stores generated $1.1 billion of sales, direct added $275 million, and international and wholesale contributed $108 million.
The model depends on repeat visits. The company sells affordable treats, like candles, soaps, sprays, and lotions, and refreshes products every four to six weeks. Its loyalty program has roughly 39 million active members who drive the majority of U.S. sales.
A key strength is the mostly domestic, vertically integrated supply chain. That means BBWI can design, make, and ship new products faster than many retailers. Management recently leaned into this agility by restoring the Everyday Luxuries line and launching Fruit Fusion to stabilize sales.
The newer question is marketplace selling. Amazon and Ulta are adding shoppers who do not visit BBWI stores or its website. But if these partnerships mostly shift sales away from owned retail into lower merchandise margin wholesale channels, the profit growth may be less valuable than it first looks.
Where the scents sell
Body Care
This includes lotions, fragrance mists, and related personal care items. It is the key category, showing sequential improvement in Q2 but still declining mid-single digits.
Home Fragrance
This includes 3-wick candles, diffusers, and White Barn products. The company exited the separate Home Care laundry business to focus strictly on these core hero products.
Soaps & Sanitizers
This area includes liquid hand soaps and sanitizers. New moisturizing soap formulas continue to drive strong average unit prices and customer engagement.
Men's, haircare, and lip care
These are adjacent categories meant to widen the brand beyond its older core. They need repeat buying, not only launch excitement, to become meaningful.
Amazon and Ulta wholesale
Wholesale is a new sales path, not a classic product line, but it changes where BBWI products are discovered. Amazon sales tripled in Q2 2026.
Q2 sales shift slightly toward digital
The mix is from fiscal Q2 2026, ended in August 2026. Stores are still the main channel at 74.2 percent of sales, but direct and wholesale are gaining share.
What could break the turn
Store traffic remains weak
High impact · High oddsNorth American store sales fell 5.4 percent in Q2 2026 due to poor traffic. Relying on a lower free shipping threshold online may cannibalize these profitable store trips.
Wholesale channels erode margins
Medium impact · Medium oddsAmazon is bringing in younger and more affluent new customers, which is a real positive. The open question is the margin impact of shifting sales from owned retail into wholesale channels.
Canadian tariffs hurt profitability
High impact · Medium oddsThe company faces significant exposure to Canadian tariffs, which currently sit at 50 percent for key products. Any further retaliatory tariffs could damage profit margins across North America.
Body Care reset fails
High impact · Medium oddsBody Care still declined mid-single digits in Q2 2026 despite new launches. If the fixes do not stick, the largest category can keep pulling down total sales.
Holiday season disappoints
High impact · Medium oddsBBWI is highly seasonal, and the fourth quarter is critical for annual profit and cash flow. A weak holiday season would test the efficacy of management's increased marketing investments.
In one breath
What does Bath & Body Works sell?
It sells body care, home fragrance, soaps, sanitizers, and related products. Major formats include fine fragrance mists, lotions, 3-wick candles, and liquid hand soaps.
Why is BBWI considered a turnaround stock?
Sales and margins have been under pressure. The turnaround plan, called the Consumer First Formula, is meant to refresh products, improve brand appeal, expand selling channels like Amazon and Ulta, and fund growth with cost savings.
Is Amazon good for Bath & Body Works?
Early signs are positive because Amazon is attracting more new-to-brand shoppers who skew younger and more affluent. The risk is that Amazon could take some sales from BBWI's own stores or carry a weaker margin at scale.
What is the biggest thing to watch next?
Body Care and physical store traffic are the key signals. If Body Care returns to growth and store declines stabilize in Q3, the bull case gets much stronger.
Sources and research notes
This page combines Finn's company research with public filings and other cited materials. The thesis is reviewed when material company information changes; Finn Scores use the latest available scoring data.
- Thesis reviewed
- September 6, 2026
- Score data
- September 27, 2026
- Reviewed by
- Shivam Bharuka
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