Bath & Body Works (NYSE: BBWI) has struggled with a litany of woes over the past couple years, watching its stock drop 60% during that period. But the home fragrance and personal care company has embarked on a new strategy, hoping for a comeback.
It certainly has a solid foundation, standing as No. 1 in U.S. sales for specialty home fragrance products, body care and body fragrance products, and hand soap and hand sanitizer products. It has more than 1,900 stores in the U.S. and Canada, and another 500-plus overseas.
As for the woes, a difficult economy for non-wealthy consumers has curbed demand for its products. Former management’s focus on expanding into new areas like hair care and men’s grooming led to neglect of BBW’s core strengths: body care, home fragrances and soaps. The new areas are now being trimmed as part of its restructuring plan: Consumer First Formula.
Another problem is stores that customers have described as overwhelming, with an excess assortment of products making it difficult to shop. Also, frequent sales and promotions meant to drive traffic have dented the company’s finances and image.
Customers have complained that rising prices have been accompanied by declining product quality, including thinner lotions and lower-grade candle ingredients.
BBW also has suffered from sales of its products by third-party vendors on online platforms such as Amazon (NASDAQ: AMZN), leaving BBW without control of those sales. To stanch that problem, in February, the company launched an authorized storefront on Amazon, allowing customers to buy a curated selection of BBW products directly through the online retailer.
Consumer First Formula
That venture too is part of the Consumer First Formula that BBW adopted in 2025. The program
includes updating product formulations and packaging; marketplace expansion, like the deal with Amazon; making the in-store experience more manageable; targeted marketing, particularly toward Generation Z and millennials; and focus on core product categories.
Morningstar analyst Jaime Katz likes the strategy. “Consumer First Formula just began, evidenced by the launch of its Amazon storefront and accelerated innovation in core categories,” she wrote in a commentary. “These efforts should support a return to consistent long-term growth in key product lines like home fragrance and soaps and sanitizers.”
The moves bring something new to the company without destroying what was good, she said. “The Consumer First Formula is an avenue to institutionalize processes across the business, rather than a complete overhaul of a product line and distribution network that has long resonated with customers.”
BBW’s sales dipped 0.2% in fiscal 2025, ended Jan. 31, 2026, and it forecasts a slide of 2.5%-4.5% this year as it works through its issues. “Transformations of this scale take time,” CEO Daniel Heaf said in the company’s latest earnings statement. Still, the changes should spark revenue growth of about 3% in 2027 and beyond, Katz said.
The company’s operating margin fell roughly 230 basis points to 22% in the fiscal fourth quarter from a year earlier. The company forecasts a margin of about 13% in fiscal 2026. Katz thinks it will rebound to 15% in 2027, as “the turnaround gains traction.” She sees an operating margin of 17.4% by 2030.
BBW may be smelling fresh soon.
Comments