Bath & Body Works, Inc. (NYSE:BBWI) returned the North American direct business to growth in Q2 2026, marking the first year-over-year increase since 2021. Direct net sales rose 3% to $275 million, helped by a lower free-shipping threshold and digital improvements. However, total net sales at Bath & Body Works, Inc. (NYSE:BBWI) declined 2.3% to $1.51 billion, while U.S. and Canadian store sales fell 5.4% to $1.13 billion.
That contrast frames the turnaround question. E-commerce can help Bath & Body Works, Inc. (NYSE:BBWI) reach shoppers beyond stores, but the $8 million year-over-year increase in direct sales offset only a small part of the $65 million store-sales decline. On the August 26 earnings call, CEO Daniel Heaf said the positive signs were “not yet broad enough to signal an inflection in the overall business.”
Bull Case
Bath & Body Works, Inc. (NYSE:BBWI) is seeing measurable progress in the channels management expected to improve first. Bath & Body Works, Inc. (NYSE:BBWI) reported more new, existing, and reactivated digital customers as better discovery, personalization, and product storytelling supported conversion.
Expanded distribution also gives Bath & Body Works, Inc. (NYSE:BBWI) access to customers who may not visit stores. Amazon sales more than tripled sequentially, attracting a younger, more affluent mix of new-to-brand shoppers, while the Ulta Beauty rollout reached approximately 600 stores. Bath & Body Works, Inc. (NYSE:BBWI) reported no observed cannibalization from those partnerships so far.
The transformation also has financial support. Bath & Body Works, Inc. (NYSE:BBWI) now forecasts approximately $650 million of company-defined non-GAAP free cash flow, calculated as operating cash flow minus capital expenditures, for 2026. That provides capacity to fund marketing and digital improvements amid continuing sales pressure.
Bear Case
The main problem is scale. Direct sales represented approximately 18% of quarterly revenue, and Bath & Body Works, Inc. (NYSE:BBWI) acknowledged that free shipping on orders above $50 shifted some sales from stores to the direct channel. Digital growth is less valuable if it merely changes where an existing customer completes a purchase.
Core-category demand also remains soft. Body care sales declined by a mid-single-digit percentage despite sequential improvement and a better-than-expected Fruit Fusion launch. For Bath & Body Works, Inc. (NYSE:BBWI), weak store traffic and softness in a hero category remain more important to the near-term revenue trajectory than early marketplace gains.
