Why Bath & Body Works Stock Cratered Today

Shares of Bath & Body Works (NYSE: BBWI) fell as much as 25.7% on Thursday after the specialty retailer posted disappointing third-quarter results and slashed its full-year outlook. The move came even as the company unveiled a transformation plan to reignite growth in its fragrance and personal-care business.

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A third-quarter miss and a new plan

In the third quarter of 2025, net sales were $1.59 billion, down 1% year over year, while adjusted earnings per share fell to $0.35 from $0.49. Both figures missed management's expectations and consensus estimates. The softness marked a shift from the second quarter of 2025, when net sales grew 1.5% year over year and adjusted earnings per share held flat year over year.

Management pointed to weaker discretionary spending and higher promotional activity -- one factor that negatively affected demand and another that weighed on profitability. CEO Daniel Heaf noted that the company's third-quarter performance came in below expectations and acknowledged ongoing macro pressure on its core shopper. At the same time, the retailer introduced its Consumer First Formula, a multi-year turnaround plan designed to sharpen product innovation, enhance its brand, and accelerate execution.

Guidance reset and valuation

The biggest shock for investors came from the revised forecast. After previously calling for full-year 2025 net sales to grow between 1.5% and 2.7%, management now expects a low single-digit decline. Additionally, adjusted earnings per share is now projected to be at least $2.87, down from a prior range of $3.35 to $3.60 -- and below last year's $3.29.

After today's plunge, the stock trades at less than six times the low end of that adjusted earnings outlook, a modest valuation multiple for a retailer that still generates significant cash flow. Still, the new plan will take time to prove itself, and the guidance cut highlights that near-term trends are negative. For investors, the steep drop improves the entry price, but the risk-reward now depends on whether the Consumer First Formula can stabilize sales and margins in a challenging spending environment.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.