BBWI

• Strategic Execution: Management reported that the 'Consumer-First Formula' is showing tangible results, evidenced by sequential improvement in body care, return to growth in digital, and accelerated expansion in wholesale channels like Amazon and Ulta.
• Product Innovation: Launched 'Fruit Fusion,' a new enduring body care franchise featuring dermatologist-approved formulas and celebrity partnership with Hilary Duff. The launch exceeded sales expectations and drove higher Average Unit Retail (AUR). Additionally, modernized existing franchises like Everyday Luxuries and A Thousand Wishes.
• Brand Rebuilding: Shifted demand creation model toward cultural relevance, utilizing creator networks and coordinated storytelling. The Fruit Fusion campaign generated ~615 million impressions and over 50,000 new social followers.
• Channel Expansion: Amazon net sales more than tripled quarter-over-quarter, making B&BW one of the largest candle brands on the platform. Launched in ~600 Ulta stores to drive trial among new, younger consumers. No cannibalization of core channels observed so far.
• Store Experience: Completed a full-store merchandising reset to improve navigation and discovery. Focus remains on earning consumer visits through improved lease-line engagement and marketing, as store traffic remains pressured by macro factors.
• Operational Efficiency: 'Fuel for Growth' cost savings program is tracking to exceed the $175 million goal by ~$25 million, funding investments in the Consumer-First Formula.

• Full-Year Net Sales: Raised the low end to down 4% (from down 5%), maintaining the high end at down 2.5%. This reflects narrowing guidance based on Q2 outperformance.
• Full-Year Adjusted EPS: Raised to $2.60–$2.80 (from $2.00–$2.50), driven by Q2 tariff refunds and operational improvements.
• Q3 Net Sales: Expected to be down 5% to down 2.5%.
• Q3 Adjusted EPS: Forecasted at $0.07–$0.12.
• Margin Assumptions: Full-year adjusted gross profit rate expected at ~43.3%; SG&A rate at ~29.6%. Note: Q2 included ~$80M in tariff refunds; forward guidance includes ~$30M offset from future tariff/input cost pressures and ~$35M in incremental marketing investments.

Net sales were $1.5 billion, a decline of 2.3% year-over-year. The digital channel returned to growth with a 3% increase to $275 million. U.S. and Canadian store sales declined 5.4% to $1.1 billion. International and other channels, including expanded distribution, grew 24.9% to $108 million. In Q2, the company exited the home care category (laundry/kitchen), which represented less than 1% of annual sales.

• Macro Environment: Continued pressure on store traffic due to broader economic conditions.
• Tariff Exposure: Forward input costs face headwinds from tariffs, particularly on Canadian production (~3% of COGS) and potential retaliatory tariffs affecting retail categories.
• Execution Risk: Transformation is multi-year; current proof points are not yet broad enough to guarantee an inflection in overall business trajectory.
• Promotional Dependency: Core business had become overly reliant on promotional activity; management aims to reduce this without sacrificing volume.

Q: Why is Q3 sales guidance still negative despite positive strategic momentum? / A: CEO Daniel Heaf explained that while progress in digital and body care is real, it is not yet large enough to change the entire business trajectory. Store traffic remains weak, and the company will not rely on increased promotions to drive top-line growth. CFO Tom Javitch added that the guidance assumes the current macro environment continues and emphasizes a prudent approach, though they remain agile to capture upside.

Q: What are the key learnings from the Fruit Fusion launch and how will they inform future strategy? / A: Heaf described Fruit Fusion as a repeatable 'go-to-market playbook' combining trend-right product, celebrity partnership, and coordinated channel execution. It demonstrated the power of franchise management over seasonal collections. The company plans to seed more durable franchises in H2, adding new fragrances and forms to build long-term equity rather than chasing short-term trends.

Q: Does expanded distribution (Amazon/Ulta) cannibalize core store or digital sales? / A: Heaf stated there is no observed cannibalization; Amazon drives convenience and new, affluent consumers, while Ulta focuses on trial and discovery. The company monitors impact daily. Javitch noted that wholesale channels have lower merchandise margins but are accretive to operating income. They view these partnerships as essential for reaching new consumers without diluting the core brand experience.

Q: How sustainable is the return to digital growth, and what does it teach about stores? / A: Heaf expressed strong confidence in digital's sustainability, citing improvements in conversion, personalization, and storytelling beyond just the Free Ship $50 initiative. He argued that digital proves that improving the total proposition drives growth. For stores, this means they must also earn visits through better merchandising and lease-line engagement, not just product placement, as traffic remains under pressure.

Q: What is the role of the semi-annual sale going forward? / A: Heaf clarified that while the June sale was impacted by lower clearance inventory (a deliberate move to avoid buying excess stock), promotions remain important. However, the company will not become incrementally more promotional to drive sales. Instead, they are leaning on brand marketing and product innovation to drive growth, believing you cannot promote a business back to health.