Goldman Sachs downgraded Bath & Body Works to Sell from Neutral and cut its price target to $19 from $23, citing a deterioration in brand sentiment and emerging risks related to the company's recent push into third-party retail channels.
Analysts led by Kate McShane noted that Bath & Body Works is "in the midst of an investment year focusing on the core business and finding new avenues for growth," but emphasized that consumer sentiment is running below historical norms.
Shares of the Columbus, Ohio-based retailer dropped 4.2% in premarket trading by 07:28 ET following the note.
Goldman examined discussions on Reddit and reported that current sentiment sits at about 9%, well under the retailer's historical average of roughly 17%. The bank also observed a sharp year-to-date decline in Reddit conversation volume, with sentiment softening around topics such as Halloween, the semi-annual sale, and specific items like creams. The analysts added that shoppers have expressed "persistent frustrations around the shopping experience, especially BOPIS" - buy online, pick up in store.
Complementing that analysis, consumer insights firm HundredX provided data showing that Net Promoter Scores remain below average among younger shoppers, particularly the 18-29 cohort, even though overall NPS has improved sequentially from a trough in May 2025.
Goldman's downgrade further reflects unease about Bath & Body Works' first significant foray into third-party retail. The company expects roughly $50 million of incremental fiscal 2026 growth stemming from expanded distribution, but Goldman estimated that if 30% of that incremental sales are cannibalized, it would amount to approximately $15 million of lost retail sales in FY26.
The bank highlighted the company's July 12 launch at more than 600 Ulta Beauty stores and on Ulta.com as a specific risk point, noting the "high competitive density in body care categories". Goldman also called out Amazon as a potential source of cannibalization because of faster shipping options and a smaller assortment, which could reduce in-store discovery and impulse purchases.
As a result of these factors, Goldman trimmed its earnings-per-share forecasts for fiscal 2026 through fiscal 2028, placing its estimates roughly 4-5% below consensus. The firm now sees FY26 EPS at $2.53 versus a consensus of $2.65. It lowered its FY26 net sales growth projection to -3.6% from -3.3% and reduced its FY26 EBIT margin estimate to 13.1% from 13.4%, attributing the changes to "ongoing competitive challenges."
Goldman said it could become more constructive if Bath & Body Works' new distribution and growth strategy produces financial benefits sooner than the bank currently expects, if consumer sentiment shows clear improvement, or if planned marketing and innovation initiatives in the second half of the year succeed in reaccelerating sales.
Context and implications
The downgrade and forecast reductions reflect concerns across several dimensions of Bath & Body Works' business: brand health as reflected in social conversation and NPS metrics, the operational and experiential issues raised by shoppers (notably BOPIS friction), and the strategic risk of moving into larger third-party retail footprints where competition and different fulfillment dynamics may blunt in-store demand.
Investors and industry observers will likely watch the company's execution around its expanded third-party distribution, the impact of Ulta and Amazon placements on retail foot traffic and impulse purchases, and whether marketing and product innovation planned for the back half of the year can reverse sentiment trends.