Bath & Body Works Faces Analyst Downgrade Amid Turnaround Concerns

Bath & Body Works US0708301041

Citi Research has removed its buy rating for Bath & Body Works Inc., shifting its stance on the retailer’s stock to a neutral position. The firm’s analyst, Paul Lejuez, expressed caution regarding the challenging business environment anticipated for fiscal 2026, which could mark a fifth consecutive year of declining revenue for the specialty fragrance and body care company. This downgrade raises questions about whether management’s planned cost-saving initiatives will be sufficient to engineer a recovery.

• Action Taken: Citi downgrades stock rating to "Neutral" from "Buy"
• Analyst: Paul Lejuez
• Primary Concerns: Projected fifth year of revenue declines, substantial required investment, risks associated with Amazon expansion
• Upcoming Catalyst: Q4 2025 earnings report scheduled for March 4, 2026

In response to these headwinds, Bath & Body Works’ leadership is proceeding with a strategic overhaul unveiled last November. The plan aims to generate approximately $250 million in savings over the next two years through operational efficiencies, with a significant portion targeted for the current 2026 fiscal year. The company intends to reinvest these funds into bolstering its digital capabilities and accelerating the launch of innovative products.

Having seen limited growth from previous forays into peripheral product categories, the retailer is now refocusing on its core competencies. A central pillar of this strategy is its extensive loyalty program, which currently boasts an active membership of roughly 40 million. Management plans to deepen engagement with this loyal customer base through personalized offers and an enhanced app experience.

Underlying Business Vulnerabilities Prompt Caution

The analyst’s revised outlook reflects deepening skepticism about the company’s market position. Lejuez notes that Bath & Body Works' fundamental business appears increasingly unstable. To revitalize customer traffic both in-stores and online, the analyst suggests that significantly greater investment may be needed than what is currently anticipated by the market.

A particular point of concern for Citi is the planned expansion onto Amazon’s platform, slated for late 2026. While this move is designed to access new customer segments, the associated operational complexities could divert management attention from the urgent turnaround efforts required in the core business.

Investors and analysts alike will gain critical insight into the progress of these measures and the company’s overall health on March 4, 2026. On that date, Bath & Body Works is set to release its fourth-quarter 2025 results and provide detailed guidance for the pivotal turnaround year ahead.