Bath & Body Works Faces Investor Lawsuits Amid Strategic Missteps

Bath & Body Works US0708301041

The parent company of Bath & Body Works is now contending with a mounting wave of class-action litigation. Multiple law firms have filed suits alleging the personal care and home fragrance retailer misled shareholders regarding its financial health and growth trajectory. These legal proceedings are clouding the investment outlook and prompting scrutiny of the company's forward path.

A sequence of disappointing earnings reports served as the catalyst for the legal challenges. For the second quarter of 2025, Bath & Body Works witnessed its earnings per share plummet by 55.8% year-over-year, falling short of the low end of its own guidance. The share price reacted sharply, declining 6.9% on the day of the announcement.

The situation deteriorated in the third quarter. The company reported a revenue decline that missed projections. In response, management issued a stark downward revision to its full-year outlook. Rather than anticipating slight growth, Bath & Body Works now forecasts a high single-digit percentage decrease in revenue. Its expected earnings per share were also significantly lowered. This guidance triggered a massive sell-off, with shares collapsing by 24.8% on November 20, 2025.

Core Allegations in the Filings

Firms including Glancy Prongay & Murray LLP have lodged formal complaints covering the period from June 4, 2024, to November 19, 2025. The central allegation is that the company's growth strategy—reliant on "complementary products, collaborations, and promotions"—failed to expand its customer base or deliver the promised sales increases. The lawsuits contend that brand partnerships were primarily used to mask weak quarterly performance and that management could not execute on its publicly stated forecasts.

Acknowledged Strategy Failure and New Direction

Confronted by these setbacks, Bath & Body Works conceded in November 2025 that its prior growth plan had not succeeded. Company leadership admitted it had lost focus on core categories, over-relied on collaborations, and attempted to force growth through excessive discounting.

Consequently, executives announced a strategic pivot. Plans include exiting certain complementary business segments to refocus on core operations. The company aims to achieve cost savings of $250 million over the next two years. Additionally, a dedicated storefront on the Amazon marketplace platform is slated to launch in 2026.

Market Volatility and Divergent Analyst Views

These events have fueled significant stock price volatility. Over the past year, the shares have experienced 23 separate moves exceeding 5%. While the stock has advanced more than 19% in the last 20 trading days, it remains down approximately 35% year-to-date.

Analyst perspectives are mixed, reflecting substantial uncertainty. The average price target stands at $30.50, but the range is wide, spanning from $15.00 to $43.00. Deutsche Bank, for instance, resumed coverage with a "Hold" rating and a $21 price target. The future performance of Bath & Body Works is now seen as heavily dependent on the successful execution of its revised operational strategy and the resolution of the pending legal cases.

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