Goldman Sachs Downgrades Bath & Body Works to 'Sell' on Weakening Brand Sentiment

Shares of Bath & Body Works, Inc. (BBWI) declined in premarket trading Tuesday after Goldman Sachs downgraded the stock to "Sell" from a "Neutral" rating. The investment bank also reduced its 12-month price target for the retailer to $19 from $23, leading to a 4.2% drop in the company's share price before the market opened.

The downgrade is primarily driven by what Goldman Sachs analysts describe as weakening brand sentiment. The report highlighted an analysis of online conversations, which showed current positive sentiment running well below historical averages. Analysts also noted a drop in conversation volume this year and persistent consumer frustrations regarding the shopping experience, including in-store pickups for online orders.

Goldman Sachs also expressed concerns about Bath & Body Works' recent expansion into third-party retail channels, including Amazon and Ulta Beauty. The bank sees a "cannibalization risk" from Amazon's faster shipping options, which could reduce in-store discovery and impulse purchases. The report also pointed to the highly competitive body care market at Ulta as a challenge for the brand's launch in over 600 stores.

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Reflecting these concerns, Goldman Sachs has trimmed its earnings per share (EPS) estimates for fiscal years 2026 through 2028, placing its forecast about 4-5% below the market consensus. The bank now projects a net sales decline of 3.6% for fiscal 2026, revising its previous forecast of a 3.3% decline, and has also lowered its estimate for the company's profit margin.

Analysts indicated they could adopt a more constructive view if the company’s new strategies deliver financial benefits more quickly than anticipated or if consumer sentiment shows marked improvement. A successful reacceleration of sales driven by marketing and product innovation planned for the second half of the year could also lead to a reassessment.