NEW YORK — Shares of Bath & Body Works Inc. surged more than 8% Friday, climbing to $19.64 in midday trading as Wall Street showed renewed confidence in the retailer's efforts to revive its iconic brand through innovation and smarter pricing, even as the company braces for another year of declining sales.

Bath & Body Works
Bath & Body Works

The stock jumped $1.60, or 8.87%, by 11:48 a.m. EDT on the New York Stock Exchange, outpacing broader market moves and drawing attention from investors hunting for value in the struggling specialty retail sector. Volume was active as traders reacted to positive analyst notes highlighting progress on the company's "Consumer First Formula."

Bath & Body Works, known for its fragrant body care, home scents and seasonal collections, has faced headwinds from cautious consumer spending, heavy promotions and competition from value retailers. Yet recent moves — including fewer deep discounts, elevated product packaging and international expansion — appear to be sparking optimism.

"We're expecting to get paid for our innovation," CEO Daniel Heaf told investors during the company's March earnings call, signaling a shift away from constant sales toward a more premium positioning without raising everyday prices.

The rally comes weeks after the company reported fourth-quarter results that beat expectations despite a modest sales dip. For the quarter ended Jan. 31, 2026, net sales fell 2% to $2.7 billion, but adjusted earnings per share reached $2.05, topping analyst forecasts of $1.77. Full-year 2025 sales were nearly flat at $7.29 billion.

Investors appeared to look past the softer 2026 outlook. The company guided for full-year sales to decline 4.5% to 2.5% and adjusted EPS of $2.40 to $2.65, citing ongoing macro pressures and tariff impacts. First-quarter sales are expected to drop 6% to 4%, with adjusted EPS between 24 and 30 cents.

Still, analysts are increasingly bullish. Bank of America raised its price target to $30 from $26 while maintaining a Buy rating, citing management's turnaround actions and a longer-term valuation framework. Wells Fargo kept an Overweight rating with a $29 target, calling the strategy "on track." Average Wall Street targets hover in the low-to-mid $20s, with some as high as $56.

The stock has traded in a wide range this year, hitting a 52-week low near $14.28 and a high of $34.66. At current levels, the market capitalization stands around $4 billion, with a forward dividend yield above 4%.

Bath & Body Works is pushing its Consumer First Formula, a multi-year plan focused on four pillars: product innovation, brand elevation through storytelling, stronger marketplace performance and operational efficiency. The company aims to deliver $250 million in cost savings over two years, including about $175 million in 2026, to fund targeted investments while protecting margins.

International growth remains a bright spot. The retailer ended fiscal 2025 with 573 locations outside the U.S. and expects mid- to high-single-digit sales growth abroad in 2026 through store expansion and e-commerce. Recent highlights include celebrations of its 20-year Japanese Cherry Blossom franchise and collaborations like a Mother's Day collection with Vera Bradley featuring Peach Blossom & Nectar.

Domestically, the company is reducing promotion frequency to rebuild brand equity. "We have relied too often in the past on deeper and more frequent discounts," Heaf said. Executives stressed that baseline prices will stay steady while new, higher-perceived-value items — with upgraded packaging and limited-edition scents — help drive full-price sales.

Gross margin pressure is expected in 2026, with the rate forecast at about 42.4% after a 150-basis-point tariff headwind in the first quarter. Adjusted SG&A is seen at 29.2%. Free cash flow is projected near $600 million, with no share repurchases assumed in guidance.

The stock's recent volatility reflects broader retail challenges. A class-action lawsuit filed on behalf of investors who bought shares between June 2024 and November 2025 alleges misleading statements around the company's performance, though the case remains in early stages.

Analysts note that success hinges on execution. Citi recently took a more cautious stance, downgrading to Neutral over concerns about core business weakness and continued sales pressure. Others point to Amazon's growing role in beauty and home categories as a risk, even as Bath & Body Works expands its own online and third-party marketplace presence.

Retail observers say the company's focus on "getting paid for innovation" could resonate with consumers seeking affordable luxuries amid economic uncertainty. Limited-edition drops and collaborations have historically driven traffic, as seen with past PEEPS and other seasonal tie-ins.

Chief Financial Officer Eva Boratto emphasized disciplined investment. "2026 will be a year of balancing rigorous cost control with targeted reinvestment to position the business for sustainable long-term growth," she said.

Bath & Body Works operates more than 1,800 stores in the U.S. and Canada, plus a growing international footprint. The brand built its reputation on signature scents like Japanese Cherry Blossom, now marking two decades as a bestseller.

Investors will watch closely for first-quarter results, expected in late May. Any signs of stabilization in domestic traffic or margin improvement could fuel further gains.

For now, Friday's surge suggests some on Wall Street are willing to bet that Heaf's vision — fewer sales, more innovation, stronger storytelling — can help the retailer reclaim its sparkle in a crowded personal care aisle.