Americas Retail Takeaways from IR management

Equity Research 3 August 2026 | 7:26AM EDT

Americas Retail: Takeaways from IR/management; Home Furnishings read-through

In this note, we discuss key takeaways from meetings with the IR/management teams Kate McShane, CFA | of Bath and Body Works (BBWI), Floor and Decor (FND), and O’Reilly Automotive Goldman Sachs & Co. LLC (ORLY). We also provide earnings read-throughs (ETD) to the Home Furnishings Mark Jordan, CFA sector and update our EYE estimates. | Goldman Sachs & Co. LLC

Emily Ghosh Takeaways from IR/management meetings | Goldman Sachs & Co. LLC

Nishi Agarwal | BBWI Goldman Sachs India SPL Bath & Body Works launched its Fruit Fusion franchise with Hillary Duff on Grace Chee | 7/6/26. Per management, Hillary Duff is nostalgic to older customers and also Goldman Sachs & Co. LLC appeals to younger customers discovering her for the first time, and she is a fan of Samantha Chiang the Bath & Body Works brand. Management noted there is more disruptive | innovation coming throughout the 2H of 2026. While marketing dollars in the past Goldman Sachs & Co. LLC

were more focused on communicating promotions, marketing is now expected to benefit launches and create a long-term halo effect to strengthen the brand. Per management, Bath & Body Works plans to introduce newness in the form of durable platforms over multiple quarters and years. In terms of the company’s ability to chase, if a launch is successful but did not start in the Beauty Park, it can be moved to the Beauty Park where they can then chase it pretty quickly. The Beauty Park is the company’s vertical production campus in Ohio with contract manufacturing, component production and packaging, and gift set assembly.

More 3P distribution details. Bath & Body Works launched on Amazon on 2/20/26 and at Ulta on 7/12/26, and the company does not have plans for incremental 3P distribution partners for this year. That said, management believes there are opportunities to grow 3P distribution in the future to increase share with existing customers and acquire new customers. The company expects 3P distribution to be EBIT margin neutral to the business, calling out a lower gross margin combined with less SG&A costs (such as labor, rent, and marketing). Also of note, while Bath & Body Works does not have any changes to store opening plans to announce today, management is taking a look at its store footprint to determine if the locations are optimized, noting the company will not open stores in the future just to open them.

There are no tariff refunds currently included in company guidance. That said, last year tariffs were a ~$80mn headwind to the business. In terms of how potential

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refunds could be used, management reiterated that Daniel Heaf (CEO) is excited about the Consumer First Formula, and if the company sees good returns from marketing or product innovation, the team will assess if they should invest more and faster there. The company plans to provide an update on tariff refunds along with 2Q earnings.

We recently downgraded BBWI to Sell from Neutral given brand sentiment is trending below historical levels and will likely take time to improve, and 3P distribution introduces risk to the existing retail business, particularly for replenishment visits. We currently estimate a 2Q sales decline of -4.3% y/y, below consensus (FactSet) at -3.4%, and 2Q adj. EPS of $0.22, below consensus at $0.24. For the year, we estimate a FY26 sales decline of -3.6% y/y, below consensus at -2.7%, and adj. EPS of $2.53, below consensus at $2.65.

FND CapEx reductions. Management noted that the reduction in CapEx is driven by the timing of spending for the store class of 2027…