Summary

  • Bath & Body Works' International and Other sales rose 24.9% to US$108 million in fiscal Q2 2026. The company attributes the increase to expanded domestic wholesale through Ulta and Amazon and higher international product sales, without quantifying either contribution.
  • The line contains franchise royalties recognized when a partner sells to a retail customer and wholesale revenue generally recognized when title passes to a partner. It is neither one customer receipt nor a pure geography.
  • The company ended the quarter with 596 partner-operated international stores, 59 more than a year earlier. That count excludes kiosks, shop-in-shops, gondolas, beauty counters and partner e-commerce, while domestic wholesale is inside the revenue line but outside the count.
  • Revenue-generating receivables reached US$98 million and primarily concerned franchise, licence and wholesale partners on typical terms of 45 to 75 days. That balance adds a collection clock; it cannot be netted against quarterly revenue.

A growth line crossed several commercial boundaries

Bath & Body Works' fiscal second quarter contained an obvious contrast. Sales through company-operated stores in the U.S. and Canada fell 5.4%, or US$65 million, to US$1.131 billion. Direct sales rose 3.0% to US$275 million. International and Other rose US$22 million to US$108 million.

The last line grew 24.9%, faster than any other reported channel. It supplied only about 7.1% of group sales, but helped offset the decline in the much larger store business. Total sales still fell 2.3% to US$1.514 billion.

That arithmetic establishes materiality. It does not establish where a consumer bought the product, who owned the inventory or how much profit followed the sale. The filing says the increase came from expanded domestic wholesale, including Ulta and Amazon, and increased international product sales. It does not publish the contribution from either source.

The line's name creates the first trap. International and Other sounds like a country perimeter. Its footnote says otherwise: it includes royalties associated with franchised stores as well as international and domestic wholesale sales. A transaction in the U.S. can therefore enter the line, while some sales outside the U.S. sit elsewhere.

US$108 million and 596 stores are not a ratio

The company ended the quarter with 559 ordinary international partner stores and 37 travel-retail stores, for a total of 596. Partners opened 25 and closed two during the first half. At the prior-year quarter end, the count was 537. The increase between those two snapshots was 59 stores, or about 11.0%.

The count does not cover the whole distribution surface. Bath & Body Works explicitly excludes kiosks, shop-in-shops, gondolas and beauty counters. At the January year end, partners also operated 34 international e-commerce sites, which were reported separately from 573 physical stores.

Domestic wholesale creates the opposite mismatch. Ulta and Amazon contributed to the stated growth driver, yet U.S. wholesale locations and marketplace activity are not international partner-operated stores. The US$108 million numerator reaches beyond the 596-store denominator in one direction; the store count omits selling formats in another.

Dividing US$108 million by 596 would therefore produce a precise-looking fiction. It would assign domestic wholesale to international stores, ignore excluded formats, use an end-of-period rather than average store count and treat Bath & Body Works revenue as the partner's retail sales. None of those assumptions is supported.

The accounting policy contains two receipt clocks

The annual report provides the cleanest explanation. Under franchise and licence arrangements, Bath & Body Works generally earns royalties when a partner sells merchandise to a retail customer. That is a downstream sell-through clock. The company's revenue depends on the partner's reported local sale and the contractual royalty calculation.

Under wholesale and sourcing arrangements, revenue is generally recognized when title passes to the partner. That is an upstream transfer clock. The partner may still need to stock, market, discount and sell the merchandise to an end customer after Bath & Body Works has recorded its own revenue.

Both are legitimate forms of revenue. They answer different questions. Royalty revenue is tied to a partner's retail transaction. Wholesale revenue is tied to a transfer of goods and control under the partner contract. Combining them is valid financial reporting, but the combined growth rate is not a consumer sell-through rate.

The distinction matters most when a channel expands quickly. A new wholesale placement can recognize revenue as inventory enters a partner's system. A franchise royalty waits for retail sale. If the mix shifts toward wholesale, International and Other can accelerate even when partner-store productivity is unchanged. The public filing does not say that this happened; it says only that domestic wholesale expansion and international product sales drove the increase.

The line is not the company's international geography

Bath & Body Works separately reports net sales outside the U.S. Those sales were US$171 million in the quarter, up only US$4 million from a year earlier. The geographic figure includes company-operated Canadian stores and Canadian e-commerce, franchise royalties and international wholesale.

International and Other increased by US$22 million over the same period. The difference does not isolate Ulta, Amazon or any other channel, because the two tables cross rather than nest. The geographic figure includes Canadian operations excluded from the channel line, while the channel line includes domestic wholesale excluded from the geographic figure.

This is a useful countercheck. International and Other cannot be read as international consumer demand. Nor can the US$4 million change outside the U.S. be subtracted from the US$22 million channel increase to manufacture a domestic-wholesale result. The missing bridge remains missing.

Brand standards and operating control divide differently

Bath & Body Works calls the international partner model asset-light. It says the company owns the assortment, pricing architecture, promotions, store designs and real-estate approval. Partners invest capital and contribute local knowledge about property, people and operating practices.

That is meaningful influence. It lets the brand define what a store should sell and how it should appear without funding every lease and payroll. It also separates control over the commercial template from responsibility for local execution.

The annual report says the company's practical control over partners is limited. Independently operated stores and websites can face weak management, insufficient capital, inconsistent staffing, legal non-compliance or political and cultural disruption. A contractual approval right does not automatically make Bath & Body Works the employer, tenant, inventory owner or local statutory operator.

The line therefore brings together businesses with different capital burdens. A company-operated Canadian store sits on the company's operating perimeter but outside International and Other. An international franchise can carry local fixed costs and produce a royalty. A wholesale partner can take title to goods and carry resale risk. A marketplace can control discovery, ranking and customer data while Bath & Body Works records a wholesale transaction.

Receivables add a third timing question

Revenue-generating accounts receivable reached US$98 million at 1 August, up from US$75 million a year earlier and US$66 million at the January year end. The company says these balances primarily relate to franchise, licence and wholesale partners. Typical payment terms are 45 to 75 days.

The increase deserves monitoring, but it is not evidence of a collection failure. US$98 million is a point-in-time balance across partner arrangements; US$108 million is a quarterly revenue flow for one blended line. Subtracting one from the other would mix time periods and populations.

Receivables do show where part of the channel's economic risk sits. Bath & Body Works may have recognized royalty or wholesale revenue before cash arrives. It periodically reviews partner credit standing and records expected-credit-loss allowances when warranted. A high-quality expansion therefore needs both sales growth and conversion within agreed terms.

Currency supplies another clock. International partner royalties are denominated in U.S. dollars but calculated from local-currency sales. Even when store activity is stable, exchange-rate movement can change the dollar royalty. Reported channel growth may combine physical expansion, sell-through, shipments, price, mix and currency.

Consolidated profit is not a channel-margin receipt

Gross profit increased US$52 million to US$692 million, and gross margin rose to 45.7%. That result does not prove that the expanding partner line carried a high margin. Bath & Body Works says approximately US$80 million of IEEPA tariff refunds drove the merchandise-margin improvement, partly offset by lower-sales deleverage.

The refund is larger than the reported gross-profit increase. It belongs to a separate period and mechanism from the channel thesis. The filing does not disclose gross profit, fulfilment cost, marketplace fee, markdown exposure or contribution profit for International and Other.

Management says marketplace partnerships have momentum while underlying business trends remain pressured. Both statements can be true. New distribution can add reach while company-operated store transactions weaken. Without channel-level margin and sell-through, the public evidence cannot decide whether the partner line is acquiring profitable demand, moving inventory into new hands or doing some of both.

What the quarter actually proves

The constructive reading is bounded. Bath & Body Works expanded distribution, increased international product sales, grew the blended channel by nearly one quarter and added physical partner locations. Direct sales also returned to growth while the larger store channel contracted.

The demanding reading is equally bounded. The fastest-growing line combines unlike transactions. Its physical count omits several formats, its geography crosses another disclosure, and its collection balance rose. Growth is real at the company's defined revenue boundary, but the public evidence does not locate the final customer, margin or inventory risk for each dollar.

A better receipt would separate domestic wholesale, international wholesale and franchise or licence royalties. It would add partner retail sell-through where contractually available, average physical locations by format, partner e-commerce and non-store touchpoints, receivable ageing, currency effects and channel contribution after fulfilment and marketplace costs.

Until that bridge appears, analysts should keep each number inside its contract. US$108 million is Bath & Body Works revenue. The 596 stores are partner-operated physical locations. Neither number becomes more informative by pretending they share a denominator.

Sources