Bath & Body Works on Wednesday warned of a steeper decline in annual sales as Americans deferred purchasing its pricier home fragrances and personal care products amid still-high inflation pinching household budgets.

Shares of the Ohio-based company fell about 2 percent in premarket trading after the retailer forecasted current-quarter sales and profit below Street expectations.

A rise in costs of living and credit repayments at higher borrowing costs in the US has prompted consumers to cut down on purchasing non-essential items. This has led to a slowdown in demand for products such as home fragrances and beauty and skincare.

The company’s results come in line with speciality retailer Estée Lauder and department store chain Macy’s, which have warned of weak consumer spending through the remainder of the year.

Bath & Body Works now expects annual net sales to decline between 1.5 percent and 3.5 percent, compared with its previous forecast of flat net sales to a mid-single-digit percentage decline.

To fend off a hit on margins from surging labour and production costs, the retailer resorted to price hikes on its products that further discouraged demand from inflation-weary Americans.

The company’s second-quarter sales fell 3.6 percent to $1.56 billion, largely in line with Street expectations, according to Refinitiv IBES data.

Excluding items, it earned 40 cents per share in the quarter, topping analysts’ expectations of a profit of 33 cents per share.

It also raised its annual profit forecast to adjusted earnings per share, now expected to range between $2.80 and $3.10, compared with $2.68 and $3.08 previously expected.

By Juveria Tabassum; Editors Shweta Agarwal

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Third Point Plans Proxy Contest at Bath & Body Works

Bath & Body Works said in a statement late on Wednesday, “The Board strongly disagrees with the views expressed in Third Point’s letter.” However, it said it would review and consider Third Point’s proposed board nominations.