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ABERCROMBIE & FITCH CO /DE/ (ANF)·Q1 2026 Earnings Summary

Executive Summary

  • Record Q1 net sales of $1.10B (+8% YoY) and EPS $1.59; both beat S&P Global consensus (Revenue $1.06B*, EPS $1.36*) as Hollister grew 22% while Abercrombie brands declined 4% . Results topped management’s March ranges (revenue +4–6%, EPS $1.25–$1.45) on operating expense leverage despite lower gross margin .
  • Full-year FY2025 guidance raised on sales (3–6% vs prior 3–5%) but reduced margins (12.5–13.5% vs prior 14–15%) and EPS ($9.50–$10.50 vs prior $10.40–$11.40) to incorporate ~$50M net tariff costs (~100 bps OPM hit) and Q2 margin flow-through .
  • Q2 outlook: net sales +3–5%, operating margin 12–13%, EPS $2.10–$2.30; share repurchases ~$50M planned in Q2 after $200M in Q1 (5% of shares outstanding) .
  • Stock reaction catalyst: clear beat vs consensus, durable Hollister momentum (8th straight growth quarter) and balanced regional growth, offset by A&F brand weakness, gross margin compression (-440 bps YoY) from freight and carryover inventory, and tariff headwinds .

What Went Well and What Went Wrong

  • What Went Well
    • Hollister delivered record first-quarter net sales (+22% YoY) and +23% comps, with strength in fleece, jeans, skirts; AURs and units both up, reflecting lower promotions .
    • Broad-based regional growth: Americas +7%, EMEA +12%, APAC +5%; positive comps across regions (Americas +4%, EMEA +6%, APAC +2%) .
    • Operating expense leverage (~140 bps) helped offset lower gross margin; marketing investment at 5.3% of sales supported growth while G&A benefited from lower payroll/incentives . Quote: “Operating expense leverage partially offset lower gross margin…resulting in an operating margin of 9.3% and EPS of $1.59” .
  • What Went Wrong
    • Abercrombie brands declined 4% YoY; comps −10% given AUR pressure to clear winter carryover and softer spring categories versus a stellar prior-year comp (Best Dressed Guest/wedding shop) .
    • Gross margin down 440 bps YoY in Q1, with more than half of decline from freight, remainder due to carryover/higher cost inventory; sequential improvement expected in Q2 as freight normalizes .
    • Tariff environment prompts FY margin guidance reduction; assumed 10% on all global imports to US and 30% on China, net ~$50M cost impact despite mitigation (supply chain shifts, vendor negotiations, opex efficiencies) .

Financial Results

MetricQ3 2025Q4 2025Q1 2026Q1 2026 Consensusvs Consensus
Revenue ($USD Millions)$1,209 $1,585 $1,097 $1,059.7*Beat
Net Income per Diluted Share (EPS) ($)$2.50 $3.57 $1.59 $1.36*Beat
Operating Income ($USD Millions)$179 $256 $102 ——
Operating Margin %14.8% 16.2% 9.3% ——
Comparable Sales %16% 14% 4% ——

Consensus values marked * retrieved from S&P Global.

Segment Net Sales and Brands – Q1 2026

Segment/BrandQ1 2026 Net Sales ($USD Thousands)YoY ChangeComparable Sales %
Americas874,804 +7% +4%
EMEA185,036 +12% +6%
APAC37,471 +5% +2%
Abercrombie brands547,947 −4% −10%
Hollister brands549,364 +22% +23%

KPIs and Balance Sheet – Q1 2026

KPIQ1 2026Prior Year/Info
Cash & equivalents$511M $864M (May 4, 2024)
Liquidity~$940M ~$1.2B (Feb 1, 2025)
Inventories (cost)$542M +21% YoY; units +6%
Marketing expense (% of sales)5.3% Key driver of selling expense deleverage
Share repurchases$200M in Q1 (2.6M shares, ~5% of SO) $1.1B remaining authorization
Stores opened/closed in Q17 openings / 3 closures (net +4) Q2 plan: ~19 openings / ~5 closures

Guidance Changes

MetricPeriodPrevious Guidance (Mar 5, 2025)Current Guidance (May 28, 2025)Change
Net Sales GrowthFY20253%–5% 3%–6% Raised high end
Operating Margin %FY202514%–15% 12.5%–13.5% Lowered (tariff impact ~100 bps)
Effective Tax RateFY2025~26% ~27% Raised
EPS (Diluted)FY2025$10.40–$11.40 $9.50–$10.50 Lowered
Diluted Weighted Avg SharesFY2025~51M ~49M Lower (buybacks)
Share RepurchasesFY2025$400M $400M Maintained
CapExFY2025~$200M ~$200M Maintained
Real Estate ActivityFY2025~40 net openings; 60 openings/20 closures; 40 remodels ~40 net openings; 60 openings/20 closures; 40 remodels Maintained
Net Sales GrowthQ2 2025—+3%–5% New
Operating Margin %Q2 2025—12%–13% New
Effective Tax RateQ2 2025—~28% New
EPS (Diluted)Q2 2025—$2.10–$2.30 New
Share RepurchasesQ2 2025—~$50M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2025)Previous Mentions (Q4 2025)Current Period (Q1 2026)Trend
Tariffs/MacroRisk factors noted; strong growth on tough comps FY2025 outlook included tariff assumptions for China/Mexico/Canada Assumes 10% tariff all imports, 30% from China; net ~$50M cost hit; no broad-based price hikes planned Increasing cost headwind; mitigation via supply chain/opex
Supply Chain / FreightNoted Red Sea risks in risk section —Freight drove >50% of −440 bps GM decline; ~$10M excess freight to be absorbed in Q2 before normalizing Pressures easing sequentially
Product PerformanceBoth brands grew double digits Hollister +16% YoY; A&F +2% Hollister +22% (record Q1); A&F −4% on carryover & spring softness Hollister momentum; A&F near-term softness
Promotions/AURHealthy AURs —Flat AUR overall; A&F AUR down due to carryover; Hollister up; expect flat AUR rest of year Normalization; selective promo alignment
Regional TrendsAmericas +14%, EMEA +15%, APAC +32% Americas +11%; EMEA +2%; APAC −4% in Q4 Americas +7%; EMEA +12%; APAC +5% Balanced growth; EMEA strengthening
Real Estate / Footprint—FY plan ~60 openings/40 remodels Q1: 7 opens/3 closes; Q2 plan 19/5; ~100 new experiences FY Accelerating store expansion
Inventory Management—Inventories +22% YoY Inventory cost up 21%; units +6%; carryover normalized vs FY2024 lows Positioned for growth; mix optimization

Management Commentary

  • “We delivered record net sales of $1.1 billion on growth of 8%…operating margin of 9.3% and earnings per share of $1.59” .
  • “Our goal is to deliver sequential improvement on the top line in the second quarter, putting Abercrombie…on a path to growth later this year” .
  • “Based on our current assumptions on tariffs, we are not planning broad-based ticket increases” .
  • “Net of expected mitigation efforts, the assumed tariffs carry a cost impact of around $50 million for 2025, impacting our full-year operating margin outlook by 100 basis points” .
  • “Hollister…delivering the brand’s eighth consecutive quarter of growth…Both AUR and units were up” .

Q&A Highlights

  • Abercrombie brand drivers: weakness in carryover-driven AUR and spring categories (wedding shop anniversary), with swim and active as bright spots; inflection expected in the back half as the team “chases” winners .
  • Margin trajectory: sequential GM improvement in Q2 as freight/carryover pressures ease; flat AUR expected for balance of year; FY operating margin guide 12.5–13.5% with potential upside if top line outperforms .
  • Real estate: returning to net store openings; FY ~100 new “experiences,” 60 opens/20 closures; smaller footprint stores (e.g., Williamsburg) performing well .
  • Tariffs and mitigation: $70M gross tariff impact partially offset ($20M) via supply chain footprint changes, vendor negotiations, and opex efficiencies .
  • Regional expansion: strong momentum in UK and Germany; diversified sourcing across 16 countries; China sourcing volume now low single digits .

Estimates Context

  • Q1 2026 vs S&P Global consensus: Revenue $1.10B vs $1.06B* (beat); EPS $1.59 vs $1.36* (beat); estimate counts: 7 revenue, 9 EPS contributors*.
  • Q4 2025 context: actual revenue $1.58B vs $1.57B*, EPS $3.57 vs $3.56* (in line/beat)*.
  • Implications: Expect upward revisions to Hollister brand growth and near-term revenue trajectory; margin estimates likely trimmed for FY2025 given tariff headwinds and Q2 margin outlook, with recovery expected in 2H as freight normalizes and carryover clears .

Consensus values marked * retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat with broad-based regional growth and sustained Hollister strength should support near-term sentiment; watch for confirmation of sequential top-line improvement in Q2 .
  • Margin headwinds are transitory (freight/carryover) and structural (tariffs). Management is not taking broad price increases, relying on mitigation and mix; near-term GM pressure should ease from Q1’s −440 bps .
  • Abercrombie brand softness is comp- and carryover-driven; signs of product traction (swim, active) and agility suggest a 2H inflection; monitor wedding/occasion reset and emerging trends (boho/western, bottoms fit changes) .
  • Capital allocation remains shareholder-friendly: $200M buybacks in Q1; FY target $400M; reduced share count supports EPS durability despite margin resets .
  • Store expansion and localized formats are a growth lever, particularly in EMEA (UK, Germany) and select US neighborhoods; footprint and digital cohesion reinforce omnichannel productivity .
  • FY guide de-risked for tariffs (OPM −100 bps); if mitigation/sourcing changes outpace assumptions or top line outperforms, margin upside exists .
  • Trading lens: Near term, beat and raised sales guide are positives; watch Q2 GM cadence and A&F brand trajectory. Medium term, Hollister momentum and disciplined opex support EPS in the $9.50–$10.50 range despite tariffs; any easing in trade costs could be a catalyst .