Abercrombie & Fitch Q1 Earnings Call Highlights

Key Points

• Abercrombie & Fitch posted record Q1 fiscal 2026 results, with net sales of $1.1 billion, operating margin of 8%, and EPS of $1.47 all coming in above expectations. The company also extended its streak to 14 consecutive quarters of net sales growth and kept its full-year guidance unchanged.
• EMEA weakness was the main drag on growth, as conflict in the Middle East and softer demand in parts of Europe caused regional sales declines that offset gains in the Americas and APAC. Management said it is adjusting inventory, receipts, and promotions to match demand trends in those markets.
• Tariffs, freight, and investments are shaping margins, but share buybacks continue, with the company now assuming lower full-year tariff pressure than previously expected and still targeting about $450 million in repurchases for fiscal 2026. It also completed its ERP upgrade and is testing AI tools to support future efficiency and growth.

Abercrombie & Fitch NYSE: ANF reported record first-quarter fiscal 2026 net sales and maintained its full-year outlook, even as geopolitical pressure in the Middle East and parts of Europe weighed on results in the EMEA region.

Chief Executive Officer Fran Horowitz said the company delivered its 14th consecutive quarter of net sales growth, with first-quarter sales reaching $1.1 billion, up 2% from a year earlier. Operating margin was 8%, above the company’s plan, while diluted earnings per share came in at $1.47, also above the company’s expected range.

“One quarter in, the team continues to stay agile in a dynamic global environment,” Horowitz said. She added that 2026 is “shaping up to be another year of consistent progress” as the company maintained its outlook for net sales, operating margin and earnings per share.

EMEA Weakness Offsets Growth in Americas and APAC

By region, first-quarter net sales rose 3% in the Americas and 24% in APAC, while EMEA sales declined 10%. Chief Financial Officer Robert Ball said EMEA demand was “directly impacted” as conflict in the Middle East ramped up, reducing total company net sales growth by more than 50 basis points relative to the company’s prior outlook.

Comparable sales declined 1% overall. Americas comparable sales rose 1%, APAC comparable sales increased 15%, and EMEA comparable sales fell 11%.

Horowitz said continued growth in the U.K. was more than offset by declines in the Middle East and other European markets. She said the company has responded by controlling receipts and adjusting promotions to match demand trends.

Ball said the company expects “more of the same” from the Middle East impact as it moves through the balance of the season. He said management is adjusting inventory and aligning promotions in the region while staying close to demand trends.

Abercrombie Brands Grow, Hollister Flat Against Prior-Year Record

Abercrombie brands posted net sales growth of 3% on flat comparable sales. Horowitz said the business saw positive average unit retail, or AUR, supported by customer response to spring assortments, with fleece, denim and wovens performing well in the Americas and U.K.

Hollister brands were flat compared with last year’s first-quarter record, with comparable sales down 2%. Horowitz said Hollister grew in the Americas and APAC, but those gains were offset by Middle East and European demand pressure. She cited graphic tees, shorts, swim and other warm-weather categories as areas of strength as the brand transitioned into spring.

During the question-and-answer session, Horowitz said both brands remain healthy and that the company is not seeing changes in performance across customer cohorts. “They’re showing up,” she said of consumers. “We’re positioned well with two healthy brands.”

Executives also highlighted brand collaborations. Abercrombie recently partnered with Sperry on footwear and apparel, a launch Horowitz said exceeded internal expectations and generated higher-than-average conversion. Hollister partnered with Kappa on a collection tied to international football ahead of the World Cup.

Tariffs, Freight and Investments Shape Margin Outlook

Operating income was $89 million in the quarter, compared with $102 million a year earlier. Ball said the 130-basis-point decline in operating margin was primarily due to 90 basis points of increased marketing investment and about 90 basis points of ERP implementation costs. These were partially offset by AUR and foreign currency benefits to gross margin.

Tariff pressure totaled 180 basis points year over year in the first quarter, but Ball said it was fully offset by favorable freight costs. Tariff expense was lower than anticipated due to the timing and level of tariff rates in the quarter.

For fiscal 2026, the company now assumes a 15% tariff on all global imports into the U.S. effective for the second half of the year, along with a 10% effective tariff rate for the second quarter. Ball said those assumptions translate to about 20 basis points of full-year gross margin pressure, improved from the 70 basis points assumed in March. He said the benefit is expected to be offset by elevated freight costs and continued investments in marketing and stores.

The company has applied for about $100 million in IEEPA tariff refunds but has not included any benefit from those applications in its outlook.

Full-Year Guidance Maintained

Abercrombie & Fitch maintained its full-year outlook for net sales growth of 3% to 5% from fiscal 2025 sales of $5.27 billion. The company expects growth across brands, growth in the Americas, and EMEA sales slightly below 2025 levels given current trends in the Middle East and parts of Europe.

Management continues to expect full-year operating margin of 12% to 12.5%, a tax rate around 30%, and diluted earnings per share of $10.20 to $11. The company expects capital expenditures of about $225 million.

For the second quarter, the company expects net sales to rise 2% to 4% from $1.2 billion a year earlier. It forecast operating margin of about 10%, including roughly $20 million, or about 120 basis points, of unfavorable tariff impact net of mitigation efforts. Second-quarter diluted earnings per share are expected to range from $1.80 to $2.

Ball said the company expects to deliver about 130 new store experiences this year, including 50 new stores and 80 remodels and right-sizes. It expects to close about 20 stores, making it a net store opener for the year.

ERP Upgrade Complete, Share Repurchases Continue

The company completed the implementation of its upgraded merchandising ERP system in March. Ball said the company proactively limited certain third-party orders during the implementation, reducing top-line growth by about 100 basis points in the first quarter. Normal operations resumed in April.

Horowitz said the ERP upgrade should support long-term channel and category expansion and help the company onboard global partners, channels and geographies. She also said the company is testing ways to use artificial intelligence across areas including customer care, forecasting, inventory and customer experience.

Abercrombie & Fitch ended the quarter with $594 million in cash and cash equivalents, about $1 billion in liquidity and $25 million in marketable securities. Inventory at cost declined 2%, while inventory units were up low single digits.

The company repurchased $105 million of shares during the quarter, equal to 3% of shares outstanding at the beginning of the year. It ended the quarter with $745 million remaining under its current share repurchase authorization and continues to expect about $450 million in share repurchases for fiscal 2026.

About Abercrombie & Fitch NYSE: ANF

Abercrombie & Fitch Co NYSE: ANF is an American specialty retailer that designs, markets and sells casual apparel and accessories for men, women and children. Founded in 1892 by David T. Abercrombie and Ezra Fitch, the company evolved from an outdoor gear outfitter to a global lifestyle brand renowned for its relaxed, preppy aesthetic. Its product assortment includes tops, bottoms, outerwear, intimates, swimwear, fragrances and personal care items.

The company operates under multiple brand names, including Abercrombie & Fitch, Abercrombie Kids, Hollister and Gilly Hicks, each targeting distinct consumer segments from teens to young adults.

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