Abercrombie Rallies as Strong Q1 Earnings Extend Winning Streak

Key Points

• Abercrombie & Fitch delivered another strong earnings beat in Q1 and extended its streak of sales growth to 14 consecutive quarters, sending shares up 12%.
• Results were driven by continued strength in the Americas and growth in the Asia-Pacific region, while the ongoing conflict in the Middle East weighed on consumer demand in EMEA.
• With shares are still down more than 30% year to date, the retailer’s strong earnings performance, continued sales growth, and discounted valuation relative to peers could make the recent pullback look increasingly attractive to investors.

Abercrombie & Fitch Co. NYSE: ANF surged Wednesday after the retailer delivered another quarter of better-than-expected earnings and extended its streak of sales growth to 14 consecutive quarters.

Shares of the apparel and accessories retailer, whose core brands include Abercrombie and Hollister, jumped about 12% following the report, helping revive momentum in a stock that has been under heavy pressure in recent months.

Abercrombie Extends Winning Streak

Abercrombie reported first-quarter earnings of $1.47 per share, down from $1.59 a year earlier, though the result handily topped Wall Street expectations for $1.26 per share. Revenue rose 1.5% year over year to $1.1 billion, but was roughly $8.2 million short of analysts’ estimates. Operating margin was 8% of sales, above the company’s outlook of around 7%.

Results were supported by strength in the Americas, where sales rose 3%, and the Asia-Pacific (APAC) region, which posted 24% growth. The company saw weakness in Europe, the Middle East, and Africa (EMEA), however, as the ongoing conflict in the Middle East weighed on consumer demand.

In terms of brand performance, Abercrombie brands posted 3% year-over-year net sales growth, while Hollister reported flat net sales and a 2% decline in comparable sales.

The company also said it completed the implementation of its upgraded merchandising enterprise resource planning (ERP) system, helping to ease investor concerns about further disruptions tied to the transition.

Outlook Remains Intact Despite Middle East Headwinds

Abercrombie issued a second-quarter outlook and reiterated its full-year guidance. For the second quarter, the company said it anticipates net sales growth of 2% to 4%, with net income per diluted share of $1.80 to $2. Operating margin is expected to be around 10%.

For the full year, Abercrombie continues to expect net sales growth of 3% to 5%, earnings per diluted share of $10.20 to $11, and operating margin between 12% and 12.5%. The company also continues to expect to repurchase around $450 million of shares.

The retailer also issued an improved outlook on tariffs, saying it now expects an unfavorable impact of roughly 20 basis points, an improvement from its prior forecast of around 70 basis points.

During the earnings call, Chief Financial Officer Robert Ball said, “We're entering the middle of 2026 with clear priorities, healthy brands, and a strong playbook. We're operating with discipline and flexibility in a mixed environment, and we're monitoring our markets, particularly the Middle East, while remaining nimble and tight with inventory.”

He added, " This is the same model we've consistently used to successfully manage through a wide range of environments, and we're confident in our ability to deliver another year of growth and profitability."

Q1 Earnings Help Restore Momentum After Sharp Pullback

The last six months have been volatile for Abercrombie stock. Shares surged at the end of November after the company delivered better-than-expected third-quarter results, driving the stock from around $66 ahead of the report to a 52-week high above $133 by Jan. 9.

Momentum reversed course shortly afterward, however, after the company tweaked its full-year outlook, indicating net sales growth and operating margin would likely come in at the lower end of its prior forecast. The update caused shares to plunge nearly 18%.

The stock came under pressure again after the company’s fourth-quarter earnings report in early March. Although Abercrombie reported record fiscal 2025 results with better-than-expected earnings and year-over-year revenue growth, investors seemed to focus on concerns about tariff pressures and potential disruptions tied to the ERP transition.

Since then, shares have continued to trend lower, falling nearly 15% over the past three months. Year to date, the stock is down more than 30%, despite the May 27 jump.

Despite the recent pressure, however, shares of Abercrombie have still delivered strong longer-term gains, rising about 10% over the past year and 90% over the last five years.

Analysts See Significant Upside Potential

Wall Street remains bullish on Abercrombie, which currently carries a Moderate Buy consensus rating based on eight Buy ratings and five Holds.

The average analyst price target of $116 implies roughly 40% upside from its recent price of just under $84. Even the lowest price target of $92 suggests shares may still have room to run, while the highest target of $149 points to significant additional upside potential.

The recent pullback may also make Abercrombie’s valuation look increasingly attractive to investors. With a price-to-earnings ratio below 8, the stock is trading at a substantial discount to the broader retail industry, which has an average P/E ratio of around 17.5.

Abercrombie also trades at a lower multiple than several key competitors, including American Eagle Outfitters Inc. NYSE: AEO, which has a P/E ratio of 16, Urban Outfitters Inc. NASDAQ: URBN at 15, and Gap Inc. NYSE: GAP, which trades at a P/E ratio above 11.

Abercrombie continues to show resilience despite facing some ongoing headwinds. With Wall Street still largely bullish and the stock trading at a discounted valuation relative to peers, investors may increasingly view the recent pullback as a potential buying opportunity.