Abercrombie & Fitch (ANF) saw its shares climb approximately 4% to 5% in premarket trading on Wednesday, following the release of first-quarter earnings that surpassed Wall Street expectations. The upbeat results have reignited discussions about the retailer's ongoing turnaround, which had faced skepticism earlier this year amid slowing demand and rising tariff costs.
Earnings Beat and Regional Performance
For the quarter ended May 2, Abercrombie reported net sales of $1.11 billion, a 2% increase year-over-year. Earnings per diluted share came in at $1.47, exceeding the analyst consensus of $1.28, as compiled by LSEG and reported by Reuters. The company characterized the period as achieving "record first-quarter net sales."
Regional performance showed a mixed picture. Sales in the Americas rose 3%, while the Asia-Pacific region posted a robust 24% gain. However, the Europe, Middle East, and Africa (EMEA) segment saw a 10% decline, which CEO Fran Horowitz attributed to soft demand impacted by the Middle East conflict, particularly affecting the Hollister brand.
Brand and Comparable Sales Details
By brand, Abercrombie sales increased 3% to $564.7 million, while Hollister sales remained flat at $549.1 million. Comparable sales—a key metric measuring stores open at least a year plus digital channels—declined 1% overall. Notably, Hollister's comparable sales fell 2%, a concerning sign given its target demographic of competitive teen and young-adult consumers.
Margins and Share Buybacks
Operating margin narrowed to 8.0% from 9.3% a year earlier, though it remained positive. During the quarter, the company repurchased $105 million of its own shares and still has $745 million remaining under its buyback authorization.
Tariff Impact and Guidance
Abercrombie benefited from a lower-than-expected tariff impact. The company now estimates the full-year tariff effect at approximately 20 basis points, down from its earlier projection of 70 basis points. It has also filed for roughly $100 million in tariff refunds under the International Emergency Economic Powers Act.
The retailer maintained its full-year outlook, projecting sales growth of 3% to 5% and earnings per diluted share in the range of $10.20 to $11.00. For the second quarter, it expects sales to rise 2% to 4%, with EPS between $1.80 and $2.00. The operating margin forecast remains at 12.0% to 12.5%.
Market Context and Analyst Views
The positive earnings report provided some relief for consumer-facing stocks, with Abercrombie's results aligning with better demand seen at Capri and Bath & Body Works, according to Reuters. However, concerns persist. Barclays downgraded ANF to Equal Weight earlier in May, citing heavier promotions and a crowded teen apparel market.
Despite the beat, challenges remain. Weakness in EMEA, flat Hollister sales, and uncertainty around tariff refunds continue to weigh on the outlook. The company has flagged risks related to trade policy, consumer demand, global conflicts, supply chains, and potential fashion missteps in its forward-looking statements.
