Shares of Abercrombie & Fitch Co. (NYSE: ANF) surged more than 22% in early trading Wednesday after the apparel retailer reported record quarterly revenue and lifted its full-year guidance, aided by a substantial one-time tariff refund. The stock jumped 22.09% to $133.00 as investors cheered both the headline beat and the improved underlying operational performance.
The company posted earnings of $4.17 per diluted share for its fiscal second quarter, a figure that included $1.75 per share from $100 million in refunds related to the International Emergency Economic Powers Act (IEEPA) tariffs. Excluding that one-time benefit, adjusted earnings came in at approximately $2.42, which is 21.6% above the $1.99 consensus estimate from FactSet, as reported by The Wall Street Journal.
Net sales rose 4.8% year over year to $1.267 billion, surpassing the LSEG projection of $1.25 billion. The company's namesake Abercrombie brand saw sales climb 8%, while Hollister recorded a 2% increase, according to Reuters. However, comparable sales were flat overall, with Abercrombie up 4% but Hollister down 3%. Geographically, comparable sales fell 4% in EMEA, rose 1% in the Americas, and jumped 13% in APAC.
The reported operating margin reached 19.9%, but the tariff refund contributed 790 basis points, implying an underlying margin of roughly 12.0%—nearly two percentage points higher than management's previous guidance of about 10%. This beat suggests that the company's core operations are performing better than expected, even before accounting for the one-time windfall.
Management raised its fiscal 2026 sales growth projection to approximately 5%, up from the earlier 3% to 5% range. The operating margin outlook was also lifted to 14.5%–15.0%, compared to the prior 12.0%–12.5% range. The full-year EPS guidance midpoint rose 25.9% to $13.35, with a new range of $13.10–$13.60, versus the previous $10.20–$11.00.
The company expects to receive about $120 million in tariff refunds for the full year, contributing roughly 220 basis points to the annual operating margin. The remainder of the margin improvement is more modest, putting the focus on sales execution and cost control for future valuation.
For the third quarter, Abercrombie guided to sales growth of 5%–6% and EPS in the range of $2.90–$3.20, which is above the analyst consensus of $2.82. This guidance includes an implicit buffer, suggesting management is confident in continued momentum despite the fading of the tariff benefit.
Capital returns also supported per-share growth. The company repurchased 2.0 million shares for $177 million during the quarter, bringing year-to-date buybacks to $282 million and reducing the share count by around 7%. Liquidity remains adequate but has decreased, with cash dropping to $628 million from $760 million at the end of January. Year-to-date operating cash flow stood at $313 million, and total liquidity was approximately $1.1 billion.
At $133.00, shares traded at roughly 10.0 times the updated annual EPS midpoint, a premium to the $122 average analyst target. Of fourteen analysts covering the stock, seven have positive ratings and seven recommend hold, according to S&P Global consensus.
Risks remain, as tariff refunds are not a recurring source of profit, comparable sales are flat overall, and cash levels have declined. The company's ability to maintain the expected 12% underlying margin will be crucial for sustaining investor enthusiasm once the refund boost subsides. Attention now turns to back-to-school demand and third-quarter margins.
