Abercrombie & Fitch Co.

Abercrombie & Fitch reported record first-quarter net sales of $1.1 billion, up 2% year over year, with comparable sales down 1%. Operating margin was 8%, versus 12%? No, the company said 8% exceeded its plan and operating income was $89 million versus $102 million last year; adjusted EBITDA margin was 12% on $131 million of adjusted EBITDA versus $140 million last year. EPS was $1.47, above expectations, versus $1.59 last year. Regionally, Americas net sales rose 3%, APAC rose 24%, and EMEA fell 10%; by brand, Abercrombie Brands sales rose 3% and Hollister Brands were flat. For the full year, management maintained outlook for net sales growth of 3% to 5% from $5.27 billion in 2025, operating margin of 12% to 12.5%, and diluted EPS of $10.20 to $11. For Q2, it guided to net sales up 2% to 4% versus $1.2 billion last year, operating margin around 10%, and EPS of $1.80 to $2. The company also expects about 130 store experiences in 2026, $225 million of capex, and around $450 million of share repurchases.

Fran Horowitz said the company is still executing its playbook: growing across brands, investing in stores, digital and marketing, and using the upgraded ERP and AI tools to support longer-term growth. Her tone was upbeat and confident, emphasizing the 14th straight quarter of net sales growth, strong customer response to assortment and collaborations, and the belief that both Abercrombie and Hollister can grow for the year. She also said the company is aiming for another year of top-line growth, double-digit operating margin and strong cash flow.

Robert Ball focused on the mechanics behind the quarter and the guide. He said the 130 bps year-over-year operating margin decline reflected about 90 bps of higher marketing expense and about 90 bps of ERP implementation costs, partly offset by AUR and FX gross margin favorability; tariff pressure of 180 bps in Q1 was fully offset by favorable freight costs. He noted inventory ended Q1 down 2% at cost, cash and cash equivalents were $594 million, liquidity was about $1 billion, marketable securities were $25 million, and $745 million remained on the buyback authorization. For 2026, he said the company still expects $450 million of repurchases, around $225 million of capex, and Q2 and full-year margin plans that absorb tariffs, freight and ongoing investment.

Analysts focused on the Middle East drag, ERP transition, promos, and the shape of the full-year guide. Management said the Middle East impact was about 50 bps to total company sales versus the March outlook, concentrated more heavily in Hollister, and that they expect the pressure to continue in Q2 and the full year while they manage inventory and promotions. They also said the ERP is now in the rearview mirror, normal operations resumed in April, and the temporary third-party order pause had reduced first-quarter growth by about 100 bps. On promotions, management repeatedly said levels were consistent with plan and that positive AUR showed customers were responding to product, while on APAC they said the strategic review remains underway and more updates will come later this year.