Abercrombie & Fitch Co.

Second-quarter net sales were a record $1.27 billion, up 5% year over year. Operating income was $253 million and operating margin was 19.9%, versus adjusted operating income of $168 million and adjusted operating margin of 13.9% last year. Net income per diluted share was $4.17 versus adjusted EPS of $2.32 last year. The quarter included approximately $100 million of IEEPA tariff refunds, which management said contributed about 790 basis points to operating margin and about $1.75 to EPS. For full year 2026, the company now expects net sales growth of around 5% from $5.27 billion in 2025, operating margin of 14.5% to 15%, and EPS of $13.10 to $13.60, including approximately $120 million of total IEEPA tariff refunds and about $2.10 of EPS benefit. For Q3, it expects sales growth of 5% to 6%, operating margin of 13% to 14%, and EPS of $2.90 to $3.20, including about $20 million of tariff-refund benefit.

Fran Horowitz-Bonadies struck an upbeat, confident tone, saying the company delivered its 15th consecutive quarter of top-line growth and that both brands posted record second-quarter sales. She emphasized balanced growth across regions, brands and categories, and pointed to progress on strategic priorities like new channels, new categories, AI and maintaining profitability while returning cash to shareholders. She also highlighted early success in SoHo, the NFL partnership, the Target wholesale expansion and initial reads in footwear and accessories as proof points for future growth.

Robert Ball focused on the mechanics of the quarter and guide, highlighting the $100 million tariff refund, the 19.9% operating margin, and the $4.17 EPS outcome. He said the quarter’s margin outperformance came from both the tariff refund and about 200 basis points of underlying strength from favorable gross margin and operating leverage. On the balance sheet, he cited $628 million of cash and cash equivalents, about $1.1 billion of liquidity, $10 million of marketable securities, and $568 million remaining on the repurchase authorization. He also said ending inventory at cost was approximately flat to last year, with units up low single digits, and that capital expenditures are expected to be around $250 million.

Analysts pressed on the drivers of improved product acceptance, AUR versus units, and whether Hollister’s inventory had constrained sales. Management said lower discounting drove better AUR, but units also improved, which they viewed as evidence that demand is real rather than purely a pricing effect. On Hollister, they said inventory had at times trailed demand and the brand was effectively “chasing,” but that stock has now caught up and growth has accelerated in August. Questions on the margin raise and long-term operating margins were answered with the view that tariffs and freight largely offset in the back half, while new growth levers like Target, NFL, footwear, accessories and licensing should complement the core business without any meaningful gross margin hit today.