Abercrombie & Fitch posted mixed first-quarter results on Wednesday and weaker-than-expected guidance after the conflict in the Middle East “directly impacted” sales, the company said.
Despite those challenges, shares jumped about 13% in morning trading as the company easily topped Wall Street’s earnings estimates.
Sales in Abercrombie’s Europe, Middle East and Africa region fell 10% during the quarter, driven by a slowdown in demand at the brand’s Hollister banner that came as the conflict ramped up, finance chief Robert Ball said on a call with analysts.
Overall, it reduced first-quarter total company net sales growth by more than 0.5 percentage points relative to the retailer’s outlook, he said.
“We’re focused on what we can control, including our inventory levels and marketing investments, ensuring we can respond to what’s happening in real-time,” CEO Fran Horowitz added on the call. “Despite these EMEA headwinds, we expect total sales growth for the second quarter, along with full-year 2026, which would be our fourth consecutive year of net sales growth.”
In the current quarter, Abercrombie expects earnings per share to be between $1.80 and $2, well behind estimates of $2.54, according to LSEG.
Though the company’s outlook for the current quarter was worth than analysts expected, it reaffirmed its full-year guidance. Abercrombie anticipates net sales will rise 3% to 5% for the fiscal year, with earnings per share of $10.20 to $11.
Despite the slowdown in EMEA, which represents about 15% of total company sales, Abercrombie’s companywide sales climbed 2%. Still, that growth didn’t come from organic consumer demand and was instead driven by new store openings and favorable foreign exchange rates, Ball said.
Here’s how the apparel company did in its first fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:
- Earnings per share: $1.47 vs. $1.28 expected
- Revenue: $1.11 billion vs. $1.12 billion expected
The company’s reported net income for the three-month period that ended May 2 was $67.13 million, or $1.47 per share, compared with $80.41 million, or $1.59 per share, a year earlier.
Sales rose to $1.11 billion, up about 2% from $1.10 billion a year earlier.
When asked about its current quarter outlook, and what it expects to change in the back half of the year, Ball mentioned easier comparisons to last year’s results and lower marketing spending, among other facors, not an expected improvement in demand.
“It is a balanced story here. Tariffs and freight, by the time we get to year-end, will be just slight headwinds year-over-year,” Ball explained. Aside from the challenges its seeing in the Middle East and the EMEA region, the company is seeing modest growth in average unit retail, which is funding the investments its making and keeping it in line with a 12% to 12.5% operating margin, Ball said.
Unlike many of its peers, Abercrombie is factoring in recent reductions in tariff rates after the U.S. Supreme Court ruled President Donald Trump’s so-called reciprocal tariffs are illegal, which helped its financial outlook.
It’s now expecting tariffs to impact profitability by 0.2 percentage points in fiscal 2026, compared to previous expectations of around 0.7 percentage points. It said it has applied for a tariff refund of around $100 million but didn’t factor that potential influx into its outlook.
