If you thought Abercrombie & Fitch was just a mall brand from the early 2000s, think again. The company is on a roll, and it showed no signs of slowing down when it reported second-quarter results on Wednesday.
The numbers were impressive, to say the least. Earnings came in at $4.17 per diluted share, absolutely demolishing the analyst consensus of $1.99. Even adjusted earnings, which strip out one-time items, rose to $2.32 per share from a year earlier. Net sales climbed 5% to $1.267 billion, beating the $1.248 billion estimate and marking the 15th straight quarter of sales growth. Comparable sales were flat, but that didn't dampen the mood.
What's driving this growth? It's a mix of brands and regions. Abercrombie brands grew 8%, while Hollister sales rose 2%. Both posted their best-ever second-quarter sales. Geographically, sales increased 5% in the Americas, 19% in the Asia-Pacific region, and 2% in Europe, the Middle East, and Africa. Operating income jumped to $252.7 million from $206.7 million, and the operating margin expanded to 19.9% from 17.1%.
Now, here's a twist: the results included about $100 million in refunds tied to tariffs imposed under the International Emergency Economic Powers Act. That benefit added an estimated $1.75 per diluted share to earnings. So, while the headline number looks stellar, a good chunk of it came from a one-time boost. But even without that, the company beat its own expectations.
CEO Fran Horowitz was clearly pleased. She said record second-quarter sales and the 15th consecutive quarter of growth reflected strength across the company's brands and regions. She highlighted faster growth in the Americas, improving trends in Europe, the Middle East, and Africa, and the 8% sales increase for Abercrombie brands. Horowitz also noted that operating margin and earnings exceeded the company's outlook beyond the tariff-refund benefit. She added that Abercrombie continues to invest in stores, digital capabilities, technology, and marketing while returning cash to shareholders.
Looking ahead, the company is feeling confident. It raised its fiscal 2026 earnings forecast to $13.10 to $13.60 per share, up from the previous range of $10.20 to $11. Analysts were expecting $10.71. Net sales are now expected to be about $5.529 billion, above the prior range of $5.424 billion to $5.529 billion and the $5.464 billion estimate. For the third quarter, Abercrombie forecasts earnings of $2.90 to $3.20 per share and sales of $1.355 billion to $1.367 billion. Analysts were looking for $2.84 per share on sales of $1.345 billion.
The company also expects higher annual sales and earnings, double-digit operating margins, strong cash flow, and at least $500 million in share repurchases. Speaking of cash, Abercrombie generated $313 million in operating cash flow during the first half. It repurchased $177 million in stock during the quarter and $282 million year to date, reducing shares outstanding by 7% from the start of the year. Cash and equivalents stood at $628 million as of Aug. 1, down from $760 million on Jan. 31.
Investors clearly liked what they saw. Abercrombie & Fitch (ANF) shares were up 11.43% at $121.35 during premarket trading on Wednesday.
So, what's the takeaway? Abercrombie is firing on all cylinders, with strong brand performance, a solid balance sheet, and a bright outlook. The tariff refunds gave earnings a nice boost, but the underlying business seems healthy too. For retail investors, this is a company that's not just surviving but thriving in a tough environment.
