Abercrombie & Fitch posted mixed first-quarter results on Wednesday and weaker-than-expected guidance after conflicts in the Middle East “had a direct impact” on sales, the company said.
Despite those challenges, shares jumped nearly 12% in afternoon trading as the company easily met Wall Street’s earnings estimates.
Sales in Abercrombie’s Europe, Middle East and Africa region fell 10% during the quarter, due to lower demand for the brand’s Hollister banner that came as the dispute escalated, Chief Financial Officer Robert Ball said on a call with analysts.
Overall, it reduced the company’s sales growth in the first quarter by more than 0.5 percent compared to the retailer’s estimate, he said.
“We’re focusing on what we can control, including our levels of innovation and marketing investment, making sure we can respond to what’s happening in real time,” CEO Fran Horowitz said on the call. “Despite these EMEA headwinds, we expect overall sales growth for the second quarter, and for the full year of 2026, which would be our fourth consecutive year of sales growth.”
For the current quarter, Abercrombie expects earnings per share to be between $1.80 and $2, behind estimates of $2.54, according to LSEG.
Although the company’s outlook for the current quarter was worse than analysts’ expectations, it reaffirmed its guidance for the full year. Abercrombie expects net sales to rise 3% to 5% for the fiscal year, with earnings per share of $10.20 to $11.
Despite the decline in EMEA, which represents about 15% of the company’s total sales, Abercrombie’s company-wide sales increased by 2%. However, that growth did not come from organic consumer demand and was instead driven by new store openings and favorable foreign exchange rates, Ball said.
Here’s how the commodities company performed in its first fiscal quarter compared to Wall Street’s expectations, based on a survey of LSEG analysts:
- 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 months 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 nearly 2% from $1.10 billion last year.
When asked about its current quarterly outlook, and what it expects to change in the back half of the year, Ball spoke of easy comparisons with last year’s results and lower spending on marketing, among other things, not the expected improvement in demand.
“It’s a balancing act here. Taxes and property, by the time we get to the end of the year, it’s going to be a bit windy year after year,” It explains Football. Despite the challenges in its outlook in the Middle East and EMEA region, the company is seeing modest growth in the number of retail stores, supporting its investments and keeping it in line with an operating margin of 12% to 12.5%, Ball said.
Unlike many of its peers, Abercrombie is looking at recent tax cuts after the US Supreme Court ruled that President Donald Trump’s so-called reconciliation tax is illegal, helping its financial outlook.
It now expects prices to impact profits by 0.2 percent in fiscal 2026, compared with an earlier expectation of about 0.7 percent. It said it has applied for a tax refund of approximately $100 million but did not include that in its view.
