Abercrombie & Fitch Co. Shows Growth in Q3 Beating Expectations

• StockStory Top Pick ANF +5.43%

Updated 4:10 p.m. ET Nov. 25

Abercrombie & Fitch reported third-quarter results and a year-end outlook that topped market expectations, catapulting the stock price up over 38 percent to $90.31 on Tuesday.

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Net sales in the third quarter ended Nov. 1 rose 7 percent to $1.3 billion, from $1.2 billion in the year-ago period. Comparable sales increased 3 percent. The company has achieved three years of consecutive quarterly sales growth.

Sales at the Abercrombie brand were down 2 percent to $617.3 million, from $629.8 million in the year-ago quarter. But sales at the Hollister brand rose 16 percent to $673.3 million from $579.1 million in the year-ago quarter.

Operating income for the quarter slipped to $155 million from $179 million a year earlier. And operating margin decreased to 12 percent from 14.8 percent.

Net income per diluted share tallied $2.36, down from $2.50 a year earlier.

The New Albany, Ohio-based specialty retailer narrowed its sales outlook for the year to 6 percent to 7 percent growth, from the previous outlook of from 5 to 7 percent growth. Net income is now seen ranging from $10.20 to $10.50 per diluted share, from the $10 to $10.50 previously forecast. The guidance on the operating margin remains the same, in the range of 13 percent to 13.5 percent.

In an interview with WWD, Fran Horowitz, chief executive officer, indicated there was much to be positive about going forward. In the face of economic pressures, she said: “Consumers are showing resilience. Our customer file is continuing to grow. Traffic in our stores and on our websites is strong. The key is to keep the team focused on what they can control. The customer always has a choice where to shop, but they’re continuing to choose us. We are clearly taking share.”

Asked what steps are being taken at Abercrombie to return the brand to positive growth, Horowitz said: “We’re very busy staying close to the customer. Our inventories are in great shape. We keep it tight…Our goal is to be approximately flat for the fourth quarter.” She cited healthy inventory positions in denim, fleece, sweaters and sleepwear, which are important categories for holiday at both the Abercrombie and Hollister brands.

With denim, “In the past, it’s been about one look. Today, particularly on the female side, there are a variety of looks, which is an interesting opportunity,” Horowitz said, citing wide-leg and low-rise baggy jeans among the styles being offered.

Also expected to give holiday sales a lift is the Hollister partnership with Taco Bell on a limited-edition Y2K-inspired collection, launching Monday, and Abercrombie’s ongoing partnership with the National Football League, which involves all 32 teams, licensed team logo-ed jerseys, styles for “dressing for game day,” and styling the football players as well as their wives and girlfriends. Some of the athletes are also involved in designing apparel.

The partnership with the NFL began a few years ago as a test, but Abercrombie discovered that many of its customers were big football fans, and that half of the fandom is female, presenting an opportunity to dress women football fans for game day with sweatshirts, flannels and leggings.

In a conference call with retail analysts and investors, Horowitz said: “We remain focused on bringing the [Abercrombie] brand back to growth by diligently executing the playbook that has delivered a double-digit compound annual growth rate on sales from 2019 on strong double-digit [average unit retail price] improvement over that time. This holiday, you’ll see a lot of what Abercrombie is known for — fashion, comfort and authenticity, and you’ll continue to see it expressed through newness across categories.”

“The theme across our brand portfolio and company is consistent,” Horowitz added. “We remain on offense. From both a brand and regional perspective, we are investing in marketing, stores and talent to support sustainable, long-term growth. We also continue to make opportunistic investments in digital, technology and our infrastructure to improve the agility and speed needed to support our growing global business. These tech investments have the power to enhance the entire customer journey, especially when paired with AI. We recently deployed AI agents and customer service to improve the experience while driving scale and efficiency.”

Shifting to the outlook, Robert Ball, chief financial officer, said during the call: “We entered the fourth quarter with momentum, and we are narrowing to the upper end of the full-year sales expectations we provided in August. We continue to reflect tariffs and mitigation consistent with our second-quarter call commentary and the team continues to find cost efficiencies through vendor discussions as we plan 2026. For the full year, we now expect net sales growth to be in the range of 6 percent to 7 percent from $4.95 billion in 2024. We’ve narrowed the range to reflect third-quarter performance and for expected fourth-quarter sales. We currently anticipate 60 basis points of favorable foreign currency in the outlook.

With the operating margin percentage still seen in the range of 13 to 13.5 percent, Ball said the rate is impacted by a $38.6 million benefit from litigation settlement, or around 70 basis points, and a tariff impact of around $90 million for 2025, or 170 basis points.

“Hollister brands grew 16 percent on a strong finish to back-to-school and fall seasonal transition,” Horowitz said. “Abercrombie brands made sequential progress in-line with our expectations, and we are tightly managing inventory as we aim for fourth-quarter brand net sales to be approximately flat to last year’s record.

“On the bottom line, we delivered a 12 percent operating margin including important investments in marketing, digital and technology, in addition to 210 basis points of adverse tariff impact,” Horowitz said. “We exceeded our expectations on earnings per share, while also returning $100 million to shareholders in the third quarter, our seventh consecutive quarter of share repurchases.

“As we enter the holiday season, our global teams are energized and ready to deliver exceptional experiences for our customers across brands and regions,” Horowitz said. “We remain on track toward record net sales for fiscal 2025, on the foundation of consistent quarterly top-line growth, top-tier profitability and healthy cash flow. Our results reinforce the strength of our operating model and give us confidence in our ability to drive sustainable, long-term shareholder value.”

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