Abercrombie Stock Gains 14.7% on Q1 Earnings Beat & Record Sales

Abercrombie & Fitch Co. ANF posted first-quarter fiscal 2025 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. Additionally, on a year-over-year basis, the company’s top line increased , but the bottom line declined.

Abercrombie’s earnings per share (EPS) of $1.59 in the fiscal first quarter declined 25.7% from $2.14 in the year-ago quarter. Moreover, the bottom line beat the Zacks Consensus Estimate of $1.35.

Abercrombie & Fitch Company Price, Consensus and EPS Surprise

Abercrombie & Fitch Company price-consensus-eps-surprise-chart | Abercrombie & Fitch Company Quote

Net sales of $1.1 billion advanced 8% year over year on both a reported basis and a constant-currency basis. The top line surpassed the Zacks Consensus Estimate of $1.06 billion. ANF’s comparable sales (comps) improved 4%. The top-line beat was driven by broad-based net sales growth across regions and exceptional growth at its Hollister brand.

Abercrombie’s shares jumped 14.7% yesterday after the company posted better-than-expected first-quarter results. The strong performance highlights its continued momentum in executing its strategic growth initiatives, supported by robust top-line results and disciplined financial management. The company is effectively leveraging its investments in store expansion and digital capabilities to drive broad-based growth across regions.

Hollister was the standout performer, delivering its eighth consecutive quarter of growth. The brand saw meaningful gains in both average unit retail and units sold, fueled by strong demand across key categories such as fleece, jeans and skirts. This balanced growth across genders and product lines, alongside increased cross-channel traffic and stepped-up marketing efforts, reflects the brand’s growing resonance with consumers and its ability to sustain performance in a competitive retail environment.

Shares of this Zacks Rank #3 (Hold) company have lost 8.5% in the past three months against the industry's 4.9% growth.

ANF Stock's Price Performance

Abercrombie’s Regional & Brand Sales Drive Growth

Sales in the Americas increased 7% year over year to $874.8 million, EMEA sales rose 12% to $185 million, and APAC sales gained 5% to $37.5 million. Comps rose 4% in the Americas, 6% in EMEA, and 2% in APAC regions.

Net sales fell 4% year over year to $547.9 million for the Abercrombie brand. Moreover, sales increased 22% to $549.4 million at Hollister. The Abercrombie brand contributed 49.9% to the total company sales, whereas Hollister contributed 50.1% to sales. Comps fell 10% for Abercrombie and grew 23% for Hollister in the quarter.

Our model predicted sales growth of 1.7% for the Abercrombie brand and 9.9% for Hollister. We estimated sales to increase 5.5% in the Americas and 6.6% in EMEA.

ANF’s Quarterly Performance: Margins & Expenses

Abercrombie’s gross margin of 62% in the fiscal first quarter contracted 440 basis points (bps) year over year. Lower gross margin in the quarter was partially offset by approximately 140 basis points of operating expense leverage, primarily driven by reduced general and administrative costs, including lower payroll and incentive compensation.

Selling expenses were $399.9 million, which grew 11.1% year over year. As a percentage of sales, selling expenses increased 110 bps to 36.4%. General and administrative costs fell 7.7% to $174.9 million, while the metric, as a percentage of sales, decreased 270 bps to 15.9%.

The company reported an operating income of $101.5 million, down 21.8% from $129.9 million in the year-ago period. It registered an operating margin of 9.3%, down 340 bps from 12.7% in the year-ago quarter.

ANF’s Financial Health Looks Stable

Abercrombie ended the fiscal first quarter with cash and cash equivalents of $511 million, no net long-term borrowings and stockholders’ equity of $1.2 billion, excluding non-controlling interests.

The company had a liquidity of $940 million at the end of the fiscal first quarter, which included cash and equivalents. Net cash provided by operating activities was $4 million as of May 3, 2025.

In the first quarter of 2025, the company repurchased 2.6 million shares for roughly $200 million, reducing the share count by 5% before accounting for the impact of stock-based compensation. Following these repurchases, $1.1 billion remains available under the share buyback program approved in March 2025.

Abercrombie’s Q2 & FY25 Outlook

Management provided the view for the second quarter and fiscal year 2025. For the second quarter of fiscal 2025, net sales are projected to rise 3-5% from $1.13 billion recorded in the year-ago period. The operating margin for the fiscal second quarter is expected to be 12-13%. It expects EPS to be in the band of $2.10-$2.30, lower than the $2.50 reported in the year-ago quarter. The effective tax rate is expected to be about 28%.

For fiscal 2025, the company expects year-over-year sales growth in the range of 3-6% compared with 3-5% growth expected earlier. This upside is likely to be backed by growth across regions and brands. The updated outlook reflects the strong first-quarter performance, prompting an increase to the high end of the previous guidance. The company anticipates an operating margin in the band of 12.5-13.5%, down from the previous guidance of 14-15%. This downward revision from the previous outlook is primarily due to an estimated 100 basis point impact from tariffs, net of mitigation efforts.

For fiscal 2025, management envisions weighted average shares of around $49 million, which reflects the impacts of 2025 share repurchases. Combined with the tax rate, ANF predicts EPS to be in the range of $9.50-$10.50 compared with the $10.40-$11.40 guided earlier.

Abercrombie anticipates an effective tax rate of around 27% for fiscal 2025. Capital expenditure is estimated to be $200 million for the current fiscal year.

For fiscal 2025, Abercrombie plans 60 store openings, together with 40 remodels and rightsizes, and 20 closures.

Key Picks

Some better-ranked stocks in the same space are Canada Goose GOOS, Allbirds Inc. BIRD and Stitch Fix SFIX.

Canada Goose is a global outerwear brand. GOOS is a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. It carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Canada Goose’s current fiscal year’s earnings and sales implies growth of 10% and 2.9%, respectively, from the year-ago actuals. GOOS delivered a trailing four-quarter average earnings surprise of 57.2%.

Allbirds is a lifestyle brand with naturally derived materials to make footwear and apparel products. It carries a Zacks Rank of 2 at present.

The Zacks Consensus Estimate for Allbirds’ current financial year’s earnings implies growth of 16.1% from the year-ago actual. The company delivered a trailing four-quarter average earnings surprise of 21.3%.

Stitch Fix delivers customized shipments of apparel, shoes and accessories for women, men and kids. It currently has a Zacks Rank of 2.

The Zacks Consensus Estimate for SFIX’s fiscal 2025 earnings implies growth of 64.7% from the year-ago actual. SFIX delivered a trailing four-quarter average earnings surprise of 48.9%.

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This article originally published on Zacks Investment Research (zacks.com).

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