Abercrombie & Fitch Sustains Sales Momentum in Q4, Sees More Gains Ahead

The fourth quarter marked the retailer's 13th consecutive quarter of growth.

Abercrombie & Fitch Courtesy image

Abercrombie & Fitch, extending its long streak of quarterly gains, reported fourth-quarter results that met the high end of the company’s expectations.

In addition, the company is forecasting single-digit sales gains in 2026.

For the quarter ended Jan. 31, net sales rose 5 percent to $1.67 billion, with comparable sales up 1 percent.

Operating income of $236 million last quarter compared to $256 million in last year’s quarter. Operating margin as a percent of sales was 14.1 percent, compared to 16.2 percent in the year-ago period. The 210 basis point year-over-year decline in operating margin was driven primarily by 360 basis points of tariff expense, which was partially offset in gross margin by 140 basis points of freight cost favorability, both included in cost of sales.

Net income per diluted share came in at $3.68, ahead of both Wall Street’s expectations at $3.58 and the $3.57 earned in the year-ago period.

The Abercrombie brand’s fourth-quarter sales rose 4 percent to $806.5 million from $772.7 million, marking a return to net sales growth, though comparable sales were down 1 percent. The Hollister division’s sales increased 6 percent to $863.3 million from $812.3 million, with comparable sales up 3 percent.

“It was another terrific year and terrific quarter, and we have expectations to grow in 2026,” Fran Horowitz, chief executive officer of Abercrombie & Fitch, told WWD.

Horowitz said the bestselling categories at Hollister were fleece, outerwear and graphic T-shirts, while Abercrombie was led by fleece, outerwear and the YTB activewear subbrand.

Wednesday’s fourth-quarter and year-end report was positive, with 2025 marking the first time A&F exceeded $5 billion in sales. But Wall Street apparently wanted a more ambitious growth outlook from the company for 2026, and pulled A&F’s stock price down 4 percent to $95.21 as of Wednesday afternoon. A&F is anticipating a first-quarter sales gains of 1 percent to 3 percent, operating margin around 7 percent, and net income per diluted share of $1.20 to $1.30. And for all of 2026, the company expects sales gains of 3 to 5 percent, operating margin in the range of 12 to 12.5 percent, and net income per diluted share in the range of $10.20 to $11.

“We start every year with a realistic outlook,” Horowitz told WWD.

Horowitz, along with Robert Ball, A&F’s chief financial officer, explained that the company is transitioning to a new enterprise resource planning system, which will limit inventory receipts and movement across the business for about two weeks, creating a temporary headwind of approximately 1 to 2 percentage points of growth for the quarter, and some incremental implementation costs in the quarter, leading to more than 100 basis points of unfavorable operating margin impact. The new ERP system is, as Ball explained, “an enabler to plug those different modes of business into our ecosystem.”

“Our old ERP system was built more than 15 years ago when we had a very different business model,” Horowitz said. Now A&F’s model is centered on “read and react, chasing merchandising, speed, agility and opportunities to grow,” with a more diversified approach to business through new partnerships and distribution channels.

So far at least, A&F has not experienced any meaningful impact from the war with Iran, Horowitz told WWD. In the Middle East, the company has 40 stores operating through partnerships. It also conducts some “minimal” production in the region. The stores closed for a brief period, but are currently up and running. The CEO emphasized the company is more focused on ensuring the safety of customers and associates in the Middle East than the operations.

Industrywide, there are concerns about rising apparel prices due to the 15 percent tariffs recently laid out by U.S. President Donald Trump. A&F did not specify how much prices are up on spring goods. “It’s hard to pinpoint,” Horowitz said, while emphasizing that the company has been “judicious” on allocating price increases. They’re more focused on noncore, fashion items where customers have been willing to pay up, and less than half the assortment has seen price increases, Horowitz said. But she also said that prices on denim have not increased this year, and that items at opening prices remain the same as well.

In other news, A&F is examining “strategic alternatives” for APAC, where the company operates owned stores and also has partnerships. “We did finish our third consecutive quarter of growth,” in APAC, Horowitz told WWD. “We believe in the long-term opportunity there, but we go to market in a variety of different ways. We have to choose.”

Abercrombie kids.

The company is also considering expanding its distribution to department stores. Currently, abercrombie kids is sold at about 1,000 department store doors in the U.S., including Macy’s, Nordstrom and Dick’s Sporting Goods. A&F’s launch of baby and toddler merchandise last month will be distributed to department stores. And A&F has a partnership with Haddad Brands to expand the global reach of its abercrombie kids brand. Haddad is a New York-based, privately held, family business specializing in children’s apparel and accessories.

Asked if adult Abercrombie merchandise or Hollister merchandise could eventually be sold at department stores, Ball replied, “There is nothing to announce today.”

For the full year, net sales rose 6 percent to $5.27 billion, with comparable sales increasing 3 percent. By brand, Hollister delivered net sales on growth of 15 percent, with Abercrombie down 1 percent.

Commentating on Hollister’s performance for the year, Horowitz, during a conference call with industry analysts, said, “With consecutive years of 15 percent growth, driven by increases in unit selling and AUR and product, we delivered growth across genders and key categories, showing improved balance on both. We saw a great response from a variety of exciting marketing campaigns supporting key product drops like our collegiate collection, the grand shop and [our] collaboration with Taco Bell,” a capsule collection that dropped on Cyber Monday last December and included jeans, hoodies and sweats with Taco Bell logos.

“At Abercrombie brands, after a challenging start to 2025, up against a near perfect 2024, the team rallied and committed to getting the brand back to growth by the end of the year. We did just that, achieving a return to net sales growth for the fourth quarter.”

At the center of A&F’s ability to keep growing is its “read and react” inventory model whereby the company chasing millions of units each year to support product demand with healthy AURs and tight inventory control. Last year, units were up in the midsingle digits.

“I can’t overemphasize how hard our team works at this, coordinating product across functions, geographies, channels and partners, all while tariffs were changing the global supply chain landscape week-to-week,” Horowitz said.

A Hollister outfit.

Shares of Abercrombie & Fitch Co. closed Wednesday down 3.6 percent to $95.65.

https://wwd.com/business-news/retail/abercrombie-amp-fitch-sustains-sales-momentum-in-q4-1238646630/