Updated 4:40 p.m. ET May 27
War in the Middle East took a toll on Abercrombie & Fitch’s first-quarter bottom line and sales, but the profit picture nonetheless exceeded both the company’s and Wall Street’s expectations.
For the quarter ended May 2, operating income was $89 million, down from $102 million a year earlier. Operating margin as a percent of sales slipped to 8 percent from 9.3 percent.
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Net income fell to $68.12 million, or $1.47 per diluted share, from $81.74 million, or $1.59 per diluted share. The $1.47 per share was 15.7 percent above analysts’ consensus estimates.
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Sales rose nearly 2 percent to $1.11 billion — a record level for the business — from $1.09 billion in the year-ago period, but were still slightly below Wall Street’s expectation. Comparable sales slipped 1 percent.
“I am actually very proud about our quarter. We came into the year with momentum and now we started 2026 with momentum,” Fran Horowitz told WWD in an interview Wednesday. “On the profit side, don’t foreget we had a tariff headwind. We didn’t have that last year for this quarter. That was a big piece of that. But that aside, with both brands we are excited about the customer and the product acceptance we’re seeing. We had AUR [average unit retail price] growth. Our inventories are really fresh and in line with sales. We have an opportunity to continue to chase into what’s working. So we’re optimistic heading into the rest of the year.”
Horowitz pointed to continued investments in stores, with 130 openings, renovations and relocations. “We have 50 stores opening this year. It’s a balance between Abercrombie and Hollister and is happening mostly in the Americas, and a little bit in EMEA. We’re going to be a net store opener for the fifth year [in a row].”
Horowitz also said the multiyear implementation of a modernized enterprise resource planning system was “seamless” and will make A&F “faster, more efficient” while it “gives us opportunities to add partners, categories and channels, which was more difficult with our old system.”
On the heels of the Abercrombie’s continuing collaboration with Sperry, Horowitz said, “There are other exciting things coming this quarter that I can’t talk about.”
During a conference call with industry analysts, the CEO said: “With the upcoming World Cup, teens are looking for authentic fits to represent their team. Hollister has partnered with Kappa, the Italian sportswear brand with a deep connection to international football, on a collection of men’s and women’s pieces. We believe we have exactly what the Hollister customer needs for match days and watch parties, in addition to the casual wear we are known for.”
Overall, the New Albany, Ohio-based retailer is seeing its strengths offset its headwinds with Horowitz citing strong product acceptance at both brands, unit and AUR growth, store openings, reduced tariffs going forward, strength in the Americas, APAC and the U.K.
Promotions are not expected to increase this year, she said.
Regarding bestsellers, Horowitz said that at the Abercrombie brand there was balanced growth across genders with fleece denim and woven performing well.
At the Hollister brand, Horowitz added, graphic T-shirts, shorts and swim while other warm weather categories grew nicely as the business transitioned to spring.
Horowitz also cited benefits from AI, including the launch on Black Friday of Perplexity agentic commerce, telling WWD: “We’re expecting to see AI embedded into our business model help with productivity, workflows, inventory and of course for our customers and providing more personalized delivery and more seamless experiences.”
She said it was still “too soon to say” if AI will ultimately result in headcount reduction.
There are headwinds, however, including rising freight costs during the second half of this year, the Middle East conflicts and pressure from rising fuel costs.
A strategic review of the APAC region continues, Horowitz told WWD. “We have a nice business there and our expectation is to make sure that we are running the business in the most efficient way and we’re exploring options to do that,” including possibly different approaches to franchising, wholesaling and other business models.
By brand, Abercrombie sales rose 3 percent to $564.7 million from $547.9 million a year ago. Comparable sales were flat.
Hollister sales were virtually flat at $549.1 million compared with $549.4 million. Comparable sales were down 2 percent.
For all of 2026, the company, maintaining its forecast from earlier in the year, expects net sales to rise 3 to 5 percent, net income in the range of $10.20 to $11 per share, and operating margin of 12 to 12.5 percent.
Wall Street seemed very pleased with the results and outlook, driving A&F’s stock price up 8.9 percent to close at $81.42 on Wednesday.
“We delivered record first-quarter net sales and our 14th consecutive quarter of growth, reflecting our teams’ consistent execution for our customers amid a dynamic global environment,” Horowitz said in a prepared statement. “Results were driven by continued growth in the Americas, led by Abercrombie brands, along with strong growth in APAC.
“In EMEA, demand softened as the Middle East conflict ramped up, particularly impacting Hollister brands, and we are proactively managing inventory and marketing to support the region. Our bottom-line results reflect discipline and consistency, with both operating margin and earnings per diluted share exceeding our outlook. We continued to invest in stores and marketing to strengthen our brands and customer experiences, while also returning $105 million to shareholders through share repurchases, supported by our strong balance sheet.
“On our first-quarter progress, we are maintaining our full-year sales and operating margin outlook,” Horowitz said. “With our customer at the center of everything we do and a strong foundation in place, we remain on offense across product and marketing and are confident in our path to deliver full-year net sales growth across brands, double-digit operating margins, strong cash flow and earnings per share growth to create long-term value for shareholders.”