Key Highlights

● Second-quarter net sales rose 5 per cent year over year to $1.27 billion.

● Reported operating margin rose to 19.9 per cent from 17.1 per cent a year earlier.

● A tariff refund of about $100 million added $1.75 to diluted earnings per share.

● The company repurchased about $177 million of stock, cutting shares outstanding 7 per cent.

Abercrombie & Fitch Co. (NYSE:ANF). Net sales reached $1.27 billion, up 5 per cent, while comparable sales were flat. Reported operating margin was 19.9 per cent, against 17.1 per cent a year earlier, and diluted earnings per share were $4.17 compared with $2.91 (or $2.32 once last year's litigation settlement is excluded). The company stressed that the quarter included about $100 million of refunds of tariffs levied under the International Emergency Economic Powers Act, recorded as a reduction in cost of sales. That refund added $1.75 to diluted earnings per share. Stripping it out leaves a far more modest picture of year-on-year profit growth, and readers should treat the headline margin as flattered by a non-recurring item. Inventories were $592 million, unchanged from $593 million a year earlier.

Two Brands, Diverging Trends

The brand split was pronounced. Abercrombie brands grew 8 per cent to about $597 million with comparable sales up 4 per cent, while Hollister rose 2 per cent to about $670 million but saw comparable sales fall 3 per cent. Chief executive Fran Horowitz described both as record second-quarter sales and cited accelerating momentum in the Americas and improving trends in EMEA. By region, the Americas grew 5 per cent, EMEA 2 per cent and Asia-Pacific 19 per cent. The contrast matters because, in fiscal 2025, Hollister had been the stronger brand, growing 15 per cent on a 13 per cent comparable gain, whereas Abercrombie brands recorded a 7 per cent comparable decline. The leadership has therefore reversed within a year.

Outlook and Capital Returns

Management guided to third-quarter net sales growth of 5 to 6 per cent, an operating margin of 13.0 to 14.0 per cent and diluted earnings per share of $2.90 to $3.20. For the full year it now expects sales growth of about 5 per cent, an operating margin of 14.5 to 15.0 per cent and earnings per share of $13.10 to $13.60. These are guidance figures, not outcomes. The outlook assumes an effective tariff rate of 10 to 12.5 per cent on imported goods for the remainder of the year, down from 15 per cent, and about $120 million of refunds for the full year. The company repurchased about $177 million of stock in the quarter, or 2.0 million shares, bringing the year-to-date total to $282 million and a 7 per cent reduction in shares outstanding. Remaining authorisation was $568 million. The company did not report a dividend in the sources reviewed, so none is described here.

Hollister's Reversal Is the Quarter's Real Story

Abercrombie & Fitch's headline margin owes a meaningful share to a non-recurring tariff refund, so the more durable signal sits in the brand mix: Abercrombie brands grew 8 per cent with comparable sales up 4 per cent, while Hollister's comparable sales fell 3 per cent after being the stronger brand a year earlier. That leadership swap, combined with full-year guidance that assumes a lower tariff rate for the rest of the year, makes the underlying brand momentum, not the refund-boosted margin, the figure worth watching into the holiday season.