Abercrombie & Fitch Q1 2025 Earnings Report

Introduction to Abercrombie & Fitch’s Performance

Abercrombie & Fitch’s shares soared on Wednesday, despite the company slashing its profit outlook due to tariffs that are expected to hit its business by $50 million. The retailer is now expecting full-year earnings per share to be between $9.50 and $10.50, down from a previous range of between $10.40 and $11.40. Analysts were expecting earnings of $10.33 a share.

Financial Performance and Outlook

The company cut its operating margin forecast, another closely watched metric by investors. It’s now expecting its operating margin to be between 12.5% and 13.5%, down from a previous range of between 14% to 15%. The company’s guidance includes the estimated impact from tariffs that are currently in effect, including a 30% tariff on imports from China and a 10% levy on goods from dozens of other countries. It excludes other currently paused tariffs.

First-Quarter Results

Abercrombie reported fiscal first-quarter results that beat Wall Street’s expectations on the top and bottom lines. Here’s how the apparel company performed in the fiscal first quarter compared with expectations:

• Earnings per share: $1.59 vs. $1.39 expected
• Revenue: $1.10 billion vs. $1.07 billion expected
  The company’s reported net income for the three-month period that ended May 3 was $80.4 million, or $1.59 per share, compared with $114 million, or $2.14 per share, a year earlier.

Sales Performance

Sales rose to $1.10 billion, up about 8% from $1.02 billion a year earlier. In a news release, Abercrombie said sales reached a record high for the fiscal first quarter. "This was above our expectations and was supported by broad-based growth across our three regions," CEO Fran Horowitz said in a statement. Hollister brands led the performance with growth of 22%, achieving its best ever first quarter net sales, while Abercrombie brands net sales were down 4% against 31% sales growth in 2024.

Guidance and Expectations

Beyond its profit outlook, Abercrombie slightly raised its full-year sales guidance and is now expecting revenue to rise between 3% and 6%, up from a previous range of between 3% and 5%. That’s largely ahead of expectations of 3.3% growth. For its current quarter, Abercrombie anticipates sales will rise between 3% and 5%, which is in line with expectations of 4.7% growth at the high end. The company expects its operating margin to be between 12% and 13%, lower than expectations of 14.1%. It anticipates earnings per share will be between $2.10 and $2.30, below expectations of $2.50.

Mitigating Tariff Impact

On a call with analysts, finance chief Robert Ball said Abercrombie expects a $70 million hit from tariffs, but will lower it to $50 million through mitigation. To offset the duties and maintain profits, the company is not planning "broad-based" price increases, but is working with its vendors to offset costs and looking to diversify its sourcing network. "The more diversified we get, the faster that we can be," Ball said. "We’re looking for expense reductions … across the business, but we’re doing that with a very clear eye to protecting long-term investments for the business, because we just see a ton of opportunity for these brands globally and longer term. So it’s a very cautious approach."

Brand Performance

Abercrombie sourced about 30% of its products from China before the pandemic, but that number is now in the low single digits, said Ball. Its biggest trading partners are now Vietnam, Cambodia, and India, which would all face tariffs between 26% and 49% under President Donald Trump’s April proposal. Abercrombie’s weak guidance largely reflects how tariffs will cut into its profits, but its sales are also expected to take a hit as it contends with a slowdown at its namesake banner. Abercrombie’s eponymous chain fueled its historic comeback over the last few years, but sales fell 4% at the brand in the first quarter, following 31% growth in the year-ago period. Meanwhile, comparable sales for the Abercrombie brand plunged 10%.

Future Plans

The company is also lapping the strong launch of its wedding shop in the year-ago period. The product launch included dresses and outfits for all of the occasions surrounding the modern-day wedding, such as the rehearsal dinner, the morning after brunch, and the bachelorette trip. To build on the success of wedding apparel, Abercrombie launched its vacation shop this year, which Horowitz expects will be a growth driver for the company. She expects the Abercrombie brand to return to growth in the back half of the year.

Conclusion

Abercrombie & Fitch’s performance and guidance reflect the challenges posed by tariffs and a slowdown in its namesake brand. However, the company’s efforts to diversify its sourcing network, mitigate tariff impacts, and drive growth through its Hollister brand and new product launches are expected to support its long-term prospects.

FAQs

Q: What is Abercrombie & Fitch’s revised profit outlook?
A: Abercrombie & Fitch is now expecting full-year earnings per share to be between $9.50 and $10.50, down from a previous range of between $10.40 and $11.40.
Q: How much is Abercrombie expecting to be hit by tariffs?
A: Abercrombie expects a $70 million hit from tariffs, but will lower it to $50 million through mitigation.
Q: What is driving Abercrombie’s growth?
A: Hollister brands led the performance with growth of 22%, achieving its best ever first quarter net sales.
Q: Is Abercrombie planning to increase prices due to tariffs?
A: The company is not planning "broad-based" price increases, but is working with its vendors to offset costs and looking to diversify its sourcing network.
Q: What are Abercrombie’s expectations for its current quarter?
A: Abercrombie anticipates sales will rise between 3% and 5%, and expects its operating margin to be between 12% and 13%.