Shares of Abercrombie & Fitch surged 25% in premarket trading despite the apparel retailer lowering its profit outlook due to the impact of tariffs. The company anticipates tariffs to reduce its earnings by $50 million this year.
Abercrombie & Fitch now projects full-year earnings per share (EPS) between $9.50 and $10.50, a revision from the earlier range of $10.40 to $11.40. Although the updated forecast falls below analysts' expectations of $10.33 per share, the company's first-quarter results surpassed estimates on both revenue and earnings.
The fiscal first-quarter report showed net income of $80.4 million, or $1.59 per share, compared to $114 million, or $2.14 per share, in the same period last year. Revenue climbed approximately 8% to $1.10 billion from $1.02 billion year-over-year, reaching a record high for the quarter.
CEO Fran Horowitz highlighted the broad growth across Abercrombie & Fitch's three regions, noting the strong performance of the Hollister brand, which reported 22% net sales growth — its best-ever first quarter. In contrast, the Abercrombie brand's sales declined 4%, following an exceptional 31% rise the previous year.
The company also revised its operating margin forecast downward to a range of 12.5% to 13.5%, down from an earlier projection of 14% to 15%. These margin estimates incorporate the effects of current tariffs, including a 30% duty on Chinese imports and a 10% tariff on goods from multiple other countries. However, they exclude tariffs that are currently paused.
Despite these headwinds, Abercrombie & Fitch raised its full-year sales growth outlook to a range of 3% to 6%, above the previously forecast 3% to 5%, driven largely by strong performance at Hollister. For the upcoming quarter, the company expects sales growth between 3% and 5%, aligning with market expectations.
Looking ahead, Abercrombie anticipates operating margins between 12% and 13% and earnings per share ranging from $2.10 to $2.30 for the current quarter, both below analyst expectations.
The decline in Abercrombie brand sales and comparable store sales — down 4% and 10%, respectively — suggests a potential slowdown following recent rapid expansion. Meanwhile, Hollister remains the primary growth driver for the company.
Overall, while tariffs and slower sales at the Abercrombie brand pressure profits, the company’s solid first-quarter performance and stronger-than-expected revenue prospects supported its stock surge despite cautious profit guidance.
