Young adult apparel retailer Abercrombie & Fitch (NYSE: ANF) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 6.6% year on year to $1.21 billion. Guidance for next quarter’s revenue was better than expected at $1.28 billion at the midpoint, 1.8% above analysts’ estimates. Its GAAP profit of $2.91 per share was 26.6% above analysts’ consensus estimates.

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StockStory’s Take

Abercrombie & Fitch’s second quarter results slightly exceeded Wall Street revenue expectations, with management crediting strong performance at Hollister and steady traffic across both digital and physical channels. CEO Fran Horowitz highlighted Hollister’s momentum, describing it as “an exciting time, with everything working across categories and genders.” Abercrombie, however, was impacted by lower average unit retail due to inventory clearance, a deliberate move to reset for future growth. Management also noted the continued benefit of new store openings and the positive response to brand activations, especially for Hollister’s heritage and Collegiate collections.

Looking ahead, management’s guidance for the next quarter and the full year reflects confidence in cross-channel traffic growth and ongoing investments in marketing and partnerships. CFO Robert Ball explained that the company is increasing marketing spend to support initiatives like the NFL partnership and fall campaigns, while also navigating tariff headwinds with a well-defined mitigation strategy. Horowitz added, “Our teams have demonstrated before, we have a variety of options in our playbook, including shifting global production, enhancing supplier contracts, managing operating expenses, and determining ways to increase AUR through lower promotions.”

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to Hollister’s strong brand resonance, strategic inventory management, and targeted investments in marketing and retail footprint expansion.

• Hollister momentum: Hollister delivered robust growth driven by cross-category strength and engagement with teen customers. Management pointed to successful launches like the Y2K heritage line and Collegiate collection, with CEO Fran Horowitz emphasizing the brand’s ability to “stay close to the customer and respond quickly to trends.”
• Abercrombie inventory reset: The Abercrombie brand saw sales decline due to lower average unit retail as the company worked through excess inventory. This was a planned move, with Horowitz noting inventory is now “in good shape,” positioning the brand to chase growth opportunities in categories like denim and respond to trends such as Boho and Western fits.
• Tariff mitigation underway: The company faced meaningful tariff headwinds, with about $5 million impacting Q2 and more expected through year-end. CFO Robert Ball described a multi-pronged mitigation strategy including shifting supply chain footprints, vendor negotiations, and operating expense efficiencies, while avoiding broad-based ticket price increases.
• Marketing and brand activations: Abercrombie & Fitch increased marketing investments, launching high-profile campaigns and new partnerships, such as the NFL collaboration, to drive traffic and consumer engagement. These efforts are supported by a balanced approach between social media and in-person events, including Lollapalooza activations.
• Store expansion: Management highlighted the opening of 13 new stores in Q2, with additional openings planned for the second half. The mix of new stores and remodels is intended to enhance brand experience and support omnichannel growth, with Ball citing higher productivity and customer acquisition benefits from physical locations.

Drivers of Future Performance

Management expects growth to be driven by sustained traffic gains, continued marketing investments, and strategic responses to supply chain and tariff challenges.

• Sustained Hollister strength: The company anticipates continued momentum at Hollister, fueled by new collections, effective brand activations, and strong alignment with teen consumers. Management believes that Hollister will outperform Abercrombie in the near term, with targeted product launches and marketing campaigns supporting top-line growth.
• Tariff and cost pressures: Tariffs are expected to pressure margins by approximately 170 basis points for the year. Management is deploying a mitigation playbook, including diversifying sourcing, renegotiating vendor contracts, and seeking operational efficiencies. Pricing actions are expected to remain limited to preserve brand value.
• Marketing and partnerships: Increased marketing spend is planned to support major partnerships—most notably the NFL collaboration—and seasonal campaigns. Management expects these efforts to drive customer engagement and support both store and digital traffic, though higher marketing expenses will partially offset margin gains.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the impact of new product launches and brand activations—such as the NFL partnership and expanded denim campaigns—on traffic and sales, (2) Abercrombie’s return to growth as inventory resets take hold and promotional activity normalizes, and (3) the effectiveness of tariff mitigation strategies, including supply chain adjustments and vendor negotiations. Store expansion progress and the ramp of marketing investments will also be important markers of execution.

Abercrombie and Fitch currently trades at $98.06, up from $96.74 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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