Abercrombie Stock Soars on Record Q1 Sales as Hollister Shines Despite Profit Forecast Cut

Despite slashing its full-year profit forecast, Abercrombie & Fitch saw its shares surge by over 15% after posting better-than-expected first-quarter results. The retailer reported earnings per share of $1.59, surpassing the $1.39 anticipated by analysts, and revenue of $1.10 billion versus the expected $1.07 billion. This revenue marked a record high for the first fiscal quarter, fueled by broad-based growth, particularly from the Hollister brand, which posted a 22% increase in sales.

Tariffs Pressure Margins, Abercrombie Diversifies Sourcing and Cuts Costs to Adapt

Abercrombie revised its full-year earnings guidance downward to $9.50–$10.50 per share from $10.40–$11.40, citing an anticipated $50 million hit from tariffs. Operating margin projections were also lowered to 12.5%–13.5% from the previous 14%–15% range. Tariffs currently in effect include a 30% levy on imports from China and 10% on goods from multiple countries, which are expected to significantly impact profitability.

To soften the blow from tariffs, Abercrombie is avoiding broad-based price hikes and instead focusing on cost-cutting and supply chain diversification. CFO Robert Ball noted the company had already reduced its reliance on Chinese sourcing from 30% pre-pandemic to low single digits, with more focus now on Vietnam, Cambodia, and India. While the Trump administration’s trade proposals could further strain margins, Abercrombie is maintaining a cautious strategy to protect long-term investments.

Abercrombie Struggles as Hollister Thrives, New Strategies Aim to Revive Growth

While Hollister experienced strong momentum, the flagship Abercrombie brand faced headwinds. Sales at Abercrombie fell 4%, and comparable sales dropped 10%, partially due to heavy discounting of unsold winter inventory and tough comparisons to the prior year’s successful wedding shop launch. The company is now pivoting with a “vacation shop” initiative and aims to return the brand to growth in the second half of the year.

Looking ahead, Abercrombie slightly raised its full-year revenue forecast to growth of 3%–6%, up from 3%–5%, exceeding analysts’ projections. For the current quarter, it expects sales growth of 3%–5% and earnings per share between $2.10 and $2.30, slightly below expectations. While margin pressures persist, the company remains optimistic, particularly with the strength of Hollister and new product strategies aimed at sustaining momentum.