Abercrombie Sales Top US$5 Billion, 2026 Growth Faces Headwinds

Abercrombie & Fitch reported record fourth-quarter and full-year net sales while forecasting muted growth for fiscal 2026, citing the impact of a 15% US tariff and potential headwinds stemming from the conflict in the Middle East. Shares fell 7% following the announcement.

The company posted full-year net sales of US$5.2 billion (MX$93 billion), up 6% from US$4.9 billion in fiscal 2024, with comparable sales rising 3%. Fourth-quarter net sales reached US$1.6 billion, a 5% increase year over year, with comparable sales up 1%. Full-year operating income totaled US$699 million on a reported basis, while operating margin declined to 13.3% from 15.0% the prior year. Net income per diluted share for the full year was US$10.4, compared with US$10.9 in fiscal 2024.

Performance diverged between the company's two brand families. The Hollister brands posted record full-year net sales, growing 15% to US$2.7 billion, with comparable sales up 13%. By contrast, Abercrombie brands declined 1% to US$2.5 billion, with comparable sales down 7%. In the fourth quarter, Abercrombie brand net sales rose 4% to US$806.5 million, while Hollister increased 6% to US$863.3 million.

“Our record fourth-quarter net sales marked our thirteenth consecutive quarter of growth, with both operating margin and earnings per share at the high end of expectations we shared in early January,” Fran Horowitz, CEO, said in a statement. “We entered fiscal 2026 with a strong foundation, including two globally relevant brands, a proven operating model and a robust balance sheet.”

By region, full-year net sales in the Americas rose 7% to US$4.2 billion. EMEA grew 6% to US$818.1 million, while Asia-Pacific increased 5% to US$157.8 million.

The company’s fiscal 2026 outlook incorporates a 15% tariff on all goods imported into the United States, based on the presidential administration’s announcement on Feb. 21, 2026, assumed to take effect Feb. 24 and remain in place for the full year. Net of planned mitigation efforts, the outlook assumes a year-over-year tariff impact of approximately 290 basis points in the first quarter and 70 basis points for the full year — roughly US$40 million based on 2025 net sales of US$5.27 billion.

That compares with an earlier estimate of about US$90 million, or a 170-basis-point impact, that Abercrombie provided in January. The company said it expects a small tariff impact in the second quarter, with pressures easing later in the year and becoming a benefit as duties fall at the end of 2026. The fiscal 2026 outlook excludes any potential refunds from previously struck-down tariffs.

"Abercrombie's growth streak has been nothing short of phenomenal, but weakening momentum — particularly for its namesake brand — shows that the retailer is not immune to the pressures facing discretionary spending," said Rachel Wolff, analyst, eMarketer.

For full-year fiscal 2026, Abercrombie expects net sales growth of 3% to 5%, compared with the analyst consensus of 4.2% compiled by LSEG. Operating margin is projected in the range of 12.0% to 12.5%, and net income per diluted share is forecast at US$10.20 to US$11.00, with the midpoint above the US$10.36 analyst expectation. First-quarter net sales are expected to grow 1% to 3%, with an operating margin of approximately 7.0% and net income per diluted share of US$1.20 to US$1.30.

The guidance "implies moderating growth and margin normalization, in our view, with tariffs a near-term headwind," Jefferies analysts led by Corey Tarlowe said in a client note Wednesday.

The company operates roughly 17 stores in the United Arab Emirates and Kuwait and said it is monitoring the conflict in the Middle East, which could affect sourcing operations and franchise and joint venture partners. Executives said they anticipate a "slight sales headwind" from the situation. 

"I do want to acknowledge the situation in the Middle East, with associates and stores in the region; our focus continues to be on their safety and well-being," Horowitz said at the start of the earnings call.

For fiscal 2026, the company plans to open approximately 30 net new stores — 55 openings against 25 closures — and remodel or right-size 70 locations. This marks the fourth consecutive year in which Abercrombie has opened more stores than it has closed. The company currently operates approximately 830 stores globally. Capital expenditures for fiscal 2026 are expected in the range of US$200 million to US$225 million.

The company ended fiscal 2025 with cash and equivalents of US$760 million, inventories of US$601 million, and total liquidity of approximately US$1.2 billion, including US$450 million available under its US$500 million asset-based revolving credit facility. Operating cash flow for the year was US$619 million. The company repurchased 5.4 million shares for US$450 million, representing 11% of shares outstanding at the start of the year. An additional US$850 million remains under the repurchase authorization established in March 2025. For fiscal 2026, the company plans share repurchases of approximately US$450 million.

Neil Saunders, Managing Director, GlobalData, said the company's position remains solid. "Overall, Abercrombie & Fitch is driving more revenue through the business and is reaching record levels in most quarters. And both the main brands continue to resonate with customers, which provides expansion opportunities that support topline growth," he said. Saunders added that acquiring or launching an additional brand could help reignite momentum, though he characterized such a move as optional rather than necessary. "All in all, the outlook for Abercrombie & Fitch is solid. The company is well run, has focus and knows what it is about."

Consumer companies have been among the hardest hit by shifting US trade policy. The US Supreme Court struck down earlier tariff levies, after which the government began collecting a 10% uniform tariff. Treasury Secretary Scott Bessent has indicated a 15% rate is expected to take effect this week. Abercrombie has sought to diversify its supply chain over the past year in part to offset the tariff impact. 

The company has also focused on selling products at full price and reducing discounts, targeting middle- to high-income consumers. Horowitz told analysts Wednesday that the company's goal for 2026 is "balanced performance, which is growth across brands, regions and channels."