Abercrombie & Fitch (NASDAQ:ANF) reported fourth-quarter financial results on Wednesday. The transcript from the company’s earnings call has been provided below.
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Operator
Good day and welcome to the Abercrombie & Fitch fourth quarter fiscal year 2025 earnings call. Today’s conference is being recorded at this time. All participants are in a listen only mode. After the speaker’s presentation there will be a question and answer session. To ask a question during the session you would need to press star 11 on your telephone. You will then hear an automated message advised and your hand is raised to withdraw your question. Please press star 11 again. I would like now to turn the conference over to Mo Gupta, Vice President of Investor Relations. Please go ahead.
Mo Gupta (Vice President of Investor Relations)
Thank you. Good morning and welcome to our fourth quarter 2025 earnings call. Joining me today on the call are Fran Horowitz, Chief Executive Officer, Scott Lipesky, Chief Operating Officer and Robert Ball, Chief Financial Officer. Earlier this morning we issued our fourth quarter earnings release which is available on our website corporate.abercrombie.com under the Investors section. Also available on our website is an Investor presentation. Please keep in mind that we will make certain forward looking statements on the call. These statements are subject to the safe harbor provisions of the Private Securities Litigation Reform act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions we mentioned today. These factors and uncertainties are discussed in our reports and filings with the Securities and Exchange Commission. In addition, we’ll be referring to certain non GAAP financial measures during the call. Additional details and reconciliations of GAAP to adjusted non GAAP financial measures are included in the release and the investor presentation issued earlier this morning. With that, I will turn the call over to Fran.
Fran Horowitz (Chief Executive Officer)
Thanks Mo, Good morning and thanks for joining us today. Before we begin, 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. Returning to our results, I’m happy to report the fourth quarter finished on the higher end of the ranges provided in our early January update. Once again, we accomplished exactly what we set out to do. Holiday product acceptance drove record fourth quarter net sales with balanced growth across regions, brands and channels along with growth in earnings per share. As a company, our goal is to set clear commitments and then deliver on them. Leveraging our strong foundation and operating model, we achieved another year of consistent results for 2025 with record sales growth across regions and channels and leading double digit operating margins. Substantial operating cash flows also enabled strong returns of cash to shareholders via share repurchases. Looking forward to 2026, we expect to continue on the path of global growth and add to our track record of consistent strong profitability. For the fourth quarter we delivered net sales growth of 5% which was balanced across regions, brands and channels. It was particularly great to see both brands deliver record fourth quarter net sales. At Abercrombie Brands we achieved our goal of returning the brand to growth with 4% net sales growth on top of a record last year. Hollister brand continues to deliver for the teen customer, producing an 11th consecutive quarter of net sales growth at up 6%. With balanced top line growth and continued financial discipline, we delivered an operating margin of 14.1% including 360 basis points of tariff pressure. I have to recognize the team’s incredible efforts here to meaningfully reduce the impact of these costs on the bottom line. Earnings per share of $3.68 improved 3% on last year’s record quarterly result, demonstrating our ability to create value through a balanced combination of global growth, operational excellence and disciplined capital allocation. Recapping the year, fiscal 2025 net sales were a record 5.3 billion, surpassing 5 billion for the first time in company history. We grew over 6% exceeding our beginning of the year growth projections provided last March. For the third consecutive year, our customers responded to the team’s compelling product and engaging marketing delivering net sales growth across regions led by the Americas up 7%. Sales also grew across channels for the third year in a row. We continued to see great traffic on digital and in store and importantly we continue to see our highest value customers shopping across channels. We delivered an operating margin of 13.3% or or 12.5% adjusting for a one time litigation benefit, a double digit result for the third straight year despite 170 basis points of tariff pressure on the bottom line. We delivered full year earnings per share of $10.46 our second consecutive year of EPS over $10. By far the strongest back to back performance in our 30 year history as a public company. We also remain committed to shareholder return with $619 million operating cash flow. After investing back into the business, we returned $450 million to shareholders via share repurchases totaling 11% of shares outstanding at the beginning of 2025. The team worked hard all year staying fully committed to our customer and our playbooks and I’m proud of the consistency of these results as a clear demonstration of our leading operating model and culture of financial decision. From a regional perspective, 2025 was another year of progress in the Americas. We grew net sales 7% on strong cross channel traffic driven by compelling marketing across brands and continued store expansion in EMEA. Net sales growth of 6% was driven by double digit growth in the UK along with good growth in the Middle East. APAC grew 5% this year, led by solid performance across our digital platforms. Moving on to brand performance, I’ll start with Hollister Brands where we set records across the business. I am so proud of what the team has achieved with the global teen consumer with two consecutive years of 15% growth driven by increases in unit selling and aur on product. We delivered growth across genders and key categories, showing improved balance on both. We saw great response from a variety of exciting marketing campaigns supporting key product drops like our Collegiate Collection, the Grad Shop and engaging collaboration with Taco Bell. We added millions of new customers in 2025 and importantly, we also saw improved retention. Simply put, Hollister’s growth and scale stand out in the team space. We are excited about what is ahead at Abercrombie Brands. After a challenging start to 2025 up against a near perfect 2024, the team rallied and committed to getting the brand back to growth for by the end of the year. We did just that, achieving a return to net sales growth for the fourth quarter. As we have shared throughout the year, we believe Abercrombie remains a leader for our target customer. We continue to see strong traffic along with growth in customer counts and good retention trends. Reflecting our confidence, we invested across stores, digital and marketing to bring the brand to life in new ways throughout 2025. Most recently, the brand hosted several amazing activations leading up to the Super Bowl. As an official fashion partner of the NFL, the first of its kind, we had players and their families, several celebrities and league figures, as well as our target customers at a series of events. I was there and it was incredible to see Abercrombie at the intersection of fashion, sports and culture. A great finish to our 2025 season and the perfect kickoff to 2026. Our ongoing investments across channels continued to pay off in 2025, we saw growth in the stores and digital direct channels for a third consecutive year and both remain nicely profitable. In digital, we continue to see strong performance, finishing the year with that channel delivering 44% of total sales. We also surpassed 1 billion visits across our platforms for the first time, demonstrating the scale and direct reach we have with our customers. Stores matter to them too, and we were net openers for a fourth consecutive year, leveraging our digital demand to help us determine where we can better serve Hollister and Abercrombie customers with a physical location at the center of all These excellent brand, channel and regional cost accomplishments was our ‘read and react’ inventory model. For the third consecutive year we chased millions of units to support product demand at Healthy Aurs, helping to drive top line growth. Inventories remain tightly controlled and we finished the year with units up in the mid single digits. I can’t overemphasize how hard our team works at this coordinating product across functions, geographies, channels and partners all while tariffs were changing the global supply chain landscape week to week. So looking forward we are very excited for 2026. We entered the year with a strong foundation we which includes two globally relevant brands, a proven operating model and a strong balance sheet, all managed by a world class team. For the year. Our goals for the company are as follows. First, to grow sales across brands with continued investments in owned and operated stores and digital businesses while adding growth from partnerships and new product categories like our recent launch of Baby and Toddler in Abercrombie Kids. Second. Second, to stabilize gross margins as we progress through the year by mitigating as much of the tariff impact as possible. Third, to continue to invest in tools and technologies to improve our speed and efficiency across the product and customer journeys. A good example of this is to go live of our new merchandising ERP system this month. We’re also moving quickly to leverage AI to benefit the customer and we’re modernizing systems to help us and finally to maintain our strong profitability by delivering another year of double double digit operating margins and expansion in earnings per share. We also expect to continue our track record of returning excess cash to shareholders through share repurchases. After closing another record year in 2025, we are off and running on these growth objectives for 2026. We have the team, the experience and the track record of delivering for our customers and our shareholders. Many thanks to the entire organization that makes this happen every single day. The work continues and always forward and with that I’ll hand it over to Robert.
Robert Ball (Chief Financial Officer)
Thanks Fran and good morning everyone. I’d like to add my thanks to our associates around the world for staying agile and executing consistently throughout 2025. We’re really proud of what we’ve achieved and we have so much further to go. Starting with Q4 results, we delivered net sales of $1.67 billion, up 5% from last year on a reported basis. Comparable sales for the quarter were up 1% with approximately 100 basis points of benefit from foreign currency by region. Fourth quarter net sales increased 5% in the Americas, 8% in EMEA and 9% in APAC on a comparable sales basis. Americas was up 2%, EMEA was down 3% and APAC was approximately flat. Within the brands, both Abercrombie and Hollister delivered record fourth quarter net sales. Abercrombie Brands returned to net sales growth up 4% over last year on a comparable sales decline of 1%. Hollister brand’s net sales grew 6% on comparable sales growth of 3%. Across the business we saw mid single digit AUR growth and low single digit unit growth on increased traffic across regions and brands. The spread from net sales to comparable sales was driven by net new store openings, third party channel performance and favorable foreign currency. Operating margin was 14.1% of sales coming in at the high end of the outlook w
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Operator
You As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced and to withdraw your question, please press star 11. Again we ask that you please limit to one question and one follow up. The first question comes from Dana Telsey with Telsey Advisory Group. Your line is open.
Telsey Advisory Group Analyst
Hi. Good morning everyone. And certainly nice to see the progress. Fran, after the building blocks that you put in place for 24, for 25, the collaborations that you did with the businesses and frankly returning to growth in the Abercrombie brand and certainly saw what you saw with the super bowl and being the fashion partner, how do you think of the Merchandising drivers of 2026 and what you’re most excited about to drive growth? And then, Rob, as you think about the building blocks for margins in 2026, how do you think of aur growth relative to price increases from tariffs and the impact of tariffs on margins going forward? Thank you.
Fran Horowitz (Chief Executive Officer)
Hey, Dana, good morning. So excited about what we just delivered for both the fourth quarter as well …