Abercrombie & Fitch Co. Q4 FY2025 earnings call

• Fourth quarter finished on the higher end of ranges provided in early January update, with record net sales, balanced growth across regions, brands, and channels, and growth in earnings per share. - Fiscal 2025 had record sales, growth across regions and channels, leading double-digit operating margins, and substantial operating cash flows enabling strong returns to shareholders. - Hollister Brands set records, with two consecutive years of 15% growth driven by unit selling and AUR increases, and great response to marketing campaigns. - Abercrombie Brands rallied to return to net sales growth in the fourth quarter, with investments in stores, digital, and marketing. - Ongoing investments across channels paid off, with growth in stores and digital direct channels for a third consecutive year, and Read and React inventory model helped drive top-line growth. - Entering 2026, goals include growing sales across brands with investments in owned and operated stores and digital businesses, stabilizing growth margins by mitigating tariff impact, investing in tools and technologies to improve speed and efficiency, and maintaining strong profitability.

Fourth quarter net sales grew 5%, balanced across regions, brands, and channels. Abercrombie Brands had 4% net sales growth, Hollister Brand had 6% net sales growth for an 11th consecutive quarter of growth. Fiscal 2025 net sales were a record $5.3 billion, up over 6%. Americas net sales grew 7%, EMEA 6%, APAC 5%. Hollister Brands had 15% net sales growth and 13% comparable sales growth; Abercrombie Brands had 1% net sales decline and 7% comparable sales decline. Digital channel delivered 44% of total sales in 2025, Hollister around 31% and Abercrombie around 59%. Ended 2025 with 829 stores, 523 Hollister, and 306 A&F across 5.3 million gross square feet, growing square footage by 4%.

• Full-year 2026 net sales growth expected in the range of 3% to 5% from $5.27 billion in 2025, with growth across brands. - Anticipate 40 basis points of favorable impact to net sales from foreign currency. - Expect full-year operating margin in the range of 12% to 12.5%, with approximately 70 basis points of incremental tariff expense. - Forecast tax rate of around 29%. - Expect earnings per share in the range of $10.20 to $11. - Capital expenditures in the range of 200 million to $225 million. - Target share repurchases of around $450 million. - First quarter 2026 expects net sales growth in the range of 1% to 3%, with slight AUR expansion, ERP implementation to have over 100 basis points of unfavorable operating margin impact, tariffs to drive approximately 290 basis points of decline, freight tailwind of approximately 160 basis points, marketing investments up around 50 basis points, and tax rate around 26%, earnings per share in the range of $1.20 to $1.30.

• ERP implementation in first quarter 2026 will temporarily impact operations for approximately two weeks, creating a temporary headwind of one to two percentage points of growth. - Evolving Middle East conflict currently anticipated to have a slight sales headwind. - Tariffs announced by the administration are assumed to remain in effect throughout fiscal 2026 with no refunds or recoveries assumed, driving margin decline.

Q: Dana Telsey asked about merchandising drivers of 2026 and margins in 2026.

A: Fran talked about the company's model working and Rob discussed tariff impact cadence and mitigation strategies.

Q: Corey Tarlow asked about Hollister's growth algorithm and Abercrombie's ERP implementation.

A: Fran spoke about Hollister's drivers and Scott and Rob discussed the ERP implementation differences and its impact.

Q: Matthew Boss asked about sales growth intersection of brands and normalized growth.

A: Fran and Rob discussed balanced performance and growth expectations.

Q: Paula Juice asked about ERP system impact cadence and sourcing base.

A: Rob discussed ERP impact cadence and sourcing base details.

Q: Marnie Shapiro asked about licensing efforts and international go-to-market.

A: Marty and Fran discussed licensing in kids and international go-to-market opportunities.

Q: Mauricio Cerner asked about consumer reaction to ticket increases and Q1 trends.

A: Fran and Rob discussed consumer reaction to ticket increases and Q1 trends.

Q: John Kepore asked about Q1 gross margin and promo levels.

A: Rob discussed Q1 gross margin factors and promo levels.

Q: Rick Patel asked about growth in every quarter and inventory.

A: Fran and Rob discussed growth expectations and inventory planning.

Q: Janine Stichter asked about conversion and margin target.

A: Fran discussed conversion and margin construct underpinnings