Abercrombie & Fitch Q1 2026 Earnings Call - Record Sales and $450M Buyback Guide Despite EMEA Headwinds

Operator: Good day, and thank you for standing by. Welcome to the Abercrombie & Fitch first quarter fiscal year 2026 earnings conference call. 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 will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Mohit Gupta, VP of Investor Relations. Please go ahead.

Mohit Gupta, VP of Investor Relations, Abercrombie & Fitch: Thank you. Good morning and welcome to our first quarter 2026 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 first quarter earnings release, which is available on our website at corporate.abercrombie.com under the investor 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 mention today. These factors and uncertainties are discussed in our reports and filings with the Securities and Exchange Commission.

In addition, we will 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’ll hand it over to Fran.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Thanks, Mo. Thanks everyone for joining. I’m happy to report that once again, we delivered against our commitments, growing net sales for the 14th consecutive quarter, setting a record Q1 despite headwinds in the Middle East and other select countries in EMEA. On the bottom line, our first quarter results exceeded expectations on both operating income and earnings per share. We’re seeing good progress against our company priorities so far in 2026, led by net sales growth across brands in the Americas and other key markets like the U.K. We successfully launched our upgraded merchandising ERP, which will enable long-term channel and category expansion, and we continue to make strategic investments in marketing, digital, and stores to drive profitable growth.

One quarter in, the team continues to stay agile in a dynamic global environment. 2026 is shaping up to be another year of consistent progress as we maintain our full-year outlook on net sales, operating margin, and earnings per share. Recapping the first quarter, we delivered record net sales of $1.1 billion on growth of 2% to last year, in line with our expectations. Operating margin of 8% exceeded our plan, reflecting slightly lower tariff rates. Earnings per share of $1.47 was above our expected range. We used our strong balance sheet to return $105 million to shareholders through share repurchases totaling 3% of shares outstanding as of the beginning of the year. Regionally, the Americas grew 3% with growth across brands and good traffic levels in both stores and digital.

In EMEA, continued growth in the U.K. was more than offset by declines in the Middle East and other European markets as the regional conflict ramped up, driving EMEA sales down 10% for the quarter. The team has taken acts by controlling receipts and dialing in promotions to align to the trend. In APAC, we grew 24% on top of 5% growth last year, and our strategic evaluation of the region is underway to ensure we fully capitalize on the large addressable market there. From a brand perspective, Abercrombie brands delivered net sales growth of 3% for the quarter on flat comparable sales. We delivered positive AURs in the quarter on solid customer response to our spring assortment, along with consistent traffic and conversion levels to last year. In the Americas and the U.K., we saw balanced growth across genders with fleece, denim, and wovens performing well.

We continue to find excellent collaboration partners to highlight Abercrombie’s elevated lifestyle brand positioning. Most recently, we teamed up with Sperry to renew a relationship that was first established in the 1930s on a collection of footwear and apparel across both men’s and women’s product. The initial launch, which reflected the rich heritage of our brand that continues to connect with today’s customers. It exceeded internal expectations, and we’re seeing higher than average conversion. We’re in our fifth year of net store expansion for Abercrombie, and we’re developing our local experiences directly on scaled customer feedback. A great example is our new expanded Abercrombie & Fitch store opening in SoHo next week. We’ve operated a smaller format location on Broadway for the past three years, and it was clear from our traffic and sales data that our customer was looking for a broader assortment.

This new store will be our best expression of the Abercrombie brand to date, and we’re continuing to invest in other new stores across key markets to support long-term growth. At Hollister brands, we continue to find opportunities to further our connection with teen customers growing nicely in the Americas and APAC. This was offset by the Middle East and European demand trend, resulting in flat net sales to last year’s first quarter record and growth of 22%. In the Americas and APAC, we saw positive traffic across both stores and digital direct channels, along with slight AUR improvement. Graphic tees, shorts, swim, and other warm weather categories grew nicely as we transition to spring.

With graduation season well underway here in the U.S., Hollister was excited to showcase Gigi Perez and her updated version of the iconic Green Day song, "Time of Your Life." We featured the song and highlighted our grad assortment across our digital marketing channels, celebrating this important milestone in our customers’ lives. With the upcoming World Cup, teams are looking for authentic fits to represent their team. Hollister has partnered with Kappa, the Italian sportswear brand, with a deep connection to international football on a collection of men’s and women’s pieces. We believe we have exactly what the Hollister customer needs for match days and watch parties, in addition to the casual wear we’re known for. Now turning to our 2026 priorities. In March, we outlined our focus areas for the year.

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. Second, to stabilize growth margins by mitigating external cost pressures, including tariffs. Third, to continue to invest in tools and technologies, including AI, to improve our speed and efficiency across the product and customer journeys. Finally, to maintain our strong profitability by delivering double-digit operating margins and expansion earnings per share, which will fuel excess cash return to shareholders through share repurchases. We made solid progress on each of these in the first quarter. We’re using our playbook in growth markets like the U.S. and the U.K., and we’re there for our customers every day in all the places they want to shop. With investments in marketing, new stores, and digital, we’re seeing the customer respond, leading to our record first quarter.

As we shared on our March call, the team is closely monitoring developments in the Middle East using our playbook and global operating model to remain agile. Sticking with our playbook, we’re focused on what we can control, including our inventory levels and marketing investments, ensuring we can respond to what’s happening in real time. Despite these EMEA headwinds, we expect total sales growth for second quarter along with full year 2026, which would be our fourth consecutive year of net sales growth. Beyond net sales, we delivered modest year-over-year gross margin expansion in the first quarter as lower tariff rates and our mitigation efforts took hold. Our customers have responded positively to spring assortments, continuing to look to both Abercrombie and Hollister as leaders in the intersection of fashion and value for their respective demographics.

We expect the team’s extensive efforts to maintain our customer relationships while balancing costs will support gross margin stability. Our 2026 priorities are also about evolving our model. We’re finding new ways to grow, adding new chapters to our playbook and strengthening our foundation. We’re excited to find new categories to serve our customers, like we are with Abercrombie baby and toddler. We’re also looking beyond our owned and operated channels, developing new franchise, wholesale, and licensing relationships that will allow us to reach even more customers. I have to commend our team on a successful ERP implementation in March. Sitting here on the other side of this incredible multi-year effort, we’re all excited to see how our new technology will accelerate our abilities to onboard and support new global partners, channels, and geographies.

Of course, we’re also looking at how the buying process is evolving, particularly as AI advances, and we’re testing new ways to bring our brands to those new chats, apps, and devices. Supported by our upgraded ERP, we have a modern digital foundation that will give us an advantage in leveraging data and insights with greater speed and impact. We’re focused on continuing to develop these new capabilities to increase both quantity and quality of our customer relationships around the world. In summary, we started the year from a position of strength, delivering progress on both top and bottom lines. We remain confident in our plans and the growth opportunities ahead as we continue executing through 2026. We’re tracking to another year of top-line growth, double-digit operating margins, expansion earnings per share, and strong cash flow, enabling us to target returning $450 million to shareholders this year via share repurchases.

With that, I’ll hand it over to Robert.

Corey Tarlowe, Analyst, Jefferies0: Thanks, Fran. Good morning, everyone. Recapping the quarter, we delivered record Q1 net sales of $1.1 billion, up 2% to last year on a reported basis, within the range of up 1%-3% we provided in March. Comparable sales for the quarter were down 1%. By region, first quarter net sales increased 3% in the Americas, 24% in APAC, and declined 10% in EMEA. On a comparable sales basis, Americas was up 1%, APAC was up 15%, and EMEA declined 11%. Demand in EMEA was directly impacted as the conflict in the Middle East ramped up, reducing first quarter total company net sales growth by more than 50 basis points relative to our outlook. As discussed in March, we proactively limited certain third-party orders during the implementation of our merchandising ERP, negatively impacting top-line growth by approximately 100 basis points.

With the implementation complete, we resumed normal operations in April and moving forward. On the brands, Abercrombie brands posted a second consecutive quarter of net sales growth, up 3% over last year on flat comparable sales. Hollister brands net sales were flat to last year’s record on comparable sales decline of 2%. As expected, across brands, we saw low single-digit AUR growth and low single-digit unit growth. Our brands both grew in the Americas and APAC, offset by softer demand trends that emerged in the Middle East and select European markets, with particular impact to the Hollister brands business. Across regions and brands, the three percentage point spread from net sales to comparable sales was driven by net new store openings and favorable foreign currency, partially offset by third-party channel performance, including the temporary pause for the ERP upgrade.

Operating margin was 8% of sales, coming in above our outlook of around 7%. We delivered operating income of $89 million compared to $102 million last year. Adjusted EBITDA margin for the quarter was 12% of sales on adjusted EBITDA of $131 million, compared to $140 million last year. The 130 basis point year-over-year decline in operating margin was primarily driven by 90 basis points of increased marketing investment and around 90 basis points of ERP implementation costs. Year-over-year expense investment was partially offset by AUR and foreign currency gross margin favorability, as 180 basis points of year-over-year tariff pressure was fully offset by favorable freight costs. Tariff expense was lower than anticipated given the timing and level of tariff rates in the quarter. The tax rate for the quarter was 28%, higher than our outlook, primarily due to the jurisdictional mix of income.

Net income per diluted share was above our outlook at $1.47 compared to $1.59 last year. We’re managing inventory tightly, ending Q1 with inventory at cost down 2%. Within that, inventory units are up low single digits, reflecting planned investments to support growth, while remaining disciplined in adjusting receipts in regions where trends are softer, particularly in the Middle East. Product cost favorability was primarily driven by lower freight costs. Moving to the balance sheet, we exited the quarter with cash and cash equivalents of $594 million and liquidity of approximately $1 billion. We also ended the quarter with marketable securities of $25 million. For the quarter, we repurchased $105 million worth of shares, or 3% of shares outstanding at the beginning of the year. We ended with the quarter with $745 million remaining on our current share repurchase authorization.

Shifting to the outlook, we remain on our path to a fourth consecutive year of total company growth, we’ve incorporated both the Q1 outperformance and the current environment into our full-year outlook. On tariffs, our 2026 outlook assumes a 15% tariff on all global imports into the U.S., effective for the second half of the year. Combined with a 10% effective tariff rate for the second quarter, the updated tariff rate assumptions drive around 20 basis points of gross margin pressure for the full year, an improvement from 70 basis points in our March outlook. We expect that release to be offset by elevated freight costs and continued investments in marketing and stores. As a result, our full-year outlook for sales and operating margin remains unchanged. We’ve applied for around $100 million in IEEPA tariff refunds. We have not assumed any benefit from these in our outlook.

Consistent with our prior outlook, for the full year, we expect net sales growth in the range of 3%-5% from $5.27 billion in 2025, with full-year net sales growth expected across brands. We anticipate growth in the Americas, with EMEA currently expected to be slightly behind 2025 sales, given the current trend in the Middle East and parts of Europe. In APAC, work continues on our review of strategic alternatives for the region. Our focus continues to be on how to best scale the region with strong returns, and we’re encouraged by the first quarter performance as it underlines the region’s potential. We continue to assume modest AUR improvement for the full year, as well as an anticipated 40 basis points of favorable impact to net sales from foreign currency. We continue to expect full-year operating margin in the range of 12%-12.5%.

We’re forecasting a tax rate around 30%. For earnings per share, we expect diluted weighted average shares of around 44 million. We expect earnings per diluted share in the range of $10.20-$11. For capital allocation, we expect capital expenditures around $225 million. On stores, we expect to deliver around 130 new experiences, including 50 new stores and 80 remodels and right sizes. We also expect to be net store openers, with our 50 new stores outpacing around 20 anticipated closures. We expect net store openings to be relatively balanced across brands, but tilted to the Americas. We continue to expect share repurchases of around $450 million for 2026.

For the second quarter of 2026, we expect net sales to be up 2% to 4% to the Q2 2025 level of $1.2 billion, consistent with how we exited the first quarter, with continued strength in the Americas and APAC and ongoing pressure in parts of EMEA. We expect operating margin to be around 10%, including around $20 million or around 120 basis points of unfavorable tariff impact, net of mitigation efforts. We also anticipate a slightly favorable impact from freight on gross margin and modest AUR growth. The remaining operating expense deleverage coming from incremental marketing, stores, and incentive compensation. We expect a Q2 tax rate around 32%. We expect net income per diluted share in the range of $1.80-$2, with diluted weighted average shares expected to be around 45 million, including the anticipated impact of at least $150 million in share repurchases for the quarter.

To close things out, we’re entering the middle of 2026 with clear priorities, healthy brands, and a strong playbook. We’re operating with discipline and flexibility in a mixed environment, and we’re monitoring our markets, particularly the Middle East, and we’re remaining nimble and tight with inventory. This is the same model we’ve consistently used to successfully manage through a wide range of environments, and we’re confident in our ability to deliver another year of growth and profitability. With that operator, we are ready for questions.

Operator: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered, or you wish to remove yourself from the queue, please press star one one again. We’ll pause for a moment while we compile our Q&A roster. Our first question comes from Dana Telsey with Telsey Advisory Group. Your line is open.

Dana Telsey, Analyst, Telsey Advisory Group: Hi, good morning, everyone. Nice to see the progress. A couple of questions. First, Middle East. How much of an impact was that? How are you planning that go forward, whether in the second quarter, how are you incorporating it to the balance of the year? What % of sales is it? Second, on ERP, is that all complete now? Is that in the rear view? Then just lastly, Fran, how would you frame the consumer both on Hollister and in Abercrombie? It certainly seems like the collaborations have done nicely. Anything to note on consumer sentiment and strength of product categories of what you’re seeing? Thank you.

Corey Tarlowe, Analyst, Jefferies0: Whoa, Dana. Good morning. I think we’re actually going to start in reverse here. I’m going to start with your third question regarding the consumer.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Just really proud of another quarter of growth. Really, we did exactly what we said we were going to do again. We have a strong relationship, as you well know, with our customer. The team is hard at work every day aligning that product voice and experience. When that customer’s willing to spend and you get it right, they choose us. That’s the magic in it, right? Both brands are strong. We are expecting to see growth in both brands through the year. As far as customer sentiment goes, I can speak to our business, right? They’re showing up. We’re positioned well with two healthy brands. We’re not seeing any change in performance across cohorts. Abercrombie, again, second consecutive quarter of growth. Hollister, strong in Americas, which I think is an important point to notice. Significantly affected more by the EMEA, which Robert’s going to go into next.

Corey Tarlowe, Analyst, Jefferies0: Yeah. Hey, Dana, it’s Robert. Impact on the quarter was about 50 basis points to the total versus the outlook that we put out there in March. Really expecting more of the same as we move throughout the balance of the season. No change in the trend expectations there. Continue to expect a bit of an impact here on the Q2 and full year. In terms of how we’re managing that, doing what we always do. We’re adjusting inventory, we’re aligning the promos. We’ll stay close to the demand of that region, do what we can to mitigate as much as we can. In terms of the ERP, really great to have that one in the rearview mirror here. Team did an amazing job with that cutover.

Really excited about how that strengthens our foundation for this business and allows us to lean more into some of these new channels that we’re developing, some of these new categories. Really excited to have that one cut over and be back to normal operations here.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Thank you.

Operator: One moment for our next question. Our next question comes from Corey Tarlowe with Jefferies. Your line is open.

Corey Tarlowe, Analyst, Jefferies: Great. Thanks, good morning. I guess maybe if we could just start to talk about trends that you saw throughout the quarter, maybe by month, and then any color on what you’re seeing quarter to date and what the expectation is for go forward comp performance as you think about Hollister specifically, where you were lapping some pretty tough comps in the quarter and how we should think about the shape of that performance throughout the remainder of the year within the current guide. Secondarily, could you talk a little bit about the promotional cadence as well and what you’re seeing there? Thanks so much.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Hey, Corey. Good morning. Let’s break down this lengthy question here. Okay. Starting with the fact that we just had a strong Q1 and our 14th consecutive quarter of growth. The Q1 trends have continued, and it’s really built into our outlook of +2% to +4%. We were straight down the fairway for Q1, and we’re excited to see some potential acceleration, expecting +2% to +4% for the quarter. The inventory is well controlled and in a great place, as Robert has mentioned. We are excited about our assortments. The consumer is responding positively to them. Regarding promotions and pricing, our strategy worked in the first quarter. There’s no change to our strategy. We saw nice AUR growth in the first quarter, which obviously is a sign of product acceptance and the customer is seeing value in what they’re purchasing.

Controlling that inventory and aligning promotions is how we run the business. That’s we will continue to run it for the balance of the year. What else is in there?

Corey Tarlowe, Analyst, Jefferies0: What did we miss, Corey Tarlowe?

Corey Tarlowe, Analyst, Jefferies: Just on the promotions, I was curious if they’ve been elevated recently, the response to that, and then how you think about that shape throughout the remainder of the year, and then just on the Hollister performance as well. Are you looking at it on a two-year stack? How should we be thinking about that performance go forward?

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Yeah.

Corey Tarlowe, Analyst, Jefferies: Thanks so much.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Sure. Yeah. The expectation for Hollister is to grow for the year. Yes, it was a 22% two-year stack for the first quarter. Good categories happening in there, Corey, like graphic tees, shorts, swim, other warm weather categories, staying connected to that teen consumer. Those categories get more important as we head into the quarter. Expecting full year growth.

Corey Tarlowe, Analyst, Jefferies: Okay, great. Then just lastly. Go ahead, Robert, sorry.

Corey Tarlowe, Analyst, Jefferies0: No, no. Our approach to promos hasn’t changed here, Corey. We’re staying disciplined, obviously showing up in the quality of the results that we’re putting out there. Q1 AUR was positive. Promotional levels were consistent with our plan coming into the quarter. Again, we’re thrilled about the product that we’re putting out there and the customer response to that product. That’s really the story here. You know how we think about promos on an ongoing basis. As long as we keep our inventory in tight control, put that great value out there for the consumer, it gives us the chance to continue to grow that AUR, and that’s our expectation here with modest AUR growth here as we think about the full year.

Corey Tarlowe, Analyst, Jefferies: Great. Thanks so much. I’ll pass it on.

Operator: One moment for our next question. Our next question comes from Marni Shapiro with The Retail Tracker. Your line is open.

Marni Shapiro, Analyst, The Retail Tracker: Hey, guys. Congratulations. I’m curious. Hollister, the inventory is moving very quickly through your stores. I’m curious if you’ve been in chase mode and is there any impact being in chase mode these days, given fuel costs and just the cost of doing business in general? Is there any additional cost to being in chase mode versus in the past? If you could just give us a quick update on YPB. There’s been a couple of sets that have looked very good. I’m curious, what that looks like today and what you’re thinking about it.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Hey, Martie. Good morning. Yes, it’s exciting. We run the business in chase mode, and Hollister is definitely in chase mode. We’ve had some exciting things happening in that business, and the team is going after them. On a weekly basis, we meet with them, see what’s working, and we have the opportunity set up with our supply chain, producing in 16 countries around the world, it enables us to do that. The fuel costs Robert mentioned earlier really are affecting us more in the back half, but we will continue to chase. It’s an important part of our business, and you know well, those are usually better purchases, right? Than buying ahead and not having as much confidence in what you’re doing. As far as YPB goes, yes. We’ve seen nice business with YPB, nice acceleration this year so far.

Marni Shapiro, Analyst, The Retail Tracker: Oh, that’s exciting. Congratulations. If you could just touch on one more thing. On the men’s side.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Sure

Marni Shapiro, Analyst, The Retail Tracker: online, there are a few, I would say dressed items, like that pleated trouser. That is amazing. Is there a shift happening in men’s a little? I’m not seeing it quite in the stores yet as I am online, and I like what I’m seeing online.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Well, balance is my favorite word. Everybody knows that. Yes. The team is working on it. A balanced assortment that is an opportunity for our customer. Overall casual as well as this more dressed up consumer has been shopping with us.

Marni Shapiro, Analyst, The Retail Tracker: Great. Congratulations. Best of luck for summer.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Thank you.

Operator: One moment for our next question. Our next question comes from Mauricio Serna with UBS. Your line is open.

Mauricio Serna, Analyst, UBS: Great. Good morning. Thanks for taking my question. Just curious on the shape of the guidance for the year, since you’re maintaining 3%-5%, then second quarter implies a little bit below that, coming after a Q1 that was also below. Just trying to understand what drives the acceleration to get to the full year guide. Then you mentioned, for the EBIT margin outlook, which you maintained, you’re getting a positive from lower tariffs, which I think it’s a 50 basis points benefit, and that’s offset by freight and marketing. Could you just break that down, like how much incremental you expect from freight and in marketing at the offset? Thank you.

Corey Tarlowe, Analyst, Jefferies0: Thanks, Mauricio. Again, 14th consecutive quarter of growth here for the first quarter, we’re excited about this. That track record, we’re adding to it every quarter here. We’ve got the confidence here to keep that going, and we’ve got the confidence in the underlying business here. Saw growth across the brands in Americas and APAC and within EMEA. We also saw growth in the U.K., which is great to see, and that’s our largest market in that region. Sitting here today, as we think about some of the headwinds that we were facing in Q1, we’ve got the 50 basis points of the Middle East. We’ve got that continuing through in terms of the magnitude on the business. We had the 100 basis points of ERP impact that’ll come back to us.

We’ve got the building blocks to keep us right in that range of that 3-5 on the full year. As long as we keep inventory in good shape, we’re seeing that AUR growth, that’s a great thing. When you think about the EBIT margin and some of the big boulders here, for the full year, it is a balanced story here. Tariffs and freight, by the time we get to year-end, will be just slight headwinds year-over-year, so think like tens of basis points each. We’ve got this modest AUR growth that is largely funding the investments that we’re making in the brand. That all keeps us in line with this 12 and 12.5, despite those headwinds that we’re seeing in the Middle East and broader EMEA.

We’re continuing to invest in this business, all while returning a bunch of cash, $450 million to shareholders through share repurchases. I guess when it gets to some of the big boulders and pieces and parts, tariff, 180 basis points of headwind here in Q1. We talked about $20 million for Q2, that’s about 120 basis points at the midpoint of our guide. That will, when we move to that 15% tariff in the back half of the year, that’ll still flip to a tailwind as we’re up against the full IEEPA tariffs from last year. That all washes out to a full year of like tens of basis points of headwind for us. On the freight side of the house, nice to see in Q1, as expected, it was 180 basis points tailwind to gross margins, that fully offset tariffs. That’s expected.

That’s really what us up against and lapping the higher freight rates that we saw in Q1 of 2025. That’ll start to normalize here as we get into Q2. Again, handfuls of tens of basis points here of benefit in Q2. With rates up, fuel prices up, we are seeing some pressure on freight. That’ll actually flip to a headwind for us in the back half of the year and wash us back out to just a slight headwind, again, tens of basis points on the full year. That’s the cadence there. From a marketing standpoint, we talked in March about front-loading a little bit of the marketing, we’re pulling some of that forward. We did show some deleverage here in Q1. We’re gonna continue to invest in the marketing.

We’ve got great brands, we’ve got a lot of great opportunities, so we’re leaning in there for Q2. We’ll get back to status quo or more normalized or flattish levels year-over-year in the back half of the year.

Mauricio Serna, Analyst, UBS: Got it. Very helpful. Thanks for the detail. Just quick follow-ups on the comps. On Q1, I saw Americas comps were up 1%. Could you talk about if both brands comp positive in the Americas? One other detail. You touched upon AI investments that you’ve done. Could you maybe share any benefits that you’ve gotten so far from your AI investments in the business? Thank you.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: I’ll take the second part of that one, Rustie. We’re very excited about AI’s potential for the business. The past couple of calls, we’ve mentioned a few things, right? We launched on Perplexity during Black Friday to learn a little bit more about agentic commerce. Our customer care function is a good example of rapid improvement, helping out our customers. The entire team is going through what we call basically a AI academy, and they all have access to Copilot Premium. We’re excited about that. We’re using it in our business model as being embedded into things like forecasting and inventory. We’re using it for our customers to create a more seamless experience. It’s really becoming integrated in the entire business, and we’re very excited about the opportunity.

Corey Tarlowe, Analyst, Jefferies0: Yeah. Just real quick on the Americas, again, proud to be delivering another quarter of growth here, both brands growing in the Americas. That’s really the right place to start. We’re seeing a healthy business there. We’ve got positive AURs and unit growth both contributing in the quarter there, along with positive traffic driving both a one-year and on a multi-year basis growth, which is great to see. Still seeing stable conversion, good product acceptance, which is why we feel good about the trajectory of the brands in that core market.

Mauricio Serna, Analyst, UBS: Great. Best of luck. Thank you.

Operator: One moment for our next question. Our next question comes from Brooke Roach with Goldman Sachs. Your line is open.

Brooke Roach, Analyst, Goldman Sachs: Hi. Thank you for the question. Good morning, everybody. I just wanted to drill into the-.

Operator: Hey, Brooke Roach.

Brooke Roach, Analyst, Goldman Sachs: Hey, how are you guys? I just wanted to drill into the EMEA impact at Hollister. I just want to make sure I understand it. It’s 50 basis points to the total company. That implies it was about 100 basis points drag to Hollister. If that’s correct, we can go off that. If that’s correct, that seems to imply that Hollister is still comp down a one. Just wondering, if we cancel out the Middle East stuff, what exactly drove the negative comp? I understand that the comp was very high last year, but I think a lot of us walked into the quarter expecting modest growth, and to see that even in adjusted numbers, still down. Just wondering what drove that down one on an adjusted basis.

Corey Tarlowe, Analyst, Jefferies0: Yeah. I would say, generally, your thought process is right, but I would correct you on one specific thing. On the EMEA side, that’s primarily a Hollister business. Applying a 50%, assuming that it’s about 50% of the business is probably a little low. You definitely have to increase that total impact on the Hollister business. Much of that EMEA impact is coming from the Hollister brands. That’s what I would say as you’re thinking about modeling out the region. Middle East was 50 in total. I’d skew that more towards the Hollister brands, obviously actively managing this and still seeing strength in places like the U.K. It is concentrated. It is focused. We’ve got very specific areas that we have to work on, and we’re controlling what we can control. We’re going to stay close to that consumer.

We’re going to adjust inventory and promos. We’re going to use that playbook that’s been effective to navigate a lot of different scenarios in the past and apply that to the EMEA region here and work to improve that trend as we move through the year.

Brooke Roach, Analyst, Goldman Sachs: Got it. Then I guess just on that last piece you mentioned, the promo cadence and things like that. We track promos like I’m sure everybody does. We’ve seen what looks like an elevated promotional cadence in Hollister, at least online. First of all, maybe I have that wrong, but if that is true that it is kind of elevated, at least online, how does that wash out so that you’re still getting the positive AUR? How should we think about what looks like elevated promotional cadence into this quarter through the rest of the year?

Corey Tarlowe, Analyst, Jefferies0: Yeah. Q1’s a messy quarter with promo cadences as Easter shifts around on you. I’d just say be cautious there. From our vantage point, we executed against our promo plans that were built into our outlook in March. We were thrilled to see the product acceptance that we saw. The customer continues to find value in the assortments that we’re putting out there. It’s ultimately driving another positive AUR result for us. That’s all part of the model. It’s not the only driver of the outlook that this continues to be this demand-led story. We’re seeing unit growth and AUR growth, which is an awesome place to be. Far in 2026, we’re seeing that customer react really, really well.

Inventory is well controlled, and that puts us in the best position here to continue to deliver AUR growth as we move through the balance of the year.

Brooke Roach, Analyst, Goldman Sachs: Got it. That’s encouraging. Thank you.

Corey Tarlowe, Analyst, Jefferies0: Thanks, Brooke Roach.

Operator: One moment before our next question. Our next question comes from Rick Patel with Raymond James. Your line is open.

Corey Tarlowe, Analyst, Jefferies1: Hi, this is Suraj Malhotra on for Rick Patel. Thank you for taking our questions. Can you just help us understand demand in the denim category? Is it holding up at full price? Are you seeing customers being drawn to promotions there? What your expectations for denim as the year moves ahead? Just to follow up on how to think about SG&A levers from here, given the slower demand in the Middle East, do you see an opportunity to cut back on spending in EMEA to preserve margins? Will you lean into more spend to drive better demand elsewhere? Just some color on the puts and takes would be great.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Good morning, Suraj Malhotra. We’ll start with the denim question. We’re not seeing any change in the demand for denim. We’re actually excited about what we’re seeing. There’s some exciting trends happening within denim. What was the balance?

Corey Tarlowe, Analyst, Jefferies0: Promos. Oh, yeah. Pricing and promos, Suraj. When we look at pricing, this is one of those categories that we’re protecting from a price point standpoint. Thrilled with the customer response there. We’re seeing success in denim across the brands, which is a great place to be, and the bottoms business has been good for us.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Yeah. Sorry about that. Yeah. Anyway, back to denim. That’s actually true for both brands, for both genders. Heading into back to school, obviously usually a big time for denim, so we’re well-positioned for that as well. We’re excited about what we’re seeing and continue to expect that for the balance of the year.

Corey Tarlowe, Analyst, Jefferies0: Yeah. Suraj, on the SG&A side and the expense side of the house, our model hasn’t changed here. We expect balance flow-through at the midpoints of our guide here. We’re choosing to invest in a growing business. Investments are focused on places like marketing, stores, expanding capabilities, ultimately things that drive long-term growth. It’s great to be in a position where on that 3% to 5% sales guide, we’re holding margins year-over-year with that 12% to 12.5% guide. As you move above that range, that sales range, the model does what it’s always done. You’ll start to see some leverage roll through the model. Sitting here today, whether EMEA or elsewhere, we’re investing in two very strong brands for the long term, and that’s what positions us to deliver consistent growth over time.

Corey Tarlowe, Analyst, Jefferies1: Understood. Thank you so much.

Operator: One moment for our next question. Our next question comes from Tom Nikic with Needham. Your line is open.

Corey Tarlowe, Analyst, Jefferies2: Hey, good morning. Thanks for taking my question. Wanted to ask about the international business, specifically about the strategic review of Asia. Given how strong Asia growth was in the quarter and some of the issues that have popped up geopolitically in EMEA, does it change the calculus at all on the strategic review, or is it full steam ahead there?

Corey Tarlowe, Analyst, Jefferies0: Yeah. Hey, Tom. Yeah, great quarter for the APAC region, both brands growing. Ultimately, what that tells us, and it reinforces our belief in the long-term opportunity there. Focus right now is making sure that it scales in the right way. To that end, we’re being thoughtful. We’re reviewing how we can optimize that go-to-market model, whether that’s partnerships or other capital-light approaches. No change there. Review’s underway. We’ll have more to share later this year. Similar story on the EMEA side of the house. We’re navigating some near-term choppiness here in the region. Happy to see growth in our biggest market there in the U.K. We’ll obviously navigate the Middle East dynamic here as we move through on the near term, but nothing changing in terms of our long-term belief and opportunity in the region for our brands.

Corey Tarlowe, Analyst, Jefferies2: Understood. If I could just follow up on Mauricio’s question earlier about margins. I just want to make sure I understand the puts and takes, I guess, for Q2 specifically. The guidance implies that the EBIT margin’s down close to 400 basis points, roughly speaking. I know tariffs are 120 basis points. It sounds like there’s some marketing that’s front-loaded to the first half this year. Any other key puts and takes for EBIT margin in Q2?

Corey Tarlowe, Analyst, Jefferies0: Yeah. Really three big drivers here for Q2. Again, you called out the tariffs, and we talked about that $20 million, so that’s 120 basis points that’ll come off the top. Again, freight, it will be a slight tailwind, but again, tens of basis points instead of that 180 basis point benefit that we saw in Q1. We’re continuing to invest in this business. When you think about the marketing investments, when you think about continuing to invest in new stores, and this overall store experience, you put that together and combine that with some modest AUR growth, and that’s what ultimately walks you down to that 10% operating margin.

Corey Tarlowe, Analyst, Jefferies2: Understood. Thanks very much. Best of luck the rest of the year.

Corey Tarlowe, Analyst, Jefferies0: Thanks, Tom.

Operator: One moment for our next question. Our next question comes from Janine Stichter with BTIG. Your line is open.

Janine Stichter, Analyst, BTIG: Hi, good morning. Wanted to follow up on the operating margin. This year, 12%-12.5%. How do you think about that structurally being the right level? I think you mentioned that if sales were above the 3%-5%, you would get some additional leverage. Would you let that flow through or would you reinvest? Just how you’re thinking about it.

Corey Tarlowe, Analyst, Jefferies0: Yeah. Our model has delivered really strong double-digit operating margins for multiple years now. Great to be positioned to continue that this year. Flow-through is really strong, and this is all about balance. We’re obviously staying on offense here and focused on building a sustainable, profitable long-term business here. We’re not managing quarter by quarter. We are navigating external headwinds like tariffs, like freight, and these geopolitical conflicts. We’re making deliberate investments at the same time in marketing, digital, and new stores, and new channels of business. We’re also going to have to make some investments on the supply chain to support the brands and set us up to drive growth. Ultimately, that’s the plan, right? We’re going to set our goals. We’re going to deliver against those goals.

This business generates a ton of cash, and we’re going to make sure that we’re supporting this business for the long term. To your point around where we see leverage points above that three to five range, you’ll start to see some leverage flow through, and you might get some margin expansion there. Again, we’re going to be diligent about how we repurpose or flow those dollars either through or reinvest back into this business for the long term.

Janine Stichter, Analyst, BTIG: Great. Then just maybe on raw materials, I know you mentioned higher freight costs from the higher fuel costs. Anything that we should be aware of on raw materials or when we would start to see any impact from the higher fuel costs flow through there?

Corey Tarlowe, Analyst, Jefferies0: Yeah. On the fuel cost side, specifically, we talked about freight flipping to a headwind here in the back half of the year. That’s really a result of just the timing of selling through that product. You’ll start to see that kind of flow through the back half of the year. Input costs, we’ve got a great sourcing team. They’ve navigated a lot of different dynamics over the years. We’ve got confidence in that team on a go-forward basis. Sitting here today, raw material costs, relatively stable. You got a little bit of an uptick on the synthetics here, but all of that’s already reflected in how we’re planning the business in that guide.

Janine Stichter, Analyst, BTIG: Great. Last one for me. I know the footwear collaboration with Sperry went really well. How should we just think about that category as a whole? Is there an opportunity to expand that, just given what you saw with that collaboration?

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Hey, Janine, it’s Fran. Yes, we have been talking a bit about footwear in the past couple of calls. We were excited about seeing the customer’s acceptance on it. One of the biggest things that we hear from our customer when we show them outfits, in any of the social media areas or on our website, is to complete the outfit. We were curious to learn a bit more about it. We saw some nice success and we’re continuing to explore.

Janine Stichter, Analyst, BTIG: Great. Thanks so much.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Yes.

Operator: One moment for our next question. Our next question comes from Janet Kloppenburg with JJK Research Associates. Your line is open.

Janet Kloppenburg, Analyst, JJK Research Associates: Hi, Fran. Hi, everybody.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Hey. Good morning, Janet.

Janet Kloppenburg, Analyst, JJK Research Associates: Hi. I wanted to review what happened in EMEA. I think you said the U.K. was okay, but the rest of the region was challenged. Can you account for that? Why the U.K. would be okay, and also, if there’s any other fundamental issues going on in EMEA besides how challenged the region is? I would just love to understand that. Should we see promotional levels pick up in this region just because you had a pretty tough result? Last question on EMEA, do you think that as comparisons ease, that EMEA could improve for Hollister as you go through the year?

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Well, starting with the U.K. The U.K. is where we export our playbook to start. We do have our strongest.

Our largest business in the region there. With our base office space in London and the closeness to the customer, that has been a successful export of our playbook. We’re excited to continue to see the growth there. Regarding promotional levels in EMEA, Janet, really, we have a model where we can control our inventory, we’re working very closely with that team to make sure that we keep things tight and in line and are reacting very quickly to the business. We feel we have that under control. What was the third part, improvement as we go through? It was in our expectations built into the.

Janet Kloppenburg, Analyst, JJK Research Associates: Yeah.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Sorry.

Janet Kloppenburg, Analyst, JJK Research Associates: Go ahead.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: All right. Just to finish. As we mentioned, what our Q2 outlook and our full-year outlook, which we held Q2 at 2%-4%, sees a bit of an acceleration in the business. That’s all built into our outlook.

Janet Kloppenburg, Analyst, JJK Research Associates: Okay. In EMEA, you see an acceleration for the Hollister brand in the second quarter?

Corey Tarlowe, Analyst, Jefferies0: Haven’t given any sort of specifics around brands by regions. We’re seeing our outlook for the second quarter is pretty consistent to how we saw things roll through coming out of Q1. Continued strength in the Americas and APAC. We’ll see some pockets of challenges here within the EMEA market that, to Fran’s point, we’re navigating. We’re going to do everything we can to adjust our inventory levels and make sure that we’re keeping things tight there and aligning things with demand. That’s ultimately what gives us the best opportunity to try and drive a trend improvement there.

Janet Kloppenburg, Analyst, JJK Research Associates: Okay. Thank you so much.

Corey Tarlowe, Analyst, Jefferies0: Thanks, Janet.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: You’re welcome.

Operator: I’m not showing any further questions at this time. I’d like to turn the call back over to Fran for any further remarks.

Fran Horowitz, Chief Executive Officer, Abercrombie & Fitch: Just want to thank everyone this morning, and we look forward to updating you after the second quarter.

Operator: Thank you, ladies and gentlemen. This does conclude today’s presentation. You may now disconnect, and have a wonderful day.