ABERCROMBIE & FITCH CO /DE/ Q4 FY26 earnings call ANF

Abercrombie & Fitch reported record fourth quarter net sales of $1.67 billion, a 5% increase year-over-year, driven by balanced growth across regions, brands, and channels. This performance contributed to a record full-year net sales of $5.27 billion, exceeding $5 billion for the first time in company history with over 6% growth. The company achieved a Q4 operating margin of 14.1% and a full-year operating margin of 12.5%, marking the third consecutive year of double-digit operating margins despite significant tariff pressures^🌐. Operating cash flow was $619 million, enabling $450 million in share repurchases.

Hollister Brands delivered its 11th consecutive quarter of net sales growth, up 6% in Q4, and achieved 15% growth for the full year, marking two consecutive years of such growth. This success was attributed to strong product acceptance in categories like fleece, graphics, and outerwear, effective marketing campaigns including a Taco Bell collaboration, and increased unit selling and average unit retail (AUR). The brand successfully added millions of new customers in 2025 and improved customer retention, solidifying its position in the teen market.

After a challenging start to 2025, Abercrombie Brands successfully returned to net sales growth in Q4, up 4% year-over-year. The brand saw strong traffic, growth in customer counts, and good retention trends. Investments in stores, digital, and marketing, including a notable partnership as the official fashion partner of the NFL with activations leading up to the Super Bowl, contributed to this recovery. The brand's performance in Q4 was against a record 2024, indicating underlying health and effective strategy execution.

Both digital and store channels demonstrated growth for the third consecutive year, remaining highly profitable. Digital sales accounted for 44% of total sales in 2025, with over 1 billion visits across platforms. The company continued its strategy of being a net store opener for the fourth consecutive year, adding 120 new store experiences (62 new stores, 11 rightsizes, 47 remodels) and closing 22, ending with 829 stores. This strategy leverages digital demand to optimize physical presence, with 4-wall store operating margins around 30%.

The company's 'Read and React' inventory model was crucial, allowing them to chase millions of units to meet product demand at healthy AURs. Inventory units finished the year up in the mid-single digits, with 3 points related to strategically building receipts ahead of a new merchandising ERP system go-live in March 2026. This ERP implementation is a multi-year undertaking designed to support the omni-channel business more efficiently, though it will cause temporary operational impacts and a 1-2 percentage point sales headwind in Q1 2026.

For 2026, Abercrombie & Fitch aims to grow sales across brands through continued investments in owned and operated stores, digital businesses, and new product categories like Baby and Toddler. Key priorities include stabilizing gross margins by mitigating tariff impact^🌐s, investing in tools and technologies (including AI) for improved speed and efficiency, and maintaining strong profitability with double-digit operating margins and EPS expansion. The company also plans to continue returning excess cash to shareholders through share repurchases.

While APAC has shown sales growth, the company is undertaking a strategic review for the region, evaluating options like partnerships, franchising, and licensing to enhance profitability and optimize capital deployment. This reflects a commitment to financial discipline and ensuring returns align with investment levels. The company maintains a diversified sourcing network across over 16 countries, which has been critical in navigating supply chain complexities and tariffs, with no meaningful disruptions from Middle East operations.