Shares of Abercrombie & Fitch (ANF) rose sharply on Wednesday after the retailer reported better-than-expected fiscal first-quarter earnings, helping ease investor concerns despite weaker comparable sales and softer second-quarter guidance.
Abercrombie stock climbed more than 12% in the trading session.
The rally came after shares had fallen roughly 41% this year following disappointing holiday sales and a weaker fiscal-year outlook earlier in 2026.
The company reported adjusted earnings of $1.47 per share for the quarter ended May 2, ahead of analyst estimates of $1.28 per share, according to FactSet.
However, profit declined from $1.59 per share reported during the same period last year.
Net sales rose 1.5% year over year to $1.11 billion, slightly below Wall Street expectations of $1.12 billion.
Comparable sales declined 1% during the quarter, reflecting flat sales at the Abercrombie brand and a 2% decline at Hollister.
Analysts had expected comparable sales growth of 0.3%.
Regional demand softens amid Middle East conflict
Company executives said demand trends varied significantly across geographic regions during the quarter.
Chief Executive Fran Horowitz said the company continued seeing strength across the Americas and Asia-Pacific markets, while demand weakened across Europe, the Middle East, and Africa amid escalating geopolitical tensions.
“We are proactively managing inventory and marketing to support the region,” Horowitz said, adding that Abercrombie is also continuing to invest in stores to strengthen its brands and customer experiences.
The retailer maintained its full-year outlook, projecting net sales growth of 3% to 5% and annual earnings between $10.20 and $11 per share.
Wall Street currently expects earnings of approximately $10.68 per share alongside sales growth of about 3.8%.
Second-quarter guidance, however, disappointed investors and analysts.
Abercrombie forecast second-quarter earnings between $1.80 and $2 per share, well below analyst expectations of $2.54 per share.
The company also guided for second-quarter sales growth of 2% to 4%, roughly in line with expectations.
Margin concerns remain a key focus
Despite the earnings beat, analysts continued highlighting concerns around profitability trends and margin sustainability.
William Blair maintained a Market Perform rating following the report.
“The story to us remains on the margin line, where we continue to see signs of fragility,” analyst Dylan Carden wrote. “We maintain that the largest risk here is worsening profitability.”
The company also updated investors on the expected impact of tariffs and freight costs.
Chief Financial Officer Robert Ball said first-quarter tariff-related expenses came in lower than expected due to the timing and level of tariff rates during the quarter.
Ball said updated assumptions now imply approximately 20 basis points of gross margin pressure for the full year, an improvement from the 70 basis points projected in the company’s March outlook.
“However, we expect that relief to be offset by elevated freight costs and continued investments in marketing and stores,” Ball said during the earnings call.
Abercrombie maintained its full-year operating margin outlook in a range of 12% to 12.5%.
William Blair noted that while the first-quarter sales miss was modest and market reaction appeared “better-than-feared,” they remained cautious regarding management’s expectations for stronger sales and margin performance during the second half of the year.
The firm said they would remain cautious on the back-half outlook “given the similar set-up to last year, when management continued to walk down profitability expectations throughout the year.”
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