ANF

Image source: The Motley Fool. Wednesday, Aug. 26, 2026 at 8:30 a.m. ET Chief Executive Officer - Fran Horowitz-Bonadies Chief Operating Officer - Scott Lipesky Chief Financial Officer - Robert Ball Operator: Good day, and welcome to the Abercrombie & Fitch Second Quarter Fiscal Year 2026 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mohit Gupta. Please go ahead. Mohit Gupta: Thank you. Good morning, and welcome to our second 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 second quarter earnings release, which is available on our website at 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 the 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 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 will turn the call over to Fran. Fran Horowitz-Bonadies: Thanks, Mo, and thanks, everyone, for joining. I'm excited to report we delivered our 15th consecutive quarter of top line growth on record second quarter net sales. Sales growth was above the expectation we set in May and was balanced across regions and brands with both Abercrombie and Hollister brands achieving record second quarter net sales. While we benefited from tariff refunds in the quarter we beat our outlook by more than the refund on both operating margin and earnings per share. Year-to-date, we've repurchased approximately 7% of shares outstanding at the beginning of the year. With the first half complete and a strong start to August, we're updating our full year net sales outlook to the high end of our prior range and increasing our expectations on the bottom line, setting us up for another year of consistent profitable growth in 2026. Importantly, we're making meaningful progress across key strategic priorities, which we believe will further strengthen our foundation and set us up for long-term success. Diving into the results. For the second quarter, we delivered record net sales of $1.27 billion, growing 5% from last year, a nice acceleration from the first quarter. While we benefited from $100 million in tariff refunds, we beat our outlook by more than that on the bottom line, delivering an operating margin of 19.9% and net income per diluted share of $4.17 for the quarter. We continue to leverage our strong cash flow and balance sheet, returning $177 million to shareholders in the quarter through our 10th consecutive quarter of share repurchases. We grew in the second quarter across our regions. The Americas grew 5% in the quarter, with growth across our direct channels, EMEA saw return to net sales growth of 2%, U.K. remains a strong growth market for us, and we saw a good sequential improvement in Germany as well as in the Middle East as the team has managed inventory and receipts well across the region. Our APAC business remained strong, growing 19% on comparable sales growth of 13%. Both our brands achieved record second quarter net sales led by Abercrombie brands growth of 8%, an acceleration from 3% in Q1. The brands also returned to comparable sales growth of 4% on improvements in conversion and AUR on full price selling, particularly in the Americas. Growth was balanced by gender and category with knits and wovens contributing along with a solid bottoms business across pants and shorts. Outside the strong financial results, it was an exciting quarter for the Abercrombie & Fitch brand. The brand is rooted in 130 years of New York City heritage, and we're so excited to bring that authenticity to life in our new SoHo store. The new location represents the modern expression of the brand and has been very well received by customers. We're continuing to lean into our New York roots with the city serving as a backdrop for our recent fall denim campaign featuring the variety of styles and fits we're known for. We also continue to build on our connection to sport. We're entering our second year as the NFL's official fashion partner with an expanded collection across several categories, serving fans of all 32 teams with styles for men, women, kids, babies and toddlers. We're bringing the partnership to life through both players and fans reflecting the personal style at the center of Abercrombie today. We featured Jaxson Dart and Malik Nabers of the New York Giants in our recent denim campaign, along with several other players, we'll continue to highlight throughout the season. We're just getting started on back-to-football for Abercrombie with more to come as we build towards holiday. Turning to the record second quarter for Hollister. The brand grew 2% on top of a 19% increase in the second quarter last year, and also sequentially accelerated from a flat first quarter. We grew across regions and genders led by strength in knits, shorts and non-denim bottoms. Hollister's collaboration with Target, the brand's first meaningful wholesale and category expansion in the U.S., has performed very well against expectations and added nicely to top line growth this quarter. Having our product in over 1,500 Target locations has also given us access to new Hollister customers across the country while providing our existing customers new categories available on our owned digital app and web experiences to outfit their dorms. We're very encouraged by this partnership and underlies the potential for our brands to expand their reach through new distribution channels and categories. Hollister's back-to-school season continued to build as we exited the second quarter, and we've seen growth accelerate off of Q2 levels so far in August. We started the season with our Lollapalooza festival launch, which included an exclusive collection with Y2K nostalgic styles expressed through a modern lens for the young adult customer as well as on the ground activations at the festival. Additionally, we teamed up with rising star, Freya Skye in our fall denim launch featuring limited edition product and a broad range of denim styles. We're excited by back-to-school, keeping Hollister on track to make 2026 the best-ever sales result in the history of the brand. Halfway into 2026, we're diligently executing to the ambitious goals we set across the business. As a reminder, our 4 priorities for the year are: first, to grow sales across brands with continued investment in owned and operated stores and digital businesses while adding growth from partnerships and new product categories; second, to stabilize gross margins by mitigating external cost pressures. Third, to continue to invest in tools and technologies, including AI to improve speed and efficiency across the product and customer journeys. And finally, to maintain our strong profitability and fuel excess cash return to shareholders. We've made meaningful progress across all 4 of these objectives in the first half of 2026. One area to highlight is the work we're doing to expand our reach through new distribution channels and product categories. We continue to be pleased with our abercrombie kids licensing performance as well as the Target partnership I mentioned earlier. And we are very excited to build on a couple of areas this fall. First, we've seen good initial reads in our footwear and accessories business across brands as we bring new categories to support head-to-toe dressing. And second, we look forward to expanding the distribution of our NFL products, which will now be sold on nflshop.com and NFL stadium stores and on official team e-commerce sites and fanatics.com. I'm so proud of this team as we continue to set sales records, improve gross margin and control expenses while making important long-term investments. We remain on offense and our updated full year outlook reflects increasing confidence that we can deliver balanced growth across brands and regions. We're also on the path to deliver industry-leading margins again this year, demonstrating the sustainability and overall quality of our business, powered by a culture of financial discipline. We see the quality in our cash flow as well. Coupled with a strong balance sheet, we now expect to return at least $500 million to shareholders through share repurchases for the year. While we've made meaningful progress so far in 2026, I am most excited by how much opportunity is ahead and the proof points we're seeing show how uniquely positioned we are to capitalize on it. We remain on track to deliver strong results this year while staying focused on what will be the next great chapter of our journey. Thank you to the entire team, the best in retail for making it all happen. And with that, I'll hand it over to Robert. Robert Ball: Thanks, Fran, and good morning, everyone. We delivered record second quarter net sales of $1.27 billion, up 5% and above the 2% to 4% growth range we provided in May. Comparable sales were flat and AUR increased mid-single digits for the quarter, with lower promotions driving better-than-expected results to our outlook. By region, net sales increased 5% in the Americas, 19% in APAC and 2% in EMEA. Comparable sales increased 1% in the Americas, 13% in APAC and declined 4% in EMEA. In EMEA, the U.K. remained strong and Germany returned to growth. By brand, Abercrombie brands' net sales increased 8% with comparable sales up 4%. Hollister net sales increased 2% against last year's record with comparable sales down 3%. Both brands grew net sales in the Americas, Abercrombie led the growth in EMEA and Hollister led the growth in APAC. Across regions and brands, the spread between net sales growth and comparable sales was driven by net new store and third-party channel performance. I'll cover the rest of our results on an adjusted non-GAAP basis, which excludes the $39 million net benefit from a favorable litigation settlement in the second quarter of 2025. Reconciliations are included in this morning's earnings release and investor presentation. Second quarter operating income was $253 million, and operating margin was 19.9% of sales. That compares with adjusted operating income of $168 million and adjusted operating margin of 13.9% of sales last year. Given the size and unique nature of the IEEPA tariff refund, we believe it's important to walk through the individual components and impact on our results this quarter, and we've included a schedule at the bottom of the first page of today's press release with the details. We received and recognized approximately $100 million of refunds related to IEEPA tariffs in the quarter. The full amount is included as a reduction of cost of sales and contributed approximately 790 basis points to second quarter operating margin and approximately $1.75 to diluted earnings per share. Our operating margin was roughly 990 basis points above the around 10% outlook we provided in May. About 790 basis points of that outperformance came from the IEEPA tariff refund. The remaining approximately 200 basis points came primarily from favorable gross margin and operating leverage on stronger sales. While the refund was meaningful, the underlying business performed above our expectations. Year-over-year, operating margin increased 600 basis points from 13.9% in the second quarter of 2025. The tariff refund benefit was partially offset by higher year-over-year tariff expenses of 100 basis points, store occupancy and fulfillment costs and selling expense as well as higher incentive compensation and general and administrative expense. We've included a table in the investor presentation with additional detail on the timing of tariff refunds and ongoing tariff expense. Tax rate for the quarter was 29%, better than our outlook due to higher earnings from the IEEPA tariff refund and overall international outperformance. Net income per diluted share was $4.17 compared with adjusted diluted earnings per share of $2.32 last year. That was above our outlook of $1.80 to $2, even when taking into account the approximate $1.75 benefit from the IEEPA tariff refund. Inventory remains tightly managed and both brands are chasing. Ending inventory at cost was approximately flat to last year, with units up low single digits and aligned with our expected unit sales growth. On the balance sheet, we ended the quarter with $628 million of cash and cash equivalents, approximately $1.1 billion of liquidity and $10 million of marketable securities. We repurchased $177 million worth of shares during the quarter and $282 million year-to-date. Repurchases for the quarter and year-to-date periods represented approximately 4% and 7%, respectively, of shares outstanding at the beginning of the year, and we ended the quarter with $568 million remaining on our current repurchase authorization. Turning to the outlook. Our first half execution and strong start to August support a higher full year sales expectation and an increase to our operating margin and EPS outlook. Our underlying second half operating margin assumptions have also improved from our May expectations. Updating our tariff refund assumptions, we now expect to recognize a total of approximately $120 million of refunds related to IEEPA tariffs, excluding accrued interest. We recognized $100 million in the second quarter and expect to recognize the remaining $20 million in the third quarter. The full year outlook includes the entire $120 million refund. We estimate that the refund will contribute approximately 220 basis points to full year operating margin and approximately $2.10 to full year diluted earnings per share. The remaining expected $20 million refund is included in our third quarter outlook. We estimate it will contribute approximately 160 basis points to third quarter operating margin and approximately $0.35 third quarter diluted earnings per share. Separate from the IEEPA tariff refunds for 2026 tariff expense, our outlook for the second half reflects the current Section 301 tariff rates of 10% to 12.5% effective on global imports into the U.S. On that basis, our updated tariff assumptions provide approximately 10 basis points of full year gross margin favorability year-over-year. We expect that benefit to be largely offset by higher freight costs. We've included a schedule in today's release and our investor presentation to provide further detail on our tariff expense and refund history. For the full year, we now expect net sales growth of around 5% from $5.27 billion in 2025, with growth across regions and brands. Our first half APAC performance reinforces the region's growth potential, and our strategic review remains focused on the best path to capture that opportunity. We continue to expect modest AUR improvement and approximately 30 basis points of benefit to net sales from foreign currency. We now expect full year operating margin in the range of 14.5% to 15%, including approximately 220 basis points of benefit from the IEEPA tariff refunds. We're forecasting a tax rate around 29%, diluted weighted average shares of around 44 million and net income per diluted share in the range of $13.10 to $13.60. The EPS outlook includes an estimated $2.10 benefit from IEEPA tariff refunds. For capital allocation, we now expect capital expenditures around $250 million. We plan to deliver approximately 130 net new store experiences, including 50 new stores and 80 remodels and right sizes against approximately 20 closures. New stores are expected to be relatively balanced across brands and weighted towards the Americas. We now expect at least $500 million of share repurchases for 2026. For the third quarter of 2026, we expect net sales growth of 5% to 6% to the Q3 2025 level of $1.3 billion with growth across regions and brands. We expect third quarter operating margin in the range of 13% to 14%, including the expected $20 million or approximately 160 basis point IEEPA tariff refund benefit. We also expect modest AUR growth and slight year-over-year favorability from tariff expense to more than offset modest freight pressure on gross margin. We expect slight operating expense deleverage from incremental payroll and amortization related to the ERP implementation completed in the first quarter. We expect a third quarter tax rate of around 29% and net income per diluted share in the range of $2.90 to $3.20, including an estimated benefit of $0.35 from the IEEPA tariff refund. Diluted weighted average shares are expected to be around 43 million, including the anticipated impact of at least $100 million of third quarter share repurchases. To close, the first half demonstrated the strength of our -- and balance of our business. We've continued to do what we said we would do, deliver profitable growth while investing for the future. We're strengthening our brands, expanding our capabilities and building the infrastructure needed to support the next phase of growth. At the same time, we've maintained healthy double-digit operating margins, generated strong cash flow and returned significant capital to shareholders through consistent share repurchases. Our updated outlook includes the benefit of IEEPA tariff refunds. More importantly, it reflects the underlying strength of the business and our confidence in our ability to continue delivering sustainable profitable growth. And with that, operator, we are ready for questions. Operator: [Operator Instructions] First question coming from the line of Dana Telsey with Telsey Advisory Group. Dana Telsey: Congratulations, everyone. So nice to see the progress. Fran, as you think of the product acceptance and what you've been seeing in Hollister and Abercrombie, when you think of new product trends or fashion versus core, what are you seeing in each? And how do you see the denim cycle? And then, Robert, as you think about inventory, AUR versus units, how do you think of that progress as we go through the year? Fran Horowitz-Bonadies: Yes, exciting quarter for us, exceeded expectations, 15th consecutive quarter of growth, win across both Abercrombie and Hollister brands and regions. So super excited about what we reported this morning. Regarding fashion, we're seeing lots of different things in the brands. It's exciting to see the customer really showing up. We're seeing a balance between casual and dressed up. Second quarter was really driven through some incredible key knit opportunities and items that we had in wovens. Denim specifically is important to both brands. We're heading into the back -- obviously, we're in the middle of the back-to-school season for Hollister. It's part of the assortment. We learned years ago. We got to stay balanced to make sure it doesn't become too dominant in the assortment, but exciting. The Hollister team is absolutely loving low rise. The Abercrombie consumer is loving actually the styles we have across brands because theirs really depends on their wearing occasion and what they're doing for the day. So lots of exciting things happening and thrilled to have momentum heading into the back half. Robert Ball: Dana, as it relates to AUR versus units, not assuming anything different than what we've been talking about all year here. Outlook continues to expect modest AUR improvement in the back half. That's consistent with what we shared back in May. We're happy with this being a demand story. In Q2, AUR came in stronger than expected on reduced promotional activity. The consumers are responding really well to the assortments, and that came with unit sales growth. So it's balanced, which is what we like to see. So as we think about like going forward, inventory is in good shape, up mid-single -- up 3% across the company here with both brands positioned well to chase into the back half. And all of that gives us the best chance to grow our AURs here in the back half of the year. Operator: Our next question in queue coming from the line of Corey Tarlowe with Jefferies. Corey Tarlowe: I guess what I'm wondering is on the third quarter sales outlook, which is quite healthy. Curious how that breaks down by brand, if you could share any color and really would just be curious to understand kind of the sequential trends at Hollister as well and maybe the regional differentials, if there's been any impact based on exposures to various regions? Robert Ball: Yes, Corey. So on the outlook for sales for Q3, again, expecting 5% to 6% growth with growth across regions and brands. I haven't given specific color on individual brand performance, but we've been happy with what we've seen on the A&F side, delivering plus 8% for Q2. Happy to see that trend, and we've had a nice start to the month of August, and we've got new things coming down the pipeline with the NFL drop and different supplements to the assortment. On the Hollister side of the business, we're kind of in the middle of back-to-school here. It's been a nice acceleration here into August. So happy with what we're seeing there. And that's kind of where we are today. The EMEA business has been strong. It's been -- we saw a nice sequential improvement. The APAC business continues to be strong, and both brands are growing in the Americas. So a nice balanced business that gives us confidence here going into the back half. Corey Tarlowe: That's very helpful. And then just as a follow-up, I think Fran mentioned in her remarks, but curious if you could unpack that for us a little bit on the margin commentary. Full year margin outlook raised and by more than the amount of the tariff benefit. So seemingly, there's some embedded improvement in the margin profile based on where you were versus prior expectations. So could you kind of highlight what the main differentials are or the puts and takes, that would be really helpful. Robert Ball: Yes. I mean if you think about full year, it's a pretty straightforward story. Underlying tariff rates and freight rates are kind of going in different directions, and those are largely offsetting one another. We've talked all year about modest AUR growth as we move through the year here. That's still in play. We still continue to expect that. We did have the outperformance in margins in Q2 that we are rolling us through. So that all keeps us kind of in line when you do the -- add them up. We've got modest AUR growth offsetting some investments that keeps us kind of in that 12.5-ish percent range around last year. And then on top of that, you've got this 220 basis point benefit from the tariff refunds, and that gets us to our 14.5% to 15% range for the full year. So we feel good about where we are. The business is executing. We've got some outperformance in Q2 that we're rolling through. Now we're just focused on executing for the back half. Corey Tarlowe: Great. Best of luck. Robert Ball: Thank you. Operator: Our next question coming from the line of Matthew Boss with JPMorgan. Matthew Boss: So Fran, could you speak to structural drivers, which you think have been built that support the return to positive comps at the Abercrombie brand? And specifically, any key categories which you saw inflect this quarter and just drivers of opportunity that you see in the back half at that nameplate? Fran Horowitz-Bonadies: Thanks, Matt. So yes, we've been on quite a journey here and really have rebuilt this entire company from bottom to top and top to bottom. And the fundamentals that we've built to do that are rooted in our operating model and they're rooted in all the technology and investments that we've been making. We paid back a lot of tech debt. We talked a lot about our ERP system that's just come to fruition in March. So lots of exciting things happening, to your point, from a fundamental perspective. What we see in the business is the opportunity to get really close to that customer. Both the teams in Abercrombie and Hollister are excellent at doing that, and that showed in our results for the second quarter and the momentum that we have heading into the third quarter. Abercrombie specifically, knits, wovens, really strong throughout the second quarter, swim. Hollister also strong knit business, strong bottoms business. So what I'd like to see in the business is a balance, and that's what we're seeing right now. So balance across categories, that we're winning in lots of categories. We're winning across genders and brands and regions. So all around, super excited about the back half. Matthew Boss: Great. And then, Robert, could you just help break down expectations for AUR, freight and marketing as we think about the third quarter operating margin forecast, excluding the benefits from tax refunds? Robert Ball: Yes. So on the AUR side, no change to our thinking here. We're expecting modest AUR growth in the back half of the year. When you think about the tariff side of things and then the freight side of things, so freight has been a bit of a headwind for us here. The rates have remained elevated. So that is largely offsetting the benefit that we would be seeing from outlook to outlook related to the 10% to 12.5% tariff rates that are in place today for the 301s versus that 15% that we had assumed back in our last guide. So you can think about freight and tariffs largely offsetting one another and then getting that benefit in AUR kind of rolling through. I'm excluding all of the tariff refund components, but obviously, you've got that $20 million on the Q3 side, and then we should be relatively clean here for Q4. And then on the marketing side, I really like where our marketing has been. It's been a deleverage point for us in the front half of the year, and we've talked quite a bit about that as we've lapped some of the investments that we made last year. We're lapping that in the back half. We kind of like this, a little north of 5% range. So we wouldn't expect to see any sort of meaningful leverage or deleverage on the marketing side for the back half of the year. Fran Horowitz-Bonadies: Matt, let me add one more piece also. As we head forward, we've been talking quite a bit about this opportunity for us to diversify our operating model. So we had 2 really nice proof points this quarter, one from Abercrombie and one from Hollister. And that is expanding into new channels and new categories for us. So the great example was this Target partnership where we've introduced dorm. We got proof points now that Hollister can certainly expand way beyond apparel and there's significant opportunity there. And we just recently mentioned the fact that we're expanding our NFL partnership, and we're going to be selling in the venues and nflshop.com and other channels as well. So that's been a big piece that we've been working on behind the scenes and we're excited about what that can bring for the future. Matthew Boss: Best of luck. Fran Horowitz-Bonadies: Thanks. Robert Ball: Thanks, Matt. Operator: Our next question coming from the line of Marni Shapiro with The Retail Tracker. Marni Shapiro: Congratulations. The stores look incredible. So I have a quick question on Hollister. At times during the quarter, the inventory was very clean. And I'm curious if you had any delivery issues at Hollister or if it was just selling out at store in stores that quickly? And then I do have one quick follow-up just on Abercrombie. Fran Horowitz-Bonadies: Sure. So Marni, I'll take that first one. So yes, we had incredible demand for the brand. It really honestly exceeded our inventory at many points during the quarter. The team was absolutely chasing, chasing, chasing, which is what our model can help us do. Now that inventory has caught up, we're excited to see the acceleration and have nice momentum heading into the balance of back-to-school in the back half. Marni Shapiro: That's a great problem to have. Actually, the stores looked very empty again yesterday. And then I'm curious on Abercrombie. Other than social media, have you got -- are you activating new customers? And are you planning any activations in the back half of the year that it's going to be a balance of sort of activations and online? How are you thinking about that for the Abercrombie brand? Fran Horowitz-Bonadies: I'll take that one, too. So our goal, obviously, is always to bring new customers into the brand as well as to retain our active customers, which we're working on. We talked a bit about some new opportunities. So yes, as we head into the back half with Abercrombie, the NFL is a great example of that -- our second year as the official fashion partner, and now we're going into stadium, nflshop.com. We have an opportunity, again, for example, with Target, reaching new customers through new categories, exciting, exciting with the opening up of SoHo. That has been really a terrific opportunity for Abercrombie that bringing our heritage to where the brand is today. The customer feedback has been terrific, and the business has really exceeded our expectations. Marni Shapiro: Congrats. Best of luck with the back-to-school. Fran Horowitz-Bonadies: Thank you. Operator: Our next question coming from the line of Alex Straton with Morgan Stanley. Katherine Delahunt: This is Katie Delahunt on for Alex. Maybe just -- you mentioned Hollister demand being constrained by inventory at some point during the second quarter. Can you maybe frame like how meaningful that was to the second quarter? And what kind of acceleration that you're seeing as you kind of catch up on inventory quarter-to-date? Robert Ball: Yes. Katie, we had a great second quarter, Hollister sequential improvement up 2%, and we're squarely focused on carrying that demand and that momentum here into the third quarter. What we can say is we've seen that Hollister growth accelerate from its Q2 level so far in August, and we feel good about the product across -- and the assortment across that brand. Operator: Our next question in queue coming from the line of Mauricio Serna with UBS. Mauricio Serna Vega: I wanted to ask about Abercrombie. I think you talked about better conversion. Could you elaborate on that? Is that across both online and stores? And what in your view has led to that improvement? And then on Hollister, maybe could you talk about what kind of comp sales cadence you've seen throughout Q2? And is it fair to assume like it's -- the comp is near an inflection to positive in Q3? And yes, just on those 2 things to start, that will be super helpful. Robert Ball: Yes. I mean -- so we've been on this journey with A&F, Mauricio, with conversion. We've continued to see nice traction within the brands, and that speaks a lot to the quality of the traffic that we're bringing into the brands. When you see conversion improve on reduced discounts and still selling more units, that's a really nice sign, and it shows that the assortments are resonating with customers. And we're actually seeing that across both brands, which is great to see. And that's really showing up in a nice back-to-school and a nice start to the month of August. So we're attracting the right consumer. We're bringing them into the stores based on what we see in the first half, where the investments that we're making are great, and we're excited to see that continue into the back half. In terms of comp sales cadence again for Q2, again, not talking comps here. We're focused on driving the total here. We've got plus 2% sales on the Hollister side. We've got momentum headed into and through back-to-school, and that's carrying us into August and Q3. And so we're excited to be positioned to drive another quarter here of 5% to 6% growth on the top line and double-digit operating margins. So that's what we're squarely focused on executing here in the back half. Mauricio Serna Vega: Got it. And then just a quick follow-up on like the guidance for the year. I think if you do the math like for 5% total sales growth full year, it implies an acceleration in Q4 to roughly 7%. So just wondering what in your view is driving that acceleration. And then on the collaborations and partnerships that you're doing with Target, NFL, could you elaborate maybe on what are like the gross margin and operating margin implications of those businesses as they continue to scale? Robert Ball: Yes. So on the fourth quarter, right, we've guided Q3. We've given you the full year implications would be that we've got a nice healthy business here headed into the back half. We just got to execute. We're going to keep inventories tight, make sure that we're continuing to lean into the places that we're seeing the marketing be effective. So that's what we're focused on. Obviously, a lot of business to do here as we get through the balance of Q3 and then head into the holiday season. As it relates to the gross margin impact on 3P, I'd say like sitting here today, the short answer is there's nothing meaningful to -- there's not a meaningful impact here today. We like these opportunities. We like the incrementality of what they give us. They allow us to reach new customers. It's a nice opportunity for us to participate in new categories and extend that brand reach without requiring a ton of capital deployment. So we're excited about where that looks like. We're evaluating the right mix, obviously, of distribution channels for us. And -- but sitting here today, I don't see any sort of meaningful impact to gross margin. Fran Horowitz-Bonadies: It's very early innings, Mauricio. So stay tuned, more to come, but excited to see the beginning of this happening. Mauricio Serna Vega: Great. Best of luck. Robert Ball: Thanks, Mauricio. Operator: Our next question coming from the line of Jon Keypour with Goldman Sachs. Jonathan Keypour: Just a very quick one and then a follow-up. I noticed you raised buybacks $50 million for the year, and you've got $120 million incoming from the total tariff refunds. Just wondering what the $70 million remaining will be used for? Robert Ball: Yes. So Jon, this is Robert. I think it's pretty straightforward here. The refunds don't change how we allocate capital in our business. Balance sheet has been strong for years now, and we've been able to invest in the brands, invest in future growth and at the same time, consistently return cash to shareholders. We've got 10 consecutive quarters of share repurchases here now, and we continue -- and we expect to see that continue. So we'll work the refunds through that same framework as we go forward. But nothing else to report today. Jonathan Keypour: Got it. Okay. And then just in terms of the Target partnership, I'm not sure if you guys are willing to give the size of the impact to the quarter. But just curious about if you guys are seeing anything in terms of like a positive feedback loop where it's growing the customer book on the apparel side of things at Hollister as well? Robert Ball: Yes. I mean it's early, Jon, and we're not sizing the opportunity today. We're seeing evidence that we're reaching new customers, which is great. That's one of the primary objectives of the partnership. So we're focused right now on making sure that we have that strong customer response, healthy sell-through of the product and ultimately trying to evaluate the long-term opportunity that we have here. Fran Horowitz-Bonadies: I mean the reaction to the product has been absolutely terrific. I mean, the virality of it was incredible. I mean, from the plushies to the comforters, I mean, we learned a lot, Jon. It was really exciting to be able to see the opportunity to sell Hollister outside of apparel. So again, we're at early stages, but we're learning and testing and more to come in the future. Operator: Our next question in queue coming from the line of Janine Stichter with BTIG. Janine Hoffman Stichter: I was hoping you could comment a little bit on the promotional environment. I think you said promotions were down better than your plan. Was that across all brands? And just curious what you're seeing broadly in the environment? And then for Robert, just as we think about long-term operating margins, we're sitting here this year, stripping out the tariff benefits kind of in the 12% to 13% range. Is there anything structurally changing that you would see from here to prevent that from being a sustainable operating margin? Fran Horowitz-Bonadies: Janine, yes. So I would say, our results from Q2 are really proof that our model is working. Outperforming our outlook was primarily driven from lower discount levels, and that was across both brands, delivering this 5% growth that we have. This read and react model is really working for us. The team is chasing and tightly managing the inventory. So exciting to see how that's working for us. We don't view our promotions on what's happening on a competitive basis. We sit down with the team literally week by week, see what's working in our business, what's working, what's not working, and we take action. So again, focused on what we can control within our world. Robert Ball: Yes. And on the long term, Janine, not providing any sort of specific guidance beyond 2026 today. As we've been talking about, we are excited about new growth levers that we're building that are available to these brands on a go-forward basis, category expansion, channel diversification, new partnerships. All of those can work to complement what is effectively a very healthy and profitable owned and operated business over time. But nothing structural that I would say that would stop us from maintaining these healthy double-digit operating margins as we have for a number of years now. Operator: [Operator Instructions] Our next question in queue coming from the line of Adrienne Yih with Barclays. Angus Kelleher-Ferguson: This is Angus Kelleher on for Adrienne Yih. I wanted to ask a question on category expansion. Footwear and accessories are getting good initial reads across both brands. How big can head-to-toe be as a percent of the assortment? What is the margin structure there? And then if you could just remind us if that is an owned built or a licensed category? Robert Ball: Yes. I mean, we like these opportunities, Angus, because they expand our addressable market. They diversify our growth drivers, whether it's NFL, Target, footwear, accessories, home goods, licensing, wholesale, right? Those all help us reach customers in different ways. It's early days. We're learning a ton. We're not sizing them today because quite honestly, they are still relatively small in the grand scheme, but we're excited about the longer-term growth potential that we see across these buckets. Angus Kelleher-Ferguson: Great. And then just while I have you, I'll ask a follow-up. On the stores, you're at 130 new experiences this year with 80 of those remodels and rightsizes. So I guess the mix has kind of shifted from new doors towards modernizing the existing fleet. How much runway is left on new stores in the Americas? And then how much is left on modernizing the existing fleet? Fran Horowitz-Bonadies: So actually, that -- we have been very consistent in the balance between our new stores and our store experiences over the past several years, fifth year of being a net store opener continuing with the strategy as we move forward. And to answer the question on how many new stores are left, there's no finish line in retail, there's always new opportunities for us to explore, just like we've been doing with these street locations for Abercrombie recently. This new SoHo experience has really been so well received by our consumer. We're so excited to continue to implement that in some stores going forward. So again, no finish line, but exciting strategy that we've had on retail real estate. Operator: Our next question coming from the line of Janet Joseph with JJK Research Associates. Janet Kloppenburg: Congratulations on a nice quarter. I wondered if you could talk a little bit more about the AUR improvement and the unit improvement. On AUR, are you seeing that's coming from less promotions and you did speak to that and also price increases and what the outlook looks like for that going forward? And then on units, I was just wondering if that's a mix issue or just overall units are improving? And then lastly, when you think about EMEA, do you have confidence that, that for Hollister will continue to accelerate as we go through the second half? Robert Ball: Janet, I'll take a couple of these. So on the AUR improvement, yes, we're seeing nice AUR improvement. The outperformance to our outlook in the second quarter was primarily driven through better-than-expected AURs, and that really came from reducing our overall promotional or overall discount levels from our expectations. So nice to see the progress there. That shows that the product is resonating. We are selling more units coming along with that. That is not just a mix dynamic that is true sales units out the door. So again, nice signs that the consumer is responding to what we're putting out there for them. We haven't taken any sort of additional price increases and none of that versus what we've been talking about. That is all baked into our outlook. So we continue to expect modest AUR growth in the back half of the year. On the EMEA side of the house... Fran Horowitz-Bonadies: On the EMEA side of the house, yes, we are confident. We certainly believe in the long-term potential of that region, Janet. The local team is really busy at work staying close to that customer. Our playbook that we've exported is working. It's exciting to see that the U.K. has continued to be positive and that Germany flipped positive. All of that is obviously in our outlook for the back half. But yes, I believe in the long-term opportunity and have the confidence to see that business continue. Janet Kloppenburg: Okay. Best of luck. Fran Horowitz-Bonadies: Thank you. Robert Ball: Thank you. Operator: And there are no further questions in the queue at this time. I will now turn the call back over to Fran for any closing remarks. Fran Horowitz-Bonadies: Yes. I just want to thank everyone for participating, and we look forward to updating you after the third quarter. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect. Before you buy stock in Abercrombie & Fitch, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Abercrombie & Fitch wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $437,097!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,355,077!* That performance is why people listen. With a track record of beating the S&P 500 by nearly 5x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of September 2, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool recommends Abercrombie & Fitch. The Motley Fool has a disclosure policy. Abercrombie & Fitch (ANF) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Abercrombie & Fitch Co. (NYSE:ANF) delivered a powerful second quarter, which led to a nearly 36% one-day gain in its shares and a sharply higher full-year outlook. During the August 27 episode of Mad Money, Jim Cramer said the operating performance can give way to optimism but added: Abercrombie & Fitch Co. (NYSE:ANF) reported second-quarter net sales of $1.3 billion, up 5%, and diluted earnings per share of $4.17, compared with $2.91 a year earlier. Operating margin reached 19.9%, versus 17.1% a year earlier. The Abercrombie brand's sales increased 8%, while Hollister sales increased 2%. The earnings beat was partly driven by approximately $100 million of International Emergency Economic Powers Act tariff refunds. The refunds contributed $1.75 per diluted share and approximately 790 basis points to operating margin. Importantly, management said the company exceeded its prior earnings and operating-margin outlook by more than the amount of the tariff refund. Management raised full-year net sales growth guidance to 5% from 3%-5% and diluted EPS guidance to $13.10-$13.60 from $10.20-$11.00. Full-year operating-margin guidance increased to 14.5%-15% from 12%-12.5%, with approximately 220 basis points of favorability from $120 million of IEEPA tariff refunds. The company also expects to repurchase at least $500 million of shares. The biggest risk is that investors treat tariff-assisted profitability as structural. The second-quarter 19.9% operating margin included approximately 790 basis points from the tariff refund, while full-year guidance incorporates approximately 220 basis points of tariff-related favorability. Once those benefits roll off, Abercrombie & Fitch Co. (NYSE:ANF) will need to preserve its gains through merchandise margins, pricing discipline, and operating leverage. The sales picture is also less compelling than the headline earnings beat. Companywide comparable sales were flat, and Hollister comparable sales declined 3%. The Abercrombie brand's 8% sales growth is carrying the portfolio, increasing the importance of sustaining its momentum while management attempts to revive Hollister. Insider Monkey's tracking of more than 1,000 hedge funds shows 36 hedge funds held ANF in Q2, down from 39 in Q1. As per Insider Monkey’s data, AQR Capital Management was the most prominent hedge fund shareholder in the quarter even though it reduced its position by 30% to over 2.4 million shares. Additionally, it has a short interest of approximately 9.31% to 9.85% of its public float. Cramer noted that investors should wait for a better entry point rather than chase the initial surge: Abercrombie & Fitch Co. (NYSE:ANF) is generating strong earnings growth even after accounting for the tariff benefit and has considerable room to benefit from continued share repurchases, but Hollister remains weak and a meaningful portion of this year's margin outlook is tied to tariff refunds. After the post-earnings surge, investors have less margin for disappointment. Cramer's suggestion of buying on a pullback offers a safer approach than chasing the rally. While we acknowledge the potential of ANF as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: Jim Cramer Questions AEVEX (AVEX) Stock Sell-Off and Jim Cramer Highlights Sandisk’s (SNDK) Massive Buybacks After Stock Surge. Disclosure: None. Follow Insider Monkey on Google News.

Abercrombie & Fitch (ANF) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company. The upward trend in estimate revisions for this teen clothing retailer reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank. The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008. For Abercrombie & Fitch, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year. The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate: For the current quarter, the company is expected to earn $2.95 per share, which is a change of +25.0% from the year-ago reported number. The Zacks Consensus Estimate for Abercrombie has increased 5.5% over the last 30 days, as three estimates have gone higher while one has gone lower. For the full year, the earnings estimate of $11.01 per share represents a change of +11.7% from the year-ago number. There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, three estimates have moved up for Abercrombie versus no negative revisions. This has pushed the consensus estimate 7.42% higher. The promising estimate revisions have helped Abercrombie earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500. Investors have been betting on Abercrombie because of its solid estimate revisions, as evident from the stock's 49.1% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Dollar General Corporation? Here are five stocks we like better. Many retailers beat earnings estimates last week, but one-time tariff refunds inflated results and masked underlying weakness in some cases. Dollar General and Best Buy delivered high-quality beats, with strong comp sales growth that held up even after stripping out minimal tariff-refund contributions. Williams-Sonoma outperformed a weak home furnishings sector with accelerating comp sales and raised margin guidance that excluded any assumed tariff refunds. The retail sector was one of the biggest winners in earnings season, which was especially evident in some of the reports that rolled in last week. Eight major retailers reported earnings within 48 hours, and nearly all beat on headline numbers. But headline numbers rarely tell the story, and this quarter was especially deceiving. Tariff refunds have done to earnings what steroids did to baseball players in the 1990s, and these juiced results can mask underlying weakness. Take Abercrombie and Fitch Co. (NYSE: ANF), for example, which soared more than 35% after its Q2 release on an impressive double beat and buyback increase. But the company accumulated about $100 million in tariff refunds during the period, boosting margin by 790 basis points (bps) and adding $1.75 to the $4.12 earnings per share (EPS) figure. Another $20 million in refunds is expected in Q3, but comps were weak, especially at Hollister. → Boeing's $131B F-15 Win: Mach 1 Momentum or Just Altitude? To find the real winners, we need to screen out earnings juiced by tariff refunds. That means focusing on comp sales and traffic instead of EPS and revenue, and parsing true operational improvement from one-time windfalls. Cash-strapped consumers trading down to discount stores has been a boon to Dollar General Corp. (NYSE: DG), which seems to impress the market every time a conference call rolls around. → From SaaS-pocalypse to Perfect Storm: Workday’s AI Growth Story Strengthens In fiscal Q2 2027 results released Aug. 27, the company once again beat top- and bottom-line estimates, with same-store sales (i.e., comps) up 3.5% and growth spread out across all four merchandise categories. Foot traffic was up for a fifth consecutive quarter, and gross margins expanded by 127 bps. → 3 Retail Stocks to Watch After a Big Consumer Earnings Week Crucially, the EPS beat wasn’t reliant on tariff refunds. The company earned $2.48 per share in the period, and management estimates that only 25 cents of that figure came from tariff refunds. Removing the one-time tariff boost leaves EPS of $2.23 per share, still well above the expected $2.01 and nearly 17% higher than fiscal Q2 2026’s number of $1.86. Management also raised full-year guidance on revenue, comps, and EPS. DG shares jumped as much as 12% following the earnings call before surrendering most of those gains later in the day. But the bounce off the May lows is confirmed, and the Relative Strength Index (RSI) refuses to dip much below 50. The stock is up 16% in the last three months, and a potential Golden Cross on the 50-day and 200-day moving averages could be the next technical catalyst. Best Buy Co. Inc. (NYSE: BBY) posted one of the better quarters in the retail sector but fell 4% after the release, despite only $34 million in tariff refunds. High memory costs continue to weigh heavily on computing prices, and management expects this tension to persist through year-end. But Best Buy’s fiscal Q2 2027 results deserve a closer look, since the beat was the cleanest in the cohort. EPS and revenue both easily beat expectations, but the eye-popping number was comps, which grew 4.1% year-over-year (YOY) versus management’s expectation of 1%. Despite soaring memory costs, computing and home theater product sales continued to grow, indicating that consumers are still willing to pay up for big-ticket home entertainment. Management lifted full-year comp sales guidance to a 1.9% to 3% range, and EPS to $6.70 to $6.90. BBY shares were up nearly 30% year-to-date (YTD) before earnings, so investors may have been looking for reasons in the report to hit the cash register. But this could be an opportunity for new investors to ride some technical and fundamental tailwinds. The stock is bumping up against its 50-day moving average, which has been a support area since the Golden Cross formed in July, and the RSI is back to its August lows. Few areas of the retail sector have seen more divergent consumer attitudes than the home furnishings industry. According to the most recent Census Bureau Retail Sales report, furniture and home furnishing sales in 2026 fell 1.7% from the same 7-month period last year. But not every home goods store is feeling the heat. The K-shaped economy is alive and well in this space, and Williams-Sonoma Inc. (NYSE: WSM) continues to grow comps while many competitors struggle. Williams-Sonoma reported fiscal Q2 2026 results on Aug. 26, and (of course), beat EPS and revenue estimates. But two numbers stand out in the report. First, comp sales grew 6.2% YOY, accelerating considerably above Q1’s 4.8% number. With furniture sales basically flat in 2026, comp growth of this magnitude shows Williams-Sonoma is taking massive share from competitors struggling to get traffic in the door. Second, management raised full-year operating margin guidance to 17.8% to 18% and said it did not factor in any tariff refunds, implying operational efficiency gains will do the heavy lifting. The WSM chart has a similar setup to BBY, with investors taking profits following an excellent quarter and a YTD run-up of over 30%. But the Golden Cross hints that the uptrend will take more than a little profit-taking to break, and the 50-day SMA could be another entry opportunity for new investors. The RSI is teetering near 50, but still hasn’t submerged into the bearish zone underneath. The article "3 Retail Stocks to Watch After a Big Consumer Earnings Week" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Abercrombie & Fitch Co. ANF delivered second-quarter fiscal 2026 results that topped expectations. It reported earnings per share (EPS) of $2.42 and adjusted EPS of $4.17. The Zacks Consensus Estimate is pegged at $1.95. Revenues rose 4.8% year over year to $1.27 billion, beating the consensus estimate of $1.24 billion by 1.9%.The quarter benefited from record net sales, broad-based regional growth and a strong operating performance. Comparable sales were flat on a constant-currency basis, while both Abercrombie and Hollister brands posted record second-quarter sales.As a result, ANF’s shares have gained 35.7% during trading hours yesterday. This Zacks Rank #2 (Buy) company stock has surged 51.8% in the past six months against the industry’s 14.4% decline. Image Source: Zacks Investment Research Abercrombie reported net sales of $1.27 billion in the second quarter of fiscal 2026, up 5% year over year. The company marked its 15th consecutive quarter of growth, supported by higher sales across regions and brands.The Americas remained the largest contributor, with sales increasing 5% year over year to $1.02 billion and comparable sales rising 1%. APAC sales climbed 19% to $44.2 million, with comparable sales up 13%, while EMEA sales grew 2% to $202 million despite comparable sales declining 4%. Abercrombie brand generated net sales of $596.8 million, up 8% year over year, with comparable sales increasing 4%. Hollister sales reached $669.9 million, up 2%, although comparable sales declined 3%. We had expected sales to rise 2.1% year over year to $563.7 million for Abercrombie and 4% to $683.1 million for Hollister. The brand performance highlighted continued strength in the company’s core lifestyle offerings. Management noted that both brands achieved record second-quarter net sales, with Abercrombie brands leading overall growth. Abercrombie & Fitch Company price-consensus-eps-surprise-chart | Abercrombie & Fitch Company Quote ANF posted adjusted operating income of $252.7 million, up 50.3% from the year-ago quarter. Adjusted operating margin improved to 19.9% from 13.9%. The company benefited from approximately $100 million of IEEPA tariff refunds, which reduced cost of sales and supported profitability.Selling expense increased to $444 million, up 18.3% from the year-ago quarter, while general and administrative expense rose to $204.8 million, up 16.8% from the year-ago quarter. Higher investments in stores, marketing and payroll partially offset the benefit from stronger sales and tariff refunds. ANF ended the quarter with cash and equivalents of $627.7 million and total liquidity of approximately $1.1 billion, including available borrowing capacity under its ABL facility. Inventory stood at $591.7 million compared with $593 million in the prior-year period.The company continued returning capital to shareholders, repurchasing 2 million shares for approximately $177 million during the quarter. Year to date, ANF repurchased 3.2 million shares for $282 million, reducing shares outstanding by 7% from the beginning of the year. Abercrombie raised its fiscal 2026 outlook, now expecting net sales growth of around 5% compared with the prior forecast of 3-5%. The company also increased its operating margin outlook to 14.5-15% from 12-12.5%.For the fiscal year, ANF expects net income per diluted share of $13.10-$13.60 and share repurchases of at least $500 million. Capital expenditures are projected at around $250 million, while the company continues to plan approximately 30 net store openings, 80 remodels and rightsizes, and 20 closures. We have highlighted three other top-ranked stocks, namely, Target Corporation TGT, American Eagle Outfitters AEO and Boot Barn Holdings, Inc. BOOT.Target offers guests fashionable, differentiated merchandise and everyday essentials at discounted prices. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Target’s current financial-year sales and EPS indicates growth of 4.4% and 11.4%, respectively, from the year-ago reported numbers. TGT delivered a trailing four-quarter earnings surprise of 10.5%, on average.American Eagle is a specialty retailer of casual apparel, accessories and footwear. The company currently carries a Zacks Rank of 2. The consensus estimate for AEO’s current financial-year sales and EPS indicates growth of 5.7% and 17.3%, respectively, from the year-ago reported numbers. AEO delivered a trailing four-quarter earnings surprise of 48.5%, on average.Boot Barn is a leading lifestyle retailer in the United States, specializing in western and work-related footwear, apparel, and accessories, which currently has a Zacks Rank of 2.The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS is expected to rise 15.7% and 22.6%, respectively, from the year-ago reported figures. BOOT delivered a trailing four-quarter earnings surprise of 11.4%, on average. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report Target Corporation (TGT) : Free Stock Analysis Report American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Slipped 0.04% to 7,675, the S&P 500 (SNPINDEX:^GSPC) drifted lower alongside a 0.08% decline to 26,130 for the Nasdaq Composite (NASDAQINDEX:^IXIC), while a 0.21% drop to 53,464 for the Dow Jones Industrial Average (DJINDICES:^DJI) snapped its three-day winning streak. Abercrombie & Fitch (NYSE:ANF) shares soared 36% after the retailer raised its full-year guidance on a second-quarter earnings beat. Elsewhere, Meta Platforms (NASDAQ:META) saw volatile trading after settling a legal dispute for 17 billion. In similar, but unrelated news, Snap Inc. (NYSE:SNAP) saw its shares decline 9% as Pennsylvania's Attorney General filed a lawsuit against the company due to its addictive features and child safety concerns -- much like Meta's settlement laid out. Meta's $17 billion settlement with dozens of states over its child safety concerns stole the headlines today, but its stock was largely flat, as the market had already somewhat anticipated this possibility. Meta agreed to certain terms for users under 18 across both Facebook and Instagram, including: a default two-hour max a six-hour night-time block limits on like counts more robust age checks removal of users under 13 parental requirement to remove time-related maxes higher response rates on harmful content review One interesting wrinkle in the settlement is that if TikTok and YouTube join in on the agreement, Meta's teenage time limit would drop to one hour. The other major headline today is that Nvidia (NASDAQ:NVDA) is reporting earnings after the bell right now. Currently, shares are up 5% as of 5:45 p.m. ET after the semiconductor behemoth reported sales and EPS growth of 106% and 128%, respectively. Nvidia also raised its sales guidance for the third quarter to 89% growth. Speaking to the power of these incredible results, CEO and founder Jensen Huang explained, "The AI infrastructure build-out is at full steam. Vera Rubin, now in full production, was built to power exactly this moment." Before you buy stock in Invesco QQQ Trust, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $443,461!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,307,633!* Now, it’s worth noting Stock Advisor’s total average return is 973% — a market-crushing outperformance compared to 213% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 26, 2026. Josh Kohn-Lindquist has positions in Nvidia. The Motley Fool has positions in and recommends Meta Platforms and Nvidia. The Motley Fool recommends Abercrombie & Fitch. The Motley Fool has a disclosure policy. Stock Market Today, Aug. 26: Stocks Edge Lower As Market Digests Meta Ruling and Awaits Nvidia's Earnings was originally published by The Motley Fool

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved record second quarter net sales of $1.27 billion, marking the 15th consecutive quarter of top-line growth driven by balanced performance across brands and regions. Performance outperformance was primarily attributed to higher-than-expected conversion and Average Unit Retail (AUR) resulting from reduced promotional activity and strong full-price selling. Abercrombie brands accelerated to 8% growth, supported by a strategic return to brand heritage through the new SoHo flagship and successful sport-focused marketing like the NFL partnership. Hollister returned to growth with a 2% increase, successfully navigating inventory constraints early in the quarter by utilizing a 'read and react' operational model to chase high-demand categories. Strategic diversification into new distribution channels, such as the Hollister-Target partnership for dorm products, is providing access to new customer segments beyond traditional apparel. Operational efficiency was bolstered by the completion of a major ERP implementation in March, which is now supporting improved speed and efficiency across the product journey. Updated full-year net sales outlook to approximately 5% growth, reflecting a strong start to August and confidence in the back-to-school and holiday seasons. Operating margin guidance raised to 14.5%–15%, which includes a 220 basis point benefit from non-recurring IEEPA tariff refunds totaling approximately $120 million. Management assumes modest AUR improvement will continue through the second half of 2026, supported by tight inventory management and reduced discounting. The outlook for the second half assumes that current Section 301 tariff rates (10%–12.5%) will remain stable, with benefits largely offset by elevated freight costs. Capital allocation remains focused on store experiences, with plans for 130 net new store experiences this year, balanced between new doors and remodels. Recognized a $100 million IEEPA tariff refund in Q2, contributing approximately 790 basis points to the quarter's operating margin and $1.75 to EPS. Expect to recognize the remaining $20 million of the total $120 million tariff refund in the third quarter, impacting Q3 operating margin by approximately 160 basis points. Increased the share repurchase target to at least $500 million for the full year, reflecting strong cash flow generation and a commitment to returning excess capital. Identified freight rates as a persistent headwind that is currently offsetting the favorability gained from lower ongoing tariff expenses. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management stated that while they are not providing guidance beyond 2026, there are no structural barriers to maintaining healthy double-digit operating margins. Future profitability will be supported by new growth levers including category expansion, channel diversification, and licensing that complement the core owned-and-operated business. The partnership is currently in 'early innings' and focused on reaching new customers and testing non-apparel categories like home goods. Management noted there is no meaningful impact to gross margin currently, as the initiative is valued for its incrementality and low capital deployment requirements. Management acknowledged that Hollister demand occasionally exceeded available inventory in Q2, leading to a 'clean' inventory position and aggressive chasing. Growth has accelerated from Q2 levels into August as inventory levels caught up to support the peak back-to-school season. EMEA saw a return to growth led by the U.K. and Germany, with management expressing confidence in the long-term potential of the region as they export their U.S. playbook. APAC remains a high-growth region (up 19% in Q2), and the company is conducting a strategic review to determine the best path to further capture this market opportunity.

This article first appeared on GuruFocus. Net Sales: Record second-quarter net sales of $1.27 billion (sic - see press release, "$1.3 billion"), up 5% year-over-year. Comparable Sales: Flat for the quarter; Americas up 1%, APAC up 13%, EMEA down 4%. Operating Margin: 19.9% of sales, up 600 basis points from 13.9% in the prior-year quarter. Net Income per Diluted Share: $4.17, compared with adjusted $2.32 last year. Tariff Refund Benefit: Recognized approximately $100 million in IEEPA tariff refunds, contributing 790 basis points to operating margin and approximately $1.75 to diluted EPS. Brand Performance: Abercrombie brand net sales up 8% with comparable sales up 4%; Hollister net sales up 2% with comparable sales down 3%. Regional Performance: Americas net sales up 5%, APAC up 19%, EMEA up 2%. Inventory: Ending inventory at cost approximately flat to last year, with units up low single-digits. Share Repurchases: Repurchased $177 million in the quarter and $282 million year-to-date; now expect at least $500 million for 2026. Full-Year Outlook: Net sales growth around 5%, operating margin of 14.5% to 15%, and diluted EPS of $13.10 to $13.60. Third-Quarter Outlook: Net sales growth of 5% to 6%, operating margin of 13% to 14%, and diluted EPS of $2.90 to $3.20. Warning! GuruFocus has detected 7 Warning Signs with JKS. Is ANF fairly valued? Test your thesis with our free DCF calculator. Release Date: August 26, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record second-quarter net sales of $1.3 billion, up 5%, marking the 15th consecutive quarter of top-line growth and exceeding the company's outlook. Both Abercrombie and Hollister brands achieved record second-quarter net sales, with Abercrombie growing 8% and returning to positive comparable sales growth of 4%. Strong regional performance, with APAC growing 19% and EMEA returning to growth at 2%, while the Americas grew 5%. The company raised its full-year net sales outlook to the high end of its prior range and increased operating margin and EPS expectations, reflecting confidence in continued profitable growth. Successful expansion into new channels and categories, including the Target partnership for Hollister and the NFL partnership for Abercrombie, which are driving incremental growth and reaching new customers. Strong cash flow and balance sheet enabled the return of $177 million to shareholders in the quarter, with year-to-date share repurchases totaling $282 million (7% of shares outstanding). Comparable sales were flat overall, with Hollister's comparable sales declining 3% and EMEA comparable sales down 4%, indicating some underlying softness. The company's results were significantly boosted by a one-time $100 million IEEPA tariff refund, which contributed 790 basis points to operating margin and $1.75 to EPS, masking underlying performance. Ongoing tariff expenses and elevated freight costs are expected to offset each other, limiting gross margin expansion in the second half of the year. Hollister's demand was constrained by inventory shortages during the quarter, potentially limiting sales growth and requiring a catch-up in the third quarter. The company faces operating expense deleverage in the third quarter due to incremental payroll and amortization costs from the ERP implementation, which could pressure margins. The full-year outlook includes a $120 million tariff refund benefit, which is non-recurring and may not be sustainable in future years, raising questions about the quality of earnings. Q: Can you unpack the full-year margin outlook raise, which was increased by more than the amount of the tariff benefits? What are the main differentials or puts and takes? A: Robert Ball (CFO): The full-year story is straightforward. Underlying tariff rates and freight rates are moving in different directions and largely offsetting each other. We continue to expect modest AUR growth, and the Q2 margin outperformance is being rolled through the year. Excluding the 220-basis-point benefit from tariff refunds, we remain in that 12.5%-ish range around last year, which brings us to the 14.5% to 15% full-year operating margin range. Q: What are the structural drivers that support the return to positive comps at the Abercrombie brand, and which key categories inflected this quarter? A: Fran Horowitz (CEO): The fundamentals are rooted in our operating model and technology investments, including the new ERP system that came to fruition in March. We're getting close to the customer, which showed in Q2 results. Abercrombie saw strength in knits, wovens, and swim, while Hollister had a strong knit and bottoms business. We're seeing a balance across categories, genders, brands, and regions, which gives us confidence for the back half. Q: Can you break down expectations for AUR, freight, and marketing as we think about the third-quarter operating margin forecast, excluding the tariff refund benefits? A: Robert Ball (CFO): We expect modest AUR growth in the back half. Freight remains a headwind with elevated rates, largely offsetting the benefit from the current 10% to 12.5% Section 301 tariff rates versus the 15% assumed in the prior guide. Excluding the $20 million refund in Q3, we should be relatively clean in Q4. On marketing, we're lapping investments from last year and expect to stay in the low-5% range with no meaningful leverage or deleverage in the back half. Q: Was Hollister's inventory constraint during the quarter due to delivery issues or just selling out quickly, and how meaningful was that to Q2? A: Fran Horowitz (CEO): Demand for the brand exceeded our inventory at many points during the quarter. The team was chasing, which our model allows us to do. Now that inventory has caught up, we're excited to see the acceleration and momentum heading into the balance of back-to-school and the back half. Scott Lipesky (COO) added that Hollister growth has accelerated from Q2 levels so far in August. Q: Can you elaborate on the better conversion at Abercrombieis it across both online and stores, and what led to that improvement? A: Robert Ball (CFO): We've seen nice traction with conversion across both brands, which speaks to the quality of traffic. Seeing conversion improve on reduced discounts while still selling more units is a really nice sign that assortments are resonating. We're attracting the right consumer and bringing them into stores, and the investments we're making are showing up in a nice back-to-school and start to August. Q: The full-year guidance implies an acceleration in Q4 to roughly 7% growth. What is driving that acceleration, and what are the margin implications of the Target and NFL partnerships as they scale? A: Robert Ball (CFO): We have a nice healthy business headed into the back half. We'll keep inventories tight and continue leaning into effective marketing. On third-party partnerships, there's no meaningful impact to gross margins today. We like the incrementalitythey allow us to reach new customers and participate in new categories without significant capital deployment. Fran Horowitz (CEO) added that it's very early innings, but they're excited about the beginning of this growth. Q: You raised buybacks by $50 million for the year and have $120 million coming in from tariff refunds. What will the remaining $70 million be used for? A: Robert Ball (CFO): The refunds don't change how we allocate capital. Our balance sheet has been strong for years, allowing us to invest in brands and future growth while consistently returning cash to shareholders. We've now had 10 consecutive quarters of share repurchases and expect that to continue. We'll work the refunds through the same framework, but there's nothing new to report today. Q: Can you comment on the promotional environmentwas the lower promotional activity across all brands, and is there anything structurally changing that would prevent the current operating margin from being sustainable long-term? A: Fran Horowitz (CEO): Q2 results are proof our model is working. Outperforming our outlook was primarily driven by lower discount levels across both brands. Our Read and React model is working wellthe team was chasing and tightly managing inventory. We don't view promotions on a competitive basis; we review weekly and take action. Robert Ball (CFO) added that there's nothing structural preventing maintenance of healthy double-digit operating margins, with new growth levers like category expansion and channel diversification complementing the profitable owned-and-operated business. Q: On category expansion, how big can head-to-toe (footwear and accessories) be as a percent of assortment, what is the margin structure, and is it owned or licensed? A: Robert Ball (CFO): We like these opportunities because they expand our addressable market and diversify growth driverswhether NFL, Target, footwear, accessories, home goods, licensing, or wholesale. It's early days and we're learning a ton. We're not sizing them today because they're still relatively small, but we're excited about the longer-term growth potential across these buckets. Q: With 130 new store experiences this year and 80 remodels/right-sizes, how much runway is left on new stores in the Americas and on modernizing the existing fleet? A: Fran Horowitz (CEO): We've been very consistent in balancing new stores and store experiences over the past several yearsthis is our fifth year as a net store opener. There is no finish line in retail. New opportunities continue to emerge, like the street locations for Abercrombie. The new SOHO experience has been very well received, and we're excited to implement that concept in more stores going forward. Q: Can you talk more about the AUR improvement and unit improvementis it coming from less promotions and price increases For the complete transcript of the earnings call, please refer to the full earnings call transcript.

As of 11:47 AM ET, the S&P 500 (SNPINDEX:^GSPC) is up 0.01% to 7,678, while the Nasdaq Composite (NASDAQINDEX:^IXIC) has fallen 0.12% to 26,117, and the Dow Jones Industrial Average (DJINDICES:^DJI) is trading 0.18% lower at 53,480 as traders react to sticky inflation data. Gold is down 0.61% to $4,608.72, while the 10-Year Treasury yield gained 0.017 to 4.67%. Energy and industrial stocks lead the sector gainers, and basic materials and healthcare trail. Meta Platforms whipsawed this morning following a $17 billion legal settlement. The stock initially popped before paring gains as markets digested the news. Abercrombie & Fitch soared an eye-watering 40% after beating earnings estimates and raising its full-year guidance. Meanwhile, Alibaba Group Holding erased some losses after plunging on news of a $10 billion share placement to fund artificial intelligence (AI) development. Today's July Personal Consumption Expenditures (PCE) inflation data was slightly higher than expected, which weighed on morning trading. Prices rose 3.7% in the 12 months to July, a touch above analyst estimates. Markets are particularly sensitive to anything that might make the Federal Reserve more likely to raise interest rates, as this can slow equity growth, and stubborn inflation falls under that category. Today's biggest news hasn't happened yet: Traders are waiting for after-hours results from Nvidia, which could tell investors more about the sustainability of the AI boom and whether the massive capital outlay is justified. The company, often viewed as a bellwether for the whole AI ecosystem, may post over $100 billion in quarterly revenue for the first time, but that may not be enough to ease investor jitters. Before you buy stock in Invesco QQQ Trust, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $443,461!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,307,633!* Now, it’s worth noting Stock Advisor’s total average return is 973% — a market-crushing outperformance compared to 213% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 26, 2026. Emma Newbery has positions in CrowdStrike and Nvidia. The Motley Fool has positions in and recommends CrowdStrike, Meta Platforms, Nvidia, and Salesforce. The Motley Fool recommends Abercrombie & Fitch and Alibaba Group. The Motley Fool has a disclosure policy. Stock Market Midday, Aug. 26: Markets Muted as Investors Await Nvidia Earnings was originally published by The Motley Fool