Abercrombie & Fitch Surges 37% After Record Q2 Sales, Massive EPS Beat and Raised Full-Year Guidance

Abercrombie & Fitch posted record second-quarter net sales of $1.27 billion on Wednesday, up 5% year over year and ahead of the $1.25 billion consensus estimate, marking the retailer's 15th consecutive quarter of sales growth. Adjusted EPS came in at $4.17, more than doubling the $1.99 analyst estimate, though $1.75 of that figure reflected a pre-tax IEEPA tariff refund worth roughly $100 million in aggregate, equal to 790 basis points of operating-margin benefit. Even stripping out the refund, management said the underlying earnings beat exceeded the tariff windfall on its own.

Operating margin expanded 280 basis points year over year to 19.9%, and EBITDA of $296 million blew past the $170 million estimate. The Abercrombie brand grew net sales 8% while Hollister rose 2%, with CEO Fran Horowitz noting Hollister's back-to-school season continued to build through the end of the quarter. By region, Americas revenue rose 5% to $1.0 billion, EMEA gained 2% to $202 million despite a 4% comparable-sales decline, and APAC surged 19% to $44.2 million.

Comparable sales overall were flat. For the full year, the company raised EPS guidance to $13.10-$13.60, up sharply from the prior $10.20-$11.00 range and well above the $10.72 street estimate, incorporating roughly $120 million in full-year tariff refunds. Net sales growth guidance was tightened to approximately 5% from the prior 3%-5% range, operating margin guidance was lifted to 14.5%-15.0% from 12.0%-12.5%, and the share buyback target was raised to at least $500 million from roughly $450 million.

For the third quarter, guidance calls for EPS of $2.90-$3.20 against an estimate of $2.84, net sales growth of 5%-6%, and an operating margin of 13.0%-14.0%. The company repurchased 2.0 million shares for approximately $177 million in the second quarter, leaving $568 million under its remaining authorization. Shares surged as much as 37% to around $148.91, reaching a 19-month high and marking one of the two best single-session gains in the company's 30-year public history.

BTIG raised its price target following the results. Seeking Alpha's quant model kept its rating at Hold, citing elevated valuation despite the momentum, though noted the forward price-to-earnings ratio remains around 10.8 times and buyback yield approaches 8%.