Abercrombie & Fitch reported second-quarter fiscal 2026 earnings that significantly exceeded expectations, driving a 36.6% surge in its share price to $148.80. The company posted adjusted earnings per share of $4.17, surpassing the $1.98 consensus estimate by $2.19, while revenue reached $1.27 billion, beating the $1.25 billion consensus by $20 million.
Operating margin expanded to 19.9%, nearly double the prior guidance of about 10%, representing a 990-basis-point beat. Net sales grew 5% year-over-year, marking a record quarter for the company. The strong performance was supported by approximately $100 million in tariff refunds under the International Emergency Economic Powers Act (IEEPA), which added $1.75 per share and 790 basis points to operating margin. Excluding the refund impact, underlying business performance contributed roughly 200 basis points to the margin improvement.
The company raised its full-year operating margin target to 14.5%-15%, up from prior guidance. For the third quarter, Abercrombie & Fitch projected adjusted EPS of $2.90 to $3.20, compared with the $2.85 consensus estimate, alongside 5%-6% sales growth. Earlier in the year, the company completed an ERP system implementation that had previously constrained growth by about 100 basis points.
Brand performance showed mixed trends, with Hollister sales rising 2% but comparable sales declining 3%, primarily due to weakness in the EMEA region. However, management and BTIG noted accelerating sales momentum in August and easing comparisons for the second half of the year. Americas sales grew 5%, while Asia-Pacific sales surged 19%.
Abercrombie & Fitch also outlined plans for 130 new store experiences in 2026, including 50 new locations and 80 remodels, alongside the opening of a flagship store in SoHo. The company repurchased $282 million of its shares in the first half of the fiscal year and maintained a target of at least $500 million in buybacks for the full year. Shares were trading at a P/E ratio of approximately 13.7x, with BTIG maintaining a $175 price target, implying roughly 18% upside from current levels.
