Abercrombie & Fitch (ANF) posted its twelfth consecutive quarter of revenue growth, 15% comparable sales at Hollister, and 12% operating margin, fueling a ~40% rally in the stock on Tuesday and giving investors hope that the worst is behind the retailer.
The year got off to a rough start for ANF as tariff pressures and warnings about discretionary spending among weary consumers crushed ANF shares, driving the stock down 60% in just the first quarter of 2025.
With the help of Hollister’s enduring popularity with teens and Gen Z, trade deals with Vietnam and Cambodia, and resilient consumer spending, Abercrombie & Fitch (ANF) made a measured comeback with shares recouping nearly half of its Q1 drop by August before being chased lower again during in the third quarter on cautious guidance on remaining tariff costs (20% with Vietnam, 19% with Cambodia).
Fortunately, Q3 might be the inflection point that investors were waiting for.
“We think the stock’s reaction [Tuesday] might be evidence of the Street giving credence to the improvements the management team has made and eyes shifting to the opportunity in ’26,” said Jefferies analyst Corey Tarlowe.
“We think this momentum can be chased,” Tarlowe added, “given investors can look to ’26 and see easy ANF compares, a Hollister that is still strong, and a margin profile that is improving as the tariff narrative is derisked.”
Agrees UBS’s Mauricio Serna, who thinks that while the post-earnings rally was positioning, he remains bullish on ANF’s outlook on Hollister’s “robust” sales momentum, Abercrombie’s ongoing sales recovery, and tariff headwinds moderating after Q4.
Morgan Stanley’s Alex Straton also sees green shoots pertaining to ANF’s financial profile but cautions that there are still speed bumps ahead.
“We exit the print more constructive as ANF’s growth & margin profile continues to prove more durable/better than we thought.”
However, Abercrombie is is not completely out of the woods yet, Straton argues as there is still the holiday season to navigate. While industry forecasts look for a strong 2025 season, consumers are still bargain-hunting to offset inflationary pressures elsewhere, leaving specialty retailers like ANF vulnerable.
“We suspect the bear thesis remains intact – that Hollister sales momentum will slow, ANF topline will remain under pressure, and the business will subsequently suffer severe growth/profitability erosion back towards industry norms over time,” Straton writes, maintaining her Equal Weight rating but with a higher price target of $95.
Margin pressure also keeps Citi Research analyst Paul Lejuez Neutral on Abercrombie. Given the retailer’s limited pricing power due to its teen positioning, ANF will “bear much of the margin burden of higher tariffs, limiting EPS upside.”
Abercrombie & Fitch (ANF) shares are up for a second day, bringing the two day total to +45%.