Abercrombie & Fitch (ANF +17%) is experiencing a significant rebound. The stock faced pressure recently due to weak guidance announcements in January and early March. However, investors were pleased with the Q1 (Apr) results, which exceeded expectations, and the in-line revenue guidance for Q2 (Jul), despite weak EPS guidance. FY26 guidance showed lowered EPS, but revenue projections improved to +3-6% from +3-5%.
American Eagle (AEO, Financial), a mall-based peer, withdrew guidance on May 14, adding to investor nerves before this report. The results, although not spectacular, were better than feared, leading investors to view this as a positive outcome given the recent negative guidance.
In Q1, ANF saw sales growth in all regions. The Americas experienced a 7% increase, driven by strong traffic in stores and digital channels, despite a tough comparison to a 23% growth in Q1 last year. EMEA sales grew 12% over last year's 19% growth, with notable strength in the UK and Germany. In APAC, sales increased by 5% on top of 10% growth last year, with strong performance in China.
Same-store comps were +4%, led by the Hollister brand at +23%, compared to a -10% decline for the Abercrombie brand. This marks Hollister's eighth consecutive quarter of comp growth. Both Average Unit Retail (AUR) and units increased in Q1, with balanced growth across genders and categories, positioning Hollister well for the summer season.
The Abercrombie brand saw comps at -10%, influenced by a tough comparison to last year's +29% comp and the clearance of winter inventory. Some spring categories underperformed compared to standout growth in Q1 last year, but the brand still benefits from good traffic trends.
Although ANF's Q1 report and guidance did not exceed expectations, the results were seen positively due to low sentiment prior to the report. Despite the downside EPS guidance, the company actively repurchased 2.6 million shares for $200 million in Q1, about 5% of shares outstanding, indicating management's belief in the stock's undervaluation.
