Why Abercrombie & Fitch Stock Is Up 40% Today

Shares jumped after the retailer raised its outlook and delivered stronger underlying results than the headline tariff benefit initially suggests.

Abercrombie & Fitch stock surged roughly 40% to over $150 by late Wednesday morning after the apparel retailer reported record second quarter sales and raised its full year outlook.

A $100 million tariff refund explains much of the headline earnings beat. It does not explain all of it. Even after removing that benefit, Abercrombie produced better sales, earnings and margins than expected.

The S&P 500 was approximately flat at the time, while the SPDR S&P Retail ETF gained less than 1%.

Abercrombie’s second-quarter results

Abercrombie reported:

• Net sales: $1.27 billion, up 5% year over year
• Diluted EPS: $4.17, versus approximately $1.99 expected
• Operating margin: 19.9%, versus management’s outlook of around 10%

The tariff refund added about $1.75 to earnings per share and 790 basis points to operating margin. Subtracting that benefit leaves approximately $2.42 per share, still about 22% above the $1.99 analyst estimate reported by Reuters.

Without the refund, operating margin would have been approximately 12%, compared with management’s previous forecast of roughly 10%. Executives attributed the remaining improvement to stronger sales, favorable gross margin and the operating leverage created when revenue grows faster than expenses.

Sales at the Abercrombie brand increased 8%, with comparable sales up 4%. Hollister sales rose 2%, although comparable sales declined 3%. Overall comparable sales were flat.

Those figures help explain why investors looked beyond the refund. The company did not simply receive a large accounting benefit. Its core operations also exceeded expectations.

The better signal was lower discounting

Abercrombie’s average unit retail, or the average price collected for each item sold, increased by a mid single digit percentage during the quarter. Management said that improvement came primarily from fewer promotions, not another round of price increases.

Selling merchandise closer to full price suggests customers are responding to the assortment, while price increases alone can lift revenue without improving demand.

“We’re happy with this being a demand story,” CFO Robert Ball said during the company’s second quarter earnings call. Stronger average selling prices came alongside unit growth, rather than at the expense of volume.

Hollister’s negative comparable sales figure deserves some context. CEO Fran Horowitz said customer demand “exceeded our inventory at many points during the quarter.” After inventory caught up, Hollister’s growth accelerated from its second quarter pace in August as the back to school season developed.

New stores and outside distribution also helped total sales grow faster than comparable sales. Hollister’s Target partnership placed its products in more than 1,500 Target locations, introducing the brand to customers and categories it was not reaching through its own stores.

Guidance confirmed the strength

Management increased its expectations for the remainder of 2026:

• Full year sales growth: Around 5%, versus 3% to 5% previously
• Operating margin: 14.5% to 15%, versus 12% to 12.5%
• Diluted EPS: $13.10 to $13.60, versus $10.20 to $11
• Share repurchases: At least $500 million, versus approximately $450 million
• Third quarter sales growth: 5% to 6%

The full year EPS forecast includes an estimated $2.10 per share benefit from tariff refunds and associated interest. Removing that amount from the midpoint produces approximately $11.25 per share, slightly above the high end of Abercrombie’s previous guidance.

That is only a rough comparison. The current forecast also assumes lower ongoing tariff rates, a lower tax rate and other changes from the company’s May outlook.

Still, management specifically said its underlying operating margin assumptions for the second half had improved. The higher forecast is not solely the result of the refund.

What this means for investors

The report leaves investors with a cleaner question. The tariff refund clearly inflated the quarter, but can Abercrombie preserve the underlying margin improvement once that benefit disappears?

Two indicators should help answer it. Abercrombie needs to maintain healthier selling prices without weakening demand. Hollister must also convert its improved inventory position and stronger August sales into sustained comparable growth.

After a 40% rally, the stock already reflects much greater confidence in that outcome.