0001018840-25-000048
SEC filingNet sales grew 7% in Q3 and YTD, but operating margin contracted 280bps in Q3 due to tariff impacts and higher costs.
For the third quarter of Fiscal 2025, Abercrombie & Fitch reported net sales of $1.29 billion, a 7% increase year-over-year, driven by mid-single-digit unit volume growth and positive comparable sales of 3%. However, operating income declined 13.5% to $155.0 million, and operating margin contracted 280 basis points to 12.0%. The margin compression was primarily due to a 260-basis-point increase in cost of sales as a percentage of net sales, reflecting higher average unit costs from an approximate 210-basis-point tariff impact and unfavorable product mix. Selling expense rose 80 basis points to 35.6% of sales, driven by expense deleverage and increased marketing investments, partially offset by fulfillment leverage. General and administrative expense improved 60 basis points to 15.0% due to lower employee compensation costs.
Year-to-date, net sales grew 7% to $3.60 billion, with comparable sales up 4%. Operating income decreased 4.4% to $463.2 million, and operating margin fell 150 basis points to 12.9% (110 basis points from the litigation settlement benefit). Cost of sales deleveraged 300 basis points on higher AUC, tariffs (90 bps), and freight costs. Selling expense excluding the litigation settlement increased 90 basis points. Net income attributable to A&F was $334.8 million, down 11.7%, with diluted EPS of $6.83 versus $7.13 a year ago. Adjusted non-GAAP operating income was $424.6 million (11.8% margin), and adjusted EPS was $6.24.
Segment performance varied significantly. The Americas segment, representing 82% of total sales, grew net sales 7% to $1.06 billion in Q3, with comparable sales up 4%. Operating income fell 5.3% to $288.6 million, and margin contracted 360 basis points due to higher cost of sales and marketing spend. EMEA sales rose 7% to $194.5 million, with comparable sales up 2%, but operating income was flat at $21.5 million, as higher AUC and G&A deleverage offset occupancy leverage. APAC sales declined 6% to $38.7 million, with comparable sales down 12%, and operating loss widened to $6.3 million (margin -16.3%) due to deleverage on marketing and G&A. Year-to-date, Americas operating margin fell 200bps, EMEA dropped 460bps, and APAC swung to an operating loss of $16.7 million (-14.7%).
Management emphasized continued macro uncertainty from tariffs and inflation. They expect approximately $90 million in net tariff expense (170 basis points of sales) for Fiscal 2025, factoring in mitigation strategies. Capital expenditures are planned at $225 million for the year. Store optimization remains a priority, with a target of approximately 40 net new store openings in Fiscal 2025 (60 openings, 20 closures) and 40 remodels/right-sizes. The company maintains a strong liquidity position with $605.8 million cash and $1.1 billion total liquidity. A $1.3 billion share repurchase program was authorized in March 2025, with $950 million remaining. No specific quantitative forward guidance was provided beyond these strategic priorities.