0001018840-26-000036
SEC filingQ1 FY2026 net sales rose 2% YoY to $1.11B, but operating margin fell 130bps to 8.0% on cost deleverage and tariff headwinds.
For the first quarter of Fiscal 2026 (13 weeks ended May 2, 2026), Abercrombie & Fitch reported net sales of $1.114 billion, a 2% increase compared to $1.097 billion in the prior-year quarter. The growth was supported by low-single-digit average unit retail (AUR) gains from selective ticket and promotion changes, new owned-and-operated store openings, and favorable foreign currency translation. However, comparable sales declined 1%, contrasting with a 4% comp increase in Q1 FY2025.
Gross margin (cost of sales exclusive of depreciation and amortization) improved 80 basis points to 62.8%, driven by a 180bps decline in freight costs, AUR growth, and FX benefits, partially offset by 180bps of adverse tariff impacts.
Operating income fell to $88.8 million from $101.5 million, with operating margin contracting 130 basis points to 8.0%. The margin decline was primarily due to deleverage in selling expenses (up 230bps to 38.7% of sales), including higher store occupancy, payroll, and marketing costs, and a 50bps increase in general and administrative expenses. Net income attributable to A&F decreased to $67.1 million ($1.47 per diluted share) from $80.4 million ($1.59 per diluted share), reflecting the operating income decline and a higher effective tax rate (27.6% vs. 24.5%).
Management outlined several strategic priorities for Fiscal 2026, including delivering consistent global growth across brands, expanding channels and categories (franchise, wholesale, licensing), and executing a multifaceted strategy to mitigate tariff and cost pressures. The company expects to open approximately 50 new stores and close 20, resulting in ~30 net openings, along with about 80 remodels and right-sizes. Capital expenditures are expected to be around $225 million.
Regarding tariffs, based on current assumptions (10% tariff in Q2, 15% thereafter), the company anticipates an additional ~$10 million impact (approximately 20bps of net sales) on operating income versus Fiscal 2025, excluding any IEEPA tariff refunds. Management remains focused on maintaining double-digit operating margins and expanding net income per diluted share, while monitoring macroeconomic and geopolitical risks that could affect consumer spending and supply chain costs.
As of May 2, 2026, cash and equivalents stood at $594.1M, down $165.4M from $759.5M at year-end, driven by $105.6M in share repurchases and $61.3M in capex. The company had no borrowings under its $500M ABL facility, with availability of $449.5M after letters of credit. Marketable securities were $25.1M. Total stockholders' equity was $1,353.9M, and inventory was $532.7M, down from $601.2M at year-end.
The only disclosed purchase commitment is $53.1M in operating leases not yet commenced, primarily for retail stores. The company also has a supply chain finance program with $49.9M in liabilities recorded in accounts payable. No other purchase commitments were disclosed.
During Q1 2026, the company repurchased 1.156M shares for $105.6M (including excise tax). No new share repurchase authorization was announced. No dividends were paid. The company did not issue or repay any debt. Capital expenditures totaled $61.3M (5.5% of sales), up from $50.8M in the prior-year quarter, with the largest portion ($45.1M) in the Americas segment.
Segment reporting reveals Americas as the dominant driver: $899.9M revenue (80.8% of total), $230.9M operating income (25.7% margin), and +2.9% YoY growth. EMEA revenue declined 9.5% to $167.4M, with operating income of $3.4M (2.0% margin), impacted by store impairments in the region. APAC revenue grew 24.1% to $46.5M but remained unprofitable at -$0.9M operating loss. By brand, Abercrombie generated $564.7M (+3.1% YoY) and Hollister $549.1M (flat).