ANF - Earnings call transcript Q2 2025 | Abercrombie & Fitch Co.

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Operator

Good day, and thank you for standing by. Welcome to the Abercrombie & Fitch Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised, today's conference is being recorded.

I would now like to turn the conference over to your speaker today, Mo Gupta. Please go ahead.

Mohit Gupta

you. Thank welcome Quarter and Earnings our to morning, XXXX Second Call. Good

Operating are today our Chief investor Chief Chief which morning, is on at earnings me on our under second Fran issued Financial Earlier our we presentation. the and available Lipesky, Joining available release, Scott the an call Horowitz, Investors site quarter Also this is and Executive Officer website on Officer. corporate.abercrombie.com Officer; section.

uncertainties with statements that provisions expectations risks we discussed Exchange XXXX uncertainties and materially call. are will Securities Please on actual keep we the forward-looking to harbor the differ Commission. subject our statements certain safe Litigation factors to in from of and and subject reports Securities and are could in the and to mind and filings that mentioned are cause of These make results Private Reform the Act assumptions today. These the

financial In during addition, we'll measures call. the be referring to certain non-GAAP

details the release GAAP Additional in this investor issued presentation are the morning. to financial earlier measures and adjusted and included non-GAAP of reconciliations

Finally, brands, references Hollister references & include our include Hicks brands Gilly Hollister and our and to abercrombie and to brands. brands Fitch Abercrombie kids Abercrombie

over With I to turn that, the will call Fran.

Fran Horowitz-Bonadies

thank net for incredibly priorities brands. while provided all also in with We these results records We and operating long-term XX.X%. sales Thanks, of proud Mo, May growth margin achieved results profit. growth company XX%, reaching operating strong and an across this the and am $X.X billion second delivered us net both we expectations and quarter outstanding regions funding you second to of for financial morning. I joining exceeded report our sales set quarter

with second and sales the After thrilled first teams profitability the customers. start energized, we are full success deliver our in year to growth and our ready raising I and to for we've am global our August, entered half, half our are historic our expectations.

fiscal in in on context, I'm demonstrate our respond. showing proud out we seeing profitable so more year for clearly are results we've XXXX, set we're to sustainable defining XXXX. up how and customer, growth For the of top of

consecutive In sales, sales and and every uncertain addition new of underlies team a day the net our work in growth consumer customers' seventh to product, record our often of voice brands, dynamic, satisfy environment, this We quarter across needs was our quarter which second to and returning strength playbook. experience. our

of supply global variety is ever a as a and believe culture pieces brand we our on believe in Combined we all have chain portfolio strong as financial it's agile, an environments. across been. to I goals discipline, modern our with macro deliver place of the

want QX, X the Sharing I call demonstrated out a bit quarters. to detail we've last over theme consistent a on

we're strong also time delivering are how We in maintaining results balance growing. while

Our sales was fueled expansion second growth brands by genders. quarter broad-based, and across regions,

local saw both are units with our customers. consistent also key our across our in product, in with past as delivering categories growth growth X with relevance increasing quarters. We balance the teams assortments There's lifestyle too, and to AUR

rate to by offset On costs, we freight the higher This compared points last higher line, basis gross costs. profit product partially and AUR of XXX saw improved year. driven by was expansion

led while in the million aspirations. long-term funding people digital, $XXX this of for our operating operating also double We All nearly quarter second from the the delivered leverage quarter to prior investments and support quarter, the work to important technology year. income results marketing, great

across with nice selling across The regions second We growth delivered markets XX% balance. direct Americas traffic quarter. the sales increases quarter. net with continued the with The across theme grew of in the lead Americas consistent channels. to Continuing the way growth, in first

for in in Customers in the early aside XX% XXXX. the presence. them putting pandemic-related over of years, brand marketing EMEA, growth quarter and with respond on both on XX rebound and U.K. assortments, to we're the in increase of growth sales engaging first second top we time X% growth the In a Germany localized XXXX, to delivering to and demonstrated continue

X% on focused we XX%, of ways. Finally, engage in that comparable Japan customer APAC the in and and new China grew growth led be quarter by to sales we continue our different where markets as

runway across energized see us. our localize this we've know playbook We there's progress to but regions made to more are ahead we quarter, the of

XXXX. in categories in with brands. of dresses performing had the another growth women's outstanding swims, seasonal to of second well. growth XX% with Abercrombie XX% sales the and brands continued shorts, skirts men's net of quarter growth On Balanced quarter top across on and and

both growth existing as saw in also balanced new and AUR well units customers. as We and

we and As sizes great a the and follow-up our entered to quarter, complement extension. highlights our Wedding the proven nicely dresses. be our continued a assortment in first men's have reaction contribute suiting to now and to Shop The has from exceeded customers to expectations, options has The

continue more We to planned. prioritize channels. across at enter customer and excited marketing activations effective social digital back funding the campaigns acquisition customer to We're Abercrombie, half with

working of It's current engagement. and we one U.S., a throughout new the brands exciting Abercrombie example social the with year. campaigns latest have in digital how has planned a NFL collection, the is customers what our the we both further on win been second great partnership. released season to to the and number Related just In to expanding collection, of drive of half

brands. Hollister to on Moving

We growth exceeded XX% from continue sequentially to and in expectations QX. of sales Net growth accelerated build our momentum. XX%

with women's in unit latter driven AUR, sales the and quarter expansion continues and both by balance lower promotions. as men's both the growing well Importantly, first as from

particular we the graphic in product saw growth categories growth. and In strength to balanced and side, women the across with On shorts men's, tees contribute skirts dresses. saw

for back-to-school so back-to-school the of see with the going us and selling we happy With pleased quarter, is to trends, consistent second in very were additional week far. growth I'm how

audience. and top goal refreshed and our store locations brand. we're This With Hollister store marketing amplify target now new investing reintroduce of product, increase increased engagement experiences, to incremental our marketing great brands is in On the to to and digital spans high investment our a across with as is One which well example experiences real-life through authentic concert Fest, on and activations. festival and Feel in country. social as partnership Good the is schools across put channels

brand. represents States. more customers new brands graphics the this can across than momentum, product like the university More hoodies building The recently, sweatshirts, collections launched bring Collegiate nice universities basics, have Hollister as including and tees, Shop. we believe back-to-school of fall crew is and touting school help kicked sports Graphic we quality XX off, and a United necks, Hollister vintage-inspired logos and into collection

our to As we team's and as make for sales growth ever second strong margin. increased progress in on am reflect growth as success continued ability confident expectation on operating as global our XXXX, reflected our and and I quarter our profitability potential and in in results,

back half, team seen enter so offense while the I'm looking holiday we far. with the third As what our in on quarter we've forward to and the remains thrilled season,

customer Looking model, with a strong improve, family brands, I ahead. the all out, and regional and we opportunity relationship further of with see tremendous operating our playbook to a believe continues proven evolving

and journey, hard further work, our continue can dynamic world, put of often way our growth these aspects developing associates our times. business and whose around and succeed A customer, you well huge to to to the of even enduring customer sustainable XXXX. We dedication grow uncertain a the in strengthen on support thank have all that consistent, profitable us in

that, Scott. I'll hand with And it over to

Scott Lipesky

of the first half To we very pleased were you. year. echo Fran, the with Thank Great.

Our make teams continue to investment level execute high continuing across plan. on to progress our long-term at managing business, the while a day-to-day the

we results across compared last the regions Getting into $X.XX first and in for net sales with growth this the over delivered second billion history $X the quarter. of time the net We a of delivered in brands. the Similar quarter. sales up billion, quarter, year is second the in fiscal XX% first to record to company

quarter On comp shift our in a in the double-digit Comparable digital from reported stores XXrd consistent the growth we channels. the direct from fifth consecutive XXX benefit XX%, XXXX, of basis basis, week grew calendar a sales the sales and selling with representing expectation. saw both point

grew a X% APAC. Americas, the basis, quarters U.K. the currency net in EMEA, way, Americas, Americas, APAC. across we in delivered the sales In consecutive In closures. by Net markets. XX% the we growth in last from On large XX% across the primarily driven XX% in saw EMEA in APAC, now and growth lead spread we've year-over-year and and which a the grew basis, Germany store we similar growth sales X comp was sales regional foreign quarter, for net in and again EMEA In regions. comps region. continued a to in and On growth XX% delivered to balanced XX% and saw

growth with Abercrombie our brands From sales our XX%. to to year net up Hollister to comp growth brand XX% a and brands favorably basis, a XX% last marketing. customers Abercrombie accelerated and responded our assortments perspective, XX% grew On Hollister as grew strong delivered while

brands well lower rate We compared These inventory in from the on the as from season. we offset costs. profit, in to entering last and as up freight XXXX. were with benefit promotions XX.X% fall gross acceptance. XXX of position well-controlled lower clean the benefits X% strong higher partially for all to quarter costs with a delivered ended the We XX.X% For inventories brands up points quarter, cotton across basis benefits saw rate product year-over-year by a year

$XXX to expenses. year. operating expense quarter operating excluding compared million Operating of was other million $XXX expense, income, last to Moving the on for

as We XXX improvement continue leverage compared sales expenses of basis operating points to of operating year. an last to a drive percent expense with XX.X%, of

quarter as higher year-over-year themes investments and variable with in similar digital and on technology first saw expenses growth sales inflation as marketing, of We in growth, OpEx terms people. increased the well and to

around second expense with sales. marketing, X.X% line For in at of finishing quarter expectations, was

last operating Operating EBITDA compared last or $XXX or XX% record last share of EBITDA of from million sales million year. income $X.XX $X.XX, compared sales of to X.X% sales million XX.X% income $XXX sales or $XX income was was up $XXX or of diluted of year. year. per XX% totaled to a Net million of

We quarter authorization. million of On we remaining million $X.X roughly million on cash the ended the flow and had current the worth expenditures. cash of million of repurchase $XX We and equivalents ending shares, approximately with repurchased our operating $XXX million quarter with $XXX balance delivered sheet, $XXX $XX of share and billion. capital liquidity of

value the the redeemed notes senior quarter, with funded no secured fully par hand, ending the on debt. cash During with at we quarter

credit facility sub-facility. We our of was maximum The increased amended of the million, extended $XXX million $XXX asset-based million from size European facility. inclusive and to the $XXX also credit new

work to redemption dilution the prioritize cash to share subject from notes the senior performance, in with share expect offset market back expect compensation. a secured half, forward, the repurchases, business and shares we to we buy Moving stock price of conditions. put to to net to At us, minimum, behind back excess

fleet, the with On we store the ended XXX quarter stores.

half rightsized For and XX the opened new the first year, we XX closed stores, stores remodeled stores. or XX of

and exceeded excited many performance come. weeks in store has new remodeled our and New deliver expectations, experiences months to store we the are and to

full expect For rightsizes approximately closures. and remodels year, to we and XX the deliver XX XX stores, new

to of strong third in We've half, the sales year, first quarter. has first of weeks fiscal momentum a Shifting expectations the our to net for continued start rest and the in the delivering few the the had record XXXX.

level compared or expect the week to points the calendar sales up third year-over-year digits XX $X.XX double to quarter, billion, basis around of the XXXX. including $XX of XXrd in we For XXXX million to net third a due from quarter be headwind shift low

seasons across currency. and and impact minimal growth brands expect from We foreign

to be the XX% to of XXXX. in in margin operating to expect XX% range XX.X% We compared

profit pressure are freight expect see We cotton benefit, consistent in quarter. to gross and that majority the now rate we with of the XXXX through the be expect to the we year-over-year

We will rate we our the tax continue investing in infrastructure, to we keeping OpEx operating And effective also leverage, expect and moderate around mid-XXs. plan XXXX an expected levels. expect potential brands in which margins

of from an from range increase more impacts on growth to press million the $XX to the previous the XX% $X.X around net around billion, comparative in This week outlook we and We've growth in to continues XXXX expect provide the the now an sales of impact included level and outlook XX%. for approximately For a XX%, sales full quarter the the full in of of up of XXrd include year, up loss XXXX. table year. detail by release the expected adverse in

prior to to For our range margin, in of outlook. operating the ends compared XX%, high expect we XX% be the to increasing

by selling, driven freight gross improvement We higher continue rate the to and profit higher clearance to on expansion cotton promotions combination costs. AURs and slightly offset year-over-year the lower lower expect of by be from costs

expense process the to expect the accelerate We to to investments also leverage continue find full in funding our agile ways while to year come. in executing months business

effective capital We in expenditures the approximately mid-XXs an of rate $XXX expect tax and million.

very the sheet debt plans across with in To happy first to our business. balance in funded growth and and results record with continued financial forward We this are back how profitable delivered elimination of half deliver sustainable, we invest look to We are up, finish our executing executing improved infrastructure. the to teams our brands half, the our year. in the

now for ready are we questions. Operator,

Operator

comes question Telsey first Our Instructions] [Operator Dana Group. Advisory Telsey from with

Dana Telsey

How have growth, nice it as brand? seen think very you back-to-school Fran, by each differ results. category? what Congratulations AUR season the about does in on selling the and you the

unpacking margin the guide Scott, for to quarter, XX%. operating And third then, XX% the the

have it expenses I the do more. consensus costs? on the higher. is with If little unpack How margin could the a of -- bit reduction been that think or that, little just the gross expand a lower you bit you the freight cotton

Fran Horowitz-Bonadies

billion quarter the mean, regions outstanding excited the we back-to-school, year. balanced second performance of $X we first have to a with genders; Yes, in a for about quarter thrilled brands, across our quarter quarter. the and half as super how of second and I sales certainly both and came out started third and the of

reaction. ago back-to-school lot a quarter was work. going back really Hollister got brand, time on when to The a and bit took is we're this to It we years What spent and seeing inspect of X step nice actually had and back-to-school rebuilding a what in a rebranding. was team which our we with

you control had of actually to seeing we're continued excited What growth our it both product in brands inventories. acceptance driven Since to that's XXXX, as comes and by, what is financial down know, AUR double-digit growth. see we've which and

a seeing balanced and So categories. we're growth brands across

Scott Lipesky

Dana, QX. it's up the I'll Scott. pick

off So coming yes, a first half. great

the quarter, records So operating I'm nice -- first quarter, income there QX. there also set in us see in margin or to for sales record operating sorry, second

very digits versus to up seeing to outlook and back-to-school last happy As of line double what with come the we think about Fran Abercrombie, obviously. with QX, good growth again the start low on we're Hollister year. out an strong here, said, excited Like top quarter and

Breaking apart the rest of the P&L for QX.

what of line, of freight pretty thinking rate bit have it just all probably get profit little for We'll mentioned, Fran those little quarter is gross the we On AUR stable. keep hurt. a we're reasons a and bit here in the

of And operating marketing also we're the infrastructure in long-term aggressively brands continue just then term, business. we're the some investments make the on in to investing the invest expense in our big to hey, going make those But making short We're business, significant efforts. stronger, stronger. line, this

quarters. moderating that of couple in is seen So last the what leverage way see little maybe that OpEx we've a versus the bit we

the expanding about operating year, Really those for XX% sales for that XX%. outlook the as up outlook taking times as excited company. full guide to about to well super So margin the exciting QX, excited

Operator

Corey [Operator Jefferies. Our with next Tarlowe Instructions] question from comes

Corey Tarlowe

Abercrombie, On aspects the growth categories. that is permission one of to the really go seen of the at momentum your into you've other impressive

highlighted even So And it I've merchandise you expanded pressured think new across and the Shop, I which is other looks awesome. in NFL seen that swim, been stores, growth you the Wedding a category you've in sector. many a and highlighted retailers partnership, has The in

vectors brand, growth could be those think the do just about think which and for maybe sizable could various you about Abercrombie you over vectors you the time? most talk growth So how of

YPB because didn't like you your the in reason I which brand, see but be ask other the remarks, prepared mention seems to that stores. it in I that doing well is And fairly

drivers So as of how you for ahead. we think curious I'm about various the ranking Abercrombie growth look

Fran Horowitz-Bonadies

Corey.

on lot the time on your I spent understanding XX%, break insights the little point, the that of Okay, to close as Incredibly to mean, And this performance to is XX% all time, A&F. consumer. really and driven, by the growth, mean, a see. excited being down so to a team let's was that customer say super bit. what I on staying I about growth exciting matters customer. for really

Wedding the back season. Shop, continue We'll beat again. into fall great example, expectations our

As round. now weddings year expanded we've all fall X-, they're and The season. are occasions talked season X-, about, has really into the X-day wedding well

We X that I'm X NFL, to glad build. you partnership, to started a that chance with had another great ago. collection. example. about small, Started That's see or years the go NFL started

added carry have all and proud teams to Now categories. XX

and cetera. now So outerwear on and et and you'll sweaters and last year, T-shirts, see focused mostly fleece hats,

So We and we learn, we build continue test, on do again, it. to categories that's add how we momentum.

lots as by as exciting there's that that prioritizing, right of mentioned was they've things them you year our I knowing far the give product third consumer, them, for as So YPB happening our in right there. and fashion the and actually We're that into guess Again, well. could of we asked responded. specifically right quality, just out the growth category. for

exciting into of the happening and lots half. continuing back things So

Corey Tarlowe

And highlight margin-accretive. channel Great. could from then you're a believe I you that perspective? also just do is digital what seeing

alternative about So we're doing data. momentum like there. based would quite Because on that well be you're the channel's it curious hear seeing seems that seeing just to in what our

Scott Lipesky

yes. Corey, one. I'll Scott, It's this grab

mobile across web, seeing to place put come we're the digital really, years across the the of comps take that investments improve out, So day on ago teams digital of well has and that it in, of strength across Day the the through. a kind brand, making between channels. we're strength doing experience. back apps, in And that side and of been really seeing assortment in I experience couple we double-digit the in we're

really a It's managing up experience. and we we're our inventory digital have products, grow. great with great business to setting the So

in excited seeing. So what there excited about just more we're future, we're we're we've growth the about expect we seen, investing the growth and and

Operator

[Operator Instructions] question with next JPMorgan. Our comes Matthew from Boss

Matthew Boss

another nice quarter. on Congrats

Fran Horowitz-Bonadies

Matt. Thanks,

Matthew Boss

So thrilled that said and you on were brands? Fran, you could you times about fall And across it excitement on seeing X back-to-school. early just I think how elaborate clear you're into the call, trends August. the category

just margin would how XX% year, incremental about the then, to it relative helpful, margins XX% I just think this be operating multi-year. think best opportunities to Scott, expansion to

Fran Horowitz-Bonadies

I'll kick off.

the fact a to coming great and is to reiterate, quarter, is excited our growth that year. an the very first yes, balanced. So about half most are outstanding What first we second

coming coming coming genders. That's it's So across full on to obviously brands, it's raise our it's outlook for regions, across growth the op year. enabled across what's and year margin us sales

in We're Tops consistency working. categories. working, seeing bottoms are lot of are a

We continue just both dress Shop to some new as business also growing complement in him. well have added as working. this categories Girls. happening incredibly seeing Hollister Abercrombie We The suiting We're that's Wedding to for in

on all dressed her So best when these he can weekends, elongated outfitting. guest wedding also goes dress with Abercrombie in he

So lots happening.

time. this of here Abercrombie We're nice seeing at working. called baggy Back-to-school that couple and excitement a months out we is after got low-rise denim, ago about all

regions we're genders, balanced across well as very what again, as seeing So brands, categories.

Scott Lipesky

Matt, to I'll this go year. Yes, the margins operating XX% other thinking about so part. XX%

on that excited P&L for be coming the in First on the the done numbers. see lot of work company. to We've those every very off, a to excited and through about line talking

at have like regions. we across today, Number U.S. customer real not digits. of opportunity our We by whole but biggest across one, the we lot talk far on about and a growth Americas. growth available lot in we talk left we we a of brands lot have look feel a our double the to And here lot the believe a with P&L. and opportunities line, It's that's region, the As about into the just a more estate brands across left strong growing top out future, lot

we And think as international put that the business. on multiples about

building We the can awareness line. are customer in that. across so growing and growing believe brand And we do we are underpenetrated our top we those both on and Europe base focused regions, APAC, very

good quarter, can get AUR. As we made We good Good on can clearance. gross to continuing we talked get more. go little to less management. continue keep line, we Is execute. think It's get We're the AUR more we've about inventory a strides more, every we that Yes, us, rate? we to want we you flat. there gross we more. sell profit on earlier, If margin acceptance, product can bit into -- know

And it's that with see the line, in for then investing can returns, leverage about on business the should way if into we long we OpEx in that future. term. the do right operating the And the good

we're how gotten over how past, about it's So future. the the -- thinking here that's that's really we've and

Operator

Our question Citi. [Operator next comes from Lejuez Instructions] Paul from

Paul Lejuez

promotions any the keep going you're and for you the year-end from minimum what you terms the in quarter have built progression were if the quarter. of sales well. And of talk Curious relative sheet see, also sense cash? what you just want back-to-school you on throughout what And the saw of Scott, seeing then fourth you promotional about to balance to as can what just perspective And for on balance? you to cash maybe in a thought what

Scott Lipesky

let the And double-digit it, any is growth month And talking into QX. the you get exciting. can of obviously. of Yes, about color, we're growth we nice mentioned quarter, double-digit each Fran, Fran, here again, about kick which of sales QX. the off, me in Paul. as Progression excited start QX, throughout quarter, I add

get Our really back-to-school into to last business We the dramatically Hollister up a pretty actually groove. in back ramped as nicely with started XXXX past. improved in year

So the about growth we're again in growth be excited talking here quarter. to on third

is jumping us. the off page to Promotional, nothing

with that. delivering. I and their promos customer responding the we're we business, brands promotional, well, plans promotional being do and promotional continue we think about to always is but the are being We own talk a well. you're against same performing The the in and seeing way. executing we're our like That's happy way that that,

Fran Horowitz-Bonadies

the They work and said, come in our what's of Paul, too, as I that, literally team many what's we see off Within Yes. based working have are We you -- well times, with the to know, Monday not promotions promotions say, Scott, our business, we've as business. would every on drive years. we over I our that. considerably down, our based working, mean

So some anything point. in business. always at not yes, we'll extraordinary our We're have promotions seeing this

Scott Lipesky

here last the balance. No target piece, cash today. year-end then And sitting

X.XX% We behind full those balance, to quarter million, QX. those the of paid liquidity $X.X are notes, and us, really in in came with notes excited get nice cash And senior $XXX nice secured out at the billion. a

Looking the excess I talked we'll share more with focus on cash. out about repurchases in back half,

just strong investing And setting experiences the really any environment. digital. to in We're outside year. like a and long-term company the balance invest investing up It's U.S. inside in opening the of ago new I continuing fact our that growth. sheet. the and We're a U.S. teams about we XXX really have this in enable us sustainable for to store minute talked

going balance way. we're that use So in to that sheet strong

Operator

Instructions] [Operator Our Tracker. Marni Shapiro next from The Retail question comes with

Marni Shapiro

you back-to-school in loyalty Can amazing luck your for engaged? an of Are two brands. and they meaningful? first I Are they and each curious, loyalty One, to is using you us growing? case half, in forget. just Are I'm programs? are the on best Congratulations -- consumer you talk things? your effort of quarter about

for Fran, that and And external other company you partner to about what an brands of decision abercrombie mean could talk sub-brands? grow if just your kids, or also, then with could your some to

Fran Horowitz-Bonadies

there? Are still you

Marni Shapiro

I'm here. I'm here.

Fran Horowitz-Bonadies

Haddad. Okay. that Yes, just the with so signed exciting, partnership we

majority opportunities business to we're the our for being and about owned and our while grow to business look a continuing around for talked the of operated we've world. that So

of businesses ever, ahead for to partnership as Our you to brands know. America, are where long-term outside us. an stronger today, speaks opportunities opportunity the And majority North particularly grow kids than of our to

Scott Lipesky

always What great They level like engagement. the at efforts, other to think It's customer continue looking for evolve? that's just a other that continue it's piece So just about, something how the the But them, is every loyalty? that the us we do with like On we way grow. of for to We're next piece Marni. loyalty programs. consumer Happy engagement. with consumers. to engage every of

we're we'll to loyalty and been So asset the the have about a to thinking that today it continue think But about us. great future. into date, for programs

Marni Shapiro

comes that? there just does it -- higher of curious. the percentage signed that loyalty XX% it I'm are is a base Is customer through And a programs? up? than your Is percentage

Scott Lipesky

it's higher that. Yes, than

haven't We given a of piece loyalty our exact sales that it's good an base. through number, but come

Operator

with question Stanley. Morgan Instructions] Our [Operator Straton Alex next comes from

Alexandra Straton

you on just freight tailwind. gross great to two it is lot for actually a on quarter. are a like One being here. of being margin, I just speaking have Congrats I peers higher. feel still the a

So And then for your year? of I'm happening curious, the just what's rest the there? outlook

inventories, for saw I then And up X%.

time first an a the it's seen think like I we've build inventory that in bit.

So curious, I'm year? And about feel the we the for levels, that how where should of composition? how you goes about rest just think

Scott Lipesky

as Yes, in here the turned half. us, margin on say for we've I'd gross the side, of a headwind back freight has to a got bit

little the That's up. It's up spiking here rates a the freight summer out the And here spiking U.S. busier season. There's seeing rates too. been ocean well the we're in air in to seen some market. documented also then you've normal think the a than coming in I bit, been

of bit We're that's friction our there. Red happening, say continues for happen into a lanes so little as Sea nothing much outlook, through from a it's to to more is whatever in well So Asia. the coming baked as us, other managing

point. are units inventory than Units about side, Really X%. the are this inventory up up that. On -- at feel yes, less great

versus extra that a well as product those Abercrombie, higher-cost and tilting as Hollister. little in there in a costs We because more brings higher have of freight

read that mix in react, up how excited with that little of a units and chase get have Each on us up a you season. continues X%. mode, year-over-year, to that So But holiday the bit be hit for been and we're brand tightly controlled. sets

Operator

next UBS. Our Mauricio comes Instructions] question Serna [Operator from with

queue. looks move to like they I'll our question. disconnected from It on the next

JJK Our next Janet question Research. with from Kloppenburg comes

Janet Kloppenburg

One on I all. to sorry. was Congratulations heck of you a quarter. mute. I'm apologize. I

Fran Horowitz-Bonadies

Thanks.

Janet Kloppenburg

continue wondered -- levels, cadence of think last many, about do the starting back Fran, half inventory really you've And of are comps. normalize? had promotional your lower how about be you and now I lean year-over-year? top promotions they versus about to you wondering positive healthy to many I'm in clearance on quarters positive comps year? Or

freight. freight do expect see -- And Just be you do the that your about just wondering you time the there. pace Scott for then in guidance, it in the some quarter? expect elevated? you retreating on Do that Or continues fourth freight to

Fran Horowitz-Bonadies

Thanks, Janet.

normalize. ago, where team been and are. our make go regarding and what's the as they making we point, know, Let the and is it very we the knowing about a the very business, bit I reduction keeping continue just inventory some in are expectation than here. in few keeping driving inventory running just that to after react But really inventory, mode the Scott you this delivering levels, have lean we will time levels mean, before read the a clearance mentioned question past. certainly pleased with fresh; they sure minutes are aggressively, it this right this sure And I have as that clearance. our they lower in run and are; certainly been me the in as our business stays At well way is

Scott Lipesky

Yes.

been are one the say, at summer. going can really I'd not this around to where predict They've freight, bouncing freight a the No point. lot go. On rates this sure

we're for is obviously deliveries a get baking into of continues So We'll the But QX October more like. for fourth we're point, talk about in freight. lot in that through elevated as frame We what of rates September, and XXXX baking and quarter. doing learn what XXXX, QX. we're holiday we'll looks here peak that this at us, in time we kind see the assume through higher and

Janet Kloppenburg

Like AUC AUC But freight compensate that, the for AUC or that Scott? opportunity the diminished -- does increase tailwinds. totally offset tailwind would -- the

talk for promotional you for that half about you could the And second think think the Fran, what just your about -- of help. year-over-year, about if levels I would year,

Scott Lipesky

Yes.

me ACP. Let grab the

It's we've market you AUC, at years here things of part looking of and In break been range. a talking tailwind through kind apart biggest about the in cotton. freight been been stable. of when Really here is lot commodity, the that So in that, to $X.XX has settling nice the over see cotton, cotton QX. the gotten and we've pretty around the

see that of kind So around like level. prepandemic to

in little seen the nice couple those we off of years. a past coming be material Not quarters the could past couple really the tailwind rates we've like of as high future. that So go over over

But maybe one that, out. freight wins when Maybe the they quarter. you one cotton, one net quarter, other about loses versus think

these So we'll gross if a it, focus bit delivering thinking see. rates. we get on and to on just then continue profit promotions can But going And about as kind we're seeing of what little we're inventory, AUR see we lean that that strong more do can and nets.

Fran Horowitz-Bonadies

back quarter with prior. I quarter levels now right the in it the sorry, the -- have we go be half, momentum in success as expectation, having is we're promotions into same always promotional and the they August, with But of about and or think will the we year. back-to-school with quarter as Yes. back quarter mean that half always the certainly Janet, heading the promotional our our fourth that into for most season each lower the the is, were the is expectation than

working, it mall, what's not it what's in the the team we on the our see really weekly on business. heads working, to of But our with do not rest what's happening business, but We about focused down do worrying weekly.

Janet Kloppenburg

for second luck a of half. good Lots

Operator

[Operator Mauricio question Instructions] Our UBS. from with next Serna comes

Mauricio Serna Vega

Congrats on couple a know I kind I you Germany? you guess, all. few saw Sorry on lot about questions of and of a dropping results, minutes before. brand's improve the first, about work to talk those growth first you've in Could done positioning markets. sales. off what of on of a the U.K.

hear interested be would about more that. So to

the updated And the for guidance, on guidance year. then

mix think roughly you growth to X.X% like impact when the implies -- into outlook like the from you're QX, X.X% sales excluding the if I calendar shift. back

why makes So are bit you about QX? you to seeing that more relative QX a little conservative

Scott Lipesky

right. All

start this largest effort and out focused U.K. the or let's those we're with the localization talk Europe our Germany. So they thing of are past, is countries about really U.K. And so, that our been the gate. in year we've it, over Europe. and countries of two call on in as great Yes, making were two the we Germany and fastest-growing coming

countries we've there. [ increased really ] we've distortions focus these our in our and spend, marketing increased product So

top biggest and at countries there. start you your the we'll continue Obviously, then from on

largest strength really are working. these the are efforts The day because, in see EMEA So great again, countries to countries. in they these two two the carrying

with are regions. happy really in So teams our doing what those

XX% the for exciting of out about think Really continued is we in QX in double-digit top QX, to guidance the about Excited mean, way I talk on growth. the QX. As low of year. on about yes, focused QX here last distance. the and brands a We're strength be to plus talking growth

on points lot QX, week, take obviously, you year. again, when percentage QX growth get basis of it's last as -- point, At still, points very we'll yes, the growth a X.X we or strong talk that top of a this away there. more from XXrd

So into where is positioned company the the brands positioned, where really back and half. the positioned we are is get where happy inventory the as

Mauricio Serna Vega

gross then And margin. quick follow-up a it. Got on just

I kind that expectation QX? the same Is that talking think be relatively you says it the for when from of QX message you're if understand I margin about to guidance, gross expect flat.

And on remember to more like bit and details I any you QX AUR gain. provide a you gross from to cotton more that? used details contribution provide Could little margin behind like

Scott Lipesky

big, parts. big provided We detail there were detail there. so moving stabilized, Obviously, things some in the in have past. less Those Yes. there's some

bit through, As higher growth. we that some offset freight. AUR then talk nice and come QX, Saw some about -- last that cotton of with

across seeing of the we're company. So what that's kind

some a go of we've more we these as gotten As through big QX, into stable it's little changes.

come freight, the that costs of see from AUR levers of talked on little drive to a bit in little we'll a those about see hurt we'll last Getting growth, question. bit look for where and quarter. we the back the We'll cotton then to

margin grab we're So that talk QX. about for Nothing about thinking QX that's We'll to yet. next how gross call. for the on

Operator

[Operator Blair. William from next comes Instructions] Carden question Our Dylan with

Dylan Carden

helpful. of is prepandemic? look shift sort of any presented detail opportunity repeat versus you're the seeing if up buying -- on sort of about who's sort anecdotally brand particularly And the the kind that even there sort purchases you that top of mix aging in be would of of scaling brand, Abercrombie by the customer of interest Curious at kind of

Scott Lipesky

Yes, one me that off. let kick Dylan,

that collegiate, of to consumer and in have mid-XXs, post yes, because to Abercrombie of in that fighting up Abercrombie prepandemic. customer. versus results And goal We that we we've seen customer get felt a up And aging which seeing and the Hollister talked was in definitely there mid-XXs our So is that that space, our up teen early data, aging lot great were space age brands. we kind seen They separate about was we're there. awesome. white kind that

And back of to question versus point the retention is the next new customers.

customers. there are We out grabbing new

been been efforts very they've done, marketing have effective. well Our

So we're we're driving driving customers also retention. new and

around these Getting A&F, about that back first when categories. question talked different to Fran

things them these guests, to big, in in something bringing So all are to our customers give come retain NFL, bringing like ways dressed they time it in each making new and small, best back bringing something us. YPB,

it to the this part very and opportunity So life, as and because that, we have that's and retaining long we're a customer through new on for of working We're about excited Abercrombie on what and in we're keep for growth a this new in customers really really as focused company numbers. come seeing we're a brand. time them those

Operator

like the showing any I'd for And this further turn at time. closing to Fran I'm back not to questions remarks. over call

Fran Horowitz-Bonadies

the to soon. Thanks, all forward and call today, we to for everyone, joining you look updates providing more

Operator

today's presentation. this does gentlemen, and conclude Ladies

a now wonderful may You day. have and disconnect,

Abercrombie & Fitch (ANF) 28 Aug 242025 Q2 Earnings call transcript