A beat-and-raise second quarter wasn't enough to put Abercrombie & Fitch (ANF -1.43%) stock in positive territory on Wednesday. While there was much to like about the company's earnings release published before market open, concerns about the impact of tariffs curbed enthusiasm.
The clothing retailer's stock closed more than 1% lower, while the S&P 500 (^GSPC 0.24%) ticked up by 0.2%.
Helped by the hipsters
For the quarter, Abercrombie notched a new all-time high revenue figure of $1.19 billion, which was 7% higher on a year-over-year basis. On the bottom line, non-GAAP (generally accepted accounting principles) adjusted net income landed at nearly $113 million ($2.32 per share).
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It attributed the higher sales to strong demand for its Hollister brand, which is targeted at affluent young fashionistas. The company also saw encouraging growth in certain geographies, such as Asia-Pacific (with sales up 12%) and the Americas (8% higher). This more than offset the 1% decline in Europe, the Middle East, and Africa.
Both headline metrics edged past the average analyst estimates, which called for $1.19 billion on the top line, and $2.27 per share for adjusted net profit.
With this tailwind at its back, Abercrombie's management increased its full-year 2025 guidance. The company now expects annual net sales to grow by 5% to 7% over the previous year; its preceding forecast was a range of 3% to 6%. The per-share net income estimate also got a boost, as it's now anticipated at $10 to $10.50, up from the preceding $9.50 to $10.50.
Here come tariffs
One large asterisk next to these otherwise encouraging figures is tariffs. Abercrombie cautioned that higher U.S. government levies on countries that export to the company, like India -- which just got socked with heavy tariffs -- Vietnam, and Indonesia will increase its costs by $90 million. That's significantly higher than the $50 million it estimated for such expenses in May.
