Aug 26, 2026 earnings call — Record sales and tariff refunds lift margins
Updated full year net sales growth to around 5% and raised operating margin to 14.5% to 15%, including approximately $120 million of IEEPA tariff refunds.
Revenue $1.3B (est $1.2B) · EPS $4.17 (est $1.99)
Key quotes
"We received and recognized approximately $100 million of refunds related to IEEPA tariffs in the quarter."
"I'm excited to report we delivered our 15th consecutive quarter of top line growth on record second quarter net sales."
"We continue to leverage our strong cash flow and balance sheet, returning $177 million to shareholders in the quarter through our 10th consecutive quarter of share repurchases."
Analyst Q&A 10
product trends and inventory/AUR
Q (Dana Telsey · Telsey Advisory Group): They asked how new fashion versus core products are selling, denim trends, and how AUR versus unit trends and inventory look through the year.
A: Management said both brands are showing balanced demand across casual and dressed-up items, with strong knits and wovens and denim as part of the assortment. They expect modest AUR improvement in the back half, noted Q2 AUR strength came from reduced promotions, and inventory is up 3% across the company and positioned to chase into the back half.
"Outlook continues to expect modest AUR improvement in the back half." — Robert Ball (CFO)
Q3 sales and margin drivers
Q (Corey Tarlowe · Jefferies): They asked how the Q3 sales outlook breaks down by brand and region and what drove the margin raise beyond the tariff benefit.
A: Management expects Q3 sales growth of 5% to 6% with growth across brands and regions, and reported a strong start to August for both brands. On margins they said freight and tariff moves largely offset, modest AUR growth and Q2 margin outperformance roll through, and a 220 basis point tariff-refund benefit helps get the full-year margin to the 14.5%–15% range.
"So on the outlook for sales for Q3, again, expecting 5% to 6% growth with growth across regions and brands." — Robert Ball (CFO)
Abercrombie recovery and margin drivers
Q (Matthew Boss · JPMorgan): They asked what structural changes drove Abercrombie's sales recovery and which categories inflected, and they asked for AUR, freight and marketing expectations for Q3 margins (excluding refunds).
A: Management said they rebuilt the company and paid tech debt, including an ERP that went live in March, and that Abercrombie showed strength in knits, wovens and swim while Hollister was strong in knits and bottoms. They reiterated modest AUR growth expected, said freight has been a headwind largely offsetting tariff rate changes, noted a $20 million Q3 tariff refund, and that marketing spend is around a little north of a 5% range for the back half.
"When you think about the tariff side of things and then the freight side of things, so freight has been a bit of a headwind for us here." — Robert Ball (CFO)
Hollister sell-through and Abercrombie activations
Q (Marni Shapiro · The Retail Tracker): They asked whether Hollister stores were empty due to delivery issues or strong sell-through, and whether Abercrombie is activating new customers beyond social media and planned activations for back half.
A: Management said Hollister demand exceeded inventory at many points in the quarter and the team was "chasing" product until inventory caught up, giving momentum into back-to-school. For Abercrombie they said the goal is to bring in new customers and retain actives, citing NFL, Target and the SoHo opening as ways to reach new shoppers.
"It really honestly exceeded our inventory at many points during the quarter." — Fran Horowitz-Bonadies (CEO)
How much Hollister sales were supply-constrained
Q (Katherine Delahunt · Morgan Stanley): They asked how meaningful Hollister being inventory-constrained was to Q2 results and how much growth has accelerated as inventory caught up.
A: Management said Hollister had a great Q2 with sequential improvement of up 2%, and that growth has accelerated from the Q2 level so far in August as inventory caught up. They said they are focused on carrying that momentum into Q3.
"Katie, we had a great second quarter, Hollister sequential improvement up 2%," — Robert Ball (CFO)
conversion and Hollister cadence
Q (Mauricio Serna Vega · UBS): They asked whether better conversion was across online and stores and what improved it, and they asked about Hollister's comp cadence and whether Q3 inflects positive; also asked about drivers of full-year acceleration and margin impact of partnerships.
A: Management said conversion improved across both brands as higher-quality traffic and less discounting led to more units sold, and that this is showing up entering back-to-school and in August. They reported Hollister sales were up 2% in Q2 with momentum into Q3, said inventories will be kept tight and marketing focused for the back half, and that partnerships so far have no meaningful gross-margin impact today.
"When you see conversion improve on reduced discounts and still selling more units, that's a really nice sign, and it shows that the assortments are resonating with customers." — Robert Ball (CFO)
use of tariff refunds and Target impact
Q (Jonathan Keypour · Goldman Sachs): They asked how the company will use the remaining $70 million after buyback increase and tariff refunds, and whether the Target deal is growing Hollister's apparel customer base.
A: Management said the refunds don't change their capital allocation framework: they will continue to invest in the brands and return cash to shareholders, and share repurchases are expected to continue. On Target, they said it's early, they are not sizing the opportunity, but they are seeing evidence of reaching new customers and strong product reaction.
"The refunds don't change how we allocate capital in our business." — Robert Ball (CFO)
promotions and long-term margins
Q (Janine Hoffman Stichter · BTIG): They asked whether lower promotions were across both brands and whether anything structural prevents sustaining the mid-teens operating margins without the tariff benefit.
A: Management said Q2 outperformance was mainly driven by lower discount levels across both brands and credited their read-and-react model and tight inventory management. They would not provide guidance beyond 2026, said new growth levers (category and channel expansion, partnerships) can complement the business, and saw nothing structural that would prevent maintaining healthy double-digit operating margins.
"Outperforming our outlook was primarily driven from lower discount levels, and that was across both brands, delivering this 5% growth that we have." — Fran Horowitz-Bonadies (CEO)
category expansion and store plans
Q (Angus Kelleher-Ferguson · Barclays): They asked how large footwear/accessories/home can become in assortment, margin structure and whether owned or licensed, and how much runway remains for new stores versus remodels.
A: Management said these category and channel moves expand addressable market and diversify growth, but they're early, still relatively small, and not being sized today while they learn. On stores they said there is no finish line and they will keep balancing new openings and modernizing experiences like the well-received SoHo concept.
"We're not sizing them today because quite honestly, they are still relatively small in the grand scheme, but we're excited about the longer-term growth potential that we see across these buckets." — Robert Ball (CFO)
AUR vs units and EMEA confidence
Q (Janet Kloppenburg · JJK Research Associates): They asked whether AUR gains came from less promotion or price increases, whether unit gains are mix or true unit growth, and if Hollister in EMEA will keep accelerating in the back half.
A: Management said the Q2 AUR outperformance came mainly from reduced promotional or discount levels and they have not taken additional price increases; the higher AURs accompanied true unit sales growth, not just mix. They said they are confident in EMEA's long-term potential, noting the U.K. is positive and Germany flipped positive, and that is in their back-half outlook.
"The outperformance to our outlook in the second quarter was primarily driven through better-than-expected AURs, and that really came from reducing our overall promotional or overall discount levels from our expectations." — Robert Ball (CFO)