Abercrombie just beat Wall Street on Q1. The stock jumped about 12%.
But the 2% sales growth wasn't from new clothes. It came from new stores and a weak dollar.
EMEA Sales Fell 10% On The Iran War
Sales in Europe, the Middle East and Africa fell 10%.
CFO Robert Ball pinned the drop on the Iran war. He said it hit demand at Hollister.
EMEA is just 15% of ANF's sales. But it still trimmed Q1 sales growth by more than half a point.
That hit pushed CEO Fran Horowitz to tell the call ANF is "focused on what we can control." She named stock and ad spend.
Even with the EMEA drag, ANF still sees full-year sales growth of 3% to 5%. That would be its fourth year in a row of growth.
ANF says it's managing Hollister stock and ad spend in Europe. The plan is to stay nimble as the war plays out.
The brand is also leaning on new store openings to plug the gap. Hollister is ANF's youth brand, and Europe is a key market for it.
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The 2% Growth Wasn't From Real Demand
Here's the part most headlines missed.
The 2% sales jump came from new stores and a weak dollar. It did not come from shoppers buying more.
Even so, ANF is seeing slow growth in what it charges per item. That keeps operating margins in the 12% to 12.5% range.
The big worry is the Q2 outlook. EPS is set to land at $1.80 to $2. That falls short of the $2.54 Wall Street call.
Ball said the back half should look better. He blamed easy comps and lower ad spend - not a pickup in real demand.
He also said tariffs and freight will be just slight drags by year-end. That's a cleaner setup than most other apparel firms are flagging.
The Tariff Picture Just Got Better
One bright spot for ANF: tariffs.
The Supreme Court ruled Trump's tariffs illegal. After the ruling, ANF's tariff hit fell from 0.7 points of profit to just 0.2 points.
ANF also filed for a tariff refund of about $100 million. That cash isn't in the outlook. So if it lands, it's pure upside.
If the refund comes through, ANF could put it toward buybacks or a fresh ad push.
Many of ANF's peers are still waiting to bake the tariff win in. ANF chose to do it now.
What To Watch
ANF held its full-year outlook. The plan is sales growth of 3% to 5% and EPS of $10.20 to $11.
The next few quarters will test if ANF can grow without new stores and a weak dollar doing the work.
The Q3 print will be the first clean read on demand once the EMEA noise quiets down.
Real demand has to show up at some point.
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