A&F(US:ANF)2025-08-27 13:30Financial Data and Key Metrics Changes - The company reported record net sales of $1,210,000,000 for Q2 2025, representing a 7% increase compared to the previous year, exceeding expectations [7][19] - Operating margin was 13.9% of sales, above the outlook range provided in May, with operating income of $168,000,000 compared to $176,000,000 last year [22][23] - Adjusted net income per diluted share was $2.32, above the outlook, compared to $2.50 last year [24] Business Line Data and Key Metrics Changes - Hollister brands achieved a 19% increase in net sales for Q2, with comparable sales also up 19%, driven by strong cross-channel traffic [9][21] - Abercrombie brands saw a 5% decline in net sales, with comparable sales down 11%, primarily due to lower average unit retail (AUR) as inventory was cleared [11][21] Market Data and Key Metrics Changes - The Americas region reported an 8% increase in net sales, marking its twelfth consecutive quarter of growth [8][20] - APAC region grew by 12%, while EMEA experienced a 1% decline in net sales, impacted by softness in Germany and other European markets [8][20] Company Strategy and Development Direction - The company plans to increase full-year net sales growth expectations based on strong year-to-date results and brand positioning [16][27] - The company is focusing on maintaining strong brand health and engaging customers through partnerships, such as the collaboration with the NFL [14][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to growth by the end of the year, citing strong traffic and successful product launches [36][100] - The company is navigating a new tariff landscape from a position of strength, with plans to mitigate costs through various strategies [17][72] Other Important Information - The company repurchased $50,000,000 worth of shares in Q2, totaling $250,000,000 in repurchases for the year [7][25] - Inventory levels were reported to be in a clean position, with inventory at cost up 10% and units up 7% [23][51] Q&A Session Summary Question: What are the markers for acceleration for the Abercrombie brand? - Management highlighted strong traffic, exciting partnerships, and successful store openings as key indicators of future growth [34][36] Question: Can you clarify the credit card settlement inclusion/exclusion? - The $39,000,000 net benefit from the credit card settlement was included in the operating margin guidance, offset by increased tariffs [37][38] Question: How is the Abercrombie Kids launch going? - The launch has received positive feedback, and the company is excited about expanding its operating model [40][42] Question: What is driving the momentum in Hollister? - Management noted that everything is working well for Hollister, with strong consumer engagement and successful product launches [47][49] Question: What is the state of carryover inventory? - The company reported significant progress in managing carryover inventory, with a clean and current position heading into the back half of the year [50][51] Question: What gives confidence for Abercrombie's future performance? - Management cited strong traffic, successful campaigns, and a solid start to Q3 as reasons for confidence in returning to growth [100][102] Question: Can you elaborate on the tariff impact? - The company is facing a $90,000,000 cost impact from tariffs, with ongoing efforts to mitigate these costs through various strategies [26][72] Question: How is the EMEA business performing? - The UK market is performing well, while Germany has faced challenges; however, management remains optimistic about future growth in the region [75][76]