Abercrombie to Report Q2 Earnings: Trends Investors Should Watch

In the last reported quarter, the company’s earnings beat the consensus estimate by 16.7%. ANF has delivered an earnings surprise of 8.1%, on average, in the trailing four quarters.

Factors Likely to Impact Results

Abercrombie has been benefiting from continued strength in the Americas and APAC regions, which is expected to have supported revenue growth in second-quarter fiscal 2026. Sales in the Americas are expected to have been driven by growth across both brands, positive traffic trends, and healthy engagement in stores and digital channels. APAC’s results are likely to reflect strong customer demand and the region's expanding opportunity.

Our model estimates sales to increase 3.1% in the Americas, 4.1% in EMEA and 0.5% in APAC for second-quarter fiscal 2026. 

The company's balanced regional performance, supported by digital strength, strategic store investments and disciplined execution, continues to underpin its growth trajectory and confidence in achieving another quarter of sales growth. 

On the last reported quarter’s earnings call, management reaffirmed its fiscal 2026 sales and operating margin outlook, reflecting confidence in brand momentum, disciplined inventory management and healthy customer demand. The successful completion of its merchandising enterprise resource planning rollout, ongoing investments in AI and digital capabilities, and an active store-expansion strategy are expected to have supported growth in the to-be-reported quarter. 

For the second quarter of fiscal 2026, Abercrombie expects year-over-year net sales growth of 2-4% from the prior-year level of $1.2 billion, supported by ongoing strength in the Americas and APAC, modest average unit retail (AUR) growth and healthy customer demand. The company expects an operating margin of 10% in the fiscal second quarter, including $20 million in tariff-related impacts.

However, Abercrombie’s fiscal second-quarter performance is expected to have been weighed down by continued weakness in the EMEA region, wherein disruptions related to the Middle East conflict and softer demand trends across select European markets are hurting sales. On the last reported quarter’s earnings, management expected some of these regional headwinds to persist through the remainder of fiscal 2026, making EMEA a key area to watch.

Abercrombie’s profitability is expected to have been under pressure in the second quarter of fiscal 2026 despite delivering sales growth. Increased marketing investments and costs associated with the company's ERP implementation are expected to have weighed on the company’s margins.

Management has been facing tariff-related expenses, rising freight costs, and ongoing investments in marketing, stores and digital capabilities. Although these investments are intended to support long-term growth and brand strength, they are likely to limit near-term margin expansion.

Management assumes a 10% effective tariff rate in the fiscal second quarter and a 15% tariff rate on U.S. imports in the second half of fiscal 2026. However, the benefit from lower tariff assumptions is expected to have been largely offset by higher freight costs and continued investments in marketing and stores. The company also noted that it has not included any potential tariff refunds in its outlook, leaving trade policy and sourcing costs as ongoing risks to profitability and earnings growth.

Our model expects sales to rise 3.2% and the adjusted operating margin to decline 380 bps year over year to 10.1%. We anticipate adjusted earnings per share of $1.94 for second-quarter fiscal 2026, suggesting a 16.5% fall. 

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Abercrombie this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that is not the case here. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Abercrombie currently has an Earnings ESP of 0.00% and a Zacks Rank of 3.

ANF’s Stock Performance & Valuation Picture

From a valuation perspective, Abercrombie is trading at a discount relative to industry benchmarks. The company has a forward 12-month price-to-earnings of 9.57X, lower than the Retail - Apparel and Shoes industry’s average of 13.15X.

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The recent market movements show that ANF shares have rallied 37.8% in the past three months against the industry's 5.5% decline.

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Stocks Poised to Beat Earnings Estimates

Here are some companies, which, according to our model, have the right combination of elements to post an earnings beat:

Victoria's Secret VSXY currently has an Earnings ESP of +5.20% and a Zacks Rank of 2. The company is likely to register growth in the top and bottom lines when it reports second-quarter fiscal 2026 results. The consensus mark for VSXY’s quarterly revenues is pegged at $1.6 billion, which indicates an 11.2% rise from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus mark for VXSY’s quarterly earnings has moved up by a penny in the past 30 days to 77 cents per share. The consensus estimate indicates a significant 133% rise from the year-ago quarter’s actual. VSXY has an average trailing four-quarter earnings surprise of 81.9%.

Five Below Inc. FIVE currently has an Earnings ESP of +20.80% and a Zacks Rank of 2. The company is likely to register growth in the top and bottom lines when it reports second-quarter fiscal 2026 results. The consensus mark for FIVE’s quarterly revenues is pegged at $1.2 billion, which indicates a 17.9% rise from the figure reported in the prior-year quarter. 

The consensus mark for Five Below’s quarterly earnings has moved up 3.2% in the past 30 days to $1.28 per share. The consensus estimate indicates an increase of 58% from the year-ago quarter’s actual. FIVE has an average trailing four-quarter earnings surprise of 70.1%.

Ulta Beauty Inc. ULTA currently has an Earnings ESP of +1.20% and a Zacks Rank of 3. ULTA is likely to register top- and bottom-line growth when it reports second-quarter fiscal 2026 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $2.97 billion, which indicates 6.6% growth from the prior-year quarter’s actual.

The consensus estimate for earnings has moved up 0.2% in the past 30 days to $6.17 per share, which implies 6.8% growth from the year-ago quarter's actual. ULTA has an average trailing four-quarter earnings surprise of 10%.

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This article originally published on Zacks Investment Research (zacks.com).

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