Abercrombie & Fitch Company

Good day, and thank you for standing by. Welcome to the Abercrombie & Fitch Second Quarter Fiscal Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Mo Gupta. You may begin.

Thank you. Good morning and welcome to our second quarter 2025 earnings call. Joining me today on the call are Fran Horowitz, Chief Executive Officer, Scott Lopesky, Chief Operating Officer, and Robert Ball, Chief Financial Officer. Earlier this morning, we issued our second quarter earnings release, which is available on our website at corporate.abercrombie.com under the investor section. Also available on our website is an investor presentation. Please keep in mind that we will make certain forward-looking statements on the call. These subjects are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions we mentioned today. These factors and uncertainties are discussed in our reports and filings with the Securities and Exchange Commission. In addition, We will be referring to certain non-GAAP financial measures during the call. Additional details and reconciliations of GAAP to adjusted non-GAAP financial measures are included in the release and the investor presentation issued earlier this morning. With that, I will turn the call over to Fran.

Thanks, Mo, and thanks, everyone, for joining this morning. We entered 2025 aiming to build on our track record of delivering consistent total company success. I'm excited to share that our second quarter results continued this trend as we delivered our 11th consecutive quarter of growth while also exceeding our top and bottom line expectations. Our team continues to leverage our strong foundation to balance reading and reacting to the current environment while diligently investing to realize the long-term global potential for our business. Our strong first half and start to the third quarter gives us confidence to increase our full year net sales forecast, building on a record 2024. In short, our team and brands are strong, and we are entering the back half of the year with momentum to deliver sales growth, top tier profitability, and drive shareholder return. Second quarter net sales reached a record 1.2 billion, growing 7% over last year and above our expectations from May. We also exceeded our outlook on both operating margin and earnings per share, even after excluding the benefit of a legal settlement. In addition, we continued to put our balance sheet to work, repurchasing $50 million of stock this quarter for a total of $250 million in repurchases so far this year. Regionally, the Americas achieved its 12th consecutive quarter of growth, with net sales up 8% on continued traffic strength across direct channels. In EMEA, continued cross-channel growth in the UK was outweighed by softness in Germany and the remainder of European markets, with regional net sales lower by 1%, again, 16% growth in the second quarter of 2024. APAC continued to perform well, growing 12%, a nice cross-channel demand, while comparable sales grew 1%. Moving to the brands, let's begin with Hollister. Wow, it is amazing to see this team so dialed into the team customer. Hollister Brands delivered record first half sales, growing net sales 19% in the second quarter on strong cross-channel traffic. Comparable sales were also up 19% in the quarter, and we continued to see growth in both units and AUR. Both the men's and women's businesses contributed to the growth story in the quarter with good balance across categories. On dialing into this customer, we saw a great response to our brand activations at Lollapalooza in Chicago. Leading into August, we released our updated collegiate collection, which included several exciting social and in-store campaigns with more on the way. We continue to find fun, effective ways to engage with the team, fueling Hollister Brand's impressive growth. For Abercrombie, the quarter was slightly below our expectations and similar to the first quarter overall. Net sales were lowered by 5% against the backdrop of strong 26% growth in the second quarter of 2024. For further context on how exceptional last year was, the first half of 2025 remains the second best in brand history. In the second quarter, the team executed on their goals, leveraging promotions to manage inventory levels and by testing into new product concepts. As we expected, AUR was lower year over year, driving the majority of top line performance for the quarter, Importantly, with the team's hard work, we exited Q2 with inventory in good shape, and we're in position to continue reading and reacting. Entering the fall season, we're excited about some of the trends and fits from Boho to Western, and we'll be chasing winners to give our customers more of what they're looking for, building into holiday. Abercrombie & Fitch continues to gather momentum as a powerful global brand, and we remain on offense. Traffic was nicely positive across both stores and digital direct channels in Q2. and we continue to engage with customers globally through social and in-store campaigns. We're also investing with conviction, supported by our digitally-led customer base. We opened 13 new stores in the second quarter, including strong centers in Chicago and Toronto, as well as a great location in Hoboken. We have an additional 14 store openings planned this quarter, just in time for peak season. Strong Grand Health also allows for meaningful collaboration to capitalize on Abercrombie's significant addressable market. Earlier this week, we were excited to announce Abercrombie & Fitch as an official NFL fashion partner, a first for a league sponsor. We look forward to collaborating with the NFL to bring A&F fashion to fans and players alike. Beyond the powerful NFL partnership, we've seen a great response to our August denim campaign, which focused on consistent fit across a variety of styles from baggy to bootcut. As part of the campaign, we hosted in-store denim events in key markets, successfully highlighting our strength in this category while driving great engagement across channels. For YPB, we were excited to announce a collaboration with TJ and Danny Watt, the Pittsburgh Steelers linebacker and former professional soccer player, as we continue to build our presence in the active category. Finally, through the licensing partnership we announced in 2024, Abercrombie Kids has now launched globally with department stores like department store retailers like Nordstrom and Macy's, amongst others. Overall, Abercrombie Brands made good progress in the quarter. The brand remains strong globally, and we continue to target getting back to net sales growth by the end of the year. Looking to the second half of the year, we are increasing our full year 2025 net sales growth expectations based on our year-to-date results, supported by strong brand positioning, clean inventory, cross-channel traffic growth, and our balance sheet. On the bottom line, we've adjusted our operating margin and earnings per share outlooks to reflect the second quarter performance and revised estimated impact from tariffs, net of planned mitigation. On tariffs, we intend to bring our proven playbook, built on years of experience, to mitigate as much of the increased costs as possible over time as rates become more certain. As our teams have demonstrated before, we have a variety of options in our playbook, including shifting global production, enhancing supplier contracts and relationships, managing operating expenses, and determining ways to increase AUR through lower promotions and lower clearance selling. As we said last quarter, we don't expect broad-based ticket increases in the back half, and we'll concentrate on the fit, style, and emotional connection our customers come to us for every day. Importantly, we are operating in this new tariff landscape from a position of strength in terms of our brand health, our balance sheet, and cash flow profile. For the year, our objectives remain clear. We expect to deliver record net sales, top-tier operating margins, and significant free cash flow. As our recent results show, we intend to deploy this cash flow to further strengthen the business through long-term investments while enhancing shareholder returns via share repurchase. With each quarter, we're adding to a growing record of consistency that will keep us moving toward a significant global market opportunity for our brands. And now, I'll hand it over to Robert to expand more on our results and key outlook drivers.