Abercrombie & Fitch Company

Good day and welcome to the Abercrombie & Fitch fourth quarter fiscal year 2025 earnings call. Today's conference is being recorded. 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 would need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would like now to turn the conference over to Mo Gupta, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to our fourth 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 fourth 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 statements 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'll 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. Good morning, and thanks for joining us today. Before we begin, I do want to acknowledge the situation in the Middle East. with associates and stores in the region, our focus continues to be on their safety and well-being. Returning to our results, I'm happy to report the fourth quarter finished on the higher end of the ranges provided in our early January update. Once again, we accomplished exactly what we set out to do. Holiday product acceptance drove record fourth quarter net sales with balanced growth across regions, brands, and channels, along with growth in earnings per share. As a company, our goal is to set clear commitments and then deliver on them, leveraging our strong foundation and operating model. We achieved another year of consistent results for 2025 with record sales, growth across regions and channels, and leading double-digit operating margins. Substantial operating cash flows also enabled strong returns of cash to shareholders via share repurchases. Looking forward to 2026, We expect to continue on a path of global growth and add to our track record of consistent, strong profitability. For the fourth quarter, we delivered net sales growth of 5%, which was balanced across regions, brands, and channels. It was particularly great to see both brands deliver record fourth quarter net sales. At Abercrombie Brands, we achieved our goal of returning the brand to growth with 4% net sales growth on top of a record last year. Hollister Brand continues to deliver for the teen customer, producing an 11th consecutive quarter of net sales growth at up 6%. With balanced top line growth and continued financial discipline, we delivered an operating margin of 14.1%, including 360 basis points of tariff pressure. I have to recognize the team's incredible efforts here to meaningfully reduce the impact of these costs. On the bottom line, Earnings per share of $3.68 improved 3% on last year's record quarterly results, demonstrating our ability to create value through a balanced combination of global growth, operational excellence, and disciplined capital allocation. Recapping the year, fiscal 2025 net sales were a record $5.3 billion, surpassing $5 billion for the first time in company history. We grew over 6%. exceeding our beginning of the year growth projections provided last March. For the third consecutive year, our customers responded to the team's compelling product and engaging marketing, delivering net sales growth across regions, led by the Americas, up 7%. Sales also grew across channels for the third year in a row. We continue to see great traffic on digital and in-store, and importantly, we continue to see our highest value customers shopping across channels. We delivered an operating margin of 13.3% or 12.5% adjusting for a one-time litigation benefit, a double-digit result for the third straight year, despite 170 basis points of tariff pressure. On the bottom line, we delivered full-year earnings per share of $10.46, our second consecutive year of EPS over $10, by far the strongest back-to-back performance in our 30-year history as a public company. We also remain committed to shareholder return. With $619 million operating cash flow after investing back into the business, we returned $450 million to shareholders via share purchases, totaling 11% of shares outstanding at the beginning of 2025. The team worked hard all year, staying fully committed to our customer and our playbooks, and I'm proud of the consistency of these results as a clear demonstration of our leading operating model and culture of financial disciplines. From a regional perspective, 2025 was another year of progress. In the Americas, we grew net sales 7% on strong cross-channel traffic, driven by compelling marketing across brands and continued store expansion. In EMEA, net sales growth of 6% was driven by double-digit growth in the UK, along with good growth in the Middle East. APAC grew 5% this year, led by solid performance across our digital platforms. Moving on to brand performance, I'll start with Hollister Brands, where we set records across the business. I am so proud of what the team has achieved with the global teen consumer, with two consecutive years of 15% growth driven by increases in unit selling and AUR. On product, we delivered growth across genders and key categories, showing improved balance on both. We saw great response from a variety of exciting marketing campaigns, supporting key product drops like our collegiate collection, the grad shop, and engaging collaboration with Taco Bell. We added millions of new customers in 2025, and importantly, we also saw improved retention. Simply put, Hollister's growth and scale stand out in the team space, and we are excited about what is ahead. At Abercrombie Brands, after a challenging start to 2025, up against a near-perfect 2024, the team rallied and committed to getting the brand back to growth by the end of the year. We did just that. achieving a return to net sales growth for the fourth quarter. As we have shared throughout the year, we believe Abercrombie remains a leader for our target customer. We continue to see strong traffic along with growth in customer counts and good retention trends. Reflecting our confidence, we invested across stores, digital, and marketing to bring the brand to life in new ways throughout 2025. Most recently, the brand hosted several amazing activations leading up to the Super Bowl. As an official fashion partner of the NFL, the first of its kind, we had players and their families, several celebrities and league figures, as well as our target customers at a series of events. I was there and it was incredible to see Abercrombie at the intersection of fashion, sports, and culture. A great finish to our 2025 season and the perfect kickoff to 2026. Our ongoing investments across channels continue to pay off in 2025. We saw growth in the stores and digital direct channels for a third consecutive year, and both remain nicely profitable. In digital, we continue to see strong performance, finishing the year with that channel delivering 44% of total sales. We also surpassed 1 billion visits across our platforms for the first time, demonstrating the scale and direct reach we have with our customers. Stores matter to them too, and we were net openers for a fourth consecutive year, leveraging our digital demand to help us determine where we can better serve Hollister and Abercrombie customers with a physical location. At the center of all these excellent brand, channel, and regional accomplishments was our Read and React inventory model. For the third consecutive year, we chased millions of units to support product demand at healthy AURs, helping to drive top-line growth. Inventories remained tightly controlled, and we finished the year with units up in the mid-single digits. I can't overemphasize how hard our team works at this, coordinating product across functions, geographies, channels, and partners, all while tariffs were changing the global supply chain landscape week to week. So looking forward, we are very excited for 2026. We entered the year of a strong foundation, which includes two globally relevant brands, a proven operating model, and a strong balance sheet, all managed by a world-class team. For the year, Our goals for the company are as follows. First, to grow sales across brands with continued investments in owned and operated stores and digital businesses, while adding growth from partnerships and new product categories, like our recent launch of Baby and Toddler and Abercrombie Kids. Second, to stabilize growth margins as we progress through the year by mitigating as much of the tariff impact as possible. Third, to continue to invest in tools and technologies to improve our speed and efficiency across the product and customer journeys. A good example of this is the go-live of our new merchandising ERP system this month. We're also moving quickly to leverage AI to benefit the customer and we're modernizing systems to help us. And finally, to maintain our strong profitability by delivering another year of double-digit operating margins and expansion earnings per share. We also expect to continue our track record of returning excess cash to shareholders through share repurchases. After closing another record year in 2025, We are often running on these growth objectives for 2026. We have the team, the experience, and the track record of delivering for our customers and our shareholders. Many thanks to the entire organization that makes this happen every single day. The work continues and always forward. And with that, I'll hand it over to Robert.