Abercrombie & Fitch Just Delivered Its 15th Consecutive Quarter of Sales Growth. Here's the Real Reason the Stock Is Skyrocketing.

The trendy, casual retailer Abercrombie & Fitch (NYSE:ANF) just hit it out of the park.

In the second quarter of its fiscal year 2026, Abercrombie reported $4.17 adjusted earnings per diluted share, up from $2.33 one year ago. Revenue of $1.27 billion rose 5% year over year.

Wall Street consensus estimates had only expected $1.99 of adjusted EPS. Shares had soared roughly 33%, as of 12:53 p.m. ET today.

The quarter builds on continued momentum, with the company achieving its 15th consecutive quarter of sales growth. But here's the real reason the stock is skyrocketing today.

Image source: Getty Images.

Significantly raising guidance

In addition to the big earnings beat, Abercrombie's management team significantly raised its full-year guidance.

The company now expects annual sales growth of 5%, up from a prior range of 3% to 5%.

Operating margin is expected to land within a range of 14.5%-15%, up from a prior outlook of 12%-12.5%. Diluted earnings per share are expected to be within a range of $13.10-$13.60, up from a prior range of $10.20-$11.00.

That's an enormous lift, so it makes sense that investors are buying the stock hand over fist.

Part of the boost during the second quarter, however, is due to tariff refunds. Abercrombie & Fitch received $100 million in tariff refunds associated with the Supreme Court's ruling that tariffs enacted by the Trump administration through the International Emergency Economic Powers Act (IEEPA) were illegal.

Abercrombie's CFO, Robert Ball, said the tariffs added about $1.75 to diluted EPS in the quarter. Ball also said the company expects to recognize an additional $20 million of tariff refunds in its third quarter.

Even so, the core business is performing very well, and momentum is expected to continue in the back half of the year.

Abercrombie & Fitch had a nearly 20% operating margin in the quarter. While tariff refunds added 7.9% to that number, the company had only guided for about a 10% operating margin in the quarter.

Abercrombie picked up another 2% from favorable gross margin and operating leverage, due to stronger sales.

CEO Fran Horowitz said the brand is seeing success globally and across genders, with knits, woven shirts, pants, and shorts all performing well.

Horowitz also said the company's partnership with the NFL continues to appeal to sports fans, while Hollister's partnership with Target has brought in new customers and strengthened its relationship with existing ones.

Where can the stock go from here?

Following the big move, Abercrombie now trades at about 14 times forward earnings.

The company is also repurchasing stock and has bought back 7% of its shares since the year began. Management now plans to return at least $500 million to shareholders through repurchases in fiscal 2026; so far, it has repurchased $282 million.

The new guidance also suggests that quarterly sales growth will accelerate from here, and management believes it can achieve industry-leading margins again this year.

Companies like Abercrombie are somewhat tied to the economy and consumer spending, so that's a potential risk as inflation remains elevated.

But I do think long-term investors can buy Abercrombie & Fitch, given the strength in the underlying business. Investors may want to dollar-cost average into the stock right now, as I suspect some near-term-minded investors will take profits after the big gains.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool recommends Abercrombie & Fitch. The Motley Fool has a disclosure policy.