Abercrombie & Fitch saw its stock price climb 12% in afternoon trading this week, defying a mixed fiscal first-quarter report that highlighted significant regional challenges. While the retailer surpassed Wall Street’s earnings expectations, it noted that ongoing geopolitical tensions in the Middle East have created a direct drag on sales, particularly within its Hollister brand across the Europe, Middle East, and Africa (EMEA) region. Sales in these territories dipped 10% during the quarter, shaving more than 0.5 percentage points off the company’s projected growth.

Despite these headwinds, the company remains optimistic about its long-term trajectory. CEO Fran Horowitz emphasized a strategy focused on inventory management and agile marketing investments to navigate the current climate. Abercrombie & Fitch reaffirmed its full-year guidance, projecting net sales growth of 3% to 5% for fiscal 2026. This would mark the company’s fourth consecutive year of net sales growth, bolstered by new store openings and favorable foreign exchange rates, even as organic consumer demand remains under pressure.

Financial results for the quarter ending May 2 showed net sales of $1.11 billion, a 2% increase from the previous year. While the company’s outlook for the current quarter fell short of analyst expectations—with earnings per share projected between $1.80 and $2.00—the firm is finding relief in shifting regulatory landscapes. Specifically, the company has adjusted its profitability outlook following recent legal developments regarding tariff rates, which are now expected to have a smaller impact on the bottom line than previously anticipated. The retailer is also pursuing a significant tariff refund, though it has not yet incorporated those potential funds into its official financial guidance.