ANF Q3 2025 Review: Hollister Surges Amid Margin Compression

For investors tracking the retail sector, few turnaround stories have been as interesting lately as Abercrombie & Fitch Co. (ANF). Once defined by dimly lit malls and heavy cologne, the company has rebranded into a more inclusive, digital-forward retailer. However, growth in retail rarely comes in a straight line. Let's dig into their income statement from the latest 10-Q filing to see how the company performed in the third quarter of fiscal 2025.

To visualize how money flows through the company—from the sale of a pair of jeans down to the final profit—we have generated the following flow diagram for the quarter ended November 1, 2025:

Hollister Leads the Charge

The company reported total net sales of $1.29 billion for the 13-week period, a 7% increase compared to the same time last year. What stands out in this report is the shifting dynamic between the company's two core brands.

For several quarters, the Abercrombie brand had been the primary growth engine. However, this quarter saw a reversal of roles. Hollister surged with net sales of $673 million, a massive 16% increase year-over-year. In contrast, the Abercrombie brand saw a slight contraction, with sales dipping 2% to $617 million. This suggests that the back-to-school season was particularly strong for the teen-focused Hollister brand, while the adult-focused Abercrombie brand faced tougher comparables or shifting demand.

Margin Pressures Pinch Profits

While the top-line revenue growth is encouraging, the bottom line tells a story of tightening profitability. Despite selling more goods, the company made less profit than it did a year ago.

Net Income came in at $115.1 million ($2.36 per diluted share), down from $133.9 million ($2.50 per diluted share) in the prior year.

The primary culprit was the Cost of Sales, which rose faster than revenue. The gross profit margin was impacted as the cost of sales, exclusive of depreciation, jumped to 37.5% of net sales, compared to 34.9% last year. This 260 basis point increase indicates that the company had to pay more to make its products or arguably relied on more promotions to drive that sales volume at Hollister. Consequently, Operating Income fell to $155 million (a 12% margin), down from $179 million (a 14.8% margin) a year prior.

Geographic Breakdown

Geographically, the company remains heavily reliant on its home turf. The Americas segment brought in $1.06 billion, growing 7% and accounting for the vast majority of total revenue. The EMEA region (Europe, Middle East, and Africa) also performed well, matching that 7% growth rate to reach $195 million. The APAC (Asia-Pacific) region, however, remains a challenge, shrinking by 6% to just $39 million.

The Takeaway

Abercrombie & Fitch Co. successfully grew its sales in a competitive environment, proving the strength of the Hollister brand during a critical shopping season. However, the costs associated with generating those sales have risen, squeezing the company's efficiency. As the retailer heads into the all-important holiday quarter, investors will likely be watching to see if ANF can maintain Hollister's momentum while stabilizing margins at Abercrombie.