Abercrombie and Fitch shares climbed 31.5 percent Wednesday afternoon to an eighteen-month high after the retailer disclosed that a $100 million tariff refund lifted second-quarter operating income to $253 million from $207 million a year earlier.
The refund math
The windfall stems from the U.S. Court of International Trade ruling that companies which paid levies under the invalidated "Liberation Day" tariffs are entitled to repayment. Abercrombie recorded $90 million in tariff expenses last year, a hit that shaved 1.7 percentage points off its full-year operating margin outlook and amounted to roughly 16 percent of 2025 net income. Getting $100 million back in a single quarter more than reverses that drag.
Earnings versus expectations
Reported earnings per share came in at $4.17, more than double the $1.99 FactSet consensus. Net sales rose 5 percent to $1.3 billion. The company also lifted its full-year operating margin guidance by at least 2.5 percentage points, now targeting a 14.5 percent to 15 percent range.
The broader refund wave
Abercrombie is not alone. Walmart, Target, Home Depot and TJX collectively reported over $5 billion in refunds last week, with Walmart alone accounting for $2.9 billion. Most retailers say they will reinvest the proceeds into their businesses rather than lower consumer prices, though Walmart and Costco have signaled they will pass savings through.
What comes next
The retailer expects another $20 million in refunds during the third quarter. Whether the margin improvement holds once the one-time refunds stop is the question investors will be asking next quarter.