How Abercrombie & Fitch used data and AI to drive its turnaround

What role did data and analytics play in the turnaround?

In fiscal 2025, the year that ended 31 January 2026, Abercrombie & Fitch Co. reported net sales of $5.27 billion, up 6%, with operating income of $699 million and a 13.3% GAAP operating margin. The company attributed this performance to what management calls the Always Forward Plan, anchored on strategic growth principles to execute focused growth plans, accelerate an enterprise-wide digital revolution, and operate with financial discipline.

All this data allows A&F to better know its customers and personalize unique journeys for them. The organized and centralized data foundation, as Desai calls it, will also allow the retailer to unlock the value of AI technology including personalized recommendations, demand forecasting in stores based on weather and zip code, and a new AI stylist feature on the app. The AI stylist launched last year and is a different way for customers to find a product based on questions and prompts rather than keywords.

Management hired significant technology talent to support the transformation. We've hired north of 125 people in various digital and technology roles like product managers, data scientists, engineers. These are just kind of capabilities that really didn't exist with a lot of depth inside the company.

What specific AI applications did the company implement?

Abercrombie & Fitch deployed AI capabilities across merchandising, planning, and customer engagement. And then finally, with traditional AI, we've also really been thinking about customer lifetime value for customers we have, but using that to then create what we call a predictive customer lifetime value. We're able to look at historical data and say, 'OK, we've acquired a new customer. What do we predict the lifetime value of this customer will be?'

In planning, the company worked with technology partners to improve forecast accuracy. [AI offers planning teams] data consolidation and data clean up, said James Theuerkauf, CEO and co-founder, Syrup Tech, which supports Abercrombie & Fitch Co.'s AI efforts related to planning, among other major retailers and brands. It also improves forecast specificity and forecast granularity, with the ability to go down to the style, color, size and location level.

With more than 700 stores to plan for, gathering and parsing data in quick time is invaluable for Abercrombie & Fitch Co. We opened 60 new experiences last year and expect to continue to be a net store opener again in 2024, and AI is a way that we can further understand those new experiences, said Kozar.

How did the Read and React inventory model work?

The Read and React model became central to the company's merchandising strategy. Our Read & React inventory model was critical to our success in 2024. We chased millions of units, enabling us to align our inventory receipts and ownership with our customers' needs and preferences. Read & React supports our business in many ways and is a core principle in how we run our merchandising, planning, sourcing, supply chain, and marketing functions.

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. Initial buys are deliberately small. Sell-through is read early. Winners are reordered on compressed lead times rather than replaced next season.

The model required a diversified sourcing footprint. Obviously we've talked a lot about our sourcing footprint over the course of the last year or so. Really proud of that diversified network that we have in place, and it's taken us years to build. We currently source from over 16 different countries. That's been obviously a core enabler for us and our read and react model here.

What technology infrastructure changes supported the turnaround?

The company undertook a multiyear digital transformation. And the strategy, the digital revolution strategy itself is really focused on three core pillars in itself. One is modernizing our core platforms , moving into the cloud and really kind of upgrading and modernizing our core technology because, you know, we can't deliver a best-in-class customer experience if we're operating on a brittle, shaky foundation. Moving a lot of our technology into the cloud and all those things are really important, including unifying our data and really having a centralized repository of all of our data so that we can leverage a lot of the new technologies that are obviously, you know, out right now.

As part of these efforts, we began a multi-year process to upgrade our merchandising ERP system and to implement a new human capital management system. In March 2026, we went live with a new merchandising ERP system. The transition to the new system temporarily impacted operations, including limiting inventory receipts and movement across the business, which is expected to unfavorably affect net sales during the first quarter of Fiscal 2026. We also expect to incur additional implementation-related costs, which are expected to unfavorably impact our operating margin during the first quarter of Fiscal 2026.

RFID technology was deployed to improve inventory visibility. Following a successful 15-store pilot, the specialty apparel retailer began deploying the RFID-equipped Nedap iD Cloud Store solution in June 2025, with full implementation scheduled to be completed later in December. Inventory visibility is crucial to serving our customers seamlessly, both digitally and in-store, said Lauren Morr, senior VP of digital operations at Abercrombie & Fitch Co. The partnership enables us to optimize our operations with increased inventory accuracy and visibility.

What were the financial results?

Fourth quarter net sales rose 5% to a record $1.67 billion with balanced growth across regions, brands, and channels, and both Abercrombie and Hollister delivered record fourth-quarter net sales. Full-year fiscal 2025 net sales reached a record $5.27 billion, up over 6% and surpassing $5 billion for the first time in company history while exceeding the growth projections given at the start of the year.

The company delivered double-digit operating margins for the third straight year (12.5% adjusted for the full year) and full-year EPS of $10.46, its second consecutive year of EPS above $10 despite significant tariff pressure. Abercrombie returned $450 million of cash to shareholders through repurchases of 5.4 million shares, equal to 11% of shares outstanding at the beginning of 2025, supported by $619 million of operating cash flow.

Digital remained a significant channel. Performance attribution was balanced across all regions and channels, with digital representing 44% of total sales and physical stores serving as critical hubs for customer engagement. Abercrombie Brands target millennials aged 23-40+, with 60% of sales coming through digital channels.

What did management say about margins and profitability?

The company achieved industry-leading margins through operational discipline. The primary positive is the impressive financial turnaround with industry-leading margins (61% gross, 15.8% operating) and attractive valuation (9.1x P/E).

For fiscal 2026, management provided guidance reflecting tariff pressures. Net sales growth | FY2026 | 3% to 5% growth from $5.27 billion, expected across both brands, with ~40 bps favorable FX | Operating margin | FY2026 | 12% to 12.5%, reflecting ~70 bps of incremental tariff expense (~$40 million) at the midpoint net of product mitigation | Diluted EPS | FY2026 | $10.20 to $11.00

We remain on track for another year of significant progress, consistently delivering on our goals with expected record net sales and growth of at least 6%. We also expect top-tier profitability again this year, with leading operating margins among scaled peers, while addressing tariffs and increasing our investments for long-term success.