Good day, and welcome to the Abercrombie & Fitch Fourth quarter fiscal year 2025 earnings call. Today's conference is being recorded. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. I would like now to turn the conference over to Mohit Gupta, Vice President of Investor Relations. Please go ahead. Thank you. Good morning and welcome to our fourth quarter 2025 earnings call. Joining me today on the call are Fran Horowitz, Chief Executive Officer, Scott Lipesky, Chief Operating Officer, and Robert Ball, Chief Financial Officer. Earlier this morning, we issued our fourth quarter earnings release, which is available on our website at corporate.abercrombie.com under the Investor section. Also available on our website is an investor presentation. Please keep in mind that we will make certain forward-looking statements on the call. These statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions we mention today. These factors and uncertainties are discussed in our reports and filings with the Securities and Exchange Commission. In addition, we'll be referring to certain non-GAAP financial measures during the call. Additional details and reconciliations from GAAP to adjusted non-GAAP financial measures are included in the release and the investor presentation issued earlier this morning. With that, I will turn the call over to Fran. Thanks, Mo. Good morning, and thanks for joining us today. Before we begin, I do want to acknowledge the situation in the Middle East with associates and stores in the region. Our focus continues to be on their safety and well-being. Returning to our results, I'm happy to report the fourth quarter finished on a higher end of the ranges provided in our early January update. Once again, we accomplished exactly what we set out to do. Holiday product acceptance drove record fourth quarter net sales with balanced growth across regions, brands, and channels, along with growth in earnings per share. As a company, our goal is to set clear commitments and then deliver on them, leveraging our strong foundation and operating model. We achieved another year of consistent results for 2025, with record sales, growth across regions and channels, and leading double-digit operating margins. Substantial operating cash flows also enabled strong returns of cash to shareholders via share repurchases. Looking forward to 2026, we expect to continue on a path of global growth and add to our track record of consistent, strong profitability. For the fourth quarter, we delivered net sales growth of 5%, which was balanced across regions, brands, and channels. It was particularly great to see both brands deliver record fourth quarter net sales. At Abercrombie brands, we achieved our goal of returning the brand to growth with 4% net sales growth on top of a record last year. Hollister brand continues to deliver for the teen customer, producing an eleventh consecutive quarter of net sales growth at up 6%. With balanced top line growth and continued financial discipline, we delivered an operating margin of 14.1%, including 360 basis points of tariff pressure. I have to recognize the team's incredible efforts here to meaningfully reduce the impact of these costs. On the bottom line, earnings per share of $3.68 improved 3% on last year's record quarterly results, demonstrating our ability to create value through a balanced combination of global growth, operational excellence, and disciplined capital allocation. Recapping the year, fiscal 2025 net sales were a record $5.3 billion, surpassing $5 billion for the first time in company history. We grew over 6%, exceeding our beginning of the year growth projections provided last March. For the third consecutive year, our customers responded to the team's compelling product and engaging marketing, delivering net sales growth across regions, led by the Americas, up 7%. Sales also grew across channels for the third year in a row. We continue to see great traffic on digital and in-store. Importantly, we continue to see our highest value customers shopping across channels. We delivered an operating margin of 13.3% or 12.5%, adjusting for a one-time litigation benefit, a double-digit result for the third straight year, despite 170 basis points of tariff pressure. On the bottom line, we delivered full-year earnings per share of $10.46, our second consecutive year of EPS over $10, by far the strongest back-to-back performance in our 30-year history as a public company. We also remain committed to shareholder return. With $619 million of operating cash flow after investing back into the business, we returned $450 million to shareholders via share repurchases, totaling 11% of shares outstanding at the beginning of 2025. The team worked hard all year, staying fully committed to our customer and our playbooks. I'm proud of the consistency of these results as a clear demonstration of our leading operating model and culture of financial discipline. From a regional perspective, 2025 was another year of progress. In the Americas, we grew net sales 7% on strong cross-channel traffic, driven by compelling marketing across brands and continued store expansion. In EMEA, net sales growth of 6% was driven by double-digit growth in the U.K., along with good growth in the Middle East. APAC grew 5% this year, led by solid performance across our digital platforms. Moving on to brand performance. I'll start with Hollister brands, where we set records across the business. I am so proud of what the team has achieved with the global teen consumer. With two consecutive years of 15% growth driven by increases in unit selling and AUR. On product, we delivered growth across genders and key categories, showing improved balance on both. We saw great response from a variety of exciting marketing campaigns supporting key product drops like our collegiate collection, the grad shop, and engaging collaboration with Taco Bell. We added millions of new customers in 2025, and importantly, we also saw improved retention. Simply put, Hollister's growth and scale stand out in the teen space, and we are excited about what is ahead. At Abercrombie Brands, after a challenging start to 2025, up against a near perfect 2024, the team rallied and committed to getting the brand back to growth for by the end of the year. We did just that, achieving a return to net sales growth for the fourth quarter. As we've shared throughout the year, we believe Abercrombie remains a leader for our target customer. We continue to see strong traffic along with growth in customer counts and good retention trends. Reflecting our confidence, we invested across stores, digital, and marketing to bring the brand to life in new ways throughout 2025. Most recently, the brand hosted several amazing activations leading up to the Super Bowl. As an official fashion partner of the NFL, the first of its kind, we had players and their families, several celebrities and league figures, as well as our target customers at a series of events. It was incredible to see Abercrombie at the intersection of fashion, sports, and culture. A great finish to our 2025 season and the perfect kickoff to 2026. Our ongoing investments across channels continued to pay off in 2025. We saw growth in the stores and digital direct channels for a third consecutive year, and both remain nicely profitable. In digital, we continue to see strong performance, finishing the year with that channel delivering 44% of total sales. We also surpassed 1 billion visits across our platforms for the first time, demonstrating the scale and direct reach we have with our customers. Stores matter to them too. We were net openers for a fourth consecutive year, leveraging our digital demand to help us determine where we can better serve Hollister and Abercrombie customers with a physical location. 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. Inventories remain tightly controlled and we finished the year with units up in the mid-single digits. I can't overemphasize how hard our team works at this, coordinating product across functions, geographies, channels, and partners, all while tariffs were changing the global supply chain landscape week to week. Looking forward, we are very excited for 2026. We entered the year with a strong foundation, which includes two globally relevant brands, a proven operating model, and a strong balance sheet, all managed by a world-class team. For the year, our goals for the company are as follows. First, to grow sales across brands with continued investments in owned and operated stores and digital businesses, while adding growth from partnerships and new product categories, like our recent launch of baby and toddler in abercrombie kids. Second, to stabilize growth margins as we progress through the year by mitigating as much of the tariff impact as possible. Third, to continue to invest in tools and technologies to improve our speed and efficiency across the product and customer journeys. A good example of this is the go-live of our new merchandising ERP system this month. We're also moving quickly to leverage AI to benefit the customer, and we're modernizing systems to help us. Finally, to maintain our strong profitability by delivering another year of double-digit operating margins and expansion earnings per share. We also expect to continue our track record of returning excess cash to shareholders through share repurchases. After closing another record year in 2025, we are off and running on these growth objectives for 2026. We have the team, the experience, and the track record of delivering for our customers and our shareholders. Many thanks to the entire organization that makes this happen every single day. The work continues and always forward. With that, I'll hand it over to Robert. Thanks, Fran. Good morning, everyone. I'd like to add my thanks to our associates around the world for staying agile and executing consistently throughout 2025. We're really proud of what we've achieved, and we have so much further to go. Starting with Q4 results, we delivered net sales of $1.67 billion, up 5% to last year on a reported basis. Comparable sales for the quarter were up 1%, with approximately 100 basis points of benefit from foreign currency. By region, fourth quarter net sales increased 5% in the Americas, 8% in EMEA, and 9% in APAC. On a comparable sales basis, Americas was up 2%, EMEA was down 3%, and APAC was approximately flat. Within the brands, both Abercrombie and Hollister delivered record fourth quarter net sales. Abercrombie Brands returned to net sales growth up 4% over last year on a comparable sales decline of 1%. Hollister brands net sales grew 6% on comparable sales growth of 3%. Across the business, we saw mid-single-digit AUR growth and low single-digit unit growth on increased traffic. Across regions and brands, the spread from net sales to comparable sales was driven by net new store openings, third-party channel performance, and favorable foreign currency. Operating margin was 14.1% of sales, coming in at the high end of the outlook we provided in early January, delivering operating income of $236 million compared to $256 million last year. Adjusted EBITDA margin for the quarter was 16.6% of sales on Adjusted EBITDA of $276 million compared to $293 million last year. The 210 basis point year-over-year decline in operating margin was driven primarily by 360 basis points of tariff expense, which was partially offset in gross margin by 140 basis points of freight cost favorability, both included in cost of sales. Total operating expenses were in line with last year as a percentage of sales, with investments in stores offset by leverage in general and administrative expenses. Marketing was in line with last year as a percentage of sales. The tax rate for the fourth quarter was 28%. Net income per diluted share was above our outlook at $3.68 compared to $3.57 last year. We ended the quarter with inventory at cost up 5% with approximately 3 points related to tariffs. Inventory units were also up 5%, including approximately 3 points related to strategically building receipts ahead of our planned ERP implementation this month. I'll cover the rest of our results on an adjusted non-GAAP basis. For the year, we delivered net sales growth of 6%, reaching a record $5.27 billion. Growth was balanced across regions and channels, supported by mid-single-digit unit growth and low single-digit AUR growth on increased traffic. On a regional basis, net sales were up 7% in the Americas, 6% in EMEA, and 5% in APAC. Across the business, we saw 70 basis points of favorable impact from foreign currency. Comparable sales for the year were up 3%, led by the Americas at 4%, with EMEA approximately flat and a 3% decline in APAC. For EMEA and APAC, the favorable spread between net sales and comparable sales was driven by net store openings and third-party channel performance. EMEA also benefited from favorable foreign currency. By brand, Hollister Brands delivered net sales growth of 15% and comparable sales growth of 13%. At Abercrombie Brands, net sales declined 1% on comparable sales decline of 7%, with the 6-point favorable spread between net sales and comparable sales driven primarily by store openings and third-party channel volume. Operating income for the year was $661 million, an $80 million decline from 2024's record result, driven by approximately $90 million in tariff expense included in cost of sales. Operating margin was 12.5% of sales, a 250 basis point decline from 2024, also driven by tariff expense, totaling around 170 basis points of sales, with additional cost of sales increase driven by product mix. Operating expense as a percentage of sales leveraged slightly, with investments in marketing and store occupancy more than offset by leverage on general and administrative expenses. Adjusted EBITDA margin for 2025 was 15.5% of sales on Adjusted EBITDA of $816 million compared to $895 million last year. The effective tax rate for the year was 29%. Net income per diluted share was $9.86 compared to $10.69 in 2024. Moving to the balance sheet, we exited the year with cash and cash equivalents of $760 million and liquidity of approximately $1.2 billion. We also ended the year with current investments of $25 million. For the year, we drove operating cash flow of $619 million and free cash flow of $378 million. For the year, we used $450 million of cash to repurchase a total of 5.4 million shares of stock or 11% of shares outstanding at the beginning of the year. From a direct channel perspective, both stores and digital grew nicely for the third straight year. For the year, 44% of total sales were digital, with Hollister around 31% and Abercrombie around 59%. On the store fleet, we delivered 120 new store experiences, including 62 new stores, 11 right sizes, and 47 remodels. We also closed 22 stores, finishing as a net store opener for the fourth consecutive year. We ended the year with 829 stores, 523 Hollister, and 306 A&F across 5.3 million gross sq ft, growing square footage by 4% to last year. Both the stores and the digital business remain highly profitable, with four wall store operating margins around 30% in aggregate. Shifting to our 2026 outlook. For the full year, we expect net sales growth in the range of 3%-5% from $5.27 billion in 2025, with full-year net sales growth expected across brands. We are investing for continued growth in the Americas and EMEA from both owned and operated stores and digital channels, as well as from wholesale and licensing partnerships. In APAC, while our business has delivered sales growth in recent years, we do not believe returns have fully reflected the level of investment. Consistent with our commitment to financial discipline, we are undertaking a review of potential strategic alternatives for the region, including the evaluation of options such as partnerships, franchising, and licensing with a goal of enhanced profitability, optimized capital deployment, and a maintained focus on shareholder value creation. We currently anticipate 40 basis points of favorable impact to net sales from foreign currency. We have assumed modest AUR improvement for the full year as we've taken some revised ticket pricing across brands, largely focused on fashion elements of the assortment. We expect full year operating margin in the range of 12%-12.5%. At the midpoint, the year-over-year change reflects approximately 70 basis points of incremental tariff expense or around $40 million incrementally from 2025, net of product mitigation. Our outlook assumes the 15% global tariffs announced by the administration are effective beginning February 24th, and are assumed to remain in effect throughout the end of the fiscal year. No tariff refunds or recoveries are assumed for fiscal 2026. We also expect the first half will be favorably impacted by lower year-over-year freight costs normalizing in the back half of the year. We're forecasting a tax rate of around 29%. For earnings per share, we expect diluted weighted average shares of around 45 million, which incorporates the impact of 2025 share repurchases as well as anticipated 2026 share repurchases. Combined with the tax rate, we expect earnings per share in the range of $10.20-$11. For capital allocation, we expect capital expenditures in the range of $200 million-$225 million. On stores, we expect to deliver around 125 new experiences, including 55 new stores and 70 right sizes or remodels. We also expect to be net store openers with our 55 new stores outpacing around 25 anticipated closures. We do expect net store openings to be relatively balanced across brands, but tilted to the Americas. The company has a strong balance sheet and cash flows, we continue to expect share repurchases will be the primary use of free cash flow. For 2026, we are targeting share repurchases of around $450 million. Turning to the first quarter of 2026, we will go live with a new merchandising ERP this month, which will temporarily impact operations for approximately two weeks. During this time, we will limit inventory receipts and movement across the business, creating a temporary headwind of approximately 1 to 2 percentage points of growth for the quarter. We also have some incremental implementation costs in the quarter. In aggregate, we expect the ERP project will have over 100 basis points of unfavorable operating margin impact, which is factored into our Q1 outlook. Including those impacts, we expect net sales growth in the range of 1%-3% from the Q1 2025 level of $1.1 billion, with net sales growth expected across brands. We also expect slight AUR expansion for the quarter. On the evolving Middle East conflict, we currently anticipate a slight sales headwind and will continue to actively monitor the situation alongside our in-market franchise and joint venture partner with safety as our highest priority. We expect operating margin to be around 7%. In addition to over 100 basis points of impact from the ERP implementation, we expect tariffs will drive approximately 290 basis points of decline or $30 million net of product mitigation. This will be partially offset by an expected freight tailwind of approximately 160 basis points for the quarter. Marketing investments will also be up around 50 basis points as a% of sales, with the remainder of expense in line with Q1 last year in total. We expect a Q1 tax rate around 26%. We expect earnings per share in the range of $1.20-$1.30, with diluted weighted average shares expected to be around 46 million, including the anticipated impact of at least $100 million in share repurchases for the quarter. In closing, 2026 is underway and we're executing from a position of strength, supported by a proven model, strong cash flows, and disciplined capital allocation. Our outlook is informed by a multi-year track record of delivering on our commitments and reflects our confidence in executing in 2026 and continuing to build towards the long-term opportunities ahead. With that operator, we are ready for questions. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We ask that you please limit to one question and one follow-up. The first question comes from Dana Telsey with Telsey Advisory Group. Your line is open. Hi. Good morning, everyone, certainly nice to see the progress. Fran, after the building blocks that you put in place for 2024, for 2025, the collaborations that you did with the businesses and frankly returning to growth in the Abercrombie brand and certainly saw what you saw with the Super Bowl and being the fashion partner, how do you think of the merchandising drivers of 2026 and what you're most excited about to drive growth? Rob, as you think about the building blocks for margins in 2026, how do you think of AUR growth relative to price increases from tariffs and the impact of tariffs on margins going forward? Thank you. Hey, Dana. Good morning. Excited about what we just delivered for both the fourth quarter as well as the year. Most excited that that was delivered with balance across regions, brands, and channels. What's driving our confidence, you know, as we head into 2026 is that it's the first time the company's ever done more than $5 billion in revenue. It's proof that our model is working. We delivered all of that, to your point, the last three years, actually of double-digit margins, operating margins. Our playbook is working. Our model of chasing, you know, we didn't start the year with an expectation of Hollister to drive 15%, but with that model, we were able to chase millions of units to hit another 15% for Hollister. I'm excited about the opportunities ahead, and I'm really looking forward to 2026. Yeah, Dana. Excuse me. On the tariff impact here, our outlook does reflect that 15% being kind of held all the way throughout the balance of the year, obviously Section 122 here in the front half of the year, and then we're making the assumption of something pretty substantially similar to that carries us through the back half of the year. How that kind of cadences out, Q1, we talked about this 290 basis point of impact on operating margins. That will be fully incremental year-over-year. We'll start to lap small amounts of tariffs in Q2, really towards the back end of Q2. We talked about $5 million of tariff impact in Q2 of 2025. We'll start to lap a little bit of that, but again, largely incremental in Q2, before kind of neutralizing in Q3 and then flipping to a bit of a tailwind for us for Q4. That's kind of the cadence throughout the year. Total impact, you know, incremental impact of about $40 million here for tariffs, on a year-over-year basis. That's roughly 70 basis points. You know, feel good about the mitigation strategies that we put in place here, as it relates to country of origin changes, supplier negotiations, product costing. Then, to your last point around pricing, we did take that pricing on spring products, you know, starting kind of late Q4. That'll ramp as we move through Q1. Really only expecting, some slight AUR improvement here in Q1, and then kind of that'll build throughout the balance of the year. Give us some modest AUR growth on the full year. We feel good about the mitigation strategies we put in place. you know, we're tracking to another year of double-digit profitability, so excited to take that into 2026. Thank you. Thank you. The next question is gonna come from Corey Tarlowe with Jefferies. Your line is open. Great. Thanks, and good morning, everybody. I wanted to ask first on Hollister, how you think about the sort of the right growth algorithm, if you will, for that segment, areas of success from Q4 and then areas of opportunity in 2026. Then I have a follow-up. Okay. Hey, Corey. Good morning. Yeah, super excited. Big shout out to the Hollister team. I mean, congrats to them on the best year ever, the 11th consecutive quarter of growth. And what's driving that is really being dialed into that team consumer. You know, for holiday specifically, we saw winners in categories like fleece and graphics and outerwear. We've invested nicely into that business. We opened lots of new stores this year, refurbished a bunch of stores, spent money on marketing. You know, our Taco Bell collaboration on Cyber Monday was a terrific success. I'm excited about the team staying dialed into that customer, staying close to that customer. Spring, we're already seeing some nice response from the consumer, so we're excited to see another year of growth. That's great. Just more for Scott and Robert. There have been periods throughout, I guess, the last five-plus years where Abercrombie has invested in ERP systems, and you haven't called out impacts. What's different about this implementation specifically? What does it allow you to do going forward? How should we be thinking about, again, that impact? Is it acute or will there be any longer-lasting impacts from it? Thanks so much. Yeah. Great, Corey. Great question, Corey. As you, as you noted, this has been a multi-year undertaking for us and, you know, it's great to have go live in sight here. The system that we're replacing was originally built and released about 15 years ago, and it was really architected for a very different business than what we're running today. This new ERP system allows us to support both the owned and operated omni business that we have, as well as, you know, the expectations of growth that we have across channels and categories in a more efficient way. In terms of what you're seeing here in Q1 and the reason we haven't called out any sales impact in the past is really it's been building, right? This has been building the system, getting ready for this go live. What you're seeing here in Q1, you know, we've been running parallel with this non-production instance for quite a while now. We've completed all the testing, final development, and now we're ready to go live. That's what's coming up here in the next days and weeks. You know, we feel like we've done the right work to ensure that we've got the units in the stores to support the sales during this transition. The risk that we're calling out here in the outlook is primarily related to some temporary interruptions in third party and some product interruptions in Chase over the next couple of weeks. You know, in the end, it's all about making us faster as we think about new growth opportunities. We're really excited to get this new system in place, and we feel like any sort of disruptions kinda contains to this couple of week period here, middle of Q1, and we'll be in good shape as we head into Q2. Okay. Great. Thanks so much, and best of luck. Thank you. Our next question will come from Matthew Boss with JP Morgan. Your line's open. Great. Thanks. Fran, on your target for sales growth at both brands this year, how are you managing the intersection between Abercrombie's return to growth and the moderation at Hollister relative to last year? What do you see as normalized growth for the two concepts? Hey, Matt. Good morning. I mean, our goal is obviously to grow both brands each year. Mid-single digits, would be a definition of success for us. We're excited to see our model working. I mean, to come out of fourth quarter where we grew the business again on top of a record and actually having another record year on top of 2024 is certainly proof that our operating model is working. I'm excited that, you're already seeing confidence in the consumer about some of our, you know, the increases in prices that, Robert talked about a little while ago. Those are ramping up, you know, in our assortment, but the acceptance of spring has been good so far. Excited. You know, I think Q4, what it defines, honestly, Matt, is a balanced performance, which is growth across brands, regions, and channels, and that is definitely our objective in 2026. Great. Then maybe a follow-up for Robert. Could you just break apart the drivers by brand that supports the embedded revenue improvement in the back half of the year? In the back half of the year. In terms of sales, Matt, is that what you're looking at? Yeah, top line improvement. Well, first quarter relative to the end of the year. Yeah. You know, again, if you think about where we came out of Q4, you know, around that +5%, and again, to Fran's point, really balanced across brands, regions, channels, you know, that's kind of what we're carrying into 2026. The big difference in what you're seeing in kind of that step down from Q4 into Q1 with that 1%-3% guide is really just that ERP impact that we're talking about. It's a couple of points here. Otherwise, it's a pretty consistent build as we kinda think about the full year 2026. You know, that's how we're running this business. You know, we're setting these clear expectations. We're gonna control what we can control, and we've got the operating model that allows us to chase into revenue as we see that those trends develop. Feel like we're in a really good place, driving growth on growth, and excited to continue that trend here into 2026 in Q1. Yeah, Matt. It's, Scott. Just wanna add towards the end there. As we think about store growth, you know, as Robert noted, we're net store growers here for the fourth year in a row. We'll do that again in 2026. That store growth really ramps up towards the second half. That's a nice fuel to the fire there as we get into the back half of the year. Great color. Best of luck. Thank you. Thank you. The next question will come from Paul Lejuez with Citi. Your line's open. Hey, thanks, guys. Robert, just a clarification on the ERP system impact. Is that something that we are going to see throughout the entire quarter, or is that still in front of us? Maybe, maybe if you can talk about what you're running, quarter to date versus what you expect the next two months to be. Just wanna understand the cadence of that impact. That's just the first question. Yeah. I'd say cadence is relatively consistent. Again, you know, great end to fiscal 2025 with Q4, carrying that into Q1. The ERP timing is really kind of a two-week period. We're kind of right at the start of it here with the go live. It's really contained to that couple of weeks. You know, we've gotten the inventory to our stores to support the Easter peak and those spring break timelines. We feel good about, you know, providing and supporting our stores through there. It's really just a function of this third party, this third party impact here over the course of the next two weeks. Is the right way to think about it that you're running up, let's say, 3% - 5% outside of that two-week period, and that two-week period's gotta be, you know, down significantly to have a 100 to 200 basis point impact on the whole quarter. Is that the right way to think about it? Yeah. I don't know that it's down significantly. It actually is more of a, because of the way the third party flows through, it's really more of a comp to non-comp, compression that you'll see here over the course of the next couple of weeks. Okay. Got it. Can you just give us an update on your sourcing base, how you've made changes, where you sit as we look out to F-2026, just so we can monitor if there are any changes in tariffs by country that we might be able to keep tabs on that? Yeah. 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. Approach isn't changing, Paul. You know, we're always evolving this network to make sure that we can service our brands, help with speed, optimize costs. You know, to your point, the tariffs have clearly introduced some complexity to the supply chain, but, you know, our position here has been pretty consistent and, you know, changes here take time, and you obviously wanna get them right, and maintain quality levels. We're focused on building the right partnerships for the longer term. I think as it relates to some of the more near term news in the Middle East, you know, we do have some sourcing operations there in the region. Haven't experienced any disruptions that would have any sort of meaningful impact to the receipt plans here that underpin our outlook. You know, we'll keep monitoring that and we'll keep agile with our sourcing base in total. Got it. Last one, just on the APAC strategic review. Just what prompted that, when should we expect to hear something from you on the outcome of that review? I'll jump in on this one. You know, we have just finished our third year of growth in that region, and we really do believe in a long-term opportunity there. I'll tell you, it's just a matter of assessing our go-to-market strategy within that region. We currently go to market several different ways there, and it's our responsibility to make sure that we are doing that in the, you know, the most proper way for our shareholders. That's what the announcement was about. Any timing on that front? Early days, I would say. You know, the process is just getting started, so, you know, we'll provide updates as we can go forward here as appropriate. Thank you. The next question will come from Marni Shapiro with The Retail Tracker. Your line's open. Hey, guys. I'm curious if you can give us a little bit of an update on some of your licensing efforts, particularly in kids and what that looks like. Also on international, you've had some wholesale efforts. I know, I think you're on ASOS, for example. I'm curious if your go-to-market in, you know, maybe in EMEA and APAC would include more wholesale opportunities like that to sort of build your brand regionally alongside your own efforts. Hey, Marni. Good morning. Hey. I'll kick that one off. Yes, to your point, we've launched a global licensing opportunity this year with our kids brand, and we were very pleased with the results. In fact, we think it's actually created a halo for many people who didn't even know, many consumers that didn't know we carry a kids brand. Mm-hmm. We saw some nice growth in both our owned and operated as well as for our licensed partner. Mm-hmm. We recently launched baby and toddler, which is also very exciting, so we can now capture that customer from age zero, you know, and carry them all the way through their for lifetime value. Regarding your second question, I would say we are entertaining, you know, all concepts, you know, licensing, wholesaling, franchising. It's what we're doing as we keep talking about, you know, diversifying our operating model. All of those are opportunities. Yeah. Marni, as you know, the Europe retail business is very different than here in the United States. Mm-hmm. All of those different opportunities are available to us. We have, you know, done a few of them in the past, mainly the digital players that you called out. There are opportunities in the future in each country to be in department stores, run wholesale businesses, potential concessions way down the line. We're looking at all of that as we think about how we go to market in Europe. Yeah. If you think about it's actually a very exciting time for us. We're getting lots of reach outs, you know, the health and strength of both of our brands. You know, there's a lot of interest out there, so more to come on that. Fantastic. Fantastic. Could I just ask you one follow-up on the tariffs? Once we get to sort of the back half of the year and we anniversary all the noise from 2025, and I guess we're more in a steady state as you think forward into, say, 2027 even after 2028, should you be able to rebuild product margins or is this kind of the new normal for you guys and for the world? I mean, I think we'll see. We have a fantastic sourcing network. We've got a great sourcing team. We've been able to maintain these double-digit operating margins despite all of these different headwinds that we've faced, whether that be, you know, supply chain disruptions, input cost inflation across, you know, all of operating expenses and now tariffs. You know, we're working hard. You know, we feel like as long as we put great product out there, connect with our customers, continue to give them a great experience, we've got an opportunity to grow AURs and continue to grow this business and provide a really healthy operating margin. You know, the goal would be obviously to try and offset as much of it as possible longer term. You know, that's a process, and that's what we're kind of working towards here in 2026 with some modest AUR growth, and we'll see how all that goes. Great. Thank you, guys. Thank you. The next question will come from Mauricio Serna with UBS. Your line's open. Great. Good morning. Thanks for taking my question. First, I just wanted to ask, I mean, have you seen so far in terms of consumers' reaction to your ticket increases? Just wanted also to make sure I understood, like, I guess by quarter to date, it sounds that the growth has continued to be consistent versus what you were seeing in Q4. Just wanted to get that clarification. Thank you. Sure. Hey, good morning, Mauricio. First on the ticket prices. We mentioned during our last call that our strategy was to start to see some of these ticket increases for our spring product. As a reminder, we deliver spring around December week four, January week one, and it was going to be very judicious in things, in categories like fashion, for example. We're holding our commitment to our consumer. We did not raise prices in key categories like denim and opening price point T-shirts. We are ramping up. You know, it's a portion of our inventory today. The initial response has been good. We're gonna continue with this strategy, and we're gonna continue to test and learn as we, you know, head through 2026. Yeah. On your, on your quarter to date trends here, Mauricio, obviously very encouraged here coming off of the record fouth quarter with like, with balanced performance across brands and regions. You know, off to a good start here across both brands and regions for the first quarter. End of January and the start of February was a little bit choppy with, you know, the winter storms that we saw in the U.S. As we've seen things pick up here once we've kinda gotten out of that disruption period. Most of the volume for the quarter is still ahead of us and, you know, we're expecting growth in Q1 across brands. Again, the only other piece of disruption would be this ERP implementation that we've got going live here in the next couple of weeks. That'll provide a little bit of a one-time headwind for us. By and large, happy with where we are and excited about how the quarter started. Got it. Just a couple of follow-ups on the Q1 guide. On the, you know, on the freight, you called out the tailwind for the quarter. Is that based on contracted rates, and does that remain a tailwind for the year, or is that like Q1 peak? The other point on SG&A, you know, excluding the marketing deleverage, should it be, you know, in line with last year in terms of like dollars or percentage of sales? Just trying to get that point of clarification. Yeah. I'll give you some of the, some of the building blocks here for Q1. Tier, you called it out. We've got this 290 basis points of tariff headwind that's all incremental to last year. We do have offsetting tailwinds here. We've got freight. That's about 160 basis points of tailwind. you know, that has to do with how we've shipped product and, you know, our contract rates are in place. That's a yes on that answer. We do have some slight AUR improvements as well that'll help offset some of that tariff headwind. Then we've got this 100 basis points of headwind from the ERP go live this month, on the expense, you know, really kind of flowing through on the expense side. You called out marketing, you know, it's about a 50 basis point headwind for us in Q1. That's really just timing on the year. Marketing will be around flattish to last year as a percentage of sales. Then the rest of the expense base should be largely in line with last year's Q1 as a percentage of sales. Thank you. The next question comes from Jon Keypour with Goldman Sachs. Your line is open. Hi, everybody. Good morning. Thanks for the question. Just one more thing on the, on the Q1 gross margin. Last year you guys were lapping carryover inventory drag. It sounds like there won't be any benefit from lapping that. Just wondering how that factors in. As a follow-on, what does that sort of imply about your promotional levels going into 1Q? I guess if you could give a forward-looking statement about where you think promo may or may not be going for the rest of the year. Thank you. Yeah, Jon. You're right. We've talked about this lapping of carryover. That's really a 2024 Q1 dynamic. Q1 of 2025, it was kind of normal. That, that's the more normal base. As you think about where we are coming into 2026, nothing that's like a major mover up or down related to carryover levels or anything like that. In terms of promos for Q1, we feel great about where our inventory sits coming into the quarter. Again, once you pull out the kind of front loading of the inventory that we had to execute here for the ERP, we're up 2% on units. That's a great place to be for us. Both brands are really in chase position now. That obviously gives us the best opportunity to kind of grow the AURs here. From a promo standpoint, we feel good about it, you know, all baked into that slight AUR improvement that we're expecting here for the first quarter. You know, we're in a good position to kind of eat that up and get units flowing and inch that AUR up as we move through the quarter. Great. Then just one more follow-up, if I can. Can you guys bracket out I guess the difference in your expectations between, for the full year, between the low end and the high end of the guide? What has to happen to hit the low end? What are you guys baking into to hit the high end? I mean, at the end of the day, Jon, it's all gonna be about product execution, right? We got to put the right product out there, which, you know, we're off to a great start. We feel good about our assortments here in the first quarter. We got to keep doing it and keep executing as we move throughout the balance of the year. You know, we got to make sure that our marketing is resonating. You know, we've consistently driven positive traffic to these brands. We've got millions of customers coming into these brands, and we got to keep that going here. You know, we'll do that with, you know, consistent marketing spend here. We got to provide a great experience in our stores. You know, all of those things, kind of that 3-5 range, it's all just ranges of outcomes in terms of how we're executing here as we move throughout the year. You know, the exciting thing, though, Jon, is that the operating model that we've created and our ability to chase and stay very agile is key to winning for us. The example, you know, with Hollister last year, we certainly didn't set out expecting to pick up 15%, but our ability to chase millions of units and respond to the customer in real time has enabled us to do that. We're approaching this year the same way with the expectation for both brands, obviously, to grow in 2026. Thanks very much. Good luck. Thank you. Thanks, Jon. The next question comes from Rick Patel with Raymond James. Your line is open. Thanks. Good morning. Looking for more color on the building blocks of growth at A&F. Nice to see the expectation for growth. Do you anticipate growth in every quarter? How do we think about the timeline for a return to positive comps? Hey, Rick. Good morning. Yes, excited. You know, the team was hard at work last year. Excited to see that the commitment that we made to returning to growth for the fourth quarter came to be. As a reminder, you know, being down one in the full year top line was up against our best year ever in 2024. It just proved that the brand is healthy. We're gonna continue to invest in stores and in marketing. Some of the strength that we saw in the fourth quarter were key categories, you know, fleece, outerwear, YPB, and we're seeing nice acceptance already for spring. Our expectation is to continue to grow throughout 2026. Just to follow up on inventory, you know, appreciate that you're in chase mode, but how do we think about how you're planning units, as we think about the price changes that are happening and the potential for demand elasticity? Yep. Thanks, Rick. Units in control, nice, clean, up 5% on the prints. Again, up 2% once you exclude that ERP. You know how we operate here. We'll keep units tight and aligned with our forward growth expectations for the brands. You know, we're in good shape here leaving 2025 and heading into 2026. You know, we'll continue to flex that muscle and make sure that we're ready to chase across both of the brands. Thanks very much. Thank you. The next question will come from Janine Stichter with BTIG. Your line is open. Hi, good morning. On the product execution, can you speak to what you've been seeing on conversion, particularly at the Abercrombie brand? I think it was down a bit in 2025, but you did see some improvement as the year went on. What did you see in Q4 into Q1, and then maybe some comments on Hollister conversion as well. Thank you. Yeah. I would say it's more of the same, Janine. You know, we were making progress. The teams leaned in on the A&F side, stayed focused on that consumer, executed against key learnings all the way throughout the year. You know, and at the same time, again, going back to kind of Rick's point here, you know, we kept units in control all the way through, and that allowed us to kinda chase through. That drove improvements in conversion as we moved throughout the year, and we kinda saw more of the same headed into Q4. You know, similar story there with Hollister. You know, conversion been a nice... It's been something that's kinda built as we move throughout the year. Reflects the confidence that we have in the assortments that we're putting out there for our consumers, and we're kind of looking to do more of the same here as we move into 2026. Okay, great. Maybe just a follow-up to Marni's question. You know, it's been a while since you issued a long range margin target. A lot's changed, 12%-12.5% this year. Is that kind of the right level for the business? If we were to see upside to that, excluding changes to tariffs, where would that come from? Yeah, great question. Not gonna provide guidance beyond 2026 today. I think we can talk through some of the underpinnings of the margin constructs that we're talking about, which I think addresses both yours and Marni's questions. I think it's important for us to anchor ourselves that over the past few years, this operating model has delivered double-digit operating margins across all different kinds of environments. The last three years, you know, we've gone through freight changes, we've had inflation, you know, input costs from a product standpoint have fluctuated all over the board and obviously tariffs here for the last bit. You know, as you think about what underpins this business, it's highly cash generative. We've got highly profitable stores and digital businesses, and we're building capabilities in third party, to really accelerate that growth in more of a capital light way. You know, our balance sheet's in great shape and allows us to kind of fund into all of these things and invest in these brands and still return, you know, hundreds of million dollars to our shareholders through share repurchases, which I think is kind of in our track record. You know, we've delivered over $1.2 billion back to shareholders through cash since 2021 here through share repurchases. You know, we're looking to do more of the same here. All of that really gives us a lot of confidence as it relates to the durability of this model. While I'm not gonna sit here and extend any sort of guidance beyond 2026 today, we do think that the fundamentals of this business are incredibly strong, and they position us well to maintain these healthy earnings growth as we continue to build here in the long term. Perfect. Thanks for the color. Thank you. I show no further questions in the queue at this time. I would now like to turn the call back over to Fran for closing remarks. I wanna thank everyone for joining the call today, and we look forward to updating you all on our progress soon. This concludes today's conference call. Thank you for participating, and you may now disconnect.