FILE PHOTO: A person walks past an Abercrombie and Fitch store at a shopping compound in Beijing, China April 9, 2025. REUTERS/Tingshu Wang/File Photo

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By Savyata Mishra

(Reuters) -Abercrombie & Fitch raised its annual sales forecast on Wednesday, driven by robust demand for Hollister dresses and denim jeans as shoppers prioritize spending on trendy apparel undeterred by price hikes.

The apparel retailer, whose denim jeans are priced at an average of $100, has driven growth at its eponymous and Hollister brands by targeting affluent female shoppers.

Well-heeled shoppers in the U.S. have so far shown little resistance to price hikes, as indicated by resilient spending on aspirational goods such as Birkenstock sandals and Bugaboo strollers.

"Abercrombie's results show that consumers remain willing to invest in premium apparel, especially when it reflects strong brand equity and trend relevance," Jefferies analyst Corey Tarlowe said.

However, higher tariffs on countries such as Vietnam, Indonesia, Cambodia and India will increase costs by $90 million this year, Abercrombie warned. In May, it had estimated $50 million in tariff expenses after mitigating some impact.

U.S. President Donald Trump's trade policies have also pressured margins of other retailers such as Ralph Lauren and Coach handbag owner Tapestry.

Abercrombie would tightly control inventory levels to cushion the hit from tariffs and support its growth plans, company executives said on a post-earnings conference call.

The company now expects net sales for fiscal year 2025 to grow in the range of 5% to 7%, compared to its prior forecast of a 3% to 6% increase.

Annual net income per share is projected in the range of $10 to $10.50, compared with its earlier forecast between $9.50 and $10.50.

Shares of the company rose about 1.5% in volatile trading as it also topped second-quarter estimates. The stock is down about 33% this year.

Net sales were $1.21 billion for the quarter ended August 2, compared with analysts' average estimate of $1.20 billion, according to data compiled by LSEG.

Its adjusted profit of $2.32 per share beat estimates of $2.30 a share.

(Reporting by Savyata Mishra in Bengaluru; Editing by Leroy Leo)