Abercrombie & Fitch delivered its 12th consecutive quarter of growth in Q3 fiscal 2025, with net sales up 7% to a record $1.3 billion and comparable sales up 3%, both at the high end of outlook, and EPS of $2.36 (down from $2.50) above expectations. Brand performance diverged sharply: Hollister surged with net sales up 16% and comps up 15% on unit growth and higher AUR, while Abercrombie brands declined 2% (comps -7%) on lower AUR but showed the committed sequential improvement, guiding to approximately flat in Q4. Regionally, the Americas and EMEA each grew net sales 7% (led by U.K. strength, offset by soft Germany), while APAC fell 6% (comps -12%). Margins compressed as operating margin dropped 280 bps to 12% and gross margin was 62.5%, driven primarily by ~210 bps of tariff expense and higher marketing, with the company returning $100 million via buybacks in the quarter ($350 million year-to-date, 9% of shares). Management narrowed full-year sales guidance to the upper end of 6%-7% growth and reiterated 13%-13.5% operating margin and $10.20-$10.50 EPS, striking a confident, on-offense tone into holiday despite a ~360 bps Q4 tariff headwind it expects to mitigate through diversified sourcing and targeted spring price increases in 2026.
Thank you. Good morning and welcome to our third 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 third quarter earnings release, which is available on our website at corporate.abercrombie.com under the Investors 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 mentioned today. These factors and uncertainties are discussed in our reports and filings with the Securities and Exchange Commission.
In addition, we will be referring to certain non-GAAP financial measures during the call. Additional details and reconciliations of GAAP to adjusted non-GAAP financial measures are included in the release and in the investor presentation issued earlier this morning. With that, I will turn the call over to Fran.
Thanks, Mo, and thanks, everyone, for joining as we head into the important holiday season. I am happy to report our 12th consecutive quarter of growth, with sales up 7% to a record of $1.3 billion. We again delivered on the goals we outlined for the quarter, with net sales and operating margin both at the high end of our outlook, earnings per share above our expectations, and inventory levels aligned with trend. Along with these strong financial results, we repurchased $100 million worth of shares in the quarter, bringing our total to $350 million, or 9% of shares outstanding as of the beginning of the year. Our team continues to stay close to our customers while reading and reacting to the current environment. In the quarter, we made further progress on key brand, regional, and foundational investments.
Based on our third quarter momentum and our fourth quarter outlook, we are narrowing our full-year sales outlook towards the top end of the range we provided in August, targeting a strong finish to 2025 on top of a record 2024. Financially, in addition to record net sales, we delivered a gross margin of 62.5% and a 12% operating margin for the quarter, both of which include an adverse tariff impact of around 210 basis points. We exceeded our outlook range on earnings per share, delivering $2.36 for the third quarter. On the regions, we saw continued growth in the Americas with net sales up 7% on balanced traffic gains across channels. In EMEA, total sales increased 7%, with comparable sales higher by 2%.
Similar to last quarter, strong sales performance in the U.K., our largest country in the region, continued to be fueled by localized marketing, inventory distortions, and strategic partnerships. Strength in the U.K. was partially offset by softness in Germany and the remainder of European markets. In APAC, net sales were down 6%, with comparable sales down 12%. Across regions, we remain excited about the significant long-term global growth opportunity for our brands through a blend of go-to-market strategies, including owned and operated, franchise, wholesale, and licensing. Turning to the brands, in line with our expectations, we made sequential improvement in Abercrombie brands. Net sales were down 2%, on comparable sales down 7%. We continued to see positive cross-channel traffic to the brand, and we managed inventory tightly, enabling improved AUR trends compared to the first half.
The sequential improvement was led by women's, where we had a good seasonal transition to cold-weather categories across tops, bottoms, and outerwear. In Abercrombie, we continue to remain active in marketing, building on early fall denim and NFL campaigns with our recently announced collaboration with luxury retailer Kimo Sabe. Putting these two brands together was a great way to connect with new and existing customers, offering authentically crafted leather apparel and accessories highlighting the Western trend. Abercrombie brands has inventory in the right place and a strong marketing plan heading into holiday. We've opened 30 new stores through the third quarter, aiming for a total of 36 this year. We remain focused on bringing the brand back to growth by diligently executing the playbook that has delivered a double-digit CAGR on sales from 2019 on strong double-digit AUR improvement over that time.
This holiday, you'll see a lot of what Abercrombie is known for: fashion, comfort, and authenticity, and you'll continue to see it expressed through newness across categories. With this combination of investment across product, voice, and experience, we are aiming for Abercrombie brands to be approximately flat in the fourth quarter on net sales against a record in Q4 last year. We're excited to see that milestone within reach. In Hollister, we saw exceptional growth trends continue with 16% net sales growth in the third quarter. Comparable sales were up 15% on continued strong cross-channel traffic. Both men's and women's contributed to growth in the quarter, and we saw balance across categories. Consistent with our read and react model, we've been keeping inventory tight while continuing to flow in newness, allowing for AUR improvement on lower promotions.
Coming off a very strong back-to-school season, I was proud of the team's transition to fall and into holiday. Speaking of holiday, Hollister has some exciting campaigns and collaborations planned that will highlight some must-haves for the season. We kicked off a couple of weeks ago with six college athletes co-designing special items in our Collegiate Collection for Football's Rivalry Week. You might have seen yesterday's announcement with Taco Bell, where the brands collaborated on 90s and Y2K styles across graphics and fleece. We are just getting started, and importantly, our team has been reading and reacting and has the right product to support sales throughout the season. We're also enhancing the Hollister brand with investments in physical retail. We are on track to open 25 new stores this year while refreshing more than 35. The theme across our brand portfolio and company is consistent. We remain on offense.
From both a brand and regional perspective, we are investing in marketing, stores, and talent to support sustainable long-term growth. We also continue to make opportunistic investments in digital technology and our infrastructure to improve the agility and speed needed to support our growing global business. These tech investments have the power to enhance the entire customer journey, especially when paired with AI. We recently deployed AI agents in customer service to improve the experience while driving scale and efficiency. We are very excited about a new partnership we are kicking off this week with PayPal and Symbio, one of our technology partners in marketplace sales, that will enable agentic commerce and AI answer engines like Perplexity, where customers can seamlessly complete transactions directly within their AI conversation without even leaving the chat.
As our business continues to evolve, we're making future-focused investments to deliver for customers and strengthen our operating model. For us, that's really the story of 2025. More than three quarters in, I am proud of how the team has worked through this year responding to the dynamic tariff environment and evolving with our customers. We are fully prepared for the holiday season, having used these past months and quarters to test and learn and build confidence in our assortment and brand positioning. We've also continued to keep inventory tight with the goal of reducing promotions and clearance selling to mitigate some portion of the tariff cost. With our holiday plans in place, we expect to deliver top-tier profitability and earnings per share, reflecting the consistency of our model. With that, I'll hand it over to Robert.
Thanks, Fran, and good morning, everyone. Recapping Q3, we delivered record net sales of $1.3 billion, up 7% to last year on a reported basis, at the high end of the range we provided in August. Comparable sales for the quarter were up 3%, and we saw a benefit of approximately 50 basis points from foreign currency. By region, net sales increased 7% in the Americas, 7% in EMEA, partially offset by a 6% decline in APAC. On a comparable sales basis, Americas was up 4%, EMEA was up 2%, and APAC was down 12%. Across regions, the spread from net sales to comparable sales was driven by net new store openings and third-party channel performance. EMEA also benefited from favorable foreign currency. On the brands, Abercrombie brands' net sales declined 2%, with comparable sales down 7%.
Consistent with our third quarter outlook, the sales decline was primarily due to lower AUR, but the AUR decline was less than the first half of the year. Hollister brands' net sales grew 16% on comparable sales growth of 15%, with both unit growth and AUR improvement from lower promotions. The comp to net sales spread for Abercrombie brands in the quarter was driven by third-party channel performance along with net store openings. I'll cover the rest of our results on an adjusted non-GAAP basis. Operating margin of 12% of sales was at the top end of the outlook range we provided in August, delivering operating income of $155 million compared to $175 million last year. Adjusted EBITDA margin for the quarter was 15% of sales on adjusted EBITDA of $194 million compared to $219 million last year.
The 280 basis point decline in operating margin from Q3 2024 was driven primarily by 210 basis points of tariff expense included in cost of sales. In addition, as we forecasted in August, third-quarter marketing was up 100 basis points from the prior year. This was partially offset by leverage in general and administrative expense on lower payroll and incentive compensation. The tax rate for the quarter was below our outlook at 29%, driven by outperformance to expectations in EMEA. Net income per diluted share was above our outlook at $2.36 compared to $2.50 last year. Moving to the balance sheet, we exited the quarter with cash and cash equivalents of $606 million and liquidity of approximately $1.06 billion. We also ended the quarter with marketable securities of approximately $25 million.
For the quarter, we repurchased $100 million worth of shares, ending the quarter with $950 million remaining on our current share repurchase authorization. Year to date, we've repurchased $350 million in shares, totaling 9% of shares outstanding at the beginning of the year. We ended the third quarter in a clean current inventory position with costs up 5% and units up around 1%, and have seen freight and other unit cost mix normalize. Shifting to the outlook, we entered the fourth quarter with momentum, and we are narrowing to the upper end of the full-year sales expectations we provided in August. We continue to reflect tariffs and mitigation consistent with our second quarter call commentary, and the team continues to find cost efficiencies through vendor discussions as we plan 2026.
For the full year, we now expect net sales growth to be in the range of 6%-7% from $4.95 billion in 2024. We've narrowed the range to reflect third-quarter performance and for expected fourth-quarter sales. We currently anticipate 60 basis points of favorable foreign currency in the outlook. We continue to expect full-year GAAP operating margin in the range of 13%-13.5%. As a reminder, this range includes the impact of the $38.6 million benefit from litigation settlement, or around 70 basis points of sales. Also, the assumed tariffs included in the operating margin carry a cost impact of around $90 million for 2025, or 170 basis points of sales. We're forecasting a tax rate around 30%. For earnings per share, we expect diluted weighted average shares of around 48 million, which incorporates the anticipated impact of 2025 share repurchases.
Combined with the tax rate, we expect net income per diluted share in the range of $10.20-$10.50. For clarity, the $38.6 million benefit included in our outlook carries a favorable impact of $0.59 per share. For capital allocation, we continue to expect capital expenditures of approximately $225 million. On stores, we continue to expect to deliver around 100 new experiences, including 60 new stores and 40 right sizes or remodels. We also expect to be net store openers, with our 60 new stores outpacing around 20 anticipated closures. At the current sales and operating margin outlook, we are targeting around $450 million in share repurchases for the year, subject to business performance, share price, and market conditions. For the fourth quarter of 2025, we expect net sales to be up 4%-6% to Q4 2024 level of $1.6 billion. We expect operating margin to be around 14%.
We continue to expect lower cost of goods sold from freight at around 150 basis points of sales for the quarter. We also continue to expect $60 million of tariff impact, net of mitigation efforts, or around 360 basis points. Operating expense will be around last year as a percentage of sales. We see opportunities to incrementally invest in marketing, but this will be largely offset by leverage in other areas. We expect a Q4 tax rate around 30%. We expect net income per diluted share in the range of $3.40-$3.70, with diluted weighted average shares expected to be around 47 million, including the anticipated impact of around $100 million in share repurchases for the quarter. To close things out, we entered the fourth quarter ready to compete, with inventory aligned with trend and the right composition.
We have great momentum, having delivered against expectations these past three quarters on both top and bottom lines. Our brands are in great shape, with Abercrombie brands making sequential improvement and Hollister brands taking share with impressive growth. We remain on the offense, investing in marketing through key brand collaborations and partnerships, and with store expansion and digital enhancements that enable us to win in the long term. We look forward to a great holiday selling season, and we thank our teams around the globe for putting us in reach of record sales for fiscal 2025. With that, operator, we are ready for questions.