The insight: Abercrombie & Fitch is sticking to its lean inventory strategy, even as it expects tariffs to deliver a $50 million hit to its bottom line this year.

Why it matters: Keeping inventory levels low has been a critical factor in Abercrombie’s extraordinary growth over the past few years, enabling it to chase trends while minimizing discounting. But it’s a risky tactic given the company’s reliance on manufacturers in Vietnam, Cambodia, and India—all of which could be subject once again to heavy duties once the current pause on reciprocal tariffs ends on July 9.

However, the alternative could be just as problematic. Rival American Eagle’s attempt to stock up on inventory ahead of tariffs resulted in a $75 million write-down after shoppers showed little interest in its spring-summer collections. With Abercrombie already struggling with carryover inventory from the winter season—and determined to avoid further pileups that reduce its AUR—it’s not surprising the retailer would decide to stick with a strategy that’s worked well for it in the past.

Separating from the pack: Abercrombie is unique among retailers in another way: It raised its full-year sales outlook despite the uncertainty permeating the retail landscape.

• The company now expects sales to increase by 3% to 6%, up from its prior expectations of a 3% to 5% increase. However, most of that growth is expected to come in the first half, driven mainly by outperformance at Hollister.
• While conditions at Abercrombie are more challenging due to tough YoY comps and excess winter inventory, management is confident that its ability to remain flexible and chase goods will drive a recovery in the second half of 2025.

Our take: Abercrombie’s decision to stick to its playbook is notable. So too is its insistence that it will not resort to broad-based price hikes to offset tariffs, and instead will concentrate on delivering clothes and other products that people will want to buy at full price. That strategy is not without its risks—but it could also deliver high rewards by enabling the retailer to steer clear of inventory pileups and heavy promotions.