Tariffs won't be the Grinch that stole Abercrombie & Fitch's (ANF) profits.

At least not yet.

Abercrombie & Fitch delivered another big earnings beat on Tuesday as its namesake division continued to resonate with young adults. The upside surprise came from the value-focused Hollister division — a business that is only now turning the corner amid new product introductions such as college-themed apparel.

“Hollister is back,” Abercrombie & Fitch CEO Fran Horowitz told Yahoo Finance.

Abercrombie & Fitch stock fell about 5% in midday trading as sales results at the Abercrombie division only matched elevated analyst estimates.

Still, Citi analyst Paul Lejuez called the quarter "strong" in a note to clients.

The Street may also have been concerned that the company's inventory growth outpaced sales growth going into a holiday shopping season where consumers continue to spend cautiously.

Horowitz said the holiday season has started "strong."

Fresh potential tariffs on China that President-elect Trump floated late Monday also appeared to be weighing on investor sentiment. Abercrombie operates stores in China and sources apparel from the country.

Trump proposed an additional 10% tariff on all products from China, contending the country was shipping illegal drugs to the US.

CEOs such as Brooks Running' Dan Sheridan said tariffs could hammer the apparel industry on Yahoo Finance's Opening Bid podcast. Former longtime Gap and J Crew CEO Mickey Drexler echoed that sentiment on Opening Bid as well.

Price increases could hurt consumer demand. Consumers would pay $13.9 billion to $24 billion more for apparel in the worst-case scenario for tariffs, the National Retail Federation estimated.

Read more: How do tariffs work, and who really pays them?

"When we understand truly what's happening, we will have to make some adjustments, and we will adjust accordingly," Horowitz said. "It's exactly what we did in 2018 when we had the same challenge. In 2024 we will not be receiving more than 5% or 6% of our US receipts from China. We're taking a look at it country by country, but the agility that we've built into our supply chain is really what's going to help us manage through this."

Earnings analysis

• Net sales: +14% year over year to $1.2 billion, vs. estimates for $1.2 billion

• Comparable sales: +16% vs. +11% estimate

  • Abercrombie & Fitch division sales: $629.8 million, +15% year on year, vs. $629.5 million estimate

  • Hollister division sales: $579.1 million, +14% year on year, vs. $552.6 million estimate

• Gross profit margin: 65.1% compared to 64.9% a year ago, vs. estimates for 65%

• Adjusted diluted EPS: +32% year over year to $2.50, vs. $2.37 estimate