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Abercrombie profit tops view, shares surge
CHICAGO (Reuters) - Teen clothing retailer Abercrombie & Fitch (ANF.N) beat Wall Street profit expectations on Friday and said it is optimistic about international expansion, lifting its shares more than 13 percent.
Abercrombie also said it is reviewing its operating expenses, has already started to cut costs and plans significantly less in capital expenditures this year.
Management is "actively managing expenses, while at the same time protecting the brand for the long term," Credit Suisse analyst Paul Lejuez said in a research note.
Once a high-flyer in teen apparel retail, Abercrombie has seen a protracted sales slump as rivals such as Aeropostale (ARO.N) take market share by cutting prices.
Net profit fell sharply to $68.4 million, or 78 cents per share, in the fourth quarter that ended January 31 from $216.8 million, or $2.40 per share, a year earlier.
Excluding impairment charges and costs tied to a new employment agreement that extends CEO Mike Jeffries' contract until 2014, Abercrombie's profit of $1.10 per share topped analysts' average forecast of $1.01, according to Reuters Estimates.
Sales fell 19 percent to $998 million. Sales at stores open at least a year fell 25 percent.
Abercrombie's strategy of keeping prices higher than competitors to increase its cachet has put off many U.S. shoppers looking for bargains, although the retailer has discounted clearance items.
On Friday, the company stood by its strategy.
"We are not promotional and will not be promotional, and by promotional I mean 50 percent off a category, buy one, get 17 free, or somebody whispering to you about a secret sale; we don't do stuff like that," Jeffries said during a morning conference call.
The company has cut some prices at its Hollister and abercrombie kids chains, but said the changes were not significant.
Abercrombie is "very bullish" on the potential it sees in international markets, while it is "not bullish on U.S. malls at this point," Jeffries said.
The retailer said it is committed to opening some stores, such as its namesake ones in Milan and Tokyo in 2009, but would postpone opening its namesake store in Copenhagen and an abercrombie flagship in New York to 2010.
Jeffries said he sees the opportunity for 30 Hollister stores in the United Kingdom. There are currently three Hollister stores in London.
Abercrombie had warned last month that its fourth-quarter earnings would be significantly below the outlook of $1 to $1.05 per share that it had previously issued.
The company said it expected a difficult selling environment to continue in 2009 and did not issue an earnings outlook for the fiscal year, citing volatile sales levels.
Abercrombie expects capital expenditures of $165 million to $175 million in the fiscal year that began this month, a major portion of which is tied to new stores and remodeling.
The company spent about $370 million on capital expenditures last year.
Its shares were up 13.3 percent at $23.46 on the New York Stock Exchange.
(Additional reporting by Aarthi Sivaraman in New York and Alexandria Sage in San Francisco; Editing by Lisa Von Ahn, Dave Zimmerman)
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