(Reuters) - Shares of Abercrombie & Fitch Co (ANF.N) soared more than 30 percent in premarket trading after the teen clothing retailer reported improved third-quarter profit Wednesday on demand in foreign markets and a full-year forecast that exceeded analysts’ estimates.
Still, the improved performance doesn’t signal the end of Abercrombie’s troubles, analyst Brian Sozzi of NBG Productions said.
“I don’t believe Abercrombie is suddenly the share winner in teen apparel land, and what is being seen today is management of Street expectations and perhaps, top line related leverage from prior flagship store openings,” he said in a note to clients.
Over the past year, sales of Abercrombie & Fitch have dwindled as the chain’s style lost favor in a segment dominated by so-called fast-fashion retailers - rivals with a quicker turnover of inventory and styles such as American Eagle Outfitters (AEO.N) and Gap Inc (GPS.N), or Forever21, which offers affordable clothing for more seasons.
Shares of the company, which hired Goldman Sachs Group Inc (GS.N) in September to help ward off pressure from investors, jumped 31 percent to $40.98 in trading before the bell. Abercrombie & Fitch closed at $31.18 on Tuesday on the New York Stock Exchange.
The retailer expects to make about $2.85-$3.00 a share for the full year. Analysts, on average, were expecting the company to earn $2.48 a share, according to Thomson Reuters I/B/E/S.
The company has moved to curb dwindling sales by increasing sourcing from the United States and Central America, and delaying expansion in troubled European markets.
Same-store sales, or sales at established stores open for at least a year, fell 3 percent in the third quarter, an improvement over the 10 percent drop in the second quarter.
Same-store sales are expected to drop into the mid-single digit percentage in the fourth quarter.
For the third quarter ended October 27, Abercrombie earned $71.5 million, or 87 cents a share, compared with $50.9 million, or 57 cents a share, in the same quarter last year. Analysts were expecting earnings of 59 cents a share.
Sales rose 9 percent to $1.17 billion, led by a 37 percent rise in international markets.
Reporting by Nivedita Bhattacharjee in Chicago; Editing by Bernadette Baum