November 21, 2013 / 1:20 PM / 4 years ago

UPDATE 2-Abercrombie to offer more styles but stick with logo clothing

(Adds CEO comments, analyst comment, background, Aeropostale, updates share price)

By Aditi Shrivastava

Nov 21 (Reuters) - Teen clothing retailer Abercrombie & Fitch Co, struggling to keep up with the fickle tastes of young shoppers, said it will offer more styles faster next year but won’t move away entirely from its “logo-based” apparel.

A&F, whose shares were up 1.5 percent in early trading, reported a third-quarter loss on Thursday as comparable-store sales fell for the seventh straight quarter.

Analysts have said the company’s logo-focused preppy apparel has fallen out of favor with teens who are looking for more fashionable and cheaper alternatives.

But Chief Executive Mike Jeffries said the company’s mission was to make that category “cooler.”

A&F warned of a “significant” erosion in gross margins and a low double-digit percentage fall in comparable sales as it enters the holiday shopping quarter with excess inventory.

Jeffries said he expected to see the benefits of the company’s plan to offer a wider variety of clothing and more frequent changes in stock by next year’s back-to-school season.

So-called “fast fashion” retailers such as H&M and Forever 21 have been taking market share from more traditional teen closing retailers such as A&F that have stuck with more basic styles built around their brand name.

Inventory management, or balancing orders with demand, has been a major concern for A&F, forcing it to offer discounts that have eaten into earnings.

Retailers ranging from department store operator Macy’s Inc to apparel retailers such as Urban Outfitters are offering huge discounts to help shift stock during what is expected to be the toughest holiday shopping season since 2008.

But teen clothing sellers such as A&F and Aeropostale Aeropostale Inc are discounting the most, due in part to high unemployment rates among the young but also because teens are spending more on high-cost items such as mobile phones, gaming consoles and tablets.

Aeropostale shareholder Crescendo Partners on Thursday urged the company to sell itself after three quarters of losses.

“In our opinion, additional steps need to be taken (by A&F), especially in the area of merchandise and design,” said Stifel Research analyst Richard Jaffe, who maintained his hold rating on the stock.

CEO Jeffries has stirred controversy in the past by suggesting the company’s clothes were made for “cool” and “attractive” kids and not for “fat” people. A&F has said it will now offer women’s clothing in larger sizes by next spring.

A&F reported a net loss of $15.6 million, or 20 cents per share, for the third quarter ended Nov. 2 compared with net income of $84.0 million, or $1.02 per share, a year earlier.

Excluding items the company earned 52 cents per share, including a tax benefit of 6 cents per share.

Net sales fell 12 percent to $1.03 billion while total comparable sales, including online sales, fell 14 percent.

Comparable sales fell 13 percent at Abercrombie & Fitch outlets, 4 percent at Abercrombie Kids and 16 percent at the company’s Hollister chain of teen clothing stores.

The company announced the total comparable store sales figures earlier this month.

A&F shares were up 1.6 percent at $35.61 in early morning trading on the New York Stock Exchange on Thursday. (Editing by Joyjeet Das and Ted Kerr)

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