Abercrombie expects sales to improve in 2017, shares jump

(Reuters) - Teen apparel retailer Abercrombie & Fitch Co ANF.N said it expected its brands to perform better in 2017 and reported the first rise in quarterly comparable sales in a year at its Hollister brand, sending the company's shares up 14 percent.

A person carries a bag from the Abercrombie & Fitch store on Fifth Avenue in Manhattan, New York City, U.S., February 27, 2017. REUTERS/Andrew Kelly

Hollister, the retailer’s California beach-themed brand of surfwear, reported a surprise 1 percent rise in comparable sales for the fourth quarter ended Jan. 28.

Analysts on average were expecting a 0.7 percent decline, according to research firm Consensus Metrix.

Abercrombie and rivals such as American Eagle Outfitters Inc AEO.N and Gap Inc GPS.N have been closing stores and investing in their online businesses as they try to adjust to rapidly changing consumer tastes and battle stiff competition from Inc AMZN.O and fast-fashion retailers such as H&M HMb.ST and Inditex's ITX.MC Zara.

Abercrombie, which has been struggling with falling sales for the past four years, has been remodeling its Hollister stores, hiring top designers and executives to woo back shoppers to the company’s biggest brand.

“A&F is going in the right direction,” said Neil Saunders, managing director of GlobalData Retail.

“As it has shown with Hollister, which is more advanced in its redevelopment program, the reinvention work will ultimately pay dividends.”

Abercrombie said it planned to remodel about 40 Hollister stores in 2017.

The company is also opening seven stores under a new prototype for its A&F brand, which is trying to move away from being logo-centric, with a focus on customers above 18.

Comparable sales at Hollister are expected to either be flat or improve in the year ending January 2018, while they are likely to be better at the Abercrombie brand.

The expansion of its swimwear and re-launched intimate apparel line Gilly Hicks, as well as the addition of more colors and sizes across key apparel are expected to help attract customers.

The company’s overall comparable sales fell 5 percent in the latest quarter, partly due to weak traffic at Abercrombie’s flagship stores and at tourist locations.

The company, which shut 54 stores in 2016 in the United States, said it would close another 60 stores this year.

Net income attributable to Abercrombie & Fitch fell to $48.8 million, or 71 cents per share, in the quarter, from $57.7 million, or 85 cents per share.

Excluding one-time items, the company earned 75 cents per share, in line with analyst’s average estimate, according to Thomson Reuters I/B/E/S.

The retailer’s net sales fell about 7 percent to $1.04 billion, slightly missing the estimate of $1.05 billion.

The company’s shares were up 13.3 percent at $13.25 in late morning trading.

Reporting by Sruthi Ramakrishnan and Gayathree Ganesan in Bengaluru; Editing by Sai Sachin Ravikumar and Sriraj Kalluvila