May 29, 2014 / 11:43 AM / 5 years ago

Revamped women's clothing helps Abercrombie slow sales decline

(Reuters) - Teen apparel retailer Abercrombie & Fitch Co’s quarterly sales fell less than expected for the first time in six quarters as efforts to revitalize its women’s clothing business began to pay off, sending the company’s shares up as much as 7.5 percent.

Abercrombie and its rivals Aeropostale Inc and American Eagle Outfitters Inc have struggled to keep teen shoppers from moving to cheaper and trendier “fast fashion” chains such as Forever 21, Inditex’s Zara and Sweden’s H&M.

After Abercrombie’s logo-focused apparel fell out of fashion, it has tried to woo back its fickle clientele by expanding its merchandise to include larger clothing sizes for women and items such as shoes, and by lowering prices to combat the intense competition.

While Abercrombie’s sales still fell 2 percent in the first quarter ended May 3, that was less than the 5 percent decline Wall Street was expecting. It was also less than the nearly 12 percent declines in the preceding two quarters - a trend Piper Jaffray analyst Stephanie Wissink expects will continue.

Abercrombie also stuck to its full-year earnings forecast, which Wissink said could be conservative given the lift in sales and the fact that merchandise margins were starting to show some points of stability.

Abercrombie’s move to sell a wider variety of women’s clothing helped boost sales in categories such as dresses, denim and outwear in the quarter. Abercrombie also said its knit top business was improving.

“The encouraging thing about the women’s top business is that it is improving with a planned, marked decrease in logo wear,” CEO Mike Jeffries said on a post-earnings call.

Jeffries had come under fire for many quarters of declining same-store sales at the once-edgy retailer. While comparable store sales fell for the ninth straight quarter, the 4 percent decline in the first quarter was lower than in any quarter last fiscal.

Rival American Eagle Outfitters last week reported a 10 percent decline in comparable-store sales.

Abercrombie’s first-quarter sales fell 2 percent to $822.4 million, beating analysts’ average estimate of $798.2 million, according to Thomson Reuters I/B/E/S.

The company’s net loss more than tripled to $23.7 million, or 32 cents per share, due to restructuring charges. Excluding items, Abercrombie’s loss of 17 cents per share was narrower than the 19 cents analysts were expecting.

Abercrombie’s shares were up 4.4 percent at $36.66 in late morning trading on Thursday. The stock had risen about 10 percent this year to Wednesday’s close.

Editing by Savio D'Souza

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