For years, the sales growth for Abercrombie & Fitch (NYSE: ANF) got stuck and its price got fallen from 50 to lowest 20 in the past three years. For last year, this company stopped its sexy branding strategy to lower expense. For the last quarter, thanks to strength at its Hollister brand, sales at existing stores rose 1% in the quarter ending January 30, beating analyst estimates of a 0.1% decline.
Abercrombie also reported a surge in profits as it dialed back the number of promotions it ran over the holidays. Investors reacted positively to the strong results and sent shares up 7% to $31.52 in pre-market trading.
During the quarter, Abercrombie’s total sales rose 2%, excluding currency headwinds. However once the strong dollar was factored in, total sales fell 1% to $1.11 billion, which was essentially in line with Wall Street estimates.
Overall profit rose to $58.9 million, or 85 cents per share, from $44.4 million, or 63 cents per share, a year ago. Excluding items, the retailer earned $1.08 per share, topping Wall Street analyst estimates of 99 cents per share.
The teen retailer has struggled to compete against fast-fashion competitors like H&M and online stores. It’s also been forced to discount heavily in the highly promotional retail world in which it operates.
In an effort to revive sales, Abercrombie has cut back on its logoed apparel, remodeled stores and shifted away from its famous sexy advertising. It’s also closing stores one after another (about 60 per year) so it can throw more of its weight behind e-commerce.
The Hollister brand continues to outperform the namesake Abercrombie brand and saw same-store sales rise 4% in the quarter. Meanwhile, Abercrombie & Fitch same-store sales fell 2%.
Abercrombie gave a cautious outlook for the year ahead, projecting flat or slightly positive same-store sales. ”As we look ahead to 2016, it is likely to remain a challenging environment, but we believe we are on the right track,” said Martinez. Shares of Abercrombie, which rose 7% in pre-market trading, have risen 15% over the last three months.