March 7, 2018 / 2:48 PM / in 3 months

Strong demand for Abercrombie brands boosts holiday quarter sales

(Reuters) - Abercrombie & Fitch Co beat expectations for holiday quarter comparable sales, driven by demand for its Hollister and Abercrombie brands as well as investments in online operations, sending its shares up 14 percent.

FILE PHOTO: 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/File Photo

To combat years of falling sales, Abercrombie ditched its logo-emblazoned, high-priced clothes and added trendier denim and floral prints.

The company and rivals such as Gap Inc have also been shutting stores and pouring more money in building their online operations to better compete with Amazon.com Inc.

As a result, sales at Abercrombie’s direct-to-consumer business rose to about 34 percent of total sales, the highest in more than two-years.

“The DTC investments we’ve made early and continue to build on, are paying off, validated by our customers’ high level of mobile engagement,” Chief Operating Officer Joanne Crevoiserat said on an analyst call.

The Abercrombie brand posted a 5 percent rise in same-store sales in the quarter, its first increase in five years, beating analysts’ average estimate of 2.13 percent, helped by a revamp of its clothing styles and stores.

Gap also reported strong holiday quarter sales last week as shoppers bought more clothing from its major brands, especially Old Navy.

“There’s a little bit of a renaissance in the teen space,” Retail Metrics founder Ken Perkins said.

Same-store sales at Hollister rose, 11 percent, the fifth straight quarter of increase. Analysts had expected a 10.35 percent rise, according to Thomson Reuters I/B/E/S.

“Hollister has really turned the corner and so to have Abercrombie layer on top of that ... is going to make them more profitable,” Perkins said.

The two brands powered a 9 percent increase in total comparable store sales, beating expectations.

Abercrombie also forecast same-store sales for fiscal year 2018 to be up low-single digits percentage. Analysts are expecting an increase of 1.75 percent.

The company also said it expects to close 60 U.S. stores this year, but plans to open 21 full-price stores in fiscal 2018 with half of them in international markets.

Net income attributable to Abercrombie rose 52 percent to $74.2 million in the fourth quarter ended Feb. 3, from $48.8 million, a year earlier.

Excluding items, Abercrombie earned $1.38 per share, and reported a 15 percent rise in revenue to $1.19 billion.

Analysts on average had expected earnings of $1.10 per share and revenue of $1.16 billion in the reported quarter.

The company’s shares were up 14 percent at $24.24, touching a near two-year high at $24.52, in late morning trading.

Reporting by Aishwarya Venugopal and Vibhuti Sharma in Bengaluru; Editing by Sriraj Kalluvila and Saumyadeb Chakrabarty

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