New York - Abercrombie & Fitch shares jumped the most in three months after the teen-clothing chain posted a surprise profit, fuelling optimism that it can recover from years of slumping sales.
Excluding certain items, earnings amounted to 12 cents a share in the second quarter, the New Albany, Ohio-based company said in a statement on Wednesday. Analysts had estimated a loss of 4 cents on average, according to data compiled by Bloomberg.
Abercrombie has been retooling its business since longtime Chief Executive Officer Michael Jeffries stepped down in December. Though it still doesn’t have a permanent leader, the company has revamped its stores and product line in a bid to reconnect with teen shoppers. That appears to be paying off. Its sales performance was better than predicted last quarter, especially at its Hollister chain.
“We’re still in the early stages of the turnaround of this company, but positive developments such as we reported are reassuring to investors that we know what we’re doing and we’re on a sustainable path,” Executive Chairman Arthur Martinez said in a phone interview. “There’s nothing unimportant in these results.”
The stock rose 9.5 percent to $18.91 in New York, the biggest one-day gain since May 28. The rally followed a 40 percent decline for the shares this year.
No rush
Abercrombie’s comparable-store sales - a closely watched measure of retail performance - still fell year-over-year last quarter, but not as sharply as expected. They declined 4 percent in the period, better than the 6 percent decrease predicted by analysts, according to Consensus Metrix. The company’s Hollister chain fell just 1 percent by that measure. That beat an estimated 4.7 percent drop.
Abercrombie has been searching for a new leader for almost nine months, but it’s not in a rush. The board will appoint a CEO “in due time”, Martinez said on a conference call.
At the company’s flagship brand, the retailer is making adjustments to prices, store aesthetics and product assortment, Abercrombie Brand President Christos Angelides said on the call. While the chain saw improvements in its women’s business last quarter, the men’s side hasn’t improved at the same rate, he said. It’s also lagging behind the Hollister chain, which targets younger shoppers.
“In terms of consumer sentiment, the hill to climb for Abercrombie is a little steeper,” Martinez said in the interview. “That’s what we’re exploring on the position of branding - how do we articulate a persona for the Abercrombie brand that leaves all that baggage behind?”
BLOOMBERG