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UPDATE 2-Abercrombie signals better year as Hollister sales improve
May 28, 2015 / 12:41 PM / 3 years ago

UPDATE 2-Abercrombie signals better year as Hollister sales improve

* Comparable sales fall less than expected

* Q1 loss nearly triples, sales fall 14 pct

* Expects comp sales, margins to improve

* No turnaround “overnight”, says FBR analyst

* Shares rise nearly 12 pct to $21.90 (Adds exec and analyst comments and background, update shares)

By Ramkumar Iyer

May 28 (Reuters) - Abercrombie & Fitch Co said its business was showing signs of recovery as sales of its Hollister-branded clothes improved, suggesting that recent efforts to revitalize the teen apparel retailer may be starting to pay off.

The company’s shares rose nearly 12 percent on Thursday after it reported comparable sales fell less than expected in the first quarter ended May 2, as revamped Hollister stores and lower prices drove traffic.

Abercrombie, once popular for the preppy clothing it sold under its namesake brand, has been struggling to revive flagging sales as customers have tired of its logo-centric apparel.

Such apparel has been replaced by trendier clothing with new styles in denim and floral prints over the past months.

The company has cut prices in some international markets for its Hollister line, which offers South California-inspired t-shirts, skirts, tops and hoodies.

Abercrombie has changed the music, lighting and how it stacks clothes in several Hollister stores, moves that have resulted in slightly higher sales, Executive Chairman Arthur Martinez said on a post-earnings call.

The company said it expects comparable sales to improve through the year and forecast full-year gross margins to be flat with or slightly higher than a year earlier, helped by lower costs.

Still, there’s a long way to go.

For one, company-wide same-store sales still fell 8 percent in the quarter, though less than the 8.7 percent analysts on average had expected, according to Consensus Metrix.

“There’s really a lot of things they’re working on right now, but (a turnaround) is not going to really happen overnight,” FBR Capital Markets analyst Susan Anderson said.

“But I think we’ll continue to see incremental improvement throughout the year.”

Comparable sales at Hollister fell 6 percent, less than the 8.9 percent decline analysts had expected.

Net sales declined 14 percent to $709.4 million and net loss nearly tripled to $63.2 million, or 91 cents per share.

Abercrombie, which gets nearly 37 percent of its revenue from international markets, said it expects a stronger dollar to continue eating into revenue this year.

The dollar, which had risen 1.81 percent against a basket of currencies from February to April, lowered Abercrombie’s sales by about 6 percent in the latest quarter.

The company’s shares rose to a session high of $21.90. Up to Wednesday’s close, the stock has nearly halved over the past 12 months. (Editing by Savio D‘Souza and Sayantani Ghosh)

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