Teen apparel retailer Abercrombie & Fitch Co posted a surprise rise in sales in the holiday-shopping quarter, snapping a streak of more than three years of declines, due to strong demand for its Hollister branded clothing. The retailer's results on Wednesday showed its efforts to revive sales growth by revamping merchandise and improving shoppers' in-store experience were paying off, and sent its shares up nearly 9 percent to $31.96 in premarket trading.
Abercrombie said sales at stores open at least 12 months rose 1 percent in the fourth quarter ended Jan. 30. Analysts on average were expecting a decline of 0.10 percent, according to research firm Consensus Metrix.
"The [results] are a sign that the brand continues to make progress in what remains a challenging market during a particularly difficult period of trading," said Neil Saunders, chief executive of research firm Conlumino.
The retailer has reduced its logo-centric clothing, which had fallen out of fashion, and added trendier new styles in denim and Bohemian-inspired skirts and tops over the past year. It has also remodeled Hollister stores by changing the music, lighting and how it stacks clothes in stores. That helped same-store sales at Hollister increase 4 percent in the quarter, handily beating the 2.20 percent rise analysts were expecting.
Abercrombie said it expected company-wide same-store sales to be flat to slightly positive in fiscal 2016. Analysts on average had expected a rise of 0.8 percent. However, the retailer's executive chairman, Arthur Martinez, said 2016 "is likely to remain a challenging environment", in part due to a strong U.S. dollar. Net income attributable to the company rose 30.1 percent to $57.7 million in the latest fourth quarter. Excluding items, it earned $1.08 per share.
Net sales were $1.11 billion, down 0.6 percent and falling for the twelfth quarter in a row. But the decline has been slowing and sales have now beaten estimates for the third straight quarter.
Teen apparel retailer American Eagle Outfitters also reported growth today. The company announced a 3.2 percent rise in quarterly sales, largely helped by demand for its Aerie brand in the holiday shopping season. The company's shares rose 5.2 percent in extended trading on Wednesday.
American Eagle's results, which closely follow rival Abercrombie & Fitch Co's surprise rise in same-store sales, indicate that teen apparel retailers may be winning back young shoppers who were flocking to fast-fashion companies such as Inditex's Zara and H&M. American Eagle has also benefited from controlling inventories to boost margins and responding faster to changing fashion trends.
The company said comparable sales in the Aerie brand, which sells intimates and personal care products for women, rose 26 percent in the fourth quarter ended Jan. 30, topping the 13.5 percent rise analysts polled by Consensus Metrix had expected. American Eagle's net income rose to $81.7 million, or 42 cents per share, in the quarter, from $61.6 million, or 32 cents per share, a year earlier. The company's net revenue rose to $1.11 billion from $1.07 billion.