Abercrombie & Fitch Co. (ANF), the teen apparel retailer with more than 1,000 stores, surged the most since its initial public offering after boosting its full-year profit forecast.
The shares jumped 34 percent to $41.92 at the close in New York, the biggest one-day gain since its IPO in September 1996. The New Albany, Ohio-based retailer had dropped 36 percent this year through yesterday, compared with a 9.3 percent increase in the Standard & Poor’s 500 Index.
The company, which also owns the Southern California-style Hollister stores, raised the forecast for the year after exceeding its estimates in the third quarter. Sales in the period ended Oct. 27 rose 9 percent to $1.17 billion, including a 37 percent increase internationally and a 20 percent gain online, making up for flat U.S. sales, according to an investor presentation on its website.
In the first two quarters, “we were on the defense because we had too much inventory and we weren’t flowing newness, so that’s the biggest change,” Chief Executive Officer Michael Jeffries said in an earnings call today. “We’re also working hard to be different by brand.”
Full-year profit will be $2.85 to $3 a share, up from the $2.50 to $2.75 a share predicted in August, Abercrombie said in a statement today. Analysts projected $2.50, the average of 32 estimates compiled by Bloomberg.
“We are encouraged that improvements are being driven by both sales and expense level strategies, and we think further refinements in merchandising and assortment planning and operating expense structure will augment leverage gains,” Stephanie Wissink, an analyst at Minneapolis-based Piper Jaffray Cos. with the equivalent of a buy rating on the shares, wrote in a note today.
Abercrombie was the top performer in the S&P 500 today.
Comparable store sales at Abercrombie fell 3 percent in the period and 6 percent in the past three quarters, according to today’s presentation. Revenue at U.S. stores fell 2.2 percent to $709.4 million in the third quarter, according to the presentation, while increasing 15 percent online.
Abercrombie anticipates a “mid-single digit percentage decrease” in comparable store sales in the fourth quarter with a “slightly higher” gross margin rate relative to the rest of the year, according to today’s statement. The forecast includes the impact of Hurricane Sandy, Chief Financial Officer Jonathan Ramsden said in today’s earnings call.
In August, the retailer reported an 8 percent decline in same-store sales in the six months ended in July, and forecast a 10 percent fall for the second half of the year.
The company’s gross margin for the third-quarter was 62.5 percent, compared with 60.1 percent a year earlier, according to today’s presentation.
Third-quarter net income advanced 40 percent to $71.5 million, or 87 cents a share, from $50.9 million, or 57 cents, a year earlier.
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