Hollister Turnaround Finally Paying Off

NEW YORK, United States — Abercrombie & Fitch Co's Hollister posted its first quarterly comparable sales rise in a year, suggesting the US teen apparel retailer's efforts to turn around its biggest brand were paying off.

Abercrombie's shares rose 7 percent to $12.50 in premarket trading on Thursday.

The company has been remodelling Hollister stores, hiring top designers and executives to help it keep up with the latest in teen fashion to woo back shoppers lost to online retailers as well as "fast fashion" brands such as Inditex's Zara.

Abercrombie on Thursday also forecast overall comparable sales to improve in the year ending January 2018, with Hollister expected to maintain or improve sales and the Abercrombie brand expected to improve.

Hollister's collections in the holiday quarter looked on-trend and attractive, Stifel, Nicolaus & Co analyst Richard Jaffe wrote in a pre-earnings client note.

Hollister, which makes up about 57 percent of Abercrombie's net sales, reported a surprise 1 percent rise in comparable sales, compared with the 0.7 percent decline analysts polled by research firm Consensus Metrix had expected.

However, weak traffic at Abercrombie's flagship and tourist locations drove a decline in overall comparable sales, which fell 5 percent in the fourth quarter ended Jan. 28.

The company also said it closed 54 stores in 2016, mainly in the United States, and that it would shutter 60 stores this year.

Net income attributable to Abercrombie & Fitch fell to $48.8 million, or 71 cents per share, in the fourth quarter, from $57.7 million, or 85 cents per share.

Excluding one-time items, the company earned 75 cents per share, in line with analyst's average estimate, according to Thomson Reuters I/B/E/S.

The retailer's net sales fell about 7 percent to $1.04 billion, slightly missing analysts' average expectation of $1.05 billion.

By Sruthi Ramakrishnan and Gayathree Ganesan; editor: Sai Sachin Ravikumar.