US teen apparel retailer Abercrombie & Fitch, which has put itself up for sale, posted a smaller-than-expected drop in comparable-store sales, helped by strong demand for Hollister, its California beach-themed brand of surfwear.
Shares of the company, for which rival American Eagle Outfitters and private equity firm Cerberus Capital Management are reportedly planning to bid, rose 4 per cent before the bell on Thursday.
Abercrombie and other US apparel retailers have been hurt by fierce competition from fast-fashion retailers such as H&M and Inditex's Zara as well as from online retailers such as Amazon. com.
Same-store sales for the company’s Hollister brand, which has remained flat for two years, rose 3 per cent in the first quarter ended April 29th, while analysts polled by research firm Consensus Metrix had expected it to grow a mere 0.8 per cent.
After struggling to turnaround sales as millennials shunned its advertising and large-logo apparel, Abercrombie, in 2014, said it would revamp Hollister as a fast-fashion brand, to compete with rivals such as H&M and Zara.
Sales at established stores fell 3 per cent in the first quarter, but beat the 3.4 per cent decline expected by analysts, according to research firm Consensus Metrix.
The company had reportedly hired investment bank Perella Weinberg Partners to field takeover interest from other retailers earlier in May.
Private equity firm Cerberus Capital and American Eagle are working on a joint bid for Abercrombie, the Wall Street Journal reported on Wednesday.
Abercrombie’s net sales fell 3.6 per cent to $661.1 million (€588.9 million). Analysts on average had expected $651.3 million, according to Thomson Reuters.
Net loss attributable to the company widened to $61.7 million, or 91 cents per share, in the quarter, from $39.6 million, or 59 cents per share, a year earlier.
Excluding charges on taxes and asset impairment, the company lost 71 cents per share, missing the analysts’ average estimate by a cent.