Hopes that Abercrombie & Fitch could be turning a corner after one of its toughest years helped shares in the US retailer stage their biggest one-day rally in over 12 months.
The stock, which was down nearly half over the past 12 months before Thursday, surged 14 per cent after the once-fashionable teen apparel retailer said it expected like-for-likes sales to improve this year.
Abercrombie has struggled as teens migrate from the logo-heavy trends of the past decade to designs from the likes of H&M, Zara and Uniqlo. Although Abercrombie is in the midst of overhauling its merchandise portfolio, the company’s efforts have been hampered by an industry-wide decline in foot traffic.
The retailer’s woes were underscored by its bruising first-quarter results, which saw losses grow to $63.2m, or 91 cents a share, from a loss of $23.7m, or 32 cents a share, in the same period a year ago. This followed a bigger than expected 14 per cent slump in sales.
However, investors appeared to take heart from the company’s comments that it was seeing “sequential improvements” in some parts of the business, notably with its Hollister brand, and that overall like-for-like sales improved in May.
“While our turnround won’t be accomplished overnight, we believe the changes we are making will reinvigorate our iconic brands and lead to meaningful and lasting improvement,” said Arthur Martinez, Abercrombie’s interim chief executive after Mike Jeffries’ abrupt departure in December.
The comments had a mixed effect on other teen apparel stocks.
Shares in rival American Eagle Outfitters fell 0.2 per cent to $16.12, although the stock was still up more than 16 per cent this year as its business has proved more resilient than its peers.
Elsewhere, Ralph Lauren, the company best known for its preppy apparel, rose 3 per cent to $131.86 after analysts at Goldman Sachs upgraded the stock to “buy” from “neutral” and raised their price target to $154 from $138.
“US apparel has been tough but we think RL is better positioned with an estimated 70 per cent of its business in men’s, kids, home and accessories away from the women’s category, which has been troubled,” the analysts said.
Broadcom, whose shares surged by more than a fifth on Wednesday after reports that rival Avago Technologies was closing in on a deal to buy it, dropped 2 per cent to $56.12 after the terms of the $37bn deal were officially unveiled on Thursday.
The S&P 500 fell 0.1 per cent to 2,120.80 while the Dow Jones Industrial Average fell 0.2 per cent to 18,126.12. The Nasdaq Composite, after closing at a record high on Wednesday, retreated 0.2 per cent to 5,097.98
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