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Abercrombie & Fitch Is Skinned

The company badly misses earnings estimates.
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Abercrombie & Fitch

(ANF) - Get Abercrombie & Fitch Co. Class A Report

reported a 34% jump in second-quarter earnings and cranked up its outlook for the year on strong sales, but its results fell short of Wall Street's expectations.

The retailer earned $57.4 million, or 63 cents a share, for the quarter, up from $42.9 million, or 44 cents a share, for the same quarter last year. Wall Street analysts were expecting earnings of 69 cents a share, according to consensus estimates reported by Thomson First Call.

Shares of Abercrombie were selling off in after-hours trading, down $4.42, or 7.2% to $56.58. That drop came on top of a 3.6% decline during regular trading hours, amid pessimism about the retail sector.

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Despite the disappointment, Abercrombie raised its earnings guidance for 2005 to a range from $3.10 to $3.30 a share. Previously, it was projecting a range from $2.80 to $3 a share. It expects annual sales of around $2.7 billion.

"We continue to emphasize the aspirational character of our brands by increasing the quality of our product and enhancing the environment, presentation and customer experience in our stores," the company said. "This has enabled us to attain significant same-store sales increases at the same time that we have eliminated sales promotions and realized double-digit increases in average unit prices in Abercrombie & Fitch."

For the second quarter, the company posted net sales up 42% to $571.6 million on same-store sales, or sales at stores open at least a year, that increased 30%. Its top line also benefited from 84 new Hollister stores, compared with last year's second quarter, and a 97% increase in total denim sales.

Its gross margin rate for the quarter was 68.2%, up from 65.3% in the first quarter, and 66.4% for all of last year.

The company increased its quarterly dividend to 17.5 cents a share, and its board authorized the repurchase of an additional six million shares.

In the second half of the year, it plans to open nine new Abercrombie & Fitch stores, four abercrombie stores, 39 new Hollister stores, and four RUEHL stores.