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Updated from 6:15 p.m. EST

Abercrombie & Fitch

(ANF) - Get Abercrombie & Fitch Company Report

rallied Wednesday as the preppy clothier's cost-cutting fervor impressed investors.

Tuesday evening, the company posted fourth-quarter earnings that beat analysts' estimates, and warned of flat first-half 2002 results. Wednesday morning, its shares rose $1.91, or 8.3%, to $25, on the heels of an upgrade to buy from market perform at Wachovia Securities. Banc of America Montgomery also boosted its earnings estimate for the company while maintaining a buy rating.

For its fourth quarter ended Feb. 2, Abercrombie posted earnings of 78 cents a share, up from 76 cents a year ago and ahead of the 72-cent estimate. Abercrombie told investors Feb. 7 that it expected to beat Wall Street earnings estimates for the fourth quarter as a result of expense and inventory controls.

Fourth-quarter sales rose 6% to $467 million, leaving them just shy of the $471 million Wall Street estimate quoted by Thomson Financial/First Call. Same-store sales for the fourth quarter fell 9%, Abercrombie said.

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Abercrombie's 2002 slide

But Abercrombie, echoing

Wal-Mart's comments Tuesday morning, continues to see a weak economy and a "difficult retail environment" holding down first-half 2002 financial results. Abercrombie said it is "comfortable with EPS estimates that see our first two quarters flat with last year."

Wall Street expects Abercrombie to earn 20 cents a share for its first quarter ending in May and 26 cents for the second quarter ending in August, up from 20 cents and 24 cents in the year-ago period.

On a conference call, Abercrombie said the men's business is still lagging behind the women's, as it is at many of the nation's clothing retailers. In the fourth quarter, comparable-store sales in the men's division fell by double digits percentage-wise, while women's sales were flat.

"The men's business continues to be our toughestbusiness," said Mike Jeffries, Abercrombie's chairman and CEO.

For fiscal 2002 ended this month, same-store sales declined 9%, prompting analysts to press company executives when they might turn around. Abercrombie remained tight-lipped, however.

"I feel very good about our spring assortment," Jeffries said."But it's tough out there. It's a very competitive environment."