First-quarter per-share earnings at Abercrombie & Fitch ( ANF) grew 13% on strong sales and improving margins, the apparel chain reported on Tuesday. In its quarter ended May 4, Abercrombie earned $25.6 million, or 26 cents a share. That was up from the year-ago period, when the retailer from New Albany, Ohio, earned $23.3 million, or 23 cents a share. Total sales at the company jumped 10.8% year over year to $346.7 million. Although the company's sales fell short of analysts' expectations, the company met Wall Street's earnings projections. Analysts were expecting the company to earn 26 cents a share on $355.55 million in revenue, according to Thomson First Call. The company had previously said it expected to earn 25 cents a share in the quarter. Despite meeting expectations in the first quarter, Abercrombie warned analysts that it might not meet their targets or its prior guidance for the current quarter. The company now expects to earn between 30 cents and 34 cents a share in its second quarter. Previously, the company said it had expected to earn 34 cents in the current quarter; analysts had projected earnings of 35 cents a share. "I am pleased with our ability to achieve earnings growth in what continues to be a challenging retail environment," CEO Mike Jeffries said in a statement. "However, the state of the economy and the retail environment remain very uncertain, and it is very difficult to predict the level of business for the balance of the second quarter." In addition to increasing its sales, Abercrombie lifted its gross profit margin in the first quarter. Gross margin, which is the difference between what a company charges consumers for its goods and what it pays vendors for them, increased to 37% of sales, up 40 basis points from the first quarter a year ago. On a conference call with analysts, company officials attributed the improvement in gross margin in part to higher initial markups on the company's merchandise. The company also used fewer price promotions than it had in the year-ago period, officials said. But the markups had a tradeoff, as comparable store sales, which compare results of like outlets open more than one year, fell 6% in the quarter. Meanwhile the average transactions per store fell about 17%, company officials said. Acknowledging that the lack of promotions hurt business in the first quarter, officials said they planned to increase the company's discounts and promotions in the current quarter. However, they said the discounting would not match last year's levels. In contrast to its gross margin improvement, the company lost ground on its operating expenses. General, administrative and store operating expenses increased 60 basis points to 25.4% of sales. Company officials blamed the increase primarily on store expenses outpacing same-store sales. In response, the company said it has reduced its payroll hours in its adult-focused Abercrombie & Fitch stores by 1%. During regular trading, Abercrombie dropped $1.05, or 3.4%, to $29.85. After hours, the retailer dropped further, trading off an additional 5.5%.