ABERCROMBIE & FITCH CO. New Albany, Ohio; Retailer Surprises Street By Raising Views.(THE NEW AMERICA)

Byline: MARILYN MUCH

Pounded by the worst holiday season in 30 years, many major retailers cut earnings views for the most recent quarter. Not Abercrombie & Fitch Co. On Jan. 9, the young men and women's clothes chain surprised analysts when it raised its fourth-quarter earnings estimate to a range of 86 cents to 88 cents a share, up at least 7 cents from its prior guidance. Management based the revision on a good showing in December.

Total sales for the five weeks ended Jan. 4 climbed 19% from the prior year to $296 million. Same-store sales were flat -- not bad, considering that such sales declined during the eight previous months.

"December's results are a great indication that the potential for same-store sales to turn positive is very near," said analyst Jeffrey Klinefelter of U.S. Bancorp Piper Jaffray. "The fact they posted flat same-store sales and took up their earnings guidance -- pointing to strong margins and improving traffic trends -- says they didn't buy the improvement with markdowns. That's an indication of the healthy growth of their business." The company's December same-store sales turned positive in women's clothes at its Abercrombie & Fitch chain, which numbers close to 600 stores. Its chain of abercrombie kids stores saw gains as well, especially in its girls' business.

Another strong holiday performer was the Hollister Co. chain, says analyst Marcia Aaron of Pacific Growth Equities Inc. Launched in 2000, Hollister is a surfing- and skating-inspired concept with lower-priced goods than the flagship chain.

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Now that Abercrombie has proved it can succeed in a tough environment, the challenge is maintaining its focus, Aaron says.