(Reuters) – Abercrombie & Fitch predicted annual sales above Wall Street forecasts on Wednesday, as new store designs and a broader selection of apparel resonate better with shoppers.

A person carries a bag from the Abercrombie & Fitch store on Fifth Avenue in Manhattan, New York City, U.S., February 27, 2017. REUTERS/Andrew Kelly/Files

Shares in the teen-focused clothing chain jumped 11 percent in early trade as the company also beat Wall Street estimates for quarterly sales and earnings, as shoppers bought more Hollister apparel during the holidays.

Abercrombie is emerging from an identity crisis that hurt sales during the past few years as young shoppers shunned its trademark logo-emblazoned designs for fast-fashion brands and cheaper clothes online.

Since then, the New Albany, Ohio retailer has toned down its risqué advertising, remodeled its dimly lit and over-perfumed stores and begun offering more appealing designs. It has also closed unprofitable stores and expanded its online business.

“Our transformation initiatives are gaining traction,” Chief Executive Officer Fran Horowitz said in a statement, pointing to digital sales that had exceeded $1 billion annually.

Sales at Abercrombie & Fitch stores open for at least a year rose 3 percent in the fourth quarter ended Feb. 2, about twice the 1.47 percent increase analysts had expected, according to IBES data from Refinitiv.

Net sales in 2019 should range between $3.66 billion and $3.73 billion, the company said, comfortably above Wall Street expectations of $3.61 billion.

Abercrombie also announced it would close up to 40 stores, mainly in the United States, and launch 85 remodeled stores, particularly as its namesake brands suffers a decline.

“There is obviously a lot more work to be done, especially in the Abercrombie division,” said Neil Saunders, managing director of research firm GlobalData Retail. “But there are clear plans for this and, as such, both (Abercrombie and Hollister) have a clear sense of direction as they move into the new fiscal year.”

Fourth-quarter revenue overall fell 3 percent to $1.16 billion, but exceeded analysts’ forecasts of $1.13 billion, led by a 1 percent rise in sales at Hollister.

Excluding one-time items, the company earned $1.35 per share, well above expectations of $1.15.

Reporting by Nivedita Balu in Bengaluru; Editing by Arun Koyyur and Sai Sachin Ravikumar


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