What happened

Shares of Abercrombie & Fitch Co. (NYSE:ANF) were flying higher today after the mall-based teen apparel retailer posted impressive results in its fourth-quarter report. Comparable sales recovered at its flagship brand and surged at Hollister.

As of 11:11 a.m. EST, the stock was up 13.4%.

Two Abercrombie & Fitch models posing by a pickup truck.

Image source: Abercrombie & Fitch.

So what

Abercrombie said that total sales in the quarter, which included an extra week, rose 15% to $1.19 billion, ahead of estimates at $1.16 billion. Comparable sales at the surf-themed Hollister jumped 11%, while at namesake Abercrombie they were up 5%, a whopping improvement from a 10% decline in the first quarter of the year. Companywide, comparable sales were up 9%, and direct-to-consumer sales increased to 34% of total sales, up from 31% a year ago.

Despite the sales growth, gross margin fell 90 basis points to 58.4% due to higher input costs and lower selling prices. However, a decline in stores and distribution expenses helped operating income more than double from a year ago as did adjusted earnings per share, jumping from $0.65 to $1.38, which easily beat expectations at $1.10 per share.

CEO Fran Horowitz said, "Our focus on staying close to our customer, executing to our playbook and maintaining our disciplined approach to expense management delivered a strong performance on both the top and bottom line... We continue to improve the customer experience with ongoing investments in loyalty programs, stores, direct-to-consumer and omnichannel capabilities."

Now what

Abercrombie's guidance for 2018 was solid as the company sees comparable sales growth in the low-single digits and a modest improvement in operating margins, though management didn't specify EPS. The company also said it would close 60 stores in the U.S. as leases expire, continuing with its previous store rationalization, but at the same time it would open 11 new full-price locations in the U.S. and 10 internationally. As e-commerce becomes a larger part of the business, having fewer stores seems to make sense for the company.

Abercrombie stock has doubled over the last year as performance has significantly improved. There's a lot for shareholders to like in the latest report.

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