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Abercrombie & Fitch Co. seems to have evolved from the dismal scenario that surrounded it due to disappointing top-line performances in the last 4 quarters. With a surprising turnaround, this teen retailer reported better-than-expected holiday sales results and revised its full-year earnings guidance upward, bringing some respite to investors.

This holiday season ended on a low note with most retailers reporting lackluster results for the holiday shopping period. During the period, retailers suffered from lower traffic, an intensified promotional environment, lesser shopping days between Thanksgiving and Christmas, numerous icy storms and sluggish consumer spending.

Amid such a tough environment, Abercrombie & Fitch came out triumphant, improving from its trend of posting double-digit comps decline. This casual apparel retailer reported only a 6% decline this holiday season (nine-weeks ended Jan 4, 2014), including direct-to-consumer sales, which came as a surprise for investors, given the company’s recent trend of posting negative comps for nearly 7 straight quarters as well as its previous fourth-quarter comps projection of a low double-digit decline.

The plunge in comps mainly resulted from a 4% downside in U.S. comps and a 10% decline in International comps, while a 25% rise in direct-to-consumer comps was an offset.

Overwhelmed by the strong quarter-to-date performance and smooth progress on its cost reduction initiatives, the company raised its adjusted earnings per share forecast to $1.55 – $1.65, compared to $1.40 – $1.50 projected earlier.

This, in turn, triggered an upward movement in the Zacks Consensus Estimate over the last 30 days, while also bringing it to a Zacks Rank #2 (Buy) mark. The Zacks Consensus Estimate for fiscal 2014 reflected significant 8.8% growth to $1.60 per share in the last 30 days, while the estimate for fiscal 2015 moved up by 3.1% to $2.36 per share over the same period.

Further, the company expects significant improvement in its business in 2014 and ahead, driven by its stringent focus on successful execution of its long-term strategic plans.

Other Stocks to Consider

Other stocks performing well in the apparel retail industry include Christopher & Banks Corporation , Finish Line Inc. and The Men's Wearhouse Inc. . Of these, Christopher & Banks has a Zacks Rank #1 (Strong Buy), while Finish Line and Men’s Wearhouse carry a Zacks Rank #2 (Buy).

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