Abercrombie & Fitch Inc. swung to a loss, hurt by weaker sales, but moves to reposition its Hollister brand showed signs of improvement and the company's adjusted bottom line was much better than analysts had expected.

Shares jumped sharply, up 15% in premarket trading to $19.79.

The company posted a loss for its fiscal second quarter of $810,000, or a penny a share, from a prior-year profit of $12.9 million, or 17 cents a share. On an adjusted basis, profit fell 39% to $8.6 million, or 12 cents a share—while analysts had expected a loss of 4 cents.

Total sales declined 8.2% to $817.8 million, compared with $890.6 million a year ago. Analysts had expected $811 million.

The company's namesake brand continues to face challenges while Hollister had a stronger showing. Sales at existing Abercrombie stores fell 7% from a year ago. Hollister sales excluding newly opened or closed stores dropped 1% in the recently completed quarter, an improvement from a 6% decline in the first quarter.

"Hollister has gotten some quick traction," Executive Chairman Arthur Martinez, said in an interview. "The Abercrombie brand carries a lot of the baggage, and the process of getting out from under that baggage is taking longer."

The retailer is in the midst of implementing a new strategy, which includes updated fashions, remodeled stores and a less exclusive mind-set. Earlier this year, it ditched the shirtless models, sex-tinged marketing and logo-emblazoned T-shirts that helped create a cult following before wearing thin with shoppers.

Hollister is undergoing a refashioning from the inside out. The clothes have more color and design elements and products that are selling well can be replenished quickly, in a nod to fast fashion retailers, which are constantly filling their stores with new goods. Mr. Martinez said Hollister has cut its supply lead times in half.

Under former Chief Executive Mike Jeffries, Hollister storefronts had been decorated with shutters that made it hard for shoppers to see inside, part of an exclusionary mind-set that Mr. Martinez is trying to do away with.

Those shutters have been replaced on about 100 of Hollister's 569 stores with video screens. On the inside, five stores have been remodeled to make them lighter, brighter and easier to shop in by doing away with artificial trees, leather sofas and oriental rugs. The company has also dialed back its signature scent level by 75%.

To differentiate the brands, Hollister is focusing on high-school-aged youth, while Abercrombie is trying to appeal to a broader audience that also includes college-aged shoppers and beyond. But while Hollister reflects a distinct California, surfer-infused lifestyle, Abercrombie is still searching for an identity.

Mr. Martinez said the brand was working with outside consultants to help in a repositioning, and hopes to have an answer before year-end.

Last week American Eagle Outfitters Inc., another teen retailer that has struggled, reported stronger-than-expected profit on sales that jumped 12%, fueling expectations that the battered teen sector might be in for a rebound.

Mr. Martinez cautioned against such thinking. "If you look broadly at the apparel sector, it's been volatile and unpleasant," Mr. Martinez said.

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com

 

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(END) Dow Jones Newswires

August 26, 2015 08:05 ET (12:05 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
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