Abercrombie & Fitch Inc on Wednesday reported a surprise quarterly profit and raised its annual sales forecast, as the apparel retailer bets on its efforts to stock shelves with in-demand products, sending its shares up 18 percent.

The apparel retailer has made efforts to improve its inventory across all its labels, attracting affluent American customers to shop for a diverse range of products like dresses and cargos, as they get back to social events and working from offices.

The company’s inventories fell 20 percent to $448 million in the first quarter compared to a year ago. In the fourth quarter, they were down 4 percent.

The company reported a gross profit rate of 61 percent, up 570 basis points compared to a year ago, benefiting from lower freight costs.

Abercrombie’s forecast comes in contrast to several consumer companies, such as Kohl’s Corp, that have maintained their guidance for this year.

The company now expects 2023 net sales to increase 2 percent to 4 percent, compared to its previous range of 1 percent to 3 percent growth.

Recent economic data has also revealed that consumer spending has remained strong in April despite persistently high inflation pinching wallets, with people increasing purchases at online retailers as well as spending more at restaurants and bars.

The Ohio-based company’s eponymous Abercrombie label posted a 14 percent increase in sales for the first quarter, while the Hollister brand, which also includes its Gilly Hicks and Social Tourist labels, dropped 7 percent.

The company’s net sales rose about 3 percent to $836 million in the quarter ended April 29. Analysts on average had expected $814.5 million, according to Refinitiv IBES data.

Excluding items, Abercrombie reported a profit of 39 cents per share, compared with estimates of a loss of 5 cents.

By Granth Vanaik; Editor Maju Samuel

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