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UPDATE 1-Abercrombie promises larger sizes as shares slide

Aditi Shrivastava
Wednesday, 6 Nov 2013 | 11:09 AM ET

(Adds company comments, updates shares)

Nov 6 (Reuters) - Struggling fashion retailer Abercrombie & Fitch Co said it would expand sizes, colors and fits for all its styles next year, as it seeks to win back its teen customers.

A&F shares fell 10.4 percent to $34.35 on Wednesday after the company reported a seventh quarterly fall in same-store sales in a row and warned of a tough holiday season.

Known for its edgy marketing and shirtless young shop assistants, A&F has lost its way with younger shoppers, who have tired of its charms.

Company executives told an analyst briefing on Wednesday that the retailer would also introduce shoes and other accessories next year to try to broaden its appeal.

Analysts and investors have been looking for a new strategy from Abercrombie as its shares have fallen by more than quarter this year.

Chief Executive Mike Jeffries has stirred controversy in the past by suggesting the company's clothes were made for "cool" and "attractive" kids and not for "fat" people. The company currently does not offers sizes for women above large.

"While the company is playing good defense by cutting expenses, this does little to revitalize what we believe is a stale brand," Stifel Research analyst Richard Jaffe said.

The company said it would have the wider range of clothes in place by spring and aimed to have the shoes and other accessories in place by the next "back to school" season.

At least three analysts cut their price targets on A&F's stock after the company blamed weak spending among younger shoppers for a double-digit drop in quarterly comparable store sales in the third quarter.

The company cut its full-year adjusted profit forecast by more than half.

Brokerages including Jefferies, Cowen, and Brean Capital cut their price targets on the company's stock by between $3 and $5 to as low as $33, citing weak sales and margin trends.

Abercrombie, in a bid to cut costs, said on Tuesday it would close all of its standalone Gilly Hicks stores, which sells lingerie.

"We believe this (Gilly) eliminates a distraction from the main task of improving productivity and profit margins in the core brands," Dorothy Lakner of Topeka Capital Markets said in a note.

Eric Beder of Brean Capital cut his price target on A&F stock to $48 from $50 and said the entire teen sector would remain under pressure in the near term.

That fear of wider problems has also pushed down shares of Abercrombie's key rivals.

Aeropostale Inc shares fell 5.9 percent on the New York Stock Exchange, while American Eagle Outfitters Inc fell 3.5 percent.

(Writing by Rodney Joyce)

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