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Abercrombie cuts profit forecast on higher discounts, weak demand

Pedestrians are reflected in the window of an Abercrombie & Fitch store in San Francisco.
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Pedestrians are reflected in the window of an Abercrombie & Fitch store in San Francisco.

Struggling apparel retailer Abercrombie & Fitch cut its full-year profit forecast as higher discounts and efforts to refresh its merchandise by dropping the logo-centric approach failed to attract young customers.

Shares of the company, which also posted lower-than-expected quarterly sales, fell about 5 percent in premarket trading.

Abercrombie has been struggling to turn around its business by cutting costs, trying to bring in trendier styles that appeal to fashion-conscious young shoppers and increase its online presence.

The company has been losing customers to "fast fashion" chains such as Inditex's Zara, H&M and Forever 21, which offer newer styles at lower prices.

Abercrombie, which has most of its stores in malls, has been hurt also as fewer people visit malls in North America and Europe and prefer shopping online to take advantage of deals and heavy discounts.

The company said it expected a mid-to-high single-digit percentage fall in its current-quarter comparable sales.

Abercrombie said comparable sales improved slightly in November and through the Black Friday weekend, but it warned that conditions were likely to be "difficult" through the holiday quarter.

Its comparable sales had fallen 8 percent in the holiday quarter of 2013.

Abercrombie cut its adjusted profit forecast for the year ending February to $1.50-$1.65 per share from $2.15-$2.35.

Adjusted net income fell 25 percent to $30.4 million, or 42 cents per share, in the third quarter ended Nov. 1.

Revenue declined 12 percent to $911 million.

Analysts on average had expected a profit of 41 cents per share and revenue of $916 million, according to Thomson Reuters I/B/E/S.

Abercrombie shares closed at $27.84 on Tuesday on the New York Stock Exchange.

Up to Tuesday's close, the stock had fallen about 39 percent from its 15-month high of $45.50 hit on Aug. 27.