Three specialty chains — Abercrombie & Fitch Co., Limited Brands Inc. and Chico’s FAS Inc. — reported improved bottom-line results Wednesday as higher sales were supported by improved gross margins.

This story first appeared in the May 19, 2011 issue of WWD. Subscribe Today.

Helped by strong international sales, Abercrombie registered net income of $25.1 million, or 28 cents a diluted share, for the three months ended April 30, versus a year-ago loss of $11.8 million, or 13 cents. Excluding special items, earnings per share were 27 cents, more than twice the 12-cent result expected by analysts polled by Yahoo Finance.

Net sales expanded 21.6 percent to $836.7 million from $687.8 million, helped by a 64 percent gain in international sales to $195.7 million. Comparable-store sales gained 10 percent and gross margin climbed to 65 percent of sales from 62.7 percent a year earlier. Shares gained 3.4 percent to close at $75.69 in Wednesday trading.

Jonathan Ramsden, chief financial officer, said on the company conference call that gross margin is expected to “erode” in the second quarter, with the firm’s strong “international mix” helping to limit the contraction. He said the firm would be helped by its ability to be nimble in the face of price increases and a continuing promotional environment. “We have a very specific plan of the promotions and the domestic business that we expect to execute, and we have some flexibility in that plan,” he said.

Although rating the stock a “hold,” Stifel Nicolaus analyst Richard Jaffe voiced a degree of skepticism, noting that “after two years of declining retail prices at domestic Abercrombie and Hollister stores, it is uncertain if the customer is willing to begin to pay up for these brands.” He was “hesitant to assume [the firm’s] perfect execution” given the “diminished appeal of the merchandise domestically” and other factors.

Reporting after the close of the markets, and before its Thursday morning earnings call, Limited Brands said net income jumped 46.8 percent to $165.2 million, or 50 cents a diluted share, against profits of $112.5 million, or 34 cents, in the 2010 quarter. Adjusted EPS was 40 cents, 1 cent better than the consensus estimate.

The operator of Victoria’s Secret and Bath & Body Works registered net sales of $2.22 billion, 14.8 percent better than the $1.93 billion reported for the year-ago quarter. Comps were up a robust 15 percent, and gross margin improved to 38 percent of sales from 35.9 percent in the 2010 period.

The company projected second-quarter adjusted EPS of between 38 cents and 43 cents, with the higher number corresponding to the current consensus estimate.

Chico’s reported a 29.7 percent gain in income for the quarter to $45.9 million, or 26 cents a diluted share, from $35.4 million, or 20 cents, in the year-ago period.

Total sales rose 11.5 percent to $537.2 million from $481.6 million, with comps up 7.7 percent.

Gross margin moved up to 59.1 percent of sales from 58.5 percent. Kent Kleeberger, chief operating officer, said the firm expects second-quarter gross margin to be up slightly, with markdown percentages lower.

Comparing the company’s turnaround to a hospital stay, David Dyer, Chico’s chairman, president and chief executive officer, said the company is “home at last, healthy again and ready for sustainable profitable growth.” He told analysts that over the next three or four years, the Chico’s brand has the potential for another 150 boutique and outlet stores and White House|Black Market for possibly more than 250, with the emphasis on front-line units. Chico’s currently has 593 boutique and 71 outlet stores, versus 351 boutiques and 24 outlets for White House|Black Market.

With sales coming in below analysts’ estimates, shares dropped 5.1 percent to $14.43.

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