Abercrombie & Fitch, the preppy US clothing retailer, reported quarterly profits ahead of Wall Street expectations, driven largely by cost cuts as the company worked to close its higher-priced Ruehl line.

The company has suffered a prolonged sales slump since the recession as it took a decision to protect its brand by not discounting its prices and lost out to lower-priced competitors.

Profit for the three months ending October 31 fell 39 per cent to $38.8 million, or 44 cents per share. This was significantly ahead of analysts expectations of 20 cents a share and compares with profits of $63.9 million, or 72 cents per share, during the same period last year. Excluding charges related to closing Ruehl and a tax benefit, profit was 30 cents per share.

Sales fell 15 per cent to $765.4 million, from $896.3 million, slightly ahead of analyst expectations of $764.5 million.

Same store sales in fell 22 per cent. That includes a 18 per cent drop at the flagship Abercrombie & Fitch chain, a 22 per cent drop at Abercrombie children's clothing stores, and a 26 per cent drop at its surf-themed Hollister stores.

Direct-to-consumer sales, including Web sales, rose 11 per cent to $63.9 million.

Same store sales at Ruehl fell 30 per cent. The company said that it expects the cost of closing the chain, expected by the end of the year, to come to $60 million, down from initial estimates of $65 million. About $33.7 million of that was recorded in the first half of the year.

The company also said that it was on track to open an Abercrombie & Fitch flagship store in Tokyo in December, as well as five more Hollister stores in Europe during the fourth quarter.

In the next fiscal year, the company expects to open flagship Abercrombie & Fitch stores in Copenhagen and Fukuoka, Japan.

The Board of Directors declared a quarterly cash dividend of $0.175 per Class A share, payable on December 15, 2009.

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