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Online demand fuels Abercrombie & Fitch profit beat, rosy sales outlook

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FILE PHOTO: A person carries a bag from the Abercrombie & Fitch store on Fifth Avenue in Manhattan, New York City, U.S.
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(Reuters) - Abercrombie & Fitch Co forecast first-quarter net sales above estimates on Tuesday after tightened costs and surging online sales of sweaters, fleece tops and knit bottoms helped it report a better-than-expected quarterly profit.

The company, which said it would resume share buybacks, also benefited from increased prices during the holidays as it reined in promotions and tightened inventory.

The teen- and millenial-focused retailer has partnered with TikTok influencers Charli and Dixie D'Amelio and ramped up investments in its online business to combat declining store traffic as customers shift to online shopping due to the pandemic.

It projected a 30% to 40% increase in net sales in the first quarter versus an average analysts' estimate for a 32.8% jump to $644.62 million.

Demand for its loungewear and Gilly Hicks brand's activewear drove digital sales 34% higher, as customers staying at home turned to comfortable clothing.

"Our distribution centers remained operational, enabling us to fulfill digital customer demand globally, partially mitigating lost sales from temporary store closures," said Chief Executive Officer Fran Horowitz.

Net sales fell 5% during the quarter.

In a bid to rein in costs, the Ohio-based company reduced payroll expenses, suspended dividend and closed 137 stores last year, including eight larger format flagships, as it pivots toward smaller, newly remodeled stores to draw in customers.

Excluding one-time items, the company reported a profit of $1.50 per share in the fourth quarter, beating analysts' average estimate of $1.22 per share.

(Reporting by Aditi Sebastian; Editing by Devika Syamnath)