The retailer, with 764 stores in the United States, took a $32.9million charge from the settlement of a class action diversitylawsuit over the quarter. That led to net income coming in at $40.1million, down from $50.5 million the same year-ago period. Thecompany's same-store sales increased 1% during the quarter.

Abercrombie officials said that they might start replacing someof their kids units with their Hollister stores, which targets highschool-aged consumers. "There are some kids stores where wehypothesize that we could do more business with a Hollister store,"Singer said, explaining that the children's store are smaller thanthe typical Hollister. "We need to experiment with this, and if itworks we could roll it out in a number of locations."

Over the quarter, the company increased its total store countfrom 727 units, with Hollister experiencing the most growth. Thatchain has "huge potential for future growth," said Mike Jeffries,the company's CEO and chairman.