Shares in Abercrombie & Fitch surged by up to 17% yesterday as the US group posted a smaller than expected loss and its surfwear brand Hollister posted stronger than expected sales in Q2.

In the three months ending 31 July the US young fashion retailer recorded a loss of 16 cents a share, less than analysts’ average estimate of a 33-cent loss, while sales were also higher than expected at $779.3m. Comparable sales fell 1%, against an expected drop of 2.1%. Hollister, which now also includes the girls’ intimates, lounge and swimwear brand Gilly Hicks, experienced a growth in sales of 5% against expectations of 2.9%.

The group, which has been struggling to regain the success it achieved in the mid-00s in the face of strong competition from global fast fashion giants, was the subject of potential takeover interest this year. Private equity house Sycamore Partners and retailer American Eagle Outfitters (which recently exited the UK market closing its three stores) had been reportedly interested in purchasing the business, which was said to have a market valuation of around $650m, but had failed to strike a deal.

However last month Abercrombie & Fitch announced it had halted all talks with potential suitors and was instead focusing on its turnaround plan. CEO Fran Horowitz said of the Q2 performance: “We are encouraged by the clear progress across all brands. Through aggressive execution of our strategic plan, we delivered our third consecutive quarter of sequential comparable sales improvement.”