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Early Tuesday, Abercrombie reported inventory jumped 47% on a per-square-foot basis, and margins continued to fall amid discounts.

“In this environment, where there are a lot of concerns about consumers and where we are in this very promotional retail landscape, anyone who’s building inventories is not going to be viewed favorably, particularly when built this aggressively,” Oppenheimer analyst Pamela Quintiliano said.

In recent trading, Abercrombie sale shares dropped 6.4% to $35.23, putting them down 14% over the past three months.

Retailers resorted to heavy discounting in the wake of the economic downturn as shoppers waited to the last minute to buy and only purchased what they needed at the best deal.

Abercrombie, which had 1,098 stores as of July 31, last year significantly boosted discounting, a practice from which it had previously shied away, as shoppers were more price conscious and stayed away from the high-priced teen-apparel retailer’s wares.

Oppenheimer’s Quintiliano said Abercrombie’s management continues to be “extremely” cautious about the economy and the consumer and that higher inventory is a necessary evil to help the company gain market share. She added that the company won’t provide details about promotions because of competitive reasons but that it is proactive with planning promotions, which is likely why inventories are so high.

Meanwhile, Jefferies analyst Randal J. Konik noted that while high inventories are never great, “they seem necessary here to support improving domestic trends and roaring [international] and direct growth.”

For the quarter ended July 31, Abercrombie reported a profit of $19.5 million, or 22 cents a share. That compares with a year-earlier loss of $26.7 million, or 30 cents a share, including a loss of 21 cents per share from the closing of Abercrombie’s high-end Ruehl business.

Analysts polled by Thomson Reuters had most recently forecast earnings of 16 cents per share.

Gross margin fell to 65.1% from 66.6%.

Revenue jumped 17% to $745.8 million, the company said earlier this month, with same-store sales rising 5% overall. Abercrombie said Tuesday the same-store results were led by 8% growth at its namesake operations.

The company also announced plans to close 60 domestic stores this fiscal year, predominantly at year’s end, and cut its planned international growth for the Hollister chain by 20%. As such, capital spending is seen coming in at the low end of prior expectations.