WSJ: Overheard On The Street: Abercrombie & Fitch's Favorite Gimmick Is Making Line-Ups Outside Stories

Now the company's investors will have to learn some patience.

While announcing results Friday, the teen retailer said that it will abandon a technique called the retail method of inventory accounting. This required Abercrombie to mark down the value of its inventory when items were put on sale.

The method caused earnings to be lower to adjust for the anticipated markdowns even if items hadn't yet been sold. Under the so-called cost method for inventory, favored by most retailers, such adjustments will be made only for items that are marked down to levels below their production cost.

The new method can make a big difference in quarters when Abercrombie aggressively marks down prices. In its fiscal fourth quarter ended January 2012, Abercrombie earned $124.7 million under the cost method but only $98.5 million under the retail record.

Of course, what really matters is the ultimate price at which Abercrombie sells its jeans and hoodies if the new accounting method gives it added flexibility to discount, that may make the chain more willing to discount. While this could affect margins, it may also help sales.

Abercrombie is already known for wild swings in its share price on days when it releases quarterly earnings. Until investors get used to the new method, they should brace for a bumpy ride.