Rewrites throughout, adds background

By Neil J Kanatt

May 27 (Reuters) - Abercrombie & Fitch ANF.N and Bath & Body Works BBWI.N beat quarterly profit estimates, sending their shares up more than 12% on Wednesday, and signaled that economic uncertainties have not dented American shoppers' appetite for affordable indulgence.

The upbeat results add to signs of a K-shaped recovery in U.S. consumer spending as higher-income shoppers continue spending on discretionary and "treat" categories, while lower-income households pull back due to high inflation.

"They keep showing up ... We're not seeing any change in performance across cohorts," Abercrombie CEO Fran Horowitz said.

Abercrombie positions itself between premium and mass market and offers aspirational apparel at accessible prices.

Bath & Body Works relies on shoppers buying its products even during economic volatility and benefits from a phenomenon called "lipstick effect," where consumers buy more beauty products and self-care items.

Surging gasoline prices linked to the Iran war intensified affordability concerns, prompting broader dissatisfaction with President Donald ​Trump's handling of the economy, driving consumer sentiment to a record low in May.

Big-box retailers Walmart WMT.O and Target TGT.N last week cautioned about dented spending.

"Stock market sell-offs are making it seem like the U.S. consumer has not been spending on discretionary purchases. However, the facts argue otherwise as consumer discretionary revenues are accelerating," said Simeon Siegel, senior managing director at Guggenheim Securities.

"Counterintuitively or not, it seems that whereas people are tightening their wallets for milk and other 'needs', they are continuing to spend up on clothes and other 'wants'," Siegel added.

Separately on Wednesday, Capri Holdings CPRI.N provided an upbeat annual profit target amid a turnaround effort for its Michael Kors brand.

MID-EAST UNEASE

Shares of specialty retailers have slumped so far this year due to continued uncertainty around tariffs and growing inflation worries caused by the conflict in the Middle East.

Abercrombie, whose shares have declined more than 40% so far this year, flagged some weakness in its Europe, the Middle East and Africa (EMEA) segment due to the war.

Sales in its leading Americas geography grew 3%, but in EMEA it declined 10%. The company said it expects fuel prices to add to freight costs.

"In the months ahead, industry performance will be influenced by the persistence of higher gas prices, potential pricing pass through to other sectors, consumer sentiment and whether weak sentiment leads to a pullback in discretionary spend," Consumer Edge analyst Michael Gunther said.

Abercrombie reported quarterly adjusted net income per share of $1.47, above analysts' expectations of $1.28, according to data compiled by LSEG. Bath & Body logged an adjusted profit per share of 32 cents, above estimates of 29 cents.

"We know the consumer continues to be value-seeking," Bath & Body's outgoing CFO Eva Boratto said, adding that "value isn't just price."