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HomeretailAbercrombie moves may show openness to buyout: Analysts

Abercrombie moves may show openness to buyout: Analysts

Changes are afoot at Abercrombie & Fitch, and they could signal an easier—and possibly more likely—buyout of the struggling teen retailer.

The company said Tuesday it will immediately terminate its shareholder rights plan, otherwise known as a poison pill and make changes to its board, including separating the roles of CEO and chairman.

CEO Mike Jeffries had served as its chairman since 1996, and will stay on as CEO and a member of the board. However, Abercrombie added three retail veterans to the board—former Sears CEO Arthur Martinez, Zale Chairman Terry Burman and former Avon CEO Charles Perrin. Martinez will take the chairman role.

Analysts reacted positively to the news, saying the actions show openness and responsiveness to change. The retailer's shares rose about 8 percent in early trading.

An Abercrombie & Fitch store in San Francisco.Getty Images

"We believe management's increasing willingness to change is a major long-term positive for every aspect of the business, as it will allow the company to be a more nimble player in a constantly changing teen space," said BMO Capital Markets analyst John Morris in a research note.

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Morris has an "outperform" rating on the stock, with a price target of $47. The shares are currently trading near $37. (Click here for the latest quote.)

Stifel Nicolaus analyst Richard Jaffe agreed that the moves are a step in the right direction, but noted that the retailer still has a way to go before restoring its margins to historical levels.

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He said that Abercrombie is still challenged by the "diminished appeal of the brand and uninspired product," which will hold back its ability to significantly raise prices above current levels. As such, he retained his "hold" rating.

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