Is Abercrombie on the Rebound?

There’s a word for Abercrombie & Fitch’s (ANF) second quarter results and that word is “bad.” The company reported a big drop in year-over-year earnings and a 10% plunge in comparable store sales. Yet the stock is up 8.8% this afternoon.

The company’s 19 cents of EPS did surpass its forecast for 15 cents to 18 cents, and beat analysts’ expectations by 2 cents. And management offered some optimism on the conference call:� “Comps have improved at the start of Q3 both in the U.S. and internationally, but management noted it�s still too early to call it a trend,” wrote Sterne Agee analyst Margaret Whitfield.

Stifel Nicolaus analyst Richard Jaffe expects Abercrombie to eventually rebound in the U.S. as it closes underperforming stores. But the macroeconomy and continued pressure overseas could weigh on the stock. And margins may continue to suffer.

“[W]e believe ANF will find it difficult to return its operating margin to historical levels (operating margin is currently about half of its historical peak) due to the diminished appeal of the brand and uninspired product, which we believe will hold back the company�s ability to raise AUR significantly above its current levels.”