) --

Abercrombie & Fitch

(ANF) - Get Report

might be making strides to revive its lagging business, but don't expect to see the fruits of its labor in the second quarter.

The teen apparel retailer stood its ground and maintained full-price selling even in the worst of the recession, which Needham analyst Christine Chen said will negatively affect the company in the near term.





American Eagle Outfitters

(AEO) - Get Report

have fared better due to lower price points, taking market share away from Abercrombie.

Analysts expect Abercrombie to lose 7 cents in the second quarter on revenue of $647.9 million. The company said its preliminary second-quarter sales sank 23% to $648.5 million. Results are due out before the bell on Friday.

Last week Abercrombie reported July same-store sales tanked 28%, worse than the 26.9% decline Wall Street anticipated.

The women's division has been the biggest drag on results, but Stifel Nicolaus analyst Richard Jaffe says the product is getting better and showed signs of improvement in the second quarter.

The company also began making merchandizing and pricing changes, lowering price points across all brands by about 6% through clearance and lower opening price points.

"On a positive note we believe management has demonstrated better inventory management, which bodes well for the second half and we believe that the markdown cadence -- shallower markdowns taken throughout the quarter instead of deep clearance activity at the end of the quarter -- will likely be more effective going forward," Jaffe wrote in a note.

Investors are waiting to see how customers responded to lower price points and if management lowered prices enough on enough items.

Other pending questions are: What categories in women's have improved and which are still lagging? Will the shift in tax free holiday from July to August benefit the third quarter? Is second-quarter inventory clean of clearance merchandise?

Analysts will also be looking for any indication about how back-to-school sales are doing, an update on closing Ruehl stores, and any indications about how the company is planning for the upcoming holiday season.

In June, Abercrombie said it plans to

shutter its flailing contemporary Ruehl chain

. The strategic review of Ruehl cost the company about $51 million in non-cash, pre-tax impairment charges in its first quarter of fiscal 2009. In addition, management estimates additional pre-tax charges of approximately $65 million, which it will recognize during the rest of the year.

The move should be complete by January 2010.

Shares of the company closed down 2% on Tuesday to $31.68. Abercrombie has been trading between $13.66 and $55.83 in the 52-week period.

-- Reported by Jeanine Poggi in New York.

Copyright 2009 Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. AP contributed to this report.