You would be hard-pressed to find someone who's willing to step up and defend Abercrombie & Fitch (NYSE:ANF) unconditionally. The business has taken a beating recently, with comparable sales falling, gross margin shrinking, and earnings disappearing. It's a company that may have finally stumbled into the proverbial "it can't get worse" territory.

Abercrombie has undertaken a fairly drastic series of changes across its business, shifting its board, hiring a new brand president, and going from corporate governance bad-boy to shining exemplar. "Exemplar" may be a bit bold, but the company is making changes that should help shareholders find more bang for their buck, if consumers can be persuaded to tromp back into stores. It's an unexpected silver lining for Abercrombie & Fitch's otherwise dark cloud.

Take it from the top
According to Institutional Shareholder Services (ISS), a governance risk analysis group, Abercrombie & Fitch now falls into the bucket of companies with the least governance-based risk. It's a complete turnaround from where the company stood this time last year, when it was in the highest risk category. Much of that drop in risk has come from two major moves that Abercrombie undertook earlier this year, when it stripped its CEO of his chairman title and when the company rescinded its poison pill plan.

CEO Mike Jeffries has been at the helm for over two decades, but has been on investors' bad side for years as Abercrombie & Fitch has fallen behind companies like Gap (NYSE:GPS) and Urban Outfitters (NASDAQ:URBN). In Abercrombie's last quarter, for instance, comparable sales fell 4% compared to the same period in the previous year.

Even though Abercrombie is falling, the damage could be worse. The competition is pulling ahead by treading water, with comparable sales falling just 1% at Gap and remaining flat at Urban Outfitters. The difference is still striking, as Abercrombie's steep decline has led to a hemorrhaging of market share.

Changes at the executive level are designed to fix these sorts of problems, however, and in addition to its CEO tweaking, Abercrombie has added new blood to its branding division. Christos Angelides joined Abercrombie & Fitch from U.K.-based Next, a Banana Republic-esque retailer. Angelides needs to help Abercrombie with its "chase" fashions -- those items that jump on a trend and go from design to store floor quickly.

The governance problem
Looking back at Urban Outfitters, what Abercrombie has been able to do with its changes, according to ISS, is make the company less relatively risky. Urban Outfitters has an ISS risk score of 10, putting it in the category of highest risk from governance. Abercrombie's second wind has put it on a level field with Gap, with both companies falling into the low-risk pot.

What that doesn't mean is that Urban Outfitters is going to do worse or suffer more variance in stock price. Instead, it means that Gap and Abercrombie & Fitch should have more stable platforms to build a brand on, and should present shareholders with fewer governance surprises. The lack of a poison pill, the separation of roles, and the addition of new, independent board members is very good news for Abercrombie & Fitch.

Sales are still a problem, but with a new structure in place, the company might be better suited to meet those challenges, and reward shareholders for supporting the business as it does so. Abercrombie seems like a business that may -- may -- have finally found the bottom. All it needs now is to build itself a ladder.