It’s all about the contract negotiations.

The chief executive officer’s return with a new contract next year would be viewed as a sign the company is digging in its heels and resisting calls for new management and possibly a sale.

His departure would be taken as a welcome mat for potential suitors.

That was the reaction of analysts and other retailer observers to the push by activist investor Glenn Welling and his associates at Engaged Capital for the removal of Michael Jeffries as chairman and ceo of Abercrombie & Fitch Co., possibly as a precursor to a sale of the company.

The presence of the controversial Jeffries, who is 69, was viewed as a “major stumbling block to a transaction,” Engaged said in its letter to A&F’s board. Engaged holds about 0.5 percent of A&F’s outstanding shares. Jeffries holds about 4.1 percent, according to A&F’s last proxy.

Shares of A&F Wednesday closed at $35.70, down 29 cents, or 0.8 percent. The shares rose 5.8 percent on Tuesday on news that Engaged was pressing for Jeffries’ exit.

While Jeffries’ embrace in the past of a squeaky-clean all-American image has attracted its share of protests in years gone by, his current contract might be a greater impediment to a transaction. It expires on Feb. 1 and carries with it large payout provisions for the executive should there be a change of control of the company. According to the company’s last definitive proxy, filed in May, Jeffries’ current agreement would call for him to receive about $123.3 million, about $88 million from equity awards, in the event of a change of control at A&F.

“There’s virtually no potential for a transaction if Jeffries remains the ceo,” Brean Capital analyst Eric Beder told WWD. “You’d want a new ceo if a deal were to occur anyway and the current contract is so onerous that its renewal would be a major deterrent to some kind of a transaction.

“If the contract is not renewed, you could take that as a sign that the company is for sale,” he continued. “Certainly people on Wall Street are clamoring for a deal.”

Beder noted that while A&F’s performance has declined in recent years, it hasn’t been without its strong points. He cited Jeffries’ move to reduce its U.S. store count, making it the first of the teen retailers to do so, and its recent decision to cut its losses by closing the Gilly Hicks division.

“In a way, A&F is kind of a lightning rod for other retailers, just as Wal-Mart is for other discounters,” he added. “A&F was hardly the only teen retailer who didn’t carry plus sizes, but they’re the ones who caught flack for it.”

Officials at A&F declined to comment Wednesday.

Dana Telsey, ceo and chief research officer at Telsey Advisory Group, also felt that A&F had caught a disproportionate share of the blame for the teen sector’s struggles.

“It’s still a profitable business,” she said. “Figuring out attractive new product in the wake of the logo business is something all teen stores are struggling with.”

The key for the entire sector, she noted, would be learning to work with less inventory and compensating by learning how to bring desirable products to market faster, “especially with the Zaras and H&M’s of the world taking more space in U.S. malls.”