By Devika Krishna Kumar

(Reuters) - Abercrombie & Fitch Co (ANF.N) Chief Executive Michael Jeffries, who transformed the teen apparel retailer from a drab sports brand into a fashion icon before running afoul of shoppers and investors, has stepped down after over two decades at the helm.

Jeffries, 70, has faced flak in recent years for failing to keep pace with the tastes of teen shoppers, who are increasingly turning to "fast fashion" chains such as Forever 21 and Inditex's (ITX.MC) Zara for their sartorial needs.

A team led by Executive Chairman Arthur Martinez will manage day-to-day operations until a new CEO is named, Abercrombie said on Tuesday.

Jeffries joined Abercrombie as CEO in 1992 and spearheaded the company's transition to logo-centric apparel, promoting the merchandise with racy catalogs.

He positioned the brand as one for "cool" teens, but stirred controversy when he said Abercrombie's clothes were not meant for "fat" people.

Failing to recover from the damage to its image following the comments, the company removed Jeffries as chairman in January after two years of falling same-store sales.

Abercrombie said in August that it would shed its traditional logo-centric apparel.

"Do I think that tomorrow there's a shift in strategy? No. Because I think that shift had already begun," Simeon Siegel, a top-rated analyst from Nomura Equity Research, told Reuters.

The new management team will include Chief Operating Officer Jonathan Ramsden, Abercrombie & Fitch brand President Christos Angelides and Hollister brand President Fran Horowitz.

Jeffries' retirement comes at a time when the company is struggling to reinvent itself and has warned of a tough holiday quarter.

"For Jeffries to retire during the holiday period is surprising, and speaks, we believe, to continued weakness at the company and the overall teen space," Wunderlich Securities analyst Eric Beder wrote in a note.

Abercrombie said it had hired an executive search firm to identify internal and external candidates for the CEO position.

Siegel said the company appeared to be looking "to grow someone into the CEO spot."

Martinez, who joined Abercrombie in January as non-executive chairman, is a former CEO of Sears, Roebuck and Co and has served on the board of PepsiCo Inc (PEP.N).

Abercrombie shares were up 6.7 percent at $28.11 in noon morning trading on the New York Stock Exchange. Up to Monday's close, the stock had fallen about 20 percent this year.

(Editing by Don Sebastian and Kirti Pandey)