ABERCROMBIE & FITCH CO /DE/ [ANF] Filings

10-Q 1 anf-20240803.htm 10-Q anf-20240803

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 3, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-12107

Abercrombie & Fitch Co.

(Exact name of Registrant as specified in its charter)

Delaware

31-1469076

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

6301 Fitch Path,

New Albany,

Ohio

43054

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(614)

283-6500


Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.01 Par Value

ANF

New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). x Yes ¨ No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class A Common Stock						Shares outstanding as of September 5, 2024
$0.01 Par Value						51,078,656

Table of Contents


PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations and Comprehensive Income	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Index for Notes to Condensed Consolidated Financial Statements	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
	Signatures	45


Abercrombie & Fitch Co.			2			2024 2Q Form 10-Q

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Abercrombie & Fitch Co.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Thousands, except per share amounts)

(Unaudited)




	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
Net sales	$	1,133,974	$	935,345	$	2,154,704	$	1,771,339
Cost of sales, exclusive of depreciation and amortization	397,712		350,965		740,985		677,165
Gross profit	736,262		584,380		1,413,719		1,094,174
Stores and distribution expense	390,233		352,730		761,919		688,779
Marketing, general and administrative expense	170,471		144,502		348,351		287,133


Other operating income, net	(67)		(2,694)		(2,025)		(5,588)
Operating income	175,625		89,842		305,474		123,850
Interest expense	5,189		7,635		10,969		15,093
Interest income	(10,392)		(6,538)		(21,195)		(10,553)
Interest (income) expense, net	(5,203)		1,097		(10,226)		4,540
Income before income taxes	180,828		88,745		315,700		119,310
Income tax expense	45,449		30,014		65,243		42,732
Net income	135,379		58,731		250,457		76,578
Less: Net income attributable to noncontrolling interests	2,211		1,837		3,439		3,113
Net income attributable to A&F	$	133,168	$	56,894	$	247,018	$	73,465

Net income per share attributable to A&F
Basic	$	2.60	$	1.13	$	4.84	$	1.47
Diluted	$	2.50	$	1.10	$	4.64	$	1.43

Weighted-average shares outstanding
Basic	51,246		50,322		51,069		49,952
Diluted	53,279		51,548		53,277		51,535

Other comprehensive income (loss)
Foreign currency translation adjustments, net of tax	$	3,441	$	(3,836)	$	1,604	$	(3,525)
Derivative financial instruments, net of tax	(1,150)		2,242		(627)		2,647
Other comprehensive income (loss)	2,291		(1,594)		977		(878)
Comprehensive income	137,670		57,137		251,434		75,700
Less: Comprehensive income attributable to noncontrolling interests	2,211		1,837		3,439		3,113
Comprehensive income attributable to A&F	$	135,459	$	55,300	$	247,995	$	72,587

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.


Abercrombie & Fitch Co.			3			2024 2Q Form 10-Q

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Abercrombie & Fitch Co.

Condensed Consolidated Balance Sheets

(Thousands, except par value amounts)

(Unaudited)


	August 3, 2024		February 3, 2024
Assets
Current assets:
Cash and equivalents	$	738,402	$	900,884
Receivables	115,077		78,346
Inventories	539,759		469,466
Other current assets	123,415		88,569
Total current assets	1,516,653		1,537,265
Property and equipment, net	552,453		538,033
Operating lease right-of-use assets	746,788		678,256
Other assets	233,664		220,679
Total assets	$	3,049,558	$	2,974,233
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	406,756	$	296,976
Accrued expenses	422,484		436,655
Short-term portion of operating lease liabilities	202,840		179,625
Income taxes payable	19,576		53,564
Total current liabilities	1,051,656		966,820
Long-term liabilities:
Long-term portion of operating lease liabilities	688,006		646,624
Long-term borrowings, net	—		222,119
Other liabilities	88,746		88,683
Total long-term liabilities	776,752		957,426
Stockholders’ equity
Class A Common Stock: $0.01 par value: 150,000 shares authorized and 103,300 shares issued for all periods presented	1,033		1,033
Paid-in capital	408,293		421,609
Retained earnings	2,877,969		2,643,629
Accumulated other comprehensive loss, net of tax (“AOCL”)	(134,991)		(135,968)
Treasury stock, at average cost: 52,231 and 52,800 shares as of August 3, 2024 and February 3, 2024, respectively	(1,945,778)		(1,895,143)
Total Abercrombie & Fitch Co. stockholders’ equity	1,206,526		1,035,160
Noncontrolling interests	14,624		14,827
Total stockholders’ equity	1,221,150		1,049,987
Total liabilities and stockholders’ equity	$	3,049,558	$	2,974,233

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.


Abercrombie & Fitch Co.			4			2024 2Q Form 10-Q

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Abercrombie & Fitch Co.

Condensed Consolidated Statements of Stockholders’ Equity

(Thousands, except per share amounts)

(Unaudited)


	Thirteen Weeks Ended August 3, 2024
	Common Stock			Paid-in capital		Non-controlling interests		Retained earnings		AOCL		Treasury stock			Total stockholders’ equity
	Shares outstanding	Par value										Shares	At average cost
Balance, May 4, 2024	51,102	$	1,033	$	400,807	$	12,284	$	2,745,382	$	(137,282)	52,198	$	(1,931,054)	$	1,091,170
Net income	—	—		—		2,211		133,168		—		—	—		135,379
Purchase of Common Stock	(84)	—		—		—		—		—		84	(15,000)		(15,000)

Share-based compensation issuances and exercises	51	—		(1,747)		—		(581)		—		(51)	276		(2,052)
Share-based compensation expense	—	—		9,233		—		—		—		—	—		9,233
Derivative financial instruments, net of tax	—	—		—		—		—		(1,150)		—	—		(1,150)
Foreign currency translation adjustments, net of tax	—	—		—		—		—		3,441		—	—		3,441
Contribution from noncontrolling interests, net	—	—		—		129		—		—		—	—		129
Ending balance at August 3, 2024	51,069	$	1,033	$	408,293	$	14,624	$	2,877,969	$	(134,991)	52,231	$	(1,945,778)	$	1,221,150

	Thirteen Weeks Ended July 29, 2023
	Common Stock			Paid-in capital		Non-controlling interests		Retained earnings		AOCL		Treasury stock			Total stockholders’ equity
	Shares outstanding	Par value										Shares	At average cost
Balance, April 29, 2023	50,062	$	1,033	$	400,699	$	9,116	$	2,344,522	$	(136,811)	53,238	$	(1,907,586)	$	710,973
Net income	—	—		—		1,837		56,894		—		—	—		58,731


Share-based compensation issuances and exercises	79	—		(1,860)		—		(1,384)		—		(79)	2,834		(410)
Share-based compensation expense	—	—		11,559		—		—		—		—	—		11,559
Derivative financial instruments, net of tax	—	—		—		—		—		2,242		—	—		2,242
Foreign currency translation adjustments, net of tax	—	—		—		—		—		(3,836)		—	—		(3,836)
Distribution to noncontrolling interests, net	—	—		—		(475)		—		—		—	—		(475)
Ending balance at July 29, 2023	50,141	$	1,033	$	410,398	$	10,478	$	2,400,032	$	(138,405)	53,159	$	(1,904,752)	$	778,784


Abercrombie & Fitch Co.			5			2024 2Q Form 10-Q

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Abercrombie & Fitch Co.

Condensed Consolidated Statements of Stockholders’ Equity

(Thousands, except per share amounts)

(Unaudited)


	Twenty-Six Weeks Ended August 3, 2024
	Common Stock			Paid-in capital		Non-controlling interests		Retained earnings		AOCL		Treasury stock			Total stockholders’ equity
	Shares outstanding	Par value										Shares	At average cost
Balance, February 3, 2024	50,500	$	1,033	$	421,609	$	14,827	$	2,643,629	$	(135,968)	52,800	$	(1,895,143)	$	1,049,987
Net income	—	—		—		3,439		247,018		—		—	—		250,457
Purchase of Common Stock	(203)	—		—		—		—		—		203	(30,000)		(30,000)

Share-based compensation issuances and exercises	772	—		(33,912)		—		(12,678)		—		(772)	(20,635)		(67,225)
Share-based compensation expense	—	—		20,596		—		—		—		—	—		20,596
Derivative financial instruments, net of tax	—	—		—		—		—		(627)		—	—		(627)
Foreign currency translation adjustments, net of tax	—	—		—		—		—		1,604		—	—		1,604
Distribution to noncontrolling interests, net	—	—		—		(3,642)		—		—		—	—		(3,642)
Ending balance at August 3, 2024	51,069	$	1,033	$	408,293	$	14,624	$	2,877,969	$	(134,991)	52,231	$	(1,945,778)	$	1,221,150

	Twenty-Six Weeks Ended July 29, 2023
	Common Stock			Paid-in capital		Non-controlling interests		Retained earnings		AOCL		Treasury stock			Total stockholders’ equity
	Shares outstanding	Par value										Shares	At average cost
Balance, January 28, 2023	49,002	$	1,033	$	416,255	$	11,728	$	2,368,815	$	(137,527)	54,298	$	(1,953,735)	$	706,569
Net income	—	—		—		3,113		73,465		—		—	—		76,578


Share-based compensation issuances and exercises	1,139	—		(25,504)		—		(42,248)		—		(1,139)	48,983		(18,769)
Share-based compensation expense	—	—		19,647		—		—		—		—	—		19,647
Derivative financial instruments, net of tax	—	—		—		—		—		2,647		—	—		2,647
Foreign currency translation adjustments, net of tax	—	—		—		—		—		(3,525)		—	—		(3,525)
Distribution to noncontrolling interests, net	—	—		—		(4,363)		—		—		—	—		(4,363)
Ending balance at July 29, 2023	50,141	$	1,033	$	410,398	$	10,478	$	2,400,032	$	(138,405)	53,159	$	(1,904,752)	$	778,784

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.


Abercrombie & Fitch Co.			6			2024 2Q Form 10-Q

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Abercrombie & Fitch Co.

Condensed Consolidated Statements of Cash Flows

(Thousands)

(Unaudited)


	Twenty-Six Weeks Ended

	August 3, 2024		July 29, 2023
Operating activities
Net income	$	250,457	$	76,578
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	77,044		72,411
Asset impairment	1,567		4,436
Loss on disposal	2,170		1,622
Benefit from deferred income taxes	(4,882)		(822)
Share-based compensation	20,596		19,647
Loss on extinguishment of debt	1,114		—
Changes in assets and liabilities:
Inventories	(70,053)		11,909
Accounts payable and accrued expenses	86,000		40,954
Operating lease right-of-use assets and liabilities	(5,147)		(36,289)
Income taxes	(36,157)		28,281
Other assets	(63,060)		1,115
Other liabilities	470		(3,514)
Net cash provided by operating activities	260,119		216,328
Investing activities
Purchases of marketable securities	(15,000)		—

Purchases of property and equipment	(81,649)		(89,780)



Net cash used for investing activities	(96,649)		(89,780)
Financing activities

Repayment/redemption of senior secured notes	(223,331)		—



Payment of debt modification costs and fees	(2,716)		(17)
Purchases of Common Stock	(30,000)		—

Acquisition of Common stock for tax withholding obligations	(67,225)		(18,769)
Other financing activities	(3,689)		(4,556)
Net cash used for financing activities	(326,961)		(23,342)
Effect of foreign currency exchange rates on cash	101		(3,672)
Net (decrease) increase in cash and equivalents, and restricted cash and equivalents	(163,390)		99,534
Cash and equivalents, and restricted cash and equivalents, beginning of period	909,685		527,569
Cash and equivalents, and restricted cash and equivalents, end of period	$	746,295	$	627,103
Supplemental information related to non-cash activities
Purchases of property and equipment not yet paid at end of period	$	46,909	$	45,506
Operating lease right-of-use assets additions, net of terminations, impairments and other reductions	174,597		91,007
Supplemental information related to cash activities
Cash paid for interest	9,527		13,108
Cash paid for income taxes	108,086		16,565
Cash received from income tax refunds	10		442
Cash paid for amounts included in measurement of operating lease liabilities, net of abatements	133,673		156,486

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.


Abercrombie & Fitch Co.			7			2024 2Q Form 10-Q

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Abercrombie & Fitch Co.

Index for Notes to Condensed Consolidated Financial Statements (Unaudited)


		Page No.
Note 1.	NATURE OF BUSINESS	9
Note 2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	9
Note 3.	REVENUE RECOGNITION	11
Note 4.	NET INCOME (LOSS) PER SHARE	12
Note 5.	FAIR VALUE	12
Note 6.	PROPERTY AND EQUIPMENT, NET	13
Note 7.	LEASES	13
Note 8.	ASSET IMPAIRMENT	14
Note 9.	INCOME TAXES	14
Note 10.	BORROWINGS	15
Note 11.	SHARE-BASED COMPENSATION	16
Note 12.	DERIVATIVE INSTRUMENTS	18
Note 13.	ACCUMULATED OTHER COMPREHENSIVE LOSS	19
Note 14.	SEGMENT REPORTING	20


Abercrombie & Fitch Co.			8			2024 2Q Form 10-Q

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Abercrombie & Fitch Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. NATURE OF BUSINESS

Abercrombie & Fitch Co. (“A&F”), a company incorporated in Delaware in 1996, through its subsidiaries (collectively, A&F and its subsidiaries are referred to as the “Company”), is a global, digitally-led omnichannel retailer. The Company offers a broad assortment of apparel, personal care products and accessories for men, women and kids, which are sold primarily through its Company-owned stores and digital channels, as well as through various third-party arrangements.

The Company manages its business on a geographic basis, consisting of three reportable segments: Americas; Europe, the Middle East and Africa (“EMEA”); and Asia-Pacific (“APAC”). Corporate functions and other income and expenses are evaluated on a consolidated basis and are not allocated to the Company’s segments, and therefore are included as a reconciling item between segment and total operating income.

The Company’s brands include Abercrombie brands, which includes Abercrombie & Fitch and abercrombie kids, and Hollister brands, which includes Hollister and Gilly Hicks. These brands share a commitment to offering unique products of enduring quality and exceptional comfort that allow customers around the world to express their own individuality and style.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The accompanying Condensed Consolidated Financial Statements include historical financial statements of, and transactions applicable to, the Company and reflect its financial position, results of operations and cash flows.

The Company has interests in Emirati and Kuwaiti business ventures with Majid al Futtaim Lifestyle L.L.C. (“MAF”) and in a United States of America (the “U.S.”) business venture with Dixar L.L.C. (“Dixar”), each of which meets the definition of a variable interest entity (“VIE”). The purpose of the business ventures with MAF is to operate stores in the United Arab Emirates and Kuwait and the purpose of the business venture with Dixar is to hold the intellectual property related to the Social Tourist brand. The Company is deemed to be the primary beneficiary of these VIEs; therefore, the Company has consolidated the operating results, assets and liabilities of these VIEs, with the noncontrolling interests’ (“NCI”) portions of net income presented as net income attributable to NCI on the Condensed Consolidated Statements of Operations and Comprehensive Income and the NCI portion of stockholders’ equity presented as NCI on the Condensed Consolidated Balance Sheets.

Fiscal year

The Company’s fiscal year ends on the Saturday closest to January 31. This typically results in a fifty-two week year, but occasionally gives rise to an additional week, resulting in a fifty-three week year. Fiscal years are designated in the Condensed Consolidated Financial Statements and notes, as well as the remainder of this Quarterly Report on Form 10-Q, by the calendar year in which the fiscal year commences. All references herein to the Company’s fiscal years are as follows:

Fiscal year

Year ended/ending

Number of weeks

Fiscal 2023

February 3, 2024

Fiscal 2024

February 1, 2025

Fiscal 2025

January 31, 2026

Interim financial statements

The Condensed Consolidated Financial Statements as of August 3, 2024, and for the thirteen and twenty-six week periods ended August 3, 2024 and July 29, 2023, are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim consolidated financial statements. Accordingly, the Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto contained in A&F’s Annual Report on Form 10-K for Fiscal 2023 filed with the SEC on April 1, 2024 (the “Fiscal 2023 Form 10-K”). The February 3, 2024 consolidated balance sheet data, included herein, were derived from audited consolidated financial statements, but do not include all disclosures required by accounting principles generally accepted in the U.S. (“GAAP”).

In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments (which are of a normal recurring nature) necessary to state fairly, in all material respects, the financial position, results of operations and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for Fiscal 2024.


Abercrombie & Fitch Co.			9			2024 2Q Form 10-Q

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Use of estimates

The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. Due to the inherent uncertainty involved with estimates, actual results may differ. Additionally, these estimates and assumptions may change as a result of the impact of global economic conditions such as the uncertainty regarding a slowing economy, rising interest rates, continued inflation, fluctuation in foreign exchange rates, and geopolitical concerns, all of which could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

Recent accounting pronouncements

The Company reviews recent accounting pronouncements on a quarterly basis and has excluded discussion of those not applicable to the Company and those that did not have, or are not expected to have, a material impact on the Company’s consolidated financial statements. The following table provides a brief description of certain accounting pronouncements the Company has not yet adopted and that could affect the Company’s financial statements.

Accounting Standards Update (ASU)

Description

Effect on the financial statements or other significant matters

ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

The update modifies the disclosure/presentation requirements of reportable segments. The amendments in the update require the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit and loss, The amendments also require disclosure of all other segment items by reportable segment and a description of its composition. Additionally, the amendments require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. This update is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted.

Other than the new disclosure requirements, the adoption of this guidance will not have a significant impact on the Company's consolidated financial statements.

ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures

The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. For public business entities (“PBEs”), the requirement will be effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted.

Other than the new disclosure requirements, the adoption of this guidance will not have a significant impact on the Company's consolidated financial statements.

Condensed Consolidated Statements of Cash Flows reconciliation

The following table provides a reconciliation of cash and equivalents and restricted cash and equivalents to the amounts shown on the Condensed Consolidated Statements of Cash Flows:


(in thousands)	Location	August 3, 2024		February 3, 2024		July 29, 2023		January 28, 2023
Cash and equivalents	Cash and equivalents	$	738,402	$	900,884	$	617,339	$	517,602
Long-term restricted cash and equivalents	Other assets	7,893		8,801		9,764		9,967

Cash and equivalents and restricted cash and equivalents		$	746,295	$	909,685	$	627,103	$	527,569


Abercrombie & Fitch Co.			10			2024 2Q Form 10-Q

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Supply Chain Finance Program

Under the supply chain finance (“SCF”) program, which is administered by a third party, the Company’s vendors, at their sole discretion, are given the opportunity to sell receivables from the Company to a participating financial institution at a discount that leverages the Company’s credit profile. The commercial terms negotiated by the Company with its vendors are consistent, irrespective of whether a vendor participates in the SCF program. A participating vendor has the option to be paid by the financial institution earlier than the original invoice due date. The Company’s responsibility is limited to making payment on the terms originally negotiated by the Company with each vendor, regardless of whether the vendor sells its receivable to a financial institution. If a vendor chooses to participate in the SCF program, the Company pays the financial institution the stated amount of confirmed merchandise invoices on the stated maturity date, which is typically 75 days from the invoice date. The agreement with the financial institution does not require the Company to provide assets pledged as security or other forms of guarantees for the SCF program.

As of August 3, 2024 and February 3, 2024, $97.2 million and $72.4 million of SCF program liabilities were recorded in accounts payable in the Condensed Consolidated Balance Sheets, respectively, and reflected as a cash flow from operating activities in the Condensed Consolidated Statements of Cash Flows when settled.

The following table provides activity in the SCF program for the twenty-six weeks ended August 3, 2024:


	Twenty-Six Weeks Ended
(in thousands)		August 3, 2024
Confirmed obligations outstanding at the beginning of the period		$	72,376
Invoices confirmed during the period		186,761
Confirmed invoices paid during the period		(161,890)
Confirmed obligations outstanding at the end of the period		$	97,247

3. REVENUE RECOGNITION

Disaggregation of revenue

All revenues are recognized in net sales in the Condensed Consolidated Statements of Operations and Comprehensive Income. For information regarding the disaggregation of revenue, refer to Note 14, “SEGMENT REPORTING.”

Contract liabilities

The following table details certain contract liabilities representing unearned revenue as of August 3, 2024, February 3, 2024, July 29, 2023 and January 28, 2023:


(in thousands)	August 3, 2024		February 3, 2024		July 29, 2023		January 28, 2023
Gift card liability (1)	$	39,914	$	41,144	$	36,967	$	39,235
Loyalty programs liability	29,535		27,937		23,969		25,640

(1)Includes $14.8 million and $26.4 million of revenue recognized during the twenty-six weeks ended August 3, 2024 and July 29, 2023, respectively, that was included in the gift card liability at the beginning of February 3, 2024 and January 28, 2023, respectively.

The following table details recognized revenue associated with the Company’s gift card program and loyalty programs for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023:


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
(in thousands)	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
Revenue associated with gift card redemptions and gift card breakage	$	32,831	$	24,426	$	63,492	$	48,650
Revenue associated with reward redemptions and breakage related to the Company’s loyalty programs	14,712		11,636		28,670		23,918


Abercrombie & Fitch Co.			11			2024 2Q Form 10-Q

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4. NET INCOME PER SHARE

Net income per basic and diluted share attributable to A&F is computed based on the weighted-average number of outstanding shares of A&F’s Class A Common Stock, $0.01 par value (“Common Stock”). The following table provides additional information pertaining to net income per share attributable to A&F for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023:


	Thirteen Weeks Ended		Twenty-Six Weeks Ended
(in thousands)	August 3, 2024	July 29, 2023	August 3, 2024	July 29, 2023
Shares of Common Stock issued	103,300	103,300	103,300	103,300
Weighted-average treasury shares	(52,054)	(52,978)	(52,231)	(53,348)
Weighted-average — basic shares	51,246	50,322	51,069	49,952
Dilutive effect of share-based compensation awards	2,033	1,226	2,208	1,583
Weighted-average — diluted shares	53,279	51,548	53,277	51,535
Anti-dilutive shares (1)	204	1,453	237	1,779

(1)Reflects the total number of shares related to outstanding share-based compensation awards that have been excluded from the computation of net income per diluted share because the impact would have been anti-dilutive. Unvested shares related to restricted stock units with performance-based and market-based vesting conditions can achieved from zero up to 200% of their target vesting amount and are reflected at the maximum vesting amount less any dilutive portion.

5. FAIR VALUE

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The inputs used to measure fair value are prioritized based on a three-level hierarchy. The three levels of inputs to measure fair value are as follows:

•Level 1—inputs are unadjusted quoted prices for identical assets or liabilities that are available in active markets that the Company can access at the measurement date.

•Level 2—inputs are other than quoted market prices included within Level 1 that are observable for assets or liabilities, directly or indirectly.

•Level 3—inputs to the valuation methodology are unobservable.

The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. The following table provides the three levels of the hierarchy and the distribution of the Company’s assets measured at fair value on a recurring basis, as of August 3, 2024 and February 3, 2024:


	Assets and Liabilities at Fair Value as of August 3, 2024
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents (1)	$	135,547	$	27,609	$	—	$	163,156
Marketable securities (2)	—		15,014		—		15,014
Derivative instruments (3)	—		390		—		390
Rabbi Trust assets (4)	1,164		53,207		—		54,371
Restricted cash equivalents (1)	3,300		1,458		—		4,758
Total assets	$	140,011	$	97,678	$	—	$	237,689

Liabilities:
Derivative instruments (3)	$	—	$	360	$	—	$	360
Total liabilities	$	—	$	360	$	—	$	360


	Assets and Liabilities at Fair Value as of February 3, 2024
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents (1)	$	349,174	$	26,975	$	—	$	376,149

Derivative instruments (3)	—		1,092		—		1,092
Rabbi Trust assets (4)	1,164		52,521		—		53,685
Restricted cash equivalents (1)	4,282		1,420		—		5,702
Total assets	$	354,620	$	82,008	$	—	$	436,628

Liabilities:
Derivative instruments (3)	$	—	$	539	$	—	$	539
Total liabilities	$	—	$	539	$	—	$	539


Abercrombie & Fitch Co.			12			2024 2Q Form 10-Q

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(1) Level 1 assets consisted of investments in money market funds and U.S. treasury bills. Level 2 assets consisted of time deposits with original maturities of less than three months.

(2) Level 2 assets consisted of time deposits with original maturities greater than three months, but less than one year.

(3) Level 2 assets and liabilities consisted primarily of foreign currency exchange forward contracts.

(4) Level 1 assets consisted of investments in money market funds. Level 2 assets consisted of trust-owned life insurance policies.

The Company’s Level 2 assets and liabilities consisted of:

•Trust-owned life insurance policies, which were valued using the cash surrender value of the life insurance policies;

•Time deposits with original maturities of three months or less were recorded at cost, approximating fair value, due to the short-term nature of these investments;

•Time deposits with original maturities greater than three months were recorded at fair value, which approximates their carrying value, and are primarily based upon quoted vendor or broker priced securities in active markets; and

•Derivative instruments, primarily foreign currency exchange forward contracts, which were valued using quoted market prices of the same or similar instruments, adjusted for counterparty risk.

Fair value of long-term borrowings

The Company’s borrowings were carried at historical cost in the accompanying Condensed Consolidated Balance Sheet as of February 3, 2024. On July 15, 2024 (the “Redemption Date”), Abercrombie & Fitch Management Co. (“A&F Management”) redeemed all of its outstanding senior secured notes at par value, which had a fixed 8.75% interest rate and were scheduled to mature on July 15, 2025 (the “Senior Secured Notes”). As of the Redemption Date, the Senior Secured Notes were no longer deemed outstanding.

6. PROPERTY AND EQUIPMENT, NET

The following table provides property and equipment, net as of August 3, 2024 and February 3, 2024:


(in thousands)	August 3, 2024		February 3, 2024
Property and equipment, at cost	$	2,554,699	$	2,509,184
Less: Accumulated depreciation and amortization	(2,002,246)		(1,971,151)
Property and equipment, net	$	552,453	$	538,033

Refer to Note 8, “ASSET IMPAIRMENT,” for details related to property and equipment impairment charges incurred during the thirteen and twenty-six ended August 3, 2024 and July 29, 2023.

7. LEASES

The Company is a party to leases related to its Company-operated retail stores as well as for certain of its distribution centers, office space, information technology and equipment.

The following table provides a summary of the Company’s operating lease costs for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023:


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
(in thousands)	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
Single lease cost (1)	$	64,163	$	62,655	$	124,143	$	120,995
Variable lease cost (2)	45,197		51,782		91,366		87,477
Operating lease right-of-use asset impairment (3)	472		—		811		1,414
Sublease income	(986)		(996)		(1,970)		(1,980)
Total operating lease cost	$	108,846	$	113,441	$	214,350	$	207,906

(1)Includes amortization and interest expense associated with operating lease right-of-use assets and the impact from remeasurement of operating lease liabilities.

(2)Includes variable payments related to both lease and nonlease components, such as contingent rent payments made by the Company based on performance, and payments related to taxes, insurance, and maintenance costs.

(3)Refer to Note 8, “ASSET IMPAIRMENT,” for details related to operating lease right-of-use asset impairment charges.

The Company had minimum commitments related to operating lease contracts that have not yet commenced, primarily for certain Company-operated retail stores, of approximately $107.1 million as of August 3, 2024.


Abercrombie & Fitch Co.			13			2024 2Q Form 10-Q

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8. ASSET IMPAIRMENT

The following table provides asset impairment charges for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023:


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
(in thousands)	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
Operating lease right-of-use asset impairment	$	471	$	—	$	810	$	1,414
Property and equipment asset impairment	230		—		757		3,022
Total asset impairment	$	701	$	—	$	1,567	$	4,436

Asset impairment charges for the twenty-six weeks ended August 3, 2024 and July 29, 2023 related to certain of the Company’s store assets. The store impairment charges for the twenty-six weeks ended August 3, 2024 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $6.0 million, including $5.3 million related to operating lease right-of-use assets.

9. INCOME TAXES

The quarterly provision for income taxes is based on the current estimate of the annual effective income tax rate and the tax effect of discrete items occurring during the quarter. The Company’s quarterly provision and the estimate of the annual effective tax rate are subject to significant variation due to several factors. These factors include variability in the pre-tax jurisdictional mix of earnings, changes in how the Company does business including entering into new businesses or geographies, changes in foreign currency exchange rates, changes in laws, regulations, interpretations and administrative practices, relative changes in expenses or losses for which tax benefits are not recognized and the impact of discrete items. In addition, jurisdictions where the Company anticipates an ordinary loss for the fiscal year for which the Company does not anticipate future tax benefits are excluded from the overall computation of estimated annual effective tax rate and no tax benefits are recognized in the period related to losses in such jurisdictions. The impact of these items on the effective tax rate will be greater at lower levels of pre-tax earnings.

Impact of valuation allowances

During the thirteen and twenty-six weeks ended August 3, 2024, the Company did not recognize income tax benefits on $7.0 million and $14.6 million respectively, of pretax losses, primarily in Switzerland, resulting in adverse tax impacts of $1.1 million and $2.2 million, respectively.

As of August 3, 2024, the Company had foreign net deferred tax assets of approximately $40.3 million, including $9.7 million, $7.7 million, and $13.0 million in China, Japan and the United Kingdom, respectively. While the Company believes that these net deferred tax assets are more-likely-than-not to be realized, it is not a certainty, as the Company continues to evaluate and respond to emerging situations. Should circumstances change, the net deferred tax assets may become subject to additional valuation allowances in the future. Additional valuation allowances would result in additional tax expense.

During the thirteen and twenty-six weeks ended July 29, 2023, the Company did not recognize income tax benefits on $22.7 million and $43.0 million of pretax losses, primarily in Switzerland, resulting in adverse tax impacts of $3.4 million and $6.5 million, respectively.

As of February 3, 2024, there were approximately $7.6 million, $7.5 million, and $12.6 million of net deferred tax assets in China, Japan, and the United Kingdom, respectively.

Share-based compensation

Refer to Note 11, “SHARE-BASED COMPENSATION,” for details on income tax benefits and charges related to share-based compensation awards during the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023.


Abercrombie & Fitch Co.			14			2024 2Q Form 10-Q

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10. BORROWINGS

Senior Secured Notes

On the Redemption Date, A&F redeemed all of its outstanding 8.75% Senior Secured Notes due July 15, 2025, which had an aggregate principal amount of $214 million, at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest to, but excluding, the Redemption Date, and incurred a $0.9 million loss on extinguishment of debt, recognized in interest expense on the Condensed Consolidated Statements of Operations and Comprehensive Income. During the twenty-six weeks ended August 3, 2024, A&F Management repurchased $9.3 million in the open market and redeemed $214 million of its Senior Secured Notes and incurred a loss on extinguishment of debt of $1.1 million. As of the Redemption Date, the Senior Secured Notes were no longer deemed outstanding and interest on the Senior Secured Notes ceased to accrue.

ABL Facility

On August 2, 2024, A&F, as parent and a guarantor, A&F Management, as lead borrower, and certain of A&F’s direct and indirect wholly-owned subsidiaries, as additional borrowers and guarantors, entered into the Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”), together with the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent for the lenders. The Second Amendment amends the existing Amended and Restated Credit Agreement, dated as of April 29, 2021 (the “ABL Credit Agreement”), which provided for a $400 million senior secured asset-based revolving credit facility. The Company incurred customary fees and expenses in connection with the entry into the Second Amendment.

The Second Amendment amended the ABL Credit Agreement to, among other things:

•increase the aggregate commitments thereunder to $500 million;

•establish a $100 million sub-facility for the benefit of Abfico Netherlands Distribution B.V. (“Abfico”) and AFH Stores UK Limited (“AFH UK”) that is (i) secured by a first priority security interest in all assets (subject to specified exclusions) of each of Abfico and AFH UK, (ii) guaranteed by A&F and certain of its domestic direct and indirect wholly-owned subsidiaries and (iii) subject to a borrowing base as described therein;

•extend the maturity date from April 29, 2026 to August 2, 2029;

•increase the letter of credit sub-limit from $50 million to $62.5 million;

•decrease the swing line availability from $50 million to $30 million;

•decrease the unused line fee from a variable rate of 25 basis points to 37.5 basis points to a flat rate of 25 basis points; and

•increase pricing of the interest rate margin applicable to borrowings as follows:

◦from 1.25% to 1.50% when average availability is greater than or equal to 50% of the Loan Cap (as defined in the Second Amendment); and

◦from 1.50% to 1.75% when average availability is less than 50% of the Loan Cap.

The ABL Facility is subject to a borrowing base, consisting primarily of inventory located in the U.S., the United Kingdom and the Netherlands, with a letter of credit sub-limit of $62.5 million, a swing line loan sub-limit of $30 million, and an accordion feature allowing A&F to increase the revolving commitment by up to $150 million subject to specified conditions. The ABL Facility is available for working capital, capital expenditures, and other general corporate purposes.

As of August 3, 2024, availability under the ABL Facility was $478.4 million, net of $0.4 million in outstanding stand-by letters of credit. As the Company must maintain excess availability equal to the greater of 10% of the loan cap or $36 million under the ABL Facility, borrowing capacity available to the Company under the ABL Facility was $430.5 million as of August 3, 2024.

Representations, warranties and covenants

The agreements related to the ABL Facility contain various representations, warranties and restrictive covenants that, among other things and subject to specified exceptions, restrict the ability of the Company and its subsidiaries to: grant or incur liens; incur, assume or guarantee additional indebtedness; sell or otherwise dispose of assets, including capital stock of subsidiaries; make investments in certain subsidiaries; pay dividends, make distributions or redeem or repurchase capital stock; change the nature of their business; and consolidate or merge with or into, or sell substantially all of the assets of the Company or A&F Management to another entity.

Certain of the agreements related to the ABL Facility also contain certain affirmative covenants, including reporting requirements such as delivery of financial statements, certificates and notices of certain events, maintaining insurance and providing additional guarantees and collateral in certain circumstances.

The Company was in compliance with all debt covenants under these agreements as of August 3, 2024.


Abercrombie & Fitch Co.			15			2024 2Q Form 10-Q

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11. SHARE-BASED COMPENSATION

Financial statement impact

The following table provides share-based compensation expense and the related income tax impacts for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023:


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
(in thousands)	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
Share-based compensation expense	$	9,233	$	11,559	$	20,596	$	19,647
Income tax benefits associated with share-based compensation expense recognized	1,240		1,079		2,518		2,083

The following table provides discrete income tax benefits and charges related to share-based compensation awards during the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023:



	Thirteen Weeks Ended				Twenty-Six Weeks Ended
(in thousands)	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
Income tax discrete benefits realized for tax deductions related to the issuance of shares	$	2,778	$	325	$	17,332	$	1,442
Income tax discrete charges realized upon cancellation of stock appreciation rights	—		—		—		(101)
Total income tax discrete benefits related to share-based compensation awards	$	2,778	$	325	$	17,332	$	1,341

The following table provides the amount of employee tax withheld by the Company upon the issuance of shares associated with restricted stock units vesting and the exercise of stock appreciation rights for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023:


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
(in thousands)	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
Employee tax withheld upon issuance of shares (1)	$	2,052	$	410	$	67,225	$	18,769

(1) Classified within financing activities on the Condensed Consolidated Statements of Cash Flows.

Restricted stock units

The following table provides the summarized activity for restricted stock units for the twenty-six weeks ended August 3, 2024:


	Service-based Restricted Stock Units			Performance-based Restricted Stock Units			Market-based Restricted Stock Units
	Number of Underlying Shares	Weighted- Average Grant Date Fair Value		Number of Underlying Shares	Weighted- Average Grant Date Fair Value		Number of Underlying Shares	Weighted- Average Grant Date Fair Value
Unvested at February 3, 2024	1,886,085	$	27.12	521,212	$	30.03	260,619	$	43.90
Granted	234,497	122.67		53,775	120.56		26,895	180.71
Adjustments for performance achievement	—	—		150,446	32.10		75,227	50.34
Vested	(828,274)	24.75		(300,892)	32.10		(150,454)	50.34
Forfeited	(56,716)	33.84		—	—		—	—
Unvested at August 3, 2024 (1)	1,235,592	$	46.61	424,541	$	40.76	212,287	$	58.95

(1) Unvested shares related to restricted stock units with performance-based and market-based vesting conditions are reflected at 100% of their target vesting amount in the table above. Unvested shares related to restricted stock units with performance-based and market-based vesting conditions can be achieved from zero up to 200% of their target vesting amount.

The following table provides the unrecognized compensation cost and the remaining weighted-average period over which these costs are expected to be recognized for restricted stock units as of August 3, 2024:


Abercrombie & Fitch Co.			16			2024 2Q Form 10-Q

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	Service-based Restricted Stock Units		Performance-based Restricted Stock Units		Market-based Restricted Stock Units
Unrecognized compensation cost (in thousands)	$	48,233	$	19,172	$	7,105
Remaining weighted-average period cost is expected to be recognized (years)	1.3		1.4		1.4

The following table provides additional information pertaining to restricted stock units for the twenty-six weeks ended August 3, 2024 and July 29, 2023:


	Twenty-Six Weeks Ended
(in thousands)	August 3, 2024		July 29, 2023
Service-based restricted stock units:
Total grant date fair value of awards granted	$	28,766	$	25,315
Total grant date fair value of awards vested	20,500		17,663

Performance-based restricted stock units:
Total grant date fair value of awards granted	6,483		6,300
Total grant date fair value of awards vested	9,659		—

Market-based restricted stock units:
Total grant date fair value of awards granted	4,860		4,576
Total grant date fair value of awards vested	7,574		16,040

The following table provides the weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the twenty-six weeks ended August 3, 2024 and July 29, 2023:


	Twenty-Six Weeks Ended
	August 3, 2024			July 29, 2023
Grant date market price	$	120.56		$	28.36
Fair value	180.71			41.20

Price volatility	59		%	63		%
Expected term (years)	2.9			2.9
Risk-free interest rate	4.3		%	4.6		%
Dividend yield	—			—
Average volatility of peer companies	51.8			66.0
Average correlation coefficient of peer companies	0.4866			0.5295

Stock appreciation rights

The following table provides the summarized stock appreciation rights activity for the twenty-six weeks ended August 3, 2024:


	Number of Underlying Shares	Weighted-Average Exercise Price		Aggregate Intrinsic Value (in thousands)		Weighted-Average Remaining Contractual Life (years)
Outstanding at February 3, 2024	25,600	$	29.29

Exercised	(25,600)	29.29
Forfeited or expired	—	—
Outstanding at August 3, 2024	—	$	—	$	—	0.0
Stock appreciation rights exercisable at August 3, 2024	—	$	—	$	—	0.0

As of August 3, 2024, no stock appreciation rights remain outstanding.

The following table provides additional information pertaining to stock appreciation rights exercised during the twenty-six weeks ended August 3, 2024 and July 29, 2023:


(in thousands)	August 3, 2024		July 29, 2023
Total grant date fair value of awards exercised	$	267	$	115


Abercrombie & Fitch Co.			17			2024 2Q Form 10-Q

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12. DERIVATIVE INSTRUMENTS

The Company is exposed to risks associated with changes in foreign currency exchange rates and uses derivative instruments, primarily forward contracts, to manage the financial impacts of these exposures. The Company does not use forward contracts to engage in currency speculation and does not enter into derivative financial instruments for trading purposes.

The Company uses derivative instruments, primarily foreign currency exchange forward contracts designated as cash flow hedges, to hedge the foreign currency exchange rate exposure associated with forecasted foreign-currency-denominated intercompany inventory sales to foreign subsidiaries and the related settlement of the foreign-currency-denominated intercompany receivables. Fluctuations in foreign currency exchange rates will either increase or decrease the Company’s intercompany equivalent cash flows and affect the Company’s U.S. dollar earnings. Gains or losses on the foreign currency exchange forward contracts that are used to hedge these exposures are expected to partially offset this variability. Foreign currency exchange forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed upon settlement date. These foreign currency exchange forward contracts typically have a maximum term of twelve months. The sale of the inventory to the Company’s customers will result in the reclassification of related derivative gains and losses that are reported in AOCL into earnings.

The Company also uses foreign currency exchange forward contracts to hedge certain foreign-currency-denominated net monetary assets/liabilities. Examples of monetary assets/liabilities include cash balances, receivables and payables. Fluctuations in foreign currency exchange rates result in transaction gains or losses being recorded in earnings, as GAAP requires that monetary assets/liabilities be remeasured at the spot exchange rate at quarter-end and upon settlement. The Company has chosen not to apply hedge accounting to these instruments because there are no anticipated differences in the timing of gain or loss recognition on the hedging instruments and the hedged items.

As of August 3, 2024, the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge either a portion, or all, of forecasted foreign-currency-denominated intercompany transactions:


(in thousands)	Notional Amount (1)
Euro	$	51,655
British pound	60,046
Canadian dollar	22,045

(1) Amounts reported are the U.S. Dollar notional amounts outstanding as of August 3, 2024.

As of August 3, 2024, foreign currency exchange forward contracts that were entered into to hedge foreign-currency-denominated net monetary assets and liabilities were as follows:


(in thousands)	Notional Amount (1)
British pound	$	11,557

(1) Amounts reported are the U.S. Dollar notional amounts outstanding as of August 3, 2024.

The fair value of derivative instruments is determined using quoted market prices of the same or similar instruments, adjusted for counterparty risk. The following table provides the location and amounts of derivative fair values of foreign currency exchange forward contracts on the Condensed Consolidated Balance Sheets as of August 3, 2024 and February 3, 2024:


(in thousands)	Location	August 3, 2024		February 3, 2024		Location	August 3, 2024		February 3, 2024
Derivatives designated as cash flow hedging instruments	Other current assets	$	357	$	1,090	Accrued expenses	$	360	$	539
Derivatives not designated as hedging instruments	Other current assets	33		2		Accrued expenses	—		—
Total		$	390	$	1,092		$	360	$	539

The following table provides information pertaining to derivative gains or losses from foreign currency exchange forward contracts designated as cash flow hedging instruments for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023:




	Thirteen Weeks Ended				Twenty-Six Weeks Ended
(in thousands)	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
(Loss) gain recognized in AOCL (1)	$	(587)	$	558	$	442	$	51
Gain (loss) reclassified from AOCL to cost of sales, exclusive of depreciation and amortization (2)	527		(1,708)		$	1,010	$	(2,614)

(1)Amount represents the change in fair value of derivative instruments.

(2)Amount represents gain (loss) reclassified from AOCL to cost of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) when the hedged item affects earnings, which is when merchandise is converted to cost of sales, exclusive of depreciation and amortization.

Substantially all of the unrealized gain will be recognized in costs of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statements of Operations and Comprehensive Income over the next twelve months.


Abercrombie & Fitch Co.			18			2024 2Q Form 10-Q

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The following table provides additional information pertaining to derivative gains or losses from foreign currency exchange forward contracts not designated as hedging instruments for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023:


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
(in thousands)	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
(Loss) gain, net recognized in other operating income, net	$	(219)	$	(540)	$	443	$	(1,087)

13. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables provide activity in AOCL for the thirteen and twenty-six weeks ended August 3, 2024:


	Thirteen Weeks Ended August 3, 2024
(in thousands)	Foreign Currency Translation Adjustment		Unrealized Gain (Loss) on Derivative Financial Instruments		Total
Beginning balance at May 4, 2024	$	(138,369)	$	1,087	$	(137,282)
Other comprehensive income (loss) before reclassifications	3,441		(587)		2,854
Reclassified gain from AOCL (1)	—		(527)		(527)
Tax effect	—		(36)		(36)
Other comprehensive income (loss) after reclassifications	3,441		(1,150)		2,291
Ending balance at August 3, 2024	$	(134,928)	$	(63)	$	(134,991)

	Twenty-Six Weeks Ended August 3, 2024
(in thousands)	Foreign Currency Translation Adjustment		Unrealized Gain (Loss) on Derivative Financial Instruments		Total
Beginning balance at February 3, 2024	$	(136,532)	$	564	$	(135,968)
Other comprehensive income before reclassifications	1,604		442		2,046
Reclassified gain from AOCL (1)	—		(1,010)		(1,010)
Tax effect	—		(59)		(59)
Other comprehensive income (loss) after reclassifications	1,604		(627)		977
Ending balance at August 3, 2024	$	(134,928)	$	(63)	$	(134,991)

(1) Amount represents gain reclassified from AOCL to cost of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statements of Operations and Comprehensive Income.

The following tables provide activity in AOCL for the thirteen and twenty-six weeks ended July 29, 2023:


	Thirteen Weeks Ended July 29, 2023
(in thousands)	Foreign Currency Translation Adjustment		Unrealized Gain (Loss) on Derivative Financial Instruments		Total
Beginning balance at April 29, 2023	$	(132,342)	$	(4,469)	$	(136,811)
Other comprehensive (loss) income before reclassifications	(3,836)		558		(3,278)
Reclassified loss from AOCL (1)	—		1,708		1,708
Tax effect	—		(24)		(24)
Other comprehensive (loss) income after reclassifications	(3,836)		2,242		(1,594)
Ending balance at July 29, 2023	$	(136,178)	$	(2,227)	$	(138,405)

	Twenty-Six Weeks Ended July 29, 2023
(in thousands)	Foreign Currency Translation Adjustment		Unrealized Gain (Loss) on Derivative Financial Instruments		Total
Beginning balance at January 28, 2023	$	(132,653)	$	(4,874)	$	(137,527)
Other comprehensive (loss) income before reclassifications	(3,525)		51		(3,474)
Reclassified loss from AOCL (1)	—		2,614		2,614
Tax effect	—		(18)		(18)
Other comprehensive (loss) income after reclassifications	(3,525)		2,647		(878)
Ending balance at July 29, 2023	$	(136,178)	$	(2,227)	$	(138,405)

(1) Amount represents loss reclassified from AOCL to cost of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statements of Operations and Comprehensive Income.


Abercrombie & Fitch Co.			19			2024 2Q Form 10-Q

Table of Contents

14. SEGMENT REPORTING

The Company’s reportable segments are based on the financial information the chief operating decision maker (“CODM”) uses to allocate resources and assess performance of its business.

The Company manages its business on a geographic basis, consisting of three reportable segments: Americas; EMEA; and APAC. Corporate functions and other income and expenses are evaluated on a consolidated basis and are not allocated to the Company’s segments, and therefore are included as a reconciling item between segment and total operating income. The Americas reportable segment includes the results of operations in North America and South America. The EMEA reportable segment includes the results of operations in Europe, the Middle East and Africa. The APAC reportable segment includes the results of operations in the Asia-Pacific region, including Asia and Oceania. Intersegment sales and transfers are recorded at cost and are treated as a transfer of inventory. All intercompany revenues are eliminated in consolidation and are not reviewed when evaluating segment performance.

The group comprised of the Company’s (i) Chief Executive Officer and (ii) Chief Financial Officer and Chief Operating Officer functions as the Company’s CODM. The Company’s CODM manages business operations and evaluates the performance of each segment based on the net sales and operating income (loss) of the segment.

Net sales by segment are presented by attributing revenues on the basis of the segment that fulfills the order. Operating income for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributed to the segment. Corporate/other expenses include expenses incurred that are not directly attributed to a reportable segment and primarily relate to corporate or global functions such as design, sourcing, brand management, corporate strategy, information technology, finance, treasury, legal, human resources, and other corporate support services, as well as certain globally managed components of the planning, merchandising, and marketing functions.

The Company reports inventories by segment as that information is used by the CODM in determining allocation of resources to the segments. The Company does not report its other assets by segment as that information is not used by the CODM in assessing segment performance or allocating resources.

The following tables provide the Company’s segment information as of August 3, 2024 and February 3, 2024, and for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023:

Net Sales

Thirteen Weeks Ended

Twenty-Six Weeks Ended

(in thousands)

August 3, 2024

July 29, 2023