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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 May 4, 2024
or
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)
Delaware31-1469076
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
6301 Fitch Path,New Albany,Ohio43054
(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 classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.01 Par ValueANFNew 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 filerxAccelerated 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 June 5, 2024
$0.01 Par Value51,105,328


Table of Contents


Abercrombie & Fitch Co.
2
2024 1Q Form 10-Q

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
May 4, 2024April 29, 2023
Net sales$1,020,730 $835,994 
Cost of sales, exclusive of depreciation and amortization343,273 326,200 
Gross profit677,457 509,794 
Stores and distribution expense371,686 336,049 
Marketing, general and administrative expense177,880 142,631 
Other operating income, net(1,958)(2,894)
Operating income129,849 34,008 
Interest expense5,780 7,458 
Interest income(10,803)(4,015)
Interest (income) expense, net(5,023)3,443 
Income before income taxes134,872 30,565 
Income tax expense19,794 12,718 
Net income115,078 17,847 
Less: Net income attributable to noncontrolling interests1,228 1,276 
Net income attributable to A&F$113,850 $16,571 
Net income per share attributable to A&F
Basic$2.24 $0.33 
Diluted$2.14 $0.32 
Weighted-average shares outstanding
Basic50,893 49,574 
Diluted53,276 51,467 
Other comprehensive (loss) income
Foreign currency translation adjustments, net of tax$(1,837)$311 
Derivative financial instruments, net of tax523 405 
Other comprehensive (loss) income(1,314)716 
Comprehensive income113,764 18,563 
Less: Comprehensive income attributable to noncontrolling interests1,228 1,276 
Comprehensive income attributable to A&F$112,536 $17,287 
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
Abercrombie & Fitch Co.
3
2024 1Q Form 10-Q

Abercrombie & Fitch Co.
Condensed Consolidated Balance Sheets
(Thousands, except par value amounts)
(Unaudited)

May 4, 2024February 3, 2024
Assets
Current assets:
Cash and equivalents$864,195 $900,884 
Receivables93,605 78,346 
Inventories449,267 469,466 
Other current assets102,516 88,569 
Total current assets1,509,583 1,537,265 
Property and equipment, net540,697 538,033 
Operating lease right-of-use assets699,471 678,256 
Other assets220,334 220,679 
Total assets$2,970,085 $2,974,233 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$266,925 $296,976 
Accrued expenses402,786 436,655 
Short-term portion of operating lease liabilities188,851 179,625 
Income taxes payable61,137 53,564 
Total current liabilities919,699 966,820 
Long-term liabilities:
Long-term portion of operating lease liabilities656,862 646,624 
Long-term borrowings, net213,102 222,119 
Other liabilities89,252 88,683 
Total long-term liabilities959,216 957,426 
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 capital400,807 421,609 
Retained earnings2,745,382 2,643,629 
Accumulated other comprehensive loss, net of tax (“AOCL”)(137,282)(135,968)
Treasury stock, at average cost: 52,198 and 52,800 shares as of May 4, 2024 and February 3, 2024, respectively
(1,931,054)(1,895,143)
Total Abercrombie & Fitch Co. stockholders’ equity1,078,886 1,035,160 
Noncontrolling interests12,284 14,827 
Total stockholders’ equity1,091,170 1,049,987 
Total liabilities and stockholders’ equity$2,970,085 $2,974,233 

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
Abercrombie & Fitch Co.
4
2024 1Q Form 10-Q

Abercrombie & Fitch Co.
Condensed Consolidated Statements of Stockholders’ Equity
(Thousands, except per share amounts)
(Unaudited)

Thirteen Weeks Ended May 4, 2024
 Common StockPaid-in
capital
Non-controlling interestsRetained
earnings
AOCLTreasury stockTotal
stockholders’
equity
 Shares
outstanding
Par
value
SharesAt average
cost
Balance, February 3, 202450,500 $1,033 $421,609 $14,827 $2,643,629 $(135,968)52,800 $(1,895,143)$1,049,987 
Net income— — — 1,228 113,850 — — — 115,078 
Purchase of Common Stock(119)— — — — — 119 (15,000)(15,000)
Share-based compensation issuances and exercises721 — (32,165)— (12,097)— (721)(20,911)(65,173)
Share-based compensation expense— — 11,363 — — — — — 11,363 
Derivative financial instruments, net of tax— — — — — 523 — — 523 
Foreign currency translation adjustments, net of tax— — — — — (1,837)— — (1,837)
Distributions to noncontrolling interests, net— — — (3,771)— — — — (3,771)
Ending balance at May 4, 202451,102 $1,033 $400,807 $12,284 $2,745,382 $(137,282)52,198 $(1,931,054)$1,091,170 
Thirteen Weeks Ended April 29, 2023
 Common StockPaid-in
capital
Non-controlling interestsRetained
earnings
AOCLTreasury stockTotal
stockholders’
equity
 Shares
outstanding
Par
value
SharesAt average
cost
Balance, January 28, 202349,002 $1,033 $416,255 $11,728 $2,368,815 $(137,527)54,298 $(1,953,735)$706,569 
Net income— — — 1,276 16,571 — — — 17,847 
Share-based compensation issuances and exercises1,060 — (23,644)— (40,864)— (1,060)46,149 (18,359)
Share-based compensation expense— — 8,088 — — — — — 8,088 
Derivative financial instruments, net of tax— — — — — 405 — — 405 
Foreign currency translation adjustments, net of tax— — — — — 311 — — 311 
Distributions to noncontrolling interests, net— — — (3,888)— — — — (3,888)
Ending balance at April 29, 202350,062 $1,033 $400,699 $9,116 $2,344,522 $(136,811)53,238 $(1,907,586)$710,973 
Abercrombie & Fitch Co.
5
2024 1Q Form 10-Q

Abercrombie & Fitch Co.
Condensed Consolidated Statements of Cash Flows
(Thousands)
(Unaudited)
 Thirteen Weeks Ended
 May 4, 2024April 29, 2023
Operating activities
Net income$115,078 $17,847 
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization37,689 36,028 
Asset impairment866 4,436 
Loss on disposal811 489 
Provision for deferred income taxes3,064 9,689 
Share-based compensation11,363 8,088 
Loss on extinguishment of debt168  
Changes in assets and liabilities:
Inventories19,854 57,662 
Accounts payable and accrued expenses(65,715)(100,802)
Operating lease right-of-use assets and liabilities(1,660)(26,152)
Income taxes7,573 3,000 
Other assets(34,634)(10,957)
Other liabilities553 112 
Net cash provided by (used for) operating activities95,010 (560)
Investing activities
Purchases of property and equipment(38,886)(46,391)
Net cash used for investing activities(38,886)(46,391)
Financing activities
Purchase of senior secured notes(9,425) 
Purchases of Common Stock(15,000) 
Acquisition of Common stock for tax withholding obligations
(65,173)(18,359)
Other financing activities(3,353)(3,597)
Net cash used for financing activities(92,951)(21,956)
Effect of foreign currency exchange rates on cash(857)(1,998)
Net decrease in cash and equivalents, and restricted cash and equivalents(37,684)(70,905)
Cash and equivalents, and restricted cash and equivalents, beginning of period909,685 527,569 
Cash and equivalents, and restricted cash and equivalents, end of period$872,001 $456,664 
Supplemental information related to non-cash activities
Purchases of property and equipment not yet paid at end of period$40,998 $48,006 
Operating lease right-of-use assets additions, net of terminations, impairments and other reductions73,686 17,857 
Supplemental information related to cash activities
Cash paid for interest 174  
Cash paid for income taxes8,454 3,007 
Cash received from income tax refunds7 411 
Cash paid for amounts included in measurement of operating lease liabilities, net of abatements64,052 85,156 
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
Abercrombie & Fitch Co.
6
2024 1Q Form 10-Q

Abercrombie & Fitch Co.
Index for Notes to Condensed Consolidated Financial Statements (Unaudited)


Abercrombie & Fitch Co.
7
2024 1Q Form 10-Q

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 Fashion 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 yearYear ended/endingNumber of weeks
Fiscal 2023February 3, 202453
Fiscal 2024February 1, 202552
Fiscal 2025January 31, 202652

Interim financial statements

The Condensed Consolidated Financial Statements as of May 4, 2024, and for the thirteen week periods ended May 4, 2024 and April 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.
8
2024 1Q Form 10-Q

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, the ongoing conflicts between Russia and Ukraine or Israel and Hamas 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 that the company has adopted.

Accounting Standards Update (ASU)DescriptionEffect 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.
The Company is currently evaluating the impact that this guidance will have on its consolidated financial statements and accompanying notes
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)LocationMay 4, 2024February 3, 2024April 29, 2023January 28, 2023
Cash and equivalentsCash and equivalents$864,195 $900,884 $446,952 $517,602 
Long-term restricted cash and equivalentsOther assets7,807 8,801 9,712 9,967 
Cash and equivalents and restricted cash and equivalents$872,001 $909,685 $456,664 $527,569 
Abercrombie & Fitch Co.
9
2024 1Q Form 10-Q

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 May 4, 2024 and February 3, 2024, $58.0 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 thirteen weeks ended May 4, 2024
Thirteen Weeks Ended
(in thousands)May 4, 2024
Confirmed obligations outstanding at the beginning of the period$72,376 
Invoices confirmed during the period75,468 
Confirmed invoices paid during the period(89,816)
Confirmed obligations outstanding at the end of the period$58,028 

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 May 4, 2024, February 3, 2024, April 29, 2023 and January 28, 2023:
(in thousands)May 4, 2024February 3, 2024April 29, 2023January 28, 2023
Gift card liability (1)
$40,291 $41,144 $37,630 $39,235 
Loyalty programs liability27,546 27,937 23,552 25,640 
(1)Includes $9.9 million and $13.4 million of revenue recognized during the thirteen weeks ended May 4, 2024 and April 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 weeks ended May 4, 2024 and April 29, 2023:
Thirteen Weeks Ended
(in thousands)May 4, 2024April 29, 2023
Revenue associated with gift card redemptions and gift card breakage$30,661 $24,224 
Revenue associated with reward redemptions and breakage related to the Company’s loyalty programs13,958 12,282 

Abercrombie & Fitch Co.
10
2024 1Q Form 10-Q

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 weeks ended May 4, 2024 and April 29, 2023:
 Thirteen Weeks Ended
(in thousands)May 4, 2024April 29, 2023
Shares of Common Stock issued103,300 103,300 
Weighted-average treasury shares(52,407)(53,726)
Weighted-average — basic shares50,893 49,574 
Dilutive effect of share-based compensation awards2,383 1,893 
Weighted-average — diluted shares53,276 51,467 
Anti-dilutive shares (1)
436 2,834 
(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 May 4, 2024 and February 3, 2024:
Assets and Liabilities at Fair Value as of May 4, 2024
(in thousands)Level 1Level 2Level 3Total
Assets:
Cash equivalents (1)
$302,285 $17,912 $ $320,197 
Derivative instruments (2)
 1,613  1,613 
Rabbi Trust assets (3)
1,164 52,863  54,027 
Restricted cash equivalents (1)
3,285 1,441  4,726 
Total assets$306,734 $73,829 $ $380,563 
Liabilities:
Derivative instruments (2)
$ $117 $ $117 
Total liabilities$ $117 $ $117 
 
Assets and Liabilities at Fair Value as of February 3, 2024
(in thousands)Level 1Level 2Level 3Total
Assets:
Cash equivalents (1)
$349,174 $26,975 $ $376,149 
Derivative instruments (2)
 1,092  1,092 
Rabbi Trust assets (3)
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 (2)
$ $539 $ $539 
Total liabilities$ $539 $ $539 

(1)    Level 1 assets consisted of investments in money market funds and U.S. treasury bills. Level 2 assets consisted of time deposits.
(2)    Level 2 assets and liabilities consisted primarily of foreign currency exchange forward contracts.
(3)    Level 1 assets consisted of investments in money market funds. Level 2 assets consisted of trust-owned life insurance policies.
Abercrombie & Fitch Co.
11
2024 1Q Form 10-Q


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, which were valued at cost, approximating fair value, due to the short-term nature of these investments; 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 under its senior secured notes, which have a fixed 8.75% interest rate and mature on July 15, 2025 (the “Senior Secured Notes”), are carried at historical cost in the accompanying Condensed Consolidated Balance Sheets. The following table provides the carrying amount and fair value of the Company’s long-term gross borrowings as of May 4, 2024 and February 3, 2024:
(in thousands)May 4, 2024February 3, 2024
Gross borrowings outstanding, carrying amount$213,906 $223,214 
Gross borrowings outstanding, fair value (1)
215,510 226,004 
(1)    Classified as Level 2 measurements within the fair value hierarchy.

6. PROPERTY AND EQUIPMENT, NET
The following table provides property and equipment, net as of May 4, 2024 and February 3, 2024:
(in thousands)May 4, 2024February 3, 2024
Property and equipment, at cost$2,529,429 $2,509,184 
Less: Accumulated depreciation and amortization(1,988,732)(1,971,151)
Property and equipment, net$540,697 $538,033 
Refer to Note 8, “ASSET IMPAIRMENT,” for details related to property and equipment impairment charges incurred during the thirteen weeks ended May 4, 2024 and thirteen weeks ended April 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 weeks ended May 4, 2024 and April 29, 2023:
Thirteen Weeks Ended
(in thousands)May 4, 2024April 29, 2023
Single lease cost (1)
$59,980 $58,340 
Variable lease cost (2)
46,169 35,695 
Operating lease right-of-use asset impairment (3)
339 1,414 
Sublease income
(984)(984)
Total operating lease cost$105,504 $94,465 
(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 $72.1 million as of May 4, 2024.

Abercrombie & Fitch Co.
12
2024 1Q Form 10-Q

8. ASSET IMPAIRMENT

The following table provides asset impairment charges for the thirteen weeks ended May 4, 2024 and April 29, 2023:
Thirteen Weeks Ended
(in thousands)May 4, 2024April 29, 2023
Operating lease right-of-use asset impairment$339 $1,414 
Property and equipment asset impairment527 3,022 
Total asset impairment$866 $4,436 

Asset impairment charges for the thirteen weeks ended May 4, 2024 and April 29, 2023 related to certain of the Company’s store assets. The store impairment charges for the thirteen weeks ended May 4, 2024 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $8.3 million, including $6.7 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 weeks ended May 4, 2024, the Company did not recognize income tax benefits on $7.6 million of pretax losses, primarily in Switzerland, resulting in adverse tax impacts of $1.1 million.

As of May 4, 2024, the Company had foreign net deferred tax assets of approximately $38.3 million, including $8.1 million, $7.4 million, and $12.7 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 weeks ended April 29, 2023, the Company did not recognize income tax benefits on $20.3 million of pretax losses, primarily in Switzerland, resulting in adverse tax impacts of $3.1 million.

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 weeks ended May 4, 2024 and April 29, 2023.



Abercrombie & Fitch Co.
13
2024 1Q Form 10-Q

10. BORROWINGS

The following table provides details on the Company’s long-term borrowings, net, as of May 4, 2024 and February 3, 2024 :
(in thousands)May 4, 2024February 3, 2024
Long-term portion of borrowings, gross at carrying amount$213,906 $223,214 
Unamortized fees(804)(1,095)
Long-term borrowings, net$213,102 $222,119 

Senior Secured Notes

During the thirteen weeks ended May 4, 2024, A&F Management purchased $9.3 million of outstanding Senior Secured Notes in the open market and incurred a $0.2 million loss on extinguishment of debt, recognized in interest expense on the Condensed Consolidated Statements of Operations and Comprehensive Income. The terms of the Senior Secured Notes have remained unchanged from those disclosed in Note 12, “BORROWINGS,” of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of the Fiscal 2023 Form 10-K.

ABL Facility

The terms of the Company’s senior secured revolving credit facility of up to $400.0 million (the “ABL Facility”) have remained unchanged from those disclosed in Note 12, “BORROWINGS,” of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of the Fiscal 2023 Form 10-K.

The Company did not have any borrowings outstanding under the ABL Facility as of May 4, 2024 or as of February 3, 2024.

As of May 4, 2024, availability under the ABL Facility was $325.2 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 $30 million under the ABL Facility, borrowing capacity available to the Company under the ABL Facility was $292.7 million as of May 4, 2024.

Representations, warranties and covenants

The agreements related to the Senior Secured Notes and 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 Abercrombie & Fitch Management Co. (“A&F Management”) to another entity.

The Senior Secured Notes are guaranteed on a senior secured basis, jointly and severally, by A&F and each of the existing and future wholly-owned domestic restricted subsidiaries of A&F that guarantee or will guarantee A&F Management’s Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) or certain future capital markets indebtedness.

Certain of the agreements related to the Senior Secured Notes and 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 May 4, 2024.
Abercrombie & Fitch Co.
14
2024 1Q Form 10-Q

11. SHARE-BASED COMPENSATION

Financial statement impact

The following table provides share-based compensation expense and the related income tax impacts for the thirteen weeks ended May 4, 2024 and April 29, 2023:
Thirteen Weeks Ended
(in thousands)May 4, 2024April 29, 2023
Share-based compensation expense$11,363 $8,088 
Income tax benefits associated with share-based compensation expense recognized
1,278 1,005 

The following table provides discrete income tax benefits and charges related to share-based compensation awards during the thirteen weeks ended May 4, 2024 and April 29, 2023:
Thirteen Weeks Ended
(in thousands)May 4, 2024April 29, 2023
Income tax discrete benefits realized for tax deductions related to the issuance of shares
$14,554 $1,117 
Income tax discrete charges realized upon cancellation of stock appreciation rights (101)
Total income tax discrete benefits related to share-based compensation awards
$14,554 $1,016 


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 weeks ended May 4, 2024 and April 29, 2023:
Thirteen Weeks Ended
(in thousands)May 4, 2024April 29, 2023
Employee tax withheld upon issuance of shares (1)
$65,173 $18,359 
(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 thirteen weeks ended May 4, 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, 20241,886,085 $27.12 521,212 $30.03 260,619 $43.90 
Granted226,209 120.49 53,775 120.56 26,895 180.71 
Adjustments for performance achievement
  150,446 32.10 75,227 50.34 
Vested(757,301)24.37 (300,892)32.10 (150,454)50.34 
Forfeited(40,864)30.95     
Unvested at May 4, 2024 (1)
1,314,129 $44.71 424,541 $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 May 4, 2024:
Service-based Restricted
Stock Units
Performance-based Restricted
Stock Units
Market-based Restricted
Stock Units
Unrecognized compensation cost (in thousands)
$53,083 $20,866 $8,037 
Remaining weighted-average period cost is expected to be recognized (years)1.51.61.6

Abercrombie & Fitch Co.
15
2024 1Q Form 10-Q

The following table provides additional information pertaining to restricted stock units for the thirteen weeks ended May 4, 2024 and April 29, 2023:
Thirteen Weeks Ended
(in thousands)May 4, 2024April 29, 2023
Service-based restricted stock units:
Total grant date fair value of awards granted$27,256 $23,842 
Total grant date fair value of awards vested18,455 15,560 
Performance-based restricted stock units:
Total grant date fair value of awards granted6,483 6,300 
Total grant date fair value of awards vested9,659  
Market-based restricted stock units:
Total grant date fair value of awards granted4,860 4,576 
Total grant date fair value of awards vested7,574 16,040 

The following table provides the weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the thirteen weeks ended May 4, 2024 and April 29, 2023:
Thirteen Weeks Ended
May 4, 2024April 29, 2023
Grant date market price$120.56 $28.36 
Fair value180.71 41.20 
Price volatility59 %63 %
Expected term (years)2.92.9
Risk-free interest rate4.3 %4.6 %
Dividend yield  
Average volatility of peer companies51.8 66.0 
Average correlation coefficient of peer companies0.48660.5295

Stock appreciation rights

The following table provides the summarized stock appreciation rights activity for the thirteen weeks ended May 4, 2024:
Number of
Underlying
Shares
Weighted-Average
Exercise Price
Aggregate
Intrinsic Value
 (in thousands)
Weighted-Average
Remaining
Contractual Life (years)
Outstanding at February 3, 202425,600 $29.29 
Exercised(25,600)29.29 
Forfeited or expired  
Outstanding at May 4, 2024
 $ $ 0.0
Stock appreciation rights exercisable at May 4, 2024 $ $ 0.0

The following table provides additional information pertaining to stock appreciation rights exercised during the thirteen weeks ended May 4, 2024 and April 29, 2023:
(in thousands)May 4, 2024April 29, 2023
Total grant date fair value of awards exercised$267 $64 


Abercrombie & Fitch Co.
16
2024 1Q Form 10-Q

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 May 4, 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$46,741 
British pound43,758 
Canadian dollar16,150 
(1)    Amounts reported are the U.S. Dollar notional amounts outstanding as of May 4, 2024.

As of May 4, 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$12,325 
Euro21,307 
(1)    Amounts reported are the U.S. Dollar notional amounts outstanding as of May 4, 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 May 4, 2024 and February 3, 2024:
(in thousands)LocationMay 4, 2024February 3, 2024LocationMay 4, 2024February 3, 2024
Derivatives designated as cash flow hedging instruments
Other current assets
$1,163 $1,090 
Accrued expenses
$117 $539 
Derivatives not designated as hedging instruments
Other current assets
450 2 
Accrued expenses
  
Total
$1,613 $1,092 $117 $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 weeks ended May 4, 2024 and April 29, 2023:
Thirteen Weeks Ended
(in thousands)May 4, 2024April 29, 2023
Gain (loss) recognized in AOCL (1)
$1,029 $(507)
Gain (loss) reclassified from AOCL to cost of sales, exclusive of depreciation and amortization (2)
483 (906)
(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.
17
2024 1Q Form 10-Q

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 weeks ended May 4, 2024 and April 29, 2023:
Thirteen Weeks Ended
(in thousands)May 4, 2024April 29, 2023
Gain (loss) recognized in other operating income, net
$1,868 $(547)

13. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables provide activity in AOCL for the thirteen weeks ended May 4, 2024:
Thirteen Weeks Ended May 4, 2024
(in thousands)Foreign Currency Translation AdjustmentUnrealized Gain (Loss) on Derivative Financial InstrumentsTotal
Beginning balance at February 3, 2024$(136,532)$564 $(135,968)
Other comprehensive (loss) income before reclassifications(1,837)1,029 (808)
Reclassified gain from AOCL (1)
 (483)(483)
Tax effect (23)(23)
Other comprehensive (loss) income after reclassifications(1,837)523 (1,314)
Ending balance at May 4, 2024$(138,369)$1,087 $(137,282)

(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 weeks ended April 29, 2023:
Thirteen Weeks Ended April 29, 2023
(in thousands)Foreign Currency Translation AdjustmentUnrealized Gain (Loss) on Derivative Financial InstrumentsTotal
Beginning balance at January 28, 2023$(132,653)$(4,874)$(137,527)
Other comprehensive income (loss) before reclassifications311 (507)(196)
Reclassified loss from AOCL (1)
 906 906 
Tax effect 6 6 
Other comprehensive income after reclassifications311 405 716 
Ending balance at April 29, 2023$(132,342)$(4,469)$(136,811)

(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.

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; 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 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. All prior periods presented are recast to conform to the new segment presentation.

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 (loss) 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
Abercrombie & Fitch Co.
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2024 1Q Form 10-Q

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 May 4, 2024 and February 3, 2024, and for the thirteen weeks ended May 4, 2024 and April 29, 2023:

Net Sales
Thirteen Weeks Ended
(in thousands)May 4, 2024April 29, 2023
Americas$820,121 $665,423 
EMEA164,778 138,106 
APAC35,831 32,465 
Segment total$1,020,730 $835,994 

Operating Income (Loss)
Thirteen Weeks Ended
(in thousands)May 4, 2024April 29, 2023
Americas$252,347 $156,445 
EMEA24,501 (1,485)
APAC(322)(2,547)
Segment total$276,526 $152,413 
Operating (loss) income not attributed to segments:
Stores and distribution expense(3,371)(1,889)
Marketing, general and administrative expense(145,264)(119,405)
Other operating income,net1,958 2,889 
Total operating income$129,849 $34,008 
Assets
(in thousands)May 4, 2024February 3, 2024
Inventories
Americas$361,061 $372,371 
EMEA70,829 77,125 
APAC17,377 19,970 
Total inventories$449,267 $469,466 
Assets not attributed to segments
2,520,818 2,504,767 
Total assets$2,970,085 $2,974,233 

Brand Information

The following table provides additional disaggregated revenue information, which is categorized by brand, for the thirteen weeks ended May 4, 2024 and April 29, 2023:
Thirteen Weeks Ended
(in thousands)May 4, 2024April 29, 2023
Abercrombie (1)
$571,513 $436,044 
Hollister (2)
449,217 399,950 
Total$1,020,730 $835,994 
(1)Abercrombie brands includes Abercrombie & Fitch and abercrombie kids.
(2)Hollister brands includes Hollister and Gilly Hicks

Abercrombie & Fitch Co.
19
2024 1Q Form 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with the Company’s Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q in “Item 1. Financial Statements (Unaudited),” to which all references to Notes in MD&A are made.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The Company cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this Quarterly Report on Form 10-Q or made by the Company or, its management and spokespeople involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond the Company’s control. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “should,” “are confident,” “will,” “could,” “outlook,” or the negative versions of these words or other comparable words, and similar expressions may identify forward-looking statements. Future economic and industry trends that could potentially impact revenue and profitability are difficult to predict. Therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. Factors that could cause results to differ from those expressed in the Company’s forward-looking statements include, but are not limited to, the risks described or referenced in Part I, Item 1A. “Risk Factors,” in the Company’s Fiscal 2023 Form 10-K and otherwise in our reports and filings with the SEC, as well as the following:
risks related to changes in global economic and financial conditions, including inflation, and the resulting impact on consumer spending generally and on our operating results, financial condition, and expense management, and our ability to adequately mitigate the impact;
risks related to geopolitical conflict, armed conflict, such as the conflicts between Russia and Ukraine or Israel and Hamas and the possible expansion of conflict in the surrounding areas, including the impact of such conflicts on international trade, supplier delivery or increased freight costs, acts of terrorism, mass casualty events, social unrest, civil disturbance or disobedience;
risks related to natural disasters and other unforeseen catastrophic events;
risks related to our failure to engage our customers, anticipate customer demand and changing fashion trends, and manage our inventory;
risks related to our ability to successfully invest in and execute on our customer, digital and omnichannel initiatives;
risks related to the effects of seasonal fluctuations on our sales and our performance during the back-to-school and holiday selling seasons;
risks related to fluctuations in foreign currency exchange rates;
risks related to fluctuations in our tax obligations and effective tax rate, including as a result of earnings and losses generated from our international operations;
risks related to our ability to execute on, and maintain the success of, our strategic and growth initiatives, including those outlined in our 2025 Always Forward Plan;
risks related to global operations, including changes in the economic or political conditions where we sell or source our products or changes in import tariffs or trade restrictions;
risks and uncertainty related to adverse public health developments;
risks related to cybersecurity threats and privacy or data security breaches;
risks related to the potential loss or disruption of our information systems;
risks related to the continued validity of our trademarks and our ability to protect our intellectual property;
risks associated with climate change and other corporate responsibility issues;
risks related to reputational harm to the Company, its officers, and directors;
risks related to actual or threatened litigation; and
uncertainties related to future legislation, regulatory reform, policy changes, or interpretive guidance on existing legislation.

In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company, or any other person, that the objectives of the Company will be achieved. The forward-looking statements included herein are based on information presently available to the management of the Company. Except as may be required by applicable law, the Company assumes no obligation to publicly update or revise its forward-looking statements, including any financial targets and estimates, whether as a result of new information, future events, or otherwise. As used herein, “Abercrombie & Fitch Co.,” “the Company,” “we,” “us,” “our,” and similar terms include Abercrombie & Fitch Co. and its subsidiaries, unless the context indicates otherwise.

Abercrombie & Fitch Co.
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2024 1Q Form 10-Q

INTRODUCTION

MD&A is provided as a supplement to the accompanying Condensed Consolidated Financial Statements and notes thereto to help provide an understanding of the Company’s results of operations, financial condition, and liquidity. MD&A is organized as follows:

Overview. A general description of the Company’s business and certain segment information.
Current Trends and Outlook. A discussion related to certain of the Company’s focus areas for the current fiscal year and discussion of certain risks and challenges, as well as a summary of the Company’s performance for the thirteen weeks ended May 4, 2024 and April 29, 2023.
Results of Operations. An analysis of certain components of the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income for the thirteen weeks ended May 4, 2024 and April 29, 2023.
Liquidity and Capital Resources. A discussion of the Company’s financial condition, changes in financial condition and liquidity as of May 4, 2024, which includes (i) an analysis of financial condition as compared to February 3, 2024; (ii) an analysis of changes in cash flows for the thirteen weeks ended May 4, 2024, as compared to the thirteen weeks ended April 29, 2023; and (iii) an analysis of liquidity, including availability under the Company’s ABL Facility, the Company’s share repurchase program, and outstanding debt and covenant compliance.
Recent Accounting Pronouncements. A discussion, as applicable, of the recent accounting pronouncements the Company has adopted or is currently evaluating, including the dates of adoption and/or expected dates of adoption, and anticipated effects on the Company’s Condensed Consolidated Financial Statements.
Critical Accounting Estimates. A discussion of the accounting estimates considered to be important to the Company’s results of operations and financial condition, which typically require significant judgment and estimation on the part of management in their application.
Non-GAAP Financial Measures. MD&A provides a discussion of certain financial measures that have been determined to not be presented in accordance with GAAP. This section includes certain reconciliations between GAAP and non-GAAP financial measures and additional details on non-GAAP financial measures, including information as to why the Company believes the non-GAAP financial measures provided within MD&A are useful to investors.

Abercrombie & Fitch Co.
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2024 1Q Form 10-Q

OVERVIEW

Business summary

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.

The Company’s fiscal year ends on the Saturday closest to January 31. All references herein to the Company’s fiscal years are as follows:
Fiscal yearYear ended/endingNumber of weeks
Fiscal 2023February 3, 202453
Fiscal 2024February 1, 202552
Fiscal 2025January 31, 202652

Seasonality

Historically, the Company’s operations have been seasonal in nature and consist of two principal selling seasons: the spring season, which includes the first and second fiscal quarters (“Spring”) and the fall season, which includes the third and fourth fiscal quarters (“Fall”). Due to the seasonal nature of the retail apparel industry, the results of operations for any current period are not necessarily indicative of the results expected for the full fiscal year and the Company could have significant fluctuations in certain asset and liability accounts. The Company historically experiences its greatest sales activity during the Fall season due to back-to-school and holiday sales periods, respectively.

CURRENT TRENDS AND OUTLOOK

Focus areas for fiscal 2024

In June of Fiscal 2022, we announced our 2025 Always Forward Plan, which outlines our long-term strategy and goals, including growing shareholder value. The 2025 Always Forward Plan is anchored on our strategic growth principles, which are to:
Execute focused growth plans;
Accelerate an enterprise-wide digital revolution; and
Operate with financial discipline

The 2025 Always Forward Plan growth principles serve as a framework for the Company achieving sustainable and profitable growth and profitability in Fiscal 2024. Below are some additional details specific to Fiscal 2024 objectives within the 2025 Always Forward Plan:

Execute focused growth plans by:
driving sales growth across regions and brands primarily through marketing and store investment.
using our playbooks globally to align the brands’ products, voices, and experiences with customers, both digitally and in-store; and
using testing and chase strategies to deliver compelling assortments and product collections across genders.

Accelerate an enterprise-wide digital revolution to improve the customer and associate experience by:
continuing to progress on our multi-year enterprise resource planning (“ERP”) transformation and cloud migration journey; and
investing in digital and technology to improve experiences across key parts of the customer journey while delivering a consistent omnichannel experience.

Operate with financial discipline by:
actively managing inventory levels and positioning Abercrombie brands and Hollister brands to chase inventory as appropriate throughout the year; and
funding our growth strategies while properly balancing investments, impacts of inflation and efficiency efforts.
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2024 1Q Form 10-Q


Current macroeconomic conditions and impact of inflation

Macroeconomic conditions, including inflation, higher interest rates, the geopolitical landscape, political uncertainty including elections in several countries, foreign exchange rate fluctuations, and declines in consumer discretionary spending continue to negatively impact the global economy. In periods of perceived or actual unfavorable economic conditions, consumers may reallocate available discretionary spending, which may adversely impact demand for our products. The Company continues to experience pricing volatility with respect to cotton, raw materials and freight costs. While cotton and raw material costs have decreased from prior year-end levels, freight costs have recently been increasing. Continued inflationary pressures and pricing volatility could further impact expenses and have a long-term impact on the Company because increasing costs may impact its ability to maintain satisfactory margins.

Global events and supply chain disruptions

As a global multi-brand omnichannel specialty retailer, with operations in North America, Europe, the Middle East, and Asia, among other regions, management is mindful of macroeconomic risks, global challenges and the changing global geopolitical environment, including the ongoing armed conflicts between Russia and Ukraine or Israel and Hamas, and conflict in the surrounding areas, which could adversely impact certain areas of the business. Starting in late Fiscal 2023, disruptions to ocean vessels in the Red Sea resulted in delayed deliveries to the EMEA region. Such disruptions have also increased freight costs, which may impact the Company through the remainder of Fiscal 2024. The Company has taken certain mitigating actions in response to these events, including increasing air freight usage where appropriate and prioritizing critical orders earlier to allow for longer lead times. Further mitigating actions may be needed, particularly if there is prolonged or escalating conflict in the Red Sea.

Management continues to monitor global events and assess the potential impacts that these events and similar events may have on the business in future periods. Although management also develops and updates contingency plans to assist in mitigating potential impacts, it is possible that the Company’s preparations for such events are not adequate to mitigate their impact, and that these events could further adversely affect its business and results of operations.

Global store network optimization

The Company has a goal of finding the right size, right location and right economics for omni-enabled stores that cater to local customers. The Company continues to use data to inform its focus on aligning store square footage with digital penetration, and during the year-to-date period of Fiscal 2024, the Company opened 1 new store, while closing 13 stores. As part of this focus, the Company has updated and increased its store investment plan to include approximately 60 new stores, while closing approximately 40 stores, during Fiscal 2024, pending negotiations with our landlord partners.

Future closures could be completed through natural lease expirations, while certain other leases include early termination options that can be exercised under specific conditions. The Company may also elect to exit or modify other leases, and could incur charges related to these actions.

Pillar Two Model Rules

In 2021, the Organization for Economic Cooperation and Development (“OECD”) released Pillar Two Global Anti-Base Erosion model rules (“Pillar Two Rules”), designed to ensure large corporations are taxed at a minimum rate of 15% in all countries of operation. Although the U.S. has not yet enacted legislation implementing Pillar Two Rules, other countries where the Company does business, including the U.K. and Germany, have enacted legislation implementing Pillar Two Rules which are effective from January 1, 2024. The implementation of the Pillar Two Rules in each jurisdiction in which it operates did not have a material impact on the Company’s effective tax rate. The Company will continue to evaluate the impact as additional jurisdictions implement legislation and provide further guidance.

For a discussion of material risks that have the potential to cause our actual results to differ materially from our expectations, refer to Part I, “Item 1A. Risk Factors” on the Fiscal 2023 Form 10-K.

Abercrombie & Fitch Co.
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2024 1Q Form 10-Q

Summary of results
A summary of results for the thirteen weeks ended May 4, 2024 and April 29, 2023 was as follows:
GAAP
Non-GAAP (1)
Thirteen Weeks Ended
May 4, 2024
April 29, 2023
May 4, 2024
April 29, 2023
Net sales (in thousands)
$1,020,730 $835,994 
Change in net sales22.1 %2.9 %
Comparable sales (2)
21 %%
Gross profit rate66.4 %61.0 %
Operating income (in thousands)
$129,849 $34,008 $129,849 $38,444 
Operating income margin
12.7 %4.1 %12.7 %4.6 %
Net income attributable to A&F (in thousands)
$113,850 $16,571 $113,850 $19,820 
Net income per share attributable to A&F2.14 0.32 2.14 0.39 

(1)Discussion as to why the Company believes that these non-GAAP financial measures are useful to investors and a reconciliation of the non-GAAP measures to the most directly comparable financial measure calculated and presented in accordance with GAAP are provided below under “NON-GAAP FINANCIAL MEASURES.”
(2)Comparable sales are calculated on a constant currency basis and exclude revenue other than store and digital sales. Refer to the discussion below in “NON-GAAP FINANCIAL MEASURES,” for further details on the comparable sales calculation.

Certain components of the Company’s Condensed Consolidated Balance Sheets as of May 4, 2024 and February 3, 2024 were as follows:
(in thousands)May 4, 2024February 3, 2024
Cash and equivalents$864,195 $900,884 
Inventories449,267 469,466 
Gross long-term borrowings outstanding, carrying amount213,906 223,214 

Certain components of the Company’s Condensed Consolidated Statements of Cash Flows for the thirteen week periods ended May 4, 2024 and April 29, 2023 were as follows:
(in thousands)May 4, 2024April 29, 2023
Net cash provided by (used for) operating activities$95,010 $(560)
Net cash used for investing activities(38,886)(46,391)
Net cash used for financing activities(92,951)(21,956)

RESULTS OF OPERATIONS

The estimated basis point (“BPS”) change disclosed throughout this Results of Operations section has been rounded based on the change in the percentage of net sales.

Net sales

Net sales by segment are presented by attributing revenues on the basis of the segment that fulfills the order. The Company’s net sales by reportable segment for the thirteen weeks ended May 4, 2024 and April 29, 2023 were as follows:
Thirteen Weeks Ended
(in thousands, except ratios)May 4, 2024April 29, 2023$ Change% Change
Comparable
Sales (1)
By segment:
Americas$820,121 $665,423 $154,698 23 %21 %
EMEA164,778 138,106 26,672 19 23 
APAC35,831 32,465 3,366 10 22 
Total $1,020,730 $835,994 $184,736 22 21 
(1)Comparable sales are calculated on a constant currency basis. Refer to NON-GAAP FINANCIAL MEASURES, for further details on the comparable sales calculation.

Abercrombie & Fitch Co.
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2024 1Q Form 10-Q

For the first quarter of Fiscal 2024, net sales increased 22%, as compared to the first quarter of Fiscal 2023, primarily due to broad-based net sales growth across segments, mainly driven by a higher AUR as a result of lower promotional activity. The year-over-year increase in net sales reflects a positive comparable sales of 21%, as compared to the first quarter of Fiscal 2023, with double-digit comparable sales growth in the Americas, EMEA and APAC segments.

The Company’s net sales by brand for the thirteen weeks ended May 4, 2024 and April 29, 2023 were as follows:

Thirteen Weeks Ended
(in thousands, except ratios)May 4, 2024April 29, 2023$ Change% Change
Comparable
Sales (1)
Abercrombie (2)
$571,513 $436,044 $135,469 31 %29 %
Hollister (3)
449,217 399,950 49,267 12 13 
Total $1,020,730 $835,994 $184,736 22 21 
(1)Comparable sales are calculated on a constant currency basis. Refer to NON-GAAP FINANCIAL MEASURES, for further details on the comparable sales calculation.
(2)Includes Abercrombie & Fitch and abercrombie kids.
(3)Includes Hollister and Gilly Hicks.


Cost of sales, exclusive of depreciation and amortization
Thirteen Weeks Ended
May 4, 2024April 29, 2023
(in thousands, except ratios)% of Net sales% of Net salesBPS Change
Cost of sales, exclusive of depreciation and amortization$343,273 33.6 %$326,200 39.0 %(540)

For the first quarter of Fiscal 2024, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased by approximately 540 basis points, as compared to the first quarter of Fiscal 2023. The year-over-year percentage decline was primarily attributable to lower cotton and raw material costs as well as increased average unit retail. Year-over-year decreases in the Americas and EMEA region were primarily driven by lower discounts and clearance selling. The APAC region also benefited from lower raw material costs, partially offset by the impact of changes in foreign currency.






Abercrombie & Fitch Co.
25
2024 1Q Form 10-Q

Gross profit, exclusive of depreciation and amortization
Thirteen Weeks Ended
May 4, 2024April 29, 2023
(in thousands, except ratios)% of Net sales% of Net salesBPS Change
Gross profit, exclusive of depreciation and amortization$677,457 66.4 %$509,794 61.0 %540 

Stores and distribution expense
Thirteen Weeks Ended
May 4, 2024April 29, 2023
(in thousands, except ratios)% of Net sales% of Net salesBPS Change
Stores and distribution expense$371,686 36.4 %$336,049 40.2 %(380)

For the first quarter of Fiscal 2024, stores and distribution expense, as a percentage of net sales decreased, as compared to the first quarter of Fiscal 2023. The decrease was primarily driven by expense leverage as a result of net sales growth, slightly offset with increases in distribution center and order fulfillment costs as compared to the first quarter of 2023.

Marketing, general and administrative expense
Thirteen Weeks Ended
May 4, 2024April 29, 2023
(in thousands, except ratios)% of Net sales% of Net salesBPS Change
Marketing, general and administrative expense$177,880 17.4 %$142,631 17.1 %30 

For the first quarter of Fiscal 2024, marketing, general and administrative expense, as a percentage of net sales, increased 30 basis points, as compared to the first quarter of Fiscal 2023, primarily driven by an increase in marketing expense and investments in technology and people.

Other operating income, net
Thirteen Weeks Ended
May 4, 2024April 29, 2023
(in thousands, except ratios)% of Net sales% of Net salesBPS Change
Other operating income, net$1,958