ABERCROMBIE & FITCH CO /DE/ [ANF] Filings

10-Q 1 anf-20231028.htm 10-Q anf-20231028

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 October 28, 2023


☐			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 December 1, 2023
$0.01 Par Value						50,405,518

Table of Contents


PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	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	37
Item 4.	Controls and Procedures	39
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 5.	Other Information	41
Item 6.	Exhibits	41
	Signatures	42


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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Abercrombie & Fitch Co.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Thousands, except per share amounts)

(Unaudited)




	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Net sales	$	1,056,431	$	880,084	$	2,827,770	$	2,497,937
Cost of sales, exclusive of depreciation and amortization	370,762		359,268		1,047,927		1,061,684
Gross profit	685,669		520,816		1,779,843		1,436,253
Stores and distribution expense	383,883		367,333		1,068,226		1,045,667
Marketing, general and administrative expense	162,510		133,201		449,643		379,518

Asset impairment	—		3,744		4,436		9,336
Other operating loss (income), net	1,256		(1,005)		(4,332)		(3,894)
Operating income	138,020		17,543		261,870		5,626
Interest expense, net	671		7,295		5,211		21,519
Income (loss) before income taxes	137,349		10,248		256,659		(15,893)
Income tax expense	39,617		10,966		82,349		14,413
Net income (loss)	97,732		(718)		174,310		(30,306)
Less: Net income attributable to noncontrolling interests	1,521		1,496		4,634		5,211
Net income (loss) attributable to A&F	$	96,211	$	(2,214)	$	169,676	$	(35,517)

Net income (loss) per share attributable to A&F
Basic	$	1.91	$	(0.04)	$	3.38	$	(0.70)
Diluted	$	1.83	$	(0.04)	$	3.25	$	(0.70)

Weighted-average shares outstanding
Basic	50,504		49,486		50,138		50,673
Diluted	52,624		49,486		52,154		50,673

Other comprehensive income (loss)
Foreign currency translation adjustments, net of tax	$	(5,042)	$	(11,021)	$	(8,567)	$	(26,338)
Derivative financial instruments, net of tax	7,259		(1,206)		9,906		(1,223)
Other comprehensive income (loss)	2,217		(12,227)		1,339		(27,561)
Comprehensive income (loss)	99,949		(12,945)		175,649		(57,867)
Less: Comprehensive income attributable to noncontrolling interests	1,521		1,496		4,634		5,211
Comprehensive income (loss) attributable to A&F	$	98,428	$	(14,441)	$	171,015	$	(63,078)

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


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Abercrombie & Fitch Co.

Condensed Consolidated Balance Sheets

(Thousands, except par value amounts)

(Unaudited)


	October 28, 2023		January 28, 2023
Assets
Current assets:
Cash and equivalents	$	649,489	$	517,602
Receivables	96,762		104,506
Inventories	595,067		505,621
Other current assets	100,085		100,289
Total current assets	1,441,403		1,228,018
Property and equipment, net	546,935		551,585
Operating lease right-of-use assets	682,559		723,550
Other assets	226,749		209,947
Total assets	$	2,897,646	$	2,713,100
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	373,930	$	258,895
Accrued expenses	402,572		413,303
Short-term portion of operating lease liabilities	195,025		213,979
Income taxes payable	55,615		16,023
Total current liabilities	1,027,142		902,200
Long-term liabilities:
Long-term portion of operating lease liabilities	658,923		713,361
Long-term borrowings, net	248,033		296,852
Other liabilities	87,435		94,118
Total long-term liabilities	994,391		1,104,331
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	413,515		416,255
Retained earnings	2,486,221		2,368,815
Accumulated other comprehensive loss, net of tax (“AOCL”)	(136,188)		(137,527)
Treasury stock, at average cost: 52,899 and 54,298 shares as of October 28, 2023 and January 28, 2023, respectively	(1,898,473)		(1,953,735)
Total Abercrombie & Fitch Co. stockholders’ equity	866,108		694,841
Noncontrolling interests	10,005		11,728
Total stockholders’ equity	876,113		706,569
Total liabilities and stockholders’ equity	$	2,897,646	$	2,713,100

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


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Abercrombie & Fitch Co.

Condensed Consolidated Statements of Stockholders’ Equity

(Thousands, except per share amounts)

(Unaudited)


	Thirteen Weeks Ended October 28, 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, July 29, 2023	50,141	$	1,033	$	410,398	$	10,478	$	2,400,032	$	(138,405)	53,159	$	(1,904,752)	$	778,784
Net income	—	—		—		1,521		96,211		—		—	—		97,732


Share-based compensation issuances and exercises	260	—		(6,567)		—		(10,022)		—		(260)	6,279		(10,310)
Share-based compensation expense	—	—		9,684		—		—		—		—	—		9,684
Derivative financial instruments, net of tax	—	—		—		—		—		7,259		—	—		7,259
Foreign currency translation adjustments, net of tax	—	—		—		—		—		(5,042)		—	—		(5,042)
Distributions to noncontrolling interests, net	—	—		—		(1,994)		—		—		—	—		(1,994)
Ending balance at October 28, 2023	50,401	$	1,033	$	413,515	$	10,005	$	2,486,221	$	(136,188)	52,899	$	(1,898,473)	$	876,113

	Thirteen Weeks Ended October 29, 2022
	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, July 30, 2022	49,471	$	1,033	$	405,127	$	11,139	$	2,333,867	$	(130,040)	53,829	$	(1,948,199)	$	672,927
Net income (loss)	—	—		—		1,496		(2,214)		—		—	—		(718)
Purchase of Common Stock	(510)	—		—		—		—				510	(8,000)		(8,000)

Share-based compensation issuances and exercises	39	—		(1,396)		—		(923)		—		(39)	1,893		(426)
Share-based compensation expense	—	—		7,310		—		—		—		—	—		7,310
Derivative financial instruments, net of tax	—	—		—		—		—		(1,206)		—	—		(1,206)
Foreign currency translation adjustments, net of tax	—	—		—		—		—		(11,021)		—	—		(11,021)
Distributions to noncontrolling interests, net	—	—		—		(2,801)		—		—		—	—		(2,801)
Ending balance at October 29, 2022	49,000	$	1,033	$	411,041	$	9,834	$	2,330,730	$	(142,267)	54,300	$	(1,954,306)	$	656,065


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Abercrombie & Fitch Co.

Condensed Consolidated Statements of Stockholders’ Equity

(Thousands, except per share amounts)

(Unaudited)


	Thirty-Nine Weeks Ended October 28, 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	—	—		—		4,634		169,676		—		—	—		174,310


Share-based compensation issuances and exercises	1,399	—		(32,071)		—		(52,270)		—		(1,399)	55,262		(29,079)
Share-based compensation expense	—	—		29,331		—		—		—		—	—		29,331
Derivative financial instruments, net of tax	—	—		—		—		—		9,906		—	—		9,906
Foreign currency translation adjustments, net of tax	—	—		—		—		—		(8,567)		—	—		(8,567)
Distributions to noncontrolling interests, net	—	—		—		(6,357)		—		—		—	—		(6,357)
Ending balance at October 28, 2023	50,401	$	1,033	$	413,515	$	10,005	$	2,486,221	$	(136,188)	52,899	$	(1,898,473)	$	876,113

	Thirty-Nine Weeks Ended October 29, 2022
	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 29, 2022	52,985	$	1,033	$	413,190	$	11,234	$	2,386,156	$	(114,706)	50,315	$	(1,859,583)	$	837,324
Net income (loss)	—	—		—		5,211		(35,517)		—		—	—		(30,306)
Purchase of Common Stock	(4,770)	—		—		—						4,770	(125,775)		(125,775)

Share-based compensation issuances and exercises	785	—		(25,575)		—		(19,909)		—		(785)	31,052		(14,432)
Share-based compensation expense	—	—		23,426		—		—		—		—	—		23,426
Derivative financial instruments, net of tax	—	—		—		—		—		(1,223)		—	—		(1,223)
Foreign currency translation adjustments, net of tax	—	—		—		—		—		(26,338)		—	—		(26,338)
Distributions to noncontrolling interests, net	—	—		—		(6,611)		—		—		—	—		(6,611)
Ending balance at October 29, 2022	49,000	$	1,033	$	411,041	$	9,834	$	2,330,730	$	(142,267)	54,300	$	(1,954,306)	$	656,065

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


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Abercrombie & Fitch Co.

Condensed Consolidated Statements of Cash Flows

(Thousands)

(Unaudited)


	Thirty-Nine Weeks Ended

	October 28, 2023		October 29, 2022
Operating activities
Net income (loss)	$	174,310	$	(30,306)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization	105,547		98,393
Asset impairment	4,436		9,336
Loss (gain) on disposal	5,164		(198)
Benefit from deferred income taxes	(13,620)		(9,585)
Share-based compensation	29,331		23,426
Loss (gain) on extinguishment of debt	1,276		(52)
Changes in assets and liabilities:
Inventories	(91,817)		(221,414)
Accounts payable and accrued expenses	126,842		(87,463)
Operating lease right-of-use assets and liabilities	(30,956)		(8,364)
Income taxes	37,857		281
Other assets	8,519		(91,432)
Other liabilities	(6,747)		16,184
Net cash provided by (used for) operating activities	350,142		(301,194)
Investing activities
Purchases of property and equipment	(128,601)		(120,282)
Proceeds from the sale of property and equipment	615		11,891
Withdrawal of funds from Rabbi Trust assets	—		12,000

Net cash used for investing activities	(127,986)		(96,391)
Financing activities

Purchase of senior secured notes	(50,933)		(7,862)



Payment of debt modification costs and fees	(180)		(181)
Purchases of Common Stock	—		(125,775)

Other financing activities	(35,993)		(21,088)
Net cash used for financing activities	(87,106)		(154,906)
Effect of foreign currency exchange rates on cash	(4,491)		(14,871)
Net increase (decrease) in cash and equivalents, and restricted cash and equivalents	130,559		(567,362)
Cash and equivalents, and restricted cash and equivalents, beginning of period	527,569		834,368
Cash and equivalents, and restricted cash and equivalents, end of period	$	658,128	$	267,006
Supplemental information related to non-cash activities
Purchases of property and equipment not yet paid at end of period	$	38,787	$	64,477
Operating lease right-of-use assets additions, net of terminations, impairments and other reductions	117,959		196,003
Supplemental information related to cash activities
Cash paid for interest	14,165		13,574
Cash paid for income taxes	60,215		26,213
Cash received from income tax refunds	916		249
Cash paid for amounts included in measurement of operating lease liabilities, net of abatements	210,971		210,394

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


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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	14
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			2023 3Q 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 “Abercrombie & Fitch” or 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 digital channels and Company-owned stores, as well as through various third-party arrangements.

The Company’s brands include Abercrombie brands, which includes Abercrombie & Fitch and abercrombie kids, and Hollister brands, which includes Hollister, Gilly Hicks, and Social Tourist. 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 Social Tourist. 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 (loss) presented as net income attributable to NCI on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) 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, as will be the case in Fiscal 2023. 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 2022

January 28, 2023

Fiscal 2023

February 3, 2024

Fiscal 2024

February 1, 2025

Interim financial statements

The Condensed Consolidated Financial Statements as of October 28, 2023, and for the thirteen and thirty-nine week periods ended October 28, 2023 and October 29, 2022, 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 2022 filed with the SEC on March 27, 2023 (the “Fiscal 2022 Form 10-K”). The January 28, 2023 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”).


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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 2023.

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 conditions affecting the global economy, such as the uncertainty regarding the economy, rising interest rates, continued inflation, fluctuation in foreign exchange rates, and geopolitical conflict, armed conflict, the conflicts between Russia and Ukraine or Israel and Hamas, and 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)

Description

Date of adoption

Effect on the financial statements or other significant matters

Standards adopted

ASU 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations

The update relates to disclosure requirements for buyers in supplier finance programs. The amendments in the update require that a buyer disclose qualitative and quantitative information about their supplier finance programs. Interim and annual requirements include disclosure of outstanding amounts under the obligations as of the end of the reporting period, and annual requirements include a roll-forward of those obligations for the annual reporting period, as well as a description of payment and other key terms of the programs. This update is effective for annual periods beginning after December 15, 2022, and interim periods within those fiscal years, except for the requirement to disclose roll-forward information, which is effective for fiscal years beginning after December 15, 2023.

January 29, 2023

The Company adopted the changes to the standard under the retrospective method in the first quarter of Fiscal 2023, except for roll-forward information, which is effective for fiscal years beginning after December 15, 2023. The adoption of this guidance did not have a significant impact on the Company's condensed consolidated financial statements.

Standards not yet adopted

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

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


Abercrombie & Fitch Co.			10			2023 3Q Form 10-Q

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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 October 28, 2023 and January 28, 2023, $117.3 million and $68.4 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.

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	October 28, 2023		January 28, 2023		October 29, 2022		January 29, 2022
Cash and equivalents	Cash and equivalents	$	649,489	$	517,602	$	257,332	$	823,139
Long-term restricted cash and equivalents	Other assets	8,639		9,967		9,674		11,229

Cash and equivalents and restricted cash and equivalents		$	658,128	$	527,569	$	267,006	$	834,368

3. REVENUE RECOGNITION

Disaggregation of revenue

All revenues are recognized in net sales in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). 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 October 28, 2023, January 28, 2023, October 29, 2022 and January 29, 2022:


(in thousands)	October 28, 2023		January 28, 2023		October 29, 2022		January 29, 2022
Gift card liability (1)	$	36,506	$	39,235	$	35,016	$	36,984
Loyalty programs liability	24,521		25,640		22,930		22,757

(1)Includes $15.5 million and $14.2 million of revenue recognized during the thirty-nine weeks ended October 28, 2023 and October 29, 2022, respectively, that was included in the gift card liability at the beginning of January 28, 2023 and January 29, 2022, respectively.

The following table details recognized revenue associated with the Company’s gift card program and loyalty programs for the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022:


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Revenue associated with gift card redemptions and gift card breakage	$	24,741	$	21,194	$	73,391	$	66,847
Revenue associated with reward redemptions and breakage related to the Company’s loyalty programs	13,710		11,767		37,628		32,578


Abercrombie & Fitch Co.			11			2023 3Q Form 10-Q

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4. NET INCOME (LOSS) PER SHARE

Net income (loss) 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 (loss) per share attributable to A&F for the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022:


	Thirteen Weeks Ended		Thirty-Nine Weeks Ended
(in thousands)	October 28, 2023	October 29, 2022	October 28, 2023	October 29, 2022
Shares of Common Stock issued	103,300	103,300	103,300	103,300
Weighted-average treasury shares	(52,796)	(53,814)	(53,162)	(52,627)
Weighted-average — basic shares	50,504	49,486	50,138	50,673
Dilutive effect of share-based compensation awards	2,120	—	2,016	—
Weighted-average — diluted shares	52,624	49,486	52,154	50,673
Anti-dilutive shares (1)	445	4,199	609	4,285

(1)Reflects the total number of shares related to outstanding share-based compensation awards that have been excluded from the computation of net income (loss) 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 October 28, 2023 and January 28, 2023:


	Assets and Liabilities at Fair Value as of October 28, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents (1)	$	155,433	$	24,265	$	—	$	179,698
Derivative instruments (2)	—		5,132		—		5,132
Rabbi Trust assets (3)	1,164		52,151		—		53,315
Restricted cash equivalents (1)	1,338		4,268		—		5,606
Total assets	$	157,935	$	85,816	$	—	$	243,751

Liabilities:
Derivative instruments (2)	$	—	$	10	$	—	$	10
Total liabilities	$	—	$	10	$	—	$	10


	Assets and Liabilities at Fair Value as of January 28, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents (1)	$	50,364	$	—	$	—	$	50,364
Derivative instruments (2)	—		32		—		32
Rabbi Trust assets (3)	1		51,681		—		51,682
Restricted cash equivalents (1)	1,690		5,174		—		6,864
Total assets	$	52,055	$	56,887	$	—	$	108,942

Liabilities:
Derivative instruments (2)	$	—	$	4,986	$	—	$	4,986
Total liabilities	$	—	$	4,986	$	—	$	4,986

(1) Level 1 assets consisted of investments in money market funds and U.S. treasury bills. Level 2 assets consisted of time deposits.


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(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.

The Company’s Level 2 assets 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 October 28, 2023 and January 28, 2023:


(in thousands)	October 28, 2023		January 28, 2023
Gross borrowings outstanding, carrying amount	$	249,730	$	299,730
Gross borrowings outstanding, fair value (1)	254,100		304,975

(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 October 28, 2023 and January 28, 2023:


(in thousands)	October 28, 2023		January 28, 2023
Property and equipment, at cost	$	2,499,779	$	2,517,862
Less: Accumulated depreciation and amortization	(1,952,844)		(1,966,277)
Property and equipment, net	$	546,935	$	551,585

Refer to Note 8, “ASSET IMPAIRMENT,” for details related to property and equipment impairment charges incurred during the thirty-nine weeks ended October 28, 2023 and thirteen and thirty-nine weeks ended October 29, 2022.

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 thirty-nine weeks ended October 28, 2023 and October 29, 2022:


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Single lease cost (1)	$	63,177	$	63,263	$	184,172	$	182,796
Variable lease cost (2)	32,332		40,681		119,809		106,359
Operating lease right-of-use asset impairment (3)	—		1,205		1,414		4,693
Sublease income (4)	(979)		(908)		(2,959)		(2,869)
Total operating lease cost	$	94,530	$	104,241	$	302,436	$	290,979

(1)Included 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.

(4)The terms of the sublease agreement entered into by the Company with a third party during Fiscal 2020 related to one of its previous flagship store locations have not changed materially from that disclosed in Note 7, “LEASES,” of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of the Fiscal 2022 Form 10-K. Sublease income is recognized in other operating loss (income), net on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The Company had minimum commitments related to operating lease contracts that have not yet commenced, primarily for certain Company-operated retail stores, of approximately $8.3 million as of October 28, 2023.


Abercrombie & Fitch Co.			13			2023 3Q Form 10-Q

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8. ASSET IMPAIRMENT

The following table provides asset impairment charges for the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022:


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Operating lease right-of-use asset impairment	$	—	$	1,205	$	1,414	$	4,693
Property and equipment asset impairment	—		2,539		3,022		4,643
Total asset impairment	$	—	$	3,744	$	4,436	$	9,336

Asset impairment charges for the thirteen weeks ended October 29, 2022 and thirty-nine weeks ended October 28, 2023 and October 29, 2022 related to certain of the Company’s assets including stores across certain brands, geographies and store formats and other 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 thirty-nine weeks ended October 28, 2023, the Company did not recognize income tax benefits on $20.0 million and $63.0 million, respectively, of pretax losses, primarily in Switzerland, resulting in adverse tax impacts of $3.0 million and $9.6 million, respectively.

As of October 28, 2023, the Company had foreign net deferred tax assets of approximately $47.2 million, including $11.3 million, $7.8 million, and $14.8 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 thirty-nine weeks ended October 29, 2022, the Company did not recognize income tax benefits on $30.0 million and $69.7 million, respectively, of pretax losses, primarily in Switzerland, resulting in adverse tax impacts of $5.6 million and $12.8 million, respectively.

As of January 28, 2023, there were approximately $8.0 million, $9.1 million, and $15.6 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 thirty-nine weeks ended October 28, 2023 and October 29, 2022.


Abercrombie & Fitch Co.			14			2023 3Q Form 10-Q

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10. BORROWINGS

The following table provides details on the Company’s long-term borrowings, net, as of October 28, 2023 and January 28, 2023 :


(in thousands)	October 28, 2023		January 28, 2023
Long-term portion of borrowings, gross at carrying amount	$	249,730	$	299,730
Unamortized fees	(1,697)		(2,878)
Long-term borrowings, net	$	248,033	$	296,852

Senior Secured Notes

During the thirteen weeks ended October 28, 2023, A&F Management purchased $50.0 million of outstanding Senior Secured Notes in the open market and incurred a $1.3 million loss on extinguishment of debt, comprised of a premium of $0.9 million and the write-off of unamortized fees of $0.4 million, recognized in interest expense, net on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

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 2022 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 2022 Form 10-K.

The Company did not have any borrowings outstanding under the ABL Facility as of October 28, 2023 or as of January 28, 2023.

As of October 28, 2023, availability under the ABL Facility was $399.6 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 $359.6 million as of October 28, 2023.

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 October 28, 2023.


Abercrombie & Fitch Co.			15			2023 3Q 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 thirty-nine weeks ended October 28, 2023 and October 29, 2022:


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Share-based compensation expense	$	9,684	$	7,310	$	29,331	$	23,426
Income tax benefits associated with share-based compensation expense recognized	1,080		635		3,163		2,615

The following table provides discrete income tax benefits and charges related to share-based compensation awards during the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022:


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Income tax discrete benefits (charges) realized for tax deductions related to the issuance of shares	$	861	$	(29)	$	2,303	$	1,970
Income tax discrete charges realized upon cancellation of stock appreciation rights	—		(10)		(101)		(213)
Total income tax discrete benefits (charges) related to share-based compensation awards	$	861	$	(39)	$	2,202	$	1,757

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 thirty-nine weeks ended October 28, 2023 and October 29, 2022:


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Employee tax withheld upon issuance of shares (1)	$	10,310	$	426	$	29,079	$	14,432

(1) Classified within other 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 thirty-nine weeks ended October 28, 2023:


	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 January 28, 2023	2,461,395	$	21.30	336,549	$	31.08	662,137	$	23.68
Granted	901,293	29.11		222,144	28.36		111,077	41.20
Adjustments for performance achievement	—	—		—	—		493,854	16.24
Vested	(1,304,530)	17.67		—	—		(987,708)	16.24
Forfeited	(98,726)	24.97		(7,123)	29.89		(3,562)	43.46
Unvested at October 28, 2023 (1)	1,959,432	$	27.15	551,570	$	30.00	275,798	$	43.81

(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 October 28, 2023:


	Service-based Restricted Stock Units		Performance-based Restricted Stock Units		Market-based Restricted Stock Units
Unrecognized compensation cost (in thousands)	$	40,774	$	14,154	$	5,989
Remaining weighted-average period cost is expected to be recognized (years)	1.3		1.5		1.5


Abercrombie & Fitch Co.			16			2023 3Q Form 10-Q

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The following table provides additional information pertaining to restricted stock units for the thirty-nine weeks ended October 28, 2023 and October 29, 2022:


	Thirty-Nine Weeks Ended
(in thousands)	October 28, 2023		October 29, 2022
Service-based restricted stock units:
Total grant date fair value of awards granted	$	26,237	$	28,246
Total grant date fair value of awards vested	23,051		16,702

Performance-based restricted stock units:
Total grant date fair value of awards granted	6,300		5,600
Total grant date fair value of awards vested	—		4,482

Market-based restricted stock units:
Total grant date fair value of awards granted	4,576		3,852
Total grant date fair value of awards vested	16,040		4,105

The following table provides the weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the thirty-nine weeks ended October 28, 2023 and October 29, 2022:


	Thirty-Nine Weeks Ended
	October 28, 2023			October 29, 2022
Grant date market price	$	28.36		$	30.24
Fair value	41.20			41.60

Price volatility	63		%	66		%
Expected term (years)	2.9			2.8
Risk-free interest rate	4.6		%	2.5		%
Dividend yield	—			—
Average volatility of peer companies	66.0			72.3
Average correlation coefficient of peer companies	0.5295			0.5150

Stock appreciation rights

The following table provides the summarized stock appreciation rights activity for the thirty-nine weeks ended October 28, 2023:


	Number of Underlying Shares	Weighted-Average Exercise Price		Aggregate Intrinsic Value (in thousands)		Weighted-Average Remaining Contractual Life (years)
Outstanding at January 28, 2023	190,589	$	29.43

Exercised	(132,689)	25.95
Forfeited or expired	(23,700)	45.69
Outstanding at October 28, 2023	34,200	$	31.65	$	926	0.8
Stock appreciation rights exercisable at October 28, 2023	34,200	$	31.65	$	926	0.8

The following table provides additional information pertaining to stock appreciation rights exercised during the thirty-nine weeks ended October 28, 2023:


(in thousands)	October 28, 2023
Total grant date fair value of awards exercised	$	1,292

No stock appreciation rights were exercised during the thirty-nine weeks ended October 29, 2022.


Abercrombie & Fitch Co.			17			2023 3Q 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 October 28, 2023, 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	$	51,476
British pound	44,599
Canadian dollar	19,122

(1) Amounts reported are the U.S. Dollar notional amounts outstanding as of October 28, 2023.

As of October 28, 2023, 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)
United Arab Emirates dirham	$	22,058

(1) Amounts reported are the U.S. Dollar notional amounts outstanding as of October 28, 2023.

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 October 28, 2023 and January 28, 2023:


(in thousands)	Location	October 28, 2023		January 28, 2023		Location	October 28, 2023		January 28, 2023
Derivatives designated as cash flow hedging instruments	Other current assets	$	5,114	$	32	Accrued expenses	$	—	$	4,986
Derivatives not designated as hedging instruments	Other current assets	18		—		Accrued expenses	10		—
Total		$	5,132	$	32		$	10	$	4,986

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 thirty-nine weeks ended October 28, 2023 and October 29, 2022:




	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Gain recognized in AOCL (1)	$	7,151	$	2,723	$	7,202	$	10,447
(Loss) gain reclassified from AOCL to cost of sales, exclusive of depreciation and amortization (2)	(326)		3,909		$	(2,940)	$	11,718

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

(2)Amount represents (loss) gain 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 (Loss) over the next twelve months.


Abercrombie & Fitch Co.			18			2023 3Q 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 thirty-nine weeks ended October 28, 2023 and October 29, 2022:


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Gain (loss) recognized in other operating loss (income), net	$	2,193	$	504	$	(239)	$	2,276

13. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables provide activity in AOCL for the thirteen and thirty-nine weeks ended October 28, 2023:


	Thirteen Weeks Ended October 28, 2023
(in thousands)	Foreign Currency Translation Adjustment		Unrealized Gain (Loss) on Derivative Financial Instruments		Total
Beginning balance at July 29, 2023	$	(136,178)	$	(2,227)	$	(138,405)
Other comprehensive (loss) income before reclassifications	(5,042)		7,151		2,109
Reclassified loss from AOCL (1)	—		326		326
Tax effect	—		(218)		(218)
Other comprehensive (loss) income after reclassifications	(5,042)		7,259		2,217
Ending balance at October 28, 2023	$	(141,220)	$	5,032	$	(136,188)

	Thirty-Nine Weeks Ended October 28, 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	(8,567)		7,202		(1,365)
Reclassified loss from AOCL (1)	—		2,940		2,940
Tax effect	—		(236)		(236)
Other comprehensive (loss) income after reclassifications	(8,567)		9,906		1,339
Ending balance at October 28, 2023	$	(141,220)	$	5,032	$	(136,188)

(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 (Loss).

The following tables provide activity in AOCL for the thirteen and thirty-nine weeks ended October 29, 2022:


	Thirteen Weeks Ended October 29, 2022
(in thousands)	Foreign Currency Translation Adjustment		Unrealized Gain (Loss) on Derivative Financial Instruments		Total
Beginning balance at July 30, 2022	$	(136,006)	$	5,966	$	(130,040)
Other comprehensive (loss) income before reclassifications	(11,021)		2,723		(8,298)
Reclassified gain from AOCL (1)	—		(3,909)		(3,909)
Tax effect	—		(20)		(20)
Other comprehensive loss after reclassifications	(11,021)		(1,206)		(12,227)
Ending balance at October 29, 2022	$	(147,027)	$	4,760	$	(142,267)

	Thirty-Nine Weeks Ended October 29, 2022
(in thousands)	Foreign Currency Translation Adjustment		Unrealized Gain (Loss) on Derivative Financial Instruments		Total
Beginning balance at January 29, 2022	$	(120,689)	$	5,983	$	(114,706)
Other comprehensive (loss) income before reclassifications	(26,338)		10,447		(15,891)
Reclassified gain from AOCL (1)	—		(11,718)		(11,718)
Tax effect	—		48		48
Other comprehensive loss after reclassifications	(26,338)		(1,223)		(27,561)
Ending balance at October 29, 2022	$	(147,027)	$	4,760	$	(142,267)

(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 (Loss).


Abercrombie & Fitch Co.			19			2023 3Q 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.

During the second quarter of Fiscal 2023, to leverage the knowledge and experience of our regional teams to better drive brand growth, the Company reorganized its structure and now 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 (loss). 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 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 October 28, 2023 and January 28, 2023, and for the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022:

Net Sales

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

(in thousands)

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Americas

867,566