UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended ~~August 3,~~November 2, 2019



☐	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 1-12107

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. ☒ 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). ☒ 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	☒	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 ☒ No

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



Class A Common Stock		Shares outstanding as of ~~September~~December 6, 2019
$.01 Par Value		~~62,860,157~~62,748,098

Table of Contents

ABERCROMBIE & FITCH CO.

TABLE OF CONTENTS



		Page No.
Part I

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~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	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4.	Controls and Procedures	46

Part II

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 6.	Exhibits	48

	Signatures	49

Table of Contents

PART I. FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)

ABERCROMBIE & FITCH CO.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE ~~LOSS~~INCOME (LOSS)

(Thousands, except per share amounts)

(Unaudited)


	Thirteen Weeks Ended						Twenty-six Weeks Ended						Thirteen Weeks Ended						Thirty-nine Weeks Ended
	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018			November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018
Net sales	$	841,078		$	842,414		$	1,575,050		$	1,573,313		$	863,472		$	861,194		$	2,438,522		$	2,434,507
Cost of sales, exclusive of depreciation and amortization	342,445			335,519			632,327			624,073			344,541			333,375			976,868			957,448
Gross profit	498,633			506,895			942,723			949,240			518,931			527,819			1,461,654			1,477,059
Stores and distribution expense	376,347			374,552			732,959			731,899			377,697			371,859			1,110,656			1,103,758
Marketing, general and administrative expense	115,694			123,883			227,641			248,780			114,075			117,181			341,716			365,961
Flagship store exit charges	44,994			—			46,738			3,808			285			—			47,023			3,808
Asset impairment, exclusive of flagship store exit charges	715			8,671			2,377			9,727			12,610			656			14,987			10,383
Other operating loss (income), net	367			(434		)	(250		)	(2,994		)
Operating (loss) income	(39,484		)	223			(66,742		)	(41,980		)
Other operating income, net													(215		)	(1,557		)	(465		)	(4,551		)
Operating income (loss)													14,479			39,680			(52,263		)	(2,300		)
Interest expense, net	1,370			3,023			1,986			6,041			2,922			2,857			4,908			8,898
Loss before income taxes	(40,854		)	(2,800		)	(68,728		)	(48,021		)
Income tax (benefit) expense	(11,330		)	24			(20,918		)	(3,689		)
Net loss	(29,524		)	(2,824		)	(47,810		)	(44,332		)
Income (loss) before income taxes													11,557			36,823			(57,171		)	(11,198		)
Income tax expense (benefit)													3,987			12,047			(16,931		)	8,358
Net income (loss)													7,570			24,776			(40,240		)	(19,556		)
Less: Net income attributable to noncontrolling interests	1,618			1,029			2,487			1,982			1,047			857			3,534			2,839
Net loss attributable to A&F	$	(31,142	)	$	(3,853	)	$	(50,297	)	$	(46,314	)
Net income (loss) attributable to A&F													$	6,523		$	23,919		$	(43,774	)	$	(22,395	)

Net loss per share attributable to A&F
Net income (loss) per share attributable to A&F
Basic	$	(0.48	)	$	(0.06	)	$	(0.76	)	$	(0.68	)	$	0.10		$	0.36		$	(0.67	)	$	(0.33	)
Diluted	$	(0.48	)	$	(0.06	)	$	(0.76	)	$	(0.68	)	$	0.10		$	0.35		$	(0.67	)	$	(0.33	)

Weighted-average shares outstanding
Basic	65,156			68,008			65,848			68,254			63,099			66,818			64,932			67,775
Diluted	65,156			68,008			65,848			68,254			63,911			68,308			64,932			67,775

Other comprehensive (loss) income
Other comprehensive loss
Foreign currency translation, net of tax	$	(3,788	)	$	(11,206	)	$	(6,574	)	$	(19,545	)	$	1,355		$	(3,095	)	$	(5,219	)	$	(22,640	)
Derivative financial instruments, net of tax	3,133			7,447			3,080			19,707			(3,654		)	(681		)	(574		)	19,026
Other comprehensive (loss) income	(655		)	(3,759		)	(3,494		)	162
Comprehensive loss	(30,179		)	(6,583		)	(51,304		)	(44,170		)
Other comprehensive loss													(2,299		)	(3,776		)	(5,793		)	(3,614		)
Comprehensive income (loss)													5,271			21,000			(46,033		)	(23,170		)
Less: Comprehensive income attributable to noncontrolling interests	1,618			1,029			2,487			1,982			1,047			857			3,534			2,839
Comprehensive loss attributable to A&F	$	(31,797	)	$	(7,612	)	$	(53,791	)	$	(46,152	)
Comprehensive income (loss) attributable to A&F													$	4,224		$	20,143		$	(49,567	)	$	(26,009	)

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

Table of Contents

ABERCROMBIE & FITCH CO.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands, except par value amounts)

(Unaudited)


	August 3, 2019			February 2, 2019			November 2, 2019			February 2, 2019
Assets
Current assets:
Cash and equivalents	$	499,757		$	723,135		$	410,775		$	723,135
Receivables	98,691			73,112			92,736			73,112
Inventories	487,109			437,879			590,883			437,879
Other current assets	86,586			101,824			86,275			101,824
Total current assets	1,172,143			1,335,950			1,180,669			1,335,950
Property and equipment, net	649,360			694,855			665,862			694,855
Operating lease right-of-use assets	1,216,998			—			1,223,512			—
Other assets	368,503			354,788			415,962			354,788
Total assets	$	3,407,004		$	2,385,593		$	3,486,005		$	2,385,593
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	226,234		$	226,878		$	269,578		$	226,878
Accrued expenses	279,050			293,579			269,334			293,579
Short-term portion of operating lease liabilities	273,989			—			284,694			—
Income taxes payable	10,903			18,902			13,728			18,902
Short-term portion of deferred lease credits	—			19,558			—			19,558
Total current liabilities	790,176			558,917			837,334			558,917
Long-term liabilities:
Long-term portion of operating lease liabilities	1,229,609			—			1,234,502			—
Long-term portion of borrowings, net	251,033			250,439			241,343			250,439
Long-term portion of deferred lease credits	—			76,134			—			76,134
Leasehold financing obligations	—			46,337			—			46,337
Other liabilities	132,891			235,145			178,460			235,145
Total long-term liabilities	1,613,533			608,055			1,654,305			608,055
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			1,033			1,033
Paid-in capital	394,694			405,379			399,981			405,379
Retained earnings	2,251,032			2,418,544			2,244,150			2,418,544
Accumulated other comprehensive loss, net of tax	(105,946		)	(102,452		)	(108,245		)	(102,452		)
Treasury stock, at average cost: 40,154 and 37,073 shares as of August 3, 2019 and February 2, 2019, respectively	(1,548,836		)	(1,513,604		)
Treasury stock, at average cost: 40,543 and 37,073 shares as of November 2, 2019 and February 2, 2019, respectively							(1,553,407		)	(1,513,604		)
Total Abercrombie & Fitch Co. stockholders’ equity	991,977			1,208,900			983,512			1,208,900
Noncontrolling interests	11,318			9,721			10,854			9,721
Total stockholders’ equity	1,003,295			1,218,621			994,366			1,218,621
Total liabilities and stockholders’ equity	$	3,407,004		$	2,385,593		$	3,486,005		$	2,385,593

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

Table of Contents

ABERCROMBIE & FITCH CO.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Thousands, except per share amounts)

(Unaudited)


	Thirteen Weeks Ended August 3, 2019																								Thirteen Weeks Ended November 2, 2019
	Common Stock				Paid-in capital			Non-controlling interests			Retained earnings			Accumulated other comprehensive loss			Treasury stock					Total stockholders’ equity			Common Stock				Paid-in capital			Non-controlling interests			Retained earnings			Accumulated other comprehensive loss			Treasury stock					Total stockholders’ equity
	Shares outstanding		Par value														Shares		At average cost						Shares outstanding		Par value														Shares		At average cost
Balance, May 4, 2019	66,637		$	1,033	$	395,974		$	10,124		$	2,296,347		$	(105,291	)	36,663		$	(1,493,224	)	$	1,104,963
Net loss	—		—		—			1,618			(31,142		)	—			—		—			(29,524		)
Purchase of Common Stock	(3,545	)	—		—			—			—			—			3,545		(57,812		)	(57,812		)
Beginning balance at August 3, 2019																									63,146		$	1,033	$	394,694		$	11,318		$	2,251,032		$	(105,946	)	40,154		$	(1,548,836	)	$	1,003,295
Net income																									—		—		—			1,047			6,523			—			—		—			7,570
Purchase of common stock																									(412	)	—		—			—			—			—			412		(5,730		)	(5,730		)
Dividends ($0.20 per share)	—		—		—			—			(13,139		)	—			—		—			(13,139		)	—		—		—			—			(12,574		)	—			—		—			(12,574		)
Share-based compensation issuances and exercises	54		—		(1,316		)	—			(1,034		)	—			(54	)	2,200			(150		)	23		—		(509		)	—			(831		)	—			(23	)	1,159			(181		)
Share-based compensation expense	—		—		36			—			—			—			—		—			36			—		—		5,796			—			—			—			—		—			5,796
Derivative financial instruments, net of tax	—		—		—			—			—			3,133			—		—			3,133			—		—		—			—			—			(3,654		)	—		—			(3,654		)
Foreign currency translation adjustments, net of tax	—		—		—			—			—			(3,788		)	—		—			(3,788		)	—		—		—			—			—			1,355			—		—			1,355
Distributions to noncontrolling interests, net	—		—		—			(424		)	—			—			—		—			(424		)	—		—		—			(1,511		)	—			—			—		—			(1,511		)
Balance, August 3, 2019	63,146		$	1,033	$	394,694		$	11,318		$	2,251,032		$	(105,946	)	40,154		$	(1,548,836	)	$	1,003,295
Ending balance at November 2, 2019																									62,757		$	1,033	$	399,981		$	10,854		$	2,244,150		$	(108,245	)	40,543		$	(1,553,407	)	$	994,366

	Thirteen Weeks Ended August 4, 2018																								Thirteen Weeks Ended November 3, 2018
	Common Stock				Paid-in capital			Non-controlling interests			Retained earnings			Accumulated other comprehensive loss			Treasury stock					Total stockholders’ equity			Common Stock				Paid-in capital			Non-controlling interests			Retained earnings			Accumulated other comprehensive loss			Treasury stock					Total stockholders’ equity
	Shares outstanding		Par value														Shares		At average cost						Shares outstanding		Par value														Shares		At average cost
Balance, May 5, 2018	67,816		$	1,033	$	399,860		$	10,579		$	2,356,880		$	(91,133	)	35,484		$	(1,488,373	)	$	1,188,846
Net loss	—		—		—			1,029			(3,853		)	—			—		—			(2,824		)
Purchase of Common Stock	(969	)	—		—			—			—			—			969		(25,000		)	(25,000		)
Beginning balance at August 4, 2018																									66,975		$	1,033	$	401,483		$	10,074		$	2,337,100		$	(94,892	)	36,325		$	(1,507,414	)	$	1,147,384
Net income																									—		—		—			857			23,919			—			—		—			24,776
Purchase of common stock																									(1,184	)	—		—			—			—			—			1,184		(25,000		)	(25,000		)
Dividends ($0.20 per share)	—		—		—			—			(13,554		)	—			—		—			(13,554		)	—		—		—			—			(13,354		)	—			—		—			(13,354		)
Share-based compensation issuances and exercises	128		—		(4,533		)	—			(2,373		)	—			(128	)	5,959			(947		)	52		—		(1,271		)	—			(1,955		)	—			(52	)	2,640			(586		)
Share-based compensation expense	—		—		6,156			—			—			—			—		—			6,156			—		—		5,957			—			—			—			—		—			5,957
Derivative financial instruments, net of tax	—		—		—			—			—			7,447			—		—			7,447			—		—		—			—			—			(681		)	—		—			(681		)
Foreign currency translation adjustments, net of tax	—		—		—			—			—			(11,206		)	—		—			(11,206		)	—		—		—			—			—			(3,095		)	—		—			(3,095		)
Distributions to noncontrolling interests, net	—		—		—			(1,534		)	—			—			—		—			(1,534		)	—		—		—			(1,111		)	—			—			—		—			(1,111		)
Balance, August 4, 2018	66,975		$	1,033	$	401,483		$	10,074		$	2,337,100		$	(94,892	)	36,325		$	(1,507,414	)	$	1,147,384
Ending balance at November 3, 2018																									65,843		$	1,033	$	406,169		$	9,820		$	2,345,710		$	(98,668	)	37,457		$	(1,529,774	)	$	1,134,290

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

Table of Contents

ABERCROMBIE & FITCH CO.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Thousands, except per share amounts)

(Unaudited)


	Twenty-six Weeks Ended August 3, 2019																								Thirty-nine Weeks Ended November 2, 2019
	Common Stock				Paid-in capital			Non-controlling interests			Retained earnings			Accumulated other comprehensive loss			Treasury stock					Total stockholders’ equity			Common Stock				Paid-in capital			Non-controlling interests			Retained earnings			Accumulated other comprehensive loss			Treasury stock					Total stockholders’ equity
	Shares outstanding		Par value														Shares		At average cost						Shares outstanding		Par value														Shares		At average cost
Balance, February 2, 2019	66,227		$	1,033	$	405,379		$	9,721		$	2,418,544		$	(102,452	)	37,073		$	(1,513,604	)	$	1,218,621
Impact from adoption of the new lease accounting standard (Refer to Note 2 “Summary of Significant Accounting Policies”)	—		—		—			—			(75,165		)	—			—		—			(75,165		)
Beginning balance at February 2, 2019																									66,227		$	1,033	$	405,379		$	9,721		$	2,418,544		$	(102,452	)	37,073		$	(1,513,604	)	$	1,218,621
Impact from adoption of the new lease accounting standard (Refer to Note 2, “Summary of Significant Accounting Policies”)																									—		—		—			—			(75,165		)	—			—		—			(75,165		)
Net loss	—		—		—			2,487			(50,297		)	—			—		—			(47,810		)	—		—		—			3,534			(43,774		)	—			—		—			(40,240		)
Purchase of Common Stock	(3,545	)	—		—			—			—			—			3,545		(57,812		)	(57,812		)
Dividends ($0.40 per share)	—		—		—			—			(26,385		)	—			—		—			(26,385		)
Purchase of common stock																									(3,957	)	—		—			—			—			—			3,957		(63,542		)	(63,542		)
Dividends ($0.60 per share)																									—		—		—			—			(38,959		)	—			—		—			(38,959		)
Share-based compensation issuances and exercises	464		—		(13,353		)	—			(15,665		)	—			(464	)	22,580			(6,438		)	487		—		(13,862		)	—			(16,496		)	—			(487	)	23,739			(6,619		)
Share-based compensation expense	—		—		2,668			—			—			—			—		—			2,668			—		—		8,464			—			—			—			—		—			8,464
Derivative financial instruments, net of tax	—		—		—			—			—			3,080			—		—			3,080			—		—		—			—			—			(574		)	—		—			(574		)
Foreign currency translation adjustments, net of tax	—		—		—			—			—			(6,574		)	—		—			(6,574		)	—		—		—			—			—			(5,219		)	—		—			(5,219		)
Distributions to noncontrolling interests, net	—		—		—			(890		)	—			—			—		—			(890		)	—		—		—			(2,401		)	—			—			—		—			(2,401		)
Balance, August 3, 2019	63,146		$	1,033	$	394,694		$	11,318		$	2,251,032		$	(105,946	)	40,154		$	(1,548,836	)	$	1,003,295
Ending balance at November 2, 2019																									62,757		$	1,033	$	399,981		$	10,854		$	2,244,150		$	(108,245	)	40,543		$	(1,553,407	)	$	994,366

	Twenty-six Weeks Ended August 4, 2018																								Thirty-nine Weeks Ended November 3, 2018
	Common Stock				Paid-in capital			Non-controlling interests			Retained earnings			Accumulated other comprehensive loss			Treasury stock					Total stockholders’ equity			Common Stock				Paid-in capital			Non-controlling interests			Retained earnings			Accumulated other comprehensive loss			Treasury stock					Total stockholders’ equity
	Shares outstanding		Par value														Shares		At average cost						Shares outstanding		Par value														Shares		At average cost
Balance, February 3, 2018	68,195		$	1,033	$	406,351		$	10,092		$	2,420,552		$	(95,054	)	35,105		$	(1,490,503	)	$	1,252,471
Beginning balance at February 3, 2018																									68,195		$	1,033	$	406,351		$	10,092		$	2,420,552		$	(95,054	)	35,105		$	(1,490,503	)	$	1,252,471
Impact from adoption of the new revenue recognition accounting standard	—		—		—			—			6,944			—			—		—			6,944			—		—		—			—			6,944			—			—		—			6,944
Net loss	—		—		—			1,982			(46,314		)	—			—		—			(44,332		)	—		—		—			2,839			(22,395		)	—			—		—			(19,556		)
Purchase of Common Stock	(1,747	)	—		—			—			—			—			1,747		(43,670		)	(43,670		)
Dividends ($0.40 per share)	—		—		—			—			(27,196		)	—			—		—			(27,196		)
Purchase of common stock																									(2,931	)	—		—			—			—			—			2,931		(68,670		)	(68,670		)
Dividends ($0.60 per share)																									—		—		—			—			(40,550		)	—			—		—			(40,550		)
Share-based compensation issuances and exercises	527		—		(15,807		)	—			(16,886		)	—			(527	)	26,759			(5,934		)	579		—		(17,078		)	—			(18,841		)	—			(579	)	29,399			(6,520		)
Share-based compensation expense	—		—		10,939			—			—			—			—		—			10,939			—		—		16,896			—			—			—			—		—			16,896
Derivative financial instruments, net of tax	—		—		—			—			—			19,707			—		—			19,707			—		—		—			—			—			19,026			—		—			19,026
Foreign currency translation adjustments, net of tax	—		—		—			—			—			(19,545		)	—		—			(19,545		)	—		—		—			—			—			(22,640		)	—		—			(22,640		)
Distributions to noncontrolling interests, net	—		—		—			(2,000		)	—			—			—		—			(2,000		)	—		—		—			(3,111		)	—			—			—		—			(3,111		)
Balance, August 4, 2018	66,975		$	1,033	$	401,483		$	10,074		$	2,337,100		$	(94,892	)	36,325		$	(1,507,414	)	$	1,147,384
Ending balance at November 3, 2018																									65,843		$	1,033	$	406,169		$	9,820		$	2,345,710		$	(98,668	)	37,457		$	(1,529,774	)	$	1,134,290

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

Table of Contents

ABERCROMBIE & FITCH CO.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands)

(Unaudited)


	Twenty-six Weeks Ended						Thirty-nine Weeks Ended
	August 3, 2019			August 4, 2018			November 2, 2019			November 3, 2018
Operating activities
Net loss	$	(47,810	)	$	(44,332	)	$	(40,240	)	$	(19,556	)
Adjustments to reconcile net loss to net cash used for operating activities:
Adjustments to reconcile net loss to net cash (used for) provided by operating activities:
Depreciation and amortization	81,541			93,153			124,910			136,263
Amortization of deferred lease credits prior to adoption of new lease accounting standard	—			(10,609		)	—			(16,129		)
Asset impairment	5,606			9,727			18,216			10,383
Loss on disposal	3,720			1,644			5,326			3,191
Benefit from deferred income taxes	(22,589		)	(17,049		)	(20,631		)	(1,509		)
Share-based compensation	2,668			10,939			8,464			16,896
Changes in assets and liabilities:
Inventories	(51,297		)	(40,934		)	(154,791		)	(159,421		)
Accounts payable and accrued expenses	4,201			62,918			34,752			105,452
Operating lease right-of-use assets and liabilities	39,351			—			42,990			—
Income taxes	(5,011		)	(1,043		)	(2,264		)	(3,171		)
Other assets	(46,638		)	(12,759		)	(47,138		)	6,274
Other liabilities	203			(1,129		)	(3,433		)	(1,428		)
Net cash (used for) provided by operating activities	(36,055		)	50,526			(33,839		)	77,245
Investing activities
Purchases of property and equipment	(94,224		)	(54,115		)	(154,373		)	(98,768		)
Net cash used for investing activities	(94,224		)	(54,115		)	(154,373		)	(98,768		)
Financing activities
Purchases of common stock	(57,812		)	(43,670		)	(63,542		)	(68,670		)
Dividends paid	(26,385		)	(27,196		)	(38,959		)	(40,550		)
Repayment of term loan facility borrowings							(10,000		)	—
Other financing activities	(7,727		)	(6,875		)	(10,407		)	(8,761		)
Net cash used for financing activities	(91,924		)	(77,741		)	(122,908		)	(117,981		)
Effect of exchange rates on cash	(2,455		)	(13,437		)
Effect of foreign currency exchange rates on cash							(2,686		)	(16,068		)
Net decrease in cash and equivalents, and restricted cash and equivalents	(224,658		)	(94,767		)	(313,806		)	(155,572		)
Cash and equivalents, and restricted cash and equivalents, beginning of period	745,829			697,955			745,829			697,955
Cash and equivalents, and restricted cash and equivalents, end of period	$	521,171		$	603,188		$	432,023		$	542,383
Supplemental information related to non-cash activities
Purchases of property and equipment not yet paid at end of period	$	33,826		$	27,985		$	36,951		$	22,091
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	204,499		$	—		$	293,281		$	—
Supplemental information related to cash activities
Cash paid for interest related to Abercrombie & Fitch Co.’s term loan facility	$	7,688		$	6,832
Cash paid for interest							$	12,022		$	10,428
Cash paid for income taxes	$	16,434		$	14,928		$	18,697		$	17,712
Cash received from income tax refunds	$	8,565		$	8,173		$	8,570		$	7,477
Cash paid for operating lease liabilities	$	200,457		$	—		$	311,275		$	—

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

Table of Contents

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	14

Note 4.	Net ~~Loss~~Income (Loss) Per Share	14

Note 5.	Fair Value	15

Note 6.	Property and Equipment, Net	16

Note 7.	Leases	1716

Note 8.	Asset Impairment	1817

Note 9.	Income Taxes	18

Note 10.	~~Share-based~~Share-Based Compensation	1819

Note 11.	Derivative Instruments	21

Note 12.	Accumulated Other Comprehensive Loss	22

Note 13.	Segment Reporting	23

Note 14.	Flagship Store Exit Charges	24

Table of Contents

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”, or “we”) is a global multi-brand omnichannel specialty retailer, whose products are sold primarily through its ~~wholly-owned~~Company-owned store and ~~direct-to-consumer~~digital channels, as well as through various third-party wholesale, franchise and licensing arrangements. The Company offers a broad assortment of apparel, personal care products and accessories for ~~Men, Women~~men, women and ~~Kids~~kids under the Hollister, Abercrombie & Fitch and abercrombie kids brands. The 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 has operations in North America, Europe and Asia, among other regions.

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 an Emirati business venture and in a Kuwaiti business venture with Majid al Futtaim Fashion L.L.C. (“MAF”), each of which meets the definition of a variable interest entity (“VIE”). 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 MAF’s portion of net income presented as net income attributable to noncontrolling interests (“NCI”) on the Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss) and MAF’s portion of 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 was the case for the year ended February 3, 2018.~~year. Fiscal years are designated in the 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 commenced. All references herein to the Company’s fiscal years are as follows:



Fiscal year	~~Year~~Fiscal year ended	Number of weeks
~~Fiscal 2017~~	~~February 3, 2018~~	53
Fiscal 2018	February 2, 2019	52
Fiscal 2019	February 1, 2020	52
~~Fiscal 2020~~	~~January 30, 2021~~	52

Interim financial statements

The Condensed Consolidated Financial Statements as of ~~August 3,~~November 2, 2019, and for the thirteen and ~~twenty-six~~thirty-nine week periods ended ~~August 3,~~November 2, 2019 and ~~August 4,~~November 3, 2018, are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). 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 2018 filed with the SEC on April 1, 2019. The February 2, 2019 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 United States of America (“~~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 2019.

Certain prior year amounts have been reclassified for consistency with the current year presentation of flagship store exit charges on the Condensed Consolidated Statements of Operations and Comprehensive ~~Loss.~~Income (Loss).

Table of Contents

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 not expected to have a material impact on the Company’s consolidated financial statements. The following table provides a brief description of certain recent accounting pronouncements the Company has adopted.



Accounting Standards Update (ASU)	Description	Effect on the financial statements or other significant matters
Leases (ASU 2016-02) Date of adoption: February 3, 2019	This update supersedes the leasing standard in Accounting Standards Codification (“ASC”) 840, Leases. The new standard requires an entity to recognize lease assets and lease liabilities on the balance sheet and disclose key leasing information that depicts the lease rights and obligations of an entity.	The Company adopted this standard using a modified retrospective transition method and elected to not restate comparative periods. In conjunction with the adoption of this standard, the Company elected: - the package of practical expedients which, among other things, allowed the Company tocarry forward historical lease classification for leases existing before the date of adoption; and - to combine lease and nonlease components for ~~leases existing before the date~~all current classes of ~~adoption, as well as for any new leases.~~underlying leased assets. However, the Company did not elect the practical expedient to use hindsight when determining the lease term or assessing impairment. Adoption of this standard resulted in the Company’s total assets and total liabilities on the Condensed Consolidated Balance Sheet each increasing by approximately $1.2 billion, primarily due to the recognition of operating lease right-of-use assets and liabilities. The Company also recognized a cumulative adjustment decreasing the opening balance of retained earnings by $0.1 billion on the date of adoption. The adoption of this standard did not have a significant impact on the timing or classification of the Company’s Consolidated Statement of Cash Flows, the Company’s liquidity or the Company’s debt covenant compliance under current agreements. Additional information regarding the impact from adoption of the new lease accounting standard and updated accounting policies related to leases are provided further in this Note 2.
Derivatives and Hedging — Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12) Date of adoption: February 3, 2019	This update amends ASC 815, Derivatives and Hedging. The new standard simplifies certain aspects of hedge accounting for both financial and commodity risks to more accurately present the economic effects of an entity’s risk management activities in its financial statements.	The Company adopted this standard using a modified retrospective transition approach, while the amended presentation and disclosure standard requires a prospective approach. Upon adoption of this standard, the Company elected to include time value in its assessment of effectiveness for derivative instruments designated as cash flow hedges. Updated accounting policies related to derivatives have been updated and are provided further in this Note 2. The adoption of this standard did not have a significant impact on the Company’s Condensed Consolidated Financial Statements for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019, and is not expected to have a significant impact on the Company’s consolidated financial statements for Fiscal 2019.
Intangibles — Goodwill and Other —Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (ASU 2018-15) Date of adoption: February 3, 2019	This update amends ASC 350, Intangibles — Goodwill and Other —Internal-Use Software. The new standard allows companies to defer certain direct costs related to software as a service (“SaaS”) implementation costs and amortize them to operating expense over the term of the related SaaS arrangement. The criteria for determining whether costs associated with SaaS can be capitalized isare now the same criteria applied to internal software development costs in order to assess eligibility for deferral.	The Company early adopted this standard on a prospective basis and comparative periods have not been restated. The Company expects to capitalize up to ~~$10~~$5.0 million of SaaS implementation costs in Fiscal 2019, of which ~~$2.2~~$3.0 million has been capitalized in the ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019. Amortization expense related to capitalized SaaS implementation costs was ~~immaterial~~$0.5 million and $0.7 million for ~~each of~~ the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3, 2019.~~November 2, 2019, respectively.

Table of Contents

The following table provides the impact from adoption of the new lease accounting standard on the Company’s Condensed Consolidated Balance Sheet:



(in thousands)	February 2, 2019 (as reported under previous lease accounting standard)			Impact from adoption of new lease accounting standard			Upon adoption on February 3, 2019 (under new lease accounting standard) ⁽¹⁾
Assets
Current assets:
Cash and equivalents	$	723,135		$	—		$	723,135
Receivables	73,112			—			73,112
Inventories	437,879			—			437,879
Other current assets ⁽²⁾	101,824			(31,310		)	70,514
Total current assets	1,335,950			(31,310		)	1,304,640
Property and equipment, net ⁽³⁾	694,855			(46,624		)	648,231
Operating lease right-of-use assets ⁽²⁾	—			1,234,515			1,234,515
Other assets^{(2) (5)}	354,788			15,553			370,341
Total assets	$	2,385,593		$	1,172,134		$	3,557,727
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	226,878		$	—		$	226,878
Accrued expenses ⁽²⁾	293,579			(13,508		)	280,071
Short-term portion of operating lease liabilities⁽⁴⁾	—			280,108			280,108
Short-term portion of deferred lease credits ⁽²⁾	19,558			(19,558		)	—
Income taxes payable	18,902			—			18,902
Total current liabilities	558,917			247,042			805,959
Long-term liabilities:
Long-term portion of operating lease liabilities ⁽⁴⁾	—			1,193,946			1,193,946
Long-term portion of borrowings, net	250,439			—			250,439
Long-term portion of deferred lease credits ⁽²⁾	76,134			(76,134		)	—
Leasehold financing obligations⁽³⁾	46,337			(46,337		)	—
Other liabilities ^{(2) (5)}	235,145			(71,218		)	163,927
Total long-term liabilities	608,055			1,000,257			1,608,312
Stockholders’ equity
Class A Common Stock	1,033			—			1,033
Paid-in capital	405,379			—			405,379
Retained earnings⁽⁶⁾	2,418,544			(75,165		)	2,343,379
Accumulated other comprehensive loss, net of tax	(102,452		)	—			(102,452		)
Treasury stock, at average cost	(1,513,604		)	—			(1,513,604		)
Total Abercrombie & Fitch Co. stockholders’ equity	1,208,900			(75,165		)	1,133,735
Noncontrolling interests	9,721			—			9,721
Total stockholders’ equity	1,218,621			(75,165		)	1,143,456
Total liabilities and stockholders’ equity	$	2,385,593		$	1,172,134		$	3,557,727


⁽¹⁾	Amounts under “Upon adoption on February 3, 2019 (under new lease accounting standard),” are calculated as February 2, 2019 reported balances adjusted for the impact of adoption on the first day of Fiscal 2019, February 3, 2019.

⁽²⁾

Upon adoption, the Company recognized assets for the rights to use its operating leases on the Condensed Consolidated Balance Sheet. In conjunction with this recognition, the Company reclassified amounts to operating lease right-of-use assets including: short-term prepaid rent from other current assets; key money, long-term prepaid rent and leasehold acquisition costs from other assets; short-term and long-term portions of deferred lease credits; accrued rent and accrued straight-line rent from accrued expenses and other liabilities, respectively.

⁽³⁾

Upon adoption, the Company derecognized construction project assets and related leasehold financing obligations that previously failed to qualify for sale and leaseback accounting. In certain instances, these construction project assets had shielded other assets included within their respective asset groups from impairment, as the fair value of the construction project assets had exceeded the carrying values of their respective asset groups. In such instances, the Company recognized impairment of certain leasehold improvements and store assets upon adoption.


⁽⁴⁾	Upon adoption, the Company recognized operating lease liabilities on the Condensed Consolidated Balance Sheet.


⁽⁵⁾	Upon adoption, the Company established net deferred tax assets for operating lease right-of-use assets and operating lease liabilities.

⁽⁶⁾

Upon adoption, the Company recognized a cumulative adjustment decreasing the opening balance of retained earnings, primarily related to right-of-use asset impairment charges for certain of the Company’s stores where it was previously determined that the carrying value of assets was not recoverable, partially offset by benefits to retained earnings to establish net deferred tax assets and a net gain resulting from the derecognition of certain leased building assets and related leasehold financing obligations that previously failed to qualify for sale and leaseback accounting.

Table of Contents

The Company’s significant accounting policies as of ~~August 3,~~November 2, 2019 have not changed materially from those disclosed in Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” of the Notes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Annual Report on Form 10-K for Fiscal 2018, with the exception of those discussed below which have been updated to reflect new accounting standards adopted in Fiscal 2019.

Leases

The Company determines if an arrangement is a lease at inception. On the lease commencement date, the Company recognizes an asset for the right to use a leased asset and a liability based on the present value of remaining lease payments over the lease term.

As ~~most of~~ the ~~Company’s~~rates implicit in the Company's leases doare not ~~provide an implicit rate,~~readily determinable, the Company uses its incremental borrowing rate based on the transactional currency of the lease and the lease ~~term.~~term for the initial measurement of the lease right-of-use asset and liability. For leases existing before the adoption of the new lease accounting standard, the Company used its incremental borrowing rate as of the date of adoption, determined using the remaining lease term as of the date of adoption. For leases commencing on or after the adoption of the new lease accounting standard, the incremental borrowing rate is determined using the remaining lease term as of the lease commencement date.

The Company has elected to combine lease and nonlease components for all ~~leases existing before the adoption~~current classes of ~~the new lease accounting standard, as well as for any new leases.~~underlying leased assets.

The measurement of lease right-of-use assets and liabilities includes amounts related to:

Lease payments made prior to the lease commencement date;

Incentives from landlords received by the Company for signing a lease, including construction allowances or deferred lease credits paid to the Company by landlords towards construction and tenant improvement costs, which are presented as a reduction to the right-of-use asset recorded;

Fixed payments related to lease components, such as rent escalation payments scheduled at the lease commencement date;

Fixed payments related to nonlease components, such as taxes, insurance, and maintenance costs; and

Unamortized initial direct costs incurred in conjunction with securing a lease, including key money, which are amounts paid directly to a landlord in exchange for securing the lease, and leasehold acquisition costs, which are amounts paid to parties other than the landlord, such as an existing tenant, to secure the desired lease.

The measurement of lease right-of-use assets and liabilities excludes amounts related to:

Costs expected to be incurred to return a leased asset to its original condition, also referred to as asset retirement obligations, which are classified within other liabilities on the Condensed Consolidated Balance Sheets;

Variable payments related to lease components, such as contingent rent payments made by the Company based on performance, the expense of which is recognized in the period incurred on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss);

Variable payments related to nonlease components, such as taxes, insurance, and maintenance costs, the expense of which is recognized in the period incurred in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss); and

Leases not related to Company-operated retail stores with an initial term of 12 months or less, the expense of which is recognized in the period incurred in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Certain of the Company’s leases include options to extend the lease or to terminate the lease. The Company assesses these leases and, depending on the facts and circumstances, may or may not include these options in the measurement of the Company’s lease right-of-use assets and liabilities. Generally, the Company’s options to extend its leases are at the Company’s sole discretion and at the time of lease commencement are not reasonably certain of being exercised. There may be instances in which a lease is being renewed on a month-to-month basis and, in these instances, the Company will recognize lease expense in the period incurred in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) until a new agreement has been executed.

Amortization and interest expense related to lease right-of-use assets and liabilities are generally calculated on a straight-line basis over the lease term. Amortization and interest expense related to previously impaired lease right-of-use assets are calculated on a front-loaded pattern. Depending on the nature of the lease, amortization and interest expense is recorded ~~in either~~within stores and distribution expense, or marketing, general and administrative expense, inor flagship store exit charges on the Consolidated Statements of Operations and Comprehensive Income (Loss).

Table of Contents

The Company’s lease right-of-use assets are assessed for indicators of impairment at least quarterly, in accordance with the long-lived asset impairment policy disclosed in Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and equipment, net,” of the Notes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA,” of A&F’s Annual Report on Form 10-K for Fiscal 2018.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. In addition, the Company does not have any sublease arrangements with any related party or third party.

Refer to Note 7, “LEASES.”

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.

In order to qualify for hedge accounting treatment, a derivative instrument must be considered highly effective at offsetting changes in either the hedged item’s cash flows or fair value. Additionally, the hedge relationship must be documented to include the risk management objective and strategy, the hedging instrument, the hedged item, the risk exposure, and how hedge effectiveness will be assessed prospectively and retrospectively. The extent to which a hedging instrument has been, and is expected to continue to be, effective at offsetting changes in fair value or cash flows is assessed and documented at least quarterly. If the underlying hedged item is no longer probable of occurring, hedge accounting is discontinued.

For derivative instruments that either do not qualify for hedge accounting or are not designated as hedges, all changes in the fair value of the derivative instrument are recognized in earnings. For qualifying cash flow hedges, the change in the fair value of the derivative instrument is recorded as a component of other comprehensive income (loss) (“OCI”) and recognized in earnings when the hedged cash flows affect earnings. If the cash flow hedge relationship is terminated, the derivative instrument gains or losses that are deferred in OCI will be recognized in earnings when the hedged cash flows occur. However, for cash flow hedges that are terminated because the forecasted transaction is not expected to occur in the original specified time period, or a two-month period thereafter, the derivative instrument gains or losses are immediately recognized in earnings.

The Company uses derivative instruments, primarily forward contracts designated as cash flow hedges, to hedge the foreign currency exchange rate exposure associated with forecasted foreign-currency-denominated intercompany inventory transactions with foreign subsidiaries before inventory is sold to third parties. Fluctuations in 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 forward contracts typically have a maximum term of twelve months. The conversion of the inventory to cost of sales, exclusive of depreciation and amortization, will result in the reclassification of related derivative gains and losses that are reported in accumulated other comprehensive loss (“AOCL”) into earnings on the Condensed Consolidated Balance Sheets.

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

The Company presents its derivative assets and derivative liabilities at their gross fair values within other current assets and accrued liabilities, respectively, on the Condensed Consolidated Balance Sheets. However, the Company’s derivative contracts allow net settlements under certain conditions.

Refer to Note 11, “DERIVATIVE INSTRUMENTS.”

Table of Contents

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.~~Flows:


(in thousands)	Location	August 3, 2019		February 2, 2019		August 4, 2018		February 3, 2018		Location	November 2, 2019		February 2, 2019		November 3, 2018		February 3, 2018
Cash and equivalents	Cash and equivalents	$	499,757	$	723,135	$	581,166	$	675,558	Cash and equivalents	$	410,775	$	723,135	$	520,523	$	675,558
Long-term restricted cash and equivalents	Other assets	18,877		22,694		22,022		22,397		Other assets	18,698		22,694		21,860		22,397
Short-term restricted cash and equivalents	Other current assets	$	2,537	$	—	$	—	$	—	Other current assets	$	2,550	$	—	$	—	$	—
Cash and equivalents and restricted cash and equivalents		$	521,171	$	745,829	$	603,188	$	697,955		$	432,023	$	745,829	$	542,383	$	697,955

3. REVENUE RECOGNITION

Contract liabilities

The following table details certain contract liabilities representing unearned revenue as of ~~August 3,~~November 2, 2019, February 2, 2019, ~~August 4,~~November 3, 2018 and February 3, 2018:


(in thousands)	August 3, 2019		February 2, 2019		August 4, 2018		February 3, 2018		November 2, 2019		February 2, 2019		November 3, 2018		February 3, 2018
Unearned revenue liabilities related to the Company’s gift card program	$	20,056	$	26,062	$	17,478	$	28,939	$	19,855	$	26,062	$	17,351	$	28,939
Unearned revenue liabilities related to the Company’s loyalty programs	$	21,073	$	19,904	$	20,042	$	15,965	$	21,396	$	19,904	$	24,287	$	15,965

The ~~Company~~following table details recognized revenue associated with the Company’s gift card ~~redemptions~~program and ~~gift card breakage of approximately $12.8 million and $28.1 million~~loyalty programs for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August~~November 2, 2019 and November 3, ~~2019, respectively, and approximately $12.0 million and $25.8 million for the thirteen and twenty-six weeks ended August 4, 2018, respectively.~~2018:

The Company recognized revenue associated with reward redemptions and breakage related to the Company’s loyalty programs of approximately $8.0 million and $14.5 million for the thirteen and twenty-six weeks ended August 3, 2019, respectively, and approximately $8.2 million and $15.4 million for the thirteen and twenty-six weeks ended August 4, 2018, respectively.



	Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	November 2, 2019		November 3, 2018		November 2, 2019		November 3, 2018
Recognized revenue associated with gift card redemptions and gift card breakage	$	12,653	$	11,163	$	40,729	$	37,001
Recognized revenue associated with reward redemptions and breakage related to the Company’s loyalty programs	$	9,249	$	8,725	$	23,795	$	24,150

Disaggregation of revenue

All revenues are recognized in net sales in the Condensed Consolidated Statements of Operations and Comprehensive ~~Loss.~~Income (Loss). For information regarding the disaggregation of revenue, refer to Note 13, “SEGMENT REPORTING.”

4. NET ~~LOSS~~INCOME (LOSS) PER SHARE

Net ~~loss~~income (loss) per basic and diluted share attributable to A&F is computed based on the weighted-average number of outstanding shares of Class A Common Stock (“Common Stock”).

Additional information pertaining to net ~~loss~~income (loss) per share attributable to A&F is as follows:


	Thirteen Weeks Ended				Twenty-six Weeks Ended				Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018		November 2, 2019		November 3, 2018		November 2, 2019		November 3, 2018
Shares of Common Stock issued	103,300		103,300		103,300		103,300		103,300		103,300		103,300		103,300
Weighted-average treasury shares	(38,144	)	(35,292	)	(37,452	)	(35,046	)	(40,201	)	(36,482	)	(38,368	)	(35,525	)
Weighted-average — basic shares	65,156		68,008		65,848		68,254		63,099		66,818		64,932		67,775
Dilutive effect of share-based compensation awards	—		—		—		—		812		1,490		—		—
Weighted-average — diluted shares	65,156		68,008		65,848		68,254		63,911		68,308		64,932		67,775
Anti-dilutive shares ⁽¹⁾	3,318		3,466		3,065		4,033		2,912		1,925		1,572		3,827

⁽¹⁾

Reflects the total number of shares related to outstanding share-based compensation awards that have been excluded from the computation of net ~~loss~~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 achieve up to 200% of their target vesting amount and are reflected at the maximum vesting amount less any dilutive portion.

Table of Contents

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 three levels of the hierarchy and the distribution of the Company’s assets and liabilities that are measured at fair value on a recurring basis, were as follows:


	Assets and Liabilities at Fair Value as of August 3, 2019								Assets and Liabilities at Fair Value as of November 2, 2019
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents ⁽¹⁾	$	211	$	25,288	$	—	$	25,499	$	222	$	25,920	$	—	$	26,142
Derivative instruments ⁽²⁾	—		5,457		—		5,457		—		2,478		—		2,478
Rabbi Trust assets ⁽³⁾	1		107,466		—		107,467		1		108,271		—		108,272
Restricted cash equivalents ⁽⁴⁾	10,056		4,546		—		14,602		9,812		5,511		—		15,323
Total assets	$	10,268	$	142,757	$	—	$	153,025	$	10,035	$	142,180	$	—	$	152,215

Liabilities:
Derivative instruments ⁽²⁾	$	—	$	349	$	—	$	349	$	—	$	1,767	$	—	$	1,767
Total liabilities	$	—	$	349	$	—	$	349	$	—	$	1,767	$	—	$	1,767



	Assets and Liabilities at Fair Value as of February 2, 2019
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents ⁽¹⁾	$	55,558	$	34,440	$	—	$	89,998
Derivative instruments ⁽²⁾	—		2,162		—		2,162
Rabbi Trust assets ⁽³⁾	5		105,877		—		105,882
Restricted cash equivalents ⁽⁴⁾	10,910		4,588		—		15,498
Total assets	$	66,473	$	147,067	$	—	$	213,540

Liabilities:
Derivative instruments ⁽²⁾	$	—	$	332	$	—	$	332
Total liabilities	$	—	$	332	$	—	$	332


⁽¹⁾	Level 1 assets consist of investments in money market funds. Level 2 assets consist of time deposits.


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


⁽³⁾	Level 1 assets consist of investments in money market funds. Level 2 assets consist of trust-owned life insurance policies.


⁽⁴⁾	Level 1 assets consist of investments in U.S. treasury bills and money market funds. Level 2 assets consist of time deposits.

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

Time deposits, which are valued at cost approximating fair value due to the short-term nature of these investments;

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

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

Table of Contents

Fair value of borrowings

The Company’s borrowings under the Company’s credit facilities are carried at historical cost in the accompanying Condensed Consolidated Balance Sheets. The carrying amount and fair value of gross borrowings under the Company’s term loan credit facility were as follows:


(in thousands)	August 3, 2019		February 2, 2019		November 2, 2019		February 2, 2019
Gross borrowings outstanding, carrying amount	$	253,250	$	253,250	$	243,250	$	253,250
Gross borrowings outstanding, fair value	$	254,516	$	252,933	$	243,706	$	252,933

No borrowings were outstanding under the Company’s senior secured revolving credit facility as of ~~August 3,~~November 2, 2019 or February 2, 2019.

6. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of:

(in thousands) August 3, 2019 February 2, 2019
Property and equipment, at cost $ 2,719,350
$ 2,829,250
Less: Accumulated depreciation and amortization (2,069,990 ) (2,134,395 )
Property and equipment, net $ 649,360
$ 694,855

~~Details related to store asset impairment charges incurred during the thirteen and twenty-six weeks ended August 3, 2019 and August 4, 2018 are as follows:~~


	Thirteen Weeks Ended		Twenty-six Weeks Ended
(in thousands)	August 3, 2019	August 4, 2018	August 3, 2019	August 4, 2018	November 2, 2019			February 2, 2019
Store asset impairment	355	8,671	2,017	9,727
Property and equipment, at cost					$	2,773,862		$	2,829,250
Less: Accumulated depreciation and amortization					(2,108,000		)	(2,134,395		)
Property and equipment, net					$	665,862		$	694,855

The Company had $34.7 million of construction project assets in property and equipment, net as of February 2, 2019, related to the construction of buildings in certain lease arrangements where, under the previous lease accounting standard, the Company was deemed to be the owner of the construction project. Upon adoption of the new lease accounting standard, described further in Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” the Company derecognized these construction project assets.

Refer to Note 8, “~~Table of Contents~~ASSET IMPAIRMENT,” for details related to property and equipment impairment charges incurred during the thirteen and thirty-nine weeks ended November 2, 2019 and November 3, 2018.

7. LEASES

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

The following table provides a summary of the Company’s operating lease costs for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019:


(in thousands)	Thirteen Weeks Ended		Twenty-six Weeks Ended		Thirteen Weeks Ended		Thirty-nine Weeks Ended
Single lease cost ⁽¹⁾	$	121,270	$	213,544	$	104,726	$	318,270
Variable lease cost ⁽²⁾	60,238		103,083		25,990		129,073
Operating lease right-of-use asset impairment ⁽³⁾	3,589		3,589		9,047		12,636
Total operating lease cost	$	185,097	$	320,216	$	139,763	$	459,979

⁽¹⁾

Includes amortization and interest expense associated with operating lease right-of-use assets and liabilities. Includes $23.3 million of charges ~~related to~~included in flagship store exit charges on the Consolidated Statements of Operations and Comprehensive Income (Loss) for ~~each of~~ the ~~thirteen and twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019. Refer to Note 14, “FLAGSHIP STORE EXIT CHARGES.”

⁽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. Includes $20.2 million of charges ~~related to~~included in flagship store exit charges on the Consolidated Statements of Operations and Comprehensive Income (Loss) for ~~each of~~ the ~~thirteen and twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019. Refer to Note 14, “FLAGSHIP STORE EXIT CHARGES.”


⁽³⁾	Includes $3.2 million of asset charges ~~related to~~included in flagship store exit charges on the Consolidated Statements of Operations and Comprehensive Income (Loss) for ~~each of~~ the ~~thirteen and twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019. Refer to Note 14, “FLAGSHIP STORE EXIT CHARGES.”

Table of Contents

The following table provides the weighted-average remaining lease term of the Company’s operating leases and the weighted-average discount rates used to calculate the Company’s operating lease liabilities as of ~~August 3,~~November 2, 2019:



	~~August 3,~~November 2, 2019
Weighted-average remaining lease term (years)	~~6.3~~6.1
Weighted-average discount rate	5.5	%

The following table provides a maturity analysis of the Company’s operating lease liabilities, based on undiscounted cash flows, as of ~~August 3,~~November 2, 2019:


(in thousands)
Fiscal 2019 (excluding the twenty-six weeks ended August 3, 2019)	$	173,786
Fiscal 2019 (excluding the thirty-nine weeks ended November 2, 2019)				$	76,951
Fiscal 2020	342,672			371,357
Fiscal 2021	293,971			311,061
Fiscal 2022	245,215			262,530
Fiscal 2023	202,561			219,723
Fiscal 2024 and thereafter	531,374			560,067
Total undiscounted operating lease payments	$	1,789,579		$	1,801,689
Less: Imputed interest	(285,981		)	(282,493		)
Present value of operating lease liabilities	$	1,503,598		$	1,519,196

As of ~~August 3,~~November 2, 2019, the Company had minimum commitments related to additional operating lease contracts that have not yet commenced, primarily for its Company-operated retail stores, of approximately ~~$28.1~~$22.5 million.

As reported under the previous accounting standard, the following table provides a summary of operating lease commitments, including leasehold financing obligations, under noncancelable leases as of February 2, 2019:


(in thousands)
Fiscal 2019	$	367,622	$	367,622
Fiscal 2020	$	304,270	304,270
Fiscal 2021	$	205,542	205,542
Fiscal 2022	$	159,617	159,617
Fiscal 2023	$	128,626	128,626
Fiscal 2024 and thereafter	$	310,003	310,003
Total			$	1,475,680

~~Table of Contents~~

8. ASSET IMPAIRMENT

The following table provides additional details related to long-lived asset impairment charges for thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 and ~~August 4,~~November 3, 2018.


	Thirteen Weeks Ended				Twenty-six Weeks Ended				Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018		November 2, 2019		November 3, 2018		November 2, 2019		November 3, 2018
Operating lease right-of-use asset impairment ⁽¹⁾	$	3,589	$	—	$	3,589	$	—	$	9,047	$	—	$	12,636	$	—
Store asset impairment	355		8,671		2,017		9,727
Property and equipment asset impairment									3,563		656		5,580		10,383
Total asset impairment	$	3,944	$	8,671	$	5,606	$	9,727	$	12,610	$	656	$	18,216	$	10,383


⁽¹⁾	Includes $3.2 million of operating lease right-of-use asset impairment ~~related to~~included in flagship store exit charges on the Consolidated Statements of Operations and Comprehensive Income (Loss) for ~~each of~~ the ~~thirteen and twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019. Refer to Note 14, “FLAGSHIP STORE EXIT CHARGES.”

Long-lived asset impairment charges for the thirteen and thirty-nine weeks ended November 2, 2019 and November 3, 2018 primarily related to the Company’s flagship store assets whose carrying value exceeded fair value.

Table of Contents

9. INCOME TAXES

The quarterly tax provision for income taxes is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for discrete quarterly events. The Company’s quarterly tax provision and the estimate of the annual effective tax rate are subject to significant variation due to several factors. These 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 law, regulations, interpretations and administrative practices, relative changes in expenses or losses for which tax benefits are not recognized and the impact of discrete items. The impact of these items on the effective tax rate will be greater at lower levels of pre-tax earnings.

Tax Cuts and Jobs Act of 2017

In December 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law. The Act made broad and significantly complex changes to the U.S. corporate income tax system by, among other things: reducing the U.S. federal corporate income tax rate from 35% to 21%; transitioning U.S. international taxation to a modified territorial tax system; and imposing a mandatory one-time deemed repatriation tax, payable over eight years, on accumulated undistributed foreign subsidiary earnings and profits as of December 31, 2017. Given the significant changes resulting from and complexities associated with the Act, the estimated financial impacts related to the enactment of the Act were provisional as of November 3, 2018. Provisional amounts were finalized after the Company’s Fiscal 2017 U.S. corporate income tax return was filed in the fourth quarter of Fiscal 2018, no later than one year from the enactment of the Act.

Primarily due to regulatory guidance issued by the Internal Revenue Service in Fiscal 2018, the Company ~~incurred~~recognized measurement period charges of $0.4 million and $2.4 million during the thirteen and thirty-nine weeks ended November 3, 2018.

Swiss Tax Reform

In May 2019, Switzerland voted to approve the Federal Act on Tax Reform and AHV Financing (“Swiss Tax Reform”), effective at the federal level beginning January 2020, which will result in the abolishment of preferential tax regimes by the cantons. In addition to the abolishment of the preferential tax regimes, the cantons will need to implement new, mandatory tax provisions in their cantonal tax law which are subject to a referendum process as a result of Swiss Tax Reform. As a result of changes in Swiss tax law and actions taken by the Company, both of which occurred during the third quarter of Fiscal 2019, the Company increased its deferred income tax assets and liabilities, which are recorded on the Condensed Balance Sheet within other assets and other liabilities, respectively, by $38.0 million during the third quarter of Fiscal 2019. Swiss Tax Reform did not have an impact to the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) or the Company’s cash flows during the period.

Share-based compensation

Refer to Note 10, “SHARE-BASED COMPENSATION,” for details on discrete income tax benefits and charges ~~of $0.1 million and benefits of $1.0 million for~~related to share-based compensation awards during the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August~~November 2, 2019 and November 3, 2019, respectively, primarily related to the exercise of certain share-based compensation awards, and incurred discrete non-cash income tax benefits of $0.2 million and charges of $7.9 million for the thirteen and twenty-six ended August 4, 2018, respectively, primarily related to the expiration of certain share-based compensation awards.2018.

Table of Contents

10. SHARE-BASED COMPENSATION

Financial statement impact

The following table details share-based compensation expense and the related income tax benefit for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 and ~~August 4,~~November 3, 2018:


	Thirteen Weeks Ended				Twenty-six Weeks Ended				Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018		November 2, 2019		November 3, 2018		November 2, 2019		November 3, 2018
Share-based compensation expense	$	36	$	6,156	$	2,668	$	10,939	$	5,796	$	5,957	$	8,464	$	16,896
Income tax benefit associated with share-based compensation expense recognized during the period									$	1,211	$	1,252	$	1,566	$	3,426

The following table details discrete income tax benefits and charges related to share-based compensation awards during the thirteen and thirty-nine weeks ended November 2, 2019 and November 3, 2018:



	Thirteen Weeks Ended						Thirty-nine Weeks Ended
(in thousands)	November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018
Income tax discrete benefits realized for tax deductions related to the issuance of shares during the period	$	6		$	106		$	1,175		$	1,131
Income tax discrete charges realized upon cancellation of stock appreciation rights during the period	(447		)	(1,942		)	(611		)	(10,883		)
Total income tax discrete benefits (charges) related to share-based compensation awards	$	(441	)	$	(1,836	)	$	564		$	(9,752	)

The following table details the amount of employee tax withheld by the Company ~~recognized tax expense~~upon the issuance of shares associated with ~~share-based compensation~~restricted stock units vesting and the exercise of ~~$0.2 million and tax benefits of $0.4 million~~stock appreciation rights for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August~~November 2, 2019 and November 3, ~~2019, respectively, and tax benefits of $1.3 million and $2.2 million for the thirteen and twenty-six weeks ended August 4, 2018, respectively.~~2018:



	Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	November 2, 2019		November 3, 2018		November 2, 2019		November 3, 2018
Employee tax withheld upon issuance of shares ⁽¹⁾	$	181	$	586	$	6,619	$	6,520

~~Table of Contents~~


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

Restricted stock units

The following table summarizes activity for restricted stock units for the ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019:


	Service-based Restricted Stock Units				Performance-based Restricted Stock Units				Market-based Restricted Stock Units				Service-based Restricted Stock Units				Performance-based Restricted Stock Units				Market-based Restricted Stock Units
	Number of Underlying Shares ⁽¹⁾		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		Number of Underlying Shares ⁽¹⁾		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 2, 2019	2,020,030		$	16.76	801,527		$	13.65	435,970		$	21.24	2,020,030		$	16.76	801,527		$	13.65	435,970		$	21.24
Granted	724,363		22.16		234,984		22.89		115,238		36.24		731,886		22.10		234,984		22.89		115,238		36.24
Adjustments for performance achievement	—		—		(90,616	)	24.06		(72,497	)	28.20		—		—		(90,616	)	24.06		(72,497	)	28.20
Vested	(701,802	)	17.92		—		—		(18,125	)	28.20		(736,858	)	17.76		—		—		(18,125	)	28.20
Forfeited	(261,851	)	16.22		(195,162	)	12.93		(38,802	)	29.90		(288,194	)	16.62		(198,022	)	13.08		(38,802	)	29.90
Unvested at August 3, 2019	1,780,740		$	18.58	750,733		$	15.44	421,784		$	23.05
Unvested at November 2, 2019													1,726,864		$	18.62	747,873		$	15.41	421,784		$	23.05

⁽¹⁾

Includes ~~271,420~~259,016 unvested restricted stock units as of ~~August 3,~~November 2, 2019, subject to vesting requirements related to the achievement of certain performance metrics, such as operating income and net income, for the fiscal year immediately preceding the vesting date. Holders of these restricted stock units have the opportunity to earn back one or more installments of the award if the cumulative performance requirements are met in a subsequent year. Unvested shares related to restricted stock units with performance-based and market-based vesting conditions can achieve up to 200% of their target vesting amount and are reflected at 100% of their target vesting amount in the table above.

Table of Contents

Fair value of both service-based and performance-based restricted stock units is calculated using the market price of the underlying ~~Common Stock~~common stock on the date of grant reduced for anticipated dividend payments on unvested shares. In determining fair value, the Company does not take into account performance-based vesting requirements. Performance-based vesting requirements are taken into account in determining the number of awards expected to vest. For market-based restricted stock units, fair value is calculated using a Monte Carlo simulation with the number of shares that ultimately vest dependent on the Company’s total stockholder return measured against the total stockholder return of a select group of peer companies over a three-year period. For awards with performance-based or market-based vesting requirements, the number of shares that ultimately vest can vary from 0% to 200% of target depending on the level of achievement of performance criteria. Unvested shares related to restricted stock units with performance-based and market-based vesting conditions can achieve up to 200% of their target vesting amount and are reflected at 100% of their target vesting amount in the table above.

Service-based restricted stock units are expensed on a straight-line basis over the award’s requisite service period. Performance-based restricted stock units subject to graded vesting are expensed on an accelerated attribution basis. Performance share award expense is primarily recognized in the performance period of the award’s requisite service period. Market-based restricted stock units without graded vesting features are expensed on a straight-line basis over the award’s requisite service period. Compensation expense for stock appreciation rights is recognized on a straight-line basis over the award’s requisite service period. The Company adjusts share-based compensation expense on a quarterly basis for actual forfeitures. ~~Unrecognized compensation expense presented excludes the effect of potential forfeitures, and will be adjusted for actual forfeitures as they occur.~~

~~As of August 3, 2019, there was $27.6 million, $4.3 million and $5.4 million of total~~The following table details unrecognized compensation cost ~~related to service-based, performance-based~~ and ~~market-based restricted stock units, respectively. The unrecognized compensation cost is~~the remaining weighted-average period these costs are expected to be recognized ~~over a remaining weighted-average period of 16 months, 16 months and 14 months~~ for ~~service-based, performance-based and market-based~~ restricted stock units ~~respectively.~~

~~The actual tax benefit realized for tax deductions related to the issuance~~as of shares associated with restricted stock units vesting was $0.3 million and $4.4 million for the thirteen and twenty-six weeks ended August 3, 2019, respectively, and $1.5 million and $4.9 million for the thirteen and twenty-six weeks ended August 4, 2018, respectively.

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 was $0.2 million and $6.4 million for the thirteen and twenty-six weeks ended August 3, 2019, respectively, and $0.9 million and $5.9 million for the thirteen and twenty-six weeks ended August 4, 2018, respectively, and is classified within other financing activities on the Condensed Consolidated Statements of Cash Flows.

November 2, 2019:

~~Table of Contents~~



(in thousands)	Service-based Restricted Stock Units	Performance-based Restricted Stock Units	Market-based Restricted Stock Units
Unrecognized compensation cost	23,655	2,684	4,667
Remaining weighted-average period cost is expected to be recognized (years)	1.3	1.1	1.0

Additional information pertaining to restricted stock units for the ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 and ~~August 4,~~November 3, 2018 follows:


(in thousands)	August 3, 2019		August 4, 2018		November 2, 2019		November 3, 2018
Service-based restricted stock units:
Total grant date fair value of awards granted	$	16,052	$	16,161	$	16,175	$	16,652
Total grant date fair value of awards vested	12,576		14,608		$	13,087	$	15,873

Performance-based restricted stock units:
Total grant date fair value of awards granted	$	5,379	$	4,310	$	5,379	$	4,310
Total grant date fair value of awards vested	—		—		$	—	$	—

Market-based restricted stock units:
Total grant date fair value of awards granted	$	4,176	$	4,784	$	4,176	$	4,784
Total grant date fair value of awards vested	511		137		$	511	$	137

The weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 and ~~August 4,~~November 3, 2018 were as follows:

August 3, 2019 August 4, 2018
Grant date market price $ 25.34
$ 23.59
Fair value $ 36.24
$ 33.69
Assumptions:
Price volatility 57 % 54 %
Expected term (years) 2.9
2.9
Risk-free interest rate 2.2 % 2.4 %
Dividend yield 3.2 % 3.4 %
Average volatility of peer companies 40.0 % 37.4 %
Average correlation coefficient of peer companies 0.2407
0.2709



	November 2, 2019			November 3, 2018
Grant date market price	$	25.34		$	23.59
Fair value	$	36.24		$	33.69
Assumptions:
Price volatility	57		%	54		%
Expected term (years)	2.9			2.9
Risk-free interest rate	2.2		%	2.4		%
Dividend yield	3.2		%	3.4		%
Average volatility of peer companies	40.0		%	37.4		%
Average correlation coefficient of peer companies	0.2407			0.2709

Table of Contents

Stock appreciation rights

The following table summarizes stock appreciation rights activity for the ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019:


	Number of Underlying Shares		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Life (years)	Number of Underlying Shares		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Life (years)
Outstanding at February 2, 2019	1,041,867		$	37.81				1,041,867		$	37.81
Granted	—		—					—		—
Exercised	(43,463	)	22.41					(43,463	)	22.41
Forfeited or expired	(52,725	)	33.96					(201,679	)	32.27
Outstanding at August 3, 2019	945,679		$	38.75	$	—	2.4
Stock appreciation rights exercisable at August 3, 2019	940,054		$	38.86	$	—	2.4
Stock appreciation rights expected to become exercisable in the future as of August 3, 2019	5,526		$	19.90	$	—	6.1
Outstanding at November 2, 2019								796,725		$	40.06	$	—	2.6
Stock appreciation rights exercisable at November 2, 2019								796,100		$	40.08	$	—	2.6
Stock appreciation rights expected to become exercisable in the future as of November 2, 2019								607		$	22.55	$	—	6.2

~~As of August 3, 2019, total unrecognized compensation cost related~~Additional information pertaining to stock appreciation rights ~~was insignificant~~for the thirty-nine weeks ended November 2, 2019 and ~~is expected to be recognized over a weighted-average period of 2 months.~~November 3, 2018 follows:



(in thousands)	November 2, 2019		November 3, 2018
Total grant date fair value of awards exercised	$	620	$	1,279

The grant date fair value of stock appreciation rights that vested during the twenty-six weeks ended August 3, 2019 was $0.6 million. The grant date fair value of stock appreciation rights that were exercised during the twenty-six weeks ended August 4, 2018 was $1.2 million.

~~Table of Contents~~

11. DERIVATIVE INSTRUMENTS

As of ~~August 3,~~November 2, 2019, 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 inventory sales, the resulting settlement of the foreign-currency-denominated intercompany accounts receivable, or both:


(in thousands)	Notional Amount ⁽¹⁾		Notional Amount ⁽¹⁾
Euro	$	86,139	$	183,360
British pound	$	42,892	$	86,097
Canadian dollar	$	15,742	$	29,673
Japanese yen	$	9,140	$	17,336


⁽¹⁾	Amounts reported are the U.S. Dollar notional amounts outstanding as of ~~August 3,~~November 2, 2019.

As of ~~August 3,~~November 2, 2019, 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⁾		Notional Amount ⁽¹⁾
Chinese yuan	$	21,763	$	21,230
Euro	$	9,485	$	17,347
British pound			$	3,884


⁽¹⁾	Amount reported is the U.S. Dollar notional amount outstanding as of ~~August 3,~~November 2, 2019.

The location and amounts of derivative fair values of foreign currency exchange forward contracts on the Condensed Consolidated Balance Sheets as of ~~August 3,~~November 2, 2019 and February 2, 2019 were as follows:


(in thousands)	Location	August 3, 2019		February 2, 2019		Location	August 3, 2019		February 2, 2019		Location	November 2, 2019		February 2, 2019		Location	November 2, 2019		February 2, 2019
Derivatives designated as cash flow hedging instruments	Other current assets	$	5,254	$	2,162	Accrued expenses	$	349	$	15	Other current assets	$	2,476	$	2,162	Accrued expenses	$	1,613	$	15
Derivatives not designated as hedging instruments	Other current assets	203		—		Accrued expenses	—		317		Other current assets	2		—		Accrued expenses	154		317
Total		$	5,457	$	2,162		$	349	$	332		$	2,478	$	2,162		$	1,767	$	332

Refer to Note 5, “FAIR VALUE,” for further discussion of the determination of the fair value of derivative instruments.

Additional information pertaining to derivative gains or losses from foreign currency exchange forward contracts designated as cash flow hedging instruments for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 and ~~August 4,~~November 3, 2018 follows:

Table of Contents


	Thirteen Weeks Ended					Twenty-six Weeks Ended					Thirteen Weeks Ended					Thirty-nine Weeks Ended
(in thousands)	August 3, 2019		August 4, 2018			August 3, 2019		August 4, 2018			November 2, 2019			November 3, 2018		November 2, 2019		November 3, 2018
Gain recognized in AOCL ⁽¹⁾	$	4,791	$	8,058		$	7,053	$	16,665
(Loss) gain recognized in AOCL ⁽¹⁾											$	(1,136	)	$	2,051	$	5,918	$	18,716
Gain (loss) reclassified from AOCL into cost of sales, exclusive of depreciation and amortization ⁽²⁾	$	1,763	$	(150	)	$	4,303	$	(5,222	)	$	2,541		$	2,814	$	6,845	$	(2,408	)


⁽¹⁾	~~The amount~~Amount represents the change in fair value of derivative contracts.

⁽²⁾

~~The amount~~Amount represents gain (loss) reclassified from accumulated other comprehensive loss to cost of sales, exclusive of depreciation and amortization, on the ~~reclassification from AOCL into earnings~~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 gains or losses related to foreign currency exchange forward contracts designated as cash flow hedging instruments as of ~~August 3,~~November 2, 2019 will be recognized in cost of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) over the next twelve months.

Additional information pertaining to derivative gains or losses from foreign currency exchange forward contracts not designated as hedging instruments for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 and ~~August 4,~~November 3, 2018 follows:


	Thirteen Weeks Ended				Twenty-six Weeks Ended				Thirteen Weeks Ended						Thirty-nine Weeks Ended
(in thousands)	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018		November 2, 2019			November 3, 2018			November 2, 2019		November 3, 2018
Gain recognized in other operating income, net	$	906	$	1,894	$	1,181	$	4,595
(Loss) gain recognized in other operating income, net									$	(1,023	)	$	(1,912	)	$	157	$	2,684

~~Table of Contents~~

12. ACCUMULATED OTHER COMPREHENSIVE LOSS

The activity in accumulated other comprehensive loss for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 was as follows:


	Thirteen Weeks Ended August 3, 2019									Thirteen Weeks Ended November 2, 2019
(in thousands)	Foreign Currency Translation Adjustment			Unrealized Gain (Loss) on Derivative Financial Instruments			Total			Foreign Currency Translation Adjustment			Unrealized Gain (Loss) on Derivative Financial Instruments			Total
Beginning balance at May 4, 2019	$	(107,673	)	$	2,382		$	(105,291	)
Other comprehensive (loss) income before reclassifications	(3,788		)	4,791			1,003
Reclassified from accumulated other comprehensive loss ⁽¹⁾	—			(1,763		)	(1,763		)
Beginning balance at August 3, 2019										$	(111,461	)	$	5,515		$	(105,946	)
Other comprehensive income (loss) before reclassifications										1,355			(1,136		)	219
Reclassified gain from accumulated other comprehensive loss ⁽¹⁾										—			(2,541		)	(2,541		)
Tax effect	—			105			105			—			23			23
Other comprehensive (loss) income	(3,788		)	3,133			(655		)
Ending balance at August 3, 2019	$	(111,461	)	$	5,515		$	(105,946	)
Other comprehensive income (loss) after reclassifications										1,355			(3,654		)	(2,299		)
Ending balance at November 2, 2019										$	(110,106	)	$	1,861		$	(108,245	)

	Twenty-six Weeks Ended August 3, 2019									Thirty-nine Weeks Ended November 2, 2019
(in thousands)	Foreign Currency Translation Adjustment			Unrealized Gain (Loss) on Derivative Financial Instruments			Total			Foreign Currency Translation Adjustment			Unrealized Gain (Loss) on Derivative Financial Instruments			Total
Beginning balance at February 2, 2019	$	(104,887	)	$	2,435		$	(102,452	)	$	(104,887	)	$	2,435		$	(102,452	)
Other comprehensive (loss) income before reclassifications	(6,574		)	7,053			479			(5,219		)	5,918			699
Reclassified from accumulated other comprehensive loss ⁽¹⁾	—			(4,303		)	(4,303		)
Reclassified gain from accumulated other comprehensive loss ⁽¹⁾										—			(6,845		)	(6,845		)
Tax effect	—			330			330			—			353			353
Other comprehensive (loss) income	(6,574		)	3,080			(3,494		)
Ending balance at August 3, 2019	$	(111,461	)	$	5,515		$	(105,946	)
Other comprehensive loss after reclassifications										(5,219		)	(574		)	(5,793		)
Ending balance at November 2, 2019										$	(110,106	)	$	1,861		$	(108,245	)


⁽¹⁾	Amount represents gain reclassified from accumulated other comprehensive loss to cost of sales, exclusive of depreciation and amortization, on the Condensed Consolidated ~~Statement~~Statements of Operations and Comprehensive ~~Loss.~~Income (Loss).

Table of Contents

The activity in accumulated other comprehensive loss for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 4,~~November 3, 2018 was as follows:


	Thirteen Weeks Ended August 4, 2018									Thirteen Weeks Ended November 3, 2018
(in thousands)	Foreign Currency Translation Adjustment			Unrealized Gain (Loss) on Derivative Financial Instruments			Total			Foreign Currency Translation Adjustment			Unrealized Gain (Loss) on Derivative Financial Instruments			Total
Beginning balance at May 5, 2018	$	(93,286	)	$	2,153		$	(91,133	)
Beginning balance at August 4, 2018										$	(104,492	)	$	9,600		$	(94,892	)
Other comprehensive (loss) income before reclassifications	(11,206		)	8,058			(3,148		)	(3,111		)	2,051			(1,060		)
Reclassified from accumulated other comprehensive loss ⁽¹⁾	—			150			150
Reclassified gain from accumulated other comprehensive loss ⁽¹⁾										—			(2,814		)	(2,814		)
Tax effect	—			(761		)	(761		)	16			82			98
Other comprehensive (loss) income	(11,206		)	7,447			(3,759		)
Ending balance at August 4, 2018	$	(104,492	)	$	9,600		$	(94,892	)
Other comprehensive loss after reclassifications										(3,095		)	(681		)	(3,776		)
Ending balance at November 3, 2018										$	(107,587	)	$	8,919		$	(98,668	)

	Twenty-six Weeks Ended August 4, 2018									Thirty-nine Weeks Ended November 3, 2018
(in thousands)	Foreign Currency Translation Adjustment			Unrealized Gain (Loss) on Derivative Financial Instruments			Total			Foreign Currency Translation Adjustment			Unrealized Gain (Loss) on Derivative Financial Instruments			Total
Beginning balance at February 3, 2018	$	(84,947	)	$	(10,107	)	$	(95,054	)	$	(84,947	)	$	(10,107	)	$	(95,054	)
Other comprehensive (loss) income before reclassifications	(19,545		)	16,665			(2,880		)	(22,656		)	18,716			(3,940		)
Reclassified from accumulated other comprehensive loss⁽¹⁾	—			5,222			5,222
Reclassified loss from accumulated other comprehensive loss⁽¹⁾										—			2,408			2,408
Tax effect	—			(2,180		)	(2,180		)	16			(2,098		)	(2,082		)
Other comprehensive (loss) income	(19,545		)	19,707			162
Ending balance at August 4, 2018	$	(104,492	)	$	9,600		$	(94,892	)
Other comprehensive (loss) income after reclassifications										(22,640		)	19,026			(3,614		)
Ending balance at November 3, 2018										$	(107,587	)	$	8,919		$	(98,668	)


⁽¹⁾	Amount represents gain or loss reclassified from accumulated other comprehensive loss to cost of sales, exclusive of depreciation and amortization, on the Condensed Consolidated ~~Statement~~Statements of Operations and Comprehensive ~~Loss.~~Income (Loss).

~~Table of Contents~~

13. SEGMENT REPORTING

The Company’s 2 operating segments are brand-based: Hollister and Abercrombie, the latter of which includes the Company’s Abercrombie & Fitch and abercrombie kids brands. These operating segments have similar economic characteristics, classes of consumers, products, and production and distribution methods, operate in the same regulatory environments, and have been aggregated into 1 reportable segment. Amounts shown below include net sales from wholesale, franchise and licensing operations, which are not a significant component of total revenue, and are aggregated within their respective operating segment and geographic area.

The following table provides the Company’s net sales by operating segment for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 and ~~August 4,~~November 3, 2018.


	Thirteen Weeks Ended				Twenty-six Weeks Ended				Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018		November 2, 2019		November 3, 2018		November 2, 2019		November 3, 2018
Hollister	$	504,758	$	500,836	$	933,203	$	924,464	$	514,772	$	515,125	$	1,447,975	$	1,439,589
Abercrombie	336,320		341,578		641,847		648,849		348,700		346,069		990,547		994,918
Total	$	841,078	$	842,414	$	1,575,050	$	1,573,313	$	863,472	$	861,194	$	2,438,522	$	2,434,507

The following table provides the Company’s net sales by geographic area for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 and ~~August 4,~~November 3, 2018.


	Thirteen Weeks Ended				Twenty-six Weeks Ended				Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018		November 2, 2019		November 3, 2018		November 2, 2019		November 3, 2018
United States	$	543,472	$	531,446	$	1,013,130	$	980,572	$	583,593	$	562,590	$	1,596,723	$	1,543,162
Europe	182,815		192,354		341,060		362,014		177,844		187,516		518,905		549,530
Other	114,791		118,614		220,860		230,727		102,035		111,088		322,894		341,815
Total	$	841,078	$	842,414	$	1,575,050	$	1,573,313	$	863,472	$	861,194	$	2,438,522	$	2,434,507

Table of Contents

14. FLAGSHIP STORE EXIT CHARGES

Global Store Network Optimization

Reflecting a continued focus on one of the Company’s key transformation initiatives ‘Global Store Network ~~Optimization’,~~Optimization,’ the Company continues to pivot away from its large format flagship stores and strives to open smaller, more productive omnichannel focused brand experiences.

As a result, the Company has closed certain of its flagship stores and may have additional closures as it executes against this strategy. For context, at the end of Fiscal 2018, the Company had 19 flagship stores, and at the end of the second quarter of Fiscal 2019, the Company had 17 flagship stores. Details related to previously announced flagship store closures are as follows:



~~Location~~	~~Brand~~	~~Actual or expected closure date~~
~~Pedder Street, Hong Kong~~	~~Abercrombie~~	~~Closed in the first quarter of Fiscal 2017~~
~~Copenhagen, Denmark~~	~~Abercrombie~~	~~Closed in the first quarter of Fiscal 2019~~
~~SoHo in New York City~~	~~Hollister~~	~~Closed in the second quarter of Fiscal 2019~~
~~Milan, Italy~~	~~Abercrombie~~	~~Expected to close by the end of Fiscal 2019~~
~~Fukuoka, Japan~~	~~Abercrombie~~	~~Expected to close in the second half of Fiscal 2020~~

The Company ~~has recognized~~recognizes charges related to the ~~aforementioned store closures~~exit of its flagship stores in flagship store exit charges on the Consolidated Statements of Operations and Comprehensive ~~Loss. The following table provides additional details related to these~~Income (Loss). Details of the charges incurred during the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 and ~~August 4, 2018.~~November 3, 2018 related to this initiative were as follows:


	Thirteen Weeks Ended					Twenty-six Weeks Ended					Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	August 3, 2019			August 4, 2018		August 3, 2019			August 4, 2018		November 2, 2019		November 3, 2018		November 2, 2019			November 3, 2018
Single lease cost ⁽¹⁾	$	23,269		$	—	$	23,269		$	—	$	—	$	—	$	23,269		$	—
Variable lease cost ⁽²⁾	20,218			—		20,218			—		—		—		20,218			—
Operating lease right-of-use asset impairment	3,229			—		3,229			—		—		—		3,229			—
Operating lease cost	46,716			—		46,716			—		—		—		46,716			—
Lease termination fees ⁽³⁾	—			—		—			3,688		—		—		—			3,688
Asset disposals and other store-closure costs ⁽⁴⁾	(1,675		)	—		(1,687		)	—		—		—		(1,687		)	—
Employee severance and other employee transition costs	(47		)	—		1,709			120		285		—		1,994			120
Total flagship store exit charges	$	44,994		$	—	$	46,738		$	3,808	$	285	$	—	$	47,023		$	3,808


⁽¹⁾	Amounts represent accelerated amortization associated with the operating lease right-of-use assets ~~and liabilities~~ and the impact from remeasurement of operating lease liabilities.


⁽²⁾	Amounts represent the remeasurement of the lease liability to reflect variable lease costs that became fixed upon decision to close ~~aforementioned~~ flagship stores.


⁽³⁾	Under the new lease accounting standard, which the Company adopted on February 3, 2019, similar charges would be incorporated into the above table as a component of operating lease cost.


⁽⁴⁾	Amounts represent costs incurred in returning the store to its original condition, including updates to previous accruals for asset retirement obligations and costs to remove inventory and store assets.

~~The Company’s future~~Future fixed lease payments associated with ~~these~~closed flagship stores are reflected within short-term and long-term operating lease liabilities on the Condensed Consolidated Balance ~~Sheet and will~~Sheet. These payments are scheduled to be paid through the fiscal year ending January 30, 2029 (“Fiscal 2028”)~~.These future lease payments~~ and are not expected to exceed $15 million in aggregate in any fiscal year. Refer to Note 7, “LEASES,” for a maturity analysis of the Company’s operating lease liabilities, based on undiscounted cash flows.

As the Company continues its ‘Global Store Network Optimization’ efforts, it may incur incremental charges or future cash expenditures not currently contemplated due to events that may occur as a result of, or that are associated with, ~~additional~~previously announced flagship store ~~closures.~~closures and flagship store closures that have not yet been finalized. At this time, the Company is not able to quantify the amount of charges or future cash expenditures that may take place in future periods resulting from any potential flagship store closures given the unpredictable nature of lease exit negotiations and ultimate lease renewal decisions.

Table of Contents


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 unaudited Condensed Consolidated Financial Statements and notes thereto, which are included in this Quarterly Report on Form 10-Q in “ITEM 1. FINANCIAL STATEMENTS.”

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. This section provides a general description of the Company’s business and certain segment information.


•	Current Trends and Outlook. This section provides a summary of the Company’s performance for the thirteen and ~~twenty-six weeks ended August 3, 2019 and August 4, 2018. In addition, this section discusses certain of management’s expectations for the upcoming fiscal year.~~

thirty-nine weeks ended November 2, 2019 and November 3, 2018. In addition, this section discusses certain of management’s expectations for the upcoming fiscal year.


•	Results of Operations. This section provides an analysis of certain components of the Company’s Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss) for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 and ~~August 4,~~November 3, 2018.

•

Liquidity and Capital Resources. This section provides a discussion of the Company’s financial condition and liquidity as of ~~August 3,~~November 2, 2019, which includes (i) an analysis of financial condition as compared to February 2, 2019; (ii) an analysis of changes in cash flows for the ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 as compared to the ~~twenty-six~~thirty-nine weeks ended ~~August 4,~~November 3, 2018; (iii) and an analysis of liquidity, including the availability under credit facilities, payments of dividends, and outstanding debt and covenant compliance.


•	Recent Accounting Pronouncements. The recent accounting pronouncements the Company has adopted, including the dates of adoption and anticipated effects on the Company’s unaudited Condensed Consolidated Financial Statements, are included in this Quarterly Report on Form 10-Q in “ITEM 1. FINANCIAL STATEMENTS.”


•	Critical Accounting Policies and Estimates. This section discusses accounting policies 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. ~~This section~~MD&A provides a discussion of certain financial measures ~~provided with MD&A~~ that have been determined to not be in accordance with accounting principles generally accepted in the U.S. (“GAAP”),. This section includes certain reconciliations for non-GAAP financial measures and additional details on these financial measures, including information onas to why the Company believes the non-GAAP financial measures provided within MD&A are useful to investors.

Safe harbor statement under the Private Securities Litigation Reform Act of 1995

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, its management or 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,” 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. 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 even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

Table of Contents

The following factors, categorized by the primary nature of the associated risk, including the disclosures under the heading “FORWARD-LOOKING STATEMENTS AND RISK FACTORS” in “ITEM 1A. RISK FACTORS” of A&F’s Annual Report on Form 10-K for Fiscal 2018, in some cases have affected and in the future could affect the Company’s financial performance and could cause actual results for Fiscal 2019 and beyond to differ materially from those expressed or implied in any of the forward-looking statements included in this Quarterly Report on Form 10-Q or otherwise made by management:

Macroeconomic and industry risks include:

Changes in global economic and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits, could have a material adverse effect on our business, results of operations and liquidity;

Failure to anticipate customer demand and changing fashion trends and to manage our inventory commensurately could adversely impact our sales levels and profitability;

Our market share may be negatively impacted by increasing competition and pricing pressures from companies with brands or merchandise competitive with ours;

Fluctuations in foreign currency exchange rates could adversely impact our financial condition and results of operations;

Our ability to attract customers to our stores depends, in part, on the success of the shopping malls or area attractions that our stores are located in or around; and

The impact of war, acts of terrorism or civil unrest could have a material adverse effect on our operating results and financial condition.

Strategic risks include:

The expansion of our direct-to-consumer sales channels and omnichannel initiatives are significant components of our growth strategy, and the failure to successfully develop our position across all channels could have an adverse impact on our results of operations;

Our international growth strategy and ability to conduct business in international markets may be adversely affected by legal, regulatory, political and economic risks; and

Failure to successfully implement our strategic plans could have a negative impact on our growth and profitability.

Operational risks include:

Failure to protect our reputation could have a material adverse effect on our brands;

Our business could suffer if our information technology systems are disrupted or cease to operate effectively;

We may be exposed to risks and costs associated with cyber-attacks, data protection, credit card fraud and identity theft that would cause us to incur unexpected expenses and reputation loss;

Our reliance on DCs makes us susceptible to disruptions or adverse conditions affecting our supply chain;

Changes in the cost, availability and quality of raw materials, labor, transportation, and trade relations could cause manufacturing delays and increase our costs;

We depend upon independent third parties for the manufacture and delivery of all our merchandise, and a disruption of the manufacture or delivery of our merchandise could result in lost sales and could increase our costs;

We rely on the experience and skills of our senior executive officers and associates, the loss of whom could have a material adverse effect on our business; and

Extreme weather conditions, including natural disasters, pandemic disease and other unexpected events, could negatively impact our facilities, systems and stores, as well as the facilities and systems of our vendors and manufacturers, which could result in an interruption to our business and adversely affect our operating results.

Legal, tax, regulatory and compliance risks include:

Fluctuations in our tax obligations and effective tax rate may result in volatility in our results of operations;

Our litigation exposure could have a material adverse effect on our financial condition and results of operations;

Failure to adequately protect our trademarks could have a negative impact on our brand image and limit our ability to penetrate new markets;

Changes in the regulatory or compliance landscape and compliance with changing regulations for accounting, corporate governance and public disclosure could adversely affect our business, results of operations and reported financial results; and

Our Asset-Based Revolving Credit Agreement and our Term Loan Agreement include restrictive covenants that limit our flexibility in operating our business.

The factors listed above are not our only risks. Additional risks may arise and current evaluations of risks may change, which could lead to material, adverse effects on our business, operating results and financial condition. These risk factors could cause actual results to differ materially from those expressed or implied in any of our forward-looking statements.

Table of Contents

OVERVIEW

Business summary

The Company is a global multi-brand omnichannel specialty retailer, whose products are sold primarily through its ~~wholly-owned~~Company-owned store and ~~direct-to-consumer~~digital channels, as well as through various third-party wholesale, franchise and licensing arrangements. The Company offers a broad assortment of apparel, personal care products and accessories for ~~Men, Women~~men, women and ~~Kids~~kids under the Hollister, Abercrombie & Fitch and abercrombie kids brands. The 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 has operations in North America, Europe and Asia, among other regions.

The Company’s two operating segments are brand-based: Hollister and Abercrombie, the latter of which includes the Company’s Abercrombie & Fitch and abercrombie kids brands. These operating segments have similar economic characteristics, classes of consumers, products, and production and distribution methods, operate in the same regulatory environments, and have been aggregated into one reportable segment.

The Company’s fiscal year ends on the Saturday closest to January 31. ~~Fiscal years are designated~~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 was the ~~Condensed Consolidated Financial Statements and notes by the calendar year in which~~case for the fiscal year ~~commences.~~ended February 3, 2018. All references herein to ~~“Fiscal 2019” represent~~ the ~~fifty-two-week~~Company’s fiscal ~~year that will end on February 1, 2020, and to “Fiscal 2018” represent the fifty-two-week fiscal year that ended February 2, 2019.~~years are as follows:



Fiscal year	Fiscal year ended	Number of weeks
Fiscal 2017	February 3, 2018	53
Fiscal 2018	February 2, 2019	52
Fiscal 2019	February 1, 2020	52
Fiscal 2020	January 30, 2021	52
Fiscal 2021	January 29, 2022	52

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. The seasonality of the Company’s operations may also lead to significant fluctuations in certain asset and liability accounts.

Table of Contents

CURRENT TRENDS AND OUTLOOK

Throughout the lifetime of our Company, we have taken strides to transform our brands as consumer habits and shopping preferences change. We aim to keep pace with and anticipate our customers’ needs through a test-and-learn mentality, which has been embedded throughout our organization. Our plans for long-term growth are centered around our strategic pillars and are best categorized into three planned phases:

Phase I: Stabilizing while Transforming


–	Fiscal 2015 through Fiscal 2017

Phase II: Growing while Transforming


–	Fiscal 2018 through Fiscal 2020

Phase III: Accelerating Growth


–	Fiscal 2021 and thereafter

Fiscal 2019 is the second year of Phase II, “Growing while Transforming,” which we expect to continue through Fiscal 2020. We have developed the following key transformation initiatives ~~in order~~which, along with accelerating top-line growth, are essential to ~~deliver on~~achieving our previously disclosed Fiscal 2020 ~~targets:~~profitability target of doubling Fiscal 2017 adjusted non-GAAP operating income margin of 2.9%:

Optimizing our global store network;

Enhancing digital and omnichannel capabilities;

Increasing the speed and efficiency of our concept-to-consumer product life cycle by further investing in capabilities to position our supply chain for greater speed, agility and efficiency, while leveraging data and analytics to offer the right product at the right time and the right price; and

Improving our customer engagement through our loyalty programs and marketing optimization.

For the third quarter of Fiscal 2019, net sales and comparable sales were approximately flat as compared to last year, as strength in the U.S., was offset by international headwinds. On a constant currency basis, we delivered our third consecutive quarter of revenue growth and our ninth consecutive quarter of positive U.S. comparable sales. A summary of results for the ~~second quarter~~thirteen and thirty-nine weeks ended ~~August~~November 2, 2019 and November 3, ~~2019:~~2018 is as follows:

~~Net sales decreased 0.2% to $841.1 million, and increased 1% on a constant currency basis as compared to last year.~~

~~Comparable sales were flat against positive comparable sales of 3% last year.~~



	GAAP						Non-GAAP ⁽¹⁾
(in thousands, except change in net sales, comparable sales, gross profit rate, operating margin and per share amounts)	November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018
Thirteen Weeks Ended
Net sales	$	863,472		$	861,194
Change in net sales	0.3		%	0.2		%
Comparable sales ⁽²⁾							0		%	3		%
Gross profit rate	60.1		%	61.3		%
Operating income	$	14,479		$	39,680		$	24,947		$	36,675
Operating income margin	1.7		%	4.6		%	2.9		%	4.3		%
Net income attributable to A&F	$	6,523		$	23,919		$	14,506		$	22,383
Net income per diluted share attributable to A&F	$	0.10		$	0.35		$	0.23		$	0.33

Thirty-nine Weeks Ended
Net sales	$	2,438,522		$	2,434,507
Change in net sales	0.2		%	5.9		%
Comparable sales ⁽²⁾							0		%	3		%
Gross profit rate	59.9		%	60.7		%
Operating (loss) income ⁽³⁾	$	(52,263	)	$	(2,300	)	$	(41,795	)	$	8,966
Operating (loss) income margin	(2.1		)%	(0.1		)%	(1.7		)%	0.4		%
Net loss attributable to A&F	$	(43,774	)	$	(22,395	)	$	(35,791	)	$	(11,848	)
Net loss per diluted share attributable to A&F	$	(0.67	)	$	(0.33	)	$	(0.55	)	$	(0.17	)

~~Gross profit rate of 59.3% was down 90 basis points to last year.~~

Operating expense, excluding other operating income, of $537.8 million included $45.0 million of flagship store exit charges. Operating expense deleveraged 370 basis points and 470 basis points on a GAAP and an adjusted non-GAAP basis, respectively, reflecting a 530 basis point adverse impact from flagship store exit charges.

Operating loss of $39.5 million. Operating margin decreased 470 basis points from last year to a loss of 4.7%, primarily driven by the adverse impact of flagship store exit charges of 530 basis points. Excluding asset impairment charges last year, adjusted non-GAAP operating margin decreased 580 basis points or 530 basis points on a constant currency basis as compared to last year.


• ⁽¹⁾	~~Net loss per diluted share was $0.48, reflecting~~Discussion as to why the ~~estimated adverse impact from~~Company believes that these non-GAAP financial measures are useful to investors is 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.


⁽³⁾	The thirty-nine week periods ended November 2, 2019 and November 3, 2018 include $47.0 million and $3.8 million of flagship store exit charges, of respectively. Refer to Note 14, “~~$0.50~~FLAGSHIP STORE EXIT CHARGES. ~~This compares to GAAP net loss per diluted share of $0.06, adjusted non-GAAP net income per diluted share of $0.06 or $0.01 per diluted share on a constant currency basis.~~”

~~Trends improved throughout~~

Table of Contents

Certain components of the ~~second quarter~~Company’s Condensed Consolidated Balance Sheets as of November 2, 2019 and February 2, 2019 were as follows:



(in thousands)	November 2, 2019		February 2, 2019
Cash and equivalents	$	410,775	$	723,135
Long-term portion of borrowings, gross at carrying amount	$	243,250	$	253,250
Inventories	$	590,883	$	437,879

Certain components of the Company’s Condensed Consolidated Statements of Cash Flows for the thirty-nine week periods ended ~~August~~November 2, 2019 and November 3, 2019, resulting in net sales down 0.2% from last year, which reflects adverse impacts from changes in foreign currency exchange rates of approximately $10 million. On a constant currency basis, we experienced net sales growth of approximately 1%. The second quarter also reflects $45 million of charges related to the previously announced exits of our SoHo Hollister flagship store in New York City and our Fukuoka, Japan Abercrombie flagship store. In addition to these flagship store closures, which are a part of our key transformation initiative ‘Global Store Network Optimization’, we continue to execute on our other transformation initiatives and remain focused on achieving our Fiscal 2020 target of doubling our Fiscal 2017 adjusted non-GAAP operating income margin of 2.9%.2018 were as follows:



	November 2, 2019			November 3, 2018
Net cash (used for) provided by operating activities	$	(33,839	)	$	77,245
Purchases of property and equipment	$	(154,373	)	$	(98,768	)
Purchases of common stock	$	(63,542	)	$	(68,670	)
Dividends paid	$	(38,959	)	$	(40,550	)
Repayment of term loan facility borrowings	$	(10,000	)	$	—

For the full year of Fiscal 2019, we expect:

Net sales to be in the range of flat to up ~~2%,~~1% from Fiscal 2018 net sales of $3.59 billion, driven by comparable sales and net new store contribution, partially offset by an adverse impact from changes in foreign currency exchange rates of approximately ~~$45 million;~~$40 million of which approximately $35 million has been reflected in year-to-date results;

Comparable sales to be in the range of flat to up 2%1%, against positive comparable sales of 3% last year;

Gross profit rate to be down ~~in the range of 50 to 90~~approximately 100 basis points from the Fiscal 2018 rate of 60.2%, reflecting a combined adverse ~~impacts~~impact of 40 basis points from changes in foreign currency exchange rates ~~of approximately 40 basis points~~ and anticipated China ~~tariffs of approximately 20 basis points;~~tariffs;

Operating expense, excluding other operating income, to be up in the range of 2% to 3% from Fiscal 2018 adjusted non-GAAP operating expense of $2.03 billion, ~~including~~reflecting second quarter flagship store exit charges ~~in the second quarter of Fiscal 2019~~this year of $45 million and third quarter asset impairment charges this year of $13 million;

~~The effective~~Effective tax rate to be in the mid 20s;

Diluted ~~weighted average~~weighted-average shares outstanding of approximately 66 million shares, excluding the effect of potential share buybacks; and

Capital investments of approximately $200 million.

~~Table of Contents~~

~~Global Store Network Optimization~~

Reflecting a continued focus on one of our key transformation initiatives ‘Global Store Network Optimization’, we continue to pivot away from large format flagship stores and strive to open smaller, more productive omnichannel focused brand experiences.

As a result, we have closed certain of our flagship stores and may have additional closures as we execute against this strategy. For context, at the end of Fiscal 2018, we had 19 flagship stores, and at the end of the second quarter of Fiscal 2019, we had reduced our fleet to 17 flagship stores. Details related to previously announced flagship store closures are as follows:



~~Location~~	~~Brand~~	~~Actual or expected flagship store closure date~~
~~Pedder Street, Hong Kong~~	~~Abercrombie~~	~~Closed in the first quarter of Fiscal 2017~~
~~Copenhagen, Denmark~~	~~Abercrombie~~	~~Closed in the first quarter of Fiscal 2019~~
~~SoHo in New York City~~	~~Hollister~~	~~Closed in the second quarter of Fiscal 2019~~
~~Milan, Italy~~	~~Abercrombie~~	~~Expected to close by the end of Fiscal 2019~~
~~Fukuoka, Japan~~	~~Abercrombie~~	~~Expected to close in the second half of Fiscal 2020~~

We plan to continue our efforts ‘Global Store Network Optimization’ efforts and expect to deliver approximately 85 new store experiences in Fiscal 2019 across brands, including approximately 40 new stores, approximately 25 remodeled stores and approximately 20 right-sizes. We also expect to close up to 40 stores in Fiscal 2019, primarily in the U.S. through natural lease expirations. In addition to natural lease expirations, certain other of our leases also include early termination options that can be exercised under specific conditions, allowing for significant lease flexibility. We may also elect to exit or modify our other leases, and could incur charges related to these actions.

Certain risks and challenges

We are a global multi-brand omnichannel specialty retailer, with operations in North America, Europe and Asia, among other regions and, as a result, we are mindful of macroeconomic risks and challenges that could adversely impact certain areas of our business.

~~Specifically,~~In particular, there continues to be uncertainty with respect to trade policies, tariffs and government regulations affecting trade between the U.S. and other countries, such as the threat of additional tariffs on imported consumer goods from China. ~~In May 2019,~~A summary of certain recent tariffs impacting our business include:

Additional tariffs imposed on ~~certain imported merchandise from China~~fashion accessories, handbags and hats of up to 25%, which were effective beginning September 2018 at the ~~U.S.~~starting rate of 10% and increased from 10% to 25%, in May 2019 (“List 3”); and ~~in August 2019 these List 3~~

Additional tariffs ~~increased to 30%. Our products affected by these List 3 tariffs include fashion accessories, handbags~~imposed on select apparel and ~~hats. In addition, List 4 tariffs~~footwear of up to 25%, which were ~~proposed on certain other imported merchandise from China to the U.S., including select apparel and footwear. These List 4 tariffs are now in effect~~effective beginning September 2019 at the starting rate of 15% (“List 4A”). ~~The imposition of these~~

These List 3 and List 44A tariffs ~~based~~have not had a material impact on results for the thirteen and thirty-nine week periods ended November 2, 2019. List ~~4 starting rate of 15%,~~3 and List 4A tariffs are expected to have a direct adverse impact on Fiscal 2019 cost of merchandise and gross profit of approximately ~~$6 million for~~$5 million. This impact is based on the ~~fall season~~List 4A starting rate of ~~Fiscal 2019. In response to~~15% and the ~~recent trade developments between the U.S. and China, we~~List 3 rate of 25%.

We believe we have a number of ~~tools~~measures available to help mitigate this risk and continue to focus on the diversification of our global supply chain. Our team has taken actions to proactively prepare for potential impacts, including shifting production into other countries and regions to both existing and new partners as necessary. ~~As a reminder, only~~Only a portion of our total goods sourced from China ~~in Fiscal 2018 were~~are imported into the U.S. and are subject to these additional tariffs. ~~Specifically,~~For context, in Fiscal 2018 approximately 25% of our total global merchandise receipts were sourced from China and imported to the U.S. ~~We continue to believe~~and we ~~have the ability~~expect to reduce this percentage to ~~under 20% in~~16% for Fiscal 2019 and to the low-teens infor Fiscal 2020.

Table of Contents

In addition, in June 2016, the United Kingdom passed a referendum to recommend ~~exiting~~withdrawing from the European Union. The United Kingdom is now scheduled to exit the European Union ~~which has resulted in greater~~no later than January 31, 2020 and the final terms of the United Kingdom’s withdrawal remain unclear. As a result, there is continued uncertainty related to consumer behavior, economic conditions, foreign currency exchange rates and the free movement of goods, services, people and capital between the United Kingdom and the European ~~Union, consumer behavior, economic conditions~~Union. We believe that this referendum and ~~foreign currency exchange rates. We are preparing for~~the uncertainty surrounding the terms of United Kingdom’s withdrawal has adversely impacted international results in Fiscal 2019, and we have experienced decreased traffic in the United Kingdom and declining values of the Euro and British Pound as compared to ~~leave~~ the ~~European Union on October 31, 2019 and the potential impacts of~~U.S. Dollar over last year. The United Kingdom’s withdrawal from the European Union ~~remain unclear and~~ could also adversely impact ~~certain~~other areas of our business, including, but not limited to, an increase in duties and delays in the delivery of merchandise from our Netherlands DC to our ~~stores and direct-to-consumer~~ customers in the United Kingdom if trade barriers ~~materialize at ports of entry and departure.~~materialize. The ~~potential impacts of~~ United Kingdom’s withdrawal from the European Union could also adversely impact the operations of our ~~vendors.~~vendors and of our other third-party partners. In order to mitigate the risks associated with the United Kingdom’s withdrawal from the European Union, our team ~~has begun to proactively prepare for potential adverse impacts by~~is: collaborating across the organization and testing our ~~systems as well as~~systems; working with external partners to develop ~~the necessary~~ contingency ~~plans. We have also taken~~plans for potential adverse impacts; and taking actions to reduce, to the extent possible, the potential impact of any incremental duty exposure.

~~Table of Contents~~

We also continue to monitor certain other events of global, political unrest, ~~including~~such as the ongoing protests in Hong ~~Kong.~~Kong which have impacted our business and resulted in temporary store closures. Our team is developing contingency plans as it continues to ~~proactively~~ assess the potential impacts these protests and similar events may have on the business ~~and is preparing for potential adverse impacts by developing contingency plans.~~in future periods.

It is possible that our preparations for these events are not adequate to mitigate their impact, and that these events could further adversely affect our business and results of operations. For further discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations, refer to “ITEM 1A. RISK FACTORS,” included in A&F’s Annual Report on Form 10-K for Fiscal 2018.

~~SUMMARY OF RESULTS~~Global Store Network Optimization

~~The table below summarizes~~Reflecting a continued focus on our ~~results~~key transformation initiative ‘Global Store Network Optimization,’ we expect to deliver approximately 85 new store experiences in Fiscal 2019 across brands, including approximately: 40 new stores; 25 remodeled stores; and 20 right-sizes.

We also expect to close up to 40 stores in Fiscal 2019, primarily in the U.S. through natural lease expirations. In addition to natural lease expirations, certain other of ~~operations determined in accordance with GAAP~~our leases also include early termination options that can be exercised under specific conditions, allowing for significant lease flexibility. We may also elect to exit or modify our other leases, and ~~non-GAAP financial measures,~~could incur charges related to these actions.

A component of optimizing our global store fleet is pivoting away from large format flagship stores as we strive to open smaller, more productive omnichannel focused brand experiences. As a result, we have closed certain of our flagship stores and ~~other financial data for~~may have additional closures as we execute against this strategy. For context, at the ~~thirteen~~beginning of Fiscal 2019, we had 19 flagship stores, and ~~twenty-six week periods~~as of the end of the third quarter of Fiscal 2019, we had 17 flagship stores. In addition to the two flagship stores closed during the thirty-nine weeks ended ~~August 3,~~November 2, 2019, ~~and August 4, 2018. Discussion on why the Company believes that these non-GAAP financial measures~~we have also announced an additional four flagship closures. Details related to previously announced flagship store closures are ~~useful to investors is provided below under “NON-GAAP FINANCIAL MEASURES.”~~as follows:

August 3, 2019 August 4, 2018
(in thousands, except change in net sales, comparable sales, gross profit rate, operating loss margin and per share amounts) GAAP
Non-GAAP ⁽¹⁾
GAAP
Non-GAAP ⁽¹⁾
Thirteen Weeks Ended
Net sales $ 841,078

$ 842,414

Change in net sales (0.2 )% 8 %
Comparable sales ⁽²⁾
0 % 3 %
Gross profit rate 59.3 % 60.2 %
Operating (loss) income $ (39,484 ) $ (39,484 ) $ 223
$ 8,894
Operating (loss) income margin (4.7 )% (4.7 )% 0.0 % 1.1 %
Net (loss) income attributable to A&F $ (31,142 ) $ (31,142 ) $ (3,853 ) $ 4,171
Net (loss) income per diluted share attributable to A&F $ (0.48 ) $ (0.48 ) $ (0.06 ) $ 0.06

Twenty-six Weeks Ended
Net sales $ 1,575,050

$ 1,573,313

Change in net sales 0.1 % 9 %
Comparable sales ⁽²⁾
1 % 4 %
Gross profit rate 59.9 % 60.3 %
Operating loss $ (66,742 ) $ (66,742 ) $ (41,980 ) $ (27,709 )
Operating loss margin (4.2 )% (4.2 )% (2.7 )% (1.8 )%
Net loss attributable to A&F $ (50,297 ) $ (50,297 ) $ (46,314 ) $ (34,231 )
Net loss per diluted share attributable to A&F $ (0.76 ) $ (0.76 ) $ (0.68 ) $ (0.50 )
Net cash (used for) provided by operating activities $ (36,055 ) $ 50,526

Purchases of property and equipment $ (94,224 ) $ (54,115 )
Dividends paid $ (26,385 ) $ (27,196 )
Purchase of Common Stock $ (57,812 ) $ (43,670 )



Brand⁽¹⁾	Location	Actual or expected flagship store closure date
Abercrombie & Fitch	Pedder Street, Hong Kong Special Administrative Region, China	Closed in the first quarter of Fiscal 2017
Abercrombie & Fitch	Copenhagen, Denmark	Closed in the first quarter of Fiscal 2019
Hollister	SoHo, New York City, United States	Closed in the second quarter of Fiscal 2019
Abercrombie	Milan, Italy	Expected to close by the end of Fiscal 2019
Hollister	5^th Avenue, New York City, United States	Expected to close by the end of Fiscal 2020
Abercrombie & Fitch	Fukuoka, Japan	Expected to close in the second half of Fiscal 2020
abercrombie kids	London, United Kingdom	*


*	Closure date has not been finalized.


⁽¹⁾	~~Refer to~~ “~~RESULTS OF OPERATIONS~~” ~~for details on excluded items.~~

⁽²⁾

~~Comparable sales are calculated on~~Abercrombie includes the Company’s Abercrombie & Fitch and abercrombie kids brands and, when used in the table above, signifies a ~~constant currency basis and exclude revenue other than~~location with an abercrombie kids carveout within an Abercrombie & Fitch store ~~and digital sales. Refer to the discussion below in “NON-GAAP FINANCIAL MEASURES,” for further details on the comparable sales calculation.~~

that would be represented as a single store count.

~~The table below provides certain components of~~For details on flagship store exit charges incurred during the ~~Company’s Condensed Consolidated Balance Sheets as of August 3,~~thirteen and thirty-nine weeks ended November 2, 2019 and ~~February 2, 2019.~~

(in thousands) August 3, 2019 February 2, 2019
Cash and equivalents $ 499,757
$ 723,135
Borrowings, gross at carrying amount $ 253,250
$ 253,250
Inventories $ 487,109
$ 437,879

November 3, 2018, refer to Note 14, “FLAGSHIP STORE EXIT CHARGES.”

Table of Contents

~~STORE ACTIVITY~~

Store count and gross square footage by brand and geography for the ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 and ~~August 4,~~November 3, 2018 ~~respectively,~~ were as follows:


	Hollister ⁽¹⁾			Abercrombie ⁽²⁾				Total Company						Thirty-nine weeks ended November 2, 2019
	United States		International	United States		International		United States		International		Total		Hollister ⁽¹⁾			Abercrombie ⁽²⁾				Total Company
														United States		International	United States		International		United States		International		Total
Number of stores:
February 2, 2019	393		149	270		49		663		198		861		393		149	270		49		663		198		861
New	5		3	1		—		6		3		9		10		5	10		2		20		7		27
Closed	(3	)	—	(3	)	(1	)	(6	)	(1	)	(7	)	(3	)	—	(3	)	(1	)	(6	)	(1	)	(7	)
August 3, 2019	395		152	268		48		663		200		863
Gross square footage (in thousands):
August 3, 2019	2,622		1,250	1,980		624		4,602		1,874		6,476
November 2, 2019														400		154	277		50		677		204		881

Gross square footage:
November 2, 2019 (in thousands)														2,659		1,261	2,001		635		4,660		1,896		6,556

	Hollister ⁽¹⁾			Abercrombie ⁽²⁾				Total Company						Thirty-nine weeks ended November 3, 2018
	United States		International	United States		International		United States		International		Total		Hollister ⁽¹⁾			Abercrombie ⁽²⁾				Total Company
														United States		International	United States		International		United States		International		Total
Number of stores:
February 3, 2018	394		144	285		45		679		189		868		394		144	285		45		679		189		868
New	2		—	1		2		3		2		5		6		3	4		3		10		6		16
Closed	—		—	(3	)	—		(3	)	—		(3	)	—		—	(5	)	—		(5	)	—		(5	)
August 4, 2018	396		144	283		47		679		191		870
Gross square footage (in thousands):
August 4, 2018	2,685		1,196	2,182		631		4,867		1,827		6,694
November 3, 2018														400		147	284		48		684		195		879

Gross square footage:
November 3, 2018 (in thousands)														2,705		1,219	2,156		639		4,861		1,858		6,719

⁽¹⁾

~~Locations with Gilly Hicks carveouts within Hollister stores are represented as a single store count.~~

Excludes nine international franchise stores as of each of November 2, 2019 and August 3, 2019and eight ~~international franchise stores~~ as of February 2, ~~2019, seven international franchise stores as of August 4, 2018, and five international franchise stores as of February 3, 2018.~~2019. Excludes ~~six~~10 U.S. ~~company operated Gilly Hicks~~Company-operated temporary stores as of November 2, 2019 and six as of August 3, 2019.

⁽²⁾

Abercrombie includes the ~~Company’s~~company's Abercrombie & Fitch and abercrombie kids brands. Locations with abercrombie kids carveouts within Abercrombie & Fitch stores are represented as a single store count. Excludes seven international franchise stores as of each of November 2, 2019, August 3, 2019 and February 2, ~~2019, six international franchise stores as of August 4, 2018, and four international franchise stores as of February 3, 2018.~~2019. Excludes ~~four~~seven U.S. ~~company operated abercrombie kids~~Company-operated temporary stores as of November 2, 2019 and four as of August 3, 2019.

Table of Contents

RESULTS OF OPERATIONS

THIRTEEN AND ~~TWENTY-SIX~~THIRTY-NINE WEEKS ENDED ~~AUGUST 3,~~NOVEMBER 2, 2019 VERSUS ~~AUGUST 4,~~NOVEMBER 3, 2018

Net sales


	Thirteen Weeks Ended										Thirteen Weeks Ended
	August 3, 2019		August 4, 2018								November 2, 2019		November 3, 2018
(in thousands)	Net Sales		Net Sales		$ Change			% Change	Constant Currency % Change ⁽¹⁾	Comparable Sales ⁽¹⁾	Net Sales		Net Sales		$ Change			% Change	Comparable Sales ⁽¹⁾
Hollister	$	504,758	$	500,836	$	3,922		1%	2%	0%	$	514,772	$	515,125	$	(353	)	0%	(2)%
Abercrombie⁽²⁾	336,320		341,578		(5,258		)	(2)%	(1)%	0%	348,700		346,069		2,631			1%	3%
Total company	$	841,078	$	842,414	$	(1,336	)	0%	1%	0%	$	863,472	$	861,194	$	2,278		0%	0%

United States	$	543,472	$	531,446	$	12,026		2%	2%	2%	$	583,593	$	562,590	$	21,003		4%	3%
International	297,606		310,968		(13,362		)	(4)%	(1)%	(3)%	279,879		298,604		(18,725		)	(6)%	(8)%
Total company	$	841,078	$	842,414	$	(1,336	)	0%	1%	0%	$	863,472	$	861,194	$	2,278		0%	0%

	Twenty-six Weeks Ended										Thirty-nine Weeks Ended
	August 3, 2019		August 4, 2018								November 2, 2019		November 3, 2018
(in thousands)	Net Sales		Net Sales		$ Change			% Change	Constant Currency % Change ⁽¹⁾	Comparable Sales ⁽¹⁾	Net Sales		Net Sales		$ Change			% Change	Comparable Sales ⁽¹⁾
Hollister	$	933,203	$	924,464	$	8,739		1%	3%	1%	$	1,447,975	$	1,439,589	$	8,386		1%	0%
Abercrombie ⁽²⁾	641,847		648,849		(7,002		)	(1)%	0%	0%	990,547		994,918		(4,371		)	0%	1%
Total net sales	$	1,575,050	$	1,573,313	$	1,737		0%	2%	1%	$	2,438,522	$	2,434,507	$	4,015		0%	0%

United States	$	1,013,130	$	980,572	$	32,558		3%	3%	3%	$	1,596,723	$	1,543,162	$	53,561		3%	3%
International	561,920		592,741		(30,821		)	(5)%	(1)%	(3)%	841,799		891,345		(49,546		)	(6)%	(5)%
Total net sales	$	1,575,050	$	1,573,313	$	1,737		0%	2%	1%	$	2,438,522	$	2,434,507	$	4,015		0%	0%


⁽¹⁾	Calculated on a constant currency basis. Refer to “NON-GAAP FINANCIAL MEASURES,” for further details.


⁽²⁾	Includes Abercrombie & Fitch and abercrombie kids brands.

For the ~~second~~third quarter of Fiscal 2019, net sales ~~decreased 0.2%~~were approximately flat as compared to the ~~second~~third quarter of Fiscal 2018, reflecting ~~a slight decrease in average unit retail and units sold remaining approximately flat year-over-year.~~

~~For the year-to-date period of Fiscal 2019, net sales increased 0.1% as compared to the year-to-date period of Fiscal 2018, with~~ an increase in units sold, partially offset by a decrease in average unit ~~retail.~~retail driven by the adverse impact from changes in foreign currency exchange rates. Excluding the adverse impact of changes in foreign currency exchange rates, net sales for the third quarter of Fiscal 2019 increased 1% as compared to the third quarter of Fiscal 2018.

For the year-to-date period of Fiscal 2019, net sales were approximately flat as compared to the year-to-date period of Fiscal 2018, reflecting an increase in units sold, partially offset by a decrease in average unit retail driven by the adverse impact from changes in foreign currency exchange rates. Excluding the adverse impact of changes in foreign currency exchange rates, net sales for the year-to-date period of Fiscal 2019 increased 2% as compared to the year-to-date period of Fiscal 2018.

Table of Contents

Cost of sales, exclusive of depreciation and amortization


	Thirteen Weeks Ended						Thirteen Weeks Ended
	August 3, 2019			August 4, 2018			November 2, 2019			November 3, 2018
(in thousands)			% of Net Sales			% of Net Sales			% of Net Sales			% of Net Sales
Cost of sales, exclusive of depreciation and amortization	$	342,445	40.7%	$	335,519	39.8%	$	344,541	39.9%	$	333,375	38.7%

Gross profit	$	498,633	59.3%	$	506,895	60.2%	$	518,931	60.1%	$	527,819	61.3%
Gross profit on a constant currency basis ⁽¹⁾	$	498,633	59.3%	$	498,870	59.9%
Gross profit on a non-GAAP constant currency basis ⁽¹⁾							$	518,931	60.1%	$	519,288	60.9%

	Twenty-six Weeks Ended						Thirty-nine Weeks Ended
	August 3, 2019			August 4, 2018			November 2, 2019			November 3, 2018
(in thousands)			% of Net Sales			% of Net Sales			% of Net Sales			% of Net Sales
Cost of sales, exclusive of depreciation and amortization	$	632,327	40.1%	$	624,073	39.7%	$	976,868	40.1%	$	957,448	39.3%

Gross profit	$	942,723	59.9%	$	949,240	60.3%	$	1,461,654	59.9%	$	1,477,059	60.7%
Gross profit on a constant currency basis ⁽¹⁾	$	942,723	59.9%	$	932,770	60.3%
Gross profit on a non-GAAP constant currency basis ⁽¹⁾							$	1,461,654	59.9%	$	1,452,058	60.5%


⁽¹⁾	Refer to “NON-GAAP FINANCIAL MEASURES,” for further details.

For the ~~second~~third quarter of Fiscal 2019, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales increased by approximately 90120 basis points as compared to the ~~second~~third quarter of Fiscal 2018, ~~primarily due to~~reflecting the adverse impact from higher ~~average unit costs driven by product mix,~~year-over-year shrink of approximately 50 basis points as a result of physical inventory counts completed in the third quarter of Fiscal 2019, and ~~slightly lower average unit retail.~~the adverse impact from changes in foreign currency exchange rates, net of hedging, of approximately 40 basis points.

For the year-to-date period of Fiscal 2019, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales increased by approximately 4080 basis points as compared to the year-to-date period of Fiscal 2018, primarily due to lower average unit retail without a corresponding decrease in average unit ~~cost.~~cost, the adverse impact from higher year-over-year shrink of approximately 20 basis points as a result of physical inventory counts completed in the third quarter of Fiscal 2019 and the adverse impact from changes in foreign currency exchange rates, net of hedging, of approximately 20 basis points.

Stores and distribution expense


	Thirteen Weeks Ended						Thirteen Weeks Ended
	August 3, 2019			August 4, 2018			November 2, 2019			November 3, 2018
(in thousands)			% of Net Sales			% of Net Sales			% of Net Sales			% of Net Sales
Stores and distribution expense	$	376,347	44.7%	$	374,552	44.5%	$	377,697	43.7%	$	371,859	43.2%

	Twenty-six Weeks Ended						Thirty-nine Weeks Ended
	August 3, 2019			August 4, 2018			November 2, 2019			November 3, 2018
(in thousands)			% of Net Sales			% of Net Sales			% of Net Sales			% of Net Sales
Stores and distribution expense	$	732,959	46.5%	$	731,899	46.5%	$	1,110,656	45.5%	$	1,103,758	45.3%

For the ~~second~~third quarter of Fiscal 2019, stores and distribution expense as a percentage of net sales increased by approximately 50 basis points as compared to the third quarter of Fiscal 2018, primarily due to increased shipping and handling expense and increased depreciation expense on omnichannel investments, partially offset by a decrease in store occupancy expense as a percentage of net sales of approximately 50 basis points.

For the year-to-date period of Fiscal 2019, stores and distribution expense as a percentage of net sales increased by approximately 20 basis points as compared to the ~~second quarter~~year-to-date period of Fiscal 2018, primarily due to increased ~~direct-to-consumer~~shipping and handling expense, ~~as a percentage of total net sales,~~increased depreciation expense on omnichannel investments, partially offset by a decrease in store occupancy expense as a percentage of net sales of approximately 4050 basis points.

For the year-to-date period of Fiscal 2019, stores and distribution expense as a percentage of net sales was approximately flat as compared to the year-to-date period of Fiscal 2018, reflecting a decrease in store occupancy expense as a percentage of net sales of approximately 60 basis points and increased direct-to-consumer expense as a percentage of total net sales.

Table of Contents

Marketing, general and administrative expense


	Thirteen Weeks Ended							Thirteen Weeks Ended
	August 3, 2019			August 4, 2018				November 2, 2019			November 3, 2018
(in thousands)			% of Net Sales				% of Net Sales			% of Net Sales				% of Net Sales
Marketing, general and administrative expense	$	115,694	13.8%	$	123,883		14.7%	$	114,075	13.2%	$	117,181		13.6%
Deduct:
Benefits related to certain legal matters⁽¹⁾								—		0.0%	3,005			0.3%
Adjusted non-GAAP marketing, general and administrative expense								$	114,075	13.2%	$	120,186		14.0%

	Twenty-six Weeks Ended							Thirty-nine Weeks Ended
	August 3, 2019			August 4, 2018				November 2, 2019			November 3, 2018
(in thousands)			% of Net Sales				% of Net Sales			% of Net Sales				% of Net Sales
Marketing, general and administrative expense	$	227,641	14.5%	$	248,780		15.8%	$	341,716	14.0%	$	365,961		15.0%
Deduct:
Charges related to certain legal matters ⁽¹⁾	—		0.0%	(5,600		)	(0.4)%
Net charges related to certain legal matters⁽¹⁾								—		0.0%	(2,595		)	(0.1)%
Adjusted non-GAAP marketing, general and administrative expense	$	227,641	14.5%	$	243,180		15.5%	$	341,716	14.0%	$	363,366		14.9%


⁽¹⁾	~~Includes~~Amounts reflect legal charges and benefits in connection with a then proposed settlement of a class action claim, which received final court approval and was paid in the fourth quarter of Fiscal 2018.

For the ~~second~~third quarter of Fiscal 2019, marketing, general and administrative expense as a percentage of net sales decreased by approximately 9040 basis points as compared to the ~~second~~third quarter of Fiscal 2018, primarily due to decreased consulting, marketing and performance-based compensation ~~expense, decreased consulting costs and a reduction in depreciation expense on information technology assets. These~~expense. The aforementioned decreases were partially offset by ~~employee severance charges recognized~~increased information technology expense and the impact of benefits related to certain legal matters included in last year’s results, the ~~second~~latter of which was a benefit of 30 basis points to third quarter of Fiscal 2018 results. Excluding the benefits related to certain legal matters presented above, third quarter of Fiscal 2019 adjusted non-GAAP marketing, general and ~~an increase in marketing spend.~~administrative expense as a percentage of net sales decreased by approximately 80 basis points as compared to the third quarter of Fiscal 2018.

For the year-to-date period of Fiscal 2019, marketing, general and administrative expense as a percentage of net sales decreased by approximately ~~130~~100 basis points as compared to the year-to-date period of Fiscal 2018, primarily due to decreased performance-based compensation, consulting, and depreciation expense, as well as the impact ~~of the $5.6 million, or 40 basis points,~~ of charges related to certain legal matters onincluded in last year’s results, ~~decreased consulting expenses and a reduction in depreciation expense on information technology assets. These~~the last of which was an adverse impact of 10 basis points to year-to-date Fiscal 2018 results. The aforementioned decreases were partially offset by ~~an increase~~increases in ~~marketing spend~~information technology expense and executive employee severance ~~charges recognized in the second quarter of Fiscal 2019.~~charges. Excluding the ~~$5.6 million of~~net charges related to certain legal matters presented above, year-to-date Fiscal 2019 adjusted non-GAAP marketing, general and administrative expense as a percentage of net sales decreased by approximately ~~100~~90 basis points as compared to the year-to-date period of Fiscal 2018.

Flagship store exit charges


	Thirteen Weeks Ended						Thirteen Weeks Ended
	August 3, 2019			August 4, 2018			November 2, 2019			November 3, 2018
(in thousands)			% of Net Sales			% of Net Sales			% of Net Sales			% of Net Sales
Flagship store exit charges	$	44,994	5.3%	$	—	0.0%	$	285	0.0%	$	—	0.0%

	Twenty-six Weeks Ended						Thirty-nine Weeks Ended
	August 3, 2019			August 4, 2018			November 2, 2019			November 3, 2018
(in thousands)			% of Net Sales			% of Net Sales			% of Net Sales			% of Net Sales
Flagship store exit charges	$	46,738	3.0%	$	3,808	0.2%	$	47,023	1.9%	$	3,808	0.2%

For the ~~second quarter and~~ year-to-date period of Fiscal 2019, flagship store exit charges as a percentage of net sales increased by approximately ~~530 and 280~~170 basis points ~~respectively,~~ as compared to the ~~second quarter and~~ year-to-date period of Fiscal 2018, primarily ~~due to charges~~ related to the closure of the SoHo Hollister flagship in New York City induring the second quarter of Fiscal 2019. Refer to Note 14, “FLAGSHIP STORE EXIT CHARGES.”

Table of Contents

Asset impairment, exclusive of flagship store exit charges


	Thirteen Weeks Ended						Thirteen Weeks Ended
	August 3, 2019			August 4, 2018			November 2, 2019				November 3, 2018
(in thousands)			% of Net Sales			% of Net Sales				% of Net Sales				% of Net Sales
Asset impairment, exclusive of flagship store exit charges	$	715	0.1%	$	8,671	1.0%	$	12,610		1.5%	$	656		0.1%
Deduct:
Flagship asset impairment charges ⁽¹⁾							(10,468		)	(1.2)%	—			0.0%
Adjusted non-GAAP asset impairment, exclusive of flagship store exit charges							$	2,142		0.2%	$	656		0.1%

	Twenty-six Weeks Ended						Thirty-nine Weeks Ended
	August 3, 2019			August 4, 2018			November 2, 2019				November 3, 2018
(in thousands)			% of Net Sales			% of Net Sales				% of Net Sales				% of Net Sales
Asset impairment, exclusive of flagship store exit charges	$	2,377	0.2%	$	9,727	0.6%	$	14,987		0.6%	$	10,383		0.4%
Deduct:
Certain flagship asset impairment charges ⁽¹⁾							(10,468		)	(0.4)%	(8,671		)	(0.4)%
Adjusted non-GAAP asset impairment, exclusive of flagship store exit charges							$	4,519		0.2%	$	1,712		0.1%


⁽¹⁾	Amounts reflect asset impairment charges related to certain of the Company’s international Abercrombie flagship stores.

For the ~~second~~third quarter and year-to-date period of Fiscal 2019, asset impairment, exclusive of flagship store exit charges, as a percentage of net sales ~~decreased~~increased by approximately 90140 basis points and 4020 basis points as compared to the ~~second~~third quarter and year-to-date period of Fiscal 2018, respectively. Refer to Note 8, “ASSET IMPAIRMENT.” ~~for further details on the asset impairment charges listed above.~~

Other operating ~~(loss)~~ income, net


	Thirteen Weeks Ended							Thirteen Weeks Ended
	August 3, 2019				August 4, 2018			November 2, 2019			November 3, 2018
(in thousands)				% of Net Sales			% of Net Sales			% of Net Sales			% of Net Sales
Other operating (loss) income, net	$	(367	)	0.0%	$	434	0.1%
Other operating income, net								$	215	0.0%	$	1,557	0.2%

	Twenty-six Weeks Ended							Thirty-nine Weeks Ended
	August 3, 2019				August 4, 2018			November 2, 2019			November 3, 2018
(in thousands)				% of Net Sales			% of Net Sales			% of Net Sales			% of Net Sales
Other operating income, net	$	250		0.0%	$	2,994	0.2%	$	465	0.0%	$	4,551	0.2%

For both the ~~second~~third quarter and year-to-date period of Fiscal 2019, other operating ~~(loss)~~ income, net as a percentage of net sales decreased by approximately ~~10 basis points and~~ 20 basis points as compared to the ~~second~~third quarter and year-to-date period of Fiscal 2018, ~~respectively.~~respectively, reflecting lower foreign currency exchange rate related gains and the impact resulting from the adoption of the new derivative accounting standard in Fiscal 2019. Refer to Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” for further discussion of the new derivative accounting standard.

Table of Contents

Operating income (loss) ~~income~~


	Thirteen Weeks Ended								Thirteen Weeks Ended
	August 3, 2019				August 4, 2018				November 2, 2019				November 3, 2018
(in thousands)				% of Net Sales				% of Net Sales				% of Net Sales				% of Net Sales
Operating (loss) income	$	(39,484	)	(4.7)%	$	223		0.0%
Operating income									$	14,479		1.7%	$	39,680		4.6%
Deduct:
Certain asset impairment charges	—			0.0%	8,671			1.0%
Adjusted non-GAAP operating (loss) income	$	(39,484	)	(4.7)%	$	8,894		1.1%
Adjusted non-GAAP operating (loss) income on a constant currency basis ⁽¹⁾	$	(39,484	)	(4.7)%	$	4,587		0.6%
Flagship asset impairment charges ⁽²⁾									10,468			1.2%	—			0.0%
Benefit related to certain legal matters ⁽³⁾									—			0.0%	(3,005		)	(0.3)%
Adjusted non-GAAP operating income									$	24,947		2.9%	$	36,675		4.3%
Adjusted non-GAAP operating income on a constant currency basis ⁽¹⁾									$	24,947		2.9%	$	31,269		3.7%

	Twenty-six Weeks Ended								Thirty-nine Weeks Ended
	August 3, 2019				August 4, 2018				November 2, 2019				November 3, 2018
(in thousands)				% of Net Sales				% of Net Sales				% of Net Sales				% of Net Sales
Operating loss	$	(66,742	)	(4.2)%	$	(41,980	)	(2.7)%	$	(52,263	)	(2.1)%	$	(2,300	)	(0.1)%
Deduct:
Certain asset impairment charges	—			0.0%	8,671			0.6%
Charges related to certain legal matters ⁽²⁾	—			0.0%	5,600			0.4%
Adjusted non-GAAP operating loss	$	(66,742	)	(4.2)%	$	(27,709	)	(1.8)%
Certain flagship asset impairment charges ⁽²⁾									10,468			0.4%	8,671			0.4%
Net charges related to certain legal matters ⁽³⁾									—			0.0%	2,595			0.1%
Adjusted non-GAAP operating (loss) income									$	(41,795	)	(1.7)%	$	8,966		0.4%
Adjusted non-GAAP operating loss on a constant currency basis ⁽¹⁾	$	(66,742	)	(4.2)%	$	(34,338	)	(2.2)%	$	(41,795	)	(1.7)%	$	(3,070	)	(0.1)%


⁽¹⁾	Refer to “NON-GAAP FINANCIAL MEASURES,” for further details.


⁽²⁾	~~Includes~~Amounts reflect asset impairment charges related to certain of the Company’s international Abercrombie flagship stores.


⁽³⁾	Amounts reflect legal charges and benefits in connection with a then proposed settlement of a class action claim, which received final court approval and was paid in the fourth quarter of Fiscal 2018.

Interest expense, net



	Thirteen Weeks Ended
	November 2, 2019				November 3, 2018
(in thousands)				% of Net Sales				% of Net Sales
Interest expense	$	5,500		0.6%	$	5,643		0.7%
Interest income	(2,578		)	(0.3)%	(2,786		)	(0.3)%
Interest expense, net	$	2,922		0.3%	$	2,857		0.3%

	Thirty-nine Weeks Ended
	November 2, 2019				November 3, 2018
(in thousands)				% of Net Sales				% of Net Sales
Interest expense	$	14,518		0.6%	$	17,000		0.7%
Interest income	(9,610		)	(0.4)%	(8,102		)	(0.3)%
Interest expense, net	$	4,908		0.2%	$	8,898		0.4%

For the ~~second~~third quarter of Fiscal 2019, ~~operating (loss) income~~interest expense, net as a percentage of net sales ~~decreased by~~was approximately ~~470 basis points~~flat as compared to the ~~second~~third quarter of Fiscal 2018, primarily due to the adverse impact of flagship store exit charges in the second quarter of Fiscal 2019 of approximately 530 basis points, the net year-over-year impact of items presented in the table above and the adverse impact from changes in foreign currency exchange rates of approximately 50 basis points, net of hedging. Excluding items presented above, second quarter of Fiscal 2019 adjusted non-GAAP operating (loss) income2018. Interest expense as a percentage of ~~net~~ sales decreased by approximately ~~580~~10 basis points ~~as compared~~year-over-year, primarily driven by the elimination of landlord financing obligations and the related interest expense upon the adoption of the new lease accounting standard in Fiscal 2019, partially offset by an increase in interest expense related to certain of the ~~second quarter of Fiscal 2018.~~Company’s long-term obligations.

For the year-to-date period of Fiscal 2019, operating loss as a percentage of net sales decreased by approximately 150 basis points as compared to the year-to-date period of Fiscal 2018, primarily due to flagship store exit charges in the second quarter of Fiscal 2019 of approximately 530 basis points, the net year-over-year impact of items presented in the table above and the adverse impact from changes in foreign currency exchange rates of approximately 40 basis points, net of hedging. Excluding items presented above, year-to-date Fiscal 2019 adjusted non-GAAP operating loss as a percentage of net sales decreased by approximately 240 basis points as compared to the year-to-period of Fiscal 2018.

~~Refer to Note 14, “FLAGSHIP STORE EXIT CHARGES,” for further discussion.~~

~~Table of Contents~~

~~Interest expense, net~~

Thirteen Weeks Ended
August 3, 2019 August 4, 2018
(in thousands) % of Net Sales % of Net Sales
Interest expense $ 4,479
0.5% $ 5,695
0.7%
Interest income (3,109 ) (0.4)% (2,672 ) (0.3)%
Interest expense, net $ 1,370
0.2% $ 3,023
0.4%

Twenty-six Weeks Ended
August 3, 2019 August 4, 2018
(in thousands) % of Net Sales % of Net Sales
Interest expense $ 9,011
0.6% $ 11,357
0.7%
Interest income (7,025 ) (0.4)% (5,316 ) (0.3)%
Interest expense, net $ 1,986
0.1% $ 6,041
0.4%

~~For the second quarter and~~ year-to-date period of Fiscal 2019, interest expense, net as a percentage of net sales decreased by approximately 20 basis points ~~and 30 basis points, respectively,~~ as compared to the ~~second quarter and~~ year-to-date period of Fiscal 2018. ~~These decreases were~~Interest expense as a percentage of sales decreased by approximately 10 basis points year-over-year, primarily ~~due to~~driven by the elimination of ~~leasehold~~landlord financing obligations and ~~corresponding~~the related interest expense ~~related to these obligations~~ upon adoption of the new lease accounting standard ~~on February 3, 2019. In addition,~~in Fiscal 2019, partially offset by an increase in interest expense related to certain of the Company’s long-term obligations. Interest income as a percentage of sales increased by approximately 10 basis points year-over-year primarily driven by higher interest income earned on the Company’s investments and cash ~~holdings contributed to the decrease in interest expense, net as a percentage~~holdings.

Table of ~~net sales.~~Contents

Income tax expense (benefit) ~~expense~~


									Thirteen Weeks Ended
									November 2, 2019				November 3, 2018
(in thousands, except ratios)												Effective Tax Rate				Effective Tax Rate
Income tax expense									$	3,987		34.5%	$	12,047		32.7%
Deduct:
Tax effect of pre-tax excluded items ⁽¹⁾									2,485				(1,064		)
Tax Cuts and Jobs Act of 2017 charges⁽²⁾									—				(405		)
Adjusted non-GAAP income tax expense									$	6,472		29.4%	$	10,578		31.3%

	Thirteen Weeks Ended								Thirty-nine Weeks Ended
	August 3, 2019				August 4, 2018				November 2, 2019				November 3, 2018
(in thousands, except ratios)				Effective Tax Rate				Effective Tax Rate				Effective Tax Rate				Effective Tax Rate
Income tax (benefit) expense	$	(11,330	)	27.7%	$	24		(0.9)%	$	(16,931	)	29.6%	$	8,358		(74.6)%
Deduct:
Tax effect of excluded items ⁽¹⁾	—				2,689
Tax Cuts and Jobs Act of 2017 charges	—				(2,042		)
Tax effect of pre-tax excluded items ⁽¹⁾									2,485				3,166
Tax Cuts and Jobs Act of 2017 charges ⁽²⁾									—				(2,447		)
Adjusted non-GAAP income tax (benefit) expense	$	(11,330	)	27.7%	$	671		11.4%	$	(14,446	)	30.9%	$	9,077		13,348.5%

	Twenty-six Weeks Ended
	August 3, 2019				August 4, 2018
(in thousands, except ratios)				Effective Tax Rate				Effective Tax Rate
Income tax benefit	$	(20,918	)	30.4%	$	(3,689	)	7.7%
Deduct:
Tax effect of excluded items ⁽¹⁾	—				4,230
Tax Cuts and Jobs Act of 2017 charges	—				(2,042		)
Adjusted non-GAAP income tax benefit	$	(20,918	)	30.4%	$	(1,501	)	4.4%


⁽¹⁾	Refer to “Operating income (loss) ~~income~~” for details of pre-tax excluded items. The tax effect of pre-tax excluded items is the difference between the tax provision calculation on a GAAP basis and on an adjusted non-GAAP basis.


⁽²⁾	Refer to Note 9, “INCOME TAXES,” for details on the Tax Cuts and Jobs Act of 2017.

~~For the second quarter of Fiscal 2019, the~~The year-over-year change in the effective tax rate in Fiscal 2019 as compared to ~~the second quarter of~~ Fiscal 2018, ~~which is highly sensitive at lower levels of pre-tax earnings,~~ was primarily driven by changes in the level and mix of consolidated pre-tax earnings between operating and valuation allowance ~~jurisdictions.~~jurisdictions as well as discrete items.

InThe effective tax rate for the ~~year-to-date period~~third quarter of Fiscal 2019 and the ~~effective tax rate~~third quarter of Fiscal 2018 was impacted by discrete ~~income~~ tax ~~benefits of $1.0 million, as compared~~items related to ~~discrete non-cash income~~share-based compensation awards discussed within Note 10, “SHARE-BASED COMPENSATION.” The effective tax ~~charges of $7.9 million in~~rate for the ~~year-to-date period~~third quarter of Fiscal 2018 ~~primarily related to the exercise and expiration of certain share-based compensation awards.~~

~~In the second quarter and year-to-date period of Fiscal 2018, the effective tax rate~~ was also impacted by discrete income tax charges ~~of $2.0 million~~detailed in the table above related to the then provisional estimate of the Tax Cuts and Jobs Act of 2017.

The effective tax rate for the year-to-date period of Fiscal 2019 and the year-to-date period of Fiscal 2018 was impacted by discrete items related to share-based compensation awards discussed within Note 10, “SHARE-BASED COMPENSATION.” The year-to-date Fiscal 2018 effective tax rate, which was highly sensitive at lower levels of pre-tax earnings, was also impacted by discrete income tax charges detailed in the table above related to the then provisional estimate of the Tax Cuts and Jobs Act of 2017.

Refer to Note 9, “INCOME TAXES,” for further discussion on certain discrete items.

Table of Contents

Net income (loss) ~~income~~ and Net income (loss) ~~income~~ per share attributable to A&F


	Thirteen Weeks Ended								Thirteen Weeks Ended
	August 3, 2019				August 4, 2018				November 2, 2019				November 3, 2018
(in thousands)				% of Net Sales				% of Net Sales				% of Net Sales				% of Net Sales
Net loss attributable to A&F	$	(31,142	)	(3.7)%	$	(3,853	)	(0.5)%
Adjusted non-GAAP net (loss) income attributable to A&F ⁽¹⁾	$	(31,142	)	(3.7)%	$	4,171		0.5%
Net income attributable to A&F									$	6,523		0.8%	$	23,919		2.8%
Adjusted non-GAAP net income attributable to A&F ⁽¹⁾									$	14,506		1.7%	$	22,383		2.6%

Net loss per diluted share attributable to A&F	$	(0.48	)		$	(0.06	)
Adjusted non-GAAP net (loss) income per diluted share attributable to A&F⁽¹⁾	$	(0.48	)		$	0.06
Adjusted non-GAAP net (loss) income per diluted share attributable to A&F on a constant currency basis⁽²⁾	$	(0.48	)		$	0.01
Net income per diluted share attributable to A&F									$	0.10			$	0.35
Adjusted non-GAAP net income per diluted share attributable to A&F⁽¹⁾									$	0.23			$	0.33
Adjusted non-GAAP net income per diluted share attributable to A&F on a constant currency basis⁽²⁾									$	0.23			$	0.27

	Twenty-six Weeks Ended								Thirty-nine Weeks Ended
	August 3, 2019				August 4, 2018				November 2, 2019				November 3, 2018
(in thousands)				% of Net Sales				% of Net Sales				% of Net Sales				% of Net Sales
Net loss attributable to A&F	$	(50,297	)	(3.2)%	$	(46,314	)	(2.9)%	$	(43,774	)	(1.8)%	$	(22,395	)	(0.9)%
Adjusted non-GAAP net loss attributable to A&F⁽¹⁾	$	(50,297	)	(3.2)%	$	(34,231	)	(2.2)%	$	(35,791	)	(1.5)%	$	(11,848	)	(0.5)%

Net loss per diluted share attributable to A&F	$	(0.76	)		$	(0.68	)		$	(0.67	)		$	(0.33	)
Adjusted non-GAAP net loss per diluted share attributable to A&F ⁽¹⁾	$	(0.76	)		$	(0.50	)		$	(0.55	)		$	(0.17	)
Adjusted non-GAAP net loss per diluted share attributable to A&F on a constant currency basis⁽²⁾	$	(0.76	)		$	(0.57	)		$	(0.55	)		$	(0.31	)


⁽¹⁾	Excludes items presented above under “Operating income (loss) ~~income~~,” and “Income tax expense (benefit) ~~expense~~.”


⁽²⁾	Refer to “NON-GAAP FINANCIAL MEASURES,” for further details.

Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

HISTORICAL SOURCES AND USES OF CASH

Seasonality of cash flows

The Company’s business has 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”). As is typical in the apparel industry, the Company experiences its greatest sales activity during Fall due to Back-to-School and Holiday sales periods. The Company relies on excess operating cash flows, which are largely generated in Fall, to fund operations throughout the year and to reinvest in the business to support future growth. The Company also has a revolving credit facility available as a source of additional funding.

Credit Facilities

On August 7, 2014, ~~A&F,~~the Company, through its subsidiary Abercrombie & Fitch Management Co. (“A&F Management”) as the lead borrower (with A&F and certain other subsidiaries as borrowers or guarantors), entered into an asset-based revolving credit agreement.

On October 19, 2017, the Company, through its subsidiary A&F Management, entered into ~~the~~a Second Amendment to Credit Agreement (the “ABL Second Amendment”), amending and extending the maturity date of the asset-based revolving credit agreement to October 19, 2022. As amended, the asset-based revolving credit agreement continues to provide for a senior secured credit facility of up to $400 million (the “Amended ABL Facility”).

As of ~~August 3,~~November 2, 2019, the borrowing base on the Amended ABL Facility was ~~$345.1~~$400.0 million.

The Company uses, in the ordinary course of business, stand-by letters of credit under the existing Amended ABL Facility. As of both ~~August 3,~~November 2, 2019 and February 2, 2019, the Company had not drawn on the Amended ABL Facility, but had approximately $0.4 million of outstanding stand-by letters of credit under the Amended ABL Facility.

As of ~~August 3,~~November 2, 2019, the Company had availability under the Amended ABL Facility of ~~$344.7~~$399.6 million. In addition, excess availability equal to the greater of 10% of the loan cap or $30 million must be maintained under the Amended ABL Facility.

~~Table of Contents~~

~~As of February 2, 2019, A&F,~~On August 7, 2014, the Company, through its subsidiary A&F Management as the borrower (with A&F and certain other subsidiaries as guarantors), ~~also~~ entered into a term loan agreement, ~~on August 7, 2014,~~ which provides for a term loan facility of $300 million (the “Term Loan Facility” and, together with the Amended ABL Facility, the “Credit Facilities”). The Term Loan Facility will mature on August 7, 2021.

On June 22, 2018, ~~A&F,~~the Company, through its subsidiary A&F Management, entered into ~~the~~a Second Amendment to Term Loan ~~Second Amendment,~~Credit Agreement, which, among other things, repriced the Term Loan Facility by reducing the applicable margins for term loans by 0.25%.

The ~~interest rate on borrowings under the Term Loan Facility was 5.77% as of August 3, 2019.~~

~~The~~ Company’s ~~Term Loan~~term loan debt is presented inon the Condensed Consolidated Balance Sheets, net of the unamortized discount and fees. Net borrowings as of ~~August 3,~~November 2, 2019 and February 2, 2019 were as follows:


(in thousands)	August 3, 2019			February 2, 2019			November 2, 2019			February 2, 2019
Borrowings, gross at carrying amount	$	253,250		$	253,250
Long-term portion of borrowings, gross at carrying amount							$	243,250		$	253,250
Unamortized discount	(676		)	(845		)	(525		)	(845		)
Unamortized fees	(1,541		)	(1,966		)	(1,382		)	(1,966		)
Borrowings, net	251,033			250,439
Long-term portion of borrowings, net							241,343			250,439
Less: short-term portion of borrowings, net	—			—			—			—
Long-term portion of borrowings, net	$	251,033		$	250,439		$	241,343		$	250,439

The interest rate on borrowings under the Term Loan Facility was 5.33% as of November 2, 2019.

The Company was in compliance with the covenants under the Credit Facilities as of November 2, 2019.

The material provisions of the Credit Facilities have not changed from those disclosed in Note 10, “BORROWINGS,” of the Notes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Annual Report on Form 10-K for Fiscal 2018.

~~Operating~~

Table of Contents

Cash flows from operating, investing, and financing activities

The table below provides certain components of the Company’s Condensed Consolidated Statements of Cash Flows for the thirty-nine week periods ended November 2, 2019 and November 3, 2018:



	Thirty-nine Weeks Ended
	November 2, 2019			November 3, 2018
(in thousands)
Cash and equivalents, and restricted cash and equivalents, beginning of period	$	745,829		$	697,955
Net cash (used for) provided by operating activities	(33,839		)	$	77,245
Net cash used for investing activities	(154,373		)	(98,768		)
Net cash used for financing activities	(122,908		)	(117,981		)
Effects of foreign currency exchange rate changes on cash	(2,686		)	(16,068		)
Net decrease in cash and equivalents, and restricted cash and equivalents	(313,806		)	(155,572		)
Cash and equivalents, and restricted cash and equivalents, end of period	$	432,023		$	542,383

Operating activities - For both the ~~twenty-six~~thirty-nine weeks ended ~~August~~November 2, 2019 and November 3, ~~2019, net~~2018, the primary source of cash ~~used for~~from operations was merchandise sales which were approximately flat year-over-year. The year-over-year decrease in cash flows from operating activities ~~was $36.1 million~~for the thirty-nine weeks ended November 2, 2019 as compared to ~~net cash provided by operating activities of $50.5 million for~~ the ~~twenty-six~~thirty-nine weeks ended ~~August 4, 2018. The year-over-year change~~November 3, 2018 reflects: a larger year-to-date loss before income taxes in ~~cash flow associated with operating activities reflects~~the current year as compared to the prior year, resulting in increased benefits from deferred tax assets; changes in the timing of payments to vendors, ~~which resulted~~resulting in increased payments in the first quarter of Fiscal 2019 as compared to the prior ~~year,~~year; and decreased incentive compensation payments in Fiscal 2019 as compared to the prior year.

Investing activities

- For the ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 and ~~August 4,~~November 3, 2018, net cash outflows for investing activities were used ~~primarily~~ for purchases of property and ~~equipment of $94.2 million and $54.1 million, respectively.~~equipment.

Financing activities

- For the ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019, net cash used for financing activities primarily consisted of the repurchase of approximately ~~3.5~~4.0 million shares of A&F’s Common Stock in the open market with a market value of approximately ~~$57.8~~$63.5 million, ~~and~~ dividend payments of ~~$26.4~~$39.0 million and a voluntary debt repayment of $10.0 million. For the ~~twenty-six~~thirty-nine weeks ended ~~August 4,~~November 3, 2018, net cash used for financing activities consisted primarily of the repurchase of approximately ~~1.7~~2.9 million shares of A&F’s Common Stock in the open market with a market value of approximately ~~$43.7~~$68.7 million and dividend payments of ~~$27.2~~$40.6 million.

~~Table of Contents~~

FUTURE CASH REQUIREMENTS AND SOURCES OF CASH

The Company’s capital allocation strategy remains to prioritize investments in the business to build on the foundation for sustainable long-term growth and seeks to invest in projects that have high expected returns. The Company also evaluates opportunities to accelerate potential investments, including improvements in customer experience, both in stores and online. These improvements include store remodels and right-sizes, new store openings, and acceleration of our transformation efforts. The Company also evaluates store closures, including flagship lease buyouts and options to early terminate its store leases. In addition, the Company returns cash to stockholders through dividends and completes share repurchases as deemed appropriate. Dividends are declared at the discretion of A&F’s Board of Directors. A&F’s Board of Directors reviews the dividend on a quarterly basis and establishes the dividend rate based on A&F’s financial condition, results of operations, capital requirements, current and projected cash flows, business prospects and other factors which the Board of Directors deems relevant. Capital allocation priorities and investments are reviewed by the Company’s Board of Directors considering both liquidity and valuation factors.

To execute its capital allocation strategy, the Company relies on excess operating cash flows, which are largely generated in the Fall season, to fund operations throughout the fiscal year and to reinvest in the business to support future growth. The Company also has availability under the Amended ABL Facility as a source of additional funding. Over the next twelve months, the Company’s primary cash requirements will be to fund operating activities, including the acquisition of inventory, and obligations related to compensation, leases, any lease buyouts or options to terminate store leases the Company may exercise, taxes and other operating activities, as well as to fund capital expenditures, marketing initiatives, quarterly dividends to stockholders subject to approval by A&F’s Board of Directors and debt service requirements, including voluntary debt prepayments, or required repayments, if any, based on annual excess cash flows, as defined in the term loan agreement applicable to the Term Loan Facility.

The Company may repurchase shares of its Common Stock from time to time, dependent on market and business conditions, with the primary objective to offset dilution from issuances of Common Stock associated with the exercise of employee stock appreciation

Table of Contents

rights and vesting of restricted stock units. Shares may be repurchased in the open market, including pursuant to any trading plans established in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, through privately negotiated transactions or other transactions or by a combination of such methods. The Company would anticipate funding such repurchases by utilizing free cash flow generated from operations or proceeds from the Amended ABL Facility.

As Refer to “Item 2. Unregistered Sales of ~~August 3,~~Equity Securities and Use of Proceeds” for additional information regarding the Company’s share repurchases during the third quarter of Fiscal 2019 and the ~~Company had the authority to~~number of shares remaining available for purchase under publicly announced stock repurchase ~~approximately 5.0 million shares as part of the A&F Board of Directors’ previously approved~~ authorizations.

Income taxes

The Company’s earnings and profits from its foreign subsidiaries could be repatriated to the U.S., without incurring additional federal income tax.

The Company has determined that the remaining balance of the Company’s undistributed earnings and profits from its foreign subsidiaries as of February 2, 2019 are considered indefinitely reinvested outside of the U.S., and if these funds were to be repatriated to the U.S., the Company ~~could~~would expect to incur an insignificant amount of state income taxes and foreign withholding taxes. The Company ~~anticipates that it will accrue~~accrues for both state income taxes and foreign withholding taxes with respect to earning and profits earned after February 2, 2019, in such a manner that these funds could be repatriated without incurring additional taxes.

As of ~~August 3,~~November 2, 2019, ~~$235.9~~$191.4 million of the Company’s ~~$499.8~~$410.8 million of cash and equivalents was held by foreign affiliates. The Company is not dependent on dividends from its foreign affiliates to fund its U.S. operations or pay dividends to A&F’s stockholders.

In December 2017, the Tax Cuts and Jobs Act of 2017 was signed into law and, in May 2019, Switzerland voted to approve the Federal Act on Tax Reform and AHV Financing. Refer to Note 9, “INCOME TAXES,” for additional details regarding the impact these events had on the Company’s consolidated financial statements.

Capital investments

For Fiscal 2019, the Company expects capital investments to be approximately $200 million, prioritized towards new store experiences, as well as ~~direct-to-consumer~~digital and omnichannel investments, information technology, and other projects.

OFF-BALANCE SHEET ARRANGEMENTS

~~The~~As of November 2, 2019, the Company ~~uses, in the ordinary course of business, stand-by letters of credit under the Amended ABL Facility. The Company has no other~~did not have any material off-balance sheet arrangements.

~~Table of Contents~~

CONTRACTUAL OBLIGATIONS

The Company’s contractual obligations consist primarily of operating leases, purchase orders for merchandise inventory, unrecognized tax benefits, certain retirement obligations, lease deposits and other agreements to purchase goods and services that are legally binding and that require minimum quantities to be purchased. These contractual obligations impact the Company’s short-term and long-term liquidity and capital resource needs. During the ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019, there were no material changes in the contractual obligations as of February 2, 2019, with the exception of those obligations which occurred in the normal course of business (primarily changes in the Company’s merchandise inventory-related purchases and lease obligations, which fluctuate throughout the year as a result of the seasonal nature of the Company’s operations).

RECENT ACCOUNTING PRONOUNCEMENTS

The Company describes its significant accounting policies in Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” of the Notes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Annual Report on Form 10-K for Fiscal 2018. Refer to Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” of the Notes to Condensed Consolidated Financial Statements included in “ITEM 1. FINANCIAL STATEMENTS (UNAUDITED),” of this Quarterly Report on Form 10-Q for recent accounting pronouncements the Company has adopted, including the dates of adoption and estimated effects on the Condensed Consolidated Financial Statements.

Table of Contents

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company describes its critical accounting policies and estimates in “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” of A&F’s Annual Report on Form 10-K for Fiscal 2018. There have been no other significant changes in critical accounting policies and estimates since the end of Fiscal 2018, except as described below and in Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Recent accounting pronouncements” of the Notes to Condensed Consolidated Financial Statements included in “ITEM 1. FINANCIAL STATEMENTS (UNAUDITED),” of this Quarterly Report on Form 10-Q.



Policy		Effect if Actual Results Differ from Assumptions
Impairment of long-lived assets
Long-lived assets, primarily lease right-of-use assets, leasehold improvements, furniture, fixtures and equipment, are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset group might not be recoverable. These include, but are not limited to, material declines in operational performance, a history of losses, an expectation of future losses, adverse market conditions and store closure or relocation decisions. On at least a quarterly basis, the Company reviews for indicators of impairment at the individual store level, the lowest level for which cash flows are identifiable. Stores that display an indicator of impairment are subjected to an impairment assessment. The Company’s impairment assessment requires management to make assumptions and judgments related, but not limited, to management’s expectations for future operations and projected cash flows. The key assumptions used in the Company’s undiscounted future cash flow models include sales, gross profit and, to a lesser extent, operating expenses. An impairment loss may be recognized when these undiscounted future cash flows are less than the carrying amount of the asset group. In the circumstance of impairment, any loss would be measured as the excess of the carrying amount of the asset group over its fair value. The fair value of the asset group is determined based on the highest and best use of the asset group, which may include consideration of market rent for the ~~right to~~ lease right–of–use ~~leased~~ assets included in the asset group. The Company also may utilize assumptions related to projected store cash flows when estimating the fair value of impaired assets.		If actual results are not consistent with the estimates and assumptions used, there may be a material impact on the Company’s financial condition or results of operation. Store assets that were tested for impairment and not impaired during the thirteen weeks ended ~~August 3,~~November 2, 2019, had long-lived assets with a net book value of ~~$129.8~~$69.7 million, which included ~~$116.8~~$61.9 million of operating lease right-of-use assets ~~under the new lease accounting standard~~ as of ~~August 3,~~November 2, 2019. These stores had undiscounted cash flows which were in the range of 100% to 150% of their respective net asset values. Store assets that were impaired as of ~~August 3,~~November 2, 2019 had a remaining net book value of ~~$116.5~~$134.4 million, which included ~~$113.1~~$128.1 million of operating lease right-of-use ~~assets under the new lease accounting standard.~~assets.
Leases
The Company’s lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term. The Company’s lease liabilities represent the Company’s obligation to make lease payments arising from the lease. AtOn the lease commencement date, the ~~Company’s lease right-of-use assets~~Company recognizes an asset for the right to use a leased asset and ~~liabilities are recognized on the Condensed Consolidated Balance Sheets,~~a liability based on the present value of remaining lease payments over the lease ~~term.~~term on the Condensed Consolidated Balance Sheets. In measuring the Company’s lease liabilities, the remaining lease payments are discounted to present value using a discount rate. As ~~most of~~ the ~~Company’s~~rates implicit in the Company's leases doare not ~~provide an implicit rate,~~readily determinable, the Company uses its incremental borrowing rate based on the transactional currency of the lease and the lease term for the initial measurement of the lease right-of-use asset and liability. For leases existing before the adoption of the new lease accounting standard, the Company used its incremental borrowing rate as of the date of adoption, determined using the remaining lease term as of the date of adoption. For leases commencing on or after the adoption of the new lease accounting standard, the incremental borrowing rate is determined using the remaining lease term as of the lease commencement date. The Company estimates its incremental borrowing rate on a quarterly basis, based on the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.		The Company does not expect material changes to the underlying assumptions used to measure its lease liabilities as of ~~August 3,~~November 2, 2019. ~~However, actual results could vary from estimates and could result in material gains or losses.~~ An increase or decrease of 10% in the Company’s weighted-average discount rate as of ~~August 3,~~November 2, 2019, would impact both the Company’s total assets and total liabilities by less than 1% and would not have a material impact on the Company’s pre-tax income for Fiscal 2019.

Table of Contents

NON-GAAP FINANCIAL MEASURES

This Quarterly Report on Form 10-Q includes discussion of certain financial measures under “RESULTS OF OPERATIONS” on both a GAAP and a non-GAAP basis. The Company believes that each of the non-GAAP financial measures presented in this “ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” is useful to investors as it provides a meaningful basis to evaluate the Company’s operating performance excluding the effect of certain items that the Company believes do not reflect its future operating outlook, such as certain flagship asset impairment charges, and thereby ~~supplementing~~supplements investors’ understanding of comparability of operations across periods. Management used these non-GAAP financial measures during the periods presented to assess the Company’s performance and to develop expectations for future operating performance. These non-GAAP financial measures should be used as a supplement to, and not as an alternative to, the Company’s GAAP financial results, and may not be calculated in the same manner as similar measures presented by other companies.

Comparable sales

~~In addition, the~~The Company provides comparable sales, defined as the year-over-year percentage ~~year-over-year~~ change in the aggregate of (1) sales for stores that have been open as the same brand at least one year and whose square footage has not been expanded or reduced by more than 20% within the past year, with the prior year’s net sales converted at the current year’s foreign currency exchange rates to remove the impact of foreign currency exchange rate fluctuations, and (2) ~~direct-to-consumer~~digital sales with the prior year’s net sales converted at the current year’s foreign currency exchange rates to remove the impact of foreign currency exchange rate fluctuations. Comparable sales exclude revenue other than store and ~~direct-to-consumer~~digital sales. Management uses comparable sales to understand the drivers of year-over-year changes in net sales as well as a performance metric for certain performance-based restricted stock units. The Company believes comparable sales is a useful metric as it can assist investors in distinguishing the portion of the Company’s revenue attributable to existing locations from the portion attributable to the opening or closing of stores. The most directly comparable GAAP financial measure is change in net sales.

Excluded items

The following financial measures are disclosed on a GAAP and on an adjusted non-GAAP basis excluding the following items, as applicable:



Financial measures ⁽¹⁾		Excluded items
Marketing, general and administrative expense		~~Certain~~Benefit and net charges related to certain legal ~~charges~~matters
Asset impairment, exclusive of flagship store exit charges		~~Certain~~Flagship asset impairment charges
Operating income (loss) ~~income~~		~~Certain~~Benefit and net charges related to certain legal matters and flagship asset impairment charges
Net income (loss) ~~income~~ and net income (loss) ~~income~~ per share attributable to A&F ⁽²⁾		~~Certain~~Benefits and charges related to certain legal ~~and~~matters; flagship asset impairment charges; discrete net tax charges related to the Tax Cuts and Jobs Act of 2017; and the tax effect of pre-tax excluded items


⁽¹⁾	Certain of these financial measures are also expressed as a percentage of net sales.

⁽²⁾

The Company also presents income tax ~~benefit~~(benefit) expense and the effective tax rate on both a GAAP and on an adjusted non-GAAP basis excluding the items listed under “Operating income (loss) ~~income~~,” as applicable, in the table ~~above.~~above and discrete net tax charges related to the Act. The tax effect of excluded items is the difference between the tax provision calculation on a GAAP basis and on an adjusted non-GAAP basis.

Table of Contents

Financial information on a constant currency basis

The Company provides certain financial information on a constant currency basis to enhance investors’ understanding of underlying business trends and operating performance by removing the impact of foreign currency exchange rate fluctuations. Management also uses financial information on a constant currency basis to award employee performance-based compensation. The effect from foreign currency exchange rates, calculated on a constant currency basis, is determined by applying the current period’s foreign currency exchange rates to the prior year’s results and is net of the year-over-year impact from hedging. The per diluted share effect from foreign currency exchange rates for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 and ~~August 4,~~November 3, 2018 is calculated using a 27% effective tax rate.

A reconciliation of constant currency financial measures for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019 and ~~August 4,~~November 3, 2018 follows:


(in thousands, except change in net sales, gross profit rate, operating margin and per share data)	Thirteen Weeks Ended									Twenty-six Weeks Ended									Thirteen Weeks Ended							Thirty-nine Weeks Ended
Net sales	August 3, 2019			August 4, 2018			% Change			August 3, 2019			August 4, 2018			% Change			November 2, 2019			November 3, 2018			% Change	November 2, 2019			November 3, 2018			% Change
Total company:
GAAP	$	841,078		$	842,414		0		%	$	1,575,050		$	1,573,313		0		%
Impact from changes in foreign currency exchange rates	—			(9,957		)	1		%	—			(26,246		)	2		%
Net sales on a constant currency basis	$	841,078		$	832,457		1		%	$	1,575,050		$	1,547,067		2		%
Hollister:
GAAP	$	504,758		$	500,836		1		%	$	933,203		$	924,464		1		%
Impact from changes in foreign currency exchange rates	—			(6,984		)	1		%	—			(17,831		)	2		%
Net sales on a constant currency basis	$	504,758		$	493,852		2		%	$	933,203		$	906,633		3		%
Abercrombie:
GAAP	$	336,320		$	341,578		(2		)%	$	641,847		$	648,849		(1		)%
Impact from changes in foreign currency exchange rates	—			(2,973		)	1		%	—			(8,415		)	1		%
Net sales on a constant currency basis	$	336,320		$	338,605		(1		)%	$	641,847		$	640,434		0		%
United States:
GAAP	$	543,472		$	531,446		2		%	$	1,013,130		$	980,572		3		%
Impact from changes in foreign currency exchange rates	—			*			*			—			*			*
Net sales on a constant currency basis	$	543,472		$	531,446		2		%	$	1,013,130		$	980,572		3		%
International:
GAAP	$	297,606		$	310,968		(4		)%	$	561,920		$	592,741		(5		)%	$	863,472		$	861,194		0%	$	2,438,522		$	2,434,507		0%
Impact from changes in foreign currency exchange rates	—			(9,957		)	3		%	—			(26,246		)	4		%	—			(8,302		)	1%	—			(34,547		)	1%
Net sales on a constant currency basis	$	297,606		$	301,011		(1		)%	$	561,920		$	566,495		(1		)%	$	863,472		$	852,892		1%	$	2,438,522		$	2,399,960		2%

Gross profit ⁽²⁾	August 3, 2019			August 4, 2018			BPS Change ⁽¹⁾			August 3, 2019			August 4, 2018			BPS Change ⁽¹⁾
Gross profit ⁽¹⁾																			November 2, 2019			November 3, 2018			BPS Change ⁽²⁾	November 2, 2019			November 3, 2018			BPS Change ⁽²⁾
GAAP	$	498,633		$	506,895		(90		)	$	942,723		$	949,240		(40		)	$	518,931		$	527,819		(120)	$	1,461,654		$	1,477,059		(80)
Impact from changes in foreign currency exchange rates	—			(8,025		)	30			—			(16,470		)	—			—			(8,531		)	40	—			(25,001		)	20
Gross profit on a constant currency basis	$	498,633		$	498,870		(60		)	$	942,723		$	932,770		(40		)	$	518,931		$	519,288		(80)	$	1,461,654		$	1,452,058		(60)

Operating (loss) income	August 3, 2019			August 4, 2018			BPS Change ⁽¹⁾			August 3, 2019			August 4, 2018			BPS Change ⁽¹⁾
Operating income (loss)																			November 2, 2019			November 3, 2018			BPS Change ⁽²⁾	November 2, 2019			November 3, 2018			BPS Change ⁽²⁾
GAAP	$	(39,484	)	$	223		(470		)	$	(66,742	)	$	(41,980	)	(150		)	$	14,479		$	39,680		(290)	$	(52,263	)	$	(2,300	)	(200)
Excluded items ⁽³⁾	—			(8,671		)	110			—			(14,271		)	90			(10,468		)	3,005			(150)	(10,468		)	(11,266		)	10
Adjusted non-GAAP	$	(39,484	)	$	8,894		(580		)	$	(66,742	)	$	(27,709	)	(240		)	$	24,947		$	36,675		(140)	$	(41,795	)	$	8,966		(210)
Impact from changes in foreign currency exchange rates	—			(4,307		)	50			—			(6,629		)	40			—			(5,406		)	60	—			(12,036		)	50
Adjusted non-GAAP on a constant currency basis	$	(39,484	)	$	4,587		(530		)	$	(66,742	)	$	(34,338	)	(200		)	$	24,947		$	31,269		(80)	$	(41,795	)	$	(3,070	)	(160)

Net (loss) income per diluted share attributable to Abercrombie & Fitch Co.	August 3, 2019			August 4, 2018			$ Change			August 3, 2019			August 4, 2018			$ Change
Net income (loss) per diluted share attributable to Abercrombie & Fitch Co.																			November 2, 2019			November 3, 2018			$ Change	November 2, 2019			November 3, 2018			$ Change
GAAP	$	(0.48	)	$	(0.06	)	$	(0.42	)	$	(0.76	)	$	(0.68	)	$	(0.08	)	$	0.10		$	0.35		$(0.25)	$	(0.67	)	$	(0.33	)	$(0.34)
Excluded items, net of tax ⁽³⁾	—			(0.12		)	0.12			—			(0.18		)	0.18			(0.12		)	0.02			(0.14)	(0.12		)	(0.16		)	0.04
Adjusted non-GAAP	$	(0.48	)	$	0.06		$	(0.54	)	$	(0.76	)	$	(0.50	)	$	(0.26	)	$	0.23		$	0.33		$(0.10)	$	(0.55	)	$	(0.17	)	$(0.38)
Impact from changes in foreign currency exchange rates	—			(0.05		)	0.05			—			(0.07		)	0.07			—			(0.06		)	0.06	—			(0.13		)	0.13
Adjusted non-GAAP on a constant currency basis	$	(0.48	)	$	0.01		$	(0.49	)	$	(0.76	)	$	(0.57	)	$	(0.19	)	$	0.23		$	0.27		$(0.04)	$	(0.55	)	$	(0.31	)	$(0.24)


* ⁽¹⁾	~~Not applicable.~~Gross profit is derived from cost of sales, exclusive of depreciation and amortization.


⁽¹⁾⁽²⁾	The estimated basis point change has been rounded based on the change in the percentage of net sales.


⁽²⁾	~~Gross profit is derived from cost of sales, exclusive of depreciation and amortization.~~


⁽³⁾	Refer to “RESULTS OF OPERATIONS” for details on excluded items.

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Investment securities

The Company maintains its cash equivalents in financial instruments, primarily time deposits and money market funds, with original maturities of three months or less. Due to the short-term nature of these instruments, changes in interest rates are not expected to materially affect the fair value of these financial instruments.

The Rabbi Trust includes amounts to meet funding obligations to participants in the Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan I, the Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan II and the Supplemental Executive Retirement Plan. The Rabbi Trust assets primarily consist of trust-owned life insurance policies which are recorded at cash surrender value. The change in cash surrender value of the trust-owned life insurance policies held in the Rabbi Trust resulted in realized gains of $0.8 million and ~~$1.6~~$2.4 million for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 3,~~November 2, 2019, respectively, and realized gains of $0.8 million and ~~$1.5~~$2.3 million for the thirteen and ~~twenty-six~~thirty-nine weeks ended ~~August 4,~~November 3, 2018, respectively, which are recorded in interest expense, net on the Condensed Consolidated Statements of Operations and Comprehensive ~~Loss.~~Income (Loss).

The Rabbi Trust assets are included in other assets on the Condensed Consolidated Balance Sheets as of ~~August 3,~~November 2, 2019 and February 2, 2019, and are restricted in their use as noted above.

Interest rate risks

As of ~~August 3,~~November 2, 2019, the Company has approximately ~~$253.3~~$243.3 million in gross borrowings outstanding under its Term Loan Facility and no borrowings outstanding under its Amended ABL Facility. The Credit Facilities carry interest rates that are tied to LIBO rate, or an alternate base rate, plus a margin. The interest rate on the Term Loan Facility has a 100 basis point LIBO rate floor, and assuming no changes in the Company’s financial structure as it stands, an increase in the interest rate on borrowings under the Term Loan Facility as of ~~August 3,~~November 2, 2019 of 100 basis points would increase Fiscal 2019 annual interest expense by approximately ~~$2.6~~$2.5 million. This hypothetical analysis for Fiscal 2019 may differ from the actual change in interest expense due to potential changes in interest rates or gross borrowings outstanding under the Company’s Credit Facilities. The expected transition from the widespread use of LIBO rate to alternative rates over the next several years is not expected to have a material impact on interest expense on borrowings outstanding under the Company’s Credit Facilities.

Foreign exchange rate risk

A&F’s international subsidiaries generally operate with functional currencies other than the U.S. Dollar. Since the Company’s Condensed Consolidated Financial Statements are presented in U.S. Dollars, the Company must translate all components of these financial statements from functional currencies into U.S. Dollars at exchange rates in effect during or at the end of the reporting period. The fluctuation in the value of the U.S. Dollar against other currencies affects the reported amounts of revenues, expenses, assets and liabilities. The potential impact of foreign currency exchange rate fluctuations increases as international operations relative to domestic operations increase.

A&F and its subsidiaries have exposure to changes in foreign currency exchange rates associated with foreign currency transactions and forecasted foreign currency transactions, including the sale of inventory between subsidiaries and foreign-currency-denominated assets and liabilities. The Company has established a program that primarily utilizes foreign currency exchange forward contracts to partially offset the risks associated with the effects of certain foreign currency transactions and forecasted transactions. Under this program, increases or decreases in foreign currency exchange rate exposures are partially offset by gains or losses on foreign currency exchange forward contracts, to mitigate the impact of foreign currency exchange gains or losses. The Company does not use forward contracts to engage in currency speculation. All outstanding foreign currency exchange forward contracts are recorded at fair value at the end of each fiscal period.

~~The~~ Refer to Note 11, “DERIVATIVE INSTRUMENTS,” for the fair value of outstanding foreign currency exchange forward contracts included in other current assets ~~was $5.5 million~~and accrued expenses as of ~~August 3, 2019 and was $2.2 million as of February~~November 2, ~~2019. The fair value of outstanding foreign currency exchange forward contracts included in accrued expenses was $0.3 million as of each of August 3,~~ 2019 and February 2, 2019.

Foreign currency exchange forward contracts are sensitive to changes in foreign currency exchange rates. The Company assessed the risk of loss in fair values from the effect of a hypothetical 10% devaluation of the U.S. Dollar against the exchange rates for foreign currencies under contract. Such a hypothetical devaluation would decrease derivative contract fair values by approximately ~~$17.9~~$35.6 million. As the Company’s foreign currency exchange forward contracts are primarily designated as cash flow hedges of forecasted transactions, the hypothetical change in fair value would be largely offset by the net change in fair values of the underlying hedged items.

Table of Contents


ITEM 4.	CONTROLS AND PROCEDURES

Disclosure controls and procedures

A&F maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the reports that A&F files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to A&F’s management, including the principal executive officer and the principal financial officer, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.

A&F’s management, including the Chief Executive Officer of A&F (who serves as Principal Executive Officer of A&F) and the Senior Vice President and Chief Financial Officer of A&F (who serves as Principal Financial Officer and Principal Accounting Officer of A&F), evaluated the effectiveness of A&F’s design and operation of its disclosure controls and procedures as of the end of the fiscal quarter ended ~~August 3,~~November 2, 2019. The Chief Executive Officer of A&F (in such individual’s capacity as the Principal Executive Officer of A&F) and the Senior Vice President and Chief Financial Officer of A&F (in such individual’s capacity as the Principal Financial Officer of A&F) concluded that A&F’s disclosure controls and procedures were effective at a reasonable level of assurance as of ~~August 3,~~November 2, 2019, the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in internal control over financial reporting

There were no changes in A&F’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during A&F’s fiscal quarter ended ~~August 3,~~November 2, 2019 that materially affected, or are reasonably likely to materially affect, A&F’s internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

The Company is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business. The Company’s legal costs incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, and the Company establishes estimated liabilities for the outcome of litigation where losses are deemed probable and the amount of loss, or range of loss, is reasonably estimable. The Company also determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess of related accrued liabilities, if any, when it has determined that a loss is reasonably possible and it is able to determine such estimates. The Company’s accrued charges for certain legal contingencies are classified within accrued expenses on the Condensed Consolidated Balance Sheets included in “ITEM 1. FINANCIAL STATEMENTS (UNAUDITED),” of this Quarterly Report on Form 10-Q. In addition, the Company has not established accruals for certain claims and legal proceedings pending against the Company where it is not possible to reasonably estimate the outcome or potential liability, and cannot estimate a range of reasonably possible losses for these legal matters.

Actual liabilities may differ from the amounts recorded, due to uncertainties regarding final settlement agreement negotiations, court approvals and the terms of any approval by the courts, and there can be no assurance that final resolution of legal matters will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows. The Company’s assessment of the current exposure could change in the event of the discovery of additional facts.


ITEM 1A.	RISK FACTORS

The Company’s risk factors as of ~~August 3,~~November 2, 2019 have not changed materially from those disclosed in Part I, “ITEM 1A. RISK FACTORS” of A&F’s Annual Report on Form 10-K for Fiscal 2018.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no sales of equity securities during the ~~second~~third quarter of Fiscal 2019 that were not registered under the Securities Act of 1933, as amended.

The following table provides information regarding the purchase of shares of Common Stock of A&F made by or on behalf of A&F or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during each fiscal month of the thirteen weeks ended ~~August 3,~~November 2, 2019:

Period (Fiscal Month)
Total Number of Shares Purchased ⁽¹⁾
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾

Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs ⁽³⁾
May 5, 2019 through June 1, 2019 2,874
$ 25.64
—
3,571,938
June 2, 2019 through July 6, 2019 3,444,815
$ 16.26
3,440,417
5,131,521
July 7, 2019 through August 3, 2019 104,834
$ 17.91
104,414
5,027,107
Total 3,552,523
$ 16.32
3,544,831
5,027,107



Period (Fiscal Month)	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾	Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs ⁽³⁾
August 4, 2019 through August 31, 2019	1,967	$	15.77	—	5,027,107
September 1, 2019 through October 5, 2019	284,915	$	13.90	279,200	4,747,907
October 6, 2019 through November 2, 2019	136,745	$	14.05	132,461	4,615,446
Total	423,627	$	13.96	411,661	4,615,446


⁽¹⁾	~~7,692~~11,966 shares of A&F’s Common Stock purchased during the thirteen weeks ended ~~August 3,~~November 2, 2019 represented shares withheld for tax payments due upon the vesting of employee restricted stock units.

⁽²⁾

~~3,544,831~~Amounts represent shares of A&F’s Common Stock ~~were~~ repurchased during the thirteen weeks ended ~~August 3,~~November 2, 2019 pursuant to A&F’s publicly announced stock repurchase authorizations. On August 14, 2012, A&F’s Board of Directors authorized the repurchase of 10.0 million shares of A&F’s Common Stock, which was announced on August 15, 2012. On June 12, 2019, A&F’s Board of Directors authorized the repurchase of an additional 5.0 million shares of A&F’s Common Stock, which was announced on June 12, 2019. As of November 2, 2019, no shares remain available for repurchase under the August 14, 2012 repurchase authorization.


⁽³⁾	The number shown represents, as of the end of each period, the maximum number of shares of A&F’s Common Stock that may yet be purchased under A&F’s publicly announced stock repurchase authorizations described in footnote 2 above. The shares may be purchased, from time to time, depending on business and market conditions.

Table of Contents

ITEM 6. EXHIBITS



Exhibit No.	Document
3.1	Amended and Restated Certificate of Incorporation of Abercrombie & Fitch Co., reflecting amendments through the date of this Quarterly Report on Form 10-Q, incorporated herein by reference to Exhibit 3.2 to A&F’s Quarterly Report on Form 10-Q for the quarterly period ended July 30, 2011 (File No. 001-12107). [This document represents the Amended and Restated Certificate of Incorporation of Abercrombie & Fitch Co. in compiled form incorporating all amendments. This compiled document has not been filed with the Delaware Secretary of State.]
3.2	Amended and Restated Bylaws of Abercrombie & Fitch Co. reflecting amendments through the date of this Quarterly Report on Form 10-Q, incorporated herein by reference to Exhibit 3.10 to A&F’s Annual Report on Form 10-K for the fiscal year ended February 3, 2018 (File No. 001-12107). [This document represents the Amended and Restated Bylaws of Abercrombie & Fitch Co. in compiled form incorporating all amendments.]
~~10.1~~	Abercrombie & Fitch Co. 2016 Long-Term Incentive Plan for Associates (as amended effective June 12, 2019), incorporated herein by reference to Exhibit 10.1 to A&F’s Current Report on Form 8-K dated and filed on June 13, 2019 (File No. 001-12107).
~~10.2~~	Separation Agreement between Abercrombie & Fitch Management Co. and Joanne Crevoiserat, executed on June 12, 2019 by Abercrombie & Fitch Management Co. and by Joanne Crevoiserat, incorporated herein by reference to Exhibit 10.1 to A&F’s Current Report on Form 8-K dated and filed on June 18, 2019 (File No. 001-12107).
~~10.3~~	Executive Agreement entered into between Abercrombie & Fitch Management Co. and John Gabrielli, effective as of May 10, 2017, the date of execution by Abercrombie & Fitch Management Co.*
31.1	Certifications by Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certifications by Senior Vice President and Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certifications by Chief Executive Officer (who serves as Principal Executive Officer) and Senior Vice President and Chief Financial Officer (who serves as Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.*
101.SCH	Inline XBRL Taxonomy Extension Schema Document.*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.*
104	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).*


*	Filed herewith.


**	Furnished herewith.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	ABERCROMBIE & FITCH CO.
Date: ~~September~~December 11, 2019	By	/s/ Scott Lipesky
		Scott Lipesky
		Senior Vice President and Chief Financial Officer (Principal Financial Officer and Authorized Officer)