UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


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

For the quarterly period ended October ~~31, 2020~~30, 2021


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

For the transition period from to

Commission File Number 001-12107

Abercrombie & Fitch Co.

(Exact name of Registrant as specified in its charter)

Delaware

31-1469076

(State or other jurisdiction of incorporation or organization)

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

6301 Fitch Path,

New Albany,

Ohio

43054

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(614)

283-6500


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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.01 Par Value

ANF

New York Stock Exchange

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

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

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


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

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

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

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


Class A Common Stock						Shares outstanding as of December ~~2, 2020~~1, 2021
$0.01 Par Value						~~62,390,672~~56,493,566

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Abercrombie & Fitch Co.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Thousands, except per share amounts)

(Unaudited)


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended				Thirty-nine Weeks Ended
		October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019			October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Net sales	Net sales	$	819,653	$	863,472	$	2,003,340	$	2,438,522	Net sales	$	905,160	$	819,653	$	2,551,415	$	2,003,340
Cost of sales, exclusive of depreciation and amortization	Cost of sales, exclusive of depreciation and amortization	295,220		344,541		791,154		976,868		Cost of sales, exclusive of depreciation and amortization	328,916		295,220		916,552		791,154
Gross profit	Gross profit	524,433		518,931		1,212,186		1,461,654		Gross profit	576,244		524,433		1,634,863		1,212,186
Stores and distribution expense	Stores and distribution expense	346,263		377,697		978,757		1,110,656		Stores and distribution expense	351,804		346,263		994,347		978,757
Marketing, general and administrative expense	Marketing, general and administrative expense	121,000		114,075		326,509		341,716		Marketing, general and administrative expense	146,269		121,000		391,129		326,509
Flagship store exit (benefits) charges		(8,063)		285		(12,490)		47,023
Asset impairment, exclusive of flagship store exit charges		6,329		12,610		57,340		14,987
Other operating loss (income), net		288		(215)		(1,562)		(465)
Flagship store exit charges (benefits)										Flagship store exit charges (benefits)	11		(8,063)		(1,177)		(12,490)
Asset impairment										Asset impairment	6,749		6,329		10,199		57,340
Other operating (income) loss, net										Other operating (income) loss, net	(1,320)		288		(4,586)		(1,562)
Operating income (loss)	Operating income (loss)	58,616		14,479		(136,368)		(52,263)		Operating income (loss)	72,731		58,616		244,951		(136,368)
Interest expense, net	Interest expense, net	8,808		2,922		19,277		4,908		Interest expense, net	7,270		8,808		27,151		19,277
Income (loss) before income taxes	Income (loss) before income taxes	49,808		11,557		(155,645)		(57,171)		Income (loss) before income taxes	65,461		49,808		217,800		(155,645)
Income tax expense (benefit)		5,779		3,987		38,565		(16,931)
Income tax expense										Income tax expense	16,383		5,779		15,560		38,565
Net income (loss)	Net income (loss)	44,029		7,570		(194,210)		(40,240)		Net income (loss)	49,078		44,029		202,240		(194,210)
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	1,758		1,047		2,203		3,534		Less: Net income attributable to noncontrolling interests	1,845		1,758		4,739		2,203
Net income (loss) attributable to A&F	Net income (loss) attributable to A&F	$	42,271	$	6,523	$	(196,413)	$	(43,774)	Net income (loss) attributable to A&F	$	47,233	$	42,271	$	197,501	$	(196,413)

Net income (loss) per share attributable to A&F	Net income (loss) per share attributable to A&F									Net income (loss) per share attributable to A&F
Basic	Basic	$	0.68	$	0.10	$	(3.14)	$	(0.67)	Basic	$	0.80	$	0.68	$	3.24	$	(3.14)
Diluted	Diluted	$	0.66	$	0.10	$	(3.14)	$	(0.67)	Diluted	$	0.77	$	0.66	$	3.10	$	(3.14)

Weighted-average shares outstanding	Weighted-average shares outstanding									Weighted-average shares outstanding
Basic	Basic	62,558		63,099		62,541		64,932		Basic	58,796		62,558		60,879		62,541
Diluted	Diluted	63,877		63,911		62,541		64,932		Diluted	61,465		63,877		63,770		62,541

Other comprehensive (loss) income	Other comprehensive (loss) income									Other comprehensive (loss) income
Foreign currency translation, net of tax		$	2,142	$	1,355	$	5,477	$	(5,219)
Foreign currency translation										Foreign currency translation	$	(5,629)	$	2,142	$	(8,889)	$	5,477
Derivative financial instruments, net of tax	Derivative financial instruments, net of tax	(5,234)		(3,654)		1,224		(574)		Derivative financial instruments, net of tax	4,416		(5,234)		9,718		1,224
Other comprehensive (loss) income	Other comprehensive (loss) income	(3,092)		(2,299)		6,701		(5,793)		Other comprehensive (loss) income	(1,213)		(3,092)		829		6,701
Comprehensive income (loss)	Comprehensive income (loss)	40,937		5,271		(187,509)		(46,033)		Comprehensive income (loss)	47,865		40,937		203,069		(187,509)
Less: Comprehensive income attributable to noncontrolling interests	Less: Comprehensive income attributable to noncontrolling interests	1,758		1,047		2,203		3,534		Less: Comprehensive income attributable to noncontrolling interests	1,845		1,758		4,739		2,203
Comprehensive income (loss) attributable to A&F	Comprehensive income (loss) attributable to A&F	$	39,179	$	4,224	$	(189,712)	$	(49,567)	Comprehensive income (loss) attributable to A&F	$	46,020	$	39,179	$	198,330	$	(189,712)

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)


		October 31, 2020		February 1, 2020			October 30, 2021		January 30, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and equivalents	Cash and equivalents	$	812,881	$	671,267	Cash and equivalents	$	865,622	$	1,104,862
Receivables	Receivables	89,074		80,251		Receivables	83,447		83,857
Inventories	Inventories	545,548		434,326		Inventories	543,713		404,053
Other current assets	Other current assets	73,776		78,905		Other current assets	111,423		68,857
Total current assets	Total current assets	1,521,279		1,264,749		Total current assets	1,604,205		1,661,629
Property and equipment, net	Property and equipment, net	593,932		665,290		Property and equipment, net	516,176		550,587
Operating lease right-of-use assets	Operating lease right-of-use assets	955,781		1,230,954		Operating lease right-of-use assets	762,641		893,989
Other assets	Other assets	205,970		388,672		Other assets	229,512		208,697
Total assets	Total assets	$	3,276,962	$	3,549,665	Total assets	$	3,112,534	$	3,314,902
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	334,775	$	219,919	Accounts payable	$	424,560	$	289,396
Accrued expenses	Accrued expenses	356,370		302,214		Accrued expenses	355,149		396,365
Short-term portion of operating lease liabilities	Short-term portion of operating lease liabilities	255,775		282,829		Short-term portion of operating lease liabilities	209,812		248,846

Income taxes payable	Income taxes payable	6,663		10,392		Income taxes payable	39,900		24,792
Total current liabilities	Total current liabilities	953,583		815,354		Total current liabilities	1,029,421		959,399
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:
Long-term portion of operating lease liabilities	Long-term portion of operating lease liabilities	1,010,051		1,252,634		Long-term portion of operating lease liabilities	764,346		957,588
Long-term borrowings, net	Long-term borrowings, net	343,559		231,963		Long-term borrowings, net	303,247		343,910
Other liabilities	Other liabilities	110,965		178,536		Other liabilities	97,191		104,693
Total long-term liabilities	Total long-term liabilities	1,464,575		1,663,133		Total long-term liabilities	1,164,784		1,406,191
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity
Class A Common Stock - $0.01 par value: 150,000 shares authorized and 103,300 shares issued for all periods presented	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		Class A Common Stock - $0.01 par value: 150,000 shares authorized and 103,300 shares issued for all periods presented	1,033		1,033
Paid-in capital	Paid-in capital	396,505		404,983		Paid-in capital	406,305		401,283
Retained earnings	Retained earnings	2,067,521		2,313,745		Retained earnings	2,320,800		2,149,470
Accumulated other comprehensive loss, net of tax (“AOCL”)	Accumulated other comprehensive loss, net of tax (“AOCL”)	(102,185)		(108,886)		Accumulated other comprehensive loss, net of tax (“AOCL”)	(101,478)		(102,307)
Treasury stock, at average cost: 40,916 and 40,514 shares as of October 31, 2020 and February 1, 2020, respectively		(1,513,495)		(1,552,065)
Treasury stock, at average cost: 46,263 and 40,901 shares as of October 30, 2021 and January 30, 2021, respectively						Treasury stock, at average cost: 46,263 and 40,901 shares as of October 30, 2021 and January 30, 2021, respectively	(1,717,726)		(1,512,851)
Total Abercrombie & Fitch Co. stockholders’ equity	Total Abercrombie & Fitch Co. stockholders’ equity	849,379		1,058,810		Total Abercrombie & Fitch Co. stockholders’ equity	908,934		936,628
Noncontrolling interests	Noncontrolling interests	9,425		12,368		Noncontrolling interests	9,395		12,684
Total stockholders’ equity	Total stockholders’ equity	858,804		1,071,178		Total stockholders’ equity	918,329		949,312
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	3,276,962	$	3,549,665	Total liabilities and stockholders’ equity	$	3,112,534	$	3,314,902

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 October 30, 2021
																			Common Stock			Paid-in capital		Non-controlling interests		Retained earnings		AOCL		Treasury stock			Total stockholders’ equity
																			Shares outstanding	Par value										Shares	At average cost
Balance, July 31, 2021																		Balance, July 31, 2021	59,691	$	1,033	$	399,891	$	10,367	$	2,275,009	$	(100,265)	43,609	$	(1,619,102)	$	966,933
Net income																		Net income	—	—		—		1,845		47,233		—		—	—		49,078
Purchase of Common Stock																		Purchase of Common Stock	(2,692)	—		—		—		—		—		2,692	(100,000)		(100,000)
Share-based compensation issuances and exercises																		Share-based compensation issuances and exercises	38	—		(918)		—		(1,442)		—		(38)	1,376		(984)
Share-based compensation expense																		Share-based compensation expense	—	—		7,332		—		—		—		—	—		7,332
Derivative financial instruments, net of tax																		Derivative financial instruments, net of tax	—	—		—		—		—		4,416		—	—		4,416
Foreign currency translation adjustments, net of tax																		Foreign currency translation adjustments, net of tax	—	—		—		—		—		(5,629)		—	—		(5,629)
Distributions to noncontrolling interests, net																		Distributions to noncontrolling interests, net	—	—		—		(2,817)		—		—		—	—		(2,817)
Ending balance at October 30, 2021																		Ending balance at October 30, 2021	57,037	$	1,033	$	406,305	$	9,395	$	2,320,800	$	(101,478)	46,263	$	(1,717,726)	$	918,329

		Thirteen Weeks Ended October 31, 2020																	Thirteen Weeks Ended October 31, 2020
		Common Stock			Paid-in capital		Non-controlling interests		Retained earnings		AOCL		Treasury stock			Total stockholders’ equity			Common Stock			Paid-in capital		Non-controlling interests		Retained earnings		AOCL		Treasury stock			Total stockholders’ equity
		Shares outstanding	Par value										Shares	At average cost					Shares outstanding	Par value										Shares	At average cost
Balance, August 1, 2020	Balance, August 1, 2020	62,365	$	1,033	$	392,272	$	7,929	$	2,025,911	$	(99,093)	40,935	$	(1,514,442)	$	813,610	Balance, August 1, 2020	62,365	$	1,033	$	392,272	$	7,929	$	2,025,911	$	(99,093)	40,935	$	(1,514,442)	$	813,610
Net income	Net income	—	—		—		1,758		42,271		—		—	—		44,029		Net income	—	—		—		1,758		42,271		—		—	—		44,029

Share-based compensation issuances and exercises	Share-based compensation issuances and exercises	19	—		(436)		—		(661)		—		(19)	947		(150)		Share-based compensation issuances and exercises	19	—		(436)		—		(661)		—		(19)	947		(150)
Share-based compensation expense	Share-based compensation expense	—	—		4,669		—		—		—		—	—		4,669		Share-based compensation expense	—	—		4,669		—		—		—		—	—		4,669
Derivative financial instruments, net of tax	Derivative financial instruments, net of tax	—	—		—		—		—		(5,234)		—	—		(5,234)		Derivative financial instruments, net of tax	—	—		—		—		—		(5,234)		—	—		(5,234)
Foreign currency translation adjustments, net of tax	Foreign currency translation adjustments, net of tax	—	—		—		—		—		2,142		—	—		2,142		Foreign currency translation adjustments, net of tax	—	—		—		—		—		2,142		—	—		2,142
Distributions to noncontrolling interests, net	Distributions to noncontrolling interests, net	—	—		—		(262)		—		—		—	—		(262)		Distributions to noncontrolling interests, net	—	—		—		(262)		—		—		—	—		(262)
Ending balance at October 31, 2020	Ending balance at October 31, 2020	62,384	$	1,033	$	396,505	$	9,425	$	2,067,521	$	(102,185)	40,916	$	(1,513,495)	$	858,804	Ending balance at October 31, 2020	62,384	$	1,033	$	396,505	$	9,425	$	2,067,521	$	(102,185)	40,916	$	(1,513,495)	$	858,804

		Thirteen Weeks Ended November 2, 2019
		Common Stock			Paid-in capital		Non-controlling interests		Retained earnings		AOCL		Treasury stock			Total stockholders’ equity
		Shares outstanding	Par value										Shares	At average cost
Balance, 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)		—	—		—		—		(12,574)		—		—	—		(12,574)
Share-based compensation issuances and exercises		23	—		(509)		—		(831)		—		(23)	1,159		(181)
Share-based compensation expense		—	—		5,796		—		—		—		—	—		5,796
Derivative financial instruments, net of tax		—	—		—		—		—		(3,654)		—	—		(3,654)
Foreign currency translation adjustments, net of tax		—	—		—		—		—		1,355		—	—		1,355
Distributions to noncontrolling interests, net		—	—		—		(1,511)		—		—		—	—		(1,511)
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

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)


																			Thirty-nine Weeks Ended October 30, 2021
																			Common Stock			Paid-in capital		Non-controlling interests		Retained earnings		AOCL		Treasury stock			Total stockholders’ equity
																			Shares outstanding	Par value										Shares	At average cost
Balance, January 30, 2021																		Balance, January 30, 2021	62,399	$	1,033	$	401,283	$	12,684	$	2,149,470	$	(102,307)	40,901	$	(1,512,851)	$	949,312
Net income																		Net income	—	—		—		4,739		197,501		—		—	—		202,240
Purchase of Common Stock																		Purchase of Common Stock	(6,143)	—		—		—		—		—		6,143	(235,249)		(235,249)
Share-based compensation issuances and exercises																		Share-based compensation issuances and exercises	781	—		(17,247)		—		(26,171)		—		(781)	30,374		(13,044)
Share-based compensation expense																		Share-based compensation expense	—	—		22,269		—		—		—		—	—		22,269
Derivative financial instruments, net of tax																		Derivative financial instruments, net of tax	—	—		—		—		—		9,718		—	—		9,718
Foreign currency translation adjustments, net of tax																		Foreign currency translation adjustments, net of tax	—	—		—		—		—		(8,889)		—	—		(8,889)
Distributions to noncontrolling interests, net																		Distributions to noncontrolling interests, net	—	—		—		(8,028)		—		—		—	—		(8,028)
Ending balance at October 30, 2021																		Ending balance at October 30, 2021	57,037	$	1,033	$	406,305	$	9,395	$	2,320,800	$	(101,478)	46,263	$	(1,717,726)	$	918,329

		Thirty-nine Weeks Ended October 31, 2020																	Thirty-nine Weeks Ended October 31, 2020
		Common Stock			Paid-in capital		Non-controlling interests		Retained earnings		AOCL		Treasury stock			Total stockholders’ equity			Common Stock			Paid-in capital		Non-controlling interests		Retained earnings		AOCL		Treasury stock			Total stockholders’ equity
		Shares outstanding	Par value										Shares	At average cost					Shares outstanding	Par value										Shares	At average cost
Balance, February 1, 2020	Balance, February 1, 2020	62,786	$	1,033	$	404,983	$	12,368	$	2,313,745	$	(108,886)	40,514	$	(1,552,065)	$	1,071,178	Balance, February 1, 2020	62,786	$	1,033	$	404,983	$	12,368	$	2,313,745	$	(108,886)	40,514	$	(1,552,065)	$	1,071,178
Net loss		—	—		—		2,203		(196,413)		—		—	—		(194,210)
Net income (loss)																		Net income (loss)	—	—		—		2,203		(196,413)		—		—	—		(194,210)
Purchase of Common Stock	Purchase of Common Stock	(1,397)	—		—		—		—		—		1,397	(15,172)		(15,172)		Purchase of Common Stock	(1,397)	—		—		—		—		—		1,397	(15,172)		(15,172)
Dividends ($0.20 per share)	Dividends ($0.20 per share)	—	—		—		—		(12,556)		—		—	—		(12,556)		Dividends ($0.20 per share)	—	—		—		—		(12,556)		—		—	—		(12,556)
Share-based compensation issuances and exercises	Share-based compensation issuances and exercises	995	—		(22,053)		—		(37,255)		—		(995)	53,742		(5,566)		Share-based compensation issuances and exercises	995	—		(22,053)		—		(37,255)		—		(995)	53,742		(5,566)
Share-based compensation expense	Share-based compensation expense	—	—		13,575		—		—		—		—	—		13,575		Share-based compensation expense	—	—		13,575		—		—		—		—	—		13,575
Derivative financial instruments, net of tax	Derivative financial instruments, net of tax	—	—		—		—		—		1,224		—	—		1,224		Derivative financial instruments, net of tax	—	—		—		—		—		1,224		—	—		1,224
Foreign currency translation adjustments, net of tax	Foreign currency translation adjustments, net of tax	—	—		—		—		—		5,477		—	—		5,477		Foreign currency translation adjustments, net of tax	—	—		—		—		—		5,477		—	—		5,477
Distributions to noncontrolling interests, net	Distributions to noncontrolling interests, net	—	—		—		(5,146)		—		—		—	—		(5,146)		Distributions to noncontrolling interests, net	—	—		—		(5,146)		—		—		—	—		(5,146)
Ending balance at October 31, 2020	Ending balance at October 31, 2020	62,384	$	1,033	$	396,505	$	9,425	$	2,067,521	$	(102,185)	40,916	$	(1,513,495)	$	858,804	Ending balance at October 31, 2020	62,384	$	1,033	$	396,505	$	9,425	$	2,067,521	$	(102,185)	40,916	$	(1,513,495)	$	858,804

		Thirty-nine Weeks Ended November 2, 2019
		Common Stock			Paid-in capital		Non-controlling interests		Retained earnings		AOCL		Treasury stock			Total stockholders’ equity
		Shares outstanding	Par value										Shares	At average cost
Balance, February 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		—	—		—		—		(75,165)		—		—	—		(75,165)
Net loss		—	—		—		3,534		(43,774)		—		—	—		(40,240)
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		487	—		(13,862)		—		(16,496)		—		(487)	23,739		(6,619)
Share-based compensation expense		—	—		8,464		—		—		—		—	—		8,464
Derivative financial instruments, net of tax		—	—		—		—		—		(574)		—	—		(574)
Foreign currency translation adjustments, net of tax		—	—		—		—		—		(5,219)		—	—		(5,219)
Distributions to noncontrolling interests, net		—	—		—		(2,401)		—		—		—	—		(2,401)
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

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

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Abercrombie & Fitch Co.

Condensed Consolidated Statements of Cash Flows

(Thousands)

(Unaudited)


							Thirty-nine Weeks Ended
		Thirty-nine Weeks Ended							As Restated
		October 31, 2020		November 2, 2019			October 30, 2021		October 31, 2020
Operating activities	Operating activities					Operating activities
Net loss		$	(194,210)	$	(40,240)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Net income (loss)						Net income (loss)	$	202,240	$	(194,210)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:						Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	127,248		124,910		Depreciation and amortization	107,787		127,248
Asset impairment	Asset impairment	57,340		18,216		Asset impairment	10,199		57,340
Loss on disposal	Loss on disposal	7,586		5,326		Loss on disposal	3,500		7,586
Provision for (benefit from) deferred income taxes		27,432		(20,631)
(Benefit) provision for deferred income taxes						(Benefit) provision for deferred income taxes	(32,931)		27,432
Share-based compensation	Share-based compensation	13,575		8,464		Share-based compensation	22,269		13,575
Loss on extinguishment of debt						Loss on extinguishment of debt	5,347		—
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Inventories	Inventories	(109,665)		(154,791)		Inventories	(140,393)		(109,665)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	186,806		34,752		Accounts payable and accrued expenses	81,793		186,806
Operating lease right-of-use assets and liabilities	Operating lease right-of-use assets and liabilities	(41,976)		42,990		Operating lease right-of-use assets and liabilities	(105,046)		(41,976)
Income taxes	Income taxes	(7,168)		(2,264)		Income taxes	15,061		(7,168)
Other assets	Other assets	30,403		(47,138)		Other assets	(34,884)		30,403
Withdrawal of funds from Rabbi Trust assets		50,000		0
Other liabilities	Other liabilities	11,523		(3,433)		Other liabilities	(3,655)		11,523
Net cash provided by (used for) operating activities		158,894		(33,839)
Net cash provided by operating activities						Net cash provided by operating activities	131,287		108,894
Investing activities	Investing activities					Investing activities
Purchases of property and equipment	Purchases of property and equipment	(91,748)		(154,373)		Purchases of property and equipment	(62,223)		(91,748)
Withdrawal of funds from Rabbi Trust assets						Withdrawal of funds from Rabbi Trust assets	—		50,000
Net cash used for investing activities	Net cash used for investing activities	(91,748)		(154,373)		Net cash used for investing activities	(62,223)		(41,748)
Financing activities	Financing activities					Financing activities
Proceeds from issuance of senior secured notes	Proceeds from issuance of senior secured notes	350,000		0		Proceeds from issuance of senior secured notes	—		350,000
Purchase of senior secured notes						Purchase of senior secured notes	(46,969)		—
Proceeds from borrowings under the senior secured asset-based revolving credit facility	Proceeds from borrowings under the senior secured asset-based revolving credit facility	210,000		0		Proceeds from borrowings under the senior secured asset-based revolving credit facility	—		210,000
Repayment of borrowings under the term loan facility	Repayment of borrowings under the term loan facility	(233,250)		(10,000)		Repayment of borrowings under the term loan facility	—		(233,250)
Repayment of borrowings under the senior secured asset-based revolving credit facility		(210,000)		0
Payment of debt issuance costs and fees		(7,151)		0
Repayment of borrowings under the senior secures asset-based revolving credit facility						Repayment of borrowings under the senior secures asset-based revolving credit facility	—		(210,000)
Payment of debt issuance or modification costs and fees						Payment of debt issuance or modification costs and fees	(2,016)		(7,151)
Purchases of Common Stock	Purchases of Common Stock	(15,172)		(63,542)		Purchases of Common Stock	(235,249)		(15,172)
Dividends paid	Dividends paid	(12,556)		(38,959)		Dividends paid	—		(12,556)
Other financing activities	Other financing activities	(11,742)		(10,407)		Other financing activities	(20,124)		(11,742)
Net cash provided by (used for) financing activities		70,129		(122,908)
Net cash (used for) provided by financing activities						Net cash (used for) provided by financing activities	(304,358)		70,129
Effect of foreign currency exchange rates on cash	Effect of foreign currency exchange rates on cash	2,269		(2,686)		Effect of foreign currency exchange rates on cash	(8,560)		2,269
Net increase (decrease) in cash and equivalents, and restricted cash and equivalents		139,544		(313,806)
Net (decrease) increase in cash and equivalents, and restricted cash and equivalents						Net (decrease) increase in cash and equivalents, and restricted cash and equivalents	(243,854)		139,544
Cash and equivalents, and restricted cash and equivalents, beginning of period	Cash and equivalents, and restricted cash and equivalents, beginning of period	692,264		745,829		Cash and equivalents, and restricted cash and equivalents, beginning of period	1,124,157		692,264
Cash and equivalents, and restricted cash and equivalents, end of period	Cash and equivalents, and restricted cash and equivalents, end of period	$	831,808	$	432,023	Cash and equivalents, and restricted cash and equivalents, end of period	$	880,303	$	831,808
Supplemental information related to non-cash activities	Supplemental information related to non-cash activities					Supplemental information related to non-cash activities
Purchases of property and equipment not yet paid at end of period	Purchases of property and equipment not yet paid at end of period	$	26,554	$	36,951	Purchases of property and equipment not yet paid at end of period	$	31,561	$	26,554
Operating lease right-of-use assets additions, net of terminations, impairments and other reductions	Operating lease right-of-use assets additions, net of terminations, impairments and other reductions	$	(41,305)	$	293,281	Operating lease right-of-use assets additions, net of terminations, impairments and other reductions	$	26,473	$	(41,305)
Supplemental information related to cash activities	Supplemental information related to cash activities					Supplemental information related to cash activities
Cash paid for interest	Cash paid for interest	$	9,182	$	12,022	Cash paid for interest	$	14,950	$	9,182
Cash paid for income taxes	Cash paid for income taxes	$	10,412	$	18,697	Cash paid for income taxes	$	39,081	$	10,412
Cash received from income tax refunds	Cash received from income tax refunds	$	4,001	$	8,570	Cash received from income tax refunds	$	1,240	$	4,001
Cash paid for amounts included in measurement of operating lease liabilities		$	224,827	$	311,275
Cash paid for amounts included in measurement of operating lease liabilities, net of abatements						Cash paid for amounts included in measurement of operating lease liabilities, net of abatements	$	312,854	$	224,827

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

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Abercrombie & Fitch Co.

Index for Notes to Condensed Consolidated Financial Statements (Unaudited)


		Page No.
Note 1.	NATURE OF BUSINESS	9
Note 2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	9
Note 3.	IMPACT OF COVID-19	1011
Note 4.	REVENUE RECOGNITION	12
Note 5.	NET INCOME (LOSS) PER SHARE	12
Note 6.	FAIR VALUE	1312
Note 7.	PROPERTY AND EQUIPMENT, NET	14
Note 8.	LEASES	14
Note 9.	ASSET IMPAIRMENT	15
Note 10.	~~RABBI TRUST ASSETS~~INCOME TAXES	15
Note 11.	~~INCOME TAXES~~BORROWINGS	16
Note 12.	~~BORROWINGS~~SHARE-BASED COMPENSATION	1617
Note 13.	~~SHARE-BASED COMPENSATION~~DERIVATIVE INSTRUMENTS	1819
Note 14.	~~DERIVATIVE INSTRUMENTS~~ACCUMULATED OTHER COMPREHENSIVE LOSS	2021
Note 15.	~~ACCUMULATED OTHER COMPREHENSIVE LOSS~~SEGMENT REPORTING	22
Note 16.	~~SEGMENT REPORTING~~FLAGSHIP STORE EXIT CHARGES (BENEFITS)	23
Note 17.	~~FLAGSHIP STORE EXIT (BENEFITS) CHARGES~~SUBSEQUENT EVENTS	2423

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Abercrombie & Fitch Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. NATURE OF BUSINESS

Abercrombie & Fitch Co. (“A&F”), a company incorporated in Delaware in 1996, through its subsidiaries (collectively, A&F and its subsidiaries are referred to as “Abercrombie & Fitch” or the “Company”), is a global, ~~multi-brand~~digitally-led omnichannel ~~specialty retailer, whose products are sold primarily through its Company-owned store and digital channels, as well as through various third-party wholesale, franchise and licensing arrangements.~~retailer. The Company offers a broad assortment of apparel, personal care products and accessories for men, women and kids, ~~under~~which are sold primarily through its digital channels and Company-owned stores, as well as through various third-party arrangements. The Company’s two brand-based operating segments are Hollister, which includes the Company’s Hollister, Gilly Hicks and Social Tourist brands, and Abercrombie, which includes the Company’s Abercrombie & Fitch and abercrombie kids brands. ~~The~~These five 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 operates primarily ~~has operations~~ in North America, Europe and ~~Asia, among other regions.~~Asia.

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

Fiscal year

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

Fiscal year

Year ~~ended~~ended/ ending

Number of weeks

Fiscal 2019

February 1, 2020

Fiscal 2020

January 30, 2021

Fiscal 2021

January 29, 2022

Interim financial statements

The Condensed Consolidated Financial Statements as of October ~~31, 2020,~~30, 2021, and for the thirteen and thirty-nineweek periods ended October 30, 2021 and October 31, 2020, ~~and November 2, 2019,~~ are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). for interim consolidated financial statements. Accordingly, the Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto contained in A&F’s Annual Report on Form 10-K for Fiscal ~~2019~~2020 filed with the SEC on March ~~31, 2020.~~29, 2021. The ~~February 1, 2020~~January 30, 2021 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 ~~2020.~~2021.

Use of estimates

The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

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statements and the reported amounts of net sales and expenses during the reporting period. Due to the inherent uncertainty involved with estimates, actual results may differ. The extent to which the current outbreak of coronavirus disease (“COVID-19”) ~~impacts~~continues to impact the Company’s business and financial results will depend on numerous evolving factors including, but not limited to: the ~~magnitude~~duration and ~~duration~~spread of COVID-19 and the ~~COVID-19 pandemic~~emergence of new variants, such as the Delta and ~~its~~Omicron variants, of coronavirus, the availability and acceptance of effective vaccines, boosters or medical treatments, the impact of COVID-19 on the length or frequency of store closures, and the extent to

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which COVID-19 ~~will impact~~impacts worldwide macroeconomic conditions including interest rates, the speed of the economic recovery, and governmental, business and consumer reactions to the pandemic. The Company’s assessment of these, as well as other factors, could impact management's estimates and result in material impacts to the Company’s consolidated financial statements in future reporting periods.

Recent accounting pronouncements

The Company reviews recent accounting pronouncements on a quarterly basis and has excluded discussion of those not applicable to the Company and those that did not have, or are not expected to have, a material impact on the Company’s consolidated financial statements.

Restatement of previously issued financial information

As previously disclosed within “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Fiscal 2020 Form 10-K, a classification error was identified within the Company’s Condensed Consolidated Statements of Cash Flows in the Condensed Consolidated Financial Statements as of and for the periods ended May 2, 2020, August 1, 2020, and October 31, 2020, related to the presentation of the withdrawal of excess funds from the Company’s Rabbi Trust that occurred during the fiscal quarter ended May 2, 2020. This withdrawal of $50.0 million was originally presented incorrectly as a cash inflow from operating activities, rather than as a cash inflow from investing activities. The effects of the classification error on the Condensed Consolidated Statement of Cash Flows were disclosed in “Note 21. Correction of Error in Previously Reported Interim Financial Statements (Unaudited)” of the Notes to Consolidated Financial Statements included within “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’’s Fiscal 2020 Form 10-K. The effects of the classification error on the Condensed Consolidated Statement of Cash Flows for the thirty-nine weeks ended October 31, 2020 is shown in the table below.


	Thirty-nine Weeks Ended
	As Originally Reported				As Restated
(in thousands)	October 31, 2020		Adjustment		October 31, 2020
Net cash provided by operating activities	$	158,894	$	(50,000)	$	108,894
Net cash used for investing activities	$	(91,748)	$	50,000	$	(41,748)
Net cash provided by financing activities	$	70,129	—		$	70,129
Effect of foreign currency exchange rates on cash	$	2,269	—		$	2,269
Net increase in cash and equivalents, and restricted cash and equivalents	$	139,544	—		$	139,544
Cash and equivalents, and restricted cash and equivalents, beginning of period	$	692,264	—		$	692,264
Cash and equivalents, and restricted cash and equivalents, end of period	$	831,808	—		$	831,808

The Company’s Condensed Consolidated Statement of Cash Flows for the thirty-nine weeks ended October 31, 2020 included within this Quarterly Report on Form 10-Q has been restated to reflect the correction of this error.

Condensed Consolidated Statements of Cash Flows reconciliation

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


(in thousands)	(in thousands)	Location	October 31, 2020		February 1, 2020		November 2, 2019		February 2, 2019		(in thousands)	Location	October 30, 2021		January 30, 2021		October 31, 2020		February 1, 2020
Cash and equivalents	Cash and equivalents	Cash and equivalents	$	812,881	$	671,267	$	410,775	$	723,135	Cash and equivalents	Cash and equivalents	$	865,622	$	1,104,862	$	812,881	$	671,267
Long-term restricted cash and equivalents	Long-term restricted cash and equivalents	Other assets	14,633		18,696		18,698		22,694		Long-term restricted cash and equivalents	Other assets	11,401		14,814		14,633		18,696
Short-term restricted cash and equivalents	Short-term restricted cash and equivalents	Other current assets	4,294		2,301		2,550		0		Short-term restricted cash and equivalents	Other current assets	3,280		4,481		4,294		2,301
Cash and equivalents and restricted cash and equivalents	Cash and equivalents and restricted cash and equivalents		$	831,808	$	692,264	$	432,023	$	745,829	Cash and equivalents and restricted cash and equivalents		$	880,303	$	1,124,157	$	831,808	$	692,264

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3. IMPACT OF COVID-19

~~Recent developments~~

In March 2020, the COVID-19 outbreak was declared to be a global pandemic by the World Health Organization. In response to COVID-19, certain governments imposed travel restrictions and local statutory quarantines and the Company experienced widespread temporary store closures. The Company has seen, and may continue to see, material adverse impacts as a result of COVID-19. The extent of future impacts of COVID-19 on the Company’s business, including the duration and impact on overall customer demand, are uncertain as current circumstances are dynamic and depend on future developments, including, but not limited to, the duration and spread of ~~COVID- 19~~COVID-19, the emergence of new variants of coronavirus, such as the Delta and Omicron variants, and the availability and acceptance of an effective ~~vaccine~~vaccines, boosters or medical treatments.

~~In January~~During the thirteen and thirty-nine weeks ended October 31, 2020, the Company ~~began~~experienced a material adverse impact to ~~experience business disruptions in the Asia-Pacific (“APAC”) region~~net sales across brands and regions as a result of ~~COVID-19. In February 2020,~~widespread temporary store closures in response to COVID-19, which was not offset by year-over-year digital sales growth. During the ~~situation escalated as~~thirteen and thirty-nine weeks ended October 30, 2021, the ~~scope~~vast majority of Company-operated stores were fully open for in-store service. As of October 30, 2021, there were no COVID-19 ~~worsened beyond the APAC region, with the United States (the “U.S.”) and~~related store closures of Company-operated stores, although additional temporary store closures have subsequently been mandated in certain parts of the Europe, Middle East and Africa (“EMEA”) region experiencing significant outbreaks. In March 2020, the COVID-19 outbreak was declared to be a global pandemic by the World Health Organization. In response to COVID-19, certain governments have imposed travel restrictions and local statutory quarantines and the Company has recommended associates who are able to perform their role remotely continue to do so. The Company is reacting to COVID-19 on a daily basis, including by conforming to local government guidance and monitoring developments in government legislation or other government actions in response to ~~the COVID-19 outbreak. The Company has also implemented a range of precautionary health and safety measures with the well-being of the Company’s customers, associates and business partners in mind.~~

As a result of COVID-19, in January 2020, the Company temporarily closed the majority of its stores in the APAC region and in March 2020, the Company temporarily closed its stores across brands in North America and the EMEA region. The majority of APAC stores were reopened during March 2020, and the Company began to reopen stores in North America and the EMEA region on a rolling basis in late April 2020. As of October 31, 2020, approximately 97% of Company-operated stores had reopened for in-store service, although many with modified operating hours. The Company plans to follow the guidance of local governments to determine when it can reopen stores that have been closed due to COVID-19 and to evaluate whether further store closures will be necessary.

~~The Company’s digital operations across brands have continued to serve the Company’s customers during this unprecedented period~~COVID-19. During periods of temporary store closures, as the Company’s distribution centers implemented enhanced cleaning and social distancing measures in order to remain operational. In response to elevated digital demand during this period, the Company has increased its omnichannel capabilities by continuing to offer Purchase-Online-Pickup-in-Store, including curbside pick-up at a majority of U.S. locations, and by utilizing ship-from-store capabilities. In addition, to prepare for the Fiscal 2020 holiday season, the Company has entered into a short-term lease for an additional distribution center and has partnered with incremental carriers.

~~Impact of COVID-19~~

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as compared to the comparable periods ended November 2, 2019, respectively. The year-over-year decrease in total net sales was primarily driven by temporary widespread store closures and a decline in traffic as compared to the previous year as a result of COVID-19. The year-over-year decline in store sales was partially offset by digital sales growth of approximately 43% and 42% for the thirteen and thirty-nine weeks ended October 31, 2020 as compared to the comparable periods ended November 2, 2019, respectively.

Primarily as a result of COVID-19 and the temporary closure of the Company’s stores, the Company recognized $14.8 million of charges to reduce the carrying value of inventory in cost of sales, exclusive of depreciation and amortization on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) during the thirteen weeks ended May 2, 2020.

~~During the thirty-nine weeks ended October 31, 2020,~~ reductions in revenue have not been offset by proportional decreases in expense, as the Company ~~continued~~continues to incur store occupancy costs such as operating lease costs, net of rent abatements agreed upon during the period, depreciation expense, and certain other costs such as compensation, net of government payroll relief, and administrative expenses resulting in a negative effect on the relationship between the Company’s costs and revenues.

During ~~this period,~~the thirteen weeks ended May 2, 2020, the Company recognized $14.8 million of charges to reduce the carrying value of inventory, primarily as a result of COVID-19 and the temporary closure of the Company’s stores, in cost of sales, exclusive of depreciation and amortization on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Further negative developments in the COVID-19 pandemic could result in additional charges to reduce the carrying value of inventory.

As a result of COVID-19, the Company has suspended certain rent payments for ~~a significant number~~periods of ~~stores that were closed,~~store closures, and continues to engage with its landlords to find a mutually beneficial and agreeable path forward. ~~The~~As of October 30, 2021 and January 30, 2021, the Company ~~has elected~~had $16.5 million and $24.2 million, respectively, related to account for all qualifying lease concessions, those that are a direct consequence of COVID-19 and that result in revised lease consideration that is substantially the same or less than the original consideration, as if the enforceable rights and obligations associated with the concession existed in the original lease agreement. Rent abatements associated with such concessions are recognized in variable lease cost. Lease concessions granted as part of an agreement that substantially increases the total consideration as a result of the inclusion of additional terms, such assuspended rent payments ~~associated with a lease term extension, are treated as lease modifications. For stores where the Company suspended payments, the Company reclassified related amounts from operating lease liability to~~classified within accrued expenses ~~in the period during which rent was due, while continuing to recognize operating lease cost in~~on the Condensed Consolidated ~~Statement~~Balance Sheets. The Company obtained rent abatements of ~~Operations~~$1.7 million and ~~Comprehensive Income (Loss).~~

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which among other things, provides refundable employee retention tax credits for wages paid to employees who are unable to work$14.6 million, respectively, during the ~~COVID-19 outbreak~~thirteen and ~~the deferral of the employer–paid portion of social security taxes. Similar relief programs have also been established throughout the EMEA~~thirty-nine weeks ended October 30, 2021, and ~~APAC regions. Based on the Company's evaluation of the CARES Act~~$1.9 million and ~~legislation across regions, the Company qualifies for certain payroll tax credits, and such government subsidies have been treated as offsets to the related operating expenses when recognized. During~~$18.9 million, respectively, during the thirteen and thirty-nine weeks ended October 31, 2020. All of the benefits related to these abatements were recognized within variable lease cost during the applicable periods.

During the thirteen weeks ended October 30, 2021 and October 31, 2020, the Company recognized qualified ~~payroll tax~~payroll-related credits reducing payroll expenses by approximately $0.6 million and $2.8 million, respectively, in the Condensed Consolidated Statements of Operations and Comprehensive Income. During the thirty-nine weeks ended October 30, 2021 and October 31, 2020, the Company recognized qualified payroll-related credits reducing payroll expenses by approximately $5.4 million and $14.7 million, respectively, in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). There are also instances where governments have provided wage subsidies through direct payments to the Company’s associates. In these instances, no benefits are recognized on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), but the Company does see a reduction in expense incurred. The Company also intends to continue to defer qualified payroll and other tax payments as permitted by ~~the CARES Act~~applicable government laws and ~~other regional legislation.~~regulations.

The Company ~~also~~has recognized asset impairment charges related to the Company’s operating lease right-of-use assets and property and equipment, ~~of $6.3 million and $57.3 million during the thirteen and thirty-nine weeks ended October 31, 2020, respectively,~~ which ~~were~~are principally the result of the impact of COVID-19 on store cash flows. Refer to Note 9, “ASSET IMPAIRMENT,” for additional information.

~~In addition, the~~The Company has also experienced other material impacts as a result of COVID-19, such as deferred tax valuation allowances and other tax ~~charges during the thirty-nine weeks ended October 31, 2020, adversely impacting results by $77.4 million.~~charges. Refer to Note ~~11,~~10, “INCOME TAXES,” for additional information.

~~Balance sheet, cash flow and liquidity~~

During the thirty-nine weeks ended October 31, 2020, the Company has taken various actions to preserve liquidity and manage cash flows in order to best position the business for key stakeholders, including (i) partnering with merchandise and non-merchandise vendors in regards to payment terms; (ii) tightly managing inventory receipts to align inventory with expected market demand; (iii) significantly reducing expenses to better align operating costs with sales; and (iv) temporarily suspending its share repurchase program inIn March 2020, ~~and its dividend program~~ in ~~May 2020. In addition, despite~~an effort to improve the Company's recent history of partnering with its vendors regarding payment terms, certain payment term extensions were temporary and certain previously deferred payments have since been made. There can be no assurance that the Company will be able to maintain extended payment terms or continue to defer payments, which may result in incremental operatingCompany’s then near-term cash ~~outflows in future periods.~~

Asposition as a precautionary measure in response to COVID-19, ~~in March 2020,~~ the Company borrowed $210.0 million under its senior secured asset-based revolving credit facility (the “ABL Facility”) ~~to improve its near-term cash position~~ and withdrew the majority of excess funds from the overfunded Rabbi Trust assets, providing the Company with $50.0 million of additional cash. In July 2020, the Company took additional actions to preserve liquidity in light of the continued global uncertainty then presented by COVID-19, and completed a private offering of $350.0 million aggregate principal amount of senior secured notes (the “Senior Secured Notes”) ~~and~~. The Company used the net proceeds of such offering to repay all outstanding borrowings under the Company’s term loan facility (the “Term Loan Facility”), to repay a portion of the outstanding borrowings under the ABL Facility and to pay fees and expenses in connection with such repayments and the offering. ~~Refer to Note 12, “BORROWINGS,” and Note 10, “~~ ~~RABBI TRUST ASSETS,” for additional information.~~

As of October 31, 2020, the Company had liquidity of $1.158 billion as compared to $913.8 million as of February 1, 2020, comprised of cash and equivalents and actual incremental borrowing available to the Company under the ABL Facility.

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4. REVENUE RECOGNITION

Disaggregation of revenue

All revenues are recognized in net sales in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). For information regarding the disaggregation of revenue, refer to Note ~~16,~~15, “SEGMENT REPORTING.”

Contract liabilities

The following table details certain contract liabilities representing unearned revenue as of October 30, 2021, January 30, 2021, October 31, 2020 and February 1, ~~2020, November 2, 2019 and February 2, 2019:~~2020:


(in thousands)	(in thousands)	October 31, 2020		February 1, 2020		November 2, 2019		February 2, 2019		(in thousands)	October 30, 2021		January 30, 2021		October 31, 2020		February 1, 2020
Gift card liability	Gift card liability	$	22,910	$	28,844	$	19,855	$	26,062	Gift card liability	$	30,815	$	28,561	$	22,910	$	28,844
Loyalty program liability	Loyalty program liability	$	19,640	$	23,051	$	21,396	$	19,904	Loyalty program liability	$	21,964	$	20,426	$	19,640	$	23,051

The following table details recognized revenue associated with the Company’s gift card program and loyalty programs for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, ~~2020 and November 2, 2019:~~2020:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	(in thousands)	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019		(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Revenue associated with gift card redemptions and gift card breakage	Revenue associated with gift card redemptions and gift card breakage	$	11,717	$	12,653	$	32,792	$	40,729	Revenue associated with gift card redemptions and gift card breakage	$	17,801	$	11,717	$	51,310	$	32,792
Revenue associated with reward redemptions and breakage related to the Company’s loyalty programs	Revenue associated with reward redemptions and breakage related to the Company’s loyalty programs	$	9,686	$	9,249	$	23,377	$	23,795	Revenue associated with reward redemptions and breakage related to the Company’s loyalty programs	$	12,075	$	9,686	$	31,525	$	23,377

5. NET INCOME (LOSS) PER SHARE

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

Thirteen Weeks Ended Thirty-nine Weeks Ended
(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019
Shares of Common Stock issued 103,300 103,300 103,300 103,300
Weighted-average treasury shares (40,742) (40,201) (40,759) (38,368)
Weighted-average — basic shares 62,558 63,099 62,541 64,932
Dilutive effect of share-based compensation awards 1,319 812 0 0
Weighted-average — diluted shares 63,877 63,911 62,541 64,932
Anti-dilutive shares (1)
1,828 2,912 1,988 1,572


	Thirteen Weeks Ended		Thirty-nine Weeks Ended
(in thousands)	October 30, 2021	October 31, 2020	October 30, 2021	October 31, 2020
Shares of Common Stock issued	103,300	103,300	103,300	103,300
Weighted-average treasury shares	(44,504)	(40,742)	(42,421)	(40,759)
Weighted-average — basic shares	58,796	62,558	60,879	62,541
Dilutive effect of share-based compensation awards	2,669	1,319	2,891	—
Weighted-average — diluted shares	61,465	63,877	63,770	62,541
Anti-dilutive shares (1)	1,228	1,828	1,212	1,988

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

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6. 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.

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The three levels of the hierarchy and the distribution of the Company’s assets and liabilities that ~~are~~were measured at fair value on a recurring basis, as of October ~~31, 2020~~30, 2021 and ~~February 1, 2020~~January 30, 2021, were as follows:


		Assets at Fair Value as of October 31, 2020									Assets and Liabilities at Fair Value as of October 30, 2021
(in thousands)	(in thousands)	Level 1		Level 2		Level 3		Total		(in thousands)	Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Cash equivalents (1)	Cash equivalents (1)	$	68,271	$	43,596	$	0	$	111,867	Cash equivalents (1)	$	42,307	$	46,622	$	—	$	88,929
Derivative instruments (2)	Derivative instruments (2)	0		461		0		461		Derivative instruments (2)	—		5,082		—		5,082
Rabbi Trust assets (3)	Rabbi Trust assets (3)	1		60,418		0		60,419		Rabbi Trust assets (3)	1		61,917		—		61,918
Restricted cash equivalents ~~(4)~~(1)	Restricted cash equivalents ~~(4)~~(1)	6,670		7,918		0		14,588		Restricted cash equivalents ~~(4)~~(1)	3,104		5,115		—		8,219
Total assets	Total assets	$	74,942	$	112,393	$	0	$	187,335	Total assets	$	45,412	$	118,736	$	—	$	164,148

Liabilities:	Liabilities:									Liabilities:
Derivative instruments (2)	Derivative instruments (2)	$	0	$	367	$	0	$	367	Derivative instruments (2)	$	—	$	86	$	—	$	86
Total liabilities	Total liabilities	$	0	$	367	$	0	$	367	Total liabilities	$	—	$	86	$	—	$	86


		Assets and Liabilities at Fair Value as of February 1, 2020									Assets and Liabilities at Fair Value as of January 30, 2021
(in thousands)	(in thousands)	Level 1		Level 2		Level 3		Total		(in thousands)	Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Cash equivalents (1)	Cash equivalents (1)	$	225	$	58,447	$	0	$	58,672	Cash equivalents (1)	$	296,279	$	11,589	$	—	$	307,868
Derivative instruments (2)	Derivative instruments (2)	0		1,969		0		1,969		Derivative instruments (2)	—		79		—		79
Rabbi Trust assets (3)	Rabbi Trust assets (3)	1		109,048		0		109,049		Rabbi Trust assets (3)	1		60,789		—		60,790
Restricted cash equivalents ~~(4)~~(1)	Restricted cash equivalents ~~(4)~~(1)	9,765		4,601		0		14,366		Restricted cash equivalents ~~(4)~~(1)	2,943		7,775		—		10,718
Total assets	Total assets	$	9,991	$	174,065	$	0	$	184,056	Total assets	$	299,223	$	80,232	$	—	$	379,455

Liabilities:	Liabilities:									Liabilities:
Derivative instruments (2)	Derivative instruments (2)	$	0	$	1,460	$	0	$	1,460	Derivative instruments (2)	$	—	$	4,694	$	—	$	4,694
Total liabilities	Total liabilities	$	0	$	1,460	$	0	$	1,460	Total liabilities	$	—	$	4,694	$	—	$	4,694

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

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

(3) Level 1 assets ~~consist~~consisted of investments in money market funds. Level 2 assets ~~consist~~consisted 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~~consisted of:

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

•Time deposits, which ~~are~~were 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~~were valued using quoted market prices of the same or similar instruments, adjusted for counterparty risk.

Fair value of long-term borrowings

The Company’s borrowings under the ~~Term Loan Facility and the~~ Senior Secured Notes are carried at historical cost in the accompanying Condensed Consolidated Balance Sheets. The carrying amount and fair value of the Company’s long-term gross borrowings were as follows:

(in thousands) October 31, 2020 February 1, 2020
Gross borrowings outstanding, carrying amount $ 350,000 $ 233,250
Gross borrowings outstanding, fair value $ 374,063 $ 233,979


(in thousands)	October 30, 2021		January 30, 2021
Gross borrowings outstanding, carrying amount	$	307,730	$	350,000
Gross borrowings outstanding, fair value	$	332,641	$	389,813

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7. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of:
(in thousands) October 31, 2020 February 1, 2020
Property and equipment, at cost $ 2,741,167 $ 2,744,967
Less: Accumulated depreciation and amortization (2,147,235) (2,079,677)
Property and equipment, net $ 593,932 $ 665,290


(in thousands)	October 30, 2021		January 30, 2021
Property and equipment, at cost	$	2,490,552	$	2,488,957
Less: Accumulated depreciation and amortization	(1,974,376)		(1,938,370)
Property and equipment, net	$	516,176	$	550,587

Refer to Note 9, “ASSET IMPAIRMENT,” for details related to property and equipment impairment charges incurred during the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, ~~2020 and November 2, 2019.~~2020.

8. LEASES

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

During thirty-nine weeks ended October 31, 2020, the Company suspended rent payments for a significant number of stores that were closed as a result of COVID-19, and continues to engage with its landlords to find a mutually beneficial and agreeable path forward. The Company has elected to account for all qualifying lease concessions, those that are a direct consequence of COVID-19 and that result in revised lease consideration that is substantially the same or less than the original consideration, as if the enforceable rights and obligations associated with the concession existed in the original lease agreement. Rent abatements associated with such concessions are recognized in variable lease cost. Lease concessions granted as part of an agreement that substantially increases the total consideration as a result of the inclusion of additional terms, such as rent payments associated with a lease term extension, are treated as lease modifications. For stores where the Company suspended payments, the Company reclassified related amounts from operating lease liability to accrued expenses in the period during which rent was due, while continuing to recognize operating lease cost in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

In addition, during the thirteen weeks ended October 31, 2020, the Company entered into a sublease agreement with a third party for the remaining lease term of one of its European Abercrombie & Fitch flagship store locations upon its expected closure during the thirteen weeks ending January 30, 2021. As of October 31, 2020, the Company's subleased property had a remaining lease term of 7.1 years with the sublease term from February 1, 2021 through November 30, 2027. The sublease arrangement provides for rent and occupancy related costs such as taxes, utilities and maintenance costs. Initial sublease terms provide for rent escalations based on the index under the lease, which were estimated upon initial measurement of the operating lease right-of-use asset and liability. The sublease agreement does not include residual value guarantees. Consistent with the Company's real estate leases, the sublease contains usage restrictions, but does not contain financial covenants and restrictions. Future minimum tenant operating lease payments remaining under this sublease as of October 31, 2020 were $29.0 million.

The following table provides a summary of the Company’s operating lease costs for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, ~~2020 and November 2, 2019:~~2020:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	(in thousands)	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019		(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Single lease cost (1)	Single lease cost (1)	$	83,743	$	104,726	$	264,932	$	318,270	Single lease cost (1)	$	66,969	$	83,743	$	207,046	$	264,932
Variable lease cost (2)	Variable lease cost (2)	14,428		25,990		61,763		129,073		Variable lease cost (2)	26,409		14,428		68,875		61,763
Operating lease right-of-use asset impairment (3)	Operating lease right-of-use asset impairment (3)	3,979		9,047		44,397		12,636		Operating lease right-of-use asset impairment (3)	5,512		3,979		8,216		44,397
Sublease income (4)										Sublease income (4)	(1,068)		—		(3,256)		—
Total operating lease cost	Total operating lease cost	$	102,150	$	139,763	$	371,092	$	459,979	Total operating lease cost	$	97,822	$	102,150	$	280,881	$	371,092

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

(2)~~Includes~~Included variable payments related to both lease and nonlease components, such as contingent rent payments made by the Company based on net sales performance, and payments related to taxes, insurance, and maintenance costs, as well as the benefit of $1.7 million and $14.6 million of rent abatements during the thirteen and thirty-nine weeks ended October 30, 2021 related to the effects of the COVID-19 pandemic that resulted in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract. The benefit related to rent abatements recognized during the thirteen and thirty-nine weeks ended October 31, 2020 was $1.9 million and $18.9 million respectively.

(3)Refer to Note 9, “ASSET IMPAIRMENT,” for details related to operating lease right-of-use asset impairment charges.

(4)

~~During~~The terms of the ~~thirty-nine weeks ended October 31, 2020 and November 2, 2019,~~sublease agreement entered into by the Company ~~paid $224.8 million and $311.3 million, respectively,~~with a third party during Fiscal 2020 related to one of its previous flagship store locations have not changed materially from that disclosed in Note 8, “LEASES,” 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 ~~amounts included~~Fiscal 2020. Sublease income is recognized in ~~the measurement of~~other operating ~~lease liabilities,~~income (loss), net ~~of rent abatements agreed upon during the period. These payments are included within operating activities~~ on the Condensed Consolidated Statements of ~~Cash Flows.~~Operations and Comprehensive Income (Loss).

The Company has suspended rent payments for a number of stores that were closed as a result of COVID-19, and has been successful in obtaining certain rent abatements and landlord concessions of rent payable. Refer to Note 3. “IMPACT OF COVID-19”, for additional details.

As of October ~~31, 2020,~~30, 2021, the Company had minimum commitments related to additional operating lease contracts the terms of which have not yet commenced, primarily for its Company-operated retail stores, of approximately ~~$3.3~~$8.7 million.

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9. ASSET IMPAIRMENT

Asset impairment charges for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~ were as follows:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	(in thousands)	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019		(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Operating lease right-of-use asset impairment ~~(1)~~	Operating lease right-of-use asset impairment ~~(1)~~	$	3,979	$	9,047	$	44,397	$	12,636	Operating lease right-of-use asset impairment ~~(1)~~	$	5,512	$	3,979	$	8,216	$	44,397
Property and equipment asset impairment	Property and equipment asset impairment	2,350		3,563		12,943		5,580		Property and equipment asset impairment	1,237		2,350		1,983		12,943
Total asset impairment	Total asset impairment	$	6,329	$	12,610	$	57,340	$	18,216	Total asset impairment	$	6,749	$	6,329	$	10,199	$	57,340

~~(1)~~
~~Includes $3.2 million of operating lease right-of-use asset~~

Asset impairment ~~related to flagship store exit~~ charges for ~~each of~~ the thirteen and thirty-nine weeks ended ~~November 2, 2019. Refer~~October 30, 2021 related to ~~Note 17, “FLAGSHIP STORE EXIT (BENEFITS) CHARGES~~.”certain of the Company’s stores across brands, geographies and store formats. The impairment charges for the thirty-nine weeks ended October 30, 2021 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $19.5 million, including $17.0 million related to operating lease right-of-use assets.

Asset impairment charges for the thirteen and thirty-nine weeks ended October 31, 2020 were principally the result of the impact of COVID-19 and were related to certain of the Company’s stores across brands, geographies and store formats. The impairment charges for the thirty-nine weeks ended October 31, 2020 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $102.2 million, including $94.2 million related to operating lease right-of-use assets.

Asset impairment charges for the thirteen weeks and thirty-nine weeks ended November 2, 2019, primarily related to certain of the Company’s international flagship stores. The impairment charges for the thirty-nine weeks ended November 2, 2019 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $36.8 million, including $32.3 million related to operating lease right-of-use assets.

10. ~~RABBI TRUST ASSETS~~

As a precautionary measure and to preserve liquidity in light of the circumstances surrounding COVID-19, during the thirty-nine weeks ended October 31, 2020, the Company withdrew the majority of excess funds from the overfunded Rabbi Trust assets, providing the Company with $50.0 million of additional cash.

~~Investments of Rabbi Trust assets consisted of the following as of October 31, 2020 and February 1, 2020:~~

(in thousands) October 31, 2020 February 1, 2020
Trust-owned life insurance policies (at cash surrender value) $ 60,418 $ 109,048
Money market funds 1 1
Rabbi Trust assets $ 60,419 $ 109,049

~~Realized gains resulting from the change in cash surrender value of the Rabbi Trust assets for the thirteen and thirty-nine weeks ended October 31, 2020 and November 2, 2019 were as follows:~~

Thirteen Weeks Ended Thirty-nine Weeks Ended
(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019
Realized gains related to Rabbi Trust assets $ 391 $ 805 $ 1,369 $ 2,394

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~~11.~~ INCOME TAXES

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

Impact of valuation allowances and other tax charges ~~during Fiscal 2020~~

During the thirteen weeks ended October 30, 2021, as a result of the improvement seen in business conditions, the Company recognized $3.5 million of tax benefits due to the expected utilization of deferred tax assets against projected pre-tax income for the full fiscal year, primarily in the U.S. and Germany, based on information available, on which a valuation allowance had previously been established.

During the thirty-nine weeks ended October 30, 2021, as a result of the improvement seen in business conditions, the Company recognized $23.4 million of discrete tax benefits due to the release of valuation allowances, primarily in the U.S. and Germany, and a discrete tax benefit of $3.9 million due to a rate change in the U.K. The ~~Company’s effective~~Company also recognized $13.6 million of tax ~~rate~~benefits due to the expected utilization of deferred tax assets against projected pre-tax income for the full fiscal year, primarily in the U.S. and Germany, based on information available, on which a valuation allowance has previously been established.

During the thirty-nine weeks ended October 31, 2020, ~~was impacted by~~the Company recognized $77.4 million of ~~adverse~~ tax ~~impacts,~~charges, ultimately giving rise to income tax expense on a consolidated pre-tax year-to-date loss. Further details regarding these adverse tax impacts are as follows:

•The Company ~~anticipates~~anticipated pre-tax losses for the full fiscal year in certain jurisdictions, based on information ~~currently~~then available, primarily due to the significant adverse impacts of COVID-19. The Company did not recognize income tax benefits on $180.7 million of pre-tax losses during the thirty-nine weeks ended October 31, 2020, resulting in an adverse tax impact of $41.8 million.

•The Company recognized charges of $35.6 million related to the establishment of valuation allowances and other tax charges in certain jurisdictions during the thirty-nine weeks ended October 31, 2020, principally as a result of the significant adverse impacts of COVID–19. These charges related to valuation allowances recognized by the Company of $10.6 million and $6.0 million related to the U.S. and Germany, respectively, as well as valuation allowances and other tax charges in certain other jurisdictions against underlying tax asset balances that existed as of February 1, 2020. The Company also recognized valuation allowances of $78.9 million related to Switzerland with a U.S. branch equally offsetting amount, which in net, did not have an impact on the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

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The Company continues to review the need for valuation allowances in certain jurisdictions, principally Japan, Korea and Switzerland, on a quarterly basis. It is reasonably possible, if business conditions continue to improve, that there could be material adjustments over the next 12 months to the total amount of valuation allowances as circumstances may be such that sufficient evidence would exist to indicate that additional deferred taxes currently subject to a valuation allowance are more likely than not to be utilized. Changes in assumptions may occur based on new information that becomes available resulting in adjustments in the period in which a determination is made.

~~Global legislation in response to COVID-19~~

In March 2020, the CARES Act was enacted into U.S. law, intended to provide economic relief to those impacted by COVID-19 and enhance business’ liquidity. The Company continues to examine impacts that the provisions of the CARES Act may have on U.S. income taxes; however, the Company does not currently expect that these provisions will have a material impact on its income taxes.

The Company is still assessing the applicability of other recently passed global legislation, including the potential income tax measures offered in international jurisdictions where the Company’s operations have also been impacted by COVID-19.

Share-based compensation

Refer to Note ~~13,~~12, “SHARE-BASED COMPENSATION,” for details on income tax benefits and charges related to share-based compensation awards during the thirteen and thirty-nine weeks ended ~~November 2, 2019.~~October 30, 2021 and October 31, 2020.

~~12.~~11. BORROWINGS

Details on the Company’s long-term borrowings, net, as of October ~~31, 2020~~30, 2021 and ~~February 1, 2020~~January 30, 2021 are as follows:


(in thousands)	(in thousands)	October 31, 2020		February 1, 2020		(in thousands)	October 30, 2021		January 30, 2021
Long-term portion of borrowings, gross at carrying amount	Long-term portion of borrowings, gross at carrying amount	$	350,000	$	233,250	Long-term portion of borrowings, gross at carrying amount	$	307,730	$	350,000
Unamortized fees	Unamortized fees	(6,441)		(932)		Unamortized fees	(4,483)		(6,090)
Unamortized discount		0		(355)
Long-term borrowings, net	Long-term borrowings, net	$	343,559	$	231,963	Long-term borrowings, net	$	303,247	$	343,910

Senior Secured Notes

On July 2, 2020, Abercrombie & Fitch Management Co. (“A&F Management”), a wholly-owned indirect subsidiary of A&F, completed the private offering of the Senior Secured Notes, with ~~$350~~$350.0 million aggregate principal amount due in 2025, at an offering price of 100% of the principal amount ~~thereof.~~thereof and bearing interest at a rate of 8.75% per annum, with semi-annual interest payments which began in January 2021. The Senior Secured Notes were issued pursuant to an indenture, dated as

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of July 2, 2020, by and among A&F Management, A&F and certain of ~~its~~A&F’s wholly-owned subsidiaries, as guarantors, and U.S. Bank National Association, as trustee, and as collateral agent. During the thirty-nine weeks ended October 30, 2021, A&F Management purchased $42.3 million of its outstanding Senior Secured Notes and incurred $5.3 million of loss on extinguishment of debt, comprised of a premium of $4.7 million and the write-off of unamortized fees of $0.6 million, in interest expense, net on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The ~~Senior Secured Notes will mature on July 15, 2025 and bear interest at a rate of 8.75% per annum, with semi-annual interest payments beginning in January 2021.~~

~~The Company used the net proceeds from the offering~~terms of the Senior Secured Notes to repay outstanding borrowings and accrued interest of $233.6 million and $110.8 million under the Term Loan Facility and the ABL Facility, respectively, with the remaining net proceeds used towards fees and expenseshave not changed materially from those disclosed in ~~connection with such repayments and the offering~~Note 13, “BORROWINGS,” of the ~~Senior Secured Notes.~~

~~The Company recorded deferred financing fees associated with the issuance~~Notes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of ~~the Senior Secured Notes, which are being amortized to interest expense over the contractual term of the Senior Secured Notes.~~A&F’s Annual Report on Form 10-K for Fiscal 2020.

ABL Facility

~~The ABL Facility, which was entered into on August 7, 2014 through~~On April 29, 2021, A&F Management, in A&F Management’s capacity as the lead borrower, ~~(with A&F~~ and ~~certain~~the other ~~subsidiaries~~borrowers and guarantors party thereto, amended and restated in its entirety the Credit Agreement, dated as of ~~A&F~~August 7, 2014, as ~~borrowers or guarantors)~~amended on September 10, 2015 and ~~later~~as further amended on October 19, 2017 ~~provides~~(as amended and restated, the “Amended and Restated Credit Agreement”), among A&F Management, the other borrowers and guarantors party thereto, the lenders party thereto, Wells Fargo Bank, National Association, as administrative agent for the lenders, and the other parties thereto.

The Amended and Restated Credit Agreement continues to provide for a senior secured ~~asset-based~~ revolving credit facility of up to ~~$400~~$400.0 million (the “ABL Facility”), and (i) extends the maturity date of the ABL Facility from October 19, 2022 to April 29, 2026; and (ii) modifies the required fee on undrawn commitments under the ABL Facility from 0.25% per annum to either 0.25% or 0.375% per annum (with the ultimate amount dependent on the conditions detailed in the Amended and Restated Credit Agreement).

~~The~~Except for these changes, the terms of the ABL Facility ~~will mature on October 19, 2022.~~

~~As a precautionary measure and to improve the Company’s cash position~~remained substantially unchanged from those disclosed in ~~light~~Note 13, “BORROWINGS,” of the circumstances surrounding COVID-19, during the thirteen weeks ended May 2, 2020, the Company borrowed $210.0 million under the ABL Facility. During the thirteen weeks ended August 1, 2020, the Company used a portionNotes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of ~~the net proceeds from the offering of the Senior Secured Notes and cash~~A&F’s Annual Report on ~~hand to repay all outstanding borrowings under the ABL Facility.~~Form 10-K for Fiscal 2020.

The Company did not have any borrowings outstanding under the ABL Facility as of October ~~31, 2020~~30, 2021 or as of ~~February 1, 2020.~~January 30, 2021.

As of October ~~31, 2020, the Company had~~30, 2021, availability under the ABL Facility ~~of $383.7~~was $301.0 million, net of $0.8 million in outstanding stand-by letters of credit. As the Company must maintain excess availability equal to the greater of 10% of the loan cap or $30 million under the ABL Facility, ~~actual incremental~~ borrowing capacity available to the Company under the ABL Facility was ~~$345.2~~$270.8 million as of October ~~31, 2020.~~

The provisions under the credit agreement applicable to the ABL Facility have not changed from those described in Note 12, “BORROWINGS,” in 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 2019.

~~Term Loan Facility~~

The Term Loan Facility, which was entered into on August 7, 2014 through A&F Management as the lead borrower (with A&F and certain other subsidiaries of A&F as borrowers or guarantors) and later amended on June 22, 2018, provided for a term loan facility of $300 million.

The Company had gross borrowings outstanding under the Term Loan Facility of $233.3 million as of February 1, 2020. During the thirteen weeks ended August 1, 2020, the Company used a portion of the proceeds from the issuance of the Senior Secured Notes to repay all outstanding borrowings under the Term Loan Facility and upon repayment the Term Loan Facility was terminated effective as of July 2, 2020.

~~The Term Loan Facility was previously scheduled to mature on August 7,~~30, 2021.

Representations, warranties and covenants

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

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

~~Table of Contents~~

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

The Company was in compliance with all debt covenants under these agreements as of October ~~31, 2020.~~30, 2021.

~~13.~~12. SHARE-BASED COMPENSATION

Financial statement impact

The following table details share-based compensation expense and the related income tax impacts for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, ~~2020 and November 2, 2019:~~2020:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	(in thousands)	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019		(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Share-based compensation expense	Share-based compensation expense	$	4,669	$	5,796	$	13,575	$	8,464	Share-based compensation expense	$	7,332	$	4,669	$	22,269	$	13,575
Income tax benefit associated with share-based compensation expense recognized (1)	Income tax benefit associated with share-based compensation expense recognized (1)	$	0	$	1,211	$	0	$	1,566	Income tax benefit associated with share-based compensation expense recognized (1)	$	806	$	—	$	2,492	$	—

(1) No income tax benefit was recognized ~~related to share-based compensation expense~~ during the thirteen and thirty-nine weeks ended October 31, 2020 due to the ~~U.S. being~~establishment of a ~~loss jurisdiction.~~valuation allowance.

The following table details discrete income tax benefits and charges related to share-based compensation awards during the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, ~~2020 and November 2, 2019:~~2020:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	(in thousands)	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019		(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Income tax discrete benefits realized for tax deductions related to the issuance of shares (1)	Income tax discrete benefits realized for tax deductions related to the issuance of shares (1)	$	0	$	6	$	0	$	1,175	Income tax discrete benefits realized for tax deductions related to the issuance of shares (1)	$	150	$	—	$	4,166	$	—
Income tax discrete charges realized upon cancellation of stock appreciation rights (1)	Income tax discrete charges realized upon cancellation of stock appreciation rights (1)	0		(447)		0		(611)		Income tax discrete charges realized upon cancellation of stock appreciation rights (1)	—		—		(3)		—
Total income tax discrete (charges) benefits related to share-based compensation awards		$	0	$	(441)	$	0	$	564
Total income tax discrete benefits related to share-based compensation awards (1)										Total income tax discrete benefits related to share-based compensation awards (1)	$	150	$	—	$	4,163	$	—

(1) No income tax ~~benefits or~~discrete charges ~~related to these items~~ were recognized during the thirteen and thirty-nine weeks ended October 31, 2020 due to the ~~U.S. being~~establishment of a ~~loss jurisdiction.~~valuation allowance.

The following table details the amount of employee tax withheld by the Company upon the issuance of shares associated with restricted stock units vesting and the exercise of stock appreciation rights for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, ~~2020 and November 2, 2019:~~2020:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	(in thousands)	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019		(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Employee tax withheld upon issuance of shares (1)	Employee tax withheld upon issuance of shares (1)	$	150	$	181	$	5,566	$	6,619	Employee tax withheld upon issuance of shares (1)	$	984	$	150	$	13,044	$	5,566

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

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Restricted stock units

The following table summarizes activity for restricted stock units for the thirty-nine weeks ended October ~~31, 2020:~~30, 2021:


		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	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 1, 2020		1,676,831	$	18.68	747,056	$	15.11	421,784	$	23.05
Unvested at January 30, 2021											Unvested at January 30, 2021	3,037,098	$	11.62	297,216	$	22.43	721,879	$	21.46
Granted	Granted	2,280,194	8.57		0	0		519,905	16.24		Granted	725,926	32.73		157,645	32.09		78,827	56.99
Adjustments for performance achievement	Adjustments for performance achievement	0	0		38,381	11.37		134,122	11.79		Adjustments for performance achievement	—	—		(106,715)	21.31		(6,084)	33.69
Vested	Vested	(790,429)	17.42		(481,304)	9.63		(350,447)	11.79		Vested	(1,081,929)	12.23		—	—		(100,634)	33.69
Forfeited	Forfeited	(107,795)	13.83		(6,917)	22.80		(3,485)	35.61		Forfeited	(98,340)	16.89		(7,997)	29.92		(13,804)	25.13
Unvested at October 31, 2020 (2)		3,058,801	$	11.63	297,216	$	22.43	721,879	$	21.46
Unvested at October 30, 2021 (1)											Unvested at October 30, 2021 (1)	2,582,755	$	17.10	340,149	$	27.08	680,184	$	22.81

(1)Includes 66,624 unvested restricted stock units as of October 31, 2020, 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.

~~(2)~~ Unvested shares related to restricted stock units with performance-based and market-based vesting conditions are reflected at 100% of their target vesting amount in the table above. ~~Certain unvested~~Unvested shares related to restricted stock units with performance-based and market-based vesting conditions can be achieved at up to 200% of their target vesting amount.

The following table details unrecognized compensation cost and the remaining weighted-average period over which these costs are expected to be recognized for restricted stock units as of October ~~31, 2020:~~30, 2021:


(in thousands)	(in thousands)	Service-based Restricted Stock Units		Performance-based Restricted Stock Units		Market-based Restricted Stock Units		(in thousands)	Service-based Restricted Stock Units		Performance-based Restricted Stock Units		Market-based Restricted Stock Units
Unrecognized compensation cost	Unrecognized compensation cost	$	27,879	$	0	$	9,939	Unrecognized compensation cost	$	33,405	$	8,532	$	8,047
Remaining weighted-average period cost is expected to be recognized (years)	Remaining weighted-average period cost is expected to be recognized (years)	1.3		0.0		1.1		Remaining weighted-average period cost is expected to be recognized (years)	1.3		1.2		1.0

Additional information pertaining to restricted stock units for the thirty-nine weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~ follows:

(in thousands) October 31, 2020 November 2, 2019
Service-based restricted stock units:
Total grant date fair value of awards granted $ 19,541 $ 16,175
Total grant date fair value of awards vested $ 13,769 $ 13,087
Performance-based restricted stock units:
Total grant date fair value of awards granted $ 0 $ 5,379
Total grant date fair value of awards vested $ 4,635 $ 0
Market-based restricted stock units:
Total grant date fair value of awards granted $ 8,443 $ 4,176
Total grant date fair value of awards vested $ 4,132 $ 511

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(in thousands)	October 30, 2021		October 31, 2020
Service-based restricted stock units:
Total grant date fair value of awards granted	$	23,760	$	19,541
Total grant date fair value of awards vested	$	13,232	$	13,769

Performance-based restricted stock units:
Total grant date fair value of awards granted	$	5,059	$	—
Total grant date fair value of awards vested	$	—	$	4,635

Market-based restricted stock units:
Total grant date fair value of awards granted	$	4,492	$	8,443
Total grant date fair value of awards vested	$	3,390	$	4,132

The weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the thirty-nine weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019, respectively,~~ were as follows:


		October 31, 2020			November 2, 2019				October 30, 2021			October 31, 2020
Grant date market price	Grant date market price	$	12.31		$	25.34		Grant date market price	$	36.15		$	12.31
Fair value	Fair value	$	16.24		$	36.24		Fair value	$	56.99		$	16.24
Assumptions:	Assumptions:							Assumptions:
Price volatility	Price volatility	67		%	57		%	Price volatility	65		%	67		%
Expected term (years)	Expected term (years)	2.4			2.9			Expected term (years)	2.5			2.4
Risk-free interest rate	Risk-free interest rate	0.2		%	2.2		%	Risk-free interest rate	0.3		%	0.2		%
Dividend yield	Dividend yield	0		%	3.2		%	Dividend yield	—		%	—		%
Average volatility of peer companies	Average volatility of peer companies	66.0		%	40.0		%	Average volatility of peer companies	76.0		%	66.0		%
Average correlation coefficient of peer companies	Average correlation coefficient of peer companies	0.4967			0.2407			Average correlation coefficient of peer companies	0.5130			0.4967

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Stock appreciation rights

The following table summarizes stock appreciation rights activity for the thirty-nine weeks ended October ~~31, 2020:~~30, 2021:

Number of
Underlying
Shares Weighted-Average
Exercise Price Aggregate
Intrinsic Value Weighted-Average
Remaining
Contractual Life (years)
Outstanding at February 1, 2020 796,725 $ 40.06
Granted 0 0
Exercised 0 0
Forfeited or expired (382,225) 47.87
Outstanding at August 1, 2020 414,500 $ 32.86 $ 0 3.2
Stock appreciation rights exercisable at October 31, 2020 414,500 $ 32.86 $ 0 3.2
Stock appreciation rights expected to become exercisable in the future as of October 31, 2020 0 $ 0 $ 0 0.0


	Number of Underlying Shares	Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Life (years)
Outstanding at January 30, 2021	384,757	$	33.04
Granted	—	—
Exercised	(109,768)	26.78
Forfeited or expired	(34,150)	54.87
Outstanding at October 30, 2021	240,839	$	32.80	$	2,258,144	2.6
Stock appreciation rights exercisable at October 30, 2021	240,839	$	32.80	$	2,258,144	2.6

No stock appreciation rights were exercised during the thirty-nine weeks ended October 31, 2020. ~~Additional information~~Information pertaining to stock appreciation rights ~~for~~exercised during the thirty-nine weeks ended ~~November 2, 2019~~October 30, 2021 follows:


(in thousands)	~~November 2, 2019~~October 30, 2021
Total grant date fair value of awards exercised	$	~~620~~1,042

~~14.~~13. DERIVATIVE INSTRUMENTS

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

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

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

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As of October ~~31, 2020,~~30, 2021, 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)
Euro	$	~~65,537~~132,850
British pound	$	~~29,603~~80,441
Canadian dollar	$	~~11,239~~20,621
Japanese yen	$	8,328

(1) Amount reported is the U.S. Dollar notional amount outstanding as of October ~~31, 2020.~~30, 2021.

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The fair value of derivative instruments is valued using quoted market prices of the same or similar instruments, adjusted for counterparty risk. The location and amounts of derivative fair values of foreign currency exchange forward contracts on the Condensed Consolidated Balance ~~Sheet~~Sheets as of ~~February 1, 2020~~October 30, 2021 and January 30, 2021 were as follows:


(in thousands)	(in thousands)	Location	October 31, 2020		February 1, 2020		Location	October 31, 2020		February 1, 2020		(in thousands)	Location	October 30, 2021		January 30, 2021		Location	October 30, 2021		January 30, 2021
Derivatives designated as cash flow hedging instruments	Derivatives designated as cash flow hedging instruments	Other current assets	$	461	$	1,869	Accrued expenses	$	367	$	1,377	Derivatives designated as cash flow hedging instruments	Other current assets	$	5,082	$	79	Accrued expenses	$	86	$	4,694
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments	Other current assets	0		100		Accrued expenses	0		83		Derivatives not designated as hedging instruments	Other current assets	—		—		Accrued expenses	—		—
Total	Total		$	461	$	1,969		$	367	$	1,460	Total		$	5,082	$	79		$	86	$	4,694

Information pertaining to derivative gains or losses from foreign currency exchange forward contracts designated as cash flow hedging instruments for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 follows:


	Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Gain recognized in AOCL (1)	$	4,589	$	93	$	6,818	$	12,328
Gain (loss) reclassified from AOCL to cost of sales, exclusive of depreciation and amortization (2)	$	141	$	5,327	$	(3,010)	$	11,104

(1)Amount represents the change in fair value of derivative contracts. As a result of COVID-19, there was a significant change in the expected timing of previously hedged intercompany sales transactions, resulting in a dedesignation of the related hedge ~~instruments.~~instruments during the thirty-nine weeks ended October 31, 2020. At the time of dedesignation of these hedges, they were in a net gain position of approximately $12.6 million. Due to the extenuating circumstances leading to dedesignation, gains associated with these hedges at the time of dedesignation ~~are~~were deferred in AOCL until being reclassified into cost of goods sold, exclusive of depreciation and amortization when the originally forecasted transactions ~~occur~~occurred and the hedged items ~~affect~~affected earnings. ~~During the thirty-nine weeks ended October 31, 2020, $11.1 million had been reclassified from AOCL into earnings. During the thirty-nine weeks ended October 31, 2020 and subsequent~~Subsequent to the dedesignation of these hedges, these hedge contracts were ~~settled.~~

Thirteen Weeks Ended Thirty-nine Weeks Ended
(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019
Gain (loss) recognized in AOCL (1)
$ 93 $ (1,136) $ 12,328 $ 5,918
Gain reclassified from AOCL into cost of sales, exclusive of depreciation and amortization (2)
$ 5,327 $ 2,541 $ 11,104 $ 6,845

~~(1)Amount represents the change~~settled in ~~fair value of derivative contracts.~~Fiscal 2020.

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

Substantially all of the unrealized gain will be recognized in costs of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statements of Operations and Comprehensive Income (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 thirty-nine weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~ follows:

Thirteen Weeks Ended Thirty-nine Weeks Ended
(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019
(Loss) gain recognized in other operating (income) loss, net $ 0 $ (1,023) $ 742 $ 157


	Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Gain (loss) recognized in other operating income, net	$	487	$	—	$	324	$	742

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~~15.~~14. ACCUMULATED OTHER COMPREHENSIVE LOSS

For the thirteen and thirty-nine weeks ended October ~~31, 2020,~~30, 2021, the activity in AOCL was as follows:

Thirteen Weeks Ended October 31, 2020
(in thousands) Foreign Currency Translation Adjustment Unrealized Gain (Loss) on Derivative Financial Instruments Total
Beginning balance at August 1, 2020 $ (106,632) $ 7,539 $ (99,093)
Other comprehensive income before reclassifications 2,142 93 2,235
Reclassified gain from accumulated other comprehensive loss (1)
0 (5,327) (5,327)
Other comprehensive income (loss) after reclassifications (2)
2,142 (5,234) (3,092)
Ending balance at October 31, 2020 $ (104,490) $ 2,305 $ (102,185)
Thirty-nine Weeks Ended October 31, 2020
(in thousands) Foreign Currency Translation Adjustment Unrealized Gain (Loss) on Derivative Financial Instruments Total
Beginning balance at February 1, 2020 $ (109,967) $ 1,081 $ (108,886)
Other comprehensive income before reclassifications 5,477 12,328 17,805
Reclassified gain from accumulated other comprehensive loss (1)
0 (11,104) (11,104)
Other comprehensive income after reclassifications (2)
5,477 1,224 6,701
Ending balance at October 31, 2020 $ (104,490) $ 2,305 $ (102,185)


	Thirteen Weeks Ended October 30, 2021
(in thousands)	Foreign Currency Translation Adjustment		Unrealized Gain (Loss) on Derivative Financial Instruments		Total
Beginning balance at July 31, 2021	$	(101,032)	$	767	$	(100,265)
Other comprehensive (loss) income before reclassifications	(5,629)		4,589		(1,040)
Reclassified gain from AOCL (1)	—		(141)		(141)
Tax effect	—		(32)		(32)
Other comprehensive (loss) income after reclassifications	(5,629)		4,416		(1,213)
Ending balance at October 30, 2021	$	(106,661)	$	5,183	$	(101,478)

	Thirty-nine Weeks Ended October 30, 2021
(in thousands)	Foreign Currency Translation Adjustment		Unrealized Gain (Loss) on Derivative Financial Instruments		Total
Beginning balance at January 30, 2021	$	(97,772)	$	(4,535)	$	(102,307)
Other comprehensive (loss) income before reclassifications	(8,889)		6,818		(2,071)
Reclassified loss from AOCL (1)	—		3,010		3,010
Tax effect	—		(110)		(110)
Other comprehensive (loss) income after reclassifications	(8,889)		9,718		829
Ending balance at October 30, 2021	$	(106,661)	$	5,183	$	(101,478)

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

~~(2)~~
~~No tax effect was recognized during~~

For the thirteen and thirty-nine weeks ended October 31, 2020, ~~due to the U.S. being a loss jurisdiction.~~

~~For the thirteen and thirty-nine weeks ended November 2, 2019,~~ the activity in AOCL was as follows:

Thirteen Weeks Ended November 2, 2019
(in thousands) Foreign Currency Translation Adjustment Unrealized Gain (Loss) on Derivative Financial Instruments Total
Beginning balance at August 3, 2019 $ (111,461) $ 5,515 $ (105,946)
Other comprehensive (loss) income before reclassifications 1,355 (1,136) 219
Reclassified gain from accumulated other comprehensive loss (1)
0 (2,541) (2,541)
Tax effect 0 23 23
Other comprehensive income (loss) after reclassifications 1,355 (3,654) (2,299)
Ending balance at November 2, 2019 $ (110,106) $ 1,861 $ (108,245)
Thirty-nine Weeks Ended November 2, 2019
(in thousands) Foreign Currency Translation Adjustment Unrealized Gain (Loss) on Derivative Financial Instruments Total
Beginning balance at February 2, 2019 $ (104,887) $ 2,435 $ (102,452)
Other comprehensive (loss) income before reclassifications (5,219) 5,918 699
Reclassified gain from accumulated other comprehensive loss (1)
0 (6,845) (6,845)
Tax effect 0 353 353
Other comprehensive (loss) income after reclassifications (5,219) (574) (5,793)
Ending balance at November 2, 2019 $ (110,106) $ 1,861 $ (108,245)


	Thirteen Weeks Ended October 31, 2020
(in thousands)	Foreign Currency Translation Adjustment		Unrealized Gain (Loss) on Derivative Financial Instruments		Total
Beginning balance at August 1, 2020	$	(106,632)	$	7,539	$	(99,093)
Other comprehensive income before reclassifications	2,142		93		2,235
Reclassified gain from AOCL (1)	—		(5,327)		(5,327)

Other comprehensive income (loss) after reclassifications (2)	2,142		(5,234)		(3,092)
Ending balance at October 31, 2020	$	(104,490)	$	2,305	$	(102,185)

	Thirty-nine Weeks Ended October 31, 2020
(in thousands)	Foreign Currency Translation Adjustment		Unrealized Gain (Loss) on Derivative Financial Instruments		Total
Beginning balance at February 1, 2020	$	(109,967)	$	1,081	$	(108,886)
Other comprehensive income before reclassifications	5,477		12,328		17,805
Reclassified gain from AOCL (1)	—		(11,104)		(11,104)

Other comprehensive income after reclassifications (2)	5,477		1,224		6,701
Ending balance at October 31, 2020	$	(104,490)	$	2,305	$	(102,185)

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

(2) No income tax benefit was recognized during the period due to the establishment of a valuation allowance.

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~~16.~~15. SEGMENT REPORTING

The Company’s 2 operating segments are brand-based: Hollister, which includes the Company’s Hollister, Gilly Hicks and Social Tourist brands, 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 Company’s net sales by operating segment for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~ were as follows:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	(in thousands)	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019		(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Hollister	Hollister	$	476,665	$	514,772	$	1,178,925	$	1,447,975	Hollister	$	522,311	$	476,665	$	1,479,202	$	1,178,925
Abercrombie	Abercrombie	342,988		348,700		824,415		990,547		Abercrombie	382,849		342,988		1,072,213		824,415
Total	Total	$	819,653	$	863,472	$	2,003,340	$	2,438,522	Total	$	905,160	$	819,653	$	2,551,415	$	2,003,340

Net sales by geographic area are presented by attributing revenues to an individual country on the basis of the country in which the merchandise was sold for in-store purchases and on the basis of the shipping location provided by customers for digital orders. The Company’s net sales by geographic area for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~ were as follows:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	(in thousands)	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019		(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
U.S.	U.S.	$	557,814	$	583,593	$	1,339,347	$	1,596,723	U.S.	$	654,858	$	557,814	$	1,810,471	$	1,339,347
EMEA	EMEA	190,214		191,977		474,165		566,563		EMEA	179,156		190,214		528,998		474,165
APAC(1)	APAC(1)	43,618		55,910		117,768		188,836		APAC(1)	38,215		43,618		125,489		117,768
Other	Other	28,007		31,992		72,060		86,400		Other	32,931		28,007		86,457		72,060
International	International	$	261,839	$	279,879	$	663,993	$	841,799	International	$	250,302	$	261,839	$	740,944	$	663,993
Total	Total	$	819,653	$	863,472	$	2,003,340	$	2,438,522	Total	$	905,160	$	819,653	$	2,551,415	$	2,003,340

(1) Asia-Pacific Region (“APAC”)

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~~17.~~16. FLAGSHIP STORE EXIT CHARGES (BENEFITS) ~~CHARGES~~

Reflecting a continued focus on one of the Company’s key transformation initiatives ‘Global Store Network 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.

~~As part~~The Company recognizes impacts related to the exit of its flagship stores in flagship store exit charges (benefits) on the Consolidated Statements of Operations and Comprehensive Income (Loss). Details of the charges (benefits) recognized during the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 related to this ~~ongoing effort,~~initiative follow:


	Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Operating lease cost	—		(1,729)		(841)		(6,959)
Gain on lease assignment	—		(5,237)		—		(5,237)
Asset disposals and other store-closure benefits (1)	—		(405)		(514)		(3,610)
Employee severance and other employee transition costs (benefits)	11		(692)		178		3,316
Total flagship store exit charges (benefits)	$	11	$	(8,063)	$	(1,177)	$	(12,490)

(1) Amounts represent costs incurred or benefits realized associated with returning the store to its original condition, including updated estimates to previously established accruals for asset retirement obligations and costs to remove inventory and store assets.

During the thirteen weeks ended May 1, 2021, the Company ~~recently~~finalized an agreement with and paid its landlord partner to settle all remaining obligations related to the SoHo Hollister flagship store in New York City, which closed during the second quarter of Fiscal 2019. Prior to this new agreement, the Company was required to make payments in aggregate of $80.1 million pursuant to the lease agreements through the fiscal year ending January 30, 2029 (“Fiscal 2028”). The new agreement resulted in an acceleration of payments and provided for a discount resulting in a reduction of operating lease liabilities of $65.0 million and a cash outflow of $63.8 million to settle all remaining obligations related to this location. This cash outflow was classified within operating lease right-of-use assets and liabilities within operating activities on the Condensed Consolidated Statement of Cash Flows during the thirty-nine weeks ended October 30, 2021. The Company recognized a gain of $0.9 million in flagship store exit benefits on the Consolidated Statement of Operations and Comprehensive Income (Loss) related to this transaction.

In addition, during Fiscal 2020, the Company announced the early exit of four European Abercrombie & Fitch flagship ~~locations.~~locations, Three of the leases ~~will be~~were transferred through assignment while the fourth lease ~~will be~~has been subleased to a new tenant. The Company no longer has lease obligations ~~beyond Fiscal 2020~~ for the three transfers and is scheduled to receive payments to fully offset its lease obligations on the sublease. Refer to Note 8, “ LEASES,” for additional information on the sublease arrangement.

Future fixed lease payments associated with closed flagship stores are reflected within short-term and long-term operating lease liabilities on the Condensed Consolidated Balance Sheets. Future fixed lease payments associated with flagship stores that were closed as of October 31, 2020, excluding the subleased flagship store, are scheduled to be paid through the fiscal year ending January 30, 2029 (“Fiscal 2028”) and are not expected to exceed $15 million in aggregate in any fiscal year.

The Company recognizes impacts related to the exit of its flagship stores in flagship store exit (benefits) charges on the Consolidated Statements of Operations and Comprehensive Income (Loss). Details of the (benefits) charges incurred during the thirteen and thirty-nine weeks ended October 31, 2020 and November 2, 2019 related to this initiative follow:

Thirteen Weeks Ended Thirty-nine Weeks Ended
(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019
Operating lease cost (1,729) 0 (6,959) 46,716
Gain on lease assignment (5,237) 0 (5,237) 0
Asset disposals and other store-closure costs (1)
(405) 0 (3,610) (1,687)
Employee severance and other employee transition costs (692) 285 3,316 1,994
Total flagship store exit (benefits) charges $ (8,063) $ 285 $ (12,490) $ 47,023

~~(1)~~ Amounts represent costs incurred or benefits associated with returning the store to its original condition, including updated estimates to previously established accruals for asset retirement obligations and costs to remove inventory and store assets.

As the Company continues its ‘Global Store Network Optimization’ efforts, it may incur future cash expenditures or incremental charges or realize benefits not currently contemplated due to events that may occur as a result of, or that are associated with, previously announced flagship store closures and flagship store closures that have not yet been finalized. At this time, the Company is not able to quantify the amount of future impacts, including any 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.

17. SUBSEQUENT EVENTS

In November 2021, the A&F Board of Directors approved a new share repurchase program of $500 million of outstanding common stock, replacing the prior 2021 share repurchase program of 10.0 million shares, which had approximately 3.9 million shares remaining. The timing and actual number of common shares to be repurchased will depend on market conditions, eligibility to trade, and other factors.

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

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

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 discussion related to ~~COVID-19’s impact on~~certain of the Company’s ~~business~~focus areas for the current fiscal year and ~~other~~discussion of certain risks and challenges, such as COVID-19, as well as a summary of the Company’s performance for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, ~~2020 and November 2, 2019.~~2020.

•Results of Operations. This section provides an analysis of certain components of the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, ~~2020 and November 2, 2019.~~2020.

•Liquidity and Capital Resources. This section provides a discussion of the Company’s ~~financial condition, changes in~~expected primary sources and uses of cash, financial condition and liquidity as of October ~~31, 2020,~~30, 2021, which includes (i) an analysis of financial condition as compared to January 30, 2021; (ii) an analysis of changes in cash flows for the thirty-nine weeks ended October ~~31, 2020~~30, 2021 as compared to the thirty-nine weeks ended ~~November 2, 2019;~~October 31, 2020; and ~~(ii)~~(iii) an analysis of liquidity, including a discussion related to ~~preserving liquidity during COVID-19, remaining availability under~~ the Company’s Senior Secured Notes and ABL Facility, the Company’s share repurchase and dividend programs, and outstanding debt and covenant compliance.

•Recent Accounting Pronouncements. The recent accounting pronouncements the Company has adopted or is currently evaluating, including the dates of adoption and/or expected dates of adoption, and anticipated effects on the Company’s Condensed Consolidated Financial Statements, are discussed, as applicable.

•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. MD&A provides a discussion of certain financial measures that have been determined to not be presented in accordance with GAAP. This section includes certain reconciliations ~~for~~between GAAP and non-GAAP financial measures and additional details on ~~these~~non-GAAP financial measures, including information as to why the Company believes the non-GAAP financial measures provided within MD&A are useful to investors.

The following risks, categorized by the primary nature of the associated risk, including the disclosures in “ITEM 1A. RISK FACTORS” of A&F’s Annual Report on Form 10-K for Fiscal ~~2019, as well as those disclosed in the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 17,~~ 2020 ~~and in “ITEM 1A. RISK FACTORS” of this Quarterly Report on Form 10-Q,~~ in some cases have affected and in the future could affect the Company’s financial performance and cause actual results for Fiscal ~~2020~~2021 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. The following risks, or a combination of risks, may be exacerbated by COVID-19 and could result in adverse impacts on the Company’s business, results of operations, financial condition and cash flows.

Macroeconomic and industry risks include:

•COVID‐19 has and may continue to materially adversely impact and cause disruption to our business;

•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 impact on our business;

•Failure to engage our customers, anticipate customer demand and changing fashion trends, and manage our inventory commensurately could have a material adverse impact on our business;

•Our failure to operate effectively in a highly competitive and constantly evolving industry could have a material adverse impact on our business;

•Fluctuations in foreign currency exchange rates could have a material adverse impact on our business;

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•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;

•The impact of war, acts of terrorism, mass casualty events, social unrest, civil disturbance or ~~civil unrest~~disobedience could have a material adverse impact on our business; and

•The impact of extreme weather, infectious disease outbreaks, including COVID-19, and other unexpected events could result in an interruption to our business, as well as to the operations of our third-party partners, and have a material adverse impact on our ~~business; and~~

•The current outbreak of the novel coronavirus, or COVID‐19, has materially adversely impacted and disrupted, and may continue to materially adversely impact and cause disruption to, our business, financial performance and condition, operating results, liquidity and cash flows. The spread of the COVID‐19 outbreak has caused significant disruptions in the United States and global economy, the extent of the impact and duration of which is not yet known. Any future outbreak of any other highly infectious or contagious disease could have a similar impact. business.

Strategic risks include:

•Failure to successfully develop an omnichannel shopping experience, a significant component of our growth strategy, or failure to successfully invest in customer, digital and omnichannel initiatives could have a material adverse impact on our business;

•Our failure to optimize our global store network could have a material adverse impact on our business; ~~and~~

•Our failure to execute our international growth strategy successfully and inability to conduct business in international markets as a result of legal, tax, regulatory, political and economic risks could have a material adverse impact on our business; and

•Our failure to appropriately address emerging environmental, social and governance matters could have a material adverse impact on our reputation and, as a result, our business.

Operational risks include:

•Failure to protect our reputation could have a material adverse impact on our business;

•If our information technology systems are disrupted or cease to operate effectively, it could have a material adverse impact on our business;

•We may be exposed to risks and costs associated with cyber-attacks, data protection, credit card fraud and identity theft that could have a material adverse impact on our business;

•Our reliance on our distribution centers 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 have a material adverse impact on our business;

•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 have a material adverse impact on our business; ~~and~~

•We rely on the experience and skills of our executive officers and associates, and the failure to attract or retain this talent, ~~or effectively~~effectively manage succession, and establish a diverse workforce could have a material adverse impact on our ~~business.~~business; and

•In the past, we have identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future. If we fail to establish and maintain effective internal control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.

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 ~~and~~ could have a material adverse impact on our business;

•Our litigation exposure, or any securities litigation and shareholder activism, could have a material adverse impact on our business;

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

•Changes in the regulatory or compliance landscape could have a material adverse impact on our business; and

•The agreements related to our senior secured asset-based revolving credit facility and our senior secured notes include restrictive covenants that limit our flexibility in operating our business and our inability to obtain credit on reasonable terms in the future could have an adverse impact on 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.

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,” “should,” “are confident,” 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, including the uncertainty surrounding COVID-19, 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.

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OVERVIEW

Business summary

The Company is a global, ~~multi-brand~~digitally-led omnichannel ~~specialty retailer, whose products are sold primarily through its Company-owned store and digital channels, as well as through various third-party wholesale, franchise and licensing arrangements.~~retailer. The Company offers a broad assortment of apparel, personal care products and accessories for men, women and kids, ~~under~~which are sold primarily through its digital channels and Company-owned stores, as well as through various third-party arrangements. The Company’s two brand-based operating segments are Hollister, which includes the Company’s Hollister, Gilly Hicks and Social Tourist brands, and Abercrombie, which includes the Company’s Abercrombie & Fitch and abercrombie kids brands. ~~The~~These five 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 operates primarily ~~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.Asia.

The Company’s fiscal year ends on the Saturday closest to January 31. All references herein to the Company’s fiscal years are as follows:

Fiscal year

Year ended

Number of weeks

Fiscal ~~2018~~

~~February 2, 2019~~

~~Fiscal~~ 2019

February 1, 2020

Fiscal 2020

January 30, 2021

Fiscal 2021

January 29, 2022

Due to the seasonal nature of the retail apparel industry, the results of operations for any current period are not necessarily indicative of the results expected for the full fiscal year and the Company could have significant fluctuations in certain asset and liability accounts. The Company historically experiences its greatest sales activity during the fall season, the third and fourth fiscal quarters, due to back-to-school and holiday sales periods, respectively.

CURRENT TRENDS AND OUTLOOK

Focus areas for Fiscal 2021

The Company remains committed to, and confident in, its long-term vision of being and becoming a digitally-led global omnichannel apparel retailer and continues to evaluate opportunities to make progress against initiatives that support this vision.

The Company entered Fiscal 2021 on offense, and has made progress towards recouping COVID-19 driven sales losses. Reflecting ongoing global uncertainty, the Company plans to continue to actively manage inventories, optimize its distribution center capacity for digital demand and tightly manage expenses.

The following focus areas for Fiscal 2021 serve as a framework to the Company achieving sustainable long-term operating margin expansion:

•Accelerate digital, data and technology investments to increase agility and improve the customer experience;

•Increase marketing investments to build on momentum across brands and geographies;

•Invest in Gilly Hicks and the Company’s newest brand, Social Tourist, which launched on May 20, 2021;

•Optimize store square footage, while being opportunistic in global store expansion; and

•Integrate environmental, social and governance practices and standards throughout the organization.

Global Store Network Optimization

As part of its ongoing global store network optimization initiative and stated goal of repositioning from larger format, tourist-dependent flagship locations to smaller, omni-enabled stores that cater to local customers, the Company closed its Abercrombie & Fitch brand Orchard Road, Singapore flagship location during the first quarter of Fiscal 2021. This leaves the Company with six operating flagships at the end of the third quarter of Fiscal 2021, down from seven at the beginning of Fiscal 2021 and 15 at the beginning of Fiscal 2020.

In ~~January 2020,~~addition, the Company ~~began~~closed 129 non-flagship locations and eight flagship locations during Fiscal 2020. These actions, combined with recent digital sales growth, are expected to ~~experience business disruptions in~~continue to transform the ~~Asia-Pacific (“APAC”) region~~Company's operating model and reposition the Company for the future as the Company continues to focus on aligning store square footage with digital penetration. Future closures could be completed through natural lease expirations, while certain other leases include early termination options that can be exercised under specific conditions. The Company may also elect to exit or modify other leases, and could incur charges related to these actions.

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Additional details related to store count and gross square footage follow:


	Hollister (1)		Abercrombie (2)		Total Company (3)
	U.S.	International	U.S.	International	U.S.	International	Total
Number of stores:
January 30, 2021	347	150	190	48	537	198	735
New	9	5	6	3	15	8	23
Permanently closed	(1)	(4)	(15)	(3)	(16)	(7)	(23)
October 30, 2021	355	151	181	48	536	199	735





Gross square footage (in thousands):
October 30, 2021	2,344	1,204	1,224	387	3,568	1,591	5,159

(1)Hollister includes the Company’s Hollister and Gilly Hicks brands. Locations with Gilly Hicks carveouts within Hollister stores are represented as a ~~result~~single store count. Excludes 10 international franchise stores as of ~~COVID-19. In February 2020,~~October 30, 2021, and 9 international franchise stores as of January 30, 2021. Excludes 14 and 12 Company-operated temporary stores as of October 30, 2021 and January 30, 2021, respectively.

(2)Abercrombie includes the ~~situation escalated~~Company's Abercrombie & Fitch and abercrombie kids brands. Locations with abercrombie kids carveouts within Abercrombie & Fitch stores are represented as ~~the scope~~a single store count. Excludes 13 international franchise stores as of ~~COVID-19 worsened beyond the APAC region, with the United States (the “U.S.”)~~October 30, 2021 and ~~the Europe, Middle East~~10 international franchise stores as of January 30, 2021. Excludes four and ~~Africa (“EMEA”) region experiencing significant outbreaks.~~ two Company-operated temporary stores as of October 30, 2021 and January 30, 2021, respectively.

(3)This store count excludes one international third-party operated multi-brand outlet store as of each of October 30, 2021 and January 30, 2021.

COVID-19

In March 2020, the COVID-19 outbreak was declared to be a global pandemic by the World Health Organization. In response to COVID-19, certain governments ~~have~~ imposed travel restrictions and local statutory quarantines and the Company has recommended associates who are able to perform their role remotely continue to do so. The Company is reacting to COVID-19 on a daily basis, including by conforming to local government guidance and monitoring developments in government legislation or other government actions in response to the COVID-19 outbreak.

experienced widespread temporary store closures. As a result of COVID-19, in January 2020, the Company temporarily closed the majority of its stores in the APAC region and in March 2020, the Company temporarily closed its stores across brands in North America and the EMEA region. The majority of APAC stores were reopened during March 2020, and the Company began to reopen stores in North America and the EMEA region on a rolling basis in late April 2020. The Company had reopened approximately 97% of Company-operated stores for in-store service as of October 31, 2020. Since October 31, 2020, the Company has experienced additional store reclosures in response to COVID-19, primarily in the EMEA region, most of which have since reopened. As of December 4, 2020 approximately 98% of the30, 2021, all Company-operated stores were fully open for in-store service. ~~The Company plans to follow the guidance of local governments to determine when it can reopen closed stores and to evaluate whether further store closures will be necessary.~~

~~The Company has also implemented a range of precautionary health and safety measures with the well-being of the Company’s customers, associates and business partners in mind, including:~~

•~~Requiring associates to use face coverings, depending on geographic region;~~

•~~Encouraging or requiring customers to use face coverings, depending on geographic region;~~

•~~Conducting associate wellness checks in accordance with local government direction;~~

•~~Enhancing cleaning routines and installing plexiglass barriers in the majority of store locations;~~

•~~Implementing various measures to encourage social distancing, including managing occupancy limits;~~

•~~Encouraging contactless payment options, where available;~~

•~~Opening fitting rooms where permissible, with additional cleaning procedures for clothing that has been tried on;~~

•~~Removing returned merchandise from the sales floor for a period of time where mandated by local government;~~

•~~Reducing store hours in select locations;~~

•~~Continuing to offer Purchase-Online-Pickup-in-Store;~~

•~~Increasing its omnichannel capabilities by introducing curbside pick-up at a majority of U.S. locations;~~

•~~Following recommended cleaning and distancing measures in the Company's distribution centers; and~~

•~~Maximizing work-from-home and digital collaboration alternatives to minimize in-person meetings whenever possible.~~

~~Table of Contents~~

The Company has seen, and may continue to see, material reductions in sales across brands and regions as a result of COVID-19. Total net sales decreased approximately 5% and 18% for the thirteen and thirty-nine weeks ended October 31, 2020 as compared to the comparable periods ended November 2, 2019, respectively, primarily driven by temporary store closures and a decline in traffic as compared to the previous year as a result of COVID-19. For the U.S. and the EMEA region, which collectively accounted for 89% of total net sales in Fiscal 2019, the Company experienced sales productivity for reopened stores of approximately 75%, as compared to last year’s levels during the thirteen weeks ended October 31, 2020.

The Company’s digital operations across brands have continued to serve the Company’s customers during this unprecedented period of temporary store closures as the Company’s distribution centers implemented enhanced cleaning and social distancing measures in order to remain operational. In response to elevated digital demand during this period, the Company has increased its omnichannel capabilities by continuing to offer Purchase-Online-Pickup-in-Store, including curbside pick-up at a majority of U.S. locations, and by utilizing ship-from-store capabilities. In addition, to prepare for the Fiscal 2020 holiday season, the Company has entered into a short-term lease for an additional distribution center and has partnered with incremental carriers. Digital sales increased approximately 43% and 42% for the thirteen and thirty-nine weeks ended October 31, 2020 as compared to the comparable periods ended November 2, 2019, respectively. Despite the recent strength in digital sales, the Company has historically generated the majority of its annual net sales through stores and there can be no assurance that the current performance in the digital channel will continue.

~~The Company has seen, and may continue to see, material adverse impacts as a result of COVID-19.~~ The extent of future impacts of COVID-19 on the Company’s business, including the duration and impact on overall customer demand, are uncertain as current circumstances are dynamic and depend on future developments, including, but not limited to, the duration and spread of ~~COVID- 19~~COVID-19, the emergence of new variants of coronavirus, such as the Delta and Omicron variants, and the availability and acceptance of an effective ~~vaccine~~vaccines, boosters or medical treatments. The Company plans to follow the guidance of local governments to evaluate whether further store closures will be necessary.

Total net sales increased approximately 10% and 27% for the thirteen and thirty-nine weeks ended October 30, 2021 as compared to the thirteen and thirty-nine weeks ended October 31, 2020 driven largely by increased store foot traffic relative to last year which was impacted by widespread temporary store closures due to COVID-19. Digital net sales increased approximately 8% and increased 14% for the thirteen and thirty-nine weeks ended October 30, 2021 as compared to the thirteen and thirty-nine weeks ended October 31, 2020. Digital net sales remained highly penetrated, representing 46% and 47% of total net sales for the thirteen and thirty-nine weeks ended October 30, 2021.

The Company’s digital operations across brands have continued to serve the Company’s customers during periods of temporary store closures as the Company’s distribution centers implemented enhanced cleaning and social distancing measures in order to remain operational. In response to elevated digital demand during this period, the Company ~~is also focused on managing inventories~~has leaned into its omnichannel capabilities by continuing to offer Purchase-Online-Pickup-in-Store, rolling out curbside pick-up at a majority of U.S. locations, and by utilizing ship-from-store capabilities. Despite the ~~impacts COVID-19~~recent strength in digital sales, the Company has ~~had, and continues to have, on its global supply chain, including potential disruptions of product deliveries. The Company sources~~historically generated the majority of its ~~merchandise outside of the U.S.~~annual net sales through ~~arrangements with vendors primarily located in southeast Asia~~stores and as of October 31, 2020, the vast majority of the factories the Company partners with were operating at full capacity. In order to complete production, these manufacturing factories are dependent on raw materials from fabric mills that are primarily located in the APAC region. The Company continues to collaborate with its third-party partners to mitigate significant delays in delivery of merchandise. During Fiscal 2020, the Company has reduced certain orders that were not already in production, delayed and altered the cadence of deliveries and implemented various strategies to tightly manage inventories, including utilizing ship-from-store capabilities in select locations.

Despite these near-term challenges presented by COVID-19, the Company remains committed to, and confident in, its long-term vision. The Company continues to evaluate opportunities to make progress against its key transformation initiatives while balancing the near-term challenges and unprecedented uncertainty presented by COVID-19. The Company’s progress executing against the following key transformation initiatives has created the foundation to allow the Company to respond quickly to COVID-19:

•~~Optimizing the global store network;~~

•~~Enhancing digital and omnichannel capabilities;~~

•Increasing the speed and efficiency of the concept-to-customer product life cycle by further investing in capabilities to position the 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 customer engagement through loyalty programs and marketing optimization.~~

The Company entered this period of uncertainty with a healthy liquidity position and has taken and continues to take immediate, aggressive and prudent actions, including reevaluating all expenditures, to balance short and long-term liquidity needs, in order to best position the business for its key stakeholders. Actions to preserve liquidity and manage cash flows during Fiscal 2020, include, but are not limited to:

•~~Partnering with merchandise and non-merchandise vendors in regards to payment terms;~~

•~~Tightly managing inventory receipts to align inventory with expected market demand;~~

•~~Reducing expenses to better align operating costs with sales;~~

•~~Borrowed $210.0 million under the ABL Facility in March 2020 which was then repaid in July 2020 along with the Term Loan Facility;~~

•~~Completed a private offering of $350.0 million aggregate principal amount of senior secured notes;~~

•~~Withdrew $50.0 million from the overfunded Rabbi Trust assets, which represented the majority of excess funds;~~

•~~Temporarily suspended the Company's share repurchase and dividend programs; and~~

•~~Assessing government policy and economic stimulus responses to COVID-19 for both business and individuals.~~

In addition, despite the Company's recent history of partnering with its vendors regarding payment terms, certain payment term extensions were temporary and certain previously deferred payments have since been made. Therethere can be no assurance that the ~~Company~~current performance in the digital channel will ~~be able to maintain extended payment terms or continue to defer payments, which may result in incremental operating cash outflows in future periods.~~continue.

AsCOVID-19 has also caused disruptions to global supply chains, including temporary closures of ~~October 31, 2020,~~factories. The inability to receive inventory in a timely manner could cause delays in responding to customer demand and adversely affect sales. In addition, the Company ~~had liquidity of $1.158 billion as compared~~has seen and expects to ~~$913.8 million as of February 1, 2020, comprised of cash and equivalents and actual incremental borrowing available~~continue to see inflationary pressures affecting the Company’s transportation costs. In order to mitigate the risk associated with supply chain constraints, the Company ~~under~~has taken and expects to continue to take actions to manage through the ~~ABL Facility.~~

~~Table of Contents~~

disruption, including shipping inventory by air and shifting production as necessary and where possible, which adversely impacted the Company during the thirteen weeks ended October 30, 2021, and is likely to continue to cause increased inventory costs related to freight. It is possible that ~~our preparations for the events listed above~~responses to extended factory closures and transportation delays are not adequate to mitigate their impact, and that these events could ~~further~~ adversely affect ~~our~~the business and results of operations.

For a discussion of ~~significant~~material risks that have the potential to cause our actual results to differ materially from our expectations, refer to 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 2019. as well as the discussion provided in the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 17, 2020 and in “ITEM 1A. RISK FACTORS” of this Quarterly Report on Form 10-Q.

~~United Kingdom’s withdrawal from the European Union (“Brexit”)~~

In June 2016, the United Kingdom passed a referendum to recommend withdrawing from the European Union. Although the United Kingdom left the European Union in January 2020, the final terms of the United Kingdom’s withdrawal remain unclear. The Company believes that this referendum and the uncertainty surrounding the terms of the United Kingdom’s withdrawal adversely impacted international sales results in Fiscal 2019, with decreased traffic and declining values of the Euro and British Pound as compared to the U.S. Dollar over Fiscal 2018.

Upon withdrawal from the European Union in January 2020, the United Kingdom entered a transition period during which there will be on-going negotiations. During this transition period, the United Kingdom’s existing trading relationship with the European Union will remain in place and it will continue to follow the European Union's rules. It is not clear at this time what, if any, agreements will be reached by the current December 31, 2020 transition period deadline, or the impact that COVID-19 may have on the negotiation timeline.

There is continued uncertainty related to the impact on consumer behavior, trade relations, economic conditions, foreign currency exchange rates and the free movement of goods, services, people and capital between the United Kingdom and the European Union during this time of transition. The United Kingdom’s withdrawal from the European Union could also adversely impact other areas of the business, including, but not limited to, an increase in duties and delays in the delivery of merchandise from the Company’s Netherlands distribution center to its customers in the United Kingdom if trade barriers materialize. The United Kingdom’s withdrawal from the European Union could also adversely impact the operations of the Company’s 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, the Company is: collaborating across the organization and testing systems; working with external partners to develop contingency plans for potential adverse impacts; and taking actions to reduce, to the extent possible, the potential impact of any incremental duty exposure. It is possible that preparations for the events listed above are not adequate to mitigate their impact, and that these events could further adversely affect the business and results of operations.

~~Global Store Network Optimization~~

A component of optimizing the Company’s global store fleet is pivoting away from large format flagship stores and striving towards opening smaller, more productive omnichannel focused brand experiences that cater to local customers. As a result, the Company has closed certain of its flagship stores and may have additional closures in the future as the Company executes against this strategy. Although some of these closures may be completed through natural lease expirations, certain other of the Company’s leases include early termination options that can be exercised under specific conditions. The Company may also elect to exit or modify other leases, and could incur charges or realize benefits related to these actions.

As part of its ongoing global store network optimization, the Company recently announced the early exit of four European Abercrombie & Fitch flagship locations. The Dusseldorf flagship closed during the third quarter of Fiscal 2020, and the London, Munich and Paris flagships will close by the end of Fiscal 2020, all well ahead of their natural lease expirations. Three of the leases will be transferred through assignment while the fourth lease will be subleased to a new tenant. The Company no longer has lease obligations beyond Fiscal 2020 for the three transfers and is scheduled to receive payments to fully offset its lease obligations on the sublease. In addition to these four early lease exits, the Brussels, Madrid and Fukuoka Abercrombie & Fitch flagships are expected to close by the end of Fiscal 2020 due to natural lease expirations. These recent actions removed approximately $85 million of lease liabilities from the balance sheet, and will leave the Company with eight operating flagships at the end of Fiscal 2020, down from 15 at the beginning of Fiscal 2020.

~~Details related to recently closed flagship stores follow:~~

~~Brand~~ ~~(1)~~

~~Flagship location~~

~~Timing of store closure~~

~~Abercrombie & Fitch~~

~~Pedder Street, Hong Kong Special Administrative Region, China~~

~~First quarter of Fiscal 2017~~

~~Abercrombie & Fitch~~

~~Copenhagen, Denmark~~

~~First quarter of Fiscal 2019~~

~~Hollister~~

~~SoHo, New York City, U.S.~~

~~Second quarter of Fiscal 2019~~

~~Abercrombie~~

~~Milan, Italy~~

~~Fourth quarter of Fiscal 2019~~

~~abercrombie kids~~ ~~(2)~~

~~London, United Kingdom~~

~~Fourth quarter of Fiscal 2019~~

~~Abercrombie~~

~~Dusseldorf, Germany~~

~~Third quarter of Fiscal 2020~~

~~(1)~~ Abercrombie includes the Abercrombie & Fitch and abercrombie kids brands and, when used in the table above, signifies a location with an abercrombie kids carveout within an Abercrombie & Fitch store that would be represented as a single store count.

~~(2)~~ ~~The abercrombie kids store in London is expected to be converted to corporate office space to be utilized as the Company’s EMEA regional headquarters.~~

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~~Additional details related to store count and gross square footage follow:~~

Hollister (1)
Abercrombie (2)
Total Company
U.S. International U.S. International U.S. International Total
Number of stores:
February 1, 2020 391 155 256 52 647 207 854
New 2 2 4 4 6 6 12
Permanently closed (7) (3) (5) (2) (12) (5) (17)
October 31, 2020 386 154 255 54 641 208 849
Gross square footage (in thousands):
October 31, 2020 2,568 1,257 1,817 575 4,385 1,832 6,217

~~(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 October 31, 2020 and February 1, 2020. Excludes 15 Company-operated temporary stores as of October 31, 2020 and 16 as of February 1, 2020.

~~(2)~~ Abercrombie includes the 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 eight international franchise stores as of October 31, 2020 and seven as of February 1, 2020. Excludes five Company-operated temporary stores as of October 31, 2020 and eight as of February 1, 2020.

Summary of results

A summary of results for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~ follows:


		GAAP						Non-GAAP (1)							GAAP						Non-GAAP (1)
(in thousands, except change in net sales, gross profit rate, operating margin and per share amounts)		October 31, 2020(2)			November 2, 2019(3)			October 31, 2020(2)			November 2, 2019(3)
(in thousands, except change in net sales, gross profit rate, operating income (loss) margin and per share amounts)														(in thousands, except change in net sales, gross profit rate, operating income (loss) margin and per share amounts)	October 30, 2021 (2)			October 31, 2020 (3)			October 30, 2021 (2)			October 31, 2020 (3)
Thirteen Weeks Ended	Thirteen Weeks Ended													Thirteen Weeks Ended
Net sales	Net sales	$	819,653		$	863,472								Net sales	$	905,160		$	819,653
Change in net sales	Change in net sales	(5.1)		%	0.3		%							Change in net sales	10.4		%	(17.0)		%

Gross profit rate	Gross profit rate	64.0		%	60.1		%							Gross profit rate	63.7		%	64.0		%
Operating income	Operating income	$	58,616		$	14,479		$	64,945		$	24,947		Operating income	$	72,731		$	58,616		$	79,480		$	64,945
Operating income margin	Operating income margin	7.2		%	1.7		%	7.9		%	2.9		%	Operating income margin	8.0		%	7.2		%	8.8		%	7.9		%
Net income attributable to A&F	Net income attributable to A&F	$	42,271		$	6,523		$	48,231		$	14,506		Net income attributable to A&F	$	47,233		$	42,271		$	52,607		$	48,231
Net income per diluted share attributable to A&F	Net income per diluted share attributable to A&F	$	0.66		$	0.10		$	0.76		$	0.23		Net income per diluted share attributable to A&F	$	0.77		$	0.66		$	0.86		$	0.76
Thirty-nine Weeks Ended	Thirty-nine Weeks Ended													Thirty-nine Weeks Ended
Net sales	Net sales	$	2,003,340		$	2,438,522								Net sales	$	2,551,415		$	2,003,340
Change in net sales	Change in net sales	(17.8)		%	0.2		%							Change in net sales	27.4		%	(24.8)		%
Gross profit rate	Gross profit rate	60.5		%	59.9		%							Gross profit rate	64.1		%	60.5		%
Operating loss		$	(136,368)		$	(52,263)		$	(79,028)		$	(41,795)
Operating loss margin		(6.8)		%	(2.1)		%	(3.9)		%	(1.7)		%
Net loss attributable to A&F		$	(196,413)		$	(43,774)		$	(142,708)		$	(35,791)
Net loss per diluted share attributable to A&F		$	(3.14)		$	(0.67)		$	(2.28)		$	(0.55)
Operating income (loss)														Operating income (loss)	$	244,951		$	(136,368)		$	255,150		$	(79,028)
Operating income (loss) margin														Operating income (loss) margin	9.6		%	(6.8)		%	10.0		%	(3.9)		%
Net income (loss) attributable to A&F														Net income (loss) attributable to A&F	$	197,501		$	(196,413)		$	205,652		$	(142,708)
Net income (loss) per diluted share attributable to A&F														Net income (loss) per diluted share attributable to A&F	$	3.10		$	(3.14)		$	3.22		$	(2.28)

(1) Discussion as to why the Company believes that these non-GAAP financial measures are useful to investors isand a reconciliation of the Non-GAAP measures to the most directly comparable financial measure calculated and presented in accordance with GAAP are provided below under “NON-GAAP FINANCIAL MEASURES.”

(2)Results for Fiscal 2021 reflect tax benefits related to the release of income tax valuation allowances and the impact of a statutory rate change on the valuation of deferred tax assets. Refer to Note 10, “INCOME TAXES.”

(3) Results for Fiscal 2020 reflect significant adverse tax impacts related to valuation allowances on deferred tax assets and other tax charges. Refer to Note ~~11,~~10, “INCOME TAXES.”

~~(3)~~ ~~Results for Fiscal 2019 reflect significant adverse impacts related to flagship store exit charges. Refer to Note 17, “FLAGSHIP STORE EXIT (BENEFITS) CHARGES~~.”

Certain components of the Company’s Condensed Consolidated Balance Sheets as of October ~~31, 2020~~30, 2021 and ~~February 1, 2020~~January 30, 2021 were as follows:


(in thousands)	(in thousands)	October 31, 2020		February 1, 2020		(in thousands)	October 30, 2021		January 30, 2021
Cash and equivalents	Cash and equivalents	$	812,881	$	671,267	Cash and equivalents	$	865,622	$	1,104,862
Gross long-term borrowings outstanding, carrying amount	Gross long-term borrowings outstanding, carrying amount	$	350,000	$	233,250	Gross long-term borrowings outstanding, carrying amount	$	307,730	$	350,000
Inventories	Inventories	$	545,548	$	434,326	Inventories	$	543,713	$	404,053

Certain components of the Company’s Condensed Consolidated Statements of Cash Flows for the thirty-nine week periods ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~ were as follows:


(in thousands)	(in thousands)	October 31, 2020		November 2, 2019		(in thousands)	October 30, 2021		October 31, 2020
Net cash provided by (used for) operating activities		$	158,894	$	(33,839)
Net cash provided by operating activities						Net cash provided by operating activities	$	131,287	$	108,894
Net cash used for investing activities	Net cash used for investing activities	$	(91,748)	$	(154,373)	Net cash used for investing activities	$	(62,223)	$	(41,748)
Net cash provided by (used for) financing activities		$	70,129	$	(122,908)
Net cash (used for) provided by financing activities						Net cash (used for) provided by financing activities	$	(304,358)	$	70,129

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RESULTS OF OPERATIONS

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

Net sales

The Company’s net sales by operating segment for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~ were as follows:


		Thirteen Weeks Ended								Thirteen Weeks Ended
(in thousands)	(in thousands)	October 31, 2020		November 2, 2019		$ Change		% Change	(in thousands)	October 30, 2021		October 31, 2020		$ Change		% Change
Hollister		$	476,665	$	514,772	$	(38,107)	(7)%
Hollister (1)									Hollister (1)	$	522,311	$	476,665	$	45,646	10%
Abercrombie ~~(1)~~(2)	Abercrombie ~~(1)~~(2)	342,988		348,700		(5,712)		(2)%	Abercrombie ~~(1)~~(2)	382,849		342,988		39,861		12%

Total	Total	$	819,653	$	863,472	$	(43,819)	(5)%	Total	$	905,160	$	819,653	$	85,507	10%

										Thirty-nine Weeks Ended
		Thirty-nine Weeks Ended
(in thousands)	(in thousands)	October 31, 2020		November 2, 2019		$ Change		% Change	(in thousands)	October 30, 2021		October 31, 2020		$ Change		% Change
Hollister		$	1,178,925	$	1,447,975	$	(269,050)	(19)%
Abercrombie (1)		824,415		990,547		(166,132)		(17)%

Hollister(1)									Hollister(1)	$	1,479,202	$	1,178,925	$	300,277	25%
Abercrombie (2)									Abercrombie (2)	1,072,213		824,415		247,798		30%
Total	Total	$	2,003,340	$	2,438,522	$	(435,182)	(18)%	Total	$	2,551,415	$	2,003,340	$	548,075	27%

(1) Includes Hollister, Gilly Hicks and Social Tourist brands.

~~(1)~~(2) Includes Abercrombie & Fitch and abercrombie kids brands.

Net sales by geographic area are presented by attributing revenues to an individual country on the basis of the country in which the merchandise was sold for in-store purchases and the shipping location provided by customers for digital orders. The Company’s net sales by geographic area for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~ were as follows:


		Thirteen Weeks Ended								Thirteen Weeks Ended
(in thousands)	(in thousands)	October 31, 2020		November 2, 2019		$ Change		% Change	(in thousands)	October 30, 2021		October 31, 2020		$ Change		% Change

U.S.	U.S.	$	557,814	$	583,593	$	(25,779)	(4)%	U.S.	$	654,858	$	557,814	$	97,044	17%
EMEA	EMEA	190,214		191,977		(1,763)		(1)%	EMEA	179,156		190,214		(11,058)		(6)%
APAC	APAC	43,618		55,910		(12,292)		(22)%	APAC	38,215		43,618		(5,403)		(12)%
Other	Other	28,007		31,992		(3,985)		(12)%	Other	32,931		28,007		4,924		18%
International	International	$	261,839	$	279,879	$	(18,040)	(6)%	International	$	250,302	$	261,839	$	(11,537)	(4)%

Total	Total	$	819,653	$	863,472	$	(43,819)	(5)%	Total	$	905,160	$	819,653	$	85,507	10%

		Thirty-nine Weeks Ended								Thirty-nine Weeks Ended
(in thousands)	(in thousands)	October 31, 2020		November 2, 2019		$ Change		% Change	(in thousands)	October 30, 2021		October 31, 2020		$ Change		% Change

U.S.	U.S.	$	1,339,347	$	1,596,723	$	(257,376)	(16)%	U.S.	$	1,810,471	$	1,339,347	$	471,124	35%
EMEA	EMEA	474,165		566,563		(92,398)		(16)%	EMEA	528,998		474,165		54,833		12%
APAC	APAC	117,768		188,836		(71,068)		(38)%	APAC	125,489		117,768		7,721		7%
Other	Other	72,060		86,400		(14,340)		(17)%	Other	86,457		72,060		14,397		20%
International	International	$	663,993	$	841,799	$	(177,806)	(21)%	International	$	740,944	$	663,993	$	76,951	12%
Total	Total	$	2,003,340	$	2,438,522	$	(435,182)	(18)%	Total	$	2,551,415	$	2,003,340	$	548,075	27%

For the third quarter of Fiscal ~~2020,~~2021, net sales ~~decreased 5%~~increased 10% as compared to the third quarter of Fiscal ~~2019,~~2020, primarily due to ~~a decrease~~an increase in ~~units sold driven by reduced store traffic, including as it relates to temporary store closures~~stores sales as a result of increased store foot traffic relative to last year, which was impacted by widespread temporary store closures due to COVID-19, ~~partially offset~~and 8% digital sales growth. Average unit retail increased year-over-year, driven by ~~43%~~lower promotions and markdowns, with benefits from changes in foreign currency exchange rates of approximately $4 million.

For the year-to-date period of Fiscal 2021, net sales increased 27% as compared to the year-to-date period of Fiscal 2020, primarily due to an increase in units sold as a result of increased store foot traffic relative to last year, which was impacted by widespread temporary store closures due to COVID-19, and 14% digital sales growth. Average unit retail increased year-over-year, driven by less promotions and lower clearance levels, with benefits from changes in foreign currency exchange rates of approximately ~~$12~~$33 million. ~~Excluding the benefit from changes in foreign currency exchange rates, net~~

Table of Contents

Cost of sales, ~~for~~exclusive of depreciation and amortization


	Thirteen Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net sales			% of Net sales	BPS Change
Cost of sales, exclusive of depreciation and amortization	$	328,916	36.3%	$	295,220	36.0%	30


	Thirty-nine Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net Sales			% of Net Sales	BPS Change
Cost of sales, exclusive of depreciation and amortization	$	916,552	35.9%	$	791,154	39.5%	(360)

For the third quarter of Fiscal ~~2020 decreased 6%~~2021, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales increased by approximately 30 basis points as compared to the third quarter of Fiscal ~~2019.~~2020. The year-over-year increase was driven by approximately 300 basis points of higher average unit cost from freight inflation and efforts to offset supply chain issues, almost fully offset by higher average unit retail on reduced promotions.

For the year-to-date period of Fiscal 2020, net sales decreased 18% as compared to the year-to-date period of Fiscal 2019, primarily due to a decrease in units sold driven by reduced store traffic, including as it relates to temporary store closures as a result of COVID-19, partially offset by 42% digital sales growth. Average unit retail increased year-over-year, driven by less promotions and lower clearance levels, with benefits from changes in foreign currency exchange rates of approximately $3 million. Excluding the benefit from changes in foreign currency exchange rates, net sales for the year-to-date period of Fiscal 2020 decreased 18% as compared to the year-to-date period of Fiscal 2019.

~~Table of Contents~~

~~Cost of sales, exclusive of depreciation and amortization~~

Thirteen Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net sales % of Net sales
BPS Change (1)
Cost of sales, exclusive of depreciation and amortization $ 295,220 36.0% $ 344,541 39.9% (390)
Thirty-nine Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net Sales % of Net Sales
BPS Change (1)
Cost of sales, exclusive of depreciation and amortization $ 791,154 39.5% $ 976,868 40.1% (60)

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

~~For the third quarter of Fiscal 2020,~~2021, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased by approximately ~~390~~360 basis points as compared to the ~~third quarter~~year-to-date period of Fiscal ~~2019.~~2020. The year-over-year decline was primarily attributable to increased average unit retail on reduced promotions and ~~lower average unit cost, benefiting from inventory shrink favorability and changes in foreign currency exchange rates.~~

For the year-to-date period of Fiscal 2020, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased by approximately 60 basis points as compared to the year-to-date period of Fiscal 2019. The year-over-year decline reflects benefits from inventory shrink favorability and changes in foreign currency exchange rates, as well as adverse impacts related to charges reducing the carrying value of inventory during the first quarter of Fiscal 2020 of approximately $15 million.markdowns.

Gross profit, exclusive of depreciation and amortization

Thirteen Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net sales % of Net sales
BPS Change (1)
Gross profit, exclusive of depreciation and amortization $ 524,433 64.0% $ 518,931 60.1% 390
Thirty-nine Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net Sales % of Net Sales
BPS Change (1)
Gross profit, exclusive of depreciation and amortization $ 1,212,186 60.5% $ 1,461,654 59.9% 60

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


	Thirteen Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net sales			% of Net sales	BPS Change
Gross profit, exclusive of depreciation and amortization	$	576,244	63.7%	$	524,433	64.0%	(30)



	Thirty-nine Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net Sales			% of Net Sales	BPS Change
Gross profit, exclusive of depreciation and amortization	$	1,634,863	64.1%	$	1,212,186	60.5%	360

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Stores and distribution expense

Thirteen Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net sales % of Net sales
BPS Change (1)
Stores and distribution expense $ 346,263 42.2% $ 377,697 43.7% (150)
Thirty-nine Weeks Ended
November 2, 2019 November 3, 2018
(in thousands) % of Net Sales % of Net Sales
BPS Change (1)
Stores and distribution expense $ 978,757 48.9% $ 1,110,656 45.5% 340

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


	Thirteen Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net sales			% of Net sales	BPS Change
Stores and distribution expense	$	351,804	38.9%	$	346,263	42.2%	(330)


	Thirty-nine Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net Sales			% of Net Sales	BPS Change
Stores and distribution expense	$	994,347	39.0%	$	978,757	48.9%	(990)

For the third quarter of Fiscal ~~2020,~~2021, stores and distribution expense ~~decreased 8%~~increased 2% as compared to the third quarter of Fiscal ~~2019,~~2020, primarily driven by a ~~$24~~$13 million increase in digital sales marketing expense, a $5 million increase in digital direct expense, and a $3 million increase in digital shipping and handling expenses, reflecting 8% year-over-year digital sales growth. These increases were partially offset by a $19 million reduction in store occupancy expense reflecting a decrease in store count and a $11 million reduction in payroll expense, which was net of a benefit of $3 million related to expected government subsidies in certain jurisdictions where the Company qualifies, reflecting the impact of COVID-19 on operations including temporary store closures. These reductions in expense were partially offset by a $10 million increase in shipping and fulfillment expense related to 43% year-over-year digital sales growth.favorable rent negotiations.

For the year-to-date period of Fiscal ~~2020,~~2021, stores and distribution expense ~~decreased 12%~~increased 2% as compared to the year-to-date period of Fiscal ~~2019,~~2020, primarily driven by a ~~$77~~$36 million ~~reduction~~increase in store payroll expense, ~~which was net~~reflecting the return of certain expenses saved last year from COVID-19 temporary store closures, a ~~benefit of~~$24 million increase in digital sales marketing expense, and a $15 million ~~related to expected government subsidies~~increase in ~~certain jurisdictions where the Company qualifies,~~digital shipping and handling expense reflecting 14% year-over-year digital sales growth. These increases were partially offset by a ~~$64~~$75 million reduction in store occupancy expense reflecting ~~the impact of COVID-19 on operations including temporary~~a decrease in store ~~closures. These reductions~~count and favorable rent negotiations and include approximately $18 million in ~~expense were partially offset by a $31 million increase in shipping and fulfillment expense~~benefits related to ~~42% year-over-year digital sales growth.~~rent abatements and a favorable resolution of a flagship store closure.

Marketing, general and administrative expense

Thirteen Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net sales % of Net sales
BPS Change (1)
Marketing, general and administrative expense $ 121,000 14.8% $ 114,075 13.2% 160
Thirty-nine Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net Sales % of Net Sales
BPS Change (1)
Marketing, general and administrative expense $ 326,509 16.3% $ 341,716 14.0% 230

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


	Thirteen Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net sales			% of Net sales	BPS Change
Marketing, general and administrative expense	$	146,269	16.2%	$	121,000	14.8%	140


	Thirty-nine Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net Sales			% of Net Sales	BPS Change
Marketing, general and administrative expense	$	391,129	15.3%	$	326,509	16.3%	(100)

For the third quarter of Fiscal ~~2020,~~2021, marketing, general and administrative expense increased 6%21% as compared to the third quarter of Fiscal ~~2019,~~2020, primarily driven by ~~an increase in payroll expense as a result of higher~~increased digital media spend, performance-based compensation, ~~expense,~~legal, consulting and information technology expense. These increases were partially offset by ~~lower non-customer facing and in-store marketing costs.~~a decrease in depreciation expense.

For the year-to-date period of Fiscal ~~2020,~~2021, marketing, general and ~~administrative~~administration expense ~~decreased 4%~~increased 20% as compared to the year-to-date period of Fiscal ~~2019,~~2020, primarily by driven by ~~lower marketing~~increased digital media spend, performance-based compensation, legal, consulting and ~~other controllable expenses,~~information technology expense. These increases were partially offset by ~~an increase~~a decrease in ~~payroll expense as a result of higher performance-based compensation~~depreciation expense.

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Flagship store exit charges (benefits) ~~charges~~

Thirteen Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net sales % of Net sales
BPS Change (1)
Flagship store exit (benefits) charges $ (8,063) (1.0)% $ 285 —% (100)
Thirty-nine Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net Sales % of Net Sales
BPS Change (1)
Flagship store exit (benefits) charges $ (12,490) (0.6)% $ 47,023 1.9% (250)

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


	Thirteen Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net sales			% of Net sales	BPS Change
Flagship store exit charges (benefits)	$	11	—%	$	(8,063)	(1.0)%	100


	Thirty-nine Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net Sales			% of Net Sales	BPS Change
Flagship store exit charges (benefits)	$	(1,177)	—%	$	(12,490)	(0.6)%	60

Flagship store exit benefits in Fiscal 2020 primarily relate to the planned closure of several international Abercrombie & Fitch flagship stores. Flagship store exit charges for Fiscal 2019 primarily relate to the closure of the Company’s SoHo, New York City Hollister flagship store. Refer to Note ~~17,~~16, “FLAGSHIP STORE EXIT ~~(BENEFITS) CHARGES~~CHARGE S (BENEFITS).”

Asset impairment ~~exclusive of flagship store exit charges~~

Thirteen Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net sales % of Net sales
BPS Change (1)
Asset impairment, exclusive of flagship store exit charges $ 6,329 0.8% $ 12,610 1.5% (70)
Excluded items:
Asset impairment charges (2)
(6,329) (0.8)% (10,468) (1.2)% 40
Adjusted non-GAAP asset impairment, exclusive of flagship store exit charges $ — 0.0% $ 2,142 0.2% (20)
Thirty-nine Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net Sales % of Net Sales
BPS Change (1)
Asset impairment, exclusive of flagship store exit charges $ 57,340 2.9% $ 14,987 0.6% 230
Excluded items:
Asset impairment charges (2)
(57,340) (2.9)% (10,468) (0.4)% (250)
Adjusted non-GAAP asset impairment, exclusive of flagship store exit charges $ — 0.0% $ 4,519 0.2% (20)


	Thirteen Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net sales			% of Net sales	BPS Change
Asset impairment	$	6,749	0.7%	$	6,329	0.8%	(10)
Excluded items:
Asset impairment charges (1)	(6,749)		(0.7)%	(6,329)		(0.8)%	10
Adjusted non-GAAP asset impairment	$	—	0.0%	$	—	—%	—


	Thirty-nine Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net Sales			% of Net Sales	BPS Change
Asset impairment	$	10,199	0.4%	$	57,340	2.9%	(250)
Excluded items:
Asset impairment charges (1)	(10,199)		(0.4)%	(57,340)		(2.9)%	250
Adjusted non-GAAP asset impairment	$	—	0.0%	$	—	—%	—

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

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

Refer to Note 9, “ASSET IMPAIRMENT.”

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

Thirteen Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net sales % of Net sales
BPS Change (1)
Other operating (loss) income, net $ (288) —% $ 215 —% —
Thirty-nine Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net Sales % of Net Sales
BPS Change (1)
Other operating income, net $ 1,562 0.1% $ 465 —% 10

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


	Thirteen Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net sales			% of Net sales	BPS Change
Other operating income (loss), net	$	1,320	0.1%	$	(288)	—%	(10)


	Thirty-nine Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net Sales			% of Net Sales	BPS Change
Other operating income, net	$	4,586	0.2%	$	1,562	0.1%	10

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Operating income (loss)


		Thirteen Weeks Ended								Thirteen Weeks Ended
		October 31, 2020			November 2, 2019					October 30, 2021			October 31, 2020
(in thousands)	(in thousands)			% of Net sales			% of Net sales	BPS Change (1)	(in thousands)			% of Net sales			% of Net sales	BPS Change
Operating income	Operating income	$	58,616	7.2%	$	14,479	1.7%	550	Operating income	$	72,731	8.0%	$	58,616	7.2%	80
Excluded items:	Excluded items:								Excluded items:
Asset impairment charges (2)		6,329		0.8%	10,468		1.2%	(40)

Asset impairment charges (1)									Asset impairment charges (1)	6,749		0.7%	6,329		0.8%	(10)
Adjusted non-GAAP operating income	Adjusted non-GAAP operating income	$	64,945	7.9%	$	24,947	2.9%	500	Adjusted non-GAAP operating income	$	79,480	8.8%	$	64,945	7.9%	90

		Thirty-nine Weeks Ended								Thirty-nine Weeks Ended
		October 31, 2020			November 2, 2019					October 30, 2021			October 31, 2020
(in thousands)	(in thousands)			% of Net Sales			% of Net Sales	BPS Change (1)	(in thousands)			% of Net Sales			% of Net Sales	BPS Change
Operating loss		$	(136,368)	(6.8)%	$	(52,263)	(2.1)%	(470)
Operating income (loss)									Operating income (loss)	$	244,951	9.6%	$	(136,368)	(6.8)%	1,640
Excluded items:	Excluded items:								Excluded items:
Asset impairment charges (2)		57,340		2.9%	10,468		0.4%	250
Asset impairment charges (1)									Asset impairment charges (1)	10,199		0.4%	57,340		2.9%	(250)

Adjusted non-GAAP operating loss		$	(79,028)	(3.9)%	$	(41,795)	(1.7)%	(220)
Adjusted non-GAAP operating income (loss)									Adjusted non-GAAP operating income (loss)	$	255,150	10.0%	$	(79,028)	(3.9)%	1,390

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

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

Interest expense, net

Thirteen Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net sales % of Net sales
BPS Change (1)
Interest expense $ 9,408 1.1% $ 5,500 0.6% 50
Interest income (600) (0.1)% (2,578) (0.3)% 20
Interest expense, net $ 8,808 1.1% $ 2,922 0.3% 80
Thirty-nine Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net Sales % of Net Sales
BPS Change (1)
Interest expense $ 22,242 1.1% $ 14,518 0.6% 50
Interest income (2,965) (0.1)% (9,610) (0.4)% 30
Interest expense, net $ 19,277 1.0% $ 4,908 0.2% 80

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


	Thirteen Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net sales			% of Net sales	BPS Change
Interest expense	$	7,802	0.9%	$	9,408	1.1%	(20)
Interest income	(532)		(0.1)%	(600)		(0.1)%	—
Interest expense, net	$	7,270	0.8%	$	8,808	1.1%	(30)


	Thirty-nine Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net Sales			% of Net Sales	BPS Change
Interest expense	$	30,505	1.2%	$	22,242	1.1%	10
Interest income	(3,354)		(0.1)%	(2,965)		(0.1)%	—
Interest expense, net	$	27,151	1.1%	$	19,277	1.0%	10

For the third quarter of Fiscal ~~2020,~~2021, interest expense, net ~~increased $5.9~~decreased $1.5 million as compared to the third quarter of Fiscal ~~2019.~~ 2020, primarily driven by lower interest expense as a result of lower borrowings in the current quarter due to the purchase of Senior Secured Notes in the second quarter of Fiscal 2021, as well as the settlement of a lease liability related to a previously closed store.

For the year-to-date period of Fiscal ~~2020,~~2021, interest expense, net increased ~~$14.4~~$7.9 million as compared to the year-to-date period of Fiscal ~~2019.~~

2020. The increase in interest expense, net, ~~for the aforementioned periods~~ is primarily driven by the loss on the extinguishment of debt related to the purchase of Senior Secured Notes and higher interest expense in the current year, reflecting ~~incremental expense in connection with the issuance of the Senior Secured Notes and an increase in~~higher average borrowings outstanding at a higher interest ~~expense related to certain of the Company’s long-term obligations, as well as lower interest income earned on the Company’s investments and cash holdings.~~rate.

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Income tax expense ~~(benefit)~~

Thirteen Weeks Ended
October 31, 2020 November 2, 2019
(in thousands, except ratios) Effective Tax Rate Effective Tax Rate
Income tax expense $ 5,779 11.6% $ 3,987 34.5%
Excluded items:
Tax effect of pre-tax excluded items (1)
369 2,485
Adjusted non-GAAP income tax expense $ 6,148 11.0% $ 6,472 29.4%
Thirty-nine Weeks Ended
October 31, 2020 November 2, 2019
(in thousands, except ratios) Effective Tax Rate Effective Tax Rate
Income tax expense (benefit) $ 38,565 (24.8)% $ (16,931) 29.6%
Deduct:
Tax effect of pre-tax excluded items (1)
3,635 2,485
Adjusted non-GAAP income tax expense (benefit) $ 42,200 (42.9)% $ (14,446) 30.9%


	Thirteen Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands, except ratios)			Effective Tax Rate			Effective Tax Rate
Income tax expense	$	16,383	25.0%	$	5,779	11.6%
Excluded items:
Tax effect of pre-tax excluded items (1)	1,375			369
Adjusted non-GAAP income tax expense	$	17,758	24.6%	$	6,148	11.0%




	Thirty-nine Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands, except ratios)			Effective Tax Rate			Effective Tax Rate
Income tax expense	$	15,560	7.1%	$	38,565	(24.8)%
Excluded items:
Tax effect of pre-tax excluded items (1)	2,048			3,635
Adjusted non-GAAP income tax expense	$	17,608	7.7%	$	42,200	(42.9)%

(1) 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. Refer to “Operating income (loss)” for details of pre-tax excluded items.

The Company’s effective tax rate for the year-to-date period of Fiscal 2020 was impacted by $77.4 million of adverse tax impacts, ultimately giving rise to income tax expense on a consolidated pre-tax loss. These adverse tax impacts are as follows:

•The Company did not recognize income tax benefits on $180.7 million of pre-tax losses generated in the thirty-nine weeks ended October 31, 2020 in certain jurisdictions as the Company currently anticipates pre-tax losses in these jurisdictions for the fiscal year, resulting in adverse tax impacts of $41.8 million.

•The Company recognized discrete charges of $35.6 million related to the establishment of valuation allowances and other tax charges in certain jurisdictions, including, but not limited to Switzerland, Germany and the U.S. principally as a result of the significant adverse impacts of COVID-19.

Refer to Note ~~11,~~10, “INCOME TAXES.”

Net income (loss) attributable to A&F

Thirteen Weeks Ended
October 31, 2020 November 2, 2019
(in thousands) % of Net sales % of Net sales
BPS Change (1)
Net income attributable to A&F $ 42,271 5.2% $ 6,523 0.8% 440
Excluded items, net of tax (2)
5,960 0.7% 7,983 0.9% (20)
Adjusted non-GAAP net income attributable to A&F $ 48,231 5.9% $ 14,506 1.7% 420
Thirty-nine Weeks Ended
October 31, 2020 (3)
November 2, 2019
(in thousands) % of Net Sales % of Net Sales
BPS Change (1)
Net loss attributable to A&F $ (196,413) (9.8)% $ (43,774) (1.8)% (800)
Excluded items, net of tax (2)
53,705 2.7% 7,983 0.3% 240
Adjusted non-GAAP net loss attributable to A&F $ (142,708) (7.1)% $ (35,791) (1.5)% (560)

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

~~(2)~~ ~~Excluded items presented above under “Operating income (loss),” and “Income tax expense (benefit).~~”

~~(3)~~ ~~Results for Fiscal 2020 reflect significant adverse tax impacts related to valuation allowances on deferred tax assets and other tax charges. Refer to Note 11, “INCOME TAXES~~.”

~~Table of Contents~~

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

Thirteen Weeks Ended
October 31, 2020 November 2, 2019 $ Change
Net income per diluted share attributable to A&F $ 0.66 $ 0.10 $0.56
Excluded items, net of tax (1)
$ 0.09 $ 0.12 $(0.03)
Adjusted non-GAAP net income per diluted share attributable to A&F $ 0.76 $ 0.23 $0.53
Impact from changes in foreign currency exchange rates $ — $ 0.15 $(0.15)
Adjusted non-GAAP net income per diluted share attributable to A&F on a constant currency basis $ 0.76 $ 0.37 $0.39
Thirty-nine Weeks Ended
October 31, 2020 (2)
November 2, 2019 $ Change
Net loss per diluted share attributable to A&F $ (3.14) $ (0.67) $(2.47)
Excluded items, net of tax (1)
$ 0.86 $ 0.12 $0.74
Adjusted non-GAAP net loss per diluted share attributable to A&F $ (2.28) $ (0.55) $(1.73)
Impact from changes in foreign currency exchange rates $ — $ 0.12 $(0.12)
Adjusted non-GAAP net loss per diluted share attributable to A&F on a constant currency basis $ (2.28) $ (0.43) $(1.85)


	Thirteen Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net sales			% of Net sales	BPS Change
Net income attributable to A&F	$	47,233	5.2%	$	42,271	5.2%	—
Excluded items, net of tax (1)	5,374		0.6%	5,960		0.7%	(10)
Adjusted non-GAAP net income attributable to A&F (2)	$	52,607	5.8%	$	48,231	5.9%	(10)


	Thirty-nine Weeks Ended
	October 30, 2021			October 31, 2020
(in thousands)			% of Net Sales			% of Net Sales	BPS Change
Net income (loss) attributable to A&F	$	197,501	7.7%	$	(196,413)	(9.8)%	1,750
Excluded items, net of tax (1)	8,151		0.3%	53,705		2.7%	(240)
Adjusted non-GAAP net income (loss) attributable to A&F (2)	$	205,652	8.1%	$	(142,708)	(7.1)%	1,520

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

(2)~~Results for Fiscal 2020 reflect significant adverse tax impacts related to valuation allowances on deferred tax assets and other tax charges.~~ Refer to ~~Note 11,~~ “~~INCOME TAXES~~NON-GAAP FINANCIAL MEASURES.,” for further details.

Table of Contents

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


	Thirteen Weeks Ended
	October 30, 2021		October 31, 2020		$ Change
Net income per diluted share attributable to A&F	$	0.77	$	0.66	$0.11
Excluded items, net of tax (1)	$	0.09	$	0.09	$—
Adjusted non-GAAP net income per diluted share attributable to A&F	$	0.86	$	0.76	$0.10
Impact from changes in foreign currency exchange rates	$	—	$	(0.05)	$0.05
Adjusted non-GAAP net income per diluted share attributable to A&F on a constant currency basis (2)	$	0.86	$	0.71	$0.15

	Thirty-nine Weeks Ended
	October 30, 2021		October 31, 2020		$ Change
Net income (loss) per diluted share attributable to A&F	$	3.10	$	(3.14)	$6.24
Excluded items, net of tax (1)	$	0.13	$	0.86	$(0.73)
Adjusted non-GAAP net income (loss) per diluted share attributable to A&F	$	3.22	$	(2.28)	$5.50
Impact from changes in foreign currency exchange rates	$	—	$	(0.02)	$0.02
Adjusted non-GAAP net income (loss) per diluted share attributable to A&F on a constant currency basis (2)	$	3.22	$	(2.30)	$5.52

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

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

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LIQUIDITY AND CAPITAL RESOURCES

Overview

The Company’s capital allocation strategy, priorities and investments are reviewed by A&F’s Board of Directors considering both liquidity and valuation factors. ~~The Company’s current capital allocation strategy is to prioritize navigating the near-term challenges that COVID-19 presents and continuing to fund operating activities.~~ The Company believes that it will have adequate liquidity to fund operating activities over the next 12 months.

Primary sources and uses of cash

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”). The Company generally experiences its greatest sales activity during the Fall season, due to the 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 the ABL Facility available as a source of additional funding, which is described further below under “Credit facilities and Senior Secured Notes”.

As a precautionary measure in response to COVID-19, in March 2020, the Company borrowed $210.0 million under the ABL Facility to improve its near-term cash position and withdrew the majority of excess funds from the overfunded Rabbi Trust assets, providing the Company with $50.0 million of additional cash. In July 2020, the Company completed the issuance of the Senior Secured Notes and received gross proceeds of $350.0 million. The Company used the net proceeds from the offering of the Senior Secured Notes, along with existing cash on hand, to repay outstanding borrowings and accrued interest under the Term Loan Facility and the ABL Facility, with the remaining net proceeds used towards fees and expenses in connection with such repayments and the offering of the Senior Secured Notes.

Over the next twelve months, the Company expects its primary cash requirements to be directed towards ~~funding~~prioritizing investments in the business and continuing to fund operating activities, including the acquisition of inventory, and obligations related to compensation, marketing, leases and any lease buyouts or modifications it may exercise, taxes and other operating activities. The Company entered this period of uncertainty with a healthy liquidity position and has taken and continues to take immediate, aggressive and prudent actions, including reevaluating all expenditures, in order to balance the Company’s short and long-term liquidity needs and best position the business for key stakeholders.

The Company ~~also~~ evaluates opportunities for investments in the business that are in line with ~~its key transformation~~ initiatives ~~which have positioned~~that position the business ~~to quickly respond to~~for sustainable long-term growth that align with its strategic pillars as described within “ITEM 1. BUSINESS - STRATEGY AND KEY BUSINESS PRIORITIES” of A&F’s Annual Report on Form 10-K for Fiscal 2020, including being opportunistic regarding growth opportunities, such as launching the ~~COVID-19 pandemic, and strives~~Social Tourist brand. Examples of potential investment opportunities include, but are not limited to, ~~invest in projects that have high expected returns. These improvements may include~~ new store experiences ~~or investments in its omnichannel initiatives or loyalty programs. In addition, the Company evaluates store closures, including flagship lease buyouts~~ and options to early terminate store ~~leases.~~leases, investments in its omnichannel initiatives and investments to increase the Company’s capacity to fulfill digital orders. Historically, the Company has utilized free cash flow generated from operations to fund any discretionary capital expenditures, which have been prioritized towards new store experiences, as well as digital and omnichannel investments, information technology, and other projects. For the year-to-date period ended October ~~31, 2020,~~30, 2021, the Company used ~~$91.7~~$62.2 million towards capital expenditures. Total capital expenditures for Fiscal ~~2020~~2021 are expected to be approximately ~~$110~~$100 million ~~down from $202.8~~as compared to $101.9 million of capital expenditures in Fiscal ~~2019.~~2020.

The Company entered Fiscal 2021 in a strong financial position, with cash and cash equivalents of $1.1 billion and total liquidity of approximately $1.3 billion. This allows the Company to evaluate potential opportunities to strategically deploy excess cash and delever the balance sheet, depending on various factors, such as market and business conditions, including the Company’s ability to accelerate investments in the business. Such opportunities include, but are not limited to, returning cash to shareholders through share repurchases or repurchasing outstanding senior secured notes.

Share repurchases and dividends

In order to preserve liquidity and maintain financial flexibility in light of COVID-19, in March 2020, the Company announced that it had temporarily suspended its share repurchase program and in May 2020, the Company announced that it had temporarily suspended its dividend program.

The Company ~~will~~has since resumed share repurchases and may repurchase shares in the future, dependent on various factors, such as market and business conditions, including the Company’s ability to accelerate investments in the business. In November 2021, the A&F Board of Directors approved a new $500 million share repurchase authorization, replacing the prior 2021 share repurchase authorization of 10.0 million shares, which had approximately 3.9 million shares remaining available. Historically, the Company has repurchased shares of its Common Stock from time to time, dependent on market and business conditions, with the objectives of offsetting dilution from issuances of Common Stock associated with the exercise of employee stock appreciation rights and the vesting of restricted stock units and returning excess cash to shareholders. Shares may be repurchased in the open market, including pursuant to trading plans established in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), through privately negotiated transactions or other transactions or by a combination of such methods. Refer to “ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS” of Part II of this Quarterly Report on Form 10-Q for the amount remaining available for purchase under the Company’s publicly announced stock repurchase authorization.

The Company may in the future review ~~these temporary suspensions throughout the year~~its dividend program to determine, in light of facts and circumstances at that time, whether and when to ~~reinstate these programs.~~

~~Dividends~~reinstate. Any dividends are declared at the discretion of A&F’s Board of Directors. A quarterly dividend, of $0.20 per share outstanding, was declared in February for Fiscal 2020 and in each of February, May, August and November in Fiscal 2019 and Fiscal 2018. Dividends were paid in March for Fiscal 2020, and each of March, June, September and December in Fiscal 2019 and Fiscal 2018. A&F’s Board of Directors reviews ~~the dividend on a quarterly basis~~ and establishes ~~the~~a dividend amount, if any, based on A&F’s financial condition, results of operations, capital requirements, current and projected cash flows, business prospects and other factors, including the potential severity of impacts to the business resulting from COVID-19 and any restrictions ~~related to~~under the Company’s agreements related to the Senior Secured Notes and the ABL Facility. A quarterly dividend, of $0.20 per share outstanding, was declared in February and paid in March of Fiscal 2020. There can be no assurance that the Company will ~~reinstate its dividend program~~pay dividends in the future or, if dividends are paid, that they will be in amounts similar to past dividends.

Historically, the Company has repurchased 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 rights and the 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 Exchange Act, through privately negotiated transactions or other transactions or by a combination of such methods. Refer to “~~ITEM 2. UNREGISTERED SALES~~

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~~OF EQUITY SECURITIES AND USE OF PROCEEDS” of Part II of this Quarterly Report on Form 10-Q for the number of shares remaining available for purchase under the Company’s June 2019 publicly announced stock repurchase authorization.~~

Credit facilities and Senior Secured Notes

In July 2020, the Company completed the private offering of the Senior Secured Notes, and received gross proceeds of $350.0 million. The Senior Secured Notes will mature on July 15, 2025 and bear interest at a rate of 8.75% per annum, with semi-annual interest payments ~~beginning~~which began in January 2021. The Company’s debt related to the Senior Secured Notes is presented on the Condensed Consolidated Balance ~~Sheet,~~Sheets, net of the unamortized fees. During the thirty-nine weeks ended October 30, 2021, the Company repurchased $42.3 million of its outstanding Senior Secured Notes and incurred $5.3 million of loss on extinguishment of debt, comprised of a premium of $4.7 million and the write-off of unamortized fees of $0.6 million. As of October ~~31, 2020,~~30, 2021, the Company had ~~$350.0~~$307.7 million of gross borrowings outstanding under the Senior Secured Notes.

In addition, the ABL Facility provides for a senior secured asset-based revolving credit facility of up to $400 million. As of October ~~31, 2020,~~30, 2021, the Company did not have any borrowings outstanding under the ABL Facility. The ABL Facility matures on ~~October 19, 2022.~~April 29, 2026.

Details regarding the remaining borrowing capacity under the ABL Facility as of October ~~31, 2020~~30, 2021 are as follows:


(in thousands)	October ~~31, 2020~~30, 2021
Borrowing base	$	~~384,544~~301,850
Less: Outstanding stand-by letters of credit	~~(847)~~(827)
Borrowing capacity	~~383,697~~301,023
Less: Minimum excess availability (1)	~~(38,454)~~(30,185)
~~Actual incremental borrowing~~Borrowing available	$	~~345,243~~270,838

(1) The Company must maintain excess availability equal to the greater of 10% of the loan cap or $30 million under the ABL Facility.

Refer to Note ~~12,~~11, “BORROWINGS.”

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 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 would expect to incur an insignificant amount of state income taxes and foreign withholding taxes. The Company accrues for both state income taxes and foreign withholding taxes with respect to earnings and profits earned after February 2, 2019, in such a manner that these funds could be repatriated without incurring additional ~~taxes.~~

tax expense. As of October ~~31, 2020, $316.4~~30, 2021, $405.5 million of the Company’s ~~$812.9~~$865.6 million of cash and equivalents were held by foreign affiliates. The Company is not dependent on dividends from its foreign affiliates to fund its U.S. operations or pay dividends, if any, to A&F’s stockholders.

Refer to Note ~~11,~~10, “INCOME TAXES.”

Analysis of cash flows

The table below provides certain components of the Company’s Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended October 30, 2021 and October 31, ~~2020 and November 2, 2019:~~2020:


		Thirty-nine Weeks Ended					Thirty-nine Weeks Ended
		October 31, 2020		November 2, 2019			October 30, 2021		October 31, 2020
(in thousands)	(in thousands)					(in thousands)
Cash and equivalents, and restricted cash and equivalents, beginning of period	Cash and equivalents, and restricted cash and equivalents, beginning of period	$	692,264	$	745,829	Cash and equivalents, and restricted cash and equivalents, beginning of period	$	1,124,157	$	692,264
Net cash provided by (used for) operating activities		158,894		(33,839)
Net cash provided by operating activities						Net cash provided by operating activities	131,287		108,894
Net cash used for investing activities	Net cash used for investing activities	(91,748)		(154,373)		Net cash used for investing activities	(62,223)		(41,748)
Net cash provided by (used for) financing activities		70,129		(122,908)
Net cash (used for) provided by financing activities						Net cash (used for) provided by financing activities	(304,358)		70,129
Effect of foreign currency exchange rates on cash	Effect of foreign currency exchange rates on cash	2,269		(2,686)		Effect of foreign currency exchange rates on cash	(8,560)		2,269
Net increase (decrease) in cash and equivalents, and restricted cash and equivalents		139,544		(313,806)
Net (decrease) increase in cash and equivalents, and restricted cash and equivalents						Net (decrease) increase in cash and equivalents, and restricted cash and equivalents	(243,854)		139,544
Cash and equivalents, and restricted cash and equivalents, end of period	Cash and equivalents, and restricted cash and equivalents, end of period	$	831,808	$	432,023	Cash and equivalents, and restricted cash and equivalents, end of period	$	880,303	$	831,808

Operating activities - ~~The year-over-year change in operating cash flows was primarily due to actions taken by~~During the year-to-date period ended October 30, 2021, the Company recognized higher cash receipts as compared to the year-to-date period ended October 31, 2020 as a result of the 27% year-over-year increase in net sales as the Company experienced widespread temporary store closures in response to COVID-19 during Fiscal 2020.

The Company also took various immediate, aggressive actions during Fiscal 2020 to preserve liquidity and manage cash flows in light of COVID-19 in order to best position the business for key stakeholders, including, but not limited ~~to:~~to (i) partnering with

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•~~Partnering with~~ merchandise and non-merchandise vendors ~~regarding~~in regards to payment terms;

•~~Reducing and altering the cadence of~~ (ii) tightly managing inventory receipts to align inventory with expected market demand;

•~~Reducing~~ and (iii) significantly reducing expenses to better align operating costs with ~~sales;~~

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•~~Withdrawing $50.0 million from the overfunded Rabbi Trust assets, which represented the majority of excess funds; and~~

•~~Suspending~~sales. The Company also suspended rent payments for a ~~significant number~~larger proportion of its stores in Fiscal 2020 than it has in Fiscal 2021 related to stores that were closed for a period of time ~~during Fiscal 2020~~ as a result of ~~COVID-19, which, coupled with rent abatements and changes in payment cadence, attributed to a year-over-year decrease in cash paid for operating lease liabilities.~~

These benefits to operating cash flows were partially offset by lower cash receipts as a result of the 18% decrease in net sales from last year driven by temporary store closures and a decline in store traffic in response to COVID-19 during Fiscal 2020.

~~The Company continues to engage with its landlords to find a mutually beneficial and agreeable path forward.In addition, despite the Company's recent history of partnering with its vendors regarding payment terms, certain~~COVID-19. Certain payment term extensions were temporary and certain previously deferred payments have since been made. There can be no assurance that the Company will be able to maintain extended payment terms or continue to defer payments, which may result in incremental operating cash outflows in future periods.

In addition, during the year-to-date period ended October 30, 2021, the Company finalized an agreement with and paid its landlord partner to settle all remaining obligations related to the SoHo Hollister flagship store in New York City, which closed during the second quarter of Fiscal 2019. Prior to this new agreement, the Company was required to make payments in aggregate of $80.1 million pursuant to the lease agreements through Fiscal 2028. The new agreement resulted in an acceleration of payments and provided for a discount resulting in an operating cash outflow of $63.8 million during the year-to-date period ended October 30, 2021.

Investing activities - ~~For~~During the ~~thirty-nine weeks~~year-to-date period ended October ~~31, 2020,~~30, 2021, net cash outflows for investing activities were used for capital expenditures of ~~$91.7~~$62.2 million as compared to ~~$154.4~~$91.7 million for the ~~thirty-nine weeks~~year-to-date period ended ~~November 2, 2019, reflecting actions taken in Fiscal~~October 31, 2020. In addition, the year-to-date period ended October 31, 2020, ~~to preserve liquidity and manage~~reflects the withdrawal of $50.0 million from the overfunded Rabbi Trust assets, which represented the majority of excess funds, improving the Company’s near-term cash ~~flows~~position in light of ~~the COVID-19 pandemic.~~COVID-19.

Financing activities - ~~For~~During the ~~thirty-nine weeks~~year-to-date period ended October 30, 2021, net cash used by financing activities included the purchase of $42.3 million of outstanding Senior Secured Notes at a premium of $4.7 million. During the year-to-date period ended October 31, 2020, net cash provided by financing activities primarily consisted of the issuance of the Senior Secured Notes and receipt of related gross proceeds of $350.0 million and borrowings under the ABL Facility of $210.0 million. The gross proceeds from the Senior Secured Notes offering were used along with existing cash on hand, to repay all then outstanding borrowings and accrued interest under the Term Loan Facility and ABL Facility, with the remaining net proceeds used towards fees and expenses in connection with such repayments and the offering. In addition, the Company returned $27.7 million to shareholders through share repurchases and dividends during the ~~thirty-nine weeks~~year-to-date period ended October 31, 2020, prior to the Company’s decision to temporarily suspend its share repurchase and dividend programs in light of ~~COVID-19, as compared to $102.5~~COVID-19. The Company resumed share repurchase activity beginning March 2021 and repurchased approximately 6.1 million shares of A&F’s Common Stock with a market value of approximately $235.2 million during the ~~thirty-nine weeks~~year-to-date period ended ~~November 2, 2019.~~October 30, 2021.

Off-balance sheet arrangements

As of October ~~31, 2020,~~30, 2021, the Company did not have any material off-balance sheet arrangements.

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 thirteen weeks ended August 1, 2020, the Company issued the Senior Secured Notes, which mature in July 2025. The Company received $350.0 million in proceeds from this transaction and repaid all outstanding borrowings under the ABL Facility and the Term Loan Facility. Based on the aggregate principal amount of the Senior Secured Notes outstanding as of October 31, 2020, estimated interest payments related to the Senior Secured Notes are as follows:

(in thousands) Total Fiscal 2020 Fiscal 2021-Fiscal 2023 Fiscal 2024-Fiscal 2025 Fiscal 2026 and thereafter
Interest payments due by period $ 154,231 $ 16,418 $ 91,875 $ 45,938 $ —

There have been no material changes during the thirteen weeks ended October ~~31, 2020~~30, 2021 in the contractual obligations as of ~~February 1, 2020,~~January 30, 2021, 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 ~~2019.~~2020. The Company reviews recent accounting pronouncements on a quarterly basis and has excluded discussion of those not applicable to the Company and those that did not have, or are not expected to have, a material impact on the Company’s consolidated financial statements.

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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 ~~2019.~~2020. There have been no significant changes in critical accounting policies and estimates since the end of Fiscal ~~2019.~~

In Fiscal 2020, the Company incurred significant asset impairment charges which were principally the result of the impact of COVID-19 and were related to certain of the Company’s stores across brands, geographies and store formats. Additional details regarding the Company's long-lived assets are as follows:


~~Policy~~						~~Effect if Actual Results Differ from Assumptions~~
~~Long-lived Assets~~
Long-lived assets, primarily operating 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 store 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. Fair value of the Company’s store-related assets is determined at the individual store level based on the highest and best use of the asset group. The key assumptions used in the Company’s fair value analysis may include discounted future store cash flows and comparable market rents.						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 as of October 31, 2020 and not impaired, had long-lived assets with a net book value of $132.2 million, which included $108.8 million of operating lease right-of-use assets, as of October 31, 2020. Store assets that were previously impaired as of October 31, 2020, had a remaining net book value of $124.8 million, which included $114.1 million of operating lease right-of-use assets, as of October 31, 2020.

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NON-GAAP FINANCIAL MEASURES

This Quarterly Report on Form 10-Q includes discussion of certain financial measures calculated and presented 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 domay not reflect its future operating outlook, such as certain asset impairment charges related to the Company’s flagship stores and significant impairments primarily attributable to the COVID-19 pandemic, ~~therefore~~thereby supplementing 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

At times, the Company provides comparable sales, defined as the year-over-year percentage change in the aggregate of (1) net 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) digital net 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 digital sales. Management uses comparable sales to understand the drivers of year-over-year changes in net sales and 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. In light of store closures related to COVID-19, the Company has not disclosed comparable sales for Fiscal ~~2020.~~2020 or Fiscal 2021.

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
Asset impairment ~~exclusive of flagship store exit charges~~						~~Certain asset~~Asset impairment charges
Operating income (loss)						~~Certain asset~~Asset impairment charges
Income tax expense ~~(benefit)~~ (2)						Tax effect of pre-tax excluded items
Net income (loss) and net income (loss) per share attributable to A&F (2)						Pre-tax excluded items 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 tax effect of excluded items is the difference between the tax provision calculation on a GAAP basis and on an adjusted non-GAAP basis.

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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 is calculated using a 26% effective tax rate.

A reconciliation of non-GAAP financial metrics on a constant currency basis to financial measures calculated and presented in accordance with GAAP for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~ follows:


(in thousands, except change in net sales, gross profit rate, operating margin and per share data)	(in thousands, except change in net sales, gross profit rate, operating margin and per share data)	Thirteen Weeks Ended					Thirty-nine Weeks Ended					(in thousands, except change in net sales, gross profit rate, operating margin and per share data)	Thirteen Weeks Ended					Thirty-nine Weeks Ended
Net sales	Net sales	October 31, 2020		November 2, 2019		% Change	October 31, 2020		November 2, 2019		% Change	Net sales	October 30, 2021		October 31, 2020		% Change	October 30, 2021		October 31, 2020		% Change
GAAP	GAAP	$	819,653	$	863,472	(5)%	$	2,003,340	$	2,438,522	(18)%	GAAP	$	905,160	$	819,653	10%	$	2,551,415	$	2,003,340	27%
Impact from changes in foreign currency exchange rates	Impact from changes in foreign currency exchange rates	—		11,896		(1)%	—		2,948		—%	Impact from changes in foreign currency exchange rates	—		3,540		—%	—		32,518		(2)%
Non-GAAP on a constant currency basis	Non-GAAP on a constant currency basis	$	819,653	$	875,368	(6)%	$	2,003,340	$	2,441,470	(18)%	Non-GAAP on a constant currency basis	$	905,160	$	823,193	10%	$	2,551,415	$	2,035,858	25%
Gross profit, exclusive of depreciation and amortization expense	Gross profit, exclusive of depreciation and amortization expense	October 31, 2020		November 2, 2019		BPS Change (1)	October 31, 2020		November 2, 2019		BPS Change (1)	Gross profit, exclusive of depreciation and amortization expense	October 30, 2021		October 31, 2020		BPS Change (1)	October 30, 2021		October 31, 2020		BPS Change (1)
GAAP	GAAP	$	524,433	$	518,931	390	$	1,212,186	$	1,461,654	60	GAAP	$	576,244	$	524,433	(30)	$	1,634,863	$	1,212,186	360
Impact from changes in foreign currency exchange rates	Impact from changes in foreign currency exchange rates	—		14,779		(90)	—		7,323		(30)	Impact from changes in foreign currency exchange rates	—		(1,702)		50	—		17,861		10
Non-GAAP on a constant currency basis	Non-GAAP on a constant currency basis	$	524,433	$	533,710	300	$	1,212,186	$	1,468,977	30	Non-GAAP on a constant currency basis	$	576,244	$	522,731	20	$	1,634,863	$	1,230,047	370
Operating income (loss)	Operating income (loss)	October 31, 2020		November 2, 2019		BPS Change (1)	October 31, 2020		November 2, 2019		BPS Change (1)	Operating income (loss)	October 30, 2021		October 31, 2020		BPS Change (1)	October 30, 2021		October 31, 2020		BPS Change (1)
GAAP	GAAP	$	58,616	$	14,479	550	$	(136,368)	$	(41,795)	(470)	GAAP	$	72,731	$	58,616	80	$	244,951	$	(136,368)	1,640
Excluded items (2)	Excluded items (2)	(6,329)		(10,468)		50	(57,340)		—		(250)	Excluded items (2)	(6,749)		(6,329)		(10)	(10,199)		(57,340)		250
Adjusted non-GAAP	Adjusted non-GAAP	$	64,945	$	24,947	500	$	(79,028)	$	(41,795)	(220)	Adjusted non-GAAP	$	79,480	$	64,945	90	$	255,150	$	(79,028)	1,390
Impact from changes in foreign currency exchange rates	Impact from changes in foreign currency exchange rates	—		7,410		(80)	—		5,221		20	Impact from changes in foreign currency exchange rates	—		(4,067)		50	—		(1,549)		(10)
Adjusted non-GAAP on a constant currency basis	Adjusted non-GAAP on a constant currency basis	$	64,945	$	32,357	420	$	(79,028)	$	(36,574)	(240)	Adjusted non-GAAP on a constant currency basis	$	79,480	$	60,878	140	$	255,150	$	(80,577)	1,400
Net income (loss) per diluted share attributable to A&F ~~(3)~~	Net income (loss) per diluted share attributable to A&F ~~(3)~~	October 31, 2020		November 2, 2019		$ Change	October 31, 2020		November 2, 2019		$ Change	Net income (loss) per diluted share attributable to A&F ~~(3)~~	October 30, 2021		October 31, 2020		$ Change	October 30, 2021		October 31, 2020		$ Change
GAAP	GAAP	$	0.66	$	0.10	$0.56	$	(3.14)	$	(0.67)	$(2.47)	GAAP	$	0.77	$	0.66	$0.11	$	3.10	$	(3.14)	$6.24
Excluded items, net of tax (2)	Excluded items, net of tax (2)	(0.09)		(0.12)		0.03	(0.86)		(0.12)		(0.74)	Excluded items, net of tax (2)	(0.09)		(0.09)		—	(0.13)		(0.86)		0.73
Adjusted non-GAAP	Adjusted non-GAAP	$	0.76	$	0.23	$0.53	$	(2.28)	$	(0.55)	$(1.73)	Adjusted non-GAAP	$	0.86	$	0.76	$0.10	$	3.22	$	(2.28)	$5.50
Impact from changes in foreign currency exchange rates	Impact from changes in foreign currency exchange rates	—		0.15		(0.15)	—		0.12		(0.12)	Impact from changes in foreign currency exchange rates	—		(0.05)		0.05	—		(0.02)		0.02
Adjusted non-GAAP on a constant currency basis	Adjusted non-GAAP on a constant currency basis	$	0.76	$	0.37	$0.39	$	(2.28)	$	(0.43)	$(1.85)	Adjusted non-GAAP on a constant currency basis	$	0.86	$	0.71	$0.15	$	3.22	$	(2.30)	$5.52

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

(2) Excluded items for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019 consist~~consisted of pre-tax store asset impairment charges and the tax effect of pre-tax excluded items.

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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 $0.4 million and ~~$1.4~~$0.4 million for the thirteen ~~and thirty-nine~~ weeks ended October 30, 2021 and October 31, 2020, respectively, and ~~$0.8~~$1.1 million and ~~$2.4~~$1.4 million for the ~~thirteen and~~ thirty-nine weeks ended ~~November 2, 2019, respectively. These gains~~October 30, 2021 and October 31, 2020, respectively, which are recorded in interest expense, net on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The Rabbi Trust assets ~~are~~were included in other assets on the Condensed Consolidated Balance Sheets as of October ~~31, 2020~~30, 2021 and ~~February 1, 2020,~~January 30, 2021, and are restricted in their use as noted above.

INTEREST RATE RISK

Prior to July 2, 2020, ~~our~~the Company’s exposure to market risk due to changes in interest rates related primarily to the increase or decrease in the amount of interest expense from fluctuations in the LIBO rate, or an alternate base rate associated with the Term Loan Facility and the ABL Facility. On July 2, 2020 the Company issued the Senior Secured Notes due in 2025 with a 8.75% fixed interest rate per annum and repaid all outstanding borrowings under the Term Loan Facility and the ABL Facility, thereby eliminating any then existing cash flow market risk due to changes in interest rates. The Senior Secured Notes are exposed to interest rate risk that is limited to changes in fair value. This analysis for ~~the remainder of~~ Fiscal ~~2020~~2021 may differ from the actual results due to potential changes in gross borrowings outstanding under the ABL Facility and potential changes in interest rate terms and limitations described within the associated credit agreement.

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 the Company’s interest expense. In addition, the Company has seen, and may continue to see, lower interest income earned on the Company’s investments and cash holdings, reflecting the lower interest rate environment.

FOREIGN CURRENCY 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 purchase 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. Outstanding foreign currency exchange forward contracts are recorded at fair value at the end of each fiscal period.

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 ~~$10.6~~$23.7 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 values would be expected to be largely offset by the net change in fair values of the underlying hedged ~~items.Refer~~items. Refer to Note ~~14,~~13, “DERIVATIVE INSTRUMENTS,” for the fair value of any outstanding foreign currency exchange forward contracts included in other current assets and accrued expenses as of October ~~31, 2020~~30, 2021 and ~~February 1, 2020.~~January 30, 2021.

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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 A&F’s principal executive officer and A&F’s 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~~Executive 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 October ~~31, 2020.~~30, 2021. The Chief Executive Officer of A&F (in such individual’s capacity as the Principal Executive Officer of A&F) and the ~~Senior~~Executive 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 October ~~31, 2020, the end of the period covered by this Quarterly Report on Form 10-Q.~~30, 2021.

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 October ~~31, 2020~~30, 2021 that materially affected, or are reasonably likely to materially affect, A&F’s internal control over financial reporting.

As the COVID-19 pandemic evolves, the Company will continue to monitor and assess any potential impacts COVID-19 may have on the design and operating effectiveness of the Company’s internal controls.

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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 Part I of this Quarterly Report on Form 10-Q. Based on currently available information, the Company cannot estimate a range of reasonably possible losses in excess of the accrued charges for legal contingencies. 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 the Company 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 the 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.

In addition, the Company notes that in connection with the SEC’s recent modernization of the disclosures of legal proceedings required under Item 103 of Regulation S-K, the Company has elected to apply the threshold of $1 million in potential monetary sanctions (with such amount being the lesser of $1 million or 1% of the current assets of the Company on a consolidated basis) pursuant to Item 103(c)(3)(iii) of Regulation S-K in connection with determining the required disclosure with respect to environmental proceedings to which a governmental authority is a party.

Item 1A. Risk Factors.

The Company’s risk factors as of October ~~31, 2020~~30, 2021 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 2019 and those furnished under “Item 7.01, Regulation FD Disclosure” of A&F’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 17, 2020, other than those disclosed below due to the issuance of the Senior Secured Notes and termination of the Term Loan Facility during the thirteen weeks ended August 1, 2020. The COVID-19 pandemic may exacerbate the risks discussed within the aforementioned Annual Report on Form 10-K and Current Report on Form 8-K, certain of which have had and could continue to have a material effect on the Company.

~~The risk factor titled “~~Our credit facilities include restrictive covenants that limit our flexibility in operating our business and our inability to obtain credit on reasonable terms in the future could have an adverse impact on our business” ~~has been modified to read in full as follows:~~

The agreements related to our senior secured asset-based revolving credit facility and our senior secured notes include restrictive covenants that limit our flexibility in operating our business and our inability to obtain credit on reasonable terms in the future could have an adverse impact on our business.

Our senior secured asset-based revolving credit agreement, as amended (the “ABL Facility”) expires on October 19, 2022 and our senior secured notes, which have a fixed 8.75% interest rate, will mature on July 15, 2025 (the “Senior Secured Notes”). Both our ABL Facility and the indenture governing our Senior Secured Notes contain restrictive covenants that, subject to specified exemptions, restrict, among other things, the following: our ability to incur, assume or guarantee additional indebtedness; grant or incur liens; sell or otherwise dispose of assets, including capital stock of subsidiaries; make investments in certain subsidiaries; pay dividends or make distributions on our capital stock; redeem or repurchase capital stock; change the nature of our business; and consolidate or merge with or into, or sell substantially all of our assets to another entity.

If an event of default occurs, any outstanding obligations under the Senior Secured Notes and the ABL Facility could be declared immediately due and payable or the lenders could foreclose on or exercise other remedies with respect to the assets securing the indebtedness under the Senior Secured Notes and the ABL Facility. In addition, there is no assurance that we would have the cash resources available to repay such accelerated obligations. In addition, the Senior Secured Notes and ABL Facility are secured by certain of our real property, intellectual property, general intangibles and receivables, among other things, and lenders may exercise remedies against the collateral in the event of our default.

We have, and expect to continue to have, a level of indebtedness. In addition, we may, from time to time, incur additional indebtedness. We may need to refinance all or a portion of our existing indebtedness before maturity, including the Senior Secured Notes, and any indebtedness under the ABL Facility. There can be no assurance that we would be able to obtain sufficient funds to enable us to repay or refinance our debt obligations on commercially

~~Table of Contents~~

reasonable terms, or at all. Changes in market conditions could potentially impact the size and terms of a replacement facility or facilities in the future. The inability to obtain credit on commercially reasonable terms in the future could adversely impact our liquidity and results of operations.

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

There were no sales of equity securities during the third quarter of Fiscal ~~2020~~2021 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 October ~~31, 2020:~~30, 2021:

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 2, 2020 through August 29, 2020 1,569 $ 11.41 — 3,218,058
August 30, 2020 through October 3, 2020 5,324 $ 13.58 — 3,218,058
October 4, 2020 through October 31, 2020 3,594 $ 16.27 — 3,218,058
Total 10,487 $ 14.18 — 3,218,058


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 (2)(3)
August 1, 2021 through August 28, 2021	1,119	$	37.04	—	6,548,813
August 29, 2021 through October 2, 2021	2,193,109	$	36.75	2,173,947	4,374,866
October 3, 2021 through October 30, 2021	524,247	$	38.80	517,896	3,856,970
Total	2,718,475	$	37.15	2,691,843	3,856,970

(1)~~All 10,487~~An aggregate of 26,632 shares of A&F’s Common Stock purchased during the thirteen weeks ended October ~~31, 2020~~30, 2021 were withheld for tax payments due upon the vesting of employee restricted stock ~~units.~~units and the exercise of employee stock appreciation rights.

(2)On ~~June 12, 2019,~~March 2, 2021, we announced that the A~~&F’s~~&F Board of Directors ~~authorized~~approved the repurchase of ~~5.0~~10.0 million shares. On November 23, 2021 and not reflected in the table above, we announced that the A&F Board of Directors approved a new $500 million share repurchase authorization, replacing the prior 2021 share repurchase authorization of 10.0 million shares, which had approximately 3.9 million shares remaining available.

Table of ~~A&F’s Common Stock, which was announced on June 12, 2019.~~Contents

(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 authorization described in footnote 2 above. The shares may be purchased, from time to time, depending on business and market conditions. ~~The Company has temporarily suspended its share repurchase program in order to preserve liquidity and maintain financial flexibility in light of the circumstances surrounding COVID-19.~~

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Item 6. Exhibits


Exhibit						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						Form of Performance Share Award Agreement used to evidence the grant of performance shares to associates (employees) of Abercrombie & Fitch Co. and its subsidiaries under the Abercrombie & Fitch Co. 2016 Long-Term Incentive Plan for Associates on or after August 28, 2020.*Non-
~~10.2~~						~~Form of Retention Restricted Stock Unit Award Agreement, made to be effective as of August 28, 2020,~~Compete Amendment entered into between Abercrombie & Fitch Management Co. and ~~each~~Fra n Horowitz , effective as of ~~Scott Lipesky, Kristin Scott~~November 5, 2021 (the date of executi on by Abercrombie & Fitch Management Co.); together with Sche dule identifying executive officers of Abercrombie and ~~Gregory J. Henchel, incorporated herein by reference~~Fitch Co. party to ~~Exhibit 10.1 to A&F’s Current Report on Form 8-K dated and filed on September 2, 2020 (File No. 001-12107).~~substantially i dentical Non-Compete Agreements with Abercrombie & Fitch Man agement C o.*
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~~Executive 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~~Executive 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 Inline 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.

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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: December ~~7, 2020~~6, 2021	By:	/s/ Scott Lipesky
		Scott Lipesky
		~~Senior~~Executive Vice President and Chief Financial Officer (Principal Financial Officer, Principal Accounting Officer and Authorized Officer)

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PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Index for Notes to Condensed Consolidated Financial Statements	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2524
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4441
Item 4.	Controls and Procedures	4542
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	4643
Item 1A.	Risk Factors	4643
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4743
Item 6.	Exhibits	4845
	Signatures	4946


	Hollister (1)		Abercrombie (2)		Total Company
	U.S.	International	U.S.	International	U.S.	International	Total
Number of stores:
February 1, 2020	391	155	256	52	647	207	854
New	2	2	4	4	6	6	12
Permanently closed	(7)	(3)	(5)	(2)	(12)	(5)	(17)
October 31, 2020	386	154	255	54	641	208	849





Gross square footage (in thousands):
October 31, 2020	2,568	1,257	1,817	575	4,385	1,832	6,217