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~~April 30, ~~2021~~2022


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

For the transition period from to

Commission File Number 001-12107

Abercrombie & Fitch Co.

(Exact name of Registrant as specified in its charter)

Delaware

31-1469076

(State or other jurisdiction of incorporation or organization)

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

6301 Fitch Path,

New Albany,

Ohio

43054

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(614)

283-6500


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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.01 Par Value

ANF

New York Stock Exchange

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

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

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


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

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

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

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


Class A Common Stock						Shares outstanding as of ~~December 1, 2021~~June 3, 2022
$0.01 Par Value						~~56,493,566~~50,446,862

Table of Contents


Abercrombie & Fitch Co.			2			2022 1Q Form 10-Q

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Abercrombie & Fitch Co.

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income ~~(Loss)~~

(Thousands, except per share amounts)

(Unaudited)

Thirteen Weeks Ended Thirty-nine Weeks Ended
October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020
Net sales $ 905,160 $ 819,653 $ 2,551,415 $ 2,003,340
Cost of sales, exclusive of depreciation and amortization 328,916 295,220 916,552 791,154
Gross profit 576,244 524,433 1,634,863 1,212,186
Stores and distribution expense 351,804 346,263 994,347 978,757
Marketing, general and administrative expense 146,269 121,000 391,129 326,509
Flagship store exit charges (benefits) 11 (8,063) (1,177) (12,490)
Asset impairment 6,749 6,329 10,199 57,340
Other operating (income) loss, net (1,320) 288 (4,586) (1,562)
Operating income (loss) 72,731 58,616 244,951 (136,368)
Interest expense, net 7,270 8,808 27,151 19,277
Income (loss) before income taxes 65,461 49,808 217,800 (155,645)
Income tax expense 16,383 5,779 15,560 38,565
Net income (loss) 49,078 44,029 202,240 (194,210)
Less: Net income attributable to noncontrolling interests 1,845 1,758 4,739 2,203
Net income (loss) attributable to A&F $ 47,233 $ 42,271 $ 197,501 $ (196,413)
Net income (loss) per share attributable to A&F
Basic $ 0.80 $ 0.68 $ 3.24 $ (3.14)
Diluted $ 0.77 $ 0.66 $ 3.10 $ (3.14)
Weighted-average shares outstanding
Basic 58,796 62,558 60,879 62,541
Diluted 61,465 63,877 63,770 62,541
Other comprehensive (loss) income
Foreign currency translation $ (5,629) $ 2,142 $ (8,889) $ 5,477
Derivative financial instruments, net of tax 4,416 (5,234) 9,718 1,224
Other comprehensive (loss) income (1,213) (3,092) 829 6,701
Comprehensive income (loss) 47,865 40,937 203,069 (187,509)
Less: Comprehensive income attributable to noncontrolling interests 1,845 1,758 4,739 2,203
Comprehensive income (loss) attributable to A&F $ 46,020 $ 39,179 $ 198,330 $ (189,712)


	Thirteen Weeks Ended
	April 30, 2022		May 1, 2021
Net sales	$	812,762	$	781,405
Cost of sales, exclusive of depreciation and amortization	363,216		286,271
Gross profit	449,546		495,134
Stores and distribution expense	337,543		315,508
Marketing, general and administrative expense	122,149		120,947

Asset impairment	3,422		2,664
Other operating income, net	(3,842)		(1,418)
Operating (loss) income	(9,726)		57,433
Interest expense, net	7,307		8,606
(Loss) income before income taxes	(17,033)		48,827
Income tax (benefit) expense	(2,187)		6,121
Net (loss) income	(14,846)		42,706
Less: Net income attributable to noncontrolling interests	1,623		938
Net (loss) income attributable to A&F	$	(16,469)	$	41,768

Net (loss) income attributable to A&F per share
Basic	$	(0.32)	$	0.67
Diluted	$	(0.32)	$	0.64

Weighted-average shares outstanding
Basic	52,077		62,380
Diluted	52,077		65,305

Other comprehensive (loss) income
Foreign currency translation adjustments, net of tax	$	(10,403)	$	(1,274)
Derivative financial instruments, net of tax	1,712		2,599
Other comprehensive (loss) income	(8,691)		1,325
Comprehensive (loss) income	(23,537)		44,031
Less: Comprehensive income attributable to noncontrolling interests	1,623		938
Comprehensive (loss) income attributable to A&F	$	(25,160)	$	43,093

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


Abercrombie & Fitch Co.			3			2022 1Q Form 10-Q

Table of Contents

Abercrombie & Fitch Co.

Condensed Consolidated Balance Sheets

(Thousands, except par value amounts)

(Unaudited)


		October 30, 2021		January 30, 2021			April 30, 2022		January 29, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and equivalents	Cash and equivalents	$	865,622	$	1,104,862	Cash and equivalents	$	468,378	$	823,139
Receivables	Receivables	83,447		83,857		Receivables	88,807		69,102
Inventories	Inventories	543,713		404,053		Inventories	562,510		525,864
Other current assets	Other current assets	111,423		68,857		Other current assets	93,179		89,654
Total current assets	Total current assets	1,604,205		1,661,629		Total current assets	1,212,874		1,507,759
Property and equipment, net	Property and equipment, net	516,176		550,587		Property and equipment, net	497,976		508,336
Operating lease right-of-use assets	Operating lease right-of-use assets	762,641		893,989		Operating lease right-of-use assets	671,991		698,231
Other assets	Other assets	229,512		208,697		Other assets	224,462		225,165
Total assets	Total assets	$	3,112,534	$	3,314,902	Total assets	$	2,607,303	$	2,939,491
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	424,560	$	289,396	Accounts payable	$	311,352	$	374,829
Accrued expenses	Accrued expenses	355,149		396,365		Accrued expenses	320,681		395,815
Short-term portion of operating lease liabilities	Short-term portion of operating lease liabilities	209,812		248,846		Short-term portion of operating lease liabilities	195,599		222,823
Income taxes payable	Income taxes payable	39,900		24,792		Income taxes payable	25,400		21,773
Total current liabilities	Total current liabilities	1,029,421		959,399		Total current liabilities	853,032		1,015,240
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:
Long-term portion of operating lease liabilities	Long-term portion of operating lease liabilities	764,346		957,588		Long-term portion of operating lease liabilities	662,322		697,264
Long-term borrowings, net	Long-term borrowings, net	303,247		343,910		Long-term borrowings, net	303,901		303,574
Other liabilities	Other liabilities	97,191		104,693		Other liabilities	83,243		86,089
Total long-term liabilities	Total long-term liabilities	1,164,784		1,406,191		Total long-term liabilities	1,049,466		1,086,927
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		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						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	406,305		401,283		Paid-in capital	398,412		413,190
Retained earnings	Retained earnings	2,320,800		2,149,470		Retained earnings	2,350,807		2,386,156
Accumulated other comprehensive loss, net of tax (“AOCL”)	Accumulated other comprehensive loss, net of tax (“AOCL”)	(101,478)		(102,307)		Accumulated other comprehensive loss, net of tax (“AOCL”)	(123,397)		(114,706)
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)
Treasury stock, at average cost: 52,858 and 50,315 shares as of April 30, 2022 and January 29, 2022, respectively						Treasury stock, at average cost: 52,858 and 50,315 shares as of April 30, 2022 and January 29, 2022, respectively	(1,931,494)		(1,859,583)
Total Abercrombie & Fitch Co. stockholders’ equity	Total Abercrombie & Fitch Co. stockholders’ equity	908,934		936,628		Total Abercrombie & Fitch Co. stockholders’ equity	695,361		826,090
Noncontrolling interests	Noncontrolling interests	9,395		12,684		Noncontrolling interests	9,444		11,234
Total stockholders’ equity	Total stockholders’ equity	918,329		949,312		Total stockholders’ equity	704,805		837,324
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	3,112,534	$	3,314,902	Total liabilities and stockholders’ equity	$	2,607,303	$	2,939,491

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


Abercrombie & Fitch Co.			4			2022 1Q Form 10-Q

Table of Contents

Abercrombie & Fitch Co.

Condensed Consolidated Statements of Stockholders’ Equity

(Thousands, except per share amounts)

(Unaudited)


		Thirteen Weeks Ended October 30, 2021																	Thirteen Weeks Ended April 30, 2022
		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, 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		—	—		—		1,845		47,233		—		—	—		49,078
Balance, January 29, 2022																		Balance, January 29, 2022	52,985	$	1,033	$	413,190	$	11,234	$	2,386,156	$	(114,706)	50,315	$	(1,859,583)	$	837,324
Net loss																		Net loss	—	—		—		1,623		(16,469)		—		—	—		(14,846)
Purchase of Common Stock	Purchase of Common Stock	(2,692)	—		—		—		—		—		2,692	(100,000)		(100,000)		Purchase of Common Stock	(3,260)	—		—		—		—		—		3,260	(100,000)		(100,000)
Share-based compensation issuances and exercises		38	—		(918)		—		(1,442)		—		(38)	1,376		(984)
Share-based compensation expense		—	—		7,332		—		—		—		—	—		7,332
Derivative financial instruments, net of tax		—	—		—		—		—		4,416		—	—		4,416
Foreign currency translation adjustments, net of tax		—	—		—		—		—		(5,629)		—	—		(5,629)
Distributions to noncontrolling interests, net		—	—		—		(2,817)		—		—		—	—		(2,817)
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
		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 1, 2020		62,365	$	1,033	$	392,272	$	7,929	$	2,025,911	$	(99,093)	40,935	$	(1,514,442)	$	813,610
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	717	—		(23,134)		—		(18,880)		—		(717)	28,089		(13,925)
Share-based compensation expense	Share-based compensation expense	—	—		4,669		—		—		—		—	—		4,669		Share-based compensation expense	—	—		8,356		—		—		—		—	—		8,356
Derivative financial instruments, net of tax	Derivative financial instruments, net of tax	—	—		—		—		—		(5,234)		—	—		(5,234)		Derivative financial instruments, net of tax	—	—		—		—		—		1,712		—	—		1,712
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	—	—		—		—		—		(10,403)		—	—		(10,403)
Distributions to noncontrolling interests, net	Distributions to noncontrolling interests, net	—	—		—		(262)		—		—		—	—		(262)		Distributions to noncontrolling interests, net	—	—		—		(3,413)		—		—		—	—		(3,413)
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 April 30, 2022																		Ending balance at April 30, 2022	50,442	$	1,033	$	398,412	$	9,444	$	2,350,807	$	(123,397)	52,858	$	(1,931,494)	$	704,805

																			Thirteen Weeks Ended May 1, 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	—	—		—		938		41,768		—		—	—		42,706
Purchase of Common Stock																		Purchase of Common Stock	(1,077)	—		—		—						1,077	(35,249)		(35,249)

Share-based compensation issuances and exercises																		Share-based compensation issuances and exercises	613	—		(14,456)		—		(21,490)		—		(613)	24,198		(11,748)
Share-based compensation expense																		Share-based compensation expense	—	—		8,450		—		—		—		—	—		8,450
Derivative financial instruments, net of tax																		Derivative financial instruments, net of tax	—	—		—		—		—		2,599		—	—		2,599
Foreign currency translation adjustments, net of tax																		Foreign currency translation adjustments, net of tax	—	—		—		—		—		(1,274)		—	—		(1,274)
Distributions to noncontrolling interests, net																		Distributions to noncontrolling interests, net	—	—		—		(4,846)		—		—		—	—		(4,846)
Ending balance at May 1, 2021																		Ending balance at May 1, 2021	61,935	$	1,033	$	395,277	$	8,776	$	2,169,748	$	(100,982)	41,365	$	(1,523,902)	$	949,950

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 62,399 $ 1,033 $ 401,283 $ 12,684 $ 2,149,470 $ (102,307) 40,901 $ (1,512,851) $ 949,312
Net income — — — 4,739 197,501 — — — 202,240
Purchase of Common Stock (6,143) — — — — — 6,143 (235,249) (235,249)
Share-based compensation issuances and exercises 781 — (17,247) — (26,171) — (781) 30,374 (13,044)
Share-based compensation expense — — 22,269 — — — — — 22,269
Derivative financial instruments, net of tax — — — — — 9,718 — — 9,718
Foreign currency translation adjustments, net of tax — — — — — (8,889) — — (8,889)
Distributions to noncontrolling interests, net — — — (8,028) — — — — (8,028)
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
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 1, 2020 62,786 $ 1,033 $ 404,983 $ 12,368 $ 2,313,745 $ (108,886) 40,514 $ (1,552,065) $ 1,071,178
Net income (loss) — — — 2,203 (196,413) — — — (194,210)
Purchase of Common Stock (1,397) — — — — — 1,397 (15,172) (15,172)
Dividends ($0.20 per share) — — — — (12,556) — — — (12,556)
Share-based compensation issuances and exercises 995 — (22,053) — (37,255) — (995) 53,742 (5,566)
Share-based compensation expense — — 13,575 — — — — — 13,575
Derivative financial instruments, net of tax — — — — — 1,224 — — 1,224
Foreign currency translation adjustments, net of tax — — — — — 5,477 — — 5,477
Distributions to noncontrolling interests, net — — — (5,146) — — — — (5,146)
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

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


Abercrombie & Fitch Co.			5			2022 1Q Form 10-Q

Table of Contents

Abercrombie & Fitch Co.

Condensed Consolidated Statements of Cash Flows

(Thousands)

(Unaudited)


		Thirty-nine Weeks Ended					Thirteen Weeks Ended
				As Restated
		October 30, 2021		October 31, 2020			April 30, 2022		May 1, 2021
Operating activities	Operating activities					Operating activities
Net income (loss)		$	202,240	$	(194,210)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net (loss) income						Net (loss) income	$	(14,846)	$	42,706
Adjustments to reconcile net (loss) income to net cash used for operating activities:						Adjustments to reconcile net (loss) income to net cash used for operating activities:
Depreciation and amortization	Depreciation and amortization	107,787		127,248		Depreciation and amortization	33,888		37,856
Asset impairment	Asset impairment	10,199		57,340		Asset impairment	3,422		2,664
Loss on disposal		3,500		7,586
(Gain) loss on disposal						(Gain) loss on disposal	(2,798)		189
(Benefit) provision for deferred income taxes	(Benefit) provision for deferred income taxes	(32,931)		27,432		(Benefit) provision for deferred income taxes	(5,853)		4,231
Share-based compensation	Share-based compensation	22,269		13,575		Share-based compensation	8,356		8,450
Loss on extinguishment of debt		5,347		—

Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Inventories	Inventories	(140,393)		(109,665)		Inventories	(38,475)		15,186
Accounts payable and accrued expenses	Accounts payable and accrued expenses	81,793		186,806		Accounts payable and accrued expenses	(138,774)		(133,506)
Operating lease right-of-use assets and liabilities	Operating lease right-of-use assets and liabilities	(105,046)		(41,976)		Operating lease right-of-use assets and liabilities	(32,127)		(76,379)
Income taxes	Income taxes	15,061		(7,168)		Income taxes	2,664		1,751
Other assets	Other assets	(34,884)		30,403		Other assets	(33,475)		(34,162)
Other liabilities	Other liabilities	(3,655)		11,523		Other liabilities	231		(336)
Net cash provided by operating activities		131,287		108,894
Net cash used for operating activities						Net cash used for operating activities	(217,787)		(131,350)
Investing activities	Investing activities					Investing activities
Purchases of property and equipment	Purchases of property and equipment	(62,223)		(91,748)		Purchases of property and equipment	(26,292)		(14,404)
Withdrawal of funds from Rabbi Trust assets		—		50,000
Proceeds from the sale of property and equipment						Proceeds from the sale of property and equipment	7,751		—
Net cash used for investing activities	Net cash used for investing activities	(62,223)		(41,748)		Net cash used for investing activities	(18,541)		(14,404)
Financing activities	Financing activities					Financing activities
Proceeds from issuance of senior secured notes		—		350,000
Purchase of senior secured notes		(46,969)		—
Proceeds from borrowings under the senior secured asset-based revolving credit facility		—		210,000
Repayment of borrowings under the term loan facility		—		(233,250)
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)		Payment of debt issuance or modification costs and fees	—		(1,490)
Purchases of Common Stock	Purchases of Common Stock	(235,249)		(15,172)		Purchases of Common Stock	(100,000)		(35,249)
Dividends paid		—		(12,556)

Other financing activities	Other financing activities	(20,124)		(11,742)		Other financing activities	(16,945)		(16,452)
Net cash (used for) provided by financing activities		(304,358)		70,129
Net cash used for financing activities						Net cash used for financing activities	(116,945)		(53,191)
Effect of foreign currency exchange rates on cash	Effect of foreign currency exchange rates on cash	(8,560)		2,269		Effect of foreign currency exchange rates on cash	(2,617)		(1,021)
Net (decrease) increase in cash and equivalents, and restricted cash and equivalents		(243,854)		139,544
Net decrease in cash and equivalents, and restricted cash and equivalents						Net decrease in cash and equivalents, and restricted cash and equivalents	(355,890)		(199,966)
Cash and equivalents, and restricted cash and equivalents, beginning of period	Cash and equivalents, and restricted cash and equivalents, beginning of period	1,124,157		692,264		Cash and equivalents, and restricted cash and equivalents, beginning of period	834,368		1,124,157
Cash and equivalents, and restricted cash and equivalents, end of period	Cash and equivalents, and restricted cash and equivalents, end of period	$	880,303	$	831,808	Cash and equivalents, and restricted cash and equivalents, end of period	$	478,478	$	924,191
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	$	31,561	$	26,554	Purchases of property and equipment not yet paid at end of period	$	33,035	$	22,597
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	$	26,473	$	(41,305)	Operating lease right-of-use assets additions, net of terminations, impairments and other reductions	35,521		4,856
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	$	14,950	$	9,182	Cash paid for interest	—		676
Cash paid for income taxes	Cash paid for income taxes	$	39,081	$	10,412	Cash paid for income taxes	2,887		1,848
Cash received from income tax refunds	Cash received from income tax refunds	$	1,240	$	4,001	Cash received from income tax refunds	114		235
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	Cash paid for amounts included in measurement of operating lease liabilities, net of abatements	88,322		145,052

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	98
Note 2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	98
~~Note 3.~~	~~IMPACT OF COVID-19~~	11
Note 4.3.	REVENUE RECOGNITION	129
Note 5.4.	NET (LOSS) INCOME ~~(LOSS)~~ PER SHARE	1210
Note 6.5.	FAIR VALUE	1210
Note 7.6.	PROPERTY AND EQUIPMENT, NET	1411
Note 8.7.	LEASES	1411
Note 9.8.	ASSET IMPAIRMENT	1512
Note ~~10.~~9.	INCOME TAXES	1512
Note ~~11.~~10.	BORROWINGS	1612
Note ~~12.~~11.	SHARE-BASED COMPENSATION	1713
Note ~~13.~~12.	DERIVATIVE INSTRUMENTS	1915
Note ~~14.~~13.	ACCUMULATED OTHER COMPREHENSIVE LOSS	2117
Note ~~15.~~14.	SEGMENT REPORTING	2217
~~Note 16.~~	~~FLAGSHIP STORE EXITCHARGES (BENEFITS~~)	23
~~Note 17.~~	~~SUBSEQUENT EVENTS~~	23


Abercrombie & Fitch Co.			7			2022 1Q Form 10-Q

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Abercrombie & Fitch Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. NATURE OF BUSINESS

Abercrombie & Fitch Co. (“A&F”), a company incorporated in Delaware in 1996, through its subsidiaries (collectively, A&F and its subsidiaries are referred to as “Abercrombie & Fitch” or the “Company”), is a global, digitally-led omnichannel retailer. The Company offers a broad assortment of apparel, personal care products and accessories for men, women and kids, which are sold primarily through its digital channels and Company-owned stores, as well as through various third-party arrangements. The Company’s 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. 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 in North America, Europe and 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~~the business ventures with MAF is to operate stores in the United Arab Emirates and Kuwait and the purpose of the business venture with Dixar is to hold the intellectual property related to the Social Tourist brand. The Company is deemed to be the primary beneficiary of these VIEs; therefore, the Company has consolidated the operating results, assets and liabilities of these VIEs, with the noncontrolling interests’ (“NCI”) portions of net income presented as net income attributable to NCI on the Condensed Consolidated Statements of Operations and Comprehensive ~~Income~~ (Loss) Incomeand the NCI portion of stockholders’ equity presented as NCI on the Condensed Consolidated Balance Sheets.

Fiscal year

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

Fiscal year

Year ended/ ending

Number of weeks

Fiscal ~~2019~~

~~February 1, 2020~~

~~Fiscal 2020~~

~~January 30, 2021~~

~~Fiscal~~ 2021

January 29, 2022

Fiscal 2022

January 28, 2023

Fiscal 2023

February 3, 2024

Interim financial statements

The Condensed Consolidated Financial Statements as of ~~October~~April 30, ~~2021,~~2022, and for the thirteen ~~and thirty-nine~~week periods ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020,~~May 1, 2021, 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 ~~2020~~2021 filed with the SEC on March ~~29, 2021.~~28, 2022 (the “Fiscal 2021 Form 10-K”). The January ~~30, 2021~~29, 2022 consolidated balance sheet data, included herein, were derived from audited consolidated financial statements, but do not include all disclosures required by accounting principles generally accepted in the U.S. (“GAAP”).

In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments (which are of a normal recurring nature) necessary to state fairly, in all material respects, the financial position, results of operations and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for Fiscal ~~2021.~~2022.

During the first quarter of 2022, the Company reclassified Flagship store exit benefits into Stores and distribution expense on the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. There were no changes to Operating (loss) income or Net (loss) income. Prior period amounts have been reclassified to conform to current year’s presentation.


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Use of estimates

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

~~Table of Contents~~

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”) continues to impact the Company’s business and financial results will depend on numerous evolving factors including, but not limited to: the duration and spread of COVID-19 and the emergence of new variants ~~such as the Delta and 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 which COVID-19 impacts worldwide macroeconomic conditions including interest rates, foreign currency exchange 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) Location October 30, 2021 January 30, 2021 October 31, 2020 February 1, 2020
Cash and equivalents Cash and equivalents $ 865,622 $ 1,104,862 $ 812,881 $ 671,267
Long-term restricted cash and equivalents Other assets 11,401 14,814 14,633 18,696
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 $ 880,303 $ 1,124,157 $ 831,808 $ 692,264

~~Table of Contents~~

~~3. IMPACT OF COVID-19~~


(in thousands)	Location	April 30, 2022		January 29, 2022		May 1, 2021		January 30, 2021
Cash and equivalents	Cash and equivalents	$	468,378	$	823,139	$	909,008	$	1,104,862
Long-term restricted cash and equivalents	Other assets	10,100		11,229		14,712		14,814
Short-term restricted cash and equivalents	Other current assets	—		—		471		4,481
Cash and equivalents and restricted cash and equivalents		$	478,478	$	834,368	$	924,191	$	1,124,157

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, the emergence of new variants of coronavirus, such as the Delta and Omicron variants, and the availability and acceptance of effective vaccines, boosters or medical treatments.

During the thirteen and thirty-nine weeks ended October 31, 2020, the Company experienced a material adverse impact to net sales across brands and regions as a result of widespread temporary store closures in response to COVID-19, which was not offset by year-over-year digital sales growth. During the thirteen and thirty-nine weeks ended October 30, 2021, the vast majority of Company-operated stores were fully open for in-store service. As of October 30, 2021, there were no COVID-19 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 in response to COVID-19. During periods of temporary store closures, reductions in revenue have not been offset by proportional decreases in expense, as the Company 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 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 periods of store closures, and continues to engage with its landlords to find a mutually beneficial and agreeable path forward. As of October 30, 2021 and January 30, 2021, the Company had $16.5 million and $24.2 million, respectively, related to suspended rent payments classified within accrued expenses on the Condensed Consolidated Balance Sheets. The Company obtained rent abatements of $1.7 million and $14.6 million, respectively, during the thirteen and thirty-nine weeks ended October 30, 2021, and $1.9 million and $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-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 applicable government laws and regulations.

The Company has recognized asset impairment charges related to the Company’s operating lease right-of-use assets and property and equipment, which are principally the result of the impact of COVID-19 on store cash flows. Refer to Note 9, “~~ASSET IMPAIRMENT,” for additional information.~~

~~The Company has also experienced other material impacts as a result of COVID-19, such as deferred tax valuation allowances and other tax charges. Refer to Note 10, “INCOME TAXES,” for additional information.~~

In March 2020, in an effort to improve the Company’s then near-term cash position as a precautionary measure in response to COVID-19, the Company borrowed $210.0 million under its senior secured asset-based revolving credit facility (the “ABL Facility”) 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”). 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.

~~Table of Contents~~

4.3. REVENUE RECOGNITION

Disaggregation of revenue

All revenues are recognized in net sales in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income ~~(Loss)~~. For information regarding the disaggregation of revenue, refer to Note ~~15,~~14, “SEGMENT REPORTING.”

Contract liabilities

The following table details certain contract liabilities representing unearned revenue as of ~~October~~April 30, ~~2021,~~2022, January ~~30, 2021, October 31, 2020~~29, 2022 and ~~February~~May 1, ~~2020:~~2021:


(in thousands)	(in thousands)	October 30, 2021		January 30, 2021		October 31, 2020		February 1, 2020		(in thousands)	April 30, 2022		January 29, 2022		May 1, 2021
Gift card liability	Gift card liability	$	30,815	$	28,561	$	22,910	$	28,844	Gift card liability	$	35,665	$	36,984	$	27,919
Loyalty program liability		$	21,964	$	20,426	$	19,640	$	23,051
Loyalty programs liability										Loyalty programs liability	22,177		22,757		19,991

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~~April 30, ~~2021~~2022 and ~~October 31, 2020:~~May 1, 2021:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended
(in thousands)	(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020		(in thousands)	April 30, 2022		May 1, 2021
Revenue associated with gift card redemptions and gift card breakage	Revenue associated with gift card redemptions and gift card breakage	$	17,801	$	11,717	$	51,310	$	32,792	Revenue associated with gift card redemptions and gift card breakage	$	23,001	$	16,156
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	$	12,075	$	9,686	$	31,525	$	23,377	Revenue associated with reward redemptions and breakage related to the Company’s loyalty programs	10,181		9,553


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

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


		Thirteen Weeks Ended		Thirty-nine Weeks Ended			Thirteen Weeks Ended
(in thousands)	(in thousands)	October 30, 2021	October 31, 2020	October 30, 2021	October 31, 2020	(in thousands)	April 30, 2022	May 1, 2021
Shares of Common Stock issued	Shares of Common Stock issued	103,300	103,300	103,300	103,300	Shares of Common Stock issued	103,300	103,300
Weighted-average treasury shares	Weighted-average treasury shares	(44,504)	(40,742)	(42,421)	(40,759)	Weighted-average treasury shares	(51,223)	(40,920)
Weighted-average — basic shares	Weighted-average — basic shares	58,796	62,558	60,879	62,541	Weighted-average — basic shares	52,077	62,380
Dilutive effect of share-based compensation awards	Dilutive effect of share-based compensation awards	2,669	1,319	2,891	—	Dilutive effect of share-based compensation awards	—	2,925
Weighted-average — diluted shares	Weighted-average — diluted shares	61,465	63,877	63,770	62,541	Weighted-average — diluted shares	52,077	65,305
Anti-dilutive shares (1)	Anti-dilutive shares (1)	1,228	1,828	1,212	1,988	Anti-dilutive shares (1)	3,598	1,425

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

6.5. FAIR VALUE

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

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

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

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

The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.

~~Table of Contents~~

The three levels of the hierarchy and the distribution of the Company’s assets ~~and liabilities that were~~ measured at fair value on a recurring basis, as of ~~October~~April 30, ~~2021~~2022 and January ~~30, 2021,~~29, 2022, were as follows:


		Assets and Liabilities at Fair Value as of October 30, 2021									Assets at Fair Value as of April 30, 2022
(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)	$	42,307	$	46,622	$	—	$	88,929	Cash equivalents (1)	$	25,314	$	9,900	$	—	$	35,214
Derivative instruments (2)	Derivative instruments (2)	—		5,082		—		5,082		Derivative instruments (2)	—		6,958		—		6,958
Rabbi Trust assets (3)	Rabbi Trust assets (3)	1		61,917		—		61,918		Rabbi Trust assets (3)	1		62,626		—		62,627
Restricted cash equivalents (1)	Restricted cash equivalents (1)	3,104		5,115		—		8,219		Restricted cash equivalents (1)	4,586		2,307		—		6,893
Total assets	Total assets	$	45,412	$	118,736	$	—	$	164,148	Total assets	$	29,901	$	81,791	$	—	$	111,692

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


		Assets and Liabilities at Fair Value as of January 30, 2021									Assets at Fair Value as of January 29, 2022
(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)	$	296,279	$	11,589	$	—	$	307,868	Cash equivalents (1)	$	49,309	$	11,643	$	—	$	60,952
Derivative instruments (2)	Derivative instruments (2)	—		79		—		79		Derivative instruments (2)	—		4,973		—		4,973
Rabbi Trust assets (3)	Rabbi Trust assets (3)	1		60,789		—		60,790		Rabbi Trust assets (3)	1		62,272		—		62,273
Restricted cash equivalents (1)	Restricted cash equivalents (1)	2,943		7,775		—		10,718		Restricted cash equivalents (1)	5,391		2,326		—		7,717
Total assets	Total assets	$	299,223	$	80,232	$	—	$	379,455	Total assets	$	54,701	$	81,214	$	—	$	135,915

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

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

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

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

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

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

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

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


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Fair value of long-term borrowings

The Company’s borrowings under ~~the Senior~~its senior secured notes, which have a fixed 8.75% interest rate and mature on July 15, 2025 (the “Senior Secured ~~Notes~~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)	(in thousands)	October 30, 2021		January 30, 2021		(in thousands)	April 30, 2022		January 29, 2022
Gross borrowings outstanding, carrying amount	Gross borrowings outstanding, carrying amount	$	307,730	$	350,000	Gross borrowings outstanding, carrying amount	$	307,730	$	307,730
Gross borrowings outstanding, fair value	Gross borrowings outstanding, fair value	$	332,641	$	389,813	Gross borrowings outstanding, fair value	323,501		327,732

~~Table of Contents~~

7.6. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of:


(in thousands)	(in thousands)	October 30, 2021		January 30, 2021		(in thousands)	April 30, 2022		January 29, 2022
Property and equipment, at cost	Property and equipment, at cost	$	2,490,552	$	2,488,957	Property and equipment, at cost	$	2,436,019	$	2,453,493
Less: Accumulated depreciation and amortization	Less: Accumulated depreciation and amortization	(1,974,376)		(1,938,370)		Less: Accumulated depreciation and amortization	(1,938,043)		(1,945,157)
Property and equipment, net	Property and equipment, net	$	516,176	$	550,587	Property and equipment, net	$	497,976	$	508,336

Refer to Note 9,8, “ASSET IMPAIRMENT,” for details related to property and equipment impairment charges incurred during the thirteen ~~and thirty-nine~~ weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020.~~May 1, 2021.

8.7. LEASES

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

The following table provides a summary of the Company’s operating lease costs for the thirteen ~~and thirty-nine~~ weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020:~~May 1, 2021:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended
(in thousands)	(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020		(in thousands)	April 30, 2022		May 1, 2021
Single lease cost (1)	Single lease cost (1)	$	66,969	$	83,743	$	207,046	$	264,932	Single lease cost (1)	$	57,580	$	69,752
Variable lease cost (2)	Variable lease cost (2)	26,409		14,428		68,875		61,763		Variable lease cost (2)	33,158		23,166
Operating lease right-of-use asset impairment (3)	Operating lease right-of-use asset impairment (3)	5,512		3,979		8,216		44,397		Operating lease right-of-use asset impairment (3)	1,915		2,464
Sublease income (4)	Sublease income (4)	(1,068)		—		(3,256)		—		Sublease income (4)	(1,009)		(1,093)
Total operating lease cost	Total operating lease cost	$	97,822	$	102,150	$	280,881	$	371,092	Total operating lease cost	$	91,644	$	94,289

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

(2)~~Included~~Includes 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~~April 30, ~~2021~~2022 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~~May 1, 2021 was ~~$1.9 million and $18.9 million respectively.~~$7.7 million.

(3)Refer to Note 9,8, “ASSET IMPAIRMENT,” for details related to operating lease right-of-use asset impairment charges.

(4)The terms of the sublease agreement entered into by the Company with a third party during Fiscal 2020 related to one of its previous flagship store locations have not changed materially from that disclosed in Note 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~~the Fiscal 2021 Form ~~10-K for Fiscal 2020.~~10-K. Sublease income is recognized in other operating (loss) income, ~~(loss),~~ net on the Condensed Consolidated Statements of Operations and Comprehensive ~~Income~~ (Loss). Income.

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 30, 2021, the~~The Company had minimum commitments related to ~~additional~~ operating lease contracts ~~the terms of which~~that have not yet commenced, primarily for its Company-operated retail stores, of approximately ~~$8.7 million.~~$20.5 million as of April 30, 2022.


Abercrombie & Fitch Co.			11			2022 1Q Form 10-Q

Table of Contents

9.8. ASSET IMPAIRMENT

Asset impairment charges for the thirteen weeks ended April 30, 2022 and May 1, 2021 were as follows:


	Thirteen Weeks Ended
(in thousands)	April 30, 2022		May 1, 2021
Operating lease right-of-use asset impairment	$	1,915	$	2,464
Property and equipment asset impairment	1,507		200
Total asset impairment	$	3,422	$	2,664

Asset impairment charges for the thirteen ~~and thirty-nine~~ weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020 were as follows:~~

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

~~Asset impairment charges for the thirteen and thirty-nine weeks ended October 30,~~May 1, 2021 related to certain of the Company’s stores across brands, geographies and store formats. The impairment charges for the ~~thirty-nine~~thirteen weeks ended ~~October~~April 30, 2022 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $7.5 million, including $6.5 million related to operating lease right-of-use assets. The impairment charges for the thirteen weeks ended May 1, 2021 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately ~~$19.5~~$6.3 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$5.7 million related to operating lease right-of-use assets.

~~10.~~9. INCOME TAXES

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

Impact of valuation allowances and other tax charges

During the thirteen weeks ended ~~October~~April 30, ~~2021, as a result~~2022, the Company did not recognize income tax benefits on $13.4 million of pretax

losses, primarily in Switzerland, resulting in adverse tax impacts of $2.4 million.

During the ~~improvement seen in business conditions,~~thirteen weeks ended May 1, 2021, the Company recognized ~~$3.5~~$3.1 million of tax benefits due to the ~~expected~~anticipated 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~~As of April 30, ~~2021, as a result of the improvement seen in business conditions, the Company recognized $23.4~~2022, there were approximately $11.4 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 also recognized $13.6 million of tax benefits due to the expected utilization ofnet deferred tax assets ~~against projected pre-tax income for~~in China. The realization of these net deferred tax assets is dependent upon the ~~full fiscal year, primarily~~future generation of sufficient taxable profits 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,~~China. While the Company ~~recognized $77.4 million of~~believes that the net deferred tax ~~charges, ultimately giving rise~~assets are more-likely-than-not to ~~income tax expense on~~be realized, it is not a ~~consolidated pre-tax year-to-date loss. Further details regarding these adverse tax impacts~~certainty, as there are ~~as follows:~~

•~~The Company anticipated pre-tax losses for the full fiscal year in certain jurisdictions, based on information then available, primarily~~continued issues and related responses due to emerging situations, such as the ~~significant adverse impacts of COVID-19.~~COVID-19 pandemic. The ~~Company did not recognize income~~company is closely monitoring its operations in China. Should circumstances change, the net deferred 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).

~~Table of Contents~~

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 circumstancesassets may ~~be such that sufficient evidence would exist to indicate that additional deferred taxes currently~~become 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~~future. Additional valuation allowances would result in ~~which a determination is made.~~additional tax expense.

Share-based compensation

Refer to Note ~~12,~~11, “SHARE-BASED COMPENSATION,” for details on income tax benefits and charges related to share-based compensation awards during the thirteen ~~and thirty-nine~~ weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020.~~May 1, 2021.

~~11.~~10. BORROWINGS

Details on the Company’s long-term borrowings, net, as of ~~October~~April 30, ~~2021~~2022 and January ~~30, 2021~~29, 2022 are as follows:


(in thousands)	(in thousands)	October 30, 2021		January 30, 2021		(in thousands)	April 30, 2022		January 29, 2022
Long-term portion of borrowings, gross at carrying amount	Long-term portion of borrowings, gross at carrying amount	$	307,730	$	350,000	Long-term portion of borrowings, gross at carrying amount	$	307,730	$	307,730
Unamortized fees	Unamortized fees	(4,483)		(6,090)		Unamortized fees	(3,829)		(4,156)
Long-term borrowings, net	Long-term borrowings, net	$	303,247	$	343,910	Long-term borrowings, net	$	303,901	$	303,574

~~Senior Secured Notes~~

~~On July 2, 2020, Abercrombie & Fitch Management Co. (“A&F Management”), a wholly-owned indirect subsidiary~~


Abercrombie & Fitch Co.			12			2022 1Q Form 10-Q

Table of ~~A&F, completed the private offering of the~~ Contents

Senior Secured Notes with $350.0 million aggregate principal amount due in 2025, at an offering price of 100% of the principal amount 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 of July 2, 2020, by and among A&F Management, A&F and certain of 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 terms of the Senior Secured Notes have not changed materially from those disclosed in Note 13, “BORROWINGS,” of the Notes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Annual Report on Form 10-K for Fiscal 2020.

~~ABL Facility~~

On April 29, 2021, A&F Management, in A&F Management’s capacity as the lead borrower, and the other borrowers and guarantors party thereto, amended and restated in its entirety the Credit Agreement, dated as of August 7, 2014, as amended on September 10, 2015 and as further amended on October 19, 2017 (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 revolving credit facility of up to $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).

~~Except for these changes, the terms of the ABL Facility~~ remained ~~substantially~~ unchanged from those disclosed in Note 13, “BORROWINGS,” of the Notes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of ~~A&F’s Annual Report~~ on the Fiscal 2021 Form ~~10-K for~~10-K.

ABL Facility

The terms of the Company’s senior secured revolving credit facility of up to $400.0 million (the “ABL Facility”) remained unchanged from those disclosed in Note 13, “BORROWINGS,” of the Notes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of the Fiscal ~~2020.~~2021 Form 10-K.

The Company did not have any borrowings outstanding under the ABL Facility as of ~~October~~April 30, ~~2021~~2022 or as of January ~~30, 2021.~~29, 2022.

As of ~~October~~April 30, ~~2021,~~2022, availability under the ABL Facility was ~~$301.0~~$349.4 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, borrowing capacity available to the Company under the ABL Facility was ~~$270.8~~$314.4 million as of ~~October~~April 30, ~~2021.~~2022.

Representations, warranties and covenants

~~Table of Contents~~

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~~assets of the Company or Abercrombie & Fitch Management Co. (“A&F ~~Management’s assets~~Management”), a wholly-owned indirect subsidiary of A&F, to another entity.

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

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

The Company was in compliance with all debt covenants under these agreements as of ~~October~~April 30, ~~2021.~~2022.

~~12.~~11. 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~~April 30, ~~2021~~2022 and ~~October 31, 2020:~~May 1, 2021:

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

~~(1)~~ ~~No income tax benefit was recognized during the thirteen~~ ~~and thirty-nine weeks~~ ~~ended October 31, 2020 due to the establishment of a valuation allowance.~~


	Thirteen Weeks Ended
(in thousands)	April 30, 2022		May 1, 2021
Share-based compensation expense	$	8,356	$	8,450
Income tax benefit associated with share-based compensation expense recognized	965		298

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~~April 30, ~~2021~~2022 and ~~October 31, 2020:~~May 1, 2021:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended
(in thousands)	(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020		(in thousands)	April 30, 2022		May 1, 2021
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)~~	$	150	$	—	$	4,166	$	—	Income tax discrete benefits realized for tax deductions related to the issuance of shares ~~(1)~~	$	2,111	$	3,190
Income tax discrete charges realized upon cancellation of stock appreciation rights ~~(1)~~	Income tax discrete charges realized upon cancellation of stock appreciation rights ~~(1)~~	—		—		(3)		—		Income tax discrete charges realized upon cancellation of stock appreciation rights ~~(1)~~	(195)		(3)
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	$	—	Total income tax discrete benefits related to share-based compensation awards ~~(1)~~	$	1,916	$	3,187

~~(1)~~ ~~No income tax discrete charges were recognized during the thirteen~~ ~~and thirty-nine weeks ended~~ ~~October 31, 2020 due to the establishment of a 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~~April 30, ~~2021~~2022 and ~~October 31, 2020:~~May 1, 2021:

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


Abercrombie & Fitch Co.			13			2022 1Q Form 10-Q

Table of Contents


	Thirteen Weeks Ended
(in thousands)	April 30, 2022		May 1, 2021
Employee tax withheld upon issuance of shares (1)	$	13,925	$	11,748

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

~~Table of Contents~~

Restricted stock units

The following table summarizes activity for restricted stock units for the ~~thirty-nine~~thirteen weeks ended ~~October~~April 30, ~~2021:~~2022:


		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	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 January 30, 2021		3,037,098	$	11.62	297,216	$	22.43	721,879	$	21.46
Unvested at January 29, 2022											Unvested at January 29, 2022	2,532,240	$	17.16	340,149	$	27.08	680,184	$	22.81
Granted	Granted	725,926	32.73		157,645	32.09		78,827	56.99		Granted	725,142	32.19		165,263	32.07		82,635	45.15
Adjustments for performance achievement	Adjustments for performance achievement	—	—		(106,715)	21.31		(6,084)	33.69		Adjustments for performance achievement	—	—		5,668	23.05		18,881	36.24
Vested	Vested	(1,081,929)	12.23		—	—		(100,634)	33.69		Vested	(815,718)	16.70		(194,465)	23.05		(113,284)	36.24
Forfeited	Forfeited	(98,340)	16.89		(7,997)	29.92		(13,804)	25.13		Forfeited	(28,840)	17.38		—	—		—	—
Unvested at October 30, 2021 (1)		2,582,755	$	17.10	340,149	$	27.08	680,184	$	22.81
Unvested at April 30, 2022 (1)											Unvested at April 30, 2022 (1)	2,412,824	$	21.84	316,615	$	32.08	668,416	$	23.67

(1) Unvested shares related to restricted stock units with performance-based and market-based vesting conditions are reflected at 100% of their target vesting amount in the table above. Unvested shares related to restricted stock units with performance-based and market-based vesting conditions can be achieved 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~~April 30, ~~2021:~~2022:


(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	$	33,405	$	8,532	$	8,047	Unrecognized compensation cost	$	46,317	$	—	$	20,545
Remaining weighted-average period cost is expected to be recognized (years)	Remaining weighted-average period cost is expected to be recognized (years)	1.3		1.2		1.0		Remaining weighted-average period cost is expected to be recognized (years)	1.4		0.0		1.1

Additional information pertaining to restricted stock units for the ~~thirty-nine~~thirteen weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020~~May 1, 2021 follows:


(in thousands)	(in thousands)	October 30, 2021		October 31, 2020		(in thousands)	April 30, 2022		May 1, 2021
Service-based restricted stock units:	Service-based restricted stock units:					Service-based restricted stock units:
Total grant date fair value of awards granted	Total grant date fair value of awards granted	$	23,760	$	19,541	Total grant date fair value of awards granted	$	23,342	$	19,445
Total grant date fair value of awards vested	Total grant date fair value of awards vested	$	13,232	$	13,769	Total grant date fair value of awards vested	13,622		10,639

Performance-based restricted stock units:	Performance-based restricted stock units:					Performance-based restricted stock units:
Total grant date fair value of awards granted	Total grant date fair value of awards granted	$	5,059	$	—	Total grant date fair value of awards granted	5,300		4,658
Total grant date fair value of awards vested	Total grant date fair value of awards vested	$	—	$	4,635	Total grant date fair value of awards vested	4,482		—

Market-based restricted stock units:	Market-based restricted stock units:					Market-based restricted stock units:
Total grant date fair value of awards granted	Total grant date fair value of awards granted	$	4,492	$	8,443	Total grant date fair value of awards granted	3,731		3,651
Total grant date fair value of awards vested	Total grant date fair value of awards vested	$	3,390	$	4,132	Total grant date fair value of awards vested	4,105		3,390


Abercrombie & Fitch Co.			14			2022 1Q Form 10-Q

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The weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the ~~thirty-nine~~thirteen weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020~~May 1, 2021 were as follows:


		October 30, 2021			October 31, 2020				April 30, 2022			May 1, 2021
Grant date market price	Grant date market price	$	36.15		$	12.31		Grant date market price	$	32.07		$	31.78
Fair value	Fair value	$	56.99		$	16.24		Fair value	45.15			49.81
Assumptions:	Assumptions:							Assumptions:
Price volatility	Price volatility	65		%	67		%	Price volatility	66		%	66		%
Expected term (years)	Expected term (years)	2.5			2.4			Expected term (years)	2.9			2.9
Risk-free interest rate	Risk-free interest rate	0.3		%	0.2		%	Risk-free interest rate	2.3		%	0.3		%
Dividend yield	Dividend yield	—		%	—		%	Dividend yield	—		%	—		%
Average volatility of peer companies	Average volatility of peer companies	76.0		%	66.0		%	Average volatility of peer companies	72.9			72.0
Average correlation coefficient of peer companies	Average correlation coefficient of peer companies	0.5130			0.4967			Average correlation coefficient of peer companies	0.5146			0.4694

~~Table of Contents~~

Stock appreciation rights

The following table summarizes stock appreciation rights activity for the ~~thirty-nine~~thirteen weeks ended ~~October~~April 30, ~~2021:~~2022:

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


	Number of Underlying Shares	Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Life (years)
Outstanding at January 29, 2022	236,139	$	32.55


Forfeited or expired	(33,300)	52.75
Outstanding at April 30, 2022	202,839	$	29.24	$	1,523,587	2.4
Stock appreciation rights exercisable at April 30, 2022	202,839	$	29.24	$	1,523,587	2.4

No stock appreciation rights were exercised during the ~~thirty-nine~~thirteen weeks ended ~~October 31, 2020. Information pertaining to stock appreciation rights exercised during the thirty-nine weeks ended October~~April 30, ~~2021 follows:~~


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

2022 or May 1, 2021.

~~13.~~12. DERIVATIVE INSTRUMENTS

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

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

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

As of ~~October~~April 30, ~~2021,~~2022, 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,~~transactions, the resulting settlement of the foreign-currency-denominated intercompany accounts receivable, or both:


Abercrombie & Fitch Co.			15			2022 1Q Form 10-Q

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(in thousands)	Notional Amount (1)
Euro	$	~~132,850~~41,015
British pound	$		~~80,441~~34,626
Canadian dollar	$		~~20,621~~6,132
Japanese yen	$		~~8,328~~3,978

(1) ~~Amount~~Amounts reported isare the U.S. Dollar notional ~~amount~~amounts outstanding as of ~~October~~April 30, ~~2021.~~2022.

~~Table of Contents~~

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 Sheets as of ~~October~~April 30, ~~2021~~2022 and January ~~30, 2021~~29, 2022 were as follows:


(in thousands)	(in thousands)	Location	October 30, 2021		January 30, 2021		Location	October 30, 2021		January 30, 2021		(in thousands)	Location	April 30, 2022		January 29, 2022		Location	April 30, 2022		January 29, 2022
Derivatives designated as cash flow hedging instruments	Derivatives designated as cash flow hedging instruments	Other current assets	$	5,082	$	79	Accrued expenses	$	86	$	4,694	Derivatives designated as cash flow hedging instruments	Other current assets	$	6,958	$	4,973	Accrued expenses	$	—	$	—
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments	Other current assets	—		—		Accrued expenses	—		—		Derivatives not designated as hedging instruments	Other current assets	—		—		Accrued expenses	—		—
Total	Total		$	5,082	$	79		$	86	$	4,694	Total		$	6,958	$	4,973		$	—	$	—

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~~April 30, ~~2021~~2022 and ~~October 31, 2020~~May 1, 2021 follows:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended
(in thousands)	(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020		(in thousands)	April 30, 2022		May 1, 2021
Gain recognized in AOCL (1)	Gain recognized in AOCL (1)	$	4,589	$	93	$	6,818	$	12,328	Gain recognized in AOCL (1)	$	5,363	$	1,144
Gain (loss) reclassified from AOCL to cost of sales, exclusive of depreciation and amortization (2)	Gain (loss) reclassified from AOCL to cost of sales, exclusive of depreciation and amortization (2)	$	141	$	5,327	$	(3,010)	$	11,104	Gain (loss) reclassified from AOCL to cost of sales, exclusive of depreciation and amortization (2)	3,684		(1,455)

(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 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 were deferred in AOCL until being reclassified into cost of goods sold, exclusive of depreciation and amortization when the originally forecasted transactions occurred and the hedged items affected earnings. Subsequent to the dedesignation of these hedges, these hedge contracts were settled in Fiscal 2020.instruments.

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

Substantially all of the unrealized gain will be recognized in costs of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statements of Operations and Comprehensive ~~Income~~ (Loss) Incomeover 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~~April 30, ~~2021~~2022 and ~~October 31, 2020~~May 1, 2021 follows:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended
(in thousands)	(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020		(in thousands)	April 30, 2022		May 1, 2021
Gain (loss) recognized in other operating income, net	Gain (loss) recognized in other operating income, net	$	487	$	—	$	324	$	742	Gain (loss) recognized in other operating income, net	$	1,141	$	(468)


Abercrombie & Fitch Co.			16			2022 1Q Form 10-Q

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~~14.~~13. ACCUMULATED OTHER COMPREHENSIVE LOSS

For the thirteen ~~and thirty-nine~~ weeks ended ~~October~~April 30, ~~2021,~~2022, the activity in AOCL was as follows:


		Thirteen Weeks Ended October 30, 2021							Thirteen Weeks Ended April 30, 2022
(in thousands)	(in thousands)	Foreign Currency Translation Adjustment		Unrealized Gain (Loss) on Derivative Financial Instruments		Total		(in thousands)	Foreign Currency Translation Adjustment		Unrealized Gain on Derivative Financial Instruments		Total
Beginning balance at July 31, 2021		$	(101,032)	$	767	$	(100,265)
Beginning balance at January 29, 2022								Beginning balance at January 29, 2022	$	(120,689)	$	5,983	$	(114,706)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	(5,629)		4,589		(1,040)		Other comprehensive (loss) income before reclassifications	(10,403)		5,363		(5,040)
Reclassified gain from AOCL (1)	Reclassified gain from AOCL (1)	—		(141)		(141)		Reclassified gain from AOCL (1)	—		(3,684)		(3,684)
Tax effect	Tax effect	—		(32)		(32)		Tax effect	—		33		33
Other comprehensive (loss) income after reclassifications	Other comprehensive (loss) income after reclassifications	(5,629)		4,416		(1,213)		Other comprehensive (loss) income after reclassifications	(10,403)		1,712		(8,691)
Ending balance at October 30, 2021		$	(106,661)	$	5,183	$	(101,478)
Ending balance at April 30, 2022								Ending balance at April 30, 2022	$	(131,092)	$	7,695	$	(123,397)

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

~~For the thirteen and thirty-nine weeks ended October 31, 2020, 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 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). Income.

For the thirteen weeks ended May 1, 2021, the activity in AOCL was as follows:


	Thirteen Weeks Ended May 1, 2021
(in thousands)	Foreign Currency Translation Adjustment		Unrealized Loss on Derivative Financial Instruments		Total
Beginning balance at January 30, 2021	$	(97,772)	$	(4,535)	$	(102,307)
Other comprehensive (loss) income before reclassifications	(1,274)		1,144		(130)
Reclassified loss from AOCL (1)	—		1,455		1,455

Other comprehensive (loss) income after reclassifications (2)	(1,274)		2,599		1,325
Ending balance at May 1, 2021	$	(99,046)	$	(1,936)	$	(100,982)

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

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

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~~15.~~14. 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, 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~~April 30, ~~2021~~2022 and ~~October 31, 2020~~May 1, 2021 were as follows:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended
(in thousands)	(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020		(in thousands)	April 30, 2022		May 1, 2021
Hollister	Hollister	$	522,311	$	476,665	$	1,479,202	$	1,178,925	Hollister	$	428,834	$	442,408
Abercrombie	Abercrombie	382,849		342,988		1,072,213		824,415		Abercrombie	383,928		338,997
Total	Total	$	905,160	$	819,653	$	2,551,415	$	2,003,340	Total	$	812,762	$	781,405


Abercrombie & Fitch Co.			17			2022 1Q Form 10-Q

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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 and wholesale orders. The Company’s net sales by geographic area for the thirteen ~~and thirty-nine~~ weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020~~May 1, 2021 were as follows:


		Thirteen Weeks Ended				Thirty-nine Weeks Ended					Thirteen Weeks Ended
(in thousands)	(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020		(in thousands)	April 30, 2022		May 1, 2021
U.S.	U.S.	$	654,858	$	557,814	$	1,810,471	$	1,339,347	U.S.	$	585,106	$	553,846
EMEA(1)	EMEA(1)	179,156		190,214		528,998		474,165		EMEA(1)	163,969		159,002
APAC ~~(1)~~(2)	APAC ~~(1)~~(2)	38,215		43,618		125,489		117,768		APAC ~~(1)~~(2)	29,897		46,046
Other	Other	32,931		28,007		86,457		72,060		Other	33,790		22,511
International	International	$	250,302	$	261,839	$	740,944	$	663,993	International	$	227,656	$	227,559
Total	Total	$	905,160	$	819,653	$	2,551,415	$	2,003,340	Total	$	812,762	$	781,405

(1) Europe, Middle East and Africa (“EMEA”)

(2) Asia-Pacific Region (“APAC”)


Abercrombie & Fitch Co.			18			2022 1Q Form 10-Q

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

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.

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 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 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, Three of the leases were transferred through assignment while the fourth lease has been subleased to a new tenant. The Company no longer has lease obligations 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.~~

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.

~~Table of Contents~~

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

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

~~INTRODUCTION~~SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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 certain of the Company’s focus areas for the current fiscal year and 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.

•~~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.~~

•~~Liquidity and Capital Resources~~.This section provides a discussion of the Company’s expected primary sources and uses of cash, financial condition and liquidity as of October 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 30, 2021 as compared to the thirty-nine weeks ended October 31, 2020; and (iii) an analysis of liquidity, including discussion related to 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 between GAAP and non-GAAP financial measures and additional details on non-GAAP financial measures, including information as to why the Company believes the non-GAAP financial measures provided within MD&A are useful to investors.

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 2020 in some cases have affected and in the future could affect the Company’s financial performance and cause actual results for Fiscal 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 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.

~~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;~~

•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;

•~~We rely on the experience and skills of our executive officers and associates, and the failure to attract or retain this talent, effectively manage succession, and establish a diverse workforce could have a material adverse impact on our 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 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,” or the negative version of those words or other comparable words and similar expressions may identify forward-looking statements. Future economic and industry trends that could potentially impact revenue and profitability are difficult to predict. Therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. Factors that could cause results to differ from those expressed in the Company’s forward-looking statements include, but are not limited to, the risks described or referenced in Part I, Item 1A. “Risk Factors,” in the Company’s Annual Report on Fiscal 2021 Form 10-K for the fiscal year ended January 29, 2022 and otherwise in our reports and filings with the SEC, as well as the following:

•risks and uncertainty related to the ongoing COVID-19 pandemic and any other adverse public health developments;

•risks related to 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;

•risks related to recent inflationary pressures with respect to labor and raw materials and global supply chain constraints that have, and could continue to, affect freight, transit and other costs;

•risks related to geopolitical conflict, including the on-going hostilities in Ukraine, acts of terrorism, mass casualty events, social unrest, civil disturbance or disobedience;

•risks related to our failure to engage our customers, anticipate customer demand and changing fashion trends, and manage our inventory;

•risks related to our ability to successfully invest in customer, digital and omnichannel initiatives;

•risks related to our ability to execute on our global store network optimization initiative;

•risks related to our international growth strategy;

•risks related to cyber security threats and privacy or data security breaches or the potential loss or disruption of our information systems;

•risks associated with climate change and other corporate responsibility issues; and.

•uncertainties related to future legislation, regulatory reform, policy changes, or interpretive guidance on existing legislation.

In light of the significant uncertainties in the forward-looking statements included herein, 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.


Abercrombie & Fitch Co.			19			2022 1Q Form 10-Q

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INTRODUCTION

•Overview.A general description of the Company’s business and certain segment information.

•Current Trends and Outlook.A discussion related to certain of the Company’s focus areas for the current fiscal year and discussion of certain risks and challenges as well as a summary of the Company’s performance for the thirteen weeks ended April 30, 2022 and May 1, 2021.

•Results of Operations.An analysis of certain components of the Company’s Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the thirteen weeks ended April 30, 2022 and May 1, 2021.

•Liquidity and Capital Resources.A discussion of the Company’s financial condition, changes in financial condition and liquidity as of April 30, 2022, which includes (i) an analysis of financial condition as compared to January 29, 2022; (ii) an analysis of changes in cash flows for the thirteen weeks ended April 30, 2022 as compared to the thirteen weeks ended May 1, 2021; and (iii) an analysis of liquidity, including availability under the Company’s credit facility, the Company’s share repurchase program, and outstanding debt and covenant compliance.

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

•Critical Accounting E stimates. A discussion of the accounting estimates considered to be important to the Company’s results of operations and financial condition, which typically require significant judgment and estimation on the part of management in their application.

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


Abercrombie & Fitch Co.			20			2022 1Q Form 10-Q

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OVERVIEW

Business summary

The Companyis a global, ~~digitally-led~~digitally led omnichannel retailer. The Company offers a broad assortment of apparel, personal care products and accessories for men, women and kids, which are sold primarily through its digital channels and Company-owned stores, as well as through various third-party arrangements. The Company’s 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. 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 in North America, Europe and 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~~ended/ ending

Number of weeks

~~Fiscal 2019~~

~~February 1, 2020~~

~~Fiscal 2020~~

~~January 30, 2021~~

Fiscal 2021

January 29, 2022

Fiscal 2022

January 28, 2023

Fiscal 2023

February 3, 2024

Seasonality

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~~2022

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~~2022 serve as a framework tofor the ~~Company achieving~~Company’s achievement of sustainable growth and 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;~~Create a more personalized customer experience through a connected omnichannel ecosystem,

•Optimize ~~store square footage, while being opportunistic~~our global distribution network to expand digital capacity and improve product delivery speed

•Opportunistically open new, omni-enabled stores in ~~global store expansion;~~under penetrated markets, and

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

Supply chain disruptions, inflation and changing prices

The Company has continued to see global supply chain constraints impacting our business and operations. The inability to receive inventory in a timely manner could cause delays in responding to customer demand and adversely affect sales. During the latter half of Fiscal 2021, the Company increased its air freight usage in response to inventory delays imposed by temporary factory closures in Vietnam. This disruption and the associated increased costs adversely impacted the Company during the latter half of Fiscal 2021 and into the first quarter of Fiscal 2022. In addition, the Company has experienced and expects to continue to experience inflationary pressures affecting the Company’s freight, transit, and other costs, and such rates are likely to remain elevated throughout Fiscal 2022.

In order to mitigate supply chain constraints and higher freight rates, the Company has taken and expects to continue to take actions to manage the impact, including scheduling earlier inventory receipts to allow for longer lead times, expanding its number of freight vendors, and reducing air freight usage where possible. It is possible that the Company’s responses to factory closures, transportation delays, or freight rates will not be adequate to mitigate the impact, and that these events could continue to adversely affect the Company’s business and results of operations.

The Company has also experienced inflationary pressures with respect to labor, cotton and other raw materials and other costs. Inflation can have a long-term impact on the Company because increasing costs may impact the ability to maintain satisfactory margins. The Company may be unsuccessful in passing these increased costs on to the customer through higher ticket prices. Furthermore, increases in inflation may not be matched by growth in consumer income, which also could have a negative impact on discretionary spending. In periods of perceived unfavorable conditions, consumers may reallocate available discretionary


Abercrombie & Fitch Co.			21			2022 1Q Form 10-Q

Table of Contents

spending to areas outside of our core business. In addition, as COVID-19 restrictions begin to be lifted, consumers may use any remaining discretionary spending on travel and other experiences which may adversely impact demand for our products.

Global Store Network Optimization

As part of its ongoing global store network optimization initiative, ~~and~~the Company has a stated goal of repositioning from larger format ~~tourist-dependent~~locations, such as, tourist dependent and 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 addition, the Company closed 129 non-flagship locations and eight flagship locations during Fiscal 2020. These actions, combined with recent digital sales growth, are expected to continue to transform the Company's operating model and reposition the Company for the future as thecustomers. The Company continues to focus on aligning store square footage with digital ~~penetration.~~ penetration, and during the first quarter of Fiscal 2022, the Company opened 4 new format stores, while closing 5 legacy stores. As part of this focus, the Company plans to open 60 new stores, while closing 30 stores, during Fiscal 2022, pending negotiations with our landlord partners.

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

~~Table of Contents~~

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


		Hollister (1)		Abercrombie (2)		Total Company (3)				Hollister (1)		Abercrombie (2)		Total Company (3)
		U.S.	International	U.S.	International	U.S.	International	Total		U.S.	International	U.S.	International	U.S.	International	Total
Number of stores:	Number of stores:								Number of stores:
January 30, 2021		347	150	190	48	537	198	735
January 29, 2022									January 29, 2022	351	154	173	51	524	205	729
New	New	9	5	6	3	15	8	23	New	1	2	1	—	2	2	4
Permanently closed	Permanently closed	(1)	(4)	(15)	(3)	(16)	(7)	(23)	Permanently closed	—	—	(3)	(2)	(3)	(2)	(5)
October 30, 2021		355	151	181	48	536	199	735

April 30, 2022									April 30, 2022	352	156	171	49	523	205	728
Gross square footage (in thousands):	Gross square footage (in thousands):								Gross square footage (in thousands):
October 30, 2021		2,344	1,204	1,224	387	3,568	1,591	5,159
April 30, 2022									April 30, 2022	2,318	1,218	1,146	347	3,464	1,565	5,029

(1)Hollister includes the Company’s Hollister and Gilly Hicks brands. Locations with Gilly Hicks carveouts within Hollister stores are represented as a single store count. Excludes 108 international franchise stores as of ~~October~~April 30, ~~2021,~~2022, and ~~9 international franchise stores as of~~ January ~~30, 2021.~~29, 2022. Excludes ~~14 and 12~~13 Company-operated temporary stores as of ~~October~~April 30, ~~2021~~2022 and 14 Company-operated temporary stores as of January ~~30, 2021, respectively.~~29, 2022.

(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 1314 international franchise stores as of ~~October~~April 30, ~~2021~~2022 and ~~10 international franchise stores as of~~ January ~~30, 2021.~~29, 2022. Excludes ~~four and two~~5 Company-operated temporary stores as of ~~October~~each of April 30, ~~2021~~2022 and January ~~30, 2021, respectively.~~29, 2022.

(3)This store count excludes one international third-party operated multi-brand outlet store as of each of ~~October~~April 30, ~~2021~~2022, and January ~~30, 2021.~~29, 2022.

COVID-19

~~In March 2020, the COVID-19 outbreak was declared~~There continues to be auncertainty surrounding ongoing COVID-19 pandemic and its impact on the global ~~pandemic by the World Health Organization. In response to COVID-19, certain governments imposed travel~~economy, including government-mandated restrictions, supply chain disruptions, inflationary pressures, higher freight and ~~local statutory quarantines~~labor costs, and ~~the Company experienced widespread temporary store closures.~~labor shortages. As of ~~October~~April 30, ~~2021,~~2022, all ~~Company-operated~~U.S. stores were fully open for in-store ~~service.~~service; however, temporary store closures have been mandated in certain parts of the APAC region in response to COVID-19. During periods of temporary store closures, reductions in revenue have not been offset by proportional decreases in expense, as the Company 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.

The Company’s digital operations across brands have continued to serve the Company’s customers during periods of temporary store closures. In response to elevated digital demand during this period, the Company leveraged its omnichannel capabilities by continuing to offer Purchase-Online-Pickup-in-Store, including curbside pickup at a majority of U.S. locations, and by utilizing ship-from-store capabilities, including same-day delivery across its entire U.S. store fleet. 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 level of digital penetration will continue when stores operate at full capacity

Although U.S. and global economies have begun to recover from the COVID-19 pandemic as many health and safety restrictions have been lifted and vaccine distribution has increased, certain adverse consequences of the pandemic continue to impact the macroeconomic environment and may persist for some time, including labor shortages and disruptions of global supply chains and temporary store closures. The Company plans to follow the guidance of local governments to evaluate whether future store closures will be necessary. 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, the emergence of new variants of coronavirus, ~~such as the Delta and Omicron variants,~~ and the availability and acceptance of effective 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~~


Abercrombie & Fitch Co.			22			2022 1Q Form 10-Q

Table of ~~temporary store closures as the Company’s distribution centers implemented enhanced cleaning~~Contents

Impact of global events and social distancing measures in order to remain operational. In response to elevated digital demand during this period, the Company 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 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.uncertainty

~~COVID-19 has also caused disruptions~~We are a global multi-brand omnichannel specialty retailer, with operations in North America, Europe and Asia, among other regions, management is mindful of macroeconomic risks, global challenges and the changing global geopolitical environment, including the on-going conflict in Ukraine, that could adversely impact certain areas of the business. As a result, in addition to the events listed within MD&A, management continues to monitor certain other global ~~supply chains, including temporary closures of factories.~~events. The ~~inability~~Company continues to ~~receive inventory~~assess the potential impacts these events and similar events may have on the business in ~~a timely manner could cause delays~~future periods and continues to develop and update contingency plans to assist in responding to customer demand and adversely affect sales. In addition, the Company has seen and expects to continue to see inflationary pressures affecting the Company’s transportation costs. In order to mitigate the risk associated with supply chain constraints, the Company has taken and expects to continue to take actions to manage through the 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.mitigating potential impacts. It is possible that ~~responses to extended factory closures and transportation delays~~the Company’s preparations for such events are not adequate to mitigate their impact, and that these events could further adversely affect ~~the~~its business and results of operations.

For a discussion of 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 the Fiscal 2021 Form ~~10-K for Fiscal 2020.~~10-K.

~~Table of Contents~~

Summary of results

A summary of results for the thirteen ~~and thirty-nine~~ weeks ended ~~October~~April 30, 2022 and May 1, 2021 ~~and October 31, 2020~~ follows:

GAAP
Non-GAAP (1)
(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
Net sales $ 905,160 $ 819,653
Change in net sales 10.4 % (17.0) %
Gross profit rate 63.7 % 64.0 %
Operating income $ 72,731 $ 58,616 $ 79,480 $ 64,945
Operating income margin 8.0 % 7.2 % 8.8 % 7.9 %
Net income attributable to A&F $ 47,233 $ 42,271 $ 52,607 $ 48,231
Net income per diluted share attributable to A&F $ 0.77 $ 0.66 $ 0.86 $ 0.76
Thirty-nine Weeks Ended
Net sales $ 2,551,415 $ 2,003,340
Change in net sales 27.4 % (24.8) %
Gross profit rate 64.1 % 60.5 %
Operating income (loss) $ 244,951 $ (136,368) $ 255,150 $ (79,028)
Operating income (loss) margin 9.6 % (6.8) % 10.0 % (3.9) %
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 $ 3.10 $ (3.14) $ 3.22 $ (2.28)


	GAAP						Non-GAAP (1)
(in thousands, except change in net sales, gross profit rate, operating (loss) income margin and per share amounts)	April 30, 2022			May 1, 2021			April 30, 2022			May 1, 2021
Thirteen Weeks Ended
Net sales	$	812,762		$	781,405
Change in net sales	4.0		%	61.0		%

Gross profit rate	55.3		%	63.4		%
Operating (loss) income	$	(9,726)		$	57,433		$	(6,304)		$	60,097
Operating (loss) income margin	(1.2)		%	7.3		%	(0.8)		%	7.7		%
Net (loss) income attributable to A&F	$	(16,469)		$	41,768		$	(13,965)		$	43,983
Net (loss) income attributable to A&F per dilutive share	(0.32)			0.64			(0.27)			0.67

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

~~(2)~~ 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 10, “INCOME TAXES~~.”

Certain components of the Company’s Condensed Consolidated Balance Sheets as of ~~October~~April 30, ~~2021~~2022 and January ~~30, 2021~~29, 2022 were as follows:


(in thousands)	(in thousands)	October 30, 2021		January 30, 2021		(in thousands)	April 30, 2022		January 29, 2022
Cash and equivalents	Cash and equivalents	$	865,622	$	1,104,862	Cash and equivalents	$	468,378	$	823,139
Gross long-term borrowings outstanding, carrying amount	Gross long-term borrowings outstanding, carrying amount	$	307,730	$	350,000	Gross long-term borrowings outstanding, carrying amount	307,730		307,730
Inventories	Inventories	$	543,713	$	404,053	Inventories	562,510		525,864

Certain components of the Company’s Condensed Consolidated Statements of Cash Flows for the ~~thirty-nine~~thirteen week periods ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020~~May 1, 2021 were as follows:


(in thousands)	(in thousands)	October 30, 2021		October 31, 2020		(in thousands)	April 30, 2022		May 1, 2021
Net cash provided by operating activities		$	131,287	$	108,894
Net cash used for operating activities						Net cash used for operating activities	$	(217,787)	$	(131,350)
Net cash used for investing activities	Net cash used for investing activities	$	(62,223)	$	(41,748)	Net cash used for investing activities	(18,541)		(14,404)
Net cash (used for) provided by financing activities		$	(304,358)	$	70,129
Net cash used for financing activities						Net cash used for financing activities	(116,945)		(53,191)


Abercrombie & Fitch Co.			23			2022 1Q Form 10-Q

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RESULTS OF OPERATIONS

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

Net sales

For the first quarter of Fiscal 2022, net sales increased 4% as compared to the first quarter of Fiscal 2021, primarily due to an increase in stores sales, as well as an increase average unit retail driven by lower promotions and markdowns, partially offset by the adverse impact from changes in foreign currency exchange rates of approximately $9 million.

The Company’s net sales by operating segment for the thirteen ~~and thirty-nine~~ weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020~~May 1, 2021 were as follows:


		Thirteen Weeks Ended								Thirteen Weeks Ended
(in thousands)	(in thousands)	October 30, 2021		October 31, 2020		$ Change		% Change	(in thousands)	April 30, 2022		May 1, 2021		$ Change		% Change
Hollister (1)	Hollister (1)	$	522,311	$	476,665	$	45,646	10%	Hollister (1)	$	428,834	$	442,408	$	(13,574)	(3)%
Abercrombie (2)	Abercrombie (2)	382,849		342,988		39,861		12%	Abercrombie (2)	383,928		338,997		44,931		13%
Total	Total	$	905,160	$	819,653	$	85,507	10%	Total	$	812,762	$	781,405	$	31,357	4%

		Thirty-nine Weeks Ended
(in thousands)		October 30, 2021		October 31, 2020		$ Change		% Change
Hollister(1)		$	1,479,202	$	1,178,925	$	300,277	25%
Abercrombie (2)		1,072,213		824,415		247,798		30%
Total		$	2,551,415	$	2,003,340	$	548,075	27%

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

(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~~April 30, ~~2021~~2022 and ~~October 31, 2020~~May 1, 2021 were as follows:


		Thirteen Weeks Ended								Thirteen Weeks Ended
(in thousands)	(in thousands)	October 30, 2021		October 31, 2020		$ Change		% Change	(in thousands)	April 30, 2022		May 1, 2021		$ Change		% Change

U.S.	U.S.	$	654,858	$	557,814	$	97,044	17%	U.S.	$	585,106	$	553,846	$	31,260	6%
EMEA	EMEA	179,156		190,214		(11,058)		(6)%	EMEA	163,969		159,002		4,967		3%
APAC	APAC	38,215		43,618		(5,403)		(12)%	APAC	29,897		46,046		(16,149)		(35)%
Other	Other	32,931		28,007		4,924		18%	Other	33,790		22,511		11,279		50%
International	International	$	250,302	$	261,839	$	(11,537)	(4)%	International	$	227,656	$	227,559	$	97	0%

Total	Total	$	905,160	$	819,653	$	85,507	10%	Total	$	812,762	$	781,405	$	31,357	4%

		Thirty-nine Weeks Ended
(in thousands)		October 30, 2021		October 31, 2020		$ Change		% Change
U.S.		$	1,810,471	$	1,339,347	$	471,124	35%
EMEA		528,998		474,165		54,833		12%
APAC		125,489		117,768		7,721		7%
Other		86,457		72,060		14,397		20%
International		$	740,944	$	663,993	$	76,951	12%
Total		$	2,551,415	$	2,003,340	$	548,075	27%

For the third quarter of Fiscal 2021, net sales increased 10% as compared to the third quarter of Fiscal 2020, primarily due to an increase in 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, and 8% digital sales growth. Average unit retail increased year-over-year, driven by 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 $33 million.

~~Table of Contents~~

Cost of sales, exclusive of depreciation and amortization


		Thirteen Weeks Ended								Thirteen Weeks Ended
		October 30, 2021			October 31, 2020					April 30, 2022			May 1, 2021
(in thousands)	(in thousands)			% of Net sales			% of Net sales	BPS Change	(in thousands)			% of Net sales			% of Net sales	BPS Change
Cost of sales, exclusive of depreciation and amortization	Cost of sales, exclusive of depreciation and amortization	$	328,916	36.3%	$	295,220	36.0%	30	Cost of sales, exclusive of depreciation and amortization	$	363,216	44.7%	$	286,271	36.6%	810

		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~~first quarter of Fiscal ~~2021,~~2022, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales increased by approximately 30810 basis points as compared to the ~~third~~first quarter of Fiscal ~~2020.~~2021. The year-over-year increase was driven by approximately ~~300 basis points of~~$80 million higher average unit cost from freight inflation ~~and efforts to offset supply chain issues, almost fully~~partially offset by higher average unit retail on ~~reduced promotions.~~

For the year-to-date period of Fiscal 2021, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased by approximately 360 basis points as compared to the year-to-date period of Fiscal 2020. The year-over-year decline was primarily attributable to increased average unit retail on reducedlower promotions and ~~markdowns.~~higher ticket prices.

~~Gross profit, exclusive of depreciation and amortization~~

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


Abercrombie & Fitch Co.			24			2022 1Q Form 10-Q

Table of Contents

Gross profit, exclusive of depreciation and amortization


	Thirteen Weeks Ended
	April 30, 2022			May 1, 2021
(in thousands)			% of Net sales			% of Net sales	BPS Change
Gross profit, exclusive of depreciation and amortization	$	449,546	55.3%	$	495,134	63.4%	(810)

Stores and distribution expense


		Thirteen Weeks Ended								Thirteen Weeks Ended
		October 30, 2021			October 31, 2020					April 30, 2022			May 1, 2021
(in thousands)	(in thousands)			% of Net sales			% of Net sales	BPS Change	(in thousands)			% of Net sales			% of Net sales	BPS Change
Stores and distribution expense	Stores and distribution expense	$	351,804	38.9%	$	346,263	42.2%	(330)	Stores and distribution expense	$	337,543	41.5%	$	315,508	40.4%	110

		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~~first quarter of Fiscal ~~2021,~~2022, stores and distribution expense increased 2%7% as compared to the ~~third~~first quarter of Fiscal ~~2020,~~2021. Approximately half of the $22 million increase was due to the lapping of COVID19-related rent abatements and payroll credits last year, with the remaining primarily ~~driven by a $13 million~~due to an increase in marketing and 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.~~ fulfillment expenses. These increases were partially offset by a ~~$19 million~~ reduction in store occupancy expense reflecting a decrease in store count and favorable rent negotiations.

For the year-to-date period of Fiscal 2021, stores and distribution expense increased 2% as compared to the year-to-date period of Fiscal 2020, primarily driven by a $36 million increase in store payroll expense, reflecting the return of certain expenses saved last year from COVID-19 temporary store closures, a $24 million increase in digital sales marketing expense, and a $15 million increase in digital shipping and handling expense reflecting 14% year-over-year digital sales growth. These increases were partially offset by a $75 million reduction in store occupancy expense reflecting a decrease in store count and favorable rent negotiations and include approximately $18 million in benefits related to rent abatements and a favorable resolution of a flagship store closure.

Marketing, general and administrative expense


		Thirteen Weeks Ended								Thirteen Weeks Ended
		October 30, 2021			October 31, 2020					April 30, 2022			May 1, 2021
(in thousands)	(in thousands)			% of Net sales			% of Net sales	BPS Change	(in thousands)			% of Net sales			% of Net sales	BPS Change
Marketing, general and administrative expense	Marketing, general and administrative expense	$	146,269	16.2%	$	121,000	14.8%	140	Marketing, general and administrative expense	$	122,149	15.0%	$	120,947	15.5%	(50)

		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~~first quarter of Fiscal ~~2021,~~2022, marketing, general and administrative expense increased ~~21%~~1% as compared to the ~~third~~first quarter of Fiscal ~~2020,~~2021, primarily driven by increased digital media spend, ~~performance-based compensation, legal,~~ consulting and information technology expense. These increases were partially offset by a decrease in depreciation expense.

For the year-to-date period of Fiscal 2021, marketing, general and administration expense increased 20% as compared to the year-to-date period of Fiscal 2020, primarily driven by increased digital media spend, performance-based compensation, legal, consulting and information technology expense. These increases were partially offset by a decrease in depreciation expense.

~~Table of Contents~~

~~Flagship store exit charges (benefits)~~

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

~~Refer to Note 16, “FLAGSHIP STORE EXIT~~ ~~CHARGES (BENEFITS~~).”

Asset impairment


		Thirteen Weeks Ended								Thirteen Weeks Ended
		October 30, 2021			October 31, 2020					April 30, 2022			May 1, 2021
(in thousands)	(in thousands)			% of Net sales			% of Net sales	BPS Change	(in thousands)			% of Net sales			% of Net sales	BPS Change
Asset impairment	Asset impairment	$	6,749	0.7%	$	6,329	0.8%	(10)	Asset impairment	$	3,422	0.4%	$	2,664	0.3%	10
Excluded items:	Excluded items:								Excluded items:
Asset impairment charges (1)	Asset impairment charges (1)	(6,749)		(0.7)%	(6,329)		(0.8)%	10	Asset impairment charges (1)	(3,422)		(0.4)%	(2,664)		(0.3)%	(10)
Adjusted non-GAAP asset impairment	Adjusted non-GAAP asset impairment	$	—	0.0%	$	—	—%	—	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) Refer to “NON-GAAP FINANCIAL MEASURES,” for further details.

Refer to Note 9,8, “ASSET IMPAIRMENT.”

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

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


Abercrombie & Fitch Co.			25			2022 1Q Form 10-Q

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Other operating income, net


	Thirteen Weeks Ended
	April 30, 2022			May 1, 2021
(in thousands)			% of Net sales			% of Net sales	BPS Change
Other operating income, net	$	3,842	0.5%	$	1,418	0.2%	(30)

For the first quarter of Fiscal 2022, other operating income, net increased $2.4 million as compared to the first quarter of Fiscal 2021, primarily driven by gains on foreign currency exchange forward contracts and a gain on the sale of property and equipment.

Operating (loss) income ~~(loss)~~


		Thirteen Weeks Ended								Thirteen Weeks Ended
		October 30, 2021			October 31, 2020					April 30, 2022			May 1, 2021
(in thousands)	(in thousands)			% of Net sales			% of Net sales	BPS Change	(in thousands)			% of Net sales			% of Net sales	BPS Change
Operating income		$	72,731	8.0%	$	58,616	7.2%	80
Operating (loss) income									Operating (loss) income	$	(9,726)	(1.2)%	$	57,433	7.3%	(850)
Excluded items:	Excluded items:								Excluded items:
Asset impairment charges (1)	Asset impairment charges (1)	6,749		0.7%	6,329		0.8%	(10)	Asset impairment charges (1)	3,422		0.4%	2,664		0.3%	10
Adjusted non-GAAP operating income		$	79,480	8.8%	$	64,945	7.9%	90
Adjusted non-GAAP operating (loss) income									Adjusted non-GAAP operating (loss) income	$	(6,304)	(0.8)%	$	60,097	7.7%	(850)

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

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

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

Interest expense, net


		Thirteen Weeks Ended								Thirteen Weeks Ended
		October 30, 2021			October 31, 2020					April 30, 2022			May 1, 2021
(in thousands)	(in thousands)			% of Net sales			% of Net sales	BPS Change	(in thousands)			% of Net sales			% of Net sales	BPS Change
Interest expense	Interest expense	$	7,802	0.9%	$	9,408	1.1%	(20)	Interest expense	$	7,809	1.0%	$	9,143	1.2%	(20)
Interest income	Interest income	(532)		(0.1)%	(600)		(0.1)%	—	Interest income	(502)		(0.1)%	(537)		(0.1)%	—
Interest expense, net	Interest expense, net	$	7,270	0.8%	$	8,808	1.1%	(30)	Interest expense, net	$	7,307	0.9%	$	8,606	1.1%	(20)

		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~~first quarter of Fiscal ~~2021,~~2022, interest expense, net decreased ~~$1.5~~$1.3 million as compared to the ~~third~~first quarter of Fiscal ~~2020,~~2021, 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.~~2021.

For the year-to-date period of Fiscal 2021, interest expense, net increased $7.9 million as compared to the year-to-date period of Fiscal 2020. The increase in interest expense, net, 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 higher average borrowings outstanding at a higher interest rate.


Abercrombie & Fitch Co.			26			2022 1Q Form 10-Q

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Income tax (benefit) expense


		Thirteen Weeks Ended							Thirteen Weeks Ended
		October 30, 2021			October 31, 2020				April 30, 2022			May 1, 2021
(in thousands, except ratios)	(in thousands, except ratios)			Effective Tax Rate			Effective Tax Rate	(in thousands, except ratios)			Effective Tax Rate			Effective Tax Rate
Income tax expense		$	16,383	25.0%	$	5,779	11.6%
Income tax (benefit) expense								Income tax (benefit) expense	$	(2,187)	12.8%	$	6,121	12.5%
Excluded items:	Excluded items:							Excluded items:
Tax effect of pre-tax excluded items (1)	Tax effect of pre-tax excluded items (1)	1,375			369			Tax effect of pre-tax excluded items (1)	918			449
Adjusted non-GAAP income tax expense		$	17,758	24.6%	$	6,148	11.0%
Adjusted non-GAAP income tax (benefit) expense								Adjusted non-GAAP income tax (benefit) expense	$	(1,269)	9.3%	$	6,570	12.8%

		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 (loss) income ~~(loss)~~” and “NON-GAAP FINANCIAL MEASURES,” for details of pre-tax excluded items.

Refer to Note ~~10,~~9, “INCOME TAXES.”

Net (loss) income ~~(loss)~~ attributable to A&F


		Thirteen Weeks Ended								Thirteen Weeks Ended
		October 30, 2021			October 31, 2020					April 30, 2022			May 1, 2021
(in thousands)	(in thousands)			% of Net sales			% of Net sales	BPS Change	(in thousands)			% of Net sales			% of Net sales	BPS Change
Net income attributable to A&F		$	47,233	5.2%	$	42,271	5.2%	—
Net (loss) income attributable to A&F									Net (loss) income attributable to A&F	$	(16,469)	(2.0)%	$	41,768	5.3%	(730)
Excluded items, net of tax (1)	Excluded items, net of tax (1)	5,374		0.6%	5,960		0.7%	(10)	Excluded items, net of tax (1)	2,504		0.3%	2,215		0.3%	—
Adjusted non-GAAP net income attributable to A&F (2)		$	52,607	5.8%	$	48,231	5.9%	(10)
Adjusted non-GAAP net (loss) income attributable to A&F (2)									Adjusted non-GAAP net (loss) income attributable to A&F (2)	$	(13,965)	(1.7)%	$	43,983	5.6%	(730)

		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 (loss) income ~~(loss)~~,” and “Income tax ~~expense.~~(benefit) expense”

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

~~Table of Contents~~

Net (loss) 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


	Thirteen Weeks Ended
	April 30, 2022		May 1, 2021		$ Change
Net (loss) income attributable to A&F per diluted share	$	(0.32)	$	0.64	$(0.96)
Excluded items, net of tax (1)	0.05		0.03		0.02
Adjusted non-GAAP net (loss) income per diluted share attributable to A&F	(0.27)		0.67		(0.94)
Impact from changes in foreign currency exchange rates	—		0.05		(0.05)
Adjusted non-GAAP net (loss) income per diluted share attributable to A&F on a constant currency basis (2)	(0.27)		0.72		(0.99)

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

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


Abercrombie & Fitch Co.			27			2022 1Q Form 10-Q

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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 believes that it will have adequate liquidity to fund operating activities over the next 12 months. The Company monitors financing market conditions and may in the future determine whether and when to amend, modify, or restructure its ABL Facility and/or the Senior Secured Notes. For a discussion of the Company’s share repurchase activity and suspended dividend program, please see below under “Share repurchases and dividends.”

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~~facility and Senior Secured Notes”.

Over the next twelve months, the Company expects its primary cash requirements to be directed towards 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 evaluates opportunities for investments in the business that are in line with initiatives that position the business for sustainable long-term growth that align with its strategic pillars as described within ~~“ITEM~~“Item 1. ~~BUSINESS~~Business - STRATEGY AND KEY BUSINESS PRIORITIES” ~~of A&F’s Annual Report~~included on the Fiscal 2021 Form 10-K, ~~for Fiscal 2020,~~ including being opportunistic regarding growth ~~opportunities, such as launching the Social Tourist brand.~~opportunities. Examples of potential investment opportunities include, but are not limited to, new store experiences, and ~~options to early terminate store leases,~~ investments in its digital and omnichannel ~~initiatives and investments to increase the Company’s capacity to fulfill digital orders.~~initiatives. 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~~April 30, ~~2021,~~2022, the Company used ~~$62.2~~$26.3 million towards capital expenditures. Total capital expenditures for Fiscal ~~2021~~2022 are expected to be approximately ~~$100 million as compared to $101.9 million of capital expenditures in Fiscal 2020.~~$150 million.

The Company ~~entered Fiscal 2021 in a strong financial position,~~measures liquidity using total cash and cash equivalents and incremental borrowing available under the ABL Facility. As of April 30, 2022, the Company has cash and cash equivalents of $0.5 billion and total liquidity of approximately $0.8 billion. This compares with cash and cash equivalents of ~~$1.1~~$0.8 billion and total liquidity of approximately ~~$1.3 billion.~~$1.1 billion at the beginning of Fiscal 2022. This allows the Company to evaluate potential opportunities to strategically deploy excess cash ~~and delever~~and/or deleverage 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.~~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 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. During the year-to-date period ended April 30, 2022, the Company repurchased approximately 3.3 million shares and returned approximately $100.0 million to shareholder through repurchases.

Historically, the Company has repurchased shares of its Common Stock from time to time, dependent on market and business conditions, with the objectives of returning excess cash to shareholders and 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.~~units. 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~~I tem 2. ~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~U nregistered S ales of E quity S ecurities and U se 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.

In May 2020, the Company announced that it had temporarily suspended its dividend program in order to preserve liquidity and maintain financial flexibility in light of COVID-19. The Company may in the future review its dividend program to determine, in light of facts and circumstances at that time, whether and when to reinstate. Any dividends are declared at the discretion of A&F’s Board of Directors. A&F’s Board of Directors reviews and establishes a dividend amount, if ~~any,~~at all, 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 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 declare and pay dividends in the future or, if dividends are paid, that they will be in amounts similar to past dividends.


Abercrombie & Fitch Co.			28			2022 1Q Form 10-Q

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Credit ~~facilities~~facility 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 which began in January 2021. The Company’s debt related to the Senior Secured Notes is presented on the Condensed Consolidated Balance 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~~April 30, ~~2021,~~2022, the Company had $307.7 million of gross borrowings outstanding under the Senior Secured Notes.

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

Details regarding the remaining borrowing capacity under the ABL Facility as of ~~October~~April 30, ~~2021~~2022 are as follows:


(in thousands)	~~October~~April 30, ~~2021~~2022
Borrowing base	$	~~301,850~~350,232
Less: Outstanding stand-by letters of credit	~~(827)~~(791)
Borrowing capacity	~~301,023~~349,441
Less: Minimum excess availability (1)	~~(30,185)~~(35,023)
Borrowing available	$	~~270,838~~314,418

(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 ~~11,~~10, “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 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 tax expense. As of ~~October~~April 30, ~~2021, $405.5~~2022, $317.0 million of the Company’s ~~$865.6~~$468.4 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.~~fund investing and financing cash flow activities.

Refer to Note ~~10,~~9, “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~~thirteen weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020:~~May 1, 2021:


		Thirty-nine Weeks Ended					Thirteen Weeks Ended
		October 30, 2021		October 31, 2020			April 30, 2022		May 1, 2021
(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	$	1,124,157	$	692,264	Cash and equivalents, and restricted cash and equivalents, beginning of period	$	834,368	$	1,124,157
Net cash provided by operating activities		131,287		108,894
Net cash used for operating activities						Net cash used for operating activities	(217,787)		(131,350)
Net cash used for investing activities	Net cash used for investing activities	(62,223)		(41,748)		Net cash used for investing activities	(18,541)		(14,404)
Net cash (used for) provided by financing activities		(304,358)		70,129
Net cash used for financing activities						Net cash used for financing activities	(116,945)		(53,191)
Effect of foreign currency exchange rates on cash	Effect of foreign currency exchange rates on cash	(8,560)		2,269		Effect of foreign currency exchange rates on cash	(2,617)		(1,021)
Net (decrease) increase in cash and equivalents, and restricted cash and equivalents		(243,854)		139,544
Net decrease in cash and equivalents, and restricted cash and equivalents						Net decrease in cash and equivalents, and restricted cash and equivalents	(355,890)		(199,966)
Cash and equivalents, and restricted cash and equivalents, end of period	Cash and equivalents, and restricted cash and equivalents, end of period	$	880,303	$	831,808	Cash and equivalents, and restricted cash and equivalents, end of period	$	478,478	$	924,191

Operating activities - During the year-to-date period ended ~~October~~April 30, ~~2021,~~2022, net cash used for operating activities included the ~~Company recognized higher~~acquisition of inventory and increased payments to vendors, including additional rent payments made during the period due to fiscal calendar shifting relative to monthly rent due dates, partially offset by increased cash receipts ~~as compared to the year-to-date period ended October 31, 2020~~ as a result of the ~~27%~~4% year-over-year increase in net ~~sales as the Company experienced widespread temporary store closures in response to COVID-19 during Fiscal 2020.~~sales.

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 (i) partnering with

~~Table of Contents~~

merchandise and non-merchandise vendors in regards to payment terms; (ii) tightly managing inventory receipts to align inventory with expected market demand; and (iii) significantly reducing expenses to better align operating costs with sales. The Company also suspended rent payments for a 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 as a result of 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,~~May 1, 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,~~May 1, 2021.


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Investing activities - During the year-to-date period ended ~~October~~April 30, ~~2021,~~2022, net cash ~~outflows~~used for investing activities were primarily used for capital expenditures of ~~$62.2~~$26.3 million, aspartially offset by the proceeds from the sale of property and equipment of $7.8 million. This compared ~~to $91.7~~net cash used for investing activities of capital expenditures of $14.4 million for the year-to-date period ended October 31, 2020. In addition, the year-to-date period ended October 31, 2020, 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 position in light of COVID-19.May 1, 2021.

Financing activities - During the year-to-date period ended ~~October~~April 30, ~~2021,~~2022, net cash used byfor 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 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. The Company resumed share repurchase activity beginning March 2021 and repurchased approximately ~~6.1~~3.3 million shares of ~~A&F’s~~ Common Stock with a market value of approximately ~~$235.2 million during~~$100.0 million. During the year-to-date period ended ~~October 30, 2021.~~

~~Off-balance sheet arrangements~~

AsMay 1, 2021, net cash used for financing activities primarily consisted of ~~October 30, 2021,~~ the ~~Company did not have any material off-balance sheet arrangements.~~purchase of approximately 1.1 million shares of Common Stock with a market value of approximately $35.2 million.

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.

There have been no material changes during the thirteen weeks ended ~~October~~April 30, ~~2021~~2022 in the contractual obligations as of January ~~30, 2021,~~29, 2022, 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~~“Item 8. ~~FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Annual Report~~Financial Statements and Supplementary Data” included on the Fiscal 2021 Form ~~10-K for Fiscal 2020.~~10-K. 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.

CRITICAL ACCOUNTING ~~POLICIES AND~~ ESTIMATES

The Company describes its critical accounting ~~policies and~~ estimates in ~~“ITEM~~“Item 7. ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,~~Management’s Discussion and Analysis of Financial Condition and Results of Operations,” ~~of A&F’s Annual Report~~included on the Fiscal 2021 Form ~~10-K for Fiscal 2020.~~10-K. There have been no significant changes in critical accounting policies and estimates since the end of Fiscal ~~2020.~~2021.


Abercrombie & Fitch Co.			30			2022 1Q Form 10-Q

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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~~I tem 2. ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~M anagement ’s D iscussion and A nalysis of F inancial C ondition and R esults of O perations” 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 may 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, 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~~since Fiscal ~~2020 or Fiscal 2021.~~2019.

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~~						~~Asset impairment charges~~
Operating (loss) income ~~(loss)~~						Asset impairment charges
Income tax (benefit) expense (2)						Tax effect of pre-tax excluded items
Net (loss) income ~~(loss)~~ and net (loss) 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~~April 30, 2022 and May 1, 2021 ~~and October 31, 2020~~ 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
Net sales	Net sales	October 30, 2021		October 31, 2020		% Change	October 30, 2021		October 31, 2020		% Change	Net sales	April 30, 2022		May 1, 2021		% Change
GAAP	GAAP	$	905,160	$	819,653	10%	$	2,551,415	$	2,003,340	27%	GAAP	$	812,762	$	781,405	4%
Impact from changes in foreign currency exchange rates	Impact from changes in foreign currency exchange rates	—		3,540		—%	—		32,518		(2)%	Impact from changes in foreign currency exchange rates	—		(8,529)		1%
Non-GAAP on a constant currency basis	Non-GAAP on a constant currency basis	$	905,160	$	823,193	10%	$	2,551,415	$	2,035,858	25%	Non-GAAP on a constant currency basis	$	812,762	$	772,876	5%
Gross profit, exclusive of depreciation and amortization expense	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)	Gross profit, exclusive of depreciation and amortization expense	April 30, 2022		May 1, 2021		BPS Change (1)
GAAP	GAAP	$	576,244	$	524,433	(30)	$	1,634,863	$	1,212,186	360	GAAP	$	449,546	$	495,134	(810)
Impact from changes in foreign currency exchange rates	Impact from changes in foreign currency exchange rates	—		(1,702)		50	—		17,861		10	Impact from changes in foreign currency exchange rates	—		(3,283)		(20)
Non-GAAP on a constant currency basis	Non-GAAP on a constant currency basis	$	576,244	$	522,731	20	$	1,634,863	$	1,230,047	370	Non-GAAP on a constant currency basis	$	449,546	$	491,851	(830)
Operating income (loss)		October 30, 2021		October 31, 2020		BPS Change (1)	October 30, 2021		October 31, 2020		BPS Change (1)
Operating (loss) income												Operating (loss) income	April 30, 2022		May 1, 2021		BPS Change (1)
GAAP	GAAP	$	72,731	$	58,616	80	$	244,951	$	(136,368)	1,640	GAAP	$	(9,726)	$	57,433	(850)
Excluded items (2)	Excluded items (2)	(6,749)		(6,329)		(10)	(10,199)		(57,340)		250	Excluded items (2)	(3,422)		(2,664)		(10)
Adjusted non-GAAP	Adjusted non-GAAP	$	79,480	$	64,945	90	$	255,150	$	(79,028)	1,390	Adjusted non-GAAP	$	(6,304)	$	60,097	(860)
Impact from changes in foreign currency exchange rates	Impact from changes in foreign currency exchange rates	—		(4,067)		50	—		(1,549)		(10)	Impact from changes in foreign currency exchange rates	—		4,341		(50)
Adjusted non-GAAP on a constant currency basis	Adjusted non-GAAP on a constant currency basis	$	79,480	$	60,878	140	$	255,150	$	(80,577)	1,400	Adjusted non-GAAP on a constant currency basis	$	(6,304)	$	64,438	(910)
Net income (loss) per diluted share attributable to A&F		October 30, 2021		October 31, 2020		$ Change	October 30, 2021		October 31, 2020		$ Change
Net (loss) income attributable to A&F per diluted share												Net (loss) income attributable to A&F per diluted share	April 30, 2022		May 1, 2021		$ Change
GAAP	GAAP	$	0.77	$	0.66	$0.11	$	3.10	$	(3.14)	$6.24	GAAP	$	(0.32)	$	0.64	$(0.96)
Excluded items, net of tax (2)	Excluded items, net of tax (2)	(0.09)		(0.09)		—	(0.13)		(0.86)		0.73	Excluded items, net of tax (2)	(0.05)		(0.03)		(0.02)
Adjusted non-GAAP	Adjusted non-GAAP	$	0.86	$	0.76	$0.10	$	3.22	$	(2.28)	$5.50	Adjusted non-GAAP	$	(0.27)	$	0.67	$(0.94)
Impact from changes in foreign currency exchange rates	Impact from changes in foreign currency exchange rates	—		(0.05)		0.05	—		(0.02)		0.02	Impact from changes in foreign currency exchange rates	—		0.05		(0.05)
Adjusted non-GAAP on a constant currency basis	Adjusted non-GAAP on a constant currency basis	$	0.86	$	0.71	$0.15	$	3.22	$	(2.30)	$5.52	Adjusted non-GAAP on a constant currency basis	$	(0.27)	$	0.72	$(0.99)

(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~~April 30, ~~2021~~2022 and ~~October 31, 2020~~May 1, 2021 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 $0.4 million for the thirteen weeks ended ~~October~~April 30, ~~2021~~2022 and ~~October 31, 2020, respectively, and $1.1 million and $1.4 million for the thirty-nine weeks ended October 30,~~May 1, 2021, ~~and October 31, 2020,~~ respectively which are recorded in interest expense, net on the Condensed Consolidated Statements of Operations and Comprehensive ~~Income~~ (Loss). Income.

The Rabbi Trust assets were included in other assets on the Condensed Consolidated Balance Sheets as of ~~October~~April 30, ~~2021~~2022 and January ~~30, 2021,~~29, 2022, and are restricted in their use as noted above.

INTEREST RATE RISK

Prior to July 2, 2020, 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~~Company’s former term loan facility (the “Term Loan ~~Facility~~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 Fiscal ~~2021~~2022 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.~~Amended and Restated Credit Agreement.

In July 2017, the Financial Conduct Authority (the authority that regulates LIBO rate) announced it intended to stop compelling banks to submit rates for the calculation of LIBO rate after 2021. Certain publications of the LIBO rate were phased out at the end of 2021 and all LIBO rate publications will cease after June 30, 2023. 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.~~average daily balances.

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 ~~$23.7~~$7.8 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 to Note ~~13,~~12, “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~~April 30, ~~2021~~2022 and January ~~30, 2021.~~29, 2022.


Abercrombie & Fitch Co.			33			2022 1Q Form 10-Q

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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 Exchange ~~Act~~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 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~~April 30, ~~2021.~~2022. The Chief Executive Officer of A&F (in such individual’s capacity as the Principal Executive Officer of A&F) and the 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~~April 30, ~~2021.~~2022.

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~~April 30, ~~2021~~2022 that materially affected, or are reasonably likely to materially affect, A&F’s internal control over financial reporting.


Abercrombie & Fitch Co.			34			2022 1Q Form 10-Q

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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~~I tem 1. ~~FINANCIAL STATEMENTS (UNAUDITED)~~F inancial S tatements (U naudited ),” 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~~under the Exchange Act, the Company is required ~~disclosure with respect~~ to disclose certain information about environmental proceedings to which a governmental authority is a ~~party.~~party if the Company reasonably believes such proceedings may result in monetary sanctions, exclusive of interest and costs, above a stated threshold. The Company has elected to apply a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is required.

Item 1A. Risk Factors.

The Company’s risk factors as of ~~October~~April 30, ~~2021~~2022 have not changed materially from those disclosed in Part I, ~~“ITEM~~“Item 1A. ~~RISK FACTORS” of A&F’s Annual Report~~Risk Factors” included on the Fiscal 2021 Form ~~10-K for Fiscal 2020.~~10-K.

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

There were no sales of equity securities during the ~~third~~first quarter of Fiscal ~~2021~~2022 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~~April 30, ~~2021:~~2022:

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


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 (or Approximate Dollar Value) that May Yet Be Purchased Under the Plans or Programs (2)(3)
January 30, 2022 through February 26, 2022	—	$	—	—	$	357,959,371
February 27, 2022 through April 2, 2022	3,692,062	30.85		3,260,022	257,959,401
April 3, 2021 through April 30, 2022	451	34.79		—	257,959,401
Total	3,692,513	30.67		3,260,022	257,959,401

(1)An aggregate of ~~26,632~~432,491 shares of A&F’s Common Stock purchased during the thirteen weeks ended ~~October~~April 30, ~~2021~~2022 were withheld for tax payments due upon the vesting of employee restricted stock units and the exercise of employee stock appreciation rights.

(2)On ~~March 2, 2021, we announced that the A&F Board of Directors approved the repurchase of 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 Contents~~

(3)The number shown represents, as of the end of each period, the ~~maximum number~~approximate dollar value 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.


Abercrombie & Fitch Co.			35			2022 1Q Form 10-Q

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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						~~Non-Compete~~ ~~Amendment~~ ~~entered into~~ ~~between~~Form of Performance Share Award Agreement used to evidence the grant of performance shares to associates (employees) of Abercrombie & Fitch ~~Management~~ Co. and ~~Fran Horowitz, effective as~~ ~~of November 5, 2021~~(its subsidiaries under the ~~date of execution by~~ Abercrombie & Fitch ~~Management Co.); together with~~ ~~Schedule identifying executive officers~~ ~~of Abercrombie and Fitch~~ Co. ~~party to substantially identical Non-Compete Agreements with Abercrombie & Fitch Management C~~o.2016 Long-Term Incentive Plan for Associates on or after March 24, 2022.*


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 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 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.


Abercrombie & Fitch Co.			36			2022 1Q Form 10-Q

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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 6, 2021~~June 8, 2022	By:	/s/ Scott Lipesky
		Scott Lipesky
		Executive Vice President and Chief Financial Officer (Principal Financial Officer, Principal Accounting Officer and Authorized Officer)


Abercrombie & Fitch Co.			37			2022 1Q Form 10-Q


PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income ~~(Loss)~~	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	76
	Index for Notes to Condensed Consolidated Financial Statements	87
	Notes to Condensed Consolidated Financial Statements	98
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2419
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4133
Item 4.	Controls and Procedures	4234
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	4335
Item 1A.	Risk Factors	4335
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4335
Item 6.	Exhibits	4536
	Signatures	4637


	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