What changed in this filing

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Item 1. Financial Statements

2020-09-08 compared with 2020-06-10 · 321 added, 173 removed, 425 unchanged (54% of the section changed)

1 unchanged sentence

Abercrombie & Fitch Co.

Condensed Consolidated Statements of Operations and Comprehensive Loss

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Thousands, except per share amounts)

Thirteen Weeks Ended

Twenty-six Weeks Ended

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Cost of sales, exclusive of depreciation and amortization

3 unchanged sentences

Asset impairment, exclusive of flagship store exit charges

Other operating loss (income), net

Operating loss

Other operating (income) loss, net

Operating income (loss)

Interest expense, net

Loss before income taxes

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Net income attributable to noncontrolling interests

Net loss attributable to A&F

Net loss per share attributable to A&F

Net income (loss) attributable to A&F

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

Weighted-average shares outstanding

3 unchanged sentences

Other comprehensive income (loss)

Comprehensive loss

Comprehensive income (loss)

Comprehensive income attributable to noncontrolling interests

Comprehensive loss attributable to A&F

Comprehensive income (loss) attributable to A&F

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

2 unchanged sentences

(Thousands, except par value amounts)

August 1, 2020

February 1, 2020

10 unchanged sentences

Short-term portion of operating lease liabilities

Short-term portion of borrowings

Income taxes payable

2 unchanged sentences

Long-term portion of operating lease liabilities

Long-term portion of borrowings, net

Long-term borrowings, net

Other liabilities

7 unchanged sentences

Treasury stock, at average cost:

41,016 and 40,514 shares as of May 2, 2020 and February 1, 2020, respectively

40,935 and 40,514 shares as of August 1, 2020 and February 1, 2020, respectively

Total Abercrombie & Fitch Co.

7 unchanged sentences

(Thousands, except per share amounts)

Thirteen Weeks Ended May 2, 2020

Thirteen Weeks Ended August 1, 2020

Non-controlling interests

1 unchanged sentence

stockholders’

Balance, May 2, 2020

Share-based compensation issuances and exercises

Share-based compensation expense

Derivative financial instruments, net of tax

Foreign currency translation adjustments, net of tax

Distributions to noncontrolling interests, net

Ending balance at August 1, 2020

Thirteen Weeks Ended August 3, 2019

Non-controlling interests

Treasury stock

stockholders’

Balance, May 4, 2019

Purchase of Common Stock

Dividends ($0.20 per share)

Share-based compensation issuances and exercises

Share-based compensation expense

Derivative financial instruments, net of tax

Foreign currency translation adjustments, net of tax

Distributions to noncontrolling interests, net

Ending balance at August 3, 2019

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

Abercrombie & Fitch Co.

Condensed Consolidated Statements of Stockholders’ Equity

(Thousands, except per share amounts)

Twenty-six Weeks Ended August 1, 2020

Non-controlling interests

Treasury stock

stockholders’

Balance, February 1, 2020

6 unchanged sentences

Distributions to noncontrolling interests, net

Ending balance at May 2, 2020

Thirteen Weeks Ended May 4, 2019

Ending balance at August 1, 2020

Twenty-six Weeks Ended August 3, 2019

Non-controlling interests

3 unchanged sentences

Impact from adoption of the new lease accounting standard

Purchase of Common Stock

Dividends ($0.40 per share)

4 unchanged sentences

Distributions to noncontrolling interests, net

Ending balance at May 4, 2019

Ending balance at August 3, 2019

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

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Thirteen Weeks Ended

Twenty-six Weeks Ended

August 1, 2020

August 3, 2019

Operating activities

Adjustments to reconcile net loss to net cash used for operating activities:

Adjustments to reconcile net loss to net cash provided by (used for) operating activities:

Depreciation and amortization

8 unchanged sentences

Other liabilities

Net cash used for operating activities

Net cash provided by (used for) operating activities

Investing activities

2 unchanged sentences

Financing activities

Proceeds from borrowings under the asset-based senior secured credit facility

Proceeds from issuance of senior secured notes

Proceeds from borrowings under the senior secured asset-based revolving credit facility

Repayment of borrowings under the term loan facility

Repayment of borrowings under the senior secured asset-based revolving credit facility

Payment of debt issuance costs and fees

Purchases of Common Stock

13 unchanged sentences

Cash received from income tax refunds

Cash paid for operating lease liabilities

Cash paid for amounts included in measurement of operating lease liabilities

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

5 unchanged sentences

REVENUE RECOGNITION

NET LOSS PER SHARE

NET INCOME (LOSS) PER SHARE

PROPERTY AND EQUIPMENT, NET

20 unchanged sentences

The Company is deemed to be the primary beneficiary of these VIEs;

therefore, the Company has consolidated the operating results, assets and liabilities of these VIEs, with MAF’s portion of net income presented as net income attributable to noncontrolling interests (“NCI”) on the Condensed Consolidated Statements of Operations and Comprehensive Loss and MAF’s portion of equity presented as NCI on the Condensed Consolidated Balance Sheets.

therefore, the Company has consolidated the operating results, assets and liabilities of these VIEs, with MAF’s portion of net income presented as net income attributable to noncontrolling interests (“NCI”) on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and MAF’s portion of equity presented as NCI on the Condensed Consolidated Balance Sheets.

The Company’s fiscal year ends on the Saturday closest to January 31.

6 unchanged sentences

Interim financial statements

The Condensed Consolidated Financial Statements as of May 2, 2020 , and for the thirteen week periods ended May 2, 2020 and May 4, 2019 , are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The Condensed Consolidated Financial Statements as of August 1, 2020 , and for the thirteen and twenty-six week periods ended August 1, 2020 and August 3, 2019 , are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

Accordingly, the Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto contained in A&F’s Annual Report on Form 10-K for Fiscal 2019 filed with the SEC on March 31, 2020 .

5 unchanged sentences

The extent to which the current outbreak of coronavirus disease (“COVID-19”) impacts the Company’s business and financial results will depend on numerous evolving factors including, but not limited to:

the magnitude and duration of the COVID-19 pandemic and its impact on the length or frequency of store closures, and the extent to which COVID-19 will impact worldwide macroeconomic conditions including interest rates, the speed of the anticipated recovery, and governmental, business and consumer reactions to the pandemic.

The Company’s assessment of these, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

the magnitude and duration of the COVID-19 pandemic and its impact on the length or frequency of store closures, and the extent to which

COVID-19 will impact worldwide macroeconomic conditions including interest rates, the speed of the anticipated 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

3 unchanged sentences

(in thousands)

August 1, 2020

February 1, 2020

August 3, 2019

February 2, 2019

7 unchanged sentences

Recent developments

As a result of COVID-19, in January 2020, the Company began to experience business disruptions in the Asia-Pacific (“APAC”) region, including the temporary closure of stores in China and the surrounding area, modified operating hours in certain stores that remained open, and a decline in traffic.

In late February 2020, the situation escalated as the scope of COVID-19 worsened beyond the APAC region, with the United States (the “U.S.”) and the Europe, Middle East and Africa (“EMEA”) region experiencing significant outbreaks.

In March 2020, the COVID-19 outbreak was declared to be a global pandemic by the World Health Organization.

In response to COVID-19, certain governments have imposed travel restrictions and local statutory quarantines.

The Company is monitoring and reacting to the COVID-19 situation on a daily basis, including by conforming to local governments’ guidance and recommending associates who are able to perform their role remotely to do so.

In mid-March 2020, with the well-being of the Company’s customers, associates and business partners in mind, the Company temporarily closed its Company-operated stores across brands in North America and the EMEA region.

The Company began to reopen these stores on a rolling basis beginning in late April 2020.

The Company has experienced sales productivity for reopened stores of approximately 80% and 60% for the U.S.

and the EMEA region, respectively, since their reopenings as compared to last year’s levels.

The majority of the Company’s stores in the APAC region have also reopened, although many with temporarily reduced operating hours.

The Company plans to follow the guidance of local governments to determine when it can reopen remaining stores and to evaluate whether further store closures will be necessary.

As of June 5, 2020, approximately 58% of Company-operated stores were open.

The Company’s digital operations across brands have continued to serve the Company’s customers during this unprecedented period of temporary store closures.

The Company experienced 25% digital sales growth for the first quarter of Fiscal 2020 as compared to the first quarter of Fiscal 2019, with month-over-month acceleration in digital sales growth since temporary store closures were enacted in mid-March and through the Company's most recent fiscal month of May.

The Company has seen, and may continue to see, material adverse impacts as a result of COVID-19.

Current circumstances are dynamic and future impacts, including the duration and impact on overall customer demand, are uncertain.

Impact of COVID-19 during the first quarter of Fiscal 2020

In January 2020, the Company began to experience business disruptions in the Asia-Pacific (“APAC”) region as a result of COVID-19.

In February 2020, the situation escalated as the scope of COVID-19 worsened beyond the APAC region, with the United States (the “U.S.”) and the Europe, Middle East and Africa (“EMEA”) region experiencing significant outbreaks.

In March 2020, the COVID-19 outbreak was declared to be a global pandemic by the World Health Organization.

In response to COVID-19, certain governments have imposed travel restrictions and local statutory quarantines and the Company has recommended associates who are able to perform their role remotely to do so.

The Company is reacting to COVID-19 on a daily basis, including by conforming to local government guidance and monitoring developments in government legislation or other government actions in response to the COVID-19 outbreak.

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

As a result of COVID-19, in January 2020, the Company temporarily closed the majority of its stores in the APAC region and in March 2020, the Company temporarily closed its stores across brands in North America and the EMEA region.

The majority of APAC stores were reopened during March 2020, and the Company began to reopen stores in North America and the EMEA region on a rolling basis in late April 2020.

As of August 1, 2020, approximately 90% of Company-operated stores had reopened for in-store service, although many with modified operating hours.

The Company plans to follow the guidance of local governments to determine when it can reopen stores that have been closed due to COVID-19 and to evaluate whether further store closures will be necessary.

The Company’s digital operations across brands have continued to serve the Company’s customers during this unprecedented period of temporary store closures as the Company’s distribution centers implemented enhanced cleaning and social distancing measures in order to remain operational.

Impact of COVID-19

The Company has seen, and may continue to see material reductions in sales across brands and regions as a result of COVID-19.

Total net sales for the first quarter of Fiscal 2020 decreased approximately 34% as compared to the first quarter of Fiscal 2019.

The year-over-year decline was primarily driven by temporary widespread store closures in response to COVID-19, partially offset by digital sales growth of approximately 25% to more than $275 million.

As a result of the continued effects of COVID-19 and the temporary closure of the Company’s stores, the Company recognized approximately $ 14.8 million of charges to reduce the carrying value of inventory in cost of sales, exclusive of depreciation and amortization on the Condensed Consolidated Statements of Operations and Comprehensive Loss during the first quarter of Fiscal 2020.

During the first quarter of Fiscal 2020, reductions in revenue have not been offset by proportional decreases in expense, as the Company continued to incur store occupancy costs such as operating lease costs and depreciation expense, and certain other costs such as compensation 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 suspended rent payments for a significant number of stores, and continues to engage with its landlords.

In the period during which rent was due, the Company reclassified related amounts from operating lease liability to accrued expenses, while continuing to recognize operating lease cost in the Condensed Consolidated Statement of Operations and Comprehensive Loss.

Total net sales decreased approximately 17% and 25% for the thirteen and twenty-six weeks ended August 1, 2020 as compared to the comparable periods ended August 3, 2019, respectively.

The year-over-year decrease in total net sales was primarily driven by temporary widespread store closures and a decline in traffic as compared to the previous year as a result of COVID-19.

The year-over-year decline in store sales was partially offset by digital sales growth of approximately 56% and 41% for the thirteen and twenty-six weeks ended August 1, 2020 as compared to the comparable periods ended August 3, 2019, respectively.

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

During the thirteen and twenty-six weeks ended August 1, 2020 , reductions in revenue have not been offset by proportional decreases in expense, as the Company continued 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 and administrative expenses resulting in a negative effect on the relationship between the Company’s costs and revenues.

During this period, the Company suspended rent payments for a significant number of stores that were closed, and continues to engage with its landlords to find a mutually beneficial and agreeable path forward.

To the extent that the Company is successful in negotiating further rent abatements, these benefits will be recognized as a component of variable lease cost.

For stores where the Company suspended payments, the Company reclassified related amounts from operating lease liability to accrued expenses in the period during which rent was due, while continuing to recognize operating lease cost in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

On March 27, 2020, the U.S.

1 unchanged sentence

Similar relief programs have also been established throughout the EMEA and APAC regions.

Based on the Company's preliminary evaluation of the CARES Act and legislation across regions, the Company qualifies for certain payroll tax credits, and such government subsidies have been treated as offsets to the related operating expenses when recognized.

During the first quarter of Fiscal 2020, the qualified payroll tax credits reduced payroll expenses by approximately $ 8.8 million on the Condensed Consolidated Statements of Operations and Comprehensive Loss, with $ 7.9 million of expected relief classified in receivables on the Condensed Consolidated Balance Sheet as of May 2, 2020.

Based on the Company's evaluation of the CARES Act and legislation across regions, the Company qualifies for certain payroll tax credits, and such government subsidies have been treated as offsets to the related operating expenses when recognized.

During the thirteen and twenty-six weeks ended August 1, 2020 , the Company recognized qualified payroll tax credits reducing payroll expenses by approximately $ 3.1 million and $ 11.8 million , respectively, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), with $ 3.6 million of expected relief classified in receivables on the Condensed Consolidated Balance Sheet as of August 1, 2020 .

The Company intends to continue to defer qualified payroll and other tax payments as permitted by the CARES Act and other regional legislation.

The Company also recognized asset impairment charges related to the Company’s right-of-use assets and property and equipment of $42.9 million during the first quarter of Fiscal 2020, which were principally the result of the impact of COVID-19 on store cash flows.

The Company also recognized asset impairment charges related to the Company’s right-of-use assets and property and equipment of $8.1 million and $51.0 million during the thirteen and twenty-six weeks ended August 1, 2020 , respectively, which were principally the result of the impact of COVID-19 on store cash flows.

Refer to Note 9, “ ASSET IMPAIRMENT ,” for additional information.

In addition, the Company has also experienced other material impacts as a result of COVID-19, such as the establishment of deferred tax valuation allowances and other tax charges, adversely impacting results in the first quarter of Fiscal 2020 by approximately $ 90.9 million .

In addition, the Company has also experienced other material impacts as a result of COVID-19, such as deferred tax valuation allowances and other tax charges during the twenty-six weeks ended August 1, 2020 , adversely impacting results by $84.1 million .

Refer to Note 11, “ INCOME TAXES ,” for additional information.

Balance sheet, cash flow and liquidity

Throughout the first quarter of Fiscal 2020, the Company took various actions to preserve liquidity and manage cash flows in order to best position the business for key stakeholders, including (i) partnering with merchandise and non-merchandise vendors in regards to payment terms;

During the twenty-six weeks ended August 1, 2020, the Company has taken various actions to preserve liquidity and manage cash flows in order to best position the business for key stakeholders, including (i) partnering with merchandise and non-merchandise vendors in regards to payment terms;

(ii) reducing and recadencing inventory receipts to better align inventory with expected market demand;

(iii) significantly reducing expenses to better align operating costs with sales;

and (iv) implementing various compensation actions related to the Company’s store and corporate associates, as well as A&F’s non-associate directors.

As a precautionary measure and to improve the Company’s cash position, in March 2020, the Company borrowed $ 210.0 million under its asset-based senior secured revolving credit facility and withdrew the majority of excess funds from the Company’s overfunded Rabbi Trust assets, which provided the Company with $ 50.0 million of additional cash.

and (iv) temporarily suspending its share repurchase program in March 2020 and its dividend program in May 2020.

In addition, despite the Company’s recent history of partnering with its vendors regarding payment terms, 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.

As a precautionary measure in response to COVID-19, in March 2020, the Company borrowed $ 210.0 million under its senior secured asset-based revolving credit facility (the “ABL Facility”) to improve its near-term cash position and withdrew the majority of excess funds from the overfunded Rabbi Trust assets, providing the Company with $ 50.0 million of additional cash.

In July 2020, the Company completed a private offering of $350.0 million aggregate principal amount of senior secured notes (the “Senior Secured Notes”) and used the net proceeds to repay all outstanding borrowings under the Company’s term loan facility (the “Term Loan Facility”), to repay a portion of the outstanding borrowings under the ABL Facility and to pay fees and expenses in connection with such repayments and the offering.

Refer to Note 12, “ BORROWINGS ,” and Note 10, “ RABBI TRUST ASSETS ,” for additional information.

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

The Company will review these temporary suspensions throughout the year to determine, in light of facts and circumstances at that time, whether and when to reinstate these programs.

As of May 2, 2020, the Company had liquidity of $ 763.4 million as compared to $ 913.8 million as of February 1, 2020, comprising of cash and equivalents and actual incremental borrowing available to the Company under the Amended ABL Facility.

As of August 1, 2020 , the Company had liquidity of $ 1.061 billion as compared to $ 913.8 million as of February 1, 2020 , comprising cash and equivalents and actual incremental borrowing available to the Company under the ABL Facility.

REVENUE RECOGNITION

Disaggregation of revenue

All revenues are recognized in net sales in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

All revenues are recognized in net sales in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

For information regarding the disaggregation of revenue, refer to Note 16 , “ SEGMENT REPORTING .

Contract liabilities

The following table details certain contract liabilities representing unearned revenue as of May 2, 2020 , February 1, 2020 , May 4, 2019 and February 2, 2019:

The following table details certain contract liabilities representing unearned revenue as of August 1, 2020 , February 1, 2020 , August 3, 2019 and February 2, 2019:

(in thousands)

August 1, 2020

February 1, 2020

August 3, 2019

February 2, 2019

1 unchanged sentence

Loyalty program liability

The following table details recognized revenue associated with the Company’s gift card program and loyalty programs for the thirteen weeks ended May 2, 2020 and May 4, 2019 :

The following table details recognized revenue associated with the Company’s gift card program and loyalty programs for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 :

Thirteen Weeks Ended

Twenty-six Weeks Ended

(in thousands)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Revenue associated with gift card redemptions and gift card breakage

Revenue associated with reward redemptions and breakage related to the Company’s loyalty programs

NET LOSS PER SHARE

Net 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 per share attributable to A&F is as follows:

NET INCOME (LOSS) PER SHARE

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

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

Thirteen Weeks Ended

Twenty-six Weeks Ended

(in thousands)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Shares of Common Stock issued

4 unchanged sentences

Anti-dilutive shares (1)

Reflects the total number of shares related to outstanding share-based compensation awards that have been excluded from the computation of net loss per diluted share because the impact would have been anti-dilutive.

Reflects the total number of shares related to outstanding share-based compensation awards that have been excluded from the computation of net income (loss) per diluted share because the impact would have been anti-dilutive.

Unvested shares related to restricted stock units with performance-based and market-based vesting conditions can achieve up to 200% of their target vesting amount and are reflected at the maximum vesting amount less any dilutive portion.

6 unchanged sentences

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

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

Assets at Fair Value as of May 2, 2020

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

Assets at Fair Value as of August 1, 2020

(in thousands)

23 unchanged sentences

Fair value of long-term borrowings

The Company’s borrowings under the Company’s term loan facility are carried at historical cost in the accompanying Condensed Consolidated Balance Sheets.

The carrying amount and fair value of gross borrowings under the Company’s term loan facility were as follows:

The Company’s borrowings under the Term Loan Facility and the Senior Secured Notes are carried at historical cost in the accompanying Condensed Consolidated Balance Sheets.

The carrying amount and fair value of the Company’s long-term gross borrowings were as follows:

(in thousands)

August 1, 2020

February 1, 2020

4 unchanged sentences

(in thousands)

August 1, 2020

February 1, 2020

2 unchanged sentences

Property and equipment, net

Refer to Note 9 , “ ASSET IMPAIRMENT ,” for details related to property and equipment impairment charges incurred during the thirteen weeks ended May 2, 2020 and May 4, 2019 .

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

During the thirteen weeks ended May 2, 2020 , the Company suspended rent payments for a significant number of stores, and continues to engage with its landlords.

The following table provides a summary of the Company’s operating lease costs for the thirteen weeks ended May 2, 2020 and May 4, 2019 :

Refer to Note 9 , “ ASSET IMPAIRMENT ,” for details related to property and equipment impairment charges incurred during the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 .

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

During the thirteen and twenty-six weeks ended August 1, 2020 , the Company suspended rent payments for a significant number of stores that were closed as a result of COVID-19, and continues to engage with its landlords to find a mutually beneficial and agreeable path forward.

To the extent that the Company is successful in negotiating further rent abatements, these benefits will be recognized as a component of variable lease cost.

The following table provides a summary of the Company’s operating lease costs for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 :

Thirteen Weeks Ended

Twenty-six Weeks Ended

(in thousands)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Single lease cost (1)

3 unchanged sentences

Includes amortization and interest expense associated with operating lease right-of-use assets and liabilities.

Includes variable payments related to both lease and nonlease components, such as contingent rent payments made by the Company based on performance, and payments related to taxes, insurance, and maintenance costs.

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

As of May 2, 2020 , the Company had minimum commitments related to additional operating lease contracts that have not yet commenced, primarily for its Company-operated retail stores, of approximately $ 2.6 million .

During the twenty-six weeks ended August 1, 2020 and August 3, 2019 , the Company paid $122.1 million and $200.5 million , respectively, for amounts included in measurement of operating lease liabilities, net of rent abatements agreed upon during the period which are classified as a component variable lease cost as noted in the above table.

These payments are included within operating activities on the Condensed Consolidated Statements of Cash Flows.

During the twenty-six weeks ended August 1, 2020 and August 3, 2019 , the Company obtained operating lease right-of-use assets of $23.1 million and $204.5 million , respectively, in exchange for operating lease liabilities.

As of August 1, 2020 , the Company had minimum commitments related to additional operating lease contracts the terms of which have not yet commenced, primarily for its Company-operated retail stores, of approximately $ 2.8 million .

ASSET IMPAIRMENT

Asset impairment charges for th e thirteen weeks ended May 2, 2020 and May 4, 2019 were as follows:

Asset impairment charges for th e thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 were as follows:

Thirteen Weeks Ended

Twenty-six Weeks Ended

(in thousands)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Operating lease right-of-use asset impairment (1)

1 unchanged sentence

Total asset impairment

Asset impairment charges for the thirteen weeks ended May 2, 2020 were principally the result of the impact of COVID-19 on store cash flows and were related to certain of the Company’s stores across brands, geographies and store formats.

The impairment charge reduced the carrying value of these stores’ assets to their estimated fair value of approximately $127.9 million, including $118.8 million related to operating lease right-of-use assets.

Asset impairment charges for the thirteen weeks ended May 4, 2019 , related to certain of the Company’s mall-based stores.

The impairment charge reduced the carrying value of these stores’ assets to their estimated fair value of approximately $2.8 million, all of which related to operating lease right-of-use assets.

Includes $3.2 million of operating lease right-of-use asset impairment related to flagship store exit charges for each of the thirteen and twenty-six weeks ended August 3, 2019 .

Refer to Note 17 , “ FLAGSHIP STORE EXIT (BENEFITS) CHARGES .”

Asset impairment charges for the thirteen weeks and twenty-six weeks ended August 1, 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 twenty-six weeks ended August 1, 2020 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $ 135.5 million , including $ 124.6 million related to operating lease right-of-use assets.

Asset impairment charges for the thirteen weeks and twenty-six weeks ended August 3, 2019, primarily related to the Company’s SoHo, New York City Hollister flagship.

The impairment charges for the twenty-six weeks ended August 3, 2019 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $ 8.2 million , including $ 7.0 million related to operating lease right-of-use assets.

RABBI TRUST ASSET S

As a precautionary measure and to preserve liquidity in light of the circumstances surrounding COVID-19, during the thirteen weeks ended May 2, 2020 , the Company withdrew the majority of excess funds from the overfunded Rabbi Trust assets, providing the Company with $ 50.0 million of additional cash.

Investments of Rabbi Trust assets consisted of the following as of May 2, 2020 and February 1, 2020 :

As a precautionary measure and to preserve liquidity in light of the circumstances surrounding COVID-19, during the twenty-six weeks ended August 1, 2020 , the Company withdrew the majority of excess funds from the overfunded Rabbi Trust assets, providing the Company with $ 50.0 million of additional cash.

Investments of Rabbi Trust assets consisted of the following as of August 1, 2020 and February 1, 2020 :

(in thousands)

August 1, 2020

February 1, 2020

2 unchanged sentences

Rabbi Trust assets

Realized gains resulting from the change in cash surrender value of the Rabbi Trust assets for the thirteen weeks ended May 2, 2020 and May 4, 2019 were as follows:

Realized gains resulting from the change in cash surrender value of the Rabbi Trust assets for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 were as follows:

Thirteen Weeks Ended

Twenty-six Weeks Ended

(in thousands)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Realized gains related to Rabbi Trust assets

2 unchanged sentences

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 are excluded from the overall computation of estimated annual effective tax rate and no tax benefit are recognized in the period related to losses in such jurisdictions.

In addition, jurisdictions where the Company anticipates an ordinary loss for the fiscal year for which the Company does not anticipate future 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 first quarter of Fiscal 2020

The Company’s effective tax rate for the first quarter of Fiscal 2020 was impacted by $ 90.9 million of adverse tax impacts, ultimately giving rise to income tax expense on a consolidated pre-tax loss.

Impact of valuation allowances and other tax charges during Fiscal 2020

The Company’s effective tax rate for the twenty-six weeks ended August 1, 2020 was impacted by $ 84.1 million of adverse tax impacts, ultimately giving rise to income tax expense on a consolidated pre-tax year-to-date loss.

Further details regarding these adverse tax impacts are as follows:

The Company anticipates pre-tax losses for the fiscal year in certain jurisdictions, based on information currently available, primarily due to the significant adverse impacts of COVID-19.

The Company did not recognize income tax benefits on $212.0 million of pre-tax losses during the first quarter of Fiscal 2020, resulting in an adverse tax impact of $ 56.6 million .

The Company recognized discrete charges of $ 34.3 million related to the establishment of valuation allowances and other tax charges in certain jurisdictions during the thirteen weeks ended May 2, 2020, principally as a result of the significant adverse impacts of COVID–19.

The Company anticipates pre-tax losses for the full fiscal year in certain jurisdictions, based on information currently available, primarily due to the significant adverse impacts of COVID-19.

The Company did not recognize income tax benefits on $ 204.1 million of pre-tax losses during the twenty-six weeks ended August 1, 2020 , resulting in an adverse tax impact of $ 47.6 million .

The Company recognized charges of $ 36.5 million related to the establishment of valuation allowances and other tax charges in certain jurisdictions during the twenty-six weeks ended August 1, 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.

1 unchanged sentence

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 Loss.

branch equally offsetting amount, which in net, did not have an impact on the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

Changes in assumptions may occur based on new information that becomes available resulting in adjustments in the period in which a determination is made.

2 unchanged sentences

law, intended to provide economic relief to those impacted by COVID-19 and enhance business’ liquidity.

The Company continues to examine impacts that the CARES Act may have on U.S.

The Company continues to examine impacts that the provisions of the CARES Act may have on U.S.

income taxes;

however, the Company does not currently expect that these provisions will have a material impact on its income taxes.

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

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

Share-based compensation

Refer to Note 13 , “ SHARE-BASED COMPENSATION ,” for details on discrete income tax benefits and charges related to share-based compensation awards during the thirteen weeks ended May 4, 2019 .

Asset-based revolving credit facility

On August 7, 2014, the Company, through its subsidiary Abercrombie & Fitch Management Co.

(“A&F Management”) as the lead borrower (with A&F and certain other subsidiaries as borrowers or guarantors), entered into an asset-based revolving credit agreement.

On October 19, 2017, the Company, through its subsidiary A&F Management, entered into a Second Amendment to Credit Agreement (the “ABL Second Amendment”), amending and extending the maturity date of the asset-based revolving credit agreement to October 19, 2022.

As amended, the asset-based revolving credit agreement continues to provide for a senior secured revolving credit facility of up to $ 400 million (the “Amended ABL Facility”).

As a precautionary measure and to improve the Company’s cash position in light of the circumstances surrounding COVID-19, during the thirteen weeks ended May 2, 2020 , the Company borrowed $ 210.0 million under the Amended ABL Facility.

Borrowings under the Amended ABL Facility as of May 2, 2020 and February 1, 2020 were as follows:

(in thousands)

February 1, 2020

Short-term portion of borrowings, gross at carrying amount

As of May 2, 2020 , the interest rate on borrowings under the Amended ABL Facility was 1.82 % .

The Amended ABL Facility will mature on October 19, 2022 .

As of May 2, 2020 , the Company had availability under the Amended ABL Facility of $ 89.4 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 Amended ABL Facility, actual incremental borrowing available to the Company under the Amended ABL Facility was $ 59.4 million as of May 2, 2020 .

The provisions under the credit agreement applicable to the Amended ABL Facility have not changed from those described in Note 12, “BORROWINGS,” in the Notes to Consolidated Financial Statements contained in “ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Annual Report on Form 10-K for Fiscal 2019.

Term loan facility

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

On June 22, 2018, A&F, through A&F Management, entered into the Second Amendment to Term Loan Credit Agreement (the “Term Loan Second Agreement”), which served to reprice the Term Loan Facility.

As permitted under the credit agreement applicable to the Term Loan Facility, among other things, the Term Loan Second Amendment provided for the issuance by A&F Management of refinancing term loans in an aggregate principal amount of $ 253.3 million in exchange for the term loans then outstanding under the Term Loan Facility, which resulted in the reduction of the applicable margins for term loans by 0.25% .

Additional details on borrowings under the Term Loan Facility as of May 2, 2020 and February 1, 2020 are as follows:

Refer to Note 13 , “ SHARE-BASED COMPENSATION ,” for details on income tax benefits and charges related to share-based compensation awards during the thirteen and twenty-six weeks ended August 3, 2019 .

Details on the Company’s long-term borrowings, net, as of August 1, 2020 and February 1, 2020 are as follows:

(in thousands)

August 1, 2020

February 1, 2020

Long-term portion of borrowings, gross at carrying amount

Unamortized discount

Unamortized fees

Long-term portion of borrowings, net

short-term portion of borrowings, net

Long-term portion of borrowings, net

The interest rate on borrowings under the Term Loan Facility was 4.50 % as of May 2, 2020 .

The Term Loan Facility will mature on August 7, 2021 .

The provisions under the credit agreement applicable to the Term Loan Facility have not changed from those described in Note 12, “BORROWINGS,” in the Notes to Consolidated Financial Statements contained in “ITEM 8.

Unamortized discount

Long-term borrowings, net

Senior Secured Notes

On July 2, 2020, Abercrombie & Fitch Management Co.

(“A&F Management”), a wholly-owned indirect subsidiary of the Company, completed the private offering of the Senior Secured Notes, with a $350 million aggregate principal amount due in 2025 at an offering price of 100% of the principal amount thereof.

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 its wholly-owned subsidiaries, as guarantors, and U.S.

Bank National Association, as trustee, and as collateral agent.

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

The Company used the net proceeds from the offering of the Senior Secured Notes to repay outstanding borrowings and accrued interest of $233.6 million and $110.8 million under the Term Loan Facility and the ABL Facility, respectively, with the remaining net proceeds used towards fees and expenses in connection with such repayments and the offering of the Senior Secured Notes.

The Company recorded deferred financing fees associated with the issuance of the Senior Secured Notes, which are being amortized over the contractual term of the Senior Secured Notes.

The ABL Facility, which was entered into on August 7, 2014 through A&F Management as the lead borrower (with A&F and certain other subsidiaries as borrowers or guarantors) and later amended on October 19, 2017, provides for a senior secured asset-based revolving credit facility of up to $ 400 million (the “ABL Facility”).

The ABL Facility will mature on October 19, 2022 .

As a precautionary measure and to improve the Company’s cash position in light of the circumstances surrounding COVID-19, during the thirteen weeks ended May 2, 2020, the Company borrowed $210.0 million under the ABL Facility.

During the thirteen weeks ended August 1, 2020 , the Company used net proceeds from the offering of the Senior Secured Notes and cash on hand to repay all outstanding borrowings under the ABL Facility.

The Company did not have any borrowings outstanding under the ABL Facility as of August 1, 2020 or as of February 1, 2020 .

As of August 1, 2020 , the Company had availability under the ABL Facility of $ 327.5 million , net of $ 0.8 million in outstanding stand-by letters of credit.

As the Company must maintain excess availability equal to the greater of 10% of the loan cap or $30 million under the ABL Facility, actual incremental borrowing available to the Company under the ABL Facility was $ 294.6 million as of August 1, 2020 .

The provisions under the credit agreement applicable to the ABL Facility have not changed from those described in Note 12, “BORROWINGS,” in the Notes to Consolidated Financial Statements contained in “ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Annual Report on Form 10-K for Fiscal 2019.

Term Loan Facility

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

The Company had gross borrowings outstanding under the Term Loan Facility of $233.3 million as of February 1, 2020 .

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

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

Representations, warranties and covenants

The Credit Facilities contain various representations, warranties and restrictive covenants that, among other things and subject to specified exceptions, restrict the ability of A&F and its subsidiaries to incur indebtedness (including guarantees), grant liens, make investments, pay dividends or distributions with respect to capital stock, make prepayments on other indebtedness, engage in mergers, dispose of certain assets or change the nature of their business.

In addition, excess availability equal to the greater of 10% of the loan cap or $30 million must be maintained under the Amended ABL Facility.

The Credit Facilities do not otherwise contain financial maintenance covenants.

Both Credit Facilities 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 the covenants under the Credit Facilities as of May 2, 2020 .

The aforementioned agreements contain various representations, warranties and restrictive covenants that, among other things and subject to specified exceptions, restrict the ability of the Company and its subsidiaries to:

grant or incur liens;

incur, assume or guarantee additional indebtedness;

sell or otherwise dispose of assets, including capital stock of subsidiaries;

make investments in certain subsidiaries;

pay dividends, make distributions or redeem or repurchase capital stock;

change the nature of their business;

and consolidate or merge with or into, or sell substantially all of the Company’s or A&F Management’s assets to, another entity.

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

Certain of these agreements 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 the aforementioned agreements as of August 1, 2020 .

SHARE-BASED COMPENSATION

Financial statement impact

The following table details share-based compensation expense and the related income tax benefit for the thirteen weeks ended May 2, 2020 and May 4, 2019 :

The following table details share-based compensation expense and the related income tax impacts for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 :

Thirteen Weeks Ended

Twenty-six Weeks Ended

(in thousands)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Share-based compensation expense

Income tax benefit associated with share-based compensation expense recognized (1)

No income tax benefit was recognized related to share-based compensation expense during the thirteen weeks ended May 2, 2020 due to the U.S.

Income tax (expense) benefit associated with share-based compensation expense recognized (1)

No income tax benefit was recognized related to share-based compensation expense during the thirteen and twenty-six weeks ended August 1, 2020 due to the U.S.

being a loss jurisdiction.

The following table details discrete income tax benefits and charges related to share-based compensation awards during the thirteen weeks ended May 2, 2020 and May 4, 2019 :

The following table details discrete income tax benefits and charges related to share-based compensation awards during the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 :

Thirteen Weeks Ended

Twenty-six Weeks Ended

(in thousands)

Income tax discrete benefits realized for tax deductions related to the issuance of shares (1)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Income tax discrete (charges) benefits realized for tax deductions related to the issuance of shares (1)

Income tax discrete charges realized upon cancellation of stock appreciation rights (1)

Total income tax discrete benefits related to share-based compensation awards

No income tax benefits or charges related to these items were recognized during the thirteen weeks ended May 2, 2020 due to the U.S.

Total income tax discrete (charges) benefits related to share-based compensation awards

No income tax benefits or charges related to these items were recognized during the thirteen and twenty-six weeks ended August 1, 2020 due to the U.S.

being a loss jurisdiction.

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 weeks ended May 2, 2020 and May 4, 2019 :

Thirteen Weeks Ended

Twenty-six Weeks Ended

(in thousands)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Employee tax withheld upon issuance of shares (1)

1 unchanged sentence

Restricted stock units

The following table summarizes activity for restricted stock units for the thirteen weeks ended May 2, 2020 :

The following table summarizes activity for restricted stock units for the twenty-six weeks ended August 1, 2020 :

Service-based Restricted

9 unchanged sentences

Adjustments for performance achievement

Unvested at May 2, 2020 (2)

Includes 79,028 unvested restricted stock units as of May 2, 2020 , subject to vesting requirements related to the achievement of certain performance metrics, such as operating income and net income, for the fiscal year immediately preceding the vesting date.

Unvested at August 1, 2020 (2)

Includes 79,028 unvested restricted stock units as of August 1, 2020 , subject to vesting requirements related to the achievement of certain performance metrics, such as operating income and net income, for the fiscal year immediately preceding the vesting date.

Holders of these restricted stock units have the opportunity to earn back one or more installments of the award if the cumulative performance requirements are met in a subsequent year.

1 unchanged sentence

Certain unvested shares related to restricted stock units with performance-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 these costs are expected to be recognized for restricted stock units as of May 2, 2020 :

The following table details unrecognized compensation cost and the remaining weighted-average period these costs are expected to be recognized for restricted stock units as of August 1, 2020 :

(in thousands)

4 unchanged sentences

Remaining weighted-average period cost is expected to be recognized (years)

Additional information pertaining to restricted stock units for the thirteen weeks ended May 2, 2020 and May 4, 2019 follows:

Additional information pertaining to restricted stock units for the twenty-six weeks ended August 1, 2020 and August 3, 2019 follows:

(in thousands)

August 1, 2020

August 3, 2019

Service-based restricted stock units:

7 unchanged sentences

Total grant date fair value of awards vested

No market-based restricted stock units were granted during the thirteen weeks ended May 2, 2020 .

The weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the thirteen weeks ended May 4, 2019 were as follows:

No market-based restricted stock units were granted during the twenty-six weeks ended August 1, 2020 .

The weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the twenty-six weeks ended August 3, 2019 were as follows:

August 3, 2019

Grant date market price

6 unchanged sentences

Stock appreciation rights

The following table summarizes stock appreciation rights activity for the thirteen weeks ended May 2, 2020 :

The following table summarizes stock appreciation rights activity for the twenty-six weeks ended August 1, 2020 :

Weighted-Average

5 unchanged sentences

Forfeited or expired

Outstanding at May 2, 2020

Stock appreciation rights exercisable at May 2, 2020

Stock appreciation rights expected to become exercisable in the future as of May 2, 2020

No stock appreciation rights were exercised during the thirteen weeks ended May 2, 2020 .

Additional information pertaining to stock appreciation rights for the thirteen weeks ended May 4, 2019 follows:

Outstanding at August 1, 2020

Stock appreciation rights exercisable at August 1, 2020

Stock appreciation rights expected to become exercisable in the future as of August 1, 2020

No stock appreciation rights were exercised during the twenty-six weeks ended August 1, 2020 .

Additional information pertaining to stock appreciation rights for the twenty-six weeks ended August 3, 2019 follows:

(in thousands)

August 3, 2019

Total grant date fair value of awards exercised

13 unchanged sentences

GAAP requires that monetary assets/liabilities be remeasured at the spot exchange rate at quarter–end or upon settlement.

The Company has chosen not to

apply hedge accounting to these instruments because there are no differences in the timing of gain or loss recognition on the hedging instruments and the hedged items.

The Company did not have any outstanding foreign currency exchange forward contracts as of May 2, 2020.

The Company has chosen not to apply hedge accounting to these instruments because there are no differences in the timing of gain or loss recognition on the hedging instruments and the hedged items.

The Company did not have any outstanding foreign currency exchange forward contracts as of August 1, 2020 , although the Company may enter into these contracts in future periods.

The location and amounts of derivative fair values of foreign currency exchange forward contracts on the Condensed Consolidated Balance Sheet as of February 1, 2020 were as follows:

12 unchanged sentences

Due to the extenuating circumstances leading to dedesignation, gains associated with these hedges at the time of dedesignation are deferred in AOCL until being reclassified into cost of goods sold, exclusive of depreciation and amortization when the originally forecasted transactions occur and the hedged items affect earnings.

During the thirteen weeks ended May 2, 2020 and subsequent to the dedesignation of these hedges, these hedge contracts were settled.

Information pertaining to derivative gains or losses from foreign currency exchange forward contracts designated as cash flow hedging instruments for the thirteen weeks ended May 2, 2020 and May 4, 2019 follows:

During the twenty-six weeks ended August 1, 2020 and subsequent to the dedesignation of these hedges, these hedge contracts were settled.

Information pertaining to derivative gains or losses from foreign currency exchange forward contracts designated as cash flow hedging instruments for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 follows:

Thirteen Weeks Ended

Twenty-six Weeks Ended

(in thousands)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Gain recognized in AOCL (1)

1 unchanged sentence

A mount represents the change in fair value of derivative contracts.

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

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) when the hedged item affects earnings, which is when merchandise is converted to cost of sales, exclusive of depreciation and amortization.

Substantially all of the unrealized gain will be recognized in costs of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) over the next twelve months .

Additional information pertaining to derivative gains or losses from foreign currency exchange forward contracts not designated as hedging instruments for the thirteen weeks ended May 2, 2020 and May 4, 2019 follows:

Additional information pertaining to derivative gains or losses from foreign currency exchange forward contracts not designated as hedging instruments for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 follows:

Thirteen Weeks Ended

Twenty-six Weeks Ended

(in thousands)

Gain recognized in other operating loss (income), net

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Gain recognized in other operating (income) loss, net

ACCUMULATED OTHER COMPREHENSIVE LOSS

Fo r the thirteen weeks ended May 2, 2020 , the activity in accumulated other comprehensive loss was as follows:

Thirteen Weeks Ended May 2, 2020

Fo r the thirteen and twenty-six weeks ended August 1, 2020 , the activity in accumulated other comprehensive loss was as follows:

Thirteen Weeks Ended August 1, 2020

(in thousands)

1 unchanged sentence

Unrealized Gain (Loss) on Derivative Financial Instruments

Beginning balance at May 2, 2020

Other comprehensive income before reclassifications

Reclassified gain from accumulated other comprehensive loss (1)

Other comprehensive income (loss) after reclassifications (2)

Ending balance at August 1, 2020

Twenty-six Weeks Ended August 1, 2020

(in thousands)

Foreign Currency Translation Adjustment

Unrealized Gain (Loss) on Derivative Financial Instruments

Beginning balance at February 1, 2020

Other comprehensive income before reclassifications

Reclassified gain from accumulated other comprehensive loss (1)

Other comprehensive income after reclassifications (2)

Ending balance at August 1, 2020

No tax effect was recognized during the thirteen and twenty-six weeks ended August 1, 2020 due to the U.S.

being a loss jurisdiction.

For the thirteen and twenty-six weeks ended August 3, 2019 , the activity in accumulated other comprehensive loss was as follows:

Thirteen Weeks Ended August 3, 2019

(in thousands)

Foreign Currency Translation Adjustment

Unrealized Gain (Loss) on Derivative Financial Instruments

Beginning balance at May 4, 2019

Other comprehensive (loss) income before reclassifications

1 unchanged sentence

Other comprehensive (loss) income after reclassifications

Ending balance at May 2, 2020

No tax effect was recognized during the thirteen weeks ended May 2, 2020 due to the U.S.

being a loss jurisdiction.

For the thirteen weeks ended May 4, 2019 , the activity in accumulated other comprehensive loss was as follows:

Thirteen Weeks Ended May 4, 2019

Ending balance at August 3, 2019

Twenty-six Weeks Ended August 3, 2019

(in thousands)

4 unchanged sentences

Reclassified gain from accumulated other comprehensive loss (1)

Other comprehensive loss after reclassifications

Ending balance at May 4, 2019

Other comprehensive (loss) income after reclassifications

Ending balance at August 3, 2019

SEGMENT REPORTING

3 unchanged sentences

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 weeks ended May 2, 2020 and May 4, 2019 were as follows:

The Company’s net sales by operating segment for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 were as follows:

Thirteen Weeks Ended

Twenty-six Weeks Ended

(in thousands)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Net sales by geographic area are presented by attributing revenues to an individual country on the basis of the country in which the merchandise was sold for in-store purchases and on the basis of the shipping location provided by customers for digital orders.

The Company’s net sales by geographic area for the thirteen weeks ended May 2, 2020 and May 4, 2019 were as follows:

The Company’s net sales by geographic area for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 were as follows:

Thirteen Weeks Ended

Twenty-six Weeks Ended

(in thousands)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

International

FLAGSHIP STORE EXIT (BENEFITS) CHARGES

Global Store Network Optimization

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 (benefits) charges on the Consolidated Statements of Operations and Comprehensive Loss.

D etails of the (benefits) charges incurred during the thirteen weeks ended May 2, 2020 and May 4, 2019 related to this initiative were as follows:

The Company recognizes impacts related to the exit of its flagship stores in flagship store exit (benefits) charges on the Consolidated Statements of Operations and Comprehensive Income (Loss).

D etails of the (benefits) charges incurred during the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 related to this initiative were as follows:

Thirteen Weeks Ended

Twenty-six Weeks Ended

(in thousands)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Single lease cost (1)

Variable lease cost (2)

Operating lease right-of-use asset impairment

Operating lease cost

Asset disposals and other store-closure costs (3)

1 unchanged sentence

Total flagship store exit (benefits) charges

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

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

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

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

Future fixed lease payments associated with closed flagship stores are reflected within short-term and long-term operating lease liabilities on the Condensed Consolidated Balance Sheets.

These payments are scheduled to be paid through the fiscal year ending January 30, 2029 (“Fiscal 2028”) and are not expected to exceed $ 15 million in aggregate in any fiscal year.

As the Company continues its ‘Global Store Network Optimization’ efforts, it may incur incremental charges or future cash expenditures not currently contemplated due to events that may occur as a result of, or that are associated with, 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 incremental charges or future cash expenditures that may take place in future periods resulting from any potential flagship store closures given the unpredictable nature of lease exit negotiations and ultimate lease renewal decisions.

As the Company continues its ‘Global Store Network Optimization’ efforts, it may incur future cash expenditures, 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements