What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-06-09 compared with 2020-12-07 · 239 added, 346 removed, 401 unchanged (59% of the section changed)

3 unchanged sentences

(Thousands, except per share amounts)

Thirteen Weeks Ended Thirty-nine Weeks Ended

October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Thirteen Weeks Ended

May 1, 2021 May 2, 2020

Net sales $ 781,405 $ 485,359

3 unchanged sentences

Marketing, general and administrative expense 120,947 108,257

Flagship store exit (benefits) charges ( 8,063 ) 285 ( 12,490 ) 47,023

Flagship store exit benefits ( 1,100 ) ( 543 )

Asset impairment, exclusive of flagship store exit charges 2,664 42,928

Other operating loss (income), net 288 ( 215 ) ( 1,562 ) ( 465 )

Other operating (income) loss, net ( 1,418 ) 506

Operating income (loss) 57,433 ( 209,127 )

1 unchanged sentence

Income (loss) before income taxes 48,827 ( 212,498 )

Income tax expense (benefit) 5,779 3,987 38,565 ( 16,931 )

Income tax expense 6,121 31,533

Net income (loss) 42,706 ( 244,031 )

7 unchanged sentences

Diluted 65,305 62,541

Other comprehensive (loss) income

Other comprehensive income

Foreign currency translation, net of tax $ ( 1,274 ) $ ( 5,399 )

Derivative financial instruments, net of tax 2,599 8,865

( 5,234 ) ( 3,654 ) 1,224 ( 574 )

Other comprehensive (loss) income ( 3,092 ) ( 2,299 ) 6,701 ( 5,793 )

Other comprehensive income 1,325 3,466

Comprehensive income (loss) 44,031 ( 240,565 )

40,937 5,271 ( 187,509 ) ( 46,033 )

Comprehensive income attributable to noncontrolling interests 938 117

1,758 1,047 2,203 3,534

Comprehensive income (loss) attributable to A&F $ 43,093 $ ( 240,682 )

$ 39,179 $ 4,224 $ ( 189,712 ) $ ( 49,567 )

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

2 unchanged sentences

(Thousands, except par value amounts)

October 31, 2020 February 1, 2020

May 1, 2021 January 30, 2021

Current assets:

27 unchanged sentences

Treasury stock, at average cost:

40,916 and 40,514 shares as of October 31, 2020 and February 1, 2020, respectively ( 1,513,495 ) ( 1,552,065 )

41,365 and 40,901 shares as of May 1, 2021 and January 30, 2021, respectively

( 1,523,902 ) ( 1,512,851 )

Total Abercrombie & Fitch Co.

7 unchanged sentences

(Thousands, except per share amounts)

Thirteen Weeks Ended October 31, 2020

Common Stock Paid-in

capital Non-controlling interests Retained

earnings AOCL Treasury stock Total

stockholders’

outstanding Par

value Shares At average

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 19 — ( 436 ) — ( 661 ) — ( 19 ) 947 ( 150 )

Share-based compensation expense — — 4,669 — — — — — 4,669

Derivative financial instruments, net of tax — — — — — ( 5,234 ) — — ( 5,234 )

Foreign currency translation adjustments, net of tax — — — — — 2,142 — — 2,142

Distributions to noncontrolling interests, net — — — ( 262 ) — — — — ( 262 )

Ending balance at October 31, 2020 62,384 $ 1,033 $ 396,505 $ 9,425 $ 2,067,521 $ ( 102,185 ) 40,916 $ ( 1,513,495 ) $ 858,804

Thirteen Weeks Ended November 2, 2019

Thirteen Weeks Ended May 1, 2021

Common Stock Paid-in

4 unchanged sentences

value Shares At average

Balance, August 3, 2019 63,146 $ 1,033 $ 394,694 $ 11,318 $ 2,251,032 $ ( 105,946 ) 40,154 $ ( 1,548,836 ) $ 1,003,295

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 — — — 938 41,768 — — — 42,706

Purchase of Common Stock ( 1,077 ) — — — — — 1,077 ( 35,249 ) ( 35,249 )

Dividends ($0.20 per share) — — — — ( 12,574 ) — — — ( 12,574 )

Share-based compensation issuances and exercises 613 — ( 14,456 ) — ( 21,490 ) — ( 613 ) 24,198 ( 11,748 )

3 unchanged sentences

Distributions to noncontrolling interests, net — — — ( 4,846 ) — — — — ( 4,846 )

Ending balance at November 2, 2019 62,757 $ 1,033 $ 399,981 $ 10,854 $ 2,244,150 $ ( 108,245 ) 40,543 $ ( 1,553,407 ) $ 994,366

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

Abercrombie & Fitch Co.

Condensed Consolidated Statements of Stockholders’ Equity

(Thousands, except per share amounts)

Thirty-nine Weeks Ended October 31, 2020

Common Stock Paid-in

capital Non-controlling interests Retained

earnings AOCL Treasury stock Total

stockholders’

outstanding Par

value Shares At average

Balance, February 1, 2020 62,786 $ 1,033 $ 404,983 $ 12,368 $ 2,313,745 $ ( 108,886 ) 40,514 $ ( 1,552,065 ) $ 1,071,178

Net loss — — — 2,203 ( 196,413 ) — — — ( 194,210 )

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

Thirty-nine Weeks Ended November 2, 2019

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

Thirteen Weeks Ended May 2, 2020

Common Stock Paid-in

5 unchanged sentences

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

Impact from adoption of the new lease accounting standard — — — — ( 75,165 ) — — — ( 75,165 )

Net loss — — — 3,534 ( 43,774 ) — — — ( 40,240 )

Net income (loss) — — — 117 ( 244,148 ) — — — ( 244,031 )

Purchase of Common Stock ( 1,397 ) — — — — — 1,397 ( 15,172 ) ( 15,172 )

5 unchanged sentences

Distributions to noncontrolling interests, net — — — ( 4,658 ) — — — — ( 4,658 )

Ending balance at November 2, 2019 62,757 $ 1,033 $ 399,981 $ 10,854 $ 2,244,150 $ ( 108,245 ) 40,543 $ ( 1,553,407 ) $ 994,366

Ending balance at May 2, 2020 62,284 $ 1,033 $ 389,904 $ 7,827 $ 2,022,366 $ ( 105,420 ) 41,016 $ ( 1,517,644 ) $ 798,066

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

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Thirty-nine Weeks Ended

October 31, 2020 November 2, 2019

Thirteen Weeks Ended

May 1, 2021 May 2, 2020

Operating activities

Net loss $ ( 194,210 ) $ ( 40,240 )

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

Net income (loss) $ 42,706 $ ( 244,031 )

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

Depreciation and amortization 37,856 44,037

1 unchanged sentence

Loss on disposal 189 6,283

Provision for (benefit from) deferred income taxes 27,432 ( 20,631 )

Provision for deferred income taxes 4,231 23,353

Share-based compensation 8,450 5,162

5 unchanged sentences

Other assets ( 34,162 ) 32,213

Withdrawal of funds from Rabbi Trust assets 50,000 —

Other liabilities ( 336 ) ( 555 )

Net cash provided by (used for) operating activities 158,894 ( 33,839 )

Net cash used for operating activities ( 131,350 ) ( 140,776 )

Investing activities

Purchases of property and equipment ( 14,404 ) ( 46,990 )

Net cash used for investing activities ( 91,748 ) ( 154,373 )

Withdrawal of funds from Rabbi Trust assets — 50,000

Net cash (used for) provided by investing activities ( 14,404 ) 3,010

Financing activities

Proceeds from issuance of senior secured notes 350,000 —

Proceeds from borrowings under the senior secured asset-based revolving credit facility — 210,000

Repayment of borrowings under the term loan facility ( 233,250 ) ( 10,000 )

Repayment of borrowings under the senior secured asset-based revolving credit facility ( 210,000 ) —

Payment of debt issuance costs and fees ( 7,151 ) —

Payment of debt issuance or modification costs and fees ( 1,490 ) —

Purchases of Common Stock ( 35,249 ) ( 15,172 )

1 unchanged sentence

Other financing activities ( 16,452 ) ( 10,604 )

Net cash provided by (used for) financing activities 70,129 ( 122,908 )

Net cash (used for) provided by financing activities ( 53,191 ) 171,668

Effect of foreign currency exchange rates on cash ( 1,021 ) ( 3,891 )

Net increase (decrease) in cash and equivalents, and restricted cash and equivalents 139,544 ( 313,806 )

Net (decrease) increase in cash and equivalents, and restricted cash and equivalents ( 199,966 ) 30,011

Cash and equivalents, and restricted cash and equivalents, beginning of period 1,124,157 692,264

7 unchanged sentences

Cash received from income tax refunds $ 235 $ 568

Cash paid for amounts included in measurement of operating lease liabilities $ 224,827 $ 311,275

Cash paid for amounts included in measurement of operating lease liabilities, net of abatements $ 145,052 $ 66,510

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

8 unchanged sentences

ASSET IMPAIRMENT

RABBI TRUST ASSETS

SHARE-BASED COMPENSATION

2 unchanged sentences

SEGMENT REPORTING

FLAGSHIP STORE EXIT (BENEFITS) CHARGES

FLAGSHIP STORE EXIT BENEFITS

Abercrombie & Fitch Co.

2 unchanged sentences

Abercrombie & Fitch Co.

(“A&F”), a company incorporated in Delaware in 1996, through its subsidiaries (collectively, A&F and its subsidiaries are referred to as “Abercrombie & Fitch” or the “Company”), is a global multi-brand omnichannel specialty retailer, whose products are sold primarily through its Company-owned store and digital channels, as well as through various third-party wholesale, franchise and licensing arrangements.

The Company offers a broad assortment of apparel, personal care products and accessories for men, women and kids under the Hollister, Abercrombie & Fitch and abercrombie kids brands.

The brands share a commitment to offering unique products of enduring quality and exceptional comfort that allow customers around the world to express their own individuality and style.

The Company primarily has operations in North America, Europe and Asia, among other regions.

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.

As of May 1, 2021, the Company’s two brand-based operating segments were Hollister, which includes the Company’s Hollister and Gilly Hicks brands, and Abercrombie, which includes the Company’s Abercrombie & Fitch and abercrombie kids brands.

On May 20, 2021, the Company launched its newest brand, Social Tourist.

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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 unchanged sentences

All references herein to the Company’s fiscal years are as follows:

Fiscal year Year ended Number of weeks

Fiscal year Year ended/ ending Number of weeks

Fiscal 2019 February 1, 2020 52

Fiscal 2020 January 30, 2021 52

Fiscal 2021 January 29, 2022 52

Interim financial statements

The Condensed Consolidated Financial Statements as of October 31, 2020, and for the thirteen and thirty-nine week periods ended October 31, 2020 and November 2, 2019, are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The Condensed Consolidated Financial Statements as of May 1, 2021, and for the thirteen week periods ended May 1, 2021 and May 2, 2020, 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 2020 filed with the SEC on March 29, 2021.

The February 1, 2020 consolidated balance sheet data, included herein, were derived from audited consolidated financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”).

The January 30, 2021 consolidated balance sheet data, included herein, was derived from audited consolidated financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States of America (“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.

2 unchanged sentences

Due to the inherent uncertainty involved with estimates, actual results may differ.

The extent to which the current outbreak of coronavirus disease (“COVID-19”) impacts 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 economic recovery, and governmental, business and consumer reactions to the pandemic.

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 of the coronavirus, the availability and acceptance of effective vaccines or medical treatments, the impact of COVID-19 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 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.

1 unchanged sentence

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 the Company’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 the Company’s Fiscal 2020 Form 10-K.

The effects of the classification error on the Condensed Consolidated Statements of Cash Flow for the thirteen weeks ended May 2, 2020 is shown in the table below.

Thirteen Weeks Ended

As Originally Reported As Restated

(in thousands) May 2, 2020 Adjustment May 2, 2020

Net cash used for operating activities $ ( 90,776 ) $ ( 50,000 ) $ ( 140,776 )

Net cash (used for) provided by investing activities $ ( 46,990 ) $ 50,000 $ 3,010

Net cash provided by financing activities $ 171,668 — $ 171,668

Effect of foreign currency exchange rates on cash $ ( 3,891 ) — $ ( 3,891 )

Net increase in cash and equivalents, and restricted cash and equivalents $ 30,011 — $ 30,011

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 $ 722,275 — $ 722,275

The Company’s Condensed Consolidated Statements of Cash Flows for the thirteen weeks ended May 2, 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 31, 2020 February 1, 2020 November 2, 2019 February 2, 2019

(in thousands) Location May 1, 2021 January 30, 2021 May 2, 2020 February 1, 2020

Cash and equivalents Cash and equivalents $ 909,008 $ 1,104,862 $ 703,989 $ 671,267

3 unchanged sentences

IMPACT OF COVID-19

Recent developments

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 and the availability and acceptance of an effective vaccine or medical treatments.

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 continue to do so.

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

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

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

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

As of October 31, 2020, approximately 97% of Company-operated stores had reopened for in-store service, although many with modified operating hours.

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

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

In response to elevated digital demand during this period, the Company has increased its omnichannel capabilities by continuing to offer Purchase-Online-Pickup-in-Store, including curbside pick-up at a majority of U.S.

locations, and by utilizing ship-from-store capabilities.

In addition, to prepare for the Fiscal 2020 holiday season, the Company has entered into a short-term lease for an additional distribution center and has partnered with incremental carriers.

Impact of COVID-19

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

Total net sales decreased approximately 5% and 18% for the thirteen and thirty-nine weeks ended October 31, 2020

as compared to the comparable periods ended November 2, 2019, respectively.

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

The year-over-year decline in store sales was partially offset by digital sales growth of approximately 43% and 42% for the thirteen and thirty-nine weeks ended October 31, 2020 as compared to the comparable periods ended November 2, 2019, respectively.

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

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

During this period, the 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.

The Company has elected to account for all qualifying lease concessions, those that are a direct consequence of COVID-19 and that result in revised lease consideration that is substantially the same or less than the original consideration, as if the enforceable rights and obligations associated with the concession existed in the original lease agreement.

Rent abatements associated with such concessions are recognized in variable lease cost.

Lease concessions granted as part of an agreement that substantially increases the total consideration as a result of the inclusion of additional terms, such as rent payments associated with a lease term extension, are treated as lease modifications.

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

On March 27, 2020, the U.S.

government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which among other things, provides refundable employee retention tax credits for wages paid to employees who are unable to work during the COVID-19 outbreak and the deferral of the employer–paid portion of social security taxes.

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

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 thirty-nine weeks ended October 31, 2020, the Company recognized qualified payroll tax credits reducing payroll expenses by approximately $ 2.8 million and $ 14.7 million, respectively, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), 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 $6.3 million and $57.3 million during the thirteen and thirty-nine weeks ended October 31, 2020, respectively, which were principally the result of the impact of COVID-19 on store cash flows.

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.

During the thirteen weeks ended May 2, 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 weeks ended May 1, 2021, the vast majority of Company-operated stores were fully open for in-store service, but temporary store closures remained in the EMEA region.

During periods of temporary store closures, reductions in revenue were not 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, 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).

During the thirteen weeks ended May 1, 2021 and May 2, 2020, the Company suspended rent payments for a number of stores that were closed, and continues to engage with its landlords to find a mutually beneficial and agreeable path forward.

The Company obtained rent abatements of $ 7.8 million of during the thirteen weeks ended May 1, 2021 and recognized $ 7.7 million of benefits related to these abatements within variable lease cost during the period.

Rent abatements obtained during the thirteen weeks ended May 2, 2020 were not significant.

As of May 1, 2021 and January 30, 2021, the Company had $ 26.1 million and $ 24.2 million, respectively, related to suspended payments classified within accrued expenses on the Condensed Consolidated Balance Sheets.

During the thirteen weeks ended May 1, 2021 and May 2, 2020, the Company recognized qualified payroll-related credits reducing payroll expenses by approximately $ 4.2 million and $ 8.8 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 Consolidated Statements of Operations and Comprehensive (Loss) Income, 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 regional legislation.

During the thirteen weeks ended May 2, 2020, the Company recognized significant asset impairment charges related to the Company’s operating lease right-of-use assets and property and equipment of $ 42.9 million, 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 deferred tax valuation allowances and other tax charges during the thirty-nine weeks ended October 31, 2020, adversely impacting results by $ 77.4 million.

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.

Balance sheet, cash flow and liquidity

During the thirty-nine weeks ended October 31, 2020, the Company has taken various actions to preserve liquidity and manage cash flows in order to best position the business for key stakeholders, including (i) partnering with merchandise and non-merchandise vendors in regards to payment terms;

(ii) tightly managing inventory receipts to align inventory with expected market demand;

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

and (iv) temporarily suspending its share repurchase program 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, 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.

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.

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

In March 2020, in an effort to improve the Company’s 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 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.

REVENUE RECOGNITION

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Contract liabilities

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

(in thousands) October 31, 2020 February 1, 2020 November 2, 2019 February 2, 2019

The following table details certain contract liabilities representing unearned revenue as of May 1, 2021, January 30, 2021, May 2, 2020 and February 1, 2020:

(in thousands) May 1, 2021 January 30, 2021 May 2, 2020 February 1, 2020

Gift card liability $ 27,919 $ 28,561 $ 24,671 $ 28,844

Loyalty program liability $ 19,991 $ 20,426 $ 18,814 $ 23,051

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

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

The following table details recognized revenue associated with the Company’s gift card program and loyalty programs for the thirteen weeks ended May 1, 2021 and May 2, 2020:

Thirteen Weeks Ended

(in thousands) May 1, 2021 May 2, 2020

Revenue associated with gift card redemptions and gift card breakage $ 16,156 $ 11,009

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

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Thirteen Weeks Ended

(in thousands) May 1, 2021 May 2, 2020

Shares of Common Stock issued 103,300 103,300

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Anti-dilutive shares (1)

1,828 2,912 1,988 1,572

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

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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, as of October 31, 2020 and February 1, 2020 were as follows:

Assets at Fair Value as of October 31, 2020

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 May 1, 2021 and January 30, 2021 were as follows:

Assets at Fair Value as of May 1, 2021

(in thousands) Level 1 Level 2 Level 3 Total

10 unchanged sentences

Total liabilities $ — $ 2,518 $ — $ 2,518

Assets and Liabilities at Fair Value as of February 1, 2020

Assets and Liabilities at Fair Value as of January 30, 2021

(in thousands) Level 1 Level 2 Level 3 Total

2 unchanged sentences

Derivative instruments (2)

— 1,969 — 1,969

Rabbi Trust assets (3)

6 unchanged sentences

Total liabilities $ — $ 4,694 $ — $ 4,694

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

(1) Level 1 assets consisted of investments in money market funds.

Level 2 assets consist of time deposits.

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

(3) Level 1 assets consist of investments in money market funds.

(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 consist of trust-owned life insurance policies.

(4) Level 1 assets consist of investments in U.S.

treasury bills and money market funds.

(4) Level 1 assets consisted of investments in money market funds.

Level 2 assets consist of time deposits.

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

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

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

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

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

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

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

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

Fair value of long-term borrowings

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

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

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

(in thousands) October 31, 2020 February 1, 2020

(in thousands) May 1, 2021 January 30, 2021

Gross borrowings outstanding, carrying amount $ 350,000 $ 350,000

2 unchanged sentences

Property and equipment, net consisted of:

(in thousands) October 31, 2020 February 1, 2020

(in thousands) May 1, 2021 January 30, 2021

Property and equipment, at cost $ 2,478,888 $ 2,488,957

1 unchanged sentence

Property and equipment, net $ 533,773 $ 550,587

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

Refer to Note 9, “ ASSET IMPAIRMENT ,” for details related to property and equipment impairment charges incurred during the thirteen weeks ended May 1, 2021 and May 2, 2020.

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

During thirty-nine weeks ended October 31, 2020, the Company suspended rent payments for a significant number of stores that were closed as a result of COVID-19, and continues to engage with its landlords to find a mutually beneficial and agreeable path forward.

Rent abatements associated with such concessions are recognized in variable lease cost.

In addition, during the thirteen weeks ended October 31, 2020, the Company entered into a sublease agreement with a third party for the remaining lease term of one of its European Abercrombie & Fitch flagship store locations upon its expected closure during the thirteen weeks ending January 30, 2021.

As of October 31, 2020, the Company's subleased property had a remaining lease term of 7.1 years with the sublease term from February 1, 2021 through November 30, 2027.

The sublease arrangement provides for rent and occupancy related costs such as taxes, utilities and maintenance costs.

Initial sublease terms provide for rent escalations based on the index under the lease, which were estimated upon initial measurement of the operating lease right-of-use asset and liability.

The sublease agreement does not include residual value guarantees.

Consistent with the Company's real estate leases, the sublease contains usage restrictions, but does not contain financial covenants and restrictions.

Future minimum tenant operating lease payments remaining under this sublease as of October 31, 2020 were $ 29.0 million.

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

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

The following table provides a summary of the Company’s operating lease costs for the thirteen weeks ended May 1, 2021 and May 2, 2020:

Thirteen Weeks Ended

(in thousands) May 1, 2021 May 2, 2020

Single lease cost (1)

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Operating lease right-of-use asset impairment (3)

3,979 9,047 44,397 12,636

Sublease income (4)

Total operating lease cost $ 94,289 $ 156,401

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

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

(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 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, as well as the benefit of $ 7.7 million of rent abatements in Fiscal 2021 related to the effects of the COVID-19 pandemic that resulted in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.

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

During the thirty-nine weeks ended October 31, 2020 and November 2, 2019, the Company paid $224.8 million and $311.3 million, respectively, for amounts included in the measurement of operating lease liabilities, net of rent abatements agreed upon during the period.

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

As of October 31, 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 $ 3.3 million.

(4) The terms of the sublease agreement entered into by the Company during Fiscal 2020 related to one of its previous flagship store locations have not changed materially from that disclosed in Note 8, “LEASES,” of the Notes to Consolidated Financial Statements contained in “ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Annual Report on Form 10-K for Fiscal 2020.

Sublease income is recognized in other operating (income) loss, net on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

During the thirteen weeks ended May 1, 2021 and May 2, 2020, the Company 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.

“ I MPACT OF COVID-19 ”, for additional details.

As of May 1, 2021, the Company had minimum commitments related to additional operating lease contracts the terms of which have not yet commenced, primarily for its Company-operated retail stores, of approximately $ 4.5 million.

ASSET IMPAIRMENT

Asset impairment charges for th e thirteen and thirty-nine weeks ended October 31, 2020 and November 2, 2019 were as follows:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Asset impairment charges for the thirteen weeks ended May 1, 2021 and May 2, 2020 were as follows:

Thirteen Weeks Ended

(in thousands) May 1, 2021 May 2, 2020

Operating lease right-of-use asset impairment $ 2,464 $ 35,008

$ 3,979 $ 9,047 $ 44,397 $ 12,636

Property and equipment asset impairment 200 7,920

Total asset impairment $ 2,664 $ 42,928

(1) Includes $3.2 million of operating lease right-of-use asset impairment related to flagship store exit charges for each of the thirteen and thirty-nine weeks ended November 2, 2019.

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

Asset impairment charges for the thirteen and thirty-nine weeks ended October 31, 2020 were principally the result of the impact of COVID-19 and were related to certain of the Company’s stores across brands, geographies and store formats.

The impairment charges for the thirty-nine weeks ended October 31, 2020 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $ 102.2 million, including $ 94.2 million related to operating lease right-of-use assets.

Asset impairment charges for the thirteen weeks and thirty-nine weeks ended November 2, 2019, primarily related to certain of the Company’s international flagship stores.

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

RABBI TRUST ASSETS

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

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

(in thousands) October 31, 2020 February 1, 2020

Trust-owned life insurance policies (at cash surrender value) $ 60,418 $ 109,048

Money market funds 1 1

Rabbi Trust assets $ 60,419 $ 109,049

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

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Realized gains related to Rabbi Trust assets $ 391 $ 805 $ 1,369 $ 2,394

The quarterly provision for income taxes is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for discrete quarterly events.

Asset impairment charges for the thirteen weeks ended May 1, 2021 related to certain of the Company’s stores across brands, geographies and store formats.

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 $ 6.3 million, including $ 5.7 million related to operating lease right-of-use assets.

Asset impairment charges for the thirteen weeks ended May 2, 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 thirteen weeks ended May 2, 2020 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $ 127.9 million, including $ 118.8 million related to operating lease right-of-use assets.

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.

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The impact of these items on the effective tax rate will be greater at lower levels of pre-tax earnings.

Impact of valuation allowances and other tax charges during Fiscal 2020

The Company’s effective tax rate for the thirty-nine weeks ended October 31, 2020 was impacted by $ 77.4 million of adverse tax impacts, ultimately giving rise to income tax expense on a consolidated pre-tax year-to-date loss.

Impact of valuation allowances and other tax charges

During the thirteen weeks ended May 1, 2021, the Company recognized $ 3.1 million of tax benefits due to the utilization of deferred tax assets against projected pre-tax income for the full fiscal year in the U.S., based on information available, on which a valuation allowance had previously been established.

During the thirteen weeks ended May 2, 2020, the Company recognized $ 90.9 million of tax charges, ultimately giving rise to income tax expense on a consolidated pre-tax year-to-date loss.

Further details regarding these adverse tax impacts are as follows:

• The Company anticipates 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 $ 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.

• The Company anticipated pre-tax losses for the full fiscal year in certain jurisdictions, based on information then 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 thirteen weeks ended May 2, 2020, resulting in an adverse tax impact of $ 56.6 million.

• The Company recognized 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.

These charges related to valuation allowances recognized by the Company of $ 10.5 million and $ 6.0 million related to the U.S.

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

Global legislation in response to COVID-19

In March 2020, the CARES Act was enacted into U.S.

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

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

income taxes;

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

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

The Company continues to review the need for valuation allowances on a quarterly basis.

For deferred tax items, primarily occurring in the United States, that are projected to be utilized in the current year against projected income, the corresponding valuation allowance is expected to be released which has reduced the estimated annual effective tax rate.

It is reasonably possible, if business conditions continue to improve, that there could be material adjustments over the next 12 months to the total amount of valuation allowances as circumstances may be such that sufficient evidence would exist to indicate that additional deferred taxes currently subject to a valuation allowance are more likely than not to be utilized.

It is reasonably possible that

sufficient evidence to release certain valuation allowances, primarily in the United States, could exist in Fiscal 2021, however, there is no guarantee that such evidence will exist or that deferred taxes will be utilized.

Share-based compensation

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 thirty-nine weeks ended November 2, 2019.

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

(in thousands) October 31, 2020 February 1, 2020

Refer to Note 12, “ SHARE-BASED COMPENSATION ,” for details on income tax benefits and charges related to share-based compensation awards during the thirteen weeks ended May 1, 2021 and May 2, 2020.

Details on the Company’s long-term borrowings, net, as of May 1, 2021 and January 30, 2021 are as follows:

(in thousands) May 1, 2021 January 30, 2021

Long-term portion of borrowings, gross at carrying amount $ 350,000 $ 350,000

Unamortized fees ( 5,722 ) ( 6,090 )

Unamortized discount — ( 355 )

Long-term borrowings, net $ 344,278 $ 343,910

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

(“A&F Management”), a wholly-owned indirect subsidiary of A&F, completed the private offering of the Senior Secured Notes, with $350 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.

(“A&F Management”), a wholly-owned indirect subsidiary of A&F, completed the private offering of the 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.

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 to interest expense 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 of A&F 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 a portion of the 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 October 31, 2020 or as of February 1, 2020.

As of October 31, 2020, the Company had availability under the ABL Facility of $ 383.7 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 $ 345.2 million as of October 31, 2020.

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

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.

Term Loan Facility

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

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

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

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

On April 29, 2021, Abercrombie & Fitch Management Co.

(“A&F Management”), a wholly-owned subsidiary of Abercrombie & Fitch Co.

(the “Company”), 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 Form 10-K for Fiscal 2020.

The Company did not have any borrowings outstanding under the ABL Facility as of May 1, 2021 or as of January 30, 2021.

As of May 1, 2021, the Company had availability under the ABL Facility of $ 252.5 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, borrowing available to the Company under the ABL Facility was $ 222.5 million as of May 1, 2021.

Representations, warranties and covenants

The agreements related to the Senior Secured Notes and 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:

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;

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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.

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 or certain future capital markets indebtedness.

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

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

The Company was in compliance with all debt covenants under these agreements as of May 1, 2021.

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 31, 2020 and November 2, 2019:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

The following table details share-based compensation expense and the related income tax impacts for the thirteen weeks ended May 1, 2021 and May 2, 2020:

Thirteen Weeks Ended

(in thousands) May 1, 2021 May 2, 2020

Share-based compensation expense $ 8,450 $ 5,162

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

$ — $ 1,211 $ — $ 1,566

(1) No income tax benefit was recognized related to share-based compensation expense during the thirteen and thirty-nine weeks ended October 31, 2020 due to the U.S.

being a loss jurisdiction.

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 31, 2020 and November 2, 2019:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

(1) No income tax benefit was recognized during the thirteen weeks ended May 2, 2020 due to the establishment of a valuation allowance.

The following table details discrete income tax benefits and charges related to share-based compensation awards during the thirteen weeks ended May 1, 2021 and May 2, 2020:

Thirteen Weeks Ended

(in thousands) May 1, 2021 May 2, 2020

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

$ — $ 6 $ — $ 1,175

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

— ( 447 ) — ( 611 )

Total income tax discrete (charges) benefits related to share-based compensation awards $ — $ ( 441 ) $ — $ 564

(1) No income tax benefits or charges related to these items were recognized during the thirteen and thirty-nine weeks ended October 31, 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 and thirty-nine weeks ended October 31, 2020 and November 2, 2019:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Total income tax discrete benefits related to share-based compensation awards $ 3,187 $ —

(1) No income tax benefit was recognized during the thirteen weeks ended May 2, 2020 due to the establishment of a valuation allowance.

Thirteen Weeks Ended

(in thousands) May 1, 2021 May 2, 2020

Employee tax withheld upon issuance of shares (1)

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Restricted stock units

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

The following table summarizes activity for restricted stock units for the thirteen weeks ended May 1, 2021:

Service-based Restricted

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Stock Units Market-based Restricted

Shares Weighted-

Average Grant

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Date Fair Value

Unvested at February 1, 2020 1,676,831 $ 18.68 747,056 $ 15.11 421,784 $ 23.05

Unvested at January 30, 2021 3,037,098 $ 11.62 297,216 $ 22.43 721,879 $ 21.46

Granted 613,809 31.68 146,580 31.78 73,294 49.81

3 unchanged sentences

Forfeited ( 32,474 ) 11.98 ( 1,704 ) 23.05 ( 10,657 ) 18.91

Unvested at October 31, 2020 (2)

Unvested at May 1, 2021 (1)

2,762,519 $ 15.82 335,377 $ 26.87 677,798 $ 22.66

(1) Includes 66,624 unvested restricted stock units as of October 31, 2020, subject to vesting requirements related to the achievement of certain performance metrics, such as operating income and net income, for the fiscal year immediately preceding the vesting date.

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

(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.

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 October 31, 2020:

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 May 1, 2021:

(in thousands) Service-based Restricted

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Remaining weighted-average period cost is expected to be recognized (years) 1.4 1.3 1.1

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

(in thousands) October 31, 2020 November 2, 2019

Additional information pertaining to restricted stock units for the thirteen weeks ended May 1, 2021 and May 2, 2020 follows:

(in thousands) May 1, 2021 May 2, 2020

Service-based restricted stock units:

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Total grant date fair value of awards vested $ 3,390 $ 4,132

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

October 31, 2020 November 2, 2019

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 1, 2021 were as follows:

Grant date market price $ 31.78

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Stock appreciation rights

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

The following table summarizes stock appreciation rights activity for the thirteen weeks ended May 1, 2021:

Shares Weighted-Average

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Contractual Life (years)

Outstanding at February 1, 2020 796,725 $ 40.06

Outstanding at January 30, 2021 384,757 $ 33.04

Exercised ( 54,377 ) 22.13

Forfeited or expired ( 34,150 ) 54.87

Outstanding at August 1, 2020 414,500 $ 32.86 $ — 3.2

Stock appreciation rights exercisable at October 31, 2020 414,500 $ 32.86 $ — 3.2

Stock appreciation rights expected to become exercisable in the future as of October 31, 2020 — $ — $ — 0.0

No stock appreciation rights were exercised during the thirty-nine weeks ended October 31, 2020.

Additional information pertaining to stock appreciation rights for the thirty-nine weeks ended November 2, 2019 follows:

(in thousands) November 2, 2019

Outstanding at May 1, 2021 296,230 $ 32.53 $ 2,325,845 3.1

Stock appreciation rights exercisable at May 1, 2021 296,230 $ 32.53 $ 2,325,845 3.1

Stock appreciation rights expected to become exercisable in the future as of May 1, 2021 — $ — $ — 0.0

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

Information pertaining to stock appreciation rights exercised during the thirteen weeks ended May 1, 2021 follows:

(in thousands) May 1, 2021

Total grant date fair value of awards exercised $ 427

14 unchanged sentences

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.

As of October 31, 2020, the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge either a portion, or all, of forecasted foreign-currency-denominated intercompany inventory sales, the resulting settlement of the foreign-currency-denominated intercompany accounts receivable, or both:

As of May 1, 2021, the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge either a portion, or all, of forecasted foreign-currency-denominated intercompany inventory sales, the resulting settlement of the foreign-currency-denominated intercompany accounts receivable, or both:

(in thousands) Notional Amount (1)

2 unchanged sentences

Canadian dollar $ 17,413

Japanese yen $ 3,931

(1) Amount reported is the U.S.

Dollar notional amount outstanding as of October 31, 2020.

Dollar notional amount outstanding as of May 1, 2021.

The fair value of derivative instruments is valued using quoted market prices of the same or similar instruments, adjusted for counterparty risk.

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

(in thousands) Location October 31, 2020 February 1, 2020 Location October 31, 2020 February 1, 2020

The location and amounts of derivative fair values of foreign currency exchange forward contracts on the Condensed Consolidated Balance Sheets as of May 1, 2021 and January 30, 2021 were as follows:

(in thousands) Location May 1, 2021 January 30, 2021 Location May 1, 2021 January 30, 2021

Derivatives designated as cash flow hedging instruments

3 unchanged sentences

$ 906 $ 79 $ 2,518 $ 4,694

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.

At the time of dedesignation of these hedges, they were in a net gain position of approximately $ 12.6 million.

Due to the extenuating circumstances leading to dedesignation, gains associated with these hedges at the time of dedesignation are 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 thirty-nine weeks ended October 31, 2020, $11.1 million had been reclassified from AOCL into earnings.

During the thirty-nine weeks ended October 31, 2020 and subsequent 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 thirty-nine weeks ended October 31, 2020 and November 2, 2019 follows:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Gain (loss) recognized in AOCL (1)

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 1, 2021 and May 2, 2020 follows:

Thirteen Weeks Ended

(in thousands) May 1, 2021 May 2, 2020

Gain recognized in AOCL (1)

$ 1,144 $ 12,235

Gain reclassified from AOCL into cost of sales, exclusive of depreciation and amortization (2)

(Loss) gain reclassified from AOCL to cost of sales, exclusive of depreciation and amortization (2)

$ ( 1,455 ) $ 3,370

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

(2) 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.

(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 thirteen weeks ended May 2, 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.

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

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

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 31, 2020 and November 2, 2019 follows:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

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 1, 2021 and May 2, 2020 follows:

Thirteen Weeks Ended

(in thousands) May 1, 2021 May 2, 2020

(Loss) gain recognized in other operating (income) loss, net $ ( 468 ) $ 742

ACCUMULATED OTHER COMPREHENSIVE LOSS

Fo r 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 accumulated other comprehensive loss (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 accumulated other comprehensive loss (1)

— ( 11,104 ) ( 11,104 )

Other comprehensive income after reclassifications (2)

5,477 1,224 6,701

Ending balance at October 31, 2020 $ ( 104,490 ) $ 2,305 $ ( 102,185 )

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

(2) No tax effect was recognized during the thirteen and thirty-nine weeks ended October 31, 2020 due to the U.S.

being a loss jurisdiction.

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

Thirteen Weeks Ended November 2, 2019

Fo r 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 Gain (Loss) on Derivative Financial Instruments Total

Beginning balance at August 3, 2019 $ ( 111,461 ) $ 5,515 $ ( 105,946 )

Beginning balance at January 30, 2021 $ ( 97,772 ) $ ( 4,535 ) $ ( 102,307 )

Other comprehensive (loss) income before reclassifications ( 1,274 ) 1,144 ( 130 )

Reclassified gain from accumulated other comprehensive loss (1)

Reclassified loss from accumulated other comprehensive loss (1)

— 1,455 1,455

Tax effect — 23 23

Other comprehensive income (loss) after reclassifications 1,355 ( 3,654 ) ( 2,299 )

Ending balance at November 2, 2019 $ ( 110,106 ) $ 1,861 $ ( 108,245 )

Thirty-nine Weeks Ended November 2, 2019

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 Income (Loss).

(2) No income tax benefit was recognized during the period due to the establishment of a valuation allowance in Fiscal 2020.

For the thirteen weeks ended May 2, 2020, the activity in AOCL was as follows:

Thirteen Weeks Ended May 2, 2020

(in thousands) Foreign Currency Translation Adjustment Unrealized Gain (Loss) on Derivative Financial Instruments Total

3 unchanged sentences

— ( 3,370 ) ( 3,370 )

Tax effect — 353 353

Other comprehensive (loss) income after reclassifications (2)

Ending balance at November 2, 2019 $ ( 110,106 ) $ 1,861 $ ( 108,245 )

( 5,399 ) 8,865 3,466

Ending balance at May 2, 2020 $ ( 115,366 ) $ 9,946 $ ( 105,420 )

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

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

SEGMENT REPORTING

The Company’s two operating segments are brand-based:

Hollister and Abercrombie, the latter of which includes the Company’s Abercrombie & Fitch and abercrombie kids brands.

Hollister, which includes the Company’s Hollister and Gilly Hicks 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 one 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 31, 2020 and November 2, 2019 were as follows:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

The Company’s net sales by operating segment for the thirteen weeks ended May 1, 2021 and May 2, 2020 were as follows:

Thirteen Weeks Ended

(in thousands) May 1, 2021 May 2, 2020

Hollister $ 442,408 $ 273,012

2 unchanged sentences

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

The Company’s net sales by geographic area for the thirteen and thirty-nine weeks ended October 31, 2020 and November 2, 2019 were as follows:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

The Company’s net sales by geographic area for the thirteen weeks ended May 1, 2021 and May 2, 2020 were as follows:

Thirteen Weeks Ended

(in thousands) May 1, 2021 May 2, 2020

$ 553,846 $ 322,862

4 unchanged sentences

Total $ 781,405 $ 485,359

FLAGSHIP STORE EXIT (BENEFITS) CHARGES

FLAGSHIP STORE EXIT 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.

As part of this ongoing effort, the Company recently announced the early exit of four European Abercrombie & Fitch flagship locations.

Three of the leases will be transferred through assignment while the fourth lease will be subleased to a new tenant.

The Company no longer has lease obligations beyond Fiscal 2020 for the three transfers and is scheduled to receive payments to fully offset its lease obligations on the sublease.

Refer to Note 8, “ LEASES ,” for additional information on the sublease arrangement.

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

Future fixed lease payments associated with flagship stores that were closed as of October 31, 2020, excluding the subleased flagship store, are scheduled to be paid through the fiscal year ending January 30, 2029 (“Fiscal 2028”) and are not expected to exceed $ 15 million in aggregate in any fiscal year.

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

D etails of the (benefits) charges incurred during the thirteen and thirty-nine weeks ended October 31, 2020 and November 2, 2019 related to this initiative follow:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

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

Details of the (benefits) charges incurred during the thirteen weeks ended May 1, 2021 and May 2, 2020 related to this initiative follow:

Thirteen Weeks Ended

(in thousands) May 1, 2021 May 2, 2020

Operating lease cost ( 841 ) —

Gain on lease assignment ( 5,237 ) — ( 5,237 ) —

Asset disposals and other store-closure costs (1)

( 405 ) — ( 3,610 ) ( 1,687 )

Employee severance and other employee transition costs 255 ( 543 )

Total flagship store exit (benefits) charges $ ( 8,063 ) $ 285 $ ( 12,490 ) $ 47,023

Total flagship store exit benefits $ ( 1,100 ) $ ( 543 )

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

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 on the Condensed Consolidated Statement of Cash Flows during the thirteen weeks ended May 1, 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.

1 unchanged sentence

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