What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-09-08 compared with 2021-06-09 · 233 added, 158 removed, 482 unchanged (45% of the section changed)

3 unchanged sentences

(Thousands, except per share amounts)

Thirteen Weeks Ended

May 1, 2021 May 2, 2020

Thirteen Weeks Ended Twenty-six Weeks Ended

July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020

Net sales $ 864,850 $ 698,328 $ 1,646,255 $ 1,183,687

4 unchanged sentences

Flagship store exit benefits ( 88 ) ( 3,884 ) ( 1,188 ) ( 4,427 )

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

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

Asset impairment 786 8,083 3,450 51,011

Other operating income, net ( 1,848 ) ( 2,356 ) ( 3,266 ) ( 1,850 )

Operating income (loss) 114,787 14,143 172,220 ( 194,984 )

1 unchanged sentence

Income (loss) before income taxes 103,512 7,045 152,339 ( 205,453 )

Income tax expense 6,121 31,533

Income tax (benefit) expense ( 6,944 ) 1,253 ( 823 ) 32,786

Net income (loss) 110,456 5,792 153,162 ( 238,239 )

7 unchanged sentences

Diluted 64,136 63,286 64,803 62,543

Other comprehensive income

Other comprehensive income (loss)

Foreign currency translation, net of tax $ ( 1,986 ) $ 8,734 $ ( 3,260 ) $ 3,335

3 unchanged sentences

Comprehensive income attributable to noncontrolling interests

1,956 328 2,894 445

Comprehensive income (loss) attributable to A&F $ 109,217 $ 11,791 $ 152,310 $ ( 228,891 )

3 unchanged sentences

(Thousands, except par value amounts)

May 1, 2021 January 30, 2021

July 31, 2021 January 30, 2021

Current assets:

27 unchanged sentences

Treasury stock, at average cost:

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

43,609 and 40,901 shares as of July 31, 2021 and January 30, 2021, respectively

( 1,619,102 ) ( 1,512,851 )

8 unchanged sentences

(Thousands, except per share amounts)

Thirteen Weeks Ended May 1, 2021

Thirteen Weeks Ended July 31, 2021

Common Stock Paid-in

4 unchanged sentences

value Shares At average

Balance, May 1, 2021 61,935 $ 1,033 $ 395,277 $ 8,776 $ 2,169,748 $ ( 100,982 ) 41,365 $ ( 1,523,902 ) $ 949,950

Net income — — — 1,956 108,500 — — — 110,456

Purchase of Common Stock ( 2,374 ) — — — — — 2,374 ( 100,000 ) ( 100,000 )

Share-based compensation issuances and exercises 130 — ( 1,873 ) — ( 3,239 ) — ( 130 ) 4,800 ( 312 )

Share-based compensation expense — — 6,487 — — — — — 6,487

Derivative financial instruments, net of tax — — — — — 2,703 — — 2,703

Foreign currency translation adjustments, net of tax — — — — — ( 1,986 ) — — ( 1,986 )

Distributions to noncontrolling interests, net — — — ( 365 ) — — — — ( 365 )

Ending balance at July 31, 2021 59,691 $ 1,033 $ 399,891 $ 10,367 $ 2,275,009 $ ( 100,265 ) 43,609 $ ( 1,619,102 ) $ 966,933

Thirteen Weeks Ended August 1, 2020

Common Stock Paid-in

capital Non-controlling interests Retained

earnings AOCL Treasury stock Total

stockholders’

outstanding Par

value Shares At average

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

Net income — — — 328 5,464 — — — 5,792

Share-based compensation issuances and exercises 81 — ( 1,376 ) — ( 1,919 ) — ( 81 ) 3,202 ( 93 )

Share-based compensation expense — — 3,744 — — — — — 3,744

Derivative financial instruments, net of tax — — — — — ( 2,407 ) — — ( 2,407 )

Foreign currency translation adjustments, net of tax — — — — — 8,734 — — 8,734

Distributions to noncontrolling interests, net — — — ( 226 ) — — — — ( 226 )

Ending balance at August 1, 2020 62,365 $ 1,033 $ 392,272 $ 7,929 $ 2,025,911 $ ( 99,093 ) 40,935 $ ( 1,514,442 ) $ 813,610

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 July 31, 2021

Common Stock Paid-in

capital Non-controlling interests Retained

earnings AOCL Treasury stock Total

stockholders’

outstanding Par

value Shares At average

Balance, January 30, 2021 62,399 $ 1,033 $ 401,283 $ 12,684 $ 2,149,470 $ ( 102,307 ) 40,901 $ ( 1,512,851 ) $ 949,312

6 unchanged sentences

Distributions to noncontrolling interests, net — — — ( 5,211 ) — — — — ( 5,211 )

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

Ending balance at July 31, 2021 59,691 $ 1,033 $ 399,891 $ 10,367 $ 2,275,009 $ ( 100,265 ) 43,609 $ ( 1,619,102 ) $ 966,933

Twenty-six Weeks Ended August 1, 2020

Common Stock Paid-in

13 unchanged sentences

Distributions to noncontrolling interests, net — — — ( 4,884 ) — — — — ( 4,884 )

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

Ending balance at August 1, 2020 62,365 $ 1,033 $ 392,272 $ 7,929 $ 2,025,911 $ ( 99,093 ) 40,935 $ ( 1,514,442 ) $ 813,610

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

May 1, 2021 May 2, 2020

Twenty-six Weeks Ended

July 31, 2021 August 1, 2020

Operating activities

Net income (loss) $ 153,162 $ ( 238,239 )

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

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

Depreciation and amortization 72,249 82,753

1 unchanged sentence

Loss on disposal 2,188 7,617

Provision for deferred income taxes 4,231 23,353

(Benefit) Provision for deferred income taxes ( 21,187 ) 23,037

Share-based compensation 14,937 8,906

Loss on extinguishment of debt 5,347 —

Changes in assets and liabilities:

5 unchanged sentences

Other liabilities ( 1,554 ) 5,227

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

Net cash provided by operating activities 49,945 46,233

Investing activities

1 unchanged sentence

Withdrawal of funds from Rabbi Trust assets — 50,000

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

Net cash used for investing activities ( 35,269 ) ( 25,621 )

Financing activities

Proceeds from issuance of senior secured notes — 350,000

Purchase of senior secured notes ( 46,969 ) —

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

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

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

Payment of debt issuance or modification costs and fees ( 1,837 ) ( 6,558 )

36 unchanged sentences

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.

The Company’s two brand-based operating segments are Hollister, which includes the Company’s Hollister, Gilly Hicks and Social Tourist brands, and Abercrombie, which includes the Company’s Abercrombie & Fitch and abercrombie kids brands.

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

4 unchanged sentences

The Company has interests in an Emirati business venture and in a Kuwaiti business venture with Majid al Futtaim Fashion L.L.C.

(“MAF”), each of which meets the definition of a variable interest entity (“VIE”).

(“MAF”) and in a U.S.

business venture with Dixar L.L.C.

(“Dixar”), each of which meets the definition of a variable interest entity (“VIE”).

The purpose of these business ventures with MAF is to operate stores in the United Arab Emirates and Kuwait and the purpose of the business venture with Dixar is to hold the intellectual property related to the Social Tourist brand.

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

therefore, the Company has consolidated the operating results, assets and liabilities of these VIEs, with MAF’s portion 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.

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

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

7 unchanged sentences

Interim financial statements

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”).

The Condensed Consolidated Financial Statements as of July 31, 2021, and for the thirteen and twenty-six week periods ended July 31, 2021 and August 1, 2020, are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim consolidated financial statements.

Accordingly, the Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto contained in A&F’s Annual Report on Form 10-K for Fiscal 2020 filed with the SEC on March 29, 2021.

3 unchanged sentences

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

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

The extent to which the current outbreak of coronavirus disease (“COVID-19”)

continues to impact the Company’s business and financial results will depend on numerous evolving factors including, but not limited to:

the duration and spread of COVID-19 and the emergence of new variants 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.

Due to the inherent uncertainty

involved with estimates, actual results may differ.

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

the duration and spread of COVID-19 and the emergence of new variants, such as the Delta variant, of the coronavirus, the availability and acceptance of effective vaccines, boosters or medical treatments, the impact of COVID-19 on the length or frequency of store closures, and the extent to which COVID-19 impacts worldwide macroeconomic conditions including interest rates, 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.

3 unchanged sentences

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.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Fiscal 2020 Form 10-K, a classification error was identified within the Company’s Condensed Consolidated Statements of Cash Flows in the Condensed Consolidated Financial Statements as of and for the periods ended May 2, 2020, August 1, 2020, and October 31, 2020, related to the presentation of the withdrawal of excess funds from the Company’s Rabbi Trust that occurred during the fiscal quarter ended May 2, 2020.

This withdrawal of $ 50.0 million was originally presented incorrectly as a cash inflow from operating activities, rather than as a cash inflow from investing activities.

1 unchanged sentence

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

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

The effects of the classification error on the Condensed Consolidated Statement of Cash Flow for the twenty-six weeks ended August 1, 2020 is shown in the table below.

Twenty-six 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

(in thousands) August 1, 2020 Adjustment August 1, 2020

Net cash provided by operating activities $ 96,233 $ ( 50,000 ) $ 46,233

Net cash used for investing activities $ ( 75,621 ) $ 50,000 $ ( 25,621 )

Net cash provided by financing activities $ 71,329 — $ 71,329

3 unchanged sentences

Cash and equivalents, and restricted cash and equivalents, end of period $ 785,990 — $ 785,990

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.

The Company’s Condensed Consolidated Statement of Cash Flows for the twenty-six weeks ended August 1, 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 May 1, 2021 January 30, 2021 May 2, 2020 February 1, 2020

(in thousands) Location July 31, 2021 January 30, 2021 August 1, 2020 February 1, 2020

Cash and equivalents Cash and equivalents $ 921,504 $ 1,104,862 $ 766,721 $ 671,267

6 unchanged sentences

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.

The extent of future impacts of COVID-19 on the Company’s business, including the duration and impact on overall customer demand, are uncertain as current circumstances are dynamic and depend on future developments, including, but not limited to, the duration and spread of COVID-19, the emergence of new variants of the coronavirus, such as the Delta variant, and the availability and acceptance of effective vaccines, boosters or medical treatments.

During the thirteen and twenty-six weeks ended August 1, 2020, the Company experienced a material adverse impact to net sales across brands and regions as a result of widespread temporary store closures in response to COVID-19, which was not offset by year-over-year digital sales growth.

During the thirteen and twenty-six weeks ended July 31, 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 this period.

As of July 31, 2021, all of the Company-operated stores were open for in-store service.

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).

During the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 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 $ 5.2 million and $ 13.0 million, respectively, during the thirteen and twenty-six weeks ended July 31, 2021 and recognized all of the benefits related to these abatements within variable lease cost during the applicable periods.

Rent abatements obtained during the thirteen and twenty-six weeks ended August 1, 2020 were not significant.

As of July 31, 2021 and January 30, 2021, the Company had $ 22.2 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 July 31, 2021 and August 1, 2020, the Company recognized qualified payroll-related credits reducing payroll expenses by approximately $ 0.5 million and $ 3.1 million, respectively, in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

During the twenty-six weeks ended July 31, 2021 and August 1, 2020, the Company recognized qualified payroll-related credits reducing payroll expenses by approximately $4.8 million and $11.8 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.

In these instances, no benefits are recognized on the Consolidated Statements of Operations and Comprehensive Income (Loss), but the Company does see a reduction in expense incurred.

The Company also intends to continue to defer qualified payroll and other tax payments as permitted by 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.

During the thirteen and twenty-six weeks ended August 1, 2020, the Company recognized significant asset impairment charges related to the Company’s operating lease right-of-use assets and property and equipment of $ 8.1 million and $ 51.0 million, 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.

1 unchanged sentence

Refer to Note 10, “ INCOME TAXES ,” for additional information.

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”).

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

In July 2020, the Company took additional actions to preserve liquidity in light of the continued global uncertainty then presented by COVID-19, and completed a private offering of $350.0 million aggregate principal amount of senior secured notes (the “Senior Secured Notes”).

The Company used the net proceeds of such offering to repay all outstanding borrowings under the Company’s term loan facility (the “Term Loan Facility”), to repay a portion of the outstanding borrowings under the ABL Facility and to pay fees and expenses in connection with such repayments and the offering.

4 unchanged sentences

Contract liabilities

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

The following table details certain contract liabilities representing unearned revenue as of July 31, 2021, January 30, 2021, August 1, 2020 and February 1, 2020:

(in thousands) July 31, 2021 January 30, 2021 August 1, 2020 February 1, 2020

Gift card liability $ 29,038 $ 28,561 $ 22,461 $ 28,844

Loyalty program liability $ 20,962 $ 20,426 $ 19,674 $ 23,051

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

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 July 31, 2021 and August 1, 2020:

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020

Revenue associated with gift card redemptions and gift card breakage $ 17,353 $ 10,066 $ 33,509 $ 21,075

3 unchanged sentences

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

Thirteen Weeks Ended

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

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020

Shares of Common Stock issued 103,300 103,300 103,300 103,300

4 unchanged sentences

Anti-dilutive shares (1)

1,194 2,026 1,277 2,123

(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.

7 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 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

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 July 31, 2021 and January 30, 2021, were as follows:

Assets and Liabilities at Fair Value as of July 31, 2021

(in thousands) Level 1 Level 2 Level 3 Total

2 unchanged sentences

Derivative instruments (2)

— 1,872 — 1,872

Rabbi Trust assets (3)

20 unchanged sentences

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

Level 2 assets consist of time deposits.

Level 2 assets consisted of time deposits.

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

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

Level 2 assets consist of trust-owned life insurance policies.

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

Level 2 assets consist of time deposits.

Level 2 assets consisted of trust-owned life insurance policies.

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

5 unchanged sentences

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

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

(in thousands) July 31, 2021 January 30, 2021

Gross borrowings outstanding, carrying amount $ 307,730 $ 350,000

2 unchanged sentences

Property and equipment, net consisted of:

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

(in thousands) July 31, 2021 January 30, 2021

Property and equipment, at cost $ 2,485,623 $ 2,488,957

1 unchanged sentence

Property and equipment, net $ 532,795 $ 550,587

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.

Refer to Note 9, “ ASSET IMPAIRMENT ,” for details related to property and equipment impairment charges incurred during the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 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.

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

The following table provides a summary of the Company’s operating lease costs for the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 2020:

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020

Single lease cost (1)

3 unchanged sentences

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

240 5,410 2,704 40,418

Sublease income (4)

( 1,095 ) — (2,188) —

Total operating lease cost $ 88,770 $ 112,541 $ 183,059 $ 268,942

(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.

(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 $ 5.2 million and $ 13.0 million of rent abatements during the thirteen and twenty-six weeks ended July 31, 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.

Rent abatements obtained during the thirteen and twenty-six weeks ended August 1, 2020 were not significant.

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

(4) The terms of the sublease agreement entered into by the Company 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.

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

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Annual Report on 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.

During the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 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.

“ IMPACT OF COVID-19 ”, for additional details.

As of July 31, 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 $ 2.5 million.

ASSET IMPAIRMENT

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

Asset impairment charges for the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 2020 were as follows:

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020

Operating lease right-of-use asset impairment $ 240 $ 5,410 $ 2,704 $ 40,418

1 unchanged sentence

Total asset impairment $ 786 $ 8,083 $ 3,450 $ 51,011

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.

Asset impairment charges for the thirteen and twenty-six weeks ended July 31, 2021 related to certain of the Company’s stores across brands, geographies and store formats.

The impairment charges for the twenty-six weeks ended July 31, 2021 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $ 9.4 million, including $ 8.8 million related to operating lease right-of-use assets.

Asset impairment charges for the thirteen 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.

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.

4 unchanged sentences

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.

During the thirteen weeks ended July 31, 2021, as a result of the improvement seen in business conditions, the Company recognized $ 23.5 million of discrete tax benefits due to the release of valuation allowances, primarily in the U.S.

and Germany, and a discrete tax benefit of $ 3.9 million due to the impact of a statutory rate change in the U.K on the valuation of deferred tax assets.

The Company also recognized $ 6.7 million of tax benefits related to the utilization of deferred tax assets against projected pre-tax income for the full fiscal year, primarily in the U.S.

and Germany, based on information available, on which a valuation allowance had previously been established.

During the twenty-six weeks ended July 31, 2021, as a result of the improvement seen in business conditions, the Company recognized $ 23.6 million of discrete tax benefits due to the release of valuation allowances, primarily in the U.S.

and Germany, and a discrete tax benefit of $ 3.9 million due to the impact of a statutory rate change in the U.K on the valuation of deferred tax assets.

The Company also recognized $ 10.1 million of tax benefits related to the utilization of deferred tax assets against projected pre-tax income for the full fiscal year, primarily in the U.S.

and Germany, based on information available, on which a valuation allowance had previously been established.

The Company continues to maintain valuation allowances in certain jurisdictions, principally Japan, Korea, and Switzerland.

During the twenty-six weeks ended August 1, 2020, the Company recognized $ 84.1 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 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.

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.

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The Company also recognized valuation allowances of $ 78.9 million related to Switzerland with a U.S.

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

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

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.

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

The Company continues to review the need for valuation allowances in certain jurisdictions, principally Japan, Korea and Switzerland, on a quarterly basis.

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

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.

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

Share-based compensation

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

Refer to Note 12, “ 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 July 31, 2021 and August 1, 2020.

Details on the Company’s long-term borrowings, net, as of July 31, 2021 and January 30, 2021 are as follows:

(in thousands) July 31, 2021 January 30, 2021

Long-term portion of borrowings, gross at carrying amount $ 307,730 $ 350,000

6 unchanged sentences

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

During the thirteen weeks ended July 31, 2021, A&F Management purchased $ 42.3 million of its outstanding Senior Secured Notes and incurred $ 5.3 million of loss on extinguishment of debt, comprised of a premium of $ 4.7 million and the write-off of unamortized fees of $ 0.6 million, in interest expense, net on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The terms of the Senior Secured Notes have not changed materially from those disclosed in Note 13, “BORROWINGS,” of the Notes to Consolidated Financial Statements contained in “ITEM 8.

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

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.

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

The Amended and Restated Credit Agreement continues to provide for a senior secured revolving credit facility of up to $ 400.0 million (the “ABL Facility”), and (i) extends the maturity date of the ABL Facility from October 19, 2022 to April 29, 2026 ;

2 unchanged sentences

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.

The Company did not have any borrowings outstanding under the ABL Facility as of July 31, 2021 or as of January 30, 2021.

As of July 31, 2021, the Company had availability under the ABL Facility of $ 278.6 million, net of $ 0.8 million in outstanding stand-by letters of credit.

Representations, warranties and covenants

8 unchanged sentences

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 May 1, 2021.

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

The Company was in compliance with all debt covenants under these agreements as of July 31, 2021.

SHARE-BASED COMPENSATION

Financial statement impact

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

The following table details share-based compensation expense and the related income tax impacts for the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 2020:

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020

Share-based compensation expense $ 6,487 $ 3,744 $ 14,937 $ 8,906

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

(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

$ 1,388 $ — $ 1,686 $ —

(1) No income tax benefit was recognized during the thirteen and twenty-six weeks ended August 1, 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 and twenty-six weeks ended July 31, 2021 and August 1, 2020:

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020

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

$ 826 $ — $ 4,016 $ —

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

Total income tax discrete benefits related to share-based compensation awards (1)

(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 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 1, 2021 and May 2, 2020:

Thirteen Weeks Ended

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

$ 826 $ — $ 4,013 $ —

(1) No income tax benefit was recognized during the thirteen and twenty-six weeks ended August 1, 2020 due to the establishment of a valuation allowance.

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 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 thirteen weeks ended May 1, 2021:

The following table summarizes activity for restricted stock units for the twenty-six weeks ended July 31, 2021:

Service-based Restricted

16 unchanged sentences

Forfeited ( 45,199 ) 12.73 ( 1,704 ) 23.05 ( 10,657 ) 17.84

Unvested at May 1, 2021 (1)

Unvested at July 31, 2021 (1)

2,632,091 $ 16.58 335,377 $ 26.87 677,798 $ 22.66

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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:

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 July 31, 2021:

(in thousands) Service-based Restricted

3 unchanged sentences

Remaining weighted-average period cost is expected to be recognized (years) 1.3 1.2 1.0

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

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

Additional information pertaining to restricted stock units for the twenty-six weeks ended July 31, 2021 and August 1, 2020 follows:

(in thousands) July 31, 2021 August 1, 2020

Service-based restricted stock units:

7 unchanged sentences

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

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:

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 July 31, 2021 were as follows:

July 31, 2021

Grant date market price $ 31.78

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Stock appreciation rights

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

The following table summarizes stock appreciation rights activity for the twenty-six weeks ended July 31, 2021:

Shares Weighted-Average

5 unchanged sentences

Forfeited or expired ( 34,150 ) 54.87

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

Outstanding at July 31, 2021

243,539 $ 32.69 $ 2,029,216 2.8

Stock appreciation rights exercisable at July 31, 2021 243,539 $ 32.69 $ 2,029,216 2.8

Stock appreciation rights expected to become exercisable in the future as of July 31, 2021 — $ — $ — 0.0

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

Information pertaining to stock appreciation rights exercised during the twenty-six weeks ended July 31, 2021 follows:

(in thousands) July 31, 2021

Total grant date fair value of awards exercised $ 1,020

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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 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:

As of July 31, 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)

4 unchanged sentences

(1) Amount reported is the U.S.

Dollar notional amount outstanding as of May 1, 2021.

Dollar notional amount outstanding as of July 31, 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 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

The location and amounts of derivative fair values of foreign currency exchange forward contracts on the Condensed Consolidated Balance Sheets as of July 31, 2021 and January 30, 2021 were as follows:

(in thousands) Location July 31, 2021 January 30, 2021 Location July 31, 2021 January 30, 2021

Derivatives designated as cash flow hedging instruments

3 unchanged sentences

$ 1,872 $ 79 $ 794 $ 4,694

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

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 July 31, 2021 and August 1, 2020 follows:

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020

Gain recognized in AOCL (1)

3 unchanged sentences

(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.

3 unchanged sentences

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 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

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 July 31, 2021 and August 1, 2020 follows:

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020

Gain (loss) recognized in other operating income, net $ 304 $ — $ ( 164 ) $ 742

ACCUMULATED OTHER COMPREHENSIVE LOSS

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

Thirteen Weeks Ended May 1, 2021

Fo r the thirteen and twenty-six weeks ended July 31, 2021, the activity in AOCL was as follows:

Thirteen Weeks Ended July 31, 2021

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

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

Beginning balance at May 1, 2021 $ ( 99,046 ) $ ( 1,936 ) $ ( 100,982 )

Other comprehensive (loss) income before reclassifications ( 1,986 ) 1,084 ( 902 )

1 unchanged sentence

— 1,697 1,697

Tax effect — ( 78 ) ( 78 )

Other comprehensive (loss) income after reclassifications ( 1,986 ) 2,703 717

Ending balance at July 31, 2021 $ ( 101,032 ) $ 767 $ ( 100,265 )

Twenty-six Weeks Ended July 31, 2021

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

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

Other comprehensive (loss) income before reclassifications ( 3,260 ) 2,228 ( 1,032 )

Reclassified loss from accumulated other comprehensive loss (1)

— 3,152 3,152

Ending balance at May 1, 2021 $ ( 99,046 ) $ ( 1,936 ) $ ( 100,982 )

Tax effect — ( 78 ) ( 78 )

Other comprehensive income after reclassifications ( 3,260 ) 5,302 2,042

Ending balance at July 31, 2021 $ ( 101,032 ) $ 767 $ ( 100,265 )

(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

For the thirteen and twenty-six weeks ended August 1, 2020, the activity in AOCL was as follows:

Thirteen Weeks Ended August 1, 2020

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

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

Other comprehensive income before reclassifications 8,734 — 8,734

Reclassified gain from accumulated other comprehensive loss (1)

— ( 2,407 ) ( 2,407 )

Other comprehensive (loss) income after reclassifications (2)

8,734 ( 2,407 ) 6,327

Ending balance at August 1, 2020 $ ( 106,632 ) $ 7,539 $ ( 99,093 )

Twenty-six Weeks Ended August 1, 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 (loss) income before reclassifications ( 5,399 ) 12,235 6,836

Other comprehensive income before reclassifications 3,335 12,235 15,570

Reclassified gain from accumulated other comprehensive loss (1)

2 unchanged sentences

3,335 6,458 9,793

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

Ending balance at August 1, 2020 $ ( 106,632 ) $ 7,539 $ ( 99,093 )

(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 unchanged sentences

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

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

Hollister, which includes the Company’s Hollister, Gilly Hicks and Social Tourist brands, and Abercrombie, which includes the Company’s Abercrombie & Fitch and abercrombie kids brands.

These operating segments have similar economic characteristics, classes of consumers, products, and production and distribution methods, operate in the same regulatory environments, and have been aggregated into 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 weeks ended May 1, 2021 and May 2, 2020 were as follows:

Thirteen Weeks Ended

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

The Company’s net sales by operating segment for the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 2020 were as follows:

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020

Hollister $ 514,483 $ 429,248 $ 956,891 $ 702,260

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 weeks ended May 1, 2021 and May 2, 2020 were as follows:

Thirteen Weeks Ended

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

The Company’s net sales by geographic area for the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 2020 were as follows:

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020

$ 601,767 $ 458,671 $ 1,155,613 $ 781,533

8 unchanged sentences

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

Details of the (benefits) charges recognized during the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 2020 related to this initiative follow:

Thirteen Weeks Ended Twenty-six Weeks Ended

(in thousands) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020

Operating lease cost — ( 5,230 ) ( 841 ) ( 5,230 )

Asset disposals and other store-closure costs (1)

— ( 3,205 ) ( 514 ) ( 3,205 )

Employee severance and other employee transition costs ( 88 ) 4,551 167 4,008

Total flagship store exit benefits $ ( 88 ) $ ( 3,884 ) $ ( 1,188 ) $ ( 4,427 )

(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 .

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

During the thirteen weeks ended May 1, 2021, the Company finalized an agreement with and paid its landlord partner to settle all remaining obligations related to the SoHo Hollister flagship store in New York City, which closed during the second quarter of Fiscal 2019.

1 unchanged sentence

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.

This cash outflow was classified within operating lease right-of-use assets and liabilities within Operating activities on the Condensed Consolidated Statement of Cash Flows during the twenty-six weeks ended July 31, 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.

5 unchanged sentences

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