What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-28 compared with 2021-03-29 · 285 added, 437 removed, 948 unchanged (43% of the section changed)

1 unchanged sentence

Abercrombie & Fitch Co.

Consolidated Statements of Operations and Comprehensive (Loss) Income

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Thousands, except per share amounts)

6 unchanged sentences

Flagship store exit (benefits) charges ( 1,153 ) ( 11,636 ) 47,257

Asset impairment, exclusive of flagship store exit charges 72,937 19,135 11,580

Asset impairment, exclusive of flagship store exit (benefits) charges 12,100 72,937 19,135

Other operating income, net ( 8,327 ) ( 5,054 ) ( 1,400 )

Operating (loss) income ( 20,469 ) 70,068 127,366

Operating income (loss) 343,084 ( 20,469 ) 70,068

Interest expense, net 34,110 28,274 7,737

(Loss) income before income taxes ( 48,743 ) 62,331 116,367

Income (loss) before income taxes 308,974 ( 48,743 ) 62,331

Income tax expense 38,908 60,211 17,371

Net (loss) income ( 108,954 ) 44,960 78,808

Net income (loss) 270,066 ( 108,954 ) 44,960

Net income attributable to noncontrolling interests 7,056 5,067 5,602

Net (loss) income attributable to A&F $ ( 114,021 ) $ 39,358 $ 74,541

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

Net income (loss) attributable to A&F $ 263,010 $ ( 114,021 ) $ 39,358

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

Basic $ 4.41 $ ( 1.82 ) $ 0.61

7 unchanged sentences

10,518 ( 5,616 ) ( 1,354 )

Other comprehensive income (loss) 6,579 ( 6,434 ) ( 7,398 )

Comprehensive (loss) income ( 102,375 ) 38,526 71,410

Other comprehensive (loss) income ( 12,399 ) 6,579 ( 6,434 )

Comprehensive income (loss) 257,667 ( 102,375 ) 38,526

Comprehensive income attributable to noncontrolling interests 7,056 5,067 5,602

Comprehensive (loss) income attributable to A&F $ ( 107,442 ) $ 32,924 $ 67,143

Comprehensive income (loss) attributable to A&F $ 250,611 $ ( 107,442 ) $ 32,924

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

2 unchanged sentences

(Thousands, except par value amounts)

January 30, 2021 February 1, 2020

January 29, 2022 January 30, 2021

Current assets:

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Treasury stock, at average cost:

40,901 and 40,514 shares at January 30, 2021 and February 1, 2020, respectively ( 1,512,851 ) ( 1,552,065 )

Total Abercrombie & Fitch Co.

stockholders’ equity 936,628 1,058,810

50,315 and 40,901 shares at January 29, 2022 and January 30, 2021, respectively

( 1,859,583 ) ( 1,512,851 )

Total A&F stockholders’ equity 826,090 936,628

Noncontrolling interests 11,234 12,684

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Balance, February 2, 2019 66,227 $ 1,033 $ 405,379 $ 9,721 $ 2,418,544 $ ( 102,452 ) 37,073 $ ( 1,513,604 ) $ 1,218,621

Impact from adoption of the new revenue recognition accounting standard — — — — 6,944 — — — 6,944

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

Net income — — — 5,602 39,358 — — — 44,960

1 unchanged sentence

Dividends ($ 0.80 per share)

— — — — ( 51,510 ) — — — ( 51,510 )

Share-based compensation issuances and exercises 516 — ( 14,403 ) — ( 17,482 ) — ( 516 ) 25,081 ( 6,804 )

4 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 income — — — 5,602 39,358 — — — 44,960

Net loss — — — 5,067 ( 114,021 ) — — — ( 108,954 )

Purchase of common stock ( 1,397 ) — — — — — 1,397 ( 15,172 ) ( 15,172 )

Dividends ($ 0.28 per share)

— — — — ( 12,556 ) — — — ( 12,556 )

Share-based compensation issuances and exercises 1,010 — ( 22,382 ) — ( 37,698 ) — ( 1,010 ) 54,386 ( 5,694 )

3 unchanged sentences

Distributions to noncontrolling interests, net — — — ( 4,751 ) — — — — ( 4,751 )

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

Net income (loss) — — — 5,067 ( 114,021 ) — — — ( 108,954 )

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 — — — 7,056 263,010 — — — 270,066

Purchase of common stock ( 10,200 ) — — — — — 10,200 ( 377,290 ) ( 377,290 )

Dividends ($ 0.00 per share)

— — — — — — — — —

Share-based compensation issuances and exercises 786 — ( 17,397 ) — ( 26,324 ) — ( 786 ) 30,558 ( 13,163 )

9 unchanged sentences

Operating activities

Net (loss) income $ ( 108,954 ) $ 44,960 $ 78,808

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

Net income (loss) $ 270,066 $ ( 108,954 ) $ 44,960

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

Depreciation and amortization 144,035 166,281 173,625

1 unchanged sentence

Loss on disposal 5,020 16,353 6,298

Amortization of deferred lease credits prior to adoption of new lease accounting standard — — ( 21,320 )

Provision for deferred income taxes 23,986 9,150 5,946

Deferred income taxes ( 31,922 ) 23,986 9,150

Share-based compensation 29,304 18,682 14,007

Loss on extinguishment of debt 5,347 — —

Changes in assets and liabilities

15 unchanged sentences

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

Purchase of senior secured notes ( 46,969 ) — —

Payment of debt issuance costs and fees ( 2,016 ) ( 7,318 ) —

2 unchanged sentences

Other financing activities ( 20,623 ) ( 11,987 ) ( 12,821 )

Net cash provided by (used for) financing activities 69,717 ( 147,873 ) ( 131,691 )

Net cash (used for) provided by financing activities ( 446,898 ) 69,717 ( 147,873 )

Effect of foreign currency exchange rates on cash ( 23,694 ) 9,168 ( 3,593 )

Net increase (decrease) in cash and equivalents, and restricted cash and equivalents 431,893 ( 53,565 ) 47,874

Net (decrease) increase in cash and equivalents, and restricted cash and equivalents ( 289,789 ) 431,893 ( 53,565 )

Cash and equivalents, and restricted cash and equivalents, beginning of period 1,124,157 692,264 745,829

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Cash received from income tax refunds $ 2,292 $ 4,650 $ 8,773

Cash paid for amounts included in measurement of operating lease liabilities, net of abatements received of $30.7 million in Fiscal 2020 $ 316,992 $ 422,850 $ —

Cash paid for amounts included in measurement of operating lease liabilities, net of abatements received of $ 17.9 million and $ 30.7 million in Fiscal 2021 and 2020, respectively

$ 364,842 $ 316,992 $ 422,850

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

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CONTINGENCIES

CORRECTION OF ERROR IN PREVIOUSLY REPORTED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

SUBSEQUENT EVENT

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 digital channels and Company-owned stores, as well as through various third-party arrangements.

The Company offers a broad assortment of apparel, personal care products and accessories for men, women and kids under the Company’s two brand-based operating segments:

Hollister, which includes the Company’s Hollister and Gilly Hicks brands, and Abercrombie, which includes the Company’s 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 offers a broad assortment of apparel, personal care products and accessories for men, women and kids, which are sold primarily through its digital channels and Company-owned stores, as well as through various third-party arrangements.

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

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

The Company operates primarily in North America, Europe and Asia.

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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 United States of America (the “U.S.”) business venture with Dixar L.L.C.

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

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

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

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

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

This typically results in a fifty-two week year, but occasionally gives rise to an additional week, resulting in a fifty-three week year.

Fiscal years are designated in the Consolidated Financial Statements and Notes thereto by the calendar year in which the fiscal year commenced.

This typically results in a 52 week year, but occasionally gives rise to an additional week, resulting in a 53 week year.

Fiscal years are designated in the Consolidated Financial Statements and notes by the calendar year in which the fiscal year commences.

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

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Fiscal 2019 February 1, 2020 52

Fiscal 2020 January 30, 2021 52

Fiscal 2021 January 29, 2022 52

Fiscal 2022 January 28, 2023 52

Use of estimates

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

The preparation of financial statements, in conformity with U.S.

generally accepted accounting principles (“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”) 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 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.

2 unchanged sentences

A summary of cash and equivalents on the Consolidated Balance Sheets follows:

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

(in thousands) January 29, 2022 January 30, 2021

$ 762,187 $ 796,994

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

(in thousands) Location January 30, 2021 February 1, 2020 February 2, 2019

(in thousands) Location January 29, 2022 January 30, 2021 February 1, 2020

Cash and equivalents Cash and equivalents $ 823,139 $ 1,104,862 $ 671,267

13 unchanged sentences

Inventories on the Consolidated Balance Sheets are valued at the lower of cost and net realizable value on a weighted-average cost basis.

The Company reduces the carrying value of inventory through a lower of cost and net realizable value adjustment, the impact of which is reflected in cost of sales, exclusive of depreciation and amortization, on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The lower of cost and net realizable value adjustment is based on the Company’s consideration of multiple factors and assumptions including demand forecasts, current sales volumes, expected sell-off activity, composition and aging of inventory, historical recoverability experience and risk of obsolescence from changes in economic conditions or customer preferences.

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Leasehold improvements are amortized over either their respective lease terms or their service lives, whichever is shorter.

The cost of assets sold or retired and the related accumulated depreciation are removed from the accounts with any resulting gain or loss included in net income on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

Maintenance and repairs are charged to expense as incurred.

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As the rates implicit in the Company’s leases are not readily determinable, the Company uses its incremental borrowing rate based on the transactional currency of the operating lease and the lease term for the initial measurement of the operating lease right-of-use asset and liability.

For operating leases existing before the adoption of the new lease accounting standard, the Company used its incremental borrowing rate as of the date of adoption, determined using the remaining lease term as of the date of adoption.

For operating leases commencing on or after the adoption of the new lease accounting standard, the incremental borrowing rate is determined using the remaining lease term as of the lease commencement date.

For operating leases existing before the adoption of the current lease accounting standard, the Company used its incremental borrowing rate as of the date of adoption, determined using the remaining lease term as of the date of adoption.

For operating leases commencing on or after the adoption of the current lease accounting standard, the incremental borrowing rate is determined using the remaining lease term as of the lease commencement date.

The Company has elected to combine lease and nonlease components for all current classes of underlying leased assets.

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• Costs expected to be incurred to return a leased asset to its original condition, also referred to as asset retirement obligations, which are classified within other liabilities on the Consolidated Balance Sheets;

• Variable payments related to operating lease components, such as contingent rent payments made by the Company based on performance, the expense of which is recognized in the period incurred on the Consolidated Statements of Operations and Comprehensive (Loss) Income;

• Variable payments related to nonlease components, such as taxes, insurance, and maintenance costs, the expense of which is recognized in the period incurred in the Consolidated Statements of Operations and Comprehensive (Loss) Income;

• Leases not related to Company-operated retail stores with an initial term of 12 months or less, the expense of which is recognized in the period incurred in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Abercrombie & Fitch Co.

Certain of the Company’s operating leases include options to extend the lease or to terminate the lease.

1 unchanged sentence

Generally, the Company’s options to extend its operating leases are at the Company’s sole discretion and at the time of lease commencement are not reasonably certain of being exercised.

There may be instances in which a lease is being renewed on a month-to-month basis and, in these instances, the Company will recognize lease expense in the period incurred in the Consolidated Statements of Operations and Comprehensive (Loss) Income until a new agreement has been executed.

Upon signing of the renewal agreement, the Company recognizes an asset for the right to use the leased asset and a liability based on the present value of remaining lease payments over the lease term.

There may be instances in which a lease is being renewed on a month-to-month basis and, in these instances, the Company will recognize lease expense in the period incurred in the Consolidated Statements of Operations and Comprehensive Income (Loss) until a new agreement has been executed.

Upon the signing of the renewal agreement, the Company recognizes an asset for the right to use the leased asset and a liability based on the present value of remaining lease payments over the lease term.

Amortization and interest expense related to operating lease right-of-use assets and liabilities are generally calculated on a straight-line basis over the lease term.

Amortization and interest expense related to previously impaired operating lease right-of-use assets are calculated on a front-loaded pattern.

Depending on the nature of the operating lease, amortization and interest expense are primarily recorded within stores and distribution expense, marketing, general and administrative expense, or flagship store exit (benefits) charges on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The Company’s operating lease agreements do not contain any material residual value guarantees or material restrictive covenants.

In addition, the Company does not have any sublease arrangements with any related party.

The Company adopted Accounting Standards Update No.

2016-02, Leases (Topic 842) and its subsequent amendments effective February 3, 2019.

Adoption of this standard resulted in the Company’s total assets and total liabilities on the Consolidated Balance Sheet each increasing by approximately $ 1.2 billion on the date of adoption, primarily due to the recognition of operating lease right-of-use assets and liabilities.

Certain of these newly-established operating lease right-of-use assets related to previously impaired stores and, therefore, were assessed for impairment upon adoption.

To the extent that the initial carrying amount for each such lease right-of-use asset was greater than its fair value, an asset impairment charge was recognized as an adjustment to the opening balance of retained earnings on the date of adoption.

As a result, the Company recognized a cumulative adjustment decreasing the opening balance of retained earnings by $ 0.1 billion on the date of adoption.

Refer to Note 8, “ LEASES .”

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This recoverability test requires management to make assumptions and judgments related, but not limited, to management’s expectations for future cash flows from operating the store.

The key assumptions used in developing these projected cash flows used in the recoverability test include estimates of future sales, gross profit and, to a lesser extent, operating expenses.

The key assumption used in developing these projected cash flows used in the recoverability test is estimated sales growth rate.

If the sum of the estimated future undiscounted cash flows attributable to an asset group is less than its carrying amount, and it is determined that the carrying amount of the asset group is not recoverable, management determines if there is an impairment loss by comparing the carrying amount of the asset group to its fair value.

Fair value of an asset group is based on the highest and best use of the asset group, often using a discounted cash flow model that utilizes Level 3 fair value inputs.

The key assumptions used in estimating fair value of an asset group may include discounted estimates of future cash flows from operating the store or comparable market rents.

The key assumptions used in the Company’s fair value analysis are estimated sales growth rate and comparable market rents.

An impairment loss is recognized based on the excess of the carrying amount of the asset group over its fair value.

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Other assets on the Consolidated Balance Sheets consist primarily of the Company’s trust-owned life insurance policies held in the irrevocable rabbi trust (the “Rabbi Trust”), deferred tax assets, long-term deposits, intellectual property, long-term restricted cash and equivalents, long-term supplies and various other assets.

Abercrombie & Fitch Co.

Rabbi Trust assets

2 unchanged sentences

Nonqualified Savings and Supplemental Retirement Plan II and the Supplemental Executive Retirement Plan.

The Rabbi Trust assets primarily consist of trust-owned life insurance policies which are recorded at cash surrender value and are included in other assets on the

Abercrombie & Fitch Co.

Consolidated Balance Sheets.

The change in cash surrender value of the Rabbi Trust is recorded in interest expense, net on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The Rabbi Trust assets primarily consist of trust-owned life insurance policies which are recorded at cash surrender value and are included in other assets on the Consolidated Balance Sheets.

The change in cash surrender value of the life insurance policies in the Rabbi Trust is recorded in interest expense, net on the Consolidated Statements of Operations and Comprehensive Income (Loss).

Refer to Note 10, “ RABBI TRUST ASSETS .”

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Favorable resolution would be recognized as a reduction to the Company’s effective tax rate in the period of resolution.

The Company recognizes accrued interest and penalties related to uncertain tax positions as a component of income tax expense on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

Refer to Note 12, “ INCOME TAXES .”

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whereas, translation adjustments and gains and losses associated with measuring inter-company loans of a long-term investment nature are reported as an element of other comprehensive income (loss).

Abercrombie & Fitch Co.

Derivative instruments

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The Company does not use forward contracts to engage in currency speculation and does not enter into derivative financial instruments for trading purposes.

Abercrombie & Fitch Co.

In order to qualify for hedge accounting treatment, a derivative instrument must be considered highly effective at offsetting changes in either the hedged item’s cash flows or fair value.

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These forward contracts typically have a maximum term of twelve months.

The conversion of the inventory to cost of sales, exclusive of depreciation and amortization, will result in the reclassification of related derivative gains and losses that are reported in AOCL into earnings on the Consolidated Balance Sheets.

The Company also uses foreign currency exchange forward contracts to hedge certain foreign-currency-denominated net monetary assets and liabilities, such as cash balances, receivables and payables.

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The Company presents its derivative assets and derivative liabilities at their gross fair values within other current assets and accrued liabilities, respectively, on the Consolidated Balance Sheets.

However, the Company’s derivative contracts allow net settlements under certain conditions.

However, the Company’s derivative instruments allow net settlements under certain conditions.

Refer to Note 15, “ DERIVATIVE INSTRUMENTS .

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A summary of the Company’s Class A Common Stock (the “Common Stock”), $ 0.01 par value, and Class B Common Stock, $ 0.01 par value, follows:

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

(in thousands) January 29, 2022 January 30, 2021

Class A Common Stock

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Shares authorized 106,400 106,400

(1) No shares were issued or outstanding as of each of January 30, 2021 and February 1, 2020.

Holders of Class A Common Stock generally have identical rights to holders of Class B Common Stock, except holders of Class A Common Stock are entitled to one vote per share while holders of Class B Common Stock are entitled to three votes per share on all matters submitted to a vote of stockholders.

(1) No shares were issued or outstanding as of each of January 29, 2022 and January 30, 2021 .

Abercrombie & Fitch Co.

Revenue recognition

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Revenue associated with the related shipping and handling obligations is deferred until the obligation is fulfilled, typically upon the customer’s receipt of the merchandise.

The related shipping and handling costs are classified in stores and distribution expense on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The related shipping and handling costs are classified in stores and distribution expense on the Consolidated Statements of Operations and Comprehensive Income (Loss).

Revenue is recorded net of estimated returns, associate discounts, promotions and other similar customer incentives.

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For additional details on the Company’s unearned revenue liabilities related to the Company’s gift card and loyalty programs, refer to Note 4, “ REVENUE RECOGNITION .”

The Company also recognizes revenue under wholesale arrangements, which is generally recognized upon shipment, when control passes to the wholesale partner.

The Company also recognizes revenue under wholesale arrangements, which revenue is generally recognized upon shipment, when control passes to the wholesale partner.

Revenue from the Company’s franchise and license arrangements, primarily royalties earned upon the sale of merchandise, is generally recognized at the time merchandise is sold to the franchisees’ retail customers or to the licensees’ wholesale customers.

The Company does not include tax amounts collected from customers on behalf of third parties, including sales and indirect taxes, in net sales.

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

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

For a discussion of the disaggregation of revenue, refer to Note 18, “ SEGMENT REPORTING .

Cost of sales, exclusive of depreciation and amortization

Cost of sales, exclusive of depreciation and amortization on the Consolidated Statements of Operations and Comprehensive (Loss) Income, primarily consists of cost incurred to ready inventory for sale, including product costs, freight, and import costs, as well as provisions for reserves for shrink and lower of cost and net realizable value.

Gains and losses associated with the effective portion of designated foreign currency exchange forward contracts related to the hedging of intercompany inventory transactions are also recognized in cost of sales, exclusive of depreciation and amortization, on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

Cost of sales, exclusive of depreciation and amortization on the Consolidated Statements of Operations and Comprehensive Income (Loss), primarily consists of cost incurred to ready inventory for sale, including product costs, freight, and import costs, as well as provisions for reserves for shrink and lower of cost and net realizable value.

The Company’s cost of sales, exclusive of depreciation and amortization, and consequently gross profit, may not be comparable to those of other retailers, as inclusion of certain costs vary across the industry.

Some retailers include all costs related to buying, design and distribution operations in cost of sales, while others may include either all or a portion of these costs in selling, general and administrative expenses.

Abercrombie & Fitch Co.

Stores and distribution expense

Stores and distribution expense on the Consolidated Statements of Operations and Comprehensive (Loss) Income primarily consists of:

Stores and distribution expense on the Consolidated Statements of Operations and Comprehensive Income (Loss) primarily consists of:

store payroll;

store management;

operating lease costs in Fiscal 2020 and Fiscal 2019 and rent expense in Fiscal 2018;

operating lease costs;

utilities and other landlord expenses;

depreciation and amortization, except for those amounts included in marketing,

Abercrombie & Fitch Co.

general and administrative expense;

depreciation and amortization, except for those amounts included in marketing, general and administrative expense;

repairs and maintenance and other store support functions;

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Marketing, general and administrative expense

Marketing, general and administrative expense on the Consolidated Statements of Operations and Comprehensive (Loss) Income primarily consists of:

Marketing, general and administrative expense on the Consolidated Statements of Operations and Comprehensive Income (Loss) primarily consists of:

home office compensation and marketing, except for those departments included in stores and distribution expense;

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Other operating income, net

Other operating income, net on the Consolidated Statements of Operations and Comprehensive (Loss) Income primarily consists of gains and losses resulting from foreign-currency-denominated transactions.

Other operating income, net on the Consolidated Statements of Operations and Comprehensive Income (Loss) primarily consists of gains and losses resulting from foreign-currency-denominated transactions.

A summary of foreign-currency-denominated transactions, including those related to derivative instruments, follows:

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Interest expense, net

For Fiscal 2020 and Fiscal 2019, interest expense primarily consisted of interest expense on the Company’s long-term borrowings outstanding.

For Fiscal 2018, interest expense primarily consisted of borrowings outstanding under the Company’s Term Loan Facility and interest expense related to landlord financing obligations, which were eliminated along with the related interest expense upon adoption of the new lease accounting standard in Fiscal 2019.

For Fiscal 2020, Fiscal 2019 and Fiscal 2018, interest income primarily consisted of interest income earned on the Company’s investments and cash holdings and realized gains from the Rabbi Trust assets.

Interest expense primarily consisted of interest expense on the Company’s long-term borrowings outstanding.

Interest income primarily consisted of interest income earned on the Company’s investments and cash holdings and realized gains from the Rabbi Trust assets.

A summary of interest expense, net follows:

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Interest expense $ 37,958 $ 31,726 $ 19,908

$ 31,726 $ 19,908 $ 22,788

Interest income ( 3,848 ) ( 3,452 ) ( 12,171 )

Interest expense, net $ 34,110 $ 28,274 $ 7,737

(1) Includes interest expense related to landlord financing obligations of $ 5.5 million for Fiscal 2018.

Landlord financing obligations were eliminated with the adoption of the new lease accounting standard at the beginning of Fiscal 2019.

Advertising costs

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Advertising costs $ 204,575 $ 118,537 $ 134,058

Abercrombie & Fitch Co.

Share-based compensation

The Company issues shares of Common Stock from treasury stock upon exercise of stock options and stock appreciation rights and vesting of restricted stock units, including those converted from performance share awards.

The Company issues shares of Common Stock from treasury stock upon exercise of stock appreciation rights and vesting of

Abercrombie & Fitch Co.

restricted stock units, including those converted from performance share awards.

As of January 29, 2022, the Company had sufficient treasury stock available to settle restricted stock units and stock appreciation rights outstanding.

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2016 Long-Term Incentive Plan for Directors (as amended effective May 20, 2020, the “2016 Directors LTIP”) and the Abercrombie & Fitch Co.

2016 Long-Term Incentive Plan for Associates (as amended effective May 20, 2020, the “2016 Associates LTIP”), or under a successor or replacement plan, the Company may be required to designate some portion of the outstanding awards to be settled in cash, which would result in liability classification of such awards.

2016 Long-Term Incentive Plan for Associates (as amended effective June 9, 2021, the “2016 Associates LTIP”), or under a successor or replacement plan, the Company may be required to designate some portion of the outstanding awards to be settled in cash, which would result in liability classification of such awards.

The fair value of liability-classified awards would be re-measured each reporting date until such awards no longer remain outstanding or until sufficient shares of Common Stock become available to be issued under the existing plans or under a successor or replacement plan.

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Abercrombie & Fitch Co.

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

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

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

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

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

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

(in thousands) Fiscal 2021 Fiscal 2020 Fiscal 2019

7 unchanged sentences

1,002 3,270 1,462

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

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

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

Recent accounting pronouncements

The Company adopted Accounting Standards Update No.

2016-02, Leases (Topic 842) and its subsequent amendments effective February 3, 2019.

Adoption of this standard resulted in the Company’s total assets and total liabilities on the Consolidated Balance Sheet each increasing by approximately $1.2 billion on the date of adoption, primarily due to the recognition of operating lease right-of-use assets and liabilities.

Certain of these newly-established operating lease right-of-use assets related to previously impaired stores and, therefore, were assessed for impairment upon adoption.

As a result, the Company recognized a cumulative adjustment decreasing the opening balance of retained earnings by $0.1 billion on the date of adoption.

The Company adopted this standard using a modified retrospective transition method and elected to not restate comparative periods.

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

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, the emergence of new variants of the coronavirus and the availability and acceptance of effective vaccines 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

In response to COVID-19, certain governments imposed travel restrictions and local statutory quarantines and the Company experienced widespread temporary store closures.

As of January 29, 2022, all U.S.

Company-operated stores were fully open for in-store service;

however, temporary store closures have subsequently been mandated in certain parts of the APAC region in response to COVID-19.

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

Although U.S.

and global economies have begun to recover from the COVID-19 pandemic as many health and safety restrictions have been lifted and vaccine distribution has increased, certain adverse consequences of the pandemic continue to impact the macroeconomic environment and may persist for some time, including labor shortages and disruptions of global supply chains and temporary store closures.

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

The Company plans to follow the guidance of local governments to evaluate whether future store closures will be necessary.

During Fiscal 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.

As a result, 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 Consolidated Statements of Operations and Comprehensive Income (Loss).

Further negative developments in the COVID-19 pandemic could result in additional charges to reduce the carrying value of inventory.

As a result of COVID-19, the Company suspended certain rent payments for periods of store closures, and continues to engage with its landlords to find a mutually beneficial and agreeable path forward.

As of January 29, 2022 and January 30, 2021, the Company had $ 13.5 million and $ 24.2 million, respectively, related to suspended rent payments classified within accrued expenses on the Consolidated Balance Sheets.

The Company obtained rent abatements of $ 17.9 million and $ 30.7 million, respectively, during Fiscal 2021 and Fiscal 2020.

The majority of the benefits related to these abatements was recognized within variable lease cost during the applicable periods.

Abercrombie & Fitch Co.

region on a rolling basis in late April 2020.

As of January 30, 2021, approximately 88% of Company-operated stores were open for in-store service with temporary store closures primarily in the EMEA region.

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

The Company’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 entered into a short-term lease for an additional distribution center and 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 14% for Fiscal 2020 as compared to Fiscal 2019.

The year-over-year decrease in total net sales was primarily driven by temporary widespread store closures and a decline in store 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 39% for Fiscal 2020 as compared to Fiscal 2019.

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 Consolidated Statements of Operations and Comprehensive (Loss) income.

These charges represented the majority of inventory write-down charges related to COVID-19 incurred during Fiscal 2020.

During Fiscal 2020, 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 Fiscal 2020, 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.

The Company obtained $ 30.7 million of rent abatements during Fiscal 2020 and recognized $30.1 million of benefits related to these abatements within variable lease cost during Fiscal 2020.

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 on the Consolidated Balance Sheets in the period during which rent was due, while continuing to recognize operating lease cost in the Consolidated Statements of Operations and Comprehensive (Loss) Income.

As of January 30, 2021, the Company had $ 24.2 million related to these suspended payments classified within accrued expenses on the Consolidated Balance Sheets.

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 Fiscal 2020, the Company recognized qualified payroll tax credits and government subsidies reducing payroll expenses by approximately $ 18.1 million on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

During Fiscal 2021 and Fiscal 2020, the Company recognized qualified payroll-related credits reducing payroll expenses by approximately $ 5.6 million and $ 18.1 millions, respectively, in the Consolidated Statements of Operations and Comprehensive Income.

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 as compared to Fiscal 2019.

The Company also 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 $72.9 million during Fiscal 2020, which were principally the result of the impact of COVID-19 on store cash flows.

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 applicable government laws and regulations.

The Company has recognized asset impairment charges related to the Company’s operating lease right-of-use assets and property and equipment, which were principally the result of the impact of COVID-19 on store cash flows.

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

Abercrombie & Fitch Co.

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 Fiscal 2020, adversely impacting results by $ 101.4 million.

The Company has also experienced other material impacts as a result of COVID-19, such as the establishment of deferred tax valuation allowances and other tax charges.

Refer to Note 12, “ INCOME TAXES ,” for additional information.

Balance sheet, cash flow and liquidity

During Fiscal 2020, in light of COVID-19, the Company took various actions to preserve liquidity and manage cash flows in order to best position the business for key stakeholders, including (i) partnering with merchandise and non-merchandise vendors in regards to payment terms;

(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.

In an effort to improve the Company’s near-term cash position, 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”) 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 of such offering to repay all outstanding borrowings under the Company’s term loan facility (the “Term Loan Facility”), to repay a portion of the outstanding borrowings under the ABL Facility and to pay fees and expenses in connection with such repayments and the offering.

Refer to Note 13, “ BORROWINGS ,” and Note 10, “ RABBI TRUST ASSETS ,” for additional information.

As of January 30, 2021, the Company had liquidity of $ 1.3 billion as compared to $ 0.9 billion as of February 1, 2020, comprised of cash and equivalents and 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 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.

Refer to Note 13 “ BORROWINGS ,” for additional information.

As of January 29, 2022, the Company had liquidity of $ 1.1 billion as compared to liquidity of $ 1.3 billion as of January 30, 2021, comprised of cash and equivalents and borrowing available to the Company under the ABL Facility.

REVENUE RECOGNITION

Disaggregation of revenue

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

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

For information regarding the disaggregation of revenue, refer to Note 18, “ SEGMENT REPORTING .

Contract liabilities

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

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

The following table details certain contract liabilities representing unearned revenue as of January 29, 2022 and January 30, 2021:

(in thousands) January 29, 2022 January 30, 2021

Gift card liability

7 unchanged sentences

45,417 37,042

Refer to Note 2, “ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue recognition ,” for discussion regarding significant accounting policies related to the Company’s revenue.

Refer to Note 2, “ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue recognition ,” for discussion regarding significant accounting policies related to the Company’s revenue recognition.

Abercrombie & Fitch Co.

12 unchanged sentences

Derivative instruments (2)

— 4,973 — 4,973

Rabbi Trust assets (3)

3 unchanged sentences

Total assets $ 54,701 $ 81,214 $ — $ 135,915

Derivative instruments (2)

$ — $ 4,694 $ — $ 4,694

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

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.

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.

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.

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.

Abercrombie & Fitch Co.

Fair value of borrowings

The Company’s borrowings under the Senior Secured Notes as of January 30, 2021 and the Term Loan Facility as of February 1, 2020 are carried at historical cost in the Consolidated Balance Sheets.

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

treasury bills.

Level 2 assets consisted of time deposits.

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

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

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

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

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

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

• 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 Senior Secured Notes are carried at historical cost in the Consolidated Balance Sheets.

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

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

(in thousands) January 29, 2022 January 30, 2021

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

Gross borrowings outstanding, fair value 327,732 389,813

No borrowings were outstanding under the Company’s ABL Facility as of January 30, 2021 or February 1, 2020.

Refer to Note 13, “ BORROWINGS ,” for further discussion of the Company’s credit facilities.

Abercrombie & Fitch Co.

Inventories consisted of:

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

(in thousands) January 29, 2022 January 30, 2021

Inventories at original cost $ 549,030 $ 429,993

3 unchanged sentences

$ 525,864 $ 404,053

(1) Includes $ 106.0 million and $ 92.3 million of inventory in transit, merchandise owned by the Company that has not yet been received at a Company distribution center, as of January 30, 2021 and February 1, 2020, respectively.

A summary of the Company’s vendors based on location and the percentage of dollar cost of merchandise receipts during Fiscal 2020, Fiscal 2019 and Fiscal 2018 follows:

(1) Includes $ 142.7 million and $ 106.0 million of inventory in transit, merchandise owned by the Company that has not yet been received at a Company distribution center, as of January 29, 2022 and January 30, 2021, respectively.

A summary of the Company’s vendors based on location and the percentage of dollar cost of merchandise receipts during Fiscal 2021, and Fiscal 2020 follows:

% of Total Company Merchandise Receipts (1)

Location Fiscal 2020 Fiscal 2019 Fiscal 2018

Location Fiscal 2021 Fiscal 2020

Vietnam 36 % 41 %

Cambodia 16 15

12 % 22 % 36 %

32 % 33 % 32 %

Total 100 % 100 %

6 unchanged sentences

Refer to Note 2, “ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Inventories ,” for discussion regarding significant accounting policies related to the Company’s inventories.

Abercrombie & Fitch Co.

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of:

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

(in thousands) January 29, 2022 January 30, 2021

Land $ 28,599 $ 28,599

11 unchanged sentences

Refer to Note 2, “ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and equipment, net ,” for discussion regarding significant accounting policies related to the Company’s property and equipment, net.

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

During Fiscal 2020, the Company suspended rent payments for a significant number of stores that were closed as a result of COVID-19.

In addition, the Company has been successful in obtaining certain rent abatements and landlord concessions of rent payable during Fiscal 2020 as a result of COVID-19 store closures.

The Company continues to engage with its landlords to find a mutually beneficial and agreeable path forward.

Refer to Note 3.

“ IMPACT OF COVID-19 ”, for additional details related to these items.

In addition, during Fiscal 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 closure.

As of January 30, 2021, the Company's subleased property had a remaining lease term of 6.8 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 January 30, 2021 were $30.3 million.

Abercrombie & Fitch Co.

The following table provides a summary of the Company’s operating lease costs for Fiscal 2020 and Fiscal 2019:

(in thousands) Fiscal 2020 Fiscal 2019

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

The following table provides a summary of the Company’s operating lease costs for Fiscal 2021, Fiscal 2020 and Fiscal 2019 :

(in thousands) Fiscal 2021 Fiscal 2020 Fiscal 2019

Single lease cost (1)

4 unchanged sentences

9,509 57,026 15,812

Sublease Income ( 4,292 ) — —

Total operating lease cost $ 388,352 $ 468,514 $ 587,266

(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 $30.1 million of rent abatements in Fiscal 2020 related to the effects of the COVID-19 pandemic that resulted in lease concessions with total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.

(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 $ 14.1 million and $ 30.1 million of rent abatements in Fiscal 2021 and Fiscal 2020, respectively, related to the effects of the COVID-19 pandemic that resulted in lease concessions with total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.

The total benefit related to rent abatements recognized during Fiscal 2021 and Fiscal 2020 was $ 17.9 million and $ 30.7 million respectively.

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

As reported under the previous accounting standard, the following table provides a summary of rent expense for Fiscal 2018:

(in thousands) Fiscal 2018

Store rent expense:

Fixed minimum (1)

Contingent 18,189

Deferred lease credits amortization ( 21,320 )

Total store rent expense 362,098

Buildings, equipment and other 8,800

Total rent expense $ 370,898

(1) Includes lease termination fees of $ 4.0 million for Fiscal 2018.

Under the new lease accounting standard, which the Company adopted on February 3, 2019, similar charges would be a component of operating lease cost.

The following table provides the weighted-average remaining lease term of the Company’s operating leases and the weighted-average discount rate used to calculate the Company’s operating lease liabilities as of January 30, 2021 and February 1, 2020:

January 30, 2021 February 1, 2020

January 29, 2022 January 30, 2021

Weighted-average remaining lease term (years) 5.3 5.7

11 unchanged sentences

Present value of operating lease liabilities $ 920,087

The Company has suspended rent payments for a number of stores that were closed as a result of COVID-19, and has been successful in obtaining certain rent abatements and landlord concessions of rent payable.

Refer to Note 3.

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

During Fiscal 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 closure.

As of January 29, 2022, the Company's subleased property had a remaining lease term of 5.8 years with the sublease term from February 1, 2021 through November 30, 2027.

Future minimum tenant operating lease payments remaining under this sublease as of January 29, 2022 were $ 24.0 million.

The Company had minimum commitments related to operating lease contracts that have not yet commenced, primarily for its Company-operated retail stores, of approximately $ 17.4 million as of January 29, 2022.

9 unchanged sentences

Refer to Note 19, “ FLAGSHIP STORE EXIT (BENEFITS) CHARGES .”

Asset impairment charges for Fiscal 2021 were related to certain of the Company’s stores across brands, geographies and store formats.

The impairment charges for Fiscal 2021 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $ 18.1 million, including $ 15.6 million related to operating lease right-of-use assets.

Asset impairment charges for Fiscal 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.

2 unchanged sentences

The impairment charges for Fiscal 2019 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $ 103.4 million, including $ 99.2 million related to operating lease right-of-use assets.

Asset impairment charges for Fiscal 2018 primarily related to certain of the Company’s international flagship stores.

The impairment charges for Fiscal 2018 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $2.6 million.

Refer to Note 2, “ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Long-lived asset impairment ,” for discussion regarding significant accounting policies related to impairment of the Company’s long-lived assets.

RABBI TRUST ASSETS

In an effort to improve the Company’s near-term cash position, as a precautionary measure in response to COVID-19, during Fiscal 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 January 30, 2021 and February 1, 2020:

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

Investments of Rabbi Trust assets consisted of the following as of January 29, 2022 and January 30, 2021:

(in thousands) January 29, 2022 January 30, 2021

Trust-owned life insurance policies (at cash surrender value) $ 62,272 $ 60,789

8 unchanged sentences

Accrued expenses consisted of:

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

(in thousands) January 29, 2022 January 30, 2021

Accrued payroll and related costs (1)

6 unchanged sentences

Refer to Note 4, “ REVENUE RECOGNITION .”

Impact of valuation allowances and other tax charges during Fiscal 2020

Impact of valuation allowances and other tax charges

During Fiscal 2021, as a result of the improvement seen in business conditions, the Company recognized $ 42.5 million of tax benefits due to the release of valuation allowances, primarily in the U.S.

and Germany, and a discrete tax benefit of $ 3.9 million due to a rate change in the United Kingdom The Company did not recognize income tax benefits on $ 25.3 million of pre-tax losses generated in Fiscal 2021, primarily in Switzerland, resulting in adverse tax impacts of $ 4.6 million.

The Company’s effective tax rate for Fiscal 2020 was impacted by $ 101.4 million of adverse tax impacts, ultimately giving rise to income tax expense on a consolidated pre-tax loss.

2 unchanged sentences

• The Company recognized charges of $ 61.9 million related to the establishment of valuation allowances and other tax charges in certain jurisdictions during Fiscal 2020, including, but not limited to, the U.S., Switzerland, Germany and Japan, principally as a result of the significant adverse impacts of COVID-19.

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 CARES Act did not have a material impact on the Company’s U.S.

income taxes in Fiscal 2020 and based on information currently available, the Company does not currently expect that these provisions will have a material impact on its income taxes in the future.

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

Swiss Tax Reform

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In addition, the Company incurred tax benefits in Fiscal 2019 of $ 2.9 million as a result of Swiss Tax Reform.

Swiss Tax Reform did not have a material impact to the Consolidated Statements of Operations and Comprehensive (Loss) Income or the Company’s cash flows during Fiscal 2020 or Fiscal 2019.

Tax Cuts and Jobs Act of 2017

In December 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law and made broad and significantly complex changes to the U.S.

corporate income tax system.

Given the significant changes resulting from and complexities associated with the Act, the estimated financial impacts related to the enactment of the Act, for Fiscal 2017 and up to one year from the enactment of the Act, were provisional and subject to further analysis, interpretation and clarification of the Act.

The Company updated its interpretations and assumptions, which resulted in net benefits of $ 3.5 million recognized in Fiscal 2018 during the

Swiss Tax Reform did not have a material impact to the Consolidated Statements of Operations and Comprehensive Income (Loss) or the Company’s cash flows during Fiscal 2021, Fiscal 2020 or Fiscal 2019.

Abercrombie & Fitch Co.

measurement period, primarily due to regulatory guidance issued by the U.S.

Internal Revenue Service (the “IRS”).

The Company completed its accounting related to the Act in the fourth quarter of Fiscal 2018.

Components of income taxes

(Loss) income before income taxes consisted of:

Income (loss) before income taxes consisted of:

(in thousands) Fiscal 2021 Fiscal 2020 Fiscal 2019

1 unchanged sentence

Foreign 25,181 ( 15,326 ) 44,741

(Loss) income before income taxes $ ( 48,743 ) $ 62,331 $ 116,367

Income (loss) before income taxes $ 308,974 $ ( 48,743 ) $ 62,331

(1) Includes intercompany charges to foreign affiliates for management fees, cost-sharing, royalties and interest and excludes a portion of foreign income that is currently includable on the U.S.

federal income tax return.

Income tax expense consisted of:

Income tax expense (benefit) consisted of:

(in thousands) Fiscal 2021 Fiscal 2020 Fiscal 2019

8 unchanged sentences

Income tax expense $ 38,908 $ 60,211 $ 17,371

(1) As a result of COVID-19, Fiscal 2020 includes federal deferred tax benefit of $79.0 million and foreign deferred tax expense of $88.6 million due to the establishment of an additional valuation allowance in Switzerland.

As a result of Swiss Tax Reform, Fiscal 2019 federal deferred tax expense included charges of $24.9 million and foreign deferred tax expense included benefits of $24.9 million.

The Company’s earnings and profits from its foreign subsidiaries could be repatriated to the U.S., without incurring additional federal income tax.

(1) Fiscal 2020 includes federal deferred tax benefit of $79.0 million and foreign deferred tax expense of $88.6 million due to the establishment of an additional valuation allowance in Switzerland.

Fiscal 2019 federal deferred tax expense included charges of $24.9 million and foreign deferred tax expense included benefits of $24.9 million as a result of Swiss Tax Reform.

The Company’s earnings and profits from its foreign subsidiaries may be repatriated to the U.S., without incurring additional U.S.

federal income tax.

The Company determined that the balance of the Company’s undistributed earnings and profits from its foreign subsidiaries as of February 2, 2019 are considered indefinitely reinvested outside of the U.S., and if these funds were to be repatriated to the U.S., the Company would expect to incur an insignificant amount of state income taxes and foreign withholding taxes.

The Company accrues for both state income taxes and foreign withholding taxes with respect to earnings and profits earned after February 2, 2019, in such a manner that these funds could be repatriated without incurring additional tax expense.

The Company accrues for both state income taxes and foreign withholding taxes with respect to earnings and profits earned after February 2, 2019, in such a manner that these funds may be repatriated without incurring additional tax expense.

Abercrombie & Fitch Co.

2 unchanged sentences

federal corporate income tax rate 21.0 % 21.0 % 21.0 %

Net change in valuation allowances ( 177.2 ) 8.2 0.7

Audit and other adjustments to prior years’ accruals, net 4.7 2.6 0.8

State income tax, net of U.S.

federal income tax effect 4.4 2.6 1.9

Foreign taxation of non-U.S.

operations (1)

32.7 5.5 ( 0.9 )

Write-off of stock basis in subsidiary — 3.2 —

Internal Revenue Code Section 162(m) 1.6 ( 5.5 ) 2.2

State income tax, net of U.S.

federal income tax effect 2.6 1.9 3.6

Audit and other adjustments to prior years’ accruals, net 2.6 0.8 ( 0.1 )

Permanent items — 0.3 0.2

Statutory tax rate and law changes due to Swiss Tax Reform — ( 4.6 ) —

Credit for increasing research activities 2.6 ( 3.6 ) ( 1.7 )

Net income attributable to noncontrolling interests 2.2 ( 1.9 ) ( 0.8 )

Additional U.S.

1 unchanged sentence

operations 0.6 ( 0.2 ) ( 1.4 )

Trust-owned life insurance policies (at cash surrender value) 0.7 ( 1.1 ) ( 0.6 )

Other statutory tax rate and law changes 2.3 ( 0.9 ) ( 0.1 )

Permanent items 0.2 — 0.3

Net change in valuation allowances ( 19.7 ) ( 177.2 ) 8.2

Tax (benefit) expense recognized on share-based compensation (2)

( 1.3 ) ( 7.5 ) ( 0.9 )

Other statutory tax rate and law changes ( 1.2 ) 2.3 ( 0.9 )

Credit for increasing research activities ( 0.6 ) 2.6 ( 3.6 )

Net income attributable to noncontrolling interests ( 0.5 ) 2.2 ( 1.9 )

Trust-owned life insurance policies (at cash surrender value) ( 0.1 ) 0.7 ( 1.1 )

Credit items — 0.2 ( 0.8 )

Tax Cuts and Jobs Act of 2017 — — ( 3.0 )

Other items, net — — 0.2

Write-off of stock basis in subsidiary — — 3.2

Statutory tax rate and law changes due to Swiss Tax Reform — — ( 4.6 )

Total 12.6 % ( 123.5 ) % 27.9 %

(1) Prior to 2019, U.S.

branch operations in Canada and Puerto Rico were subject to tax at the full U.S.

7 unchanged sentences

operations reported separately in the appropriate corresponding line items.

For Fiscal 2020, the impact of taxation of non-U.S.

For both Fiscal 2021 and Fiscal 2020, the impact of taxation of non-U.S.

operations on the Company's effective income tax rate was related to the Company's jurisdictional mix driven primarily by the Company’s operations within Switzerland.

7 unchanged sentences

operations above.

For Fiscal 2018, the impact of foreign taxation of non-U.S.

operations on the Company’s effective income tax rate was primarily related to the Company’s Swiss subsidiary, along with the Company’s NCI.

For Fiscal 2018, the Company’s Swiss subsidiary earned pre-tax income of $ 24.9 million with a jurisdictional effective tax rate of 12.9 %.

With respect to the NCI, the subsidiaries incurred pre-tax income of $ 4.3 million with no jurisdictional tax effect.

The Swiss earnings are subject to U.S.

tax and the effect is included in the U.S.

taxation of non-U.S.

operations above.

Abercrombie & Fitch Co.

1 unchanged sentence

The effect of temporary differences which gives rise to deferred income tax assets (liabilities) were as follows:

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

(in thousands) January 29, 2022 January 30, 2021

Deferred income tax assets:

2 unchanged sentences

64,281 81,357

Deferred compensation 16,294 19,849

Accrued expenses and reserves 32,649 13,571

Net operating losses (NOL), tax credit and other carryforwards 52,970 56,341

Rent 530 2,727

Prepaid expenses — 1,246

Accrued expenses and reserves 30,026 32,649

Deferred compensation 16,050 16,294

Inventory 3,578 —

Other 45 2,171

3 unchanged sentences

Operating lease right-of-use assets $ ( 202,916 ) $ ( 253,417 )

offset to foreign step-up in basis (1)

Property, equipment and intangibles ( 15,328 ) ( 17,236 )

Inventory ( 1,499 ) ( 3,537 )

Store supplies ( 2,042 ) ( 2,843 )

offset to foreign deferred tax assets, excluding intangibles, foreign step-up in basis (2)

( 183 ) ( 1,654 )

Property and equipment and intangibles ( 10,150 ) ( 15,328 )

Prepaid expenses ( 2,451 ) ( 387 )

Store supplies ( 1,811 ) ( 2,042 )

Undistributed profits of non-U.S.

subsidiaries ( 1,082 ) ( 318 )

Rent ( 360 ) —

Inventory — ( 1,499 )

offset to foreign deferred tax assets, excluding intangibles, foreign step-up in basis (2)

Other ( 30 ) ( 3,499 )

7 unchanged sentences

In Fiscal 2020, a full valuation allowance was established in Switzerland and the corresponding US deferred tax liability was released.

During Fiscal 2021 an agreement was reached with the Swiss taxing authorities to decrease the basis step up to be amortized in the future thus decreasing the deferred asset by $14.8 million.

Because of the valuation allowance, there is no impact on consolidated tax expense for this agreement.

(2) This table does not reflect deferred taxes classified within AOCL.

As of January 30, 2021, AOCL included deferred tax assets of $0.9 million.

As of February 1, 2020, AOCL included an insignificant amount of deferred tax assets.

As of January 29, 2022 and January 30, 2021, AOCL included deferred tax liabilities of $1.1 million and deferred tax assets of $0.9 million, respectively.

As of January 29, 2022, the Company had deferred tax assets related to foreign and state NOL and credit carryforwards of $ 52.5 million and $ 0.4 million, respectively, that could be utilized to reduce future years’ tax liabilities.

4 unchanged sentences

All valuation allowances have been reflected through the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The valuation allowances will remain until there is sufficient positive evidence to release them, such as positive income within the jurisdiction.

In such case, the Company will recognize an adjustment in the period in which a determination is made.

The Company continues to review the need for valuation allowances on a quarterly basis and it is reasonably possible, if business conditions 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 some or all of the deferred taxes currently subject to a valuation allowance will be utilized.

The Company does not expect that sufficient evidence to release the valuation allowance is likely to exist at any time prior to the fourth quarter of Fiscal 2021, and there is no guarantee that such evidence will exist or that deferred taxes will be utilized.

The valuation allowances will remain until there is sufficient positive evidence to release them, such positive evidence would include having positive income within the jurisdiction.

In such case, the Company will record an adjustment in the period in which a determination is made.

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

Abercrombie & Fitch Co.

1 unchanged sentence

Refer to Note 14, “ SHARE-BASED COMPENSATION ,” for details on income tax benefits and charges related to share-based compensation awards during Fiscal 2021, Fiscal 2020 and Fiscal 2019.

The amount of uncertain tax positions as of January 30, 2021, February 1, 2020 and February 2, 2019, which would impact the Company’s effective tax rate if recognized and a reconciliation of the beginning and ending amounts of uncertain tax positions, excluding accrued interest and penalties, are as follows:

The amount of uncertain tax positions as of January 29, 2022, January 30, 2021 and February 1, 2020, which would impact the Company’s effective tax rate if recognized and a reconciliation of the beginning and ending amounts of uncertain tax positions, excluding accrued interest and penalties, are as follows:

(in thousands) Fiscal 2021 Fiscal 2020 Fiscal 2019

1 unchanged sentence

Gross addition for tax positions of the current year 490 235 131

Gross addition (reduction) for tax positions of prior years 395 1,349 ( 3 )

Gross (reduction) addition for tax positions of prior years ( 136 ) 395 1,349

Reductions of tax positions of prior years for:

1 unchanged sentence

Settlements during the period ( 154 ) ( 1,381 ) ( 13 )

Changes in judgment / excess reserve — — ( 549 )

Uncertain tax positions, end of year $ 1,114 $ 995 $ 1,794

8 unchanged sentences

Refer to Note 2, “ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income taxes ,” for discussion regarding significant accounting policies related to the Company’s income taxes.

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

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

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

(in thousands) January 29, 2022 January 30, 2021

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

Unamortized fees ( 4,156 ) ( 6,090 )

Unamortized discount — ( 355 )

Long-term portion of borrowings, net $ 303,574 $ 343,910

2 unchanged sentences

(“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 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, 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 (now known as U.S.

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

During Fiscal 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 repayment premium of $ 4.7 million and the write-off of unamortized fees of $ 0.6 million, in interest expense, net on the Consolidated Statements of Operations and Comprehensive Income (Loss).

Abercrombie & Fitch Co.

1 unchanged sentence

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.

Senior Secured Asset-based Revolving Credit Facility

The credit agreement for 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.

In an effort to improve the Company’s near-term cash position, as a precautionary measure in response to 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 January 30, 2021 or as of February 1, 2020.

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

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

and (ii) modifies the required fee on undrawn commitments under the ABL Facility from 0.25 % per annum to either 0.25 % or 0.375 % per annum (with the ultimate amount dependent on the conditions detailed in the Amended and Restated Credit Agreement).

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

The ABL Facility is subject to a borrowing base, consisting primarily of U.S.

3 unchanged sentences

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 $ 248.3 million as of January 29, 2022.

The ABL Facility will mature on October 19, 2022 .

Obligations under the Amended ABL Facility are unconditionally guaranteed by A&F and certain of A&F’s subsidiaries.

3 unchanged sentences

As of January 29, 2022, the applicable margins with respect to LIBO rate loans and base rate loans, including swing line loans, under the ABL Facility were 1.25 % and 0.25 % per annum, respectively, and are subject to adjustment each fiscal quarter based on average historical availability during the preceding quarter.

The Company is also required to pay a fee of 0.25 % per annum on undrawn commitments under the ABL Facility.

Customary agency fees and letter of credit fees are also payable in respect of the ABL Facility.

Term Loan Facility

On August 7, 2014, the Company, through its subsidiary A&F Management as the borrower (with A&F and certain of A&F’s subsidiaries as guarantors), entered into a term loan agreement, which 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 Fiscal 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 had been scheduled to mature on August 7, 2021.

Abercrombie & Fitch Co.

Representations, warranties and covenants

9 unchanged sentences

The Company was in compliance with all debt covenants under the agreements related to the Senior Secured Notes and the ABL Facility as of January 29, 2022.

Abercrombie & Fitch Co.

SHARE-BASED COMPENSATION

7 unchanged sentences

awards with an aggregate fair market value on the date of the grant of no more than $ 300,000 ;

• For the non-associate director occupying the role of Non-Executive Chairman of the Board (if any):

• For the non-associate director occupying the role of Non-Executive Chairperson of the Board (if any):

additional awards with an aggregate fair market value on the date of grant of no more than $ 500,000 ;

• For the non-associate director occupying the role of Executive Chairman of the Board (if any):

• For the non-associate director occupying the role of Executive Chairperson of the Board (if any):

additional awards with an aggregate fair market value on the date of grant of no more than $ 2,500,000 .

15 unchanged sentences

(in thousands) Fiscal 2021 Fiscal 2020 Fiscal 2019

Income tax discrete (charges) benefits realized for tax deductions related to the issuance of shares during the period $ ( 1,719 ) $ 1,156 $ 1,270

Income tax discrete (charges) benefits realized upon cancellation of stock appreciation rights during the period ( 1,943 ) ( 611 ) ( 10,908 )

Income tax discrete benefits (charges) realized for tax deductions related to the issuance of shares during the period $ 4,198 $ ( 1,719 ) $ 1,156

Income tax discrete charges realized upon cancellation of stock appreciation rights during the period ( 204 ) ( 1,943 ) ( 611 )

Total income tax discrete benefits (charges) related to share-based compensation awards $ 3,994 $ ( 3,662 ) $ 545

9 unchanged sentences

Stock Units Market-based Restricted

Shares Weighted-

Average Grant

Date Fair Value Number of

Shares Weighted-

Average Grant

Date Fair Value Number of

Shares Weighted-

Average Grant

Date Fair Value

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

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

Granted 730,446 32.80 157,645 32.09 78,827 50.31

5 unchanged sentences

2,532,240 $ 17.16 340,149 $ 27.08 680,184 $ 22.81

(1) Includes 66,624 unvested restricted stock units as of January 30, 2021, 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 January 30, 2021:

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 January 29, 2022:

(in thousands) Service-based Restricted

9 unchanged sentences

Total grant date fair value of awards vested 13,360 14,083 13,630

Total intrinsic value of awards vested 36,507 8,147 18,596

Performance-based restricted stock units:

4 unchanged sentences

Total grant date fair value of awards vested 3,390 4,132 511

Total intrinsic value of awards vested 3,335 3,263 181

The weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during Fiscal 2021, Fiscal 2020 and Fiscal 2019 were as follows:

14 unchanged sentences

Contractual Life (years)

Outstanding at February 1, 2020 796,725 $ 40.06

Outstanding at January 30, 2021 384,757 $ 33.04

Exercised ( 111,868 ) 26.95

2 unchanged sentences

Stock appreciation rights exercisable at January 29, 2022 236,139 $ 32.55 $ 1,276,809 2.3

Stock appreciation rights expected to become exercisable in the future as of January 30, 2021 — $ — $ — 0.0

Abercrombie & Fitch Co.

No stock appreciation rights were exercised during Fiscal 2020.

Additional information pertaining to stock appreciation rights for Fiscal 2019 and Fiscal 2018 follows:

The grant date fair value of awards exercised during Fiscal 2021 and Fiscal 2019 follows:

(in thousands) Fiscal 2021 Fiscal 2019

1 unchanged sentence

Refer to Note 2, “ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Share-based compensation ,” for discussion regarding significant accounting policies related to share-based compensation.

Abercrombie & Fitch Co.

DERIVATIVE INSTRUMENTS

3 unchanged sentences

Canadian dollar

Japanese yen 4,471

(1) Amounts reported are the U.S.

Dollar notional amounts outstanding as of January 29, 2022.

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 Consolidated Balance Sheets as of January 30, 2021 and February 1, 2020 were as follows:

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

The fair value of derivative instruments is determined 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 Consolidated Balance Sheets as of January 29, 2022 and January 30, 2021 were as follows:

(in thousands) Location January 29, 2022 January 30, 2021 Location January 29, 2022 January 30, 2021

Derivatives designated as cash flow hedging instruments

Other current assets $ 4,973 $ 79 Accrued expenses $ — $ 4,694

Derivatives not designated as hedging instruments

Other current assets — 100 Accrued expenses — 83

$ 79 $ 1,969 $ 4,694 $ 1,460

Refer to Note 5, “ FAIR VALUE , ” for further discussion of the determination of the fair value of derivative instruments.

5 unchanged sentences

1,263 13,235 9,160

(1) Amount 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 Consolidated Statements of Operations and Comprehensive (Loss) Income 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 instruments.

As a result of COVID-19 in Fiscal 2020, there was a significant change in the expected timing of previously hedged intercompany sales transactions, resulting in a dedesignation of the related hedge instruments.

2 unchanged sentences

During Fiscal 2020 and subsequent to the dedesignation of these hedges, these hedge contracts were settled.

Substantially all of the unrealized gains or losses related to foreign currency exchange forward contracts designated as cash flow hedging instruments as of January 30, 2021 will be recognized within the Consolidated Statements of Operations and Comprehensive (Loss) Income over the next twelve months.

Abercrombie & Fitch Co.

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

Substantially all of the unrealized gains or losses related to foreign currency exchange forward contracts designated as cash flow hedging instruments as of January 29, 2022 will be recognized within the Consolidated Statements of Operations and Comprehensive Income (Loss) over the next 12 months.

Additional information pertaining to derivative gains or losses from foreign currency exchange forward contracts not designated as hedging instruments for Fiscal 2021, Fiscal 2020 and Fiscal 2019 follows:

2 unchanged sentences

Refer to Note 2, “ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Derivative instruments ,” for discussion regarding significant accounting policies related to the Company’s derivative instruments.

Abercrombie & Fitch Co.

ACCUMULATED OTHER COMPREHENSIVE LOSS

1 unchanged sentence

(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 12,195 7,619 19,814

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

Other comprehensive (loss) income before reclassifications ( 22,917 ) 11,987 ( 10,930 )

Reclassified gain from AOCL (1)

— ( 1,263 ) ( 1,263 )

Tax effect — ( 206 ) ( 206 )

Other comprehensive income (loss) after reclassifications ( 22,917 ) 10,518 ( 12,399 )

12,195 ( 5,616 ) 6,579

Ending balance at January 29, 2022 $ ( 120,689 ) $ 5,983 $ ( 114,706 )

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

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

For Fiscal 2020, the activity in AOCL was as follows:

1 unchanged sentence

Beginning balance at February 1, 2020 $ ( 109,967 ) $ 1,081 $ ( 108,886 )

Other comprehensive (loss) income before reclassifications ( 5,080 ) 7,495 2,415

Other comprehensive income before reclassifications 12,195 7,619 19,814

Reclassified gain from AOCL (1)

1 unchanged sentence

Tax effect — — —

Other comprehensive loss after reclassifications ( 5,080 ) ( 1,354 ) ( 6,434 )

Ending balance at February 1, 2020 $ ( 109,967 ) $ 1,081 $ ( 108,886 )

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

Other comprehensive income (loss) after reclassifications (2)

12,195 ( 5,616 ) 6,579

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

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

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

Fo r Fiscal 2019, the activity in AOCL was as follows:

7 unchanged sentences

Ending balance at February 1, 2020 $ ( 109,967 ) $ 1,081 $ ( 108,886 )

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

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

Abercrombie & Fitch Co.

3 unchanged sentences

associates are eligible to participate in this plan if they are at least 21 years of age.

In addition, the Company maintains the Abercrombie & Fitch Nonqualified Savings and Supplemental Retirement, comprised of two sub-plans (Plan I and Plan II).

In addition, the Company maintains the Abercrombie & Fitch Nonqualified Savings and Supplemental Retirement Plan, comprised of two sub-plans (Plan I and Plan II).

Plan I contains contributions made through December 31, 2004, while Plan II contains contributions made on and after January 1, 2005.

3 unchanged sentences

In addition, the Company maintains the Supplemental Executive Retirement Plan which provides retirement income to its former Chief Executive Officer for life, based on averaged compensation before retirement, including base salary and cash incentive compensation.

As of January 30, 2021 and February 1, 2020, the Company has recorded $ 9.2 million and $ 9.5 million, respectively, in other liabilities on the Consolidated Balance Sheets related to future Supplemental Executive Retirement Plan distributions.

As of January 29, 2022 and January 30, 2021, the Company has recorded $ 8.4 million and $ 9.2 million, respectively, in other liabilities on the Consolidated Balance Sheets related to future Supplemental Executive Retirement Plan distributions.

SEGMENT REPORTING

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 two operating segments have similar economic characteristics, classes of consumers, products, 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.

13 unchanged sentences

Total $ 3,712,768 $ 3,125,384 $ 3,623,073

The Company’s long-lived assets and intellectual property, which primarily relates to trademark assets associated with the Company’s international operations, by geographic area as of January 30, 2021 and February 1, 2020 were as follows:

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

(in thousands) January 29, 2022 January 30, 2021

$ 849,298 $ 963,555

9 unchanged sentences

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 closed eight flagship store locations in Fiscal 2020 and four flagship store locations in Fiscal 2019.

Three of the leases related to Fiscal 2020 flagship store closures were transferred through assignment while the fourth lease was subleased to a new tenant upon its closure.

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 Consolidated Balance Sheets.

Future fixed lease payments associated with flagship stores that were closed as of January 30, 2021, 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 (Loss) Income.

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

Details of the (benefits) charges incurred during Fiscal 2021, Fiscal 2020 and Fiscal 2019 related to this initiative follow:

2 unchanged sentences

Gain on lease assignment — ( 5,237 ) —

Lease termination fees (1)

Asset disposals and other store-closure costs (2)

Asset disposals and other store-closure benefits (1)

( 514 ) ( 2,658 ) ( 1,687 )

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Total flagship store exit (benefits) charges $ ( 1,153 ) $ ( 11,636 ) $ 47,257

(1) Under the new lease accounting standard, which the Company adopted on February 3, 2019, similar charges would be incorporated into the above table as a component of operating lease cost.

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

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

Prior to this new agreement, the Company was required to make payments in aggregate of $ 80.1 million pursuant to the lease agreements through the fiscal year ending January 30, 2029 (“Fiscal 2028”).

The new agreement resulted in an acceleration of payments and provided for a discount resulting in a reduction of operating lease liabilities of $ 65.0 million and a cash outflow of $ 63.8 million to settle all remaining obligations related to this location.

This cash outflow was classified within operating lease right-of-use assets and liabilities within operating activities on the Consolidated Statement of Cash Flows.

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.

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.

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In addition, the Company has not established accruals for certain claims and legal proceedings pending against the Company where it is not possible to reasonably estimate the outcome or potential liability, and the Company cannot estimate a range of reasonably possible losses for these legal matters.

Abercrombie & Fitch Co.

will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Actual liabilities may differ from the amounts recorded, due to uncertainties regarding final settlement agreement negotiations, court approvals and the terms of any approval by the courts, and there can be no assurance that final resolution of legal matters will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

The Company’s assessment of the current exposure could change in the event of the discovery of additional facts.

Certain legal matters

The Company was a defendant in two separate class action lawsuits filed by former associates of the Company who are represented by the same counsel.

The first lawsuit, filed in 2013, alleged failure to indemnify business expenses and a series of derivative claims for compelled patronization, inaccurate wage statements, waiting time penalties, minimum wage violations and unfair competition under California state law on behalf of all non-exempt hourly associates at Abercrombie & Fitch, abercrombie kids, Hollister and Gilly Hicks stores in California.

Four subclasses of associates were certified, and the matter was before a U.S.

District Court in California.

The second lawsuit, filed in 2015, alleged that associates were required to purchase uniforms without reimbursement in violation of federal law, and laws of the states of New York, Florida and Massachusetts, as well as derivative putative state law claims and sought to pursue such claims on a class and collective basis.

On December 12, 2017, a U.S.

District Court in California granted the parties’ stipulation to transfer and combine the first-filed lawsuit with the second-filed lawsuit then pending before a U.S.

District Court in Ohio.

Both matters were mediated and the parties signed a settlement with a maximum potential payment of $ 25.0 million subject to a claim process.

On February 16, 2018, a U.S.

District Court in Ohio granted preliminary approval of the proposed settlement and ordered that notice of the proposed settlement be given to the absent members of the settlement class.

On November 7, 2018, the U.S.

District Court in Ohio granted final approval of the proposed settlement, which resulted in a full and final settlement of all claims in both lawsuits on a class-wide basis for an ultimate settlement amount of approximately $ 10.1 million, which was paid by the Company in the fourth quarter of Fiscal 2018, based on the actual claims made by members of the class.

In addition to the matters discussed above, the Company was a defendant in certain other class action lawsuits filed by former associates of the Company.

These lawsuits, assigned to the same judge in a U.S.

District Court in California, alleged non-exempt hourly associates of the Company were not properly compensated, in violation of federal and California law, for call-in practices requiring associates to engage in certain pre-shift activities in order to determine whether they should report to work and the Company’s alleged failure to pay reporting time pay and all wages earned at termination.

In addition, these lawsuits included derivative claims alleging inaccurate wage statements and unfair competition under California state law on behalf of non-exempt hourly associates.

One of these lawsuits was mediated and the parties involved have signed a $ 9.6 million settlement agreement, which was preliminarily approved by a U.S.

District Court in California.

On November 20, 2018, the U.S.

District Court in California granted final approval of the proposed settlement, which resulted in a full and final settlement of all claims made therein for an ultimate settlement amount of $ 9.6 million, which was paid by the Company in the fourth quarter of Fiscal 2018.

In Fiscal 2018, the Company recognized net charges of $ 2.6 million in connection with the legal matters discussed above.

Abercrombie & Fitch Co.

CORRECTION OF ERROR IN PREVIOUSLY REPORTED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Correction of error in previously reported interim financial statements

Subsequent to filing the Company’s Quarterly Reports on Form 10-Q for the periods ended May 2, 2020, August 1, 2020, and October 31, 2020 (collectively, the “Fiscal 2020 Quarterly Reports on Form 10-Q”), a classification error was identified within the Company’s condensed consolidated statements of cash flows related to the presentation of the withdrawal of excess funds from the over-funded Rabbi Trust assets that occurred during the fiscal quarter ended May 2, 2020.

The withdrawal of $50 million of excess funds from the Company’s Rabbi Trust was incorrectly presented as a cash inflow from operating activities, rather than as a cash inflow from investing activities, in the Condensed Consolidated Statements of Cash Flows included within each of the Fiscal 2020 Quarterly Reports on Form 10-Q.

Based on quantitative and qualitative assessments, the incorrect presentation of such amounts is considered material to the Condensed Consolidated Financial Statements as of and for the periods ended May 2, 2020, August 1, 2020, and October 31, 2020, which will be restated.

This classification error did not have an impact on the cash balances or on the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), the Condensed Consolidated Balance Sheets or the Condensed Consolidated Statements of Stockholders’ Equity, included within each of the Fiscal 2020 Quarterly Reports on Form 10-Q.

The effects of the classification error on the Condensed Consolidated Statements of Cash Flows are shown in the tables 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

Twenty-six Weeks Ended

As Originally Reported As Restated

(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

Effect of foreign currency exchange rates on cash $ 1,785 — $ 1,785

Net increase in cash and equivalents, and restricted cash and equivalents $ 93,726 — $ 93,726

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 $ 785,990 — $ 785,990

Thirty-nine Weeks Ended

As Originally Reported As Restated

(in thousands) October 31, 2020 Adjustment October 31, 2020

Net cash provided by operating activities $ 158,894 $ ( 50,000 ) $ 108,894

Net cash used for investing activities $ ( 91,748 ) $ 50,000 $ ( 41,748 )

Net cash provided by financing activities $ 70,129 — $ 70,129

Effect of foreign currency exchange rates on cash $ 2,269 — $ 2,269

Net increase in cash and equivalents, and restricted cash and equivalents $ 139,544 — $ 139,544

Cash and equivalents, and restricted cash and equivalents, beginning of period $ 692,264 — $ 692,264

Cash and equivalents, and restricted cash and equivalents, end of period $ 831,808 — $ 831,808

SUBSEQUENT EVENT

Subsequent to end of Fiscal 2021 and through the period ending March 25, 2022, the Company repurchased 2.7 million shares of common stock at an average price of $ 30.14 per share.

Shares were repurchased under the previously announced $ 500 million share repurchase authorization.

The timing and amount of any future share repurchases will depend on various factors, including market and business conditions.

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of Abercrombie & Fitch Co.

and its subsidiaries (the “Company”) as of January 30, 2021 and February 1, 2020, and the related consolidated statements of operations and comprehensive (loss) income, of stockholders’ equity and of cash flows for each of the three years in the period ended January 30, 2021, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of January 29, 2022 and January 30, 2021, and the related consolidated statements of operations and comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended January 29, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of January 29, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 30, 2021 and February 1, 2020, and the results of its operations and its cash flows for each of the three years in the period ended January 30, 2021 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of January 30, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because a material weakness in internal control over financial reporting existed as of that date related to ineffective design and maintenance of controls by the Company to research and apply relevant accounting guidance in assessing the appropriate classification of cash flow activities associated with new transaction types.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness referred to above is described in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A.

We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the January 30, 2021 financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 29, 2022 and January 30, 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 29, 2022 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 29, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

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Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management's report referred to above.

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions

of the assets of the company;

A company’s internal control over financial reporting includes those policies and procedures that

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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The Company’s long-lived assets, primarily operating lease right-of-use assets, leasehold improvements, furniture, fixtures and equipment, are grouped with other assets and liabilities at the store level, which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

On at least a quarterly basis, management reviews its asset groups for indicators of impairment, which include but are not limited to, material declines in operational performance, a history of losses, an expectation of future losses, adverse market conditions, store closure or relocation decisions, and any other events or changes in circumstances that would indicate the carrying amount of an asset group might not be recoverable.

On at least a quarterly basis, management reviews the Company’s asset groups for indicators of impairment, which include, but are not limited to, material declines in operational performance, a history of losses, an expectation of future losses, adverse market conditions, store closure or relocation decisions, and any other events or changes in circumstances that would indicate the carrying amount of an asset group might not be recoverable.

If an asset group displays an indicator of impairment, it is tested for recoverability by comparing the sum of the estimated future undiscounted cash flows attributable to the asset group to the carrying amount of the asset group.

This recoverability test requires management to make assumptions and judgments related, but not limited, to management’s expectations for future cash flows from operating the store.

The key assumptions used in developing these projected cash flows used in the recoverability test include estimates of future sales, gross profit and, to a lesser extent, operating expenses.

The key assumption used in developing these projected cash flows used in the recoverability test is estimated sales growth rate.

Fair value of an asset group is based on the highest and best use of the asset group, often using a discounted cash flow model that utilizes Level 3 fair value inputs.

The key assumptions used in estimating fair value of an asset group may include discounted estimates of future cash flows from operating the store or comparable market rents.

The key assumptions used in the Company’s fair value analysis are estimated sales growth rate and comparable market rents.

An impairment loss is recognized based on the excess of the carrying amount of the asset group over its fair value.

The principal considerations for our determination that performing procedures relating to the impairment of long-lived assets - stores is a critical audit matter are (i) the significant judgment by management when testing long-lived asset groups for recoverability and determining the fair value of the asset groups to measure impairment;

(ii) the high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating the assumptions used in management’s future cash flow projections related to estimates of future sales, gross profit and comparable market rents;

The principal considerations for our determination that performing procedures relating to the impairment of long-lived assets - stores is a critical audit matter are (i) the significant judgment by management when developing the future undiscounted cash flows attributable to an asset group when testing for recoverability and when determining the fair value of the asset groups to measure for impairment;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to estimated sales growth rate when developing the future undiscounted cash flows, and comparable market rents when estimating the fair value;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

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These procedures included testing the effectiveness of controls relating to management’s long-lived assets - stores recoverability test and determination of the fair value of the asset groups.

These procedures also included, among others (i) testing management’s process for developing the estimates;

(ii) evaluating the appropriateness of the models used by management in developing the fair value measurements;

(iii) testing the completeness, accuracy, and relevance of underlying data used in the models;

and (iv) evaluating the reasonableness of the significant assumptions, related to estimates of future sales, gross profit and comparable market rents.

Evaluating whether management’s assumptions related to estimates of future sales, gross profit and comparable market rents were reasonable considering (i) the current and past performance of the asset groups;

(ii) the consistency with external market data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the reasonableness of the Company’s comparable market rents assumption.

These procedures also included, among others (i) testing management’s process for developing the future undiscounted cash flows attributable to an asset group when testing for recoverability and when determining the fair value of the asset groups to measure for impairment;

(ii) evaluating the appropriateness of the models used by management in determining the fair value of the asset groups;

(iii) testing the completeness and accuracy of underlying data used in the models;

and (iv) evaluating the reasonableness of the significant assumptions related to estimated sales growth rate when developing the future undiscounted cash flows and comparable market rents when estimating the fair value.

Evaluating management’s assumptions related to estimated sales growth rate and comparable market rents involved evaluating whether the assumptions used by management were reasonable considering the current and past performance of the asset groups and the consistency with evidence obtained in other areas of the audit as it relates to estimated sales growth rate and consistency with external market data as it relates to estimated sales growth rate and comparable market rents.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the reasonableness of the comparable market rents significant assumption.

/s/ PricewaterhouseCoopers LLP

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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-K

Item 8. Financial Statements and Supplementary Data