What changed in this filing

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Item 1. Financial Statements

2022-06-08 compared with 2021-12-06 · 194 added, 336 removed, 381 unchanged (58% of the section changed)

1 unchanged sentence

Abercrombie & Fitch Co.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

(Thousands, except per share amounts)

Thirteen Weeks Ended Thirty-nine Weeks Ended

October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

Thirteen Weeks Ended

April 30, 2022 May 1, 2021

Net sales $ 812,762 $ 781,405

3 unchanged sentences

Marketing, general and administrative expense 122,149 120,947

Flagship store exit charges (benefits) 11 ( 8,063 ) ( 1,177 ) ( 12,490 )

Asset impairment 3,422 2,664

Other operating (income) loss, net ( 1,320 ) 288 ( 4,586 ) ( 1,562 )

Operating income (loss) 72,731 58,616 244,951 ( 136,368 )

Other operating income, net ( 3,842 ) ( 1,418 )

Operating (loss) income ( 9,726 ) 57,433

Interest expense, net 7,307 8,606

Income (loss) before income taxes 65,461 49,808 217,800 ( 155,645 )

Income tax expense 16,383 5,779 15,560 38,565

Net income (loss) 49,078 44,029 202,240 ( 194,210 )

(Loss) income before income taxes ( 17,033 ) 48,827

Income tax (benefit) expense ( 2,187 ) 6,121

Net (loss) income ( 14,846 ) 42,706

Net income attributable to noncontrolling interests 1,623 938

Net income (loss) attributable to A&F $ 47,233 $ 42,271 $ 197,501 $ ( 196,413 )

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

Net (loss) income attributable to A&F $ ( 16,469 ) $ 41,768

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

Basic $ ( 0.32 ) $ 0.67

4 unchanged sentences

Other comprehensive (loss) income

Foreign currency translation $ ( 5,629 ) $ 2,142 $ ( 8,889 ) $ 5,477

Foreign currency translation adjustments, net of tax $ ( 10,403 ) $ ( 1,274 )

Derivative financial instruments, net of tax 1,712 2,599

Other comprehensive (loss) income ( 8,691 ) 1,325

Comprehensive income (loss) 47,865 40,937 203,069 ( 187,509 )

Comprehensive (loss) income ( 23,537 ) 44,031

Comprehensive income attributable to noncontrolling interests 1,623 938

1,845 1,758 4,739 2,203

Comprehensive income (loss) attributable to A&F $ 46,020 $ 39,179 $ 198,330 $ ( 189,712 )

Comprehensive (loss) income attributable to A&F $ ( 25,160 ) $ 43,093

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

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

Abercrombie & Fitch Co.

Condensed Consolidated Balance Sheets

(Thousands, except par value amounts)

October 30, 2021 January 30, 2021

April 30, 2022 January 29, 2022

Current assets:

21 unchanged sentences

Stockholders’ equity

Class A Common Stock - $0.01 par value:

Class A Common Stock:

$ 0.01 par value:

150,000 shares authorized and 103,300 shares issued for all periods presented

3 unchanged sentences

Treasury stock, at average cost:

46,263 and 40,901 shares as of October 30, 2021 and January 30, 2021, respectively

52,858 and 50,315 shares as of April 30, 2022 and January 29, 2022, respectively

( 1,931,494 ) ( 1,859,583 )

6 unchanged sentences

Abercrombie & Fitch Co.

Condensed Consolidated Statements of Stockholders’ Equity

(Thousands, except per share amounts)

Thirteen Weeks Ended October 30, 2021

Common Stock Paid-in

capital Non-controlling interests Retained

earnings AOCL Treasury stock Total

stockholders’

outstanding Par

value Shares At average

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

Net income — — — 1,845 47,233 — — — 49,078

Purchase of Common Stock ( 2,692 ) — — — — — 2,692 ( 100,000 ) ( 100,000 )

Share-based compensation issuances and exercises 38 — ( 918 ) — ( 1,442 ) — ( 38 ) 1,376 ( 984 )

Share-based compensation expense — — 7,332 — — — — — 7,332

Derivative financial instruments, net of tax — — — — — 4,416 — — 4,416

Foreign currency translation adjustments, net of tax — — — — — ( 5,629 ) — — ( 5,629 )

Distributions to noncontrolling interests, net — — — ( 2,817 ) — — — — ( 2,817 )

Ending balance at October 30, 2021 57,037 $ 1,033 $ 406,305 $ 9,395 $ 2,320,800 $ ( 101,478 ) 46,263 $ ( 1,717,726 ) $ 918,329

Thirteen Weeks Ended October 31, 2020

Common Stock Paid-in

capital Non-controlling interests Retained

earnings AOCL Treasury stock Total

stockholders’

outstanding Par

value Shares At average

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

Net income — — — 1,758 42,271 — — — 44,029

Share-based compensation issuances and exercises 19 — ( 436 ) — ( 661 ) — ( 19 ) 947 ( 150 )

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

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

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

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

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

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

2022 1Q Form 10-Q

Abercrombie & Fitch Co.

1 unchanged sentence

(Thousands, except per share amounts)

Thirty-nine Weeks Ended October 30, 2021

Thirteen Weeks Ended April 30, 2022

Common Stock Paid-in

5 unchanged sentences

Balance, January 29, 2022 52,985 $ 1,033 $ 413,190 $ 11,234 $ 2,386,156 $ ( 114,706 ) 50,315 $ ( 1,859,583 ) $ 837,324

Net income — — — 4,739 197,501 — — — 202,240

Net loss — — — 1,623 ( 16,469 ) — — — ( 14,846 )

Purchase of Common Stock ( 3,260 ) — — — — — 3,260 ( 100,000 ) ( 100,000 )

4 unchanged sentences

Distributions to noncontrolling interests, net — — — ( 3,413 ) — — — — ( 3,413 )

Ending balance at October 30, 2021 57,037 $ 1,033 $ 406,305 $ 9,395 $ 2,320,800 $ ( 101,478 ) 46,263 $ ( 1,717,726 ) $ 918,329

Thirty-nine Weeks Ended October 31, 2020

Ending balance at April 30, 2022 50,442 $ 1,033 $ 398,412 $ 9,444 $ 2,350,807 $ ( 123,397 ) 52,858 $ ( 1,931,494 ) $ 704,805

Thirteen Weeks Ended May 1, 2021

Common Stock Paid-in

4 unchanged sentences

value Shares At average

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

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

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

Net income — — — 938 41,768 — — — 42,706

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

Dividends ($0.20 per share) — — — — ( 12,556 ) — — — ( 12,556 )

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

3 unchanged sentences

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

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

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

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

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

Abercrombie & Fitch Co.

Condensed Consolidated Statements of Cash Flows

Thirty-nine Weeks Ended

October 30, 2021 October 31, 2020

Thirteen Weeks Ended

April 30, 2022 May 1, 2021

Operating activities

Net income (loss) $ 202,240 $ ( 194,210 )

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

Net (loss) income $ ( 14,846 ) $ 42,706

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

Depreciation and amortization 33,888 37,856

Asset impairment 3,422 2,664

Loss on disposal 3,500 7,586

(Gain) loss on disposal ( 2,798 ) 189

(Benefit) provision for deferred income taxes ( 5,853 ) 4,231

Share-based compensation 8,356 8,450

Loss on extinguishment of debt 5,347 —

Changes in assets and liabilities:

5 unchanged sentences

Other liabilities 231 ( 336 )

Net cash provided by operating activities 131,287 108,894

Net cash used for operating activities ( 217,787 ) ( 131,350 )

Investing activities

Purchases of property and equipment ( 26,292 ) ( 14,404 )

Withdrawal of funds from Rabbi Trust assets — 50,000

Proceeds from the sale of property and equipment 7,751 —

Net cash used for investing activities ( 18,541 ) ( 14,404 )

Financing activities

Proceeds from issuance of senior secured notes — 350,000

Purchase of senior secured notes ( 46,969 ) —

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

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

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

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

Purchases of Common Stock ( 100,000 ) ( 35,249 )

Dividends paid — ( 12,556 )

Other financing activities ( 16,945 ) ( 16,452 )

Net cash (used for) provided by financing activities ( 304,358 ) 70,129

Net cash used for financing activities ( 116,945 ) ( 53,191 )

Effect of foreign currency exchange rates on cash ( 2,617 ) ( 1,021 )

Net (decrease) increase in cash and equivalents, and restricted cash and equivalents ( 243,854 ) 139,544

Net decrease in cash and equivalents, and restricted cash and equivalents ( 355,890 ) ( 199,966 )

Cash and equivalents, and restricted cash and equivalents, beginning of period 834,368 1,124,157

10 unchanged sentences

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

Abercrombie & Fitch Co.

Index for Notes to Condensed Consolidated Financial Statements (Unaudited)

1 unchanged sentence

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

IMPACT OF COVID-19

REVENUE RECOGNITION

NET INCOME (LOSS) PER SHARE

NET (LOSS) INCOME PER SHARE

PROPERTY AND EQUIPMENT, NET

4 unchanged sentences

SEGMENT REPORTING

FLAGSHIP STORE EXIT CHARGES ( BENEFITS )

SUBSEQUENT EVENTS

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

Abercrombie & Fitch Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

12 unchanged sentences

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

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

The 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 the noncontrolling interests’ (“NCI”) portions of net income presented as net income attributable to NCI on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and the NCI portion of stockholders’ equity presented as NCI on the Condensed Consolidated Balance Sheets.

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

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

3 unchanged sentences

Fiscal year Year ended/ ending Number of weeks

Fiscal 2019 February 1, 2020 52

Fiscal 2021 January 29, 2022 52

Fiscal 2022 January 28, 2023 52

Fiscal 2023 February 3, 2024 53

Interim financial statements

The Condensed Consolidated Financial Statements as of October 30, 2021, and for the thirteen and thirty-nine week periods ended October 30, 2021 and October 31, 2020, are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim consolidated financial statements.

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

The Condensed Consolidated Financial Statements as of April 30, 2022, and for the thirteen week periods ended April 30, 2022 and May 1, 2021, are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim consolidated financial statements.

The January 29, 2022 consolidated balance sheet data, included herein, were derived from audited consolidated financial statements, but do not include all disclosures required by accounting principles generally accepted in the U.S.

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

During the first quarter of 2022, the Company reclassified Flagship store exit benefits into Stores and distribution expense on the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

There were no changes to Operating (loss) income or Net (loss) income.

Prior period amounts have been reclassified to conform to current year’s presentation.

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

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.

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

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

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

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, foreign currency exchange rates, the speed of the economic recovery, and governmental, business and consumer reactions to the pandemic.

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

1 unchanged sentence

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

Restatement of previously issued financial information

As previously disclosed within “ITEM 8.

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

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

The effects of the classification error on the Condensed Consolidated Statement of Cash Flows were disclosed in “Note 21.

Correction of Error in Previously Reported Interim Financial Statements (Unaudited)” of the Notes to Consolidated Financial Statements included within “ITEM 8.

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

The effects of the classification error on the Condensed Consolidated Statement of Cash Flows for the thirty-nine weeks ended October 31, 2020 is shown in the table below.

Thirty-nine Weeks Ended

As Originally Reported As Restated

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

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

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

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

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

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

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

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

The Company’s Condensed Consolidated Statement of Cash Flows for the thirty-nine weeks ended October 31, 2020 included within this Quarterly Report on Form 10-Q has been restated to reflect the correction of this error.

Condensed Consolidated Statements of Cash Flows reconciliation

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

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

(in thousands) Location April 30, 2022 January 29, 2022 May 1, 2021 January 30, 2021

Cash and equivalents Cash and equivalents $ 468,378 $ 823,139 $ 909,008 $ 1,104,862

2 unchanged sentences

Cash and equivalents and restricted cash and equivalents $ 478,478 $ 834,368 $ 924,191 $ 1,124,157

IMPACT OF COVID-19

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

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

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

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

During the thirteen and thirty-nine weeks ended October 31, 2020, the Company experienced a material adverse impact to net sales across brands and regions as a result of widespread temporary store closures in response to COVID-19, which was not offset by year-over-year digital sales growth.

During the thirteen and thirty-nine weeks ended October 30, 2021, the vast majority of Company-operated stores were fully open for in-store service.

As of October 30, 2021, there were no COVID-19 related store closures of Company-operated stores, although additional temporary store closures have subsequently been mandated in certain parts of the Europe, Middle East and Africa (“EMEA”) region in response to COVID-19.

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

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

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

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

As of October 30, 2021 and January 30, 2021, the Company had $ 16.5 million and $ 24.2 million, respectively, related to suspended rent payments classified within accrued expenses on the Condensed Consolidated Balance Sheets.

The Company obtained rent abatements of $ 1.7 million and $ 14.6 million, respectively, during the thirteen and thirty-nine weeks ended October 30, 2021, and $ 1.9 million and $ 18.9 million, respectively, during the thirteen and thirty-nine weeks ended October 31, 2020.

All of the benefits related to these abatements were recognized within variable lease cost during the applicable periods.

During the thirteen weeks ended October 30, 2021 and October 31, 2020, the Company recognized qualified payroll-related credits reducing payroll expenses by approximately $ 0.6 million and $ 2.8 million, respectively, in the Condensed Consolidated Statements of Operations and Comprehensive Income.

During the thirty-nine weeks ended October 30, 2021 and October 31, 2020, the Company recognized qualified payroll-related credits reducing payroll expenses by approximately $ 5.4 million and $ 14.7 million, respectively, in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

There are also instances where governments have provided wage subsidies through direct payments to the Company’s associates.

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

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

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

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

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

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

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

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

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

REVENUE RECOGNITION

Disaggregation of revenue

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

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

For information regarding the disaggregation of revenue, refer to Note 14, “ SEGMENT REPORTING .

Contract liabilities

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

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

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

(in thousands) April 30, 2022 January 29, 2022 May 1, 2021

Gift card liability $ 35,665 $ 36,984 $ 27,919

Loyalty program liability $ 21,964 $ 20,426 $ 19,640 $ 23,051

The following table details recognized revenue associated with the Company’s gift card program and loyalty programs for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

Loyalty programs liability 22,177 22,757 19,991

The following table details recognized revenue associated with the Company’s gift card program and loyalty programs for the thirteen weeks ended April 30, 2022 and May 1, 2021:

Thirteen Weeks Ended

(in thousands) April 30, 2022 May 1, 2021

Revenue associated with gift card redemptions and gift card breakage $ 23,001 $ 16,156

Revenue associated with reward redemptions and breakage related to the Company’s loyalty programs 10,181 9,553

NET INCOME (LOSS) PER SHARE

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

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

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

NET (LOSS) INCOME PER SHARE

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 (“Common Stock”).

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

Thirteen Weeks Ended

(in thousands) April 30, 2022 May 1, 2021

Shares of Common Stock issued 103,300 103,300

4 unchanged sentences

Anti-dilutive shares (1)

1,228 1,828 1,212 1,988

(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.

(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.

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

6 unchanged sentences

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

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

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

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

Assets at Fair Value as of April 30, 2022

(in thousands) Level 1 Level 2 Level 3 Total

8 unchanged sentences

Total assets $ 29,901 $ 81,791 $ — $ 111,692

Derivative instruments (2)

$ — $ 86 $ — $ 86

Total liabilities $ — $ 86 $ — $ 86

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

Assets at Fair Value as of January 29, 2022

(in thousands) Level 1 Level 2 Level 3 Total

2 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

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

1 unchanged sentence

Level 2 assets consisted of time deposits.

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

(2) Level 2 assets 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:

The Company’s Level 2 assets consisted of:

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

1 unchanged sentence

• 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.

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

Fair value of long-term borrowings

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

The Company’s borrowings under its senior secured notes, which have a fixed 8.75% interest rate and mature on July 15, 2025 (the “Senior Secured Notes”) are carried at historical cost in the accompanying Condensed Consolidated Balance Sheets.

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

(in thousands) October 30, 2021 January 30, 2021

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

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

2 unchanged sentences

Property and equipment, net consisted of:

(in thousands) October 30, 2021 January 30, 2021

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

Property and equipment, at cost $ 2,436,019 $ 2,453,493

1 unchanged sentence

Property and equipment, net $ 497,976 $ 508,336

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

Refer to Note 8, “ ASSET IMPAIRMENT ,” for details related to property and equipment impairment charges incurred during the thirteen weeks ended April 30, 2022 and May 1, 2021.

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

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

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

The following table provides a summary of the Company’s operating lease costs for the thirteen weeks ended April 30, 2022 and May 1, 2021:

Thirteen Weeks Ended

(in thousands) April 30, 2022 May 1, 2021

Single lease cost (1)

3 unchanged sentences

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

5,512 3,979 8,216 44,397

Sublease income (4)

2 unchanged sentences

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

(2) Included variable payments related to both lease and nonlease components, such as contingent rent payments made by the Company based on net sales performance, and payments related to taxes, insurance, and maintenance costs, as well as the benefit of $ 1.7 million and $ 14.6 million of rent abatements during the thirteen and thirty-nine weeks ended October 30, 2021 related to the effects of the COVID-19 pandemic that resulted in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.

The benefit related to rent abatements recognized during the thirteen and thirty-nine weeks ended October 31, 2020 was $ 1.9 million and $ 18.9 million respectively.

(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 the benefit of $ 1.7 million of rent abatements during the thirteen weeks ended April 30, 2022 related to the effects of the COVID-19 pandemic that resulted in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.

The benefit related to rent abatements recognized during the thirteen weeks ended May 1, 2021 was $ 7.7 million.

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

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

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

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

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

Refer to Note 3.

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

As of October 30, 2021, the Company had minimum commitments related to additional operating lease contracts the terms of which have not yet commenced, primarily for its Company-operated retail stores, of approximately $ 8.7 million.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of the Fiscal 2021 Form 10-K.

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

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

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

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

ASSET IMPAIRMENT

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

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

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

Thirteen Weeks Ended

(in thousands) April 30, 2022 May 1, 2021

Operating lease right-of-use asset impairment $ 1,915 $ 2,464

1 unchanged sentence

Total asset impairment $ 3,422 $ 2,664

Asset impairment charges for the thirteen and thirty-nine weeks ended October 30, 2021 related to certain of the Company’s stores across brands, geographies and store formats.

The impairment charges for the thirty-nine weeks ended October 30, 2021 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $ 19.5 million, including $ 17.0 million related to operating lease right-of-use assets.

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

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

Asset impairment charges for the thirteen weeks ended April 30, 2022 and May 1, 2021 related to certain of the Company’s stores across brands, geographies and store formats.

The impairment charges for the thirteen weeks ended April 30, 2022 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $ 7.5 million, including $ 6.5 million related to operating lease right-of-use assets.

The impairment charges for the thirteen weeks ended May 1, 2021 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $ 6.3 million, including $ 5.7 million related to operating lease right-of-use assets.

The quarterly provision for income taxes is based on the current estimate of the annual effective income tax rate and the tax effect of discrete items occurring during the quarter.

4 unchanged sentences

Impact of valuation allowances and other tax charges

During the thirteen weeks ended October 30, 2021, as a result of the improvement seen in business conditions, the Company recognized $ 3.5 million of tax benefits due to the expected utilization of deferred tax assets against projected pre-tax income for the full fiscal year, primarily in the U.S.

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

During the thirty-nine weeks ended October 30, 2021, as a result of the improvement seen in business conditions, the Company recognized $ 23.4 million of discrete tax benefits due to the release of valuation allowances, primarily in the U.S.

and Germany, and a discrete tax benefit of $ 3.9 million due to a rate change in the U.K.

The Company also recognized $ 13.6 million of tax benefits due to the expected utilization of deferred tax assets against projected pre-tax income for the full fiscal year, primarily in the U.S.

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

During the thirty-nine weeks ended October 31, 2020, the Company recognized $ 77.4 million of tax charges, ultimately giving rise to income tax expense on a consolidated pre-tax year-to-date loss.

Further details regarding these adverse tax impacts are as follows:

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

The Company did not recognize income tax benefits on $ 180.7 million of pre-tax losses during the thirty-nine weeks ended October 31, 2020, resulting in an adverse tax impact of $ 41.8 million.

• The Company recognized charges of $ 35.6 million related to the establishment of valuation allowances and other tax charges in certain jurisdictions during the thirty-nine weeks ended October 31, 2020, principally as a result of the significant adverse impacts of COVID–19.

These charges related to valuation allowances recognized by the Company of $ 10.6 million and $ 6.0 million related to the U.S.

and Germany, respectively, as well as valuation allowances and other tax charges in certain other jurisdictions against underlying tax asset balances that existed as of February 1, 2020.

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

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

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

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

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

During the thirteen weeks ended April 30, 2022, the Company did not recognize income tax benefits on $ 13.4 million of pretax

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

During the thirteen weeks ended May 1, 2021, the Company recognized $ 3.1 million of tax benefits due to the anticipated utilization of deferred tax assets against projected pre-tax income for the full fiscal year, primarily in the U.S.

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

As of April 30, 2022, there were approximately $ 11.4 million of net deferred tax assets in China.

The realization of these net deferred tax assets is dependent upon the future generation of sufficient taxable profits in China.

While the Company believes that the net deferred tax assets are more-likely-than-not to be realized, it is not a certainty, as there are continued issues and related responses due to emerging situations, such as the COVID-19 pandemic.

The company is closely monitoring its operations in China.

Should circumstances change, the net deferred tax assets may become subject to a valuation allowance in the future.

Additional valuation allowances would result in additional tax expense.

Share-based compensation

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

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

(in thousands) October 30, 2021 January 30, 2021

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

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

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

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

1 unchanged sentence

Long-term borrowings, net $ 303,901 $ 303,574

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

Senior Secured Notes

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

(“A&F Management”), a wholly-owned indirect subsidiary of A&F, completed the private offering of the Senior Secured Notes, with $ 350.0 million aggregate principal amount due in 2025, at an offering price of 100% of the principal amount thereof and bearing interest at a rate of 8.75 % per annum, with semi-annual interest payments which began in January 2021.

The Senior Secured Notes were issued pursuant to an indenture, dated as of July 2, 2020, by and among A&F Management, A&F and certain of A&F’s wholly-owned subsidiaries, as guarantors, and U.S.

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

During the thirty-nine weeks ended October 30, 2021, A&F Management purchased $ 42.3 million of its outstanding Senior Secured Notes and incurred $ 5.3 million of loss on extinguishment of debt, comprised of a premium of $ 4.7 million and the write-off of unamortized fees of $ 0.6 million, in interest expense, net on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

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

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

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

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

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

Except for these changes, the terms of the ABL Facility remained substantially unchanged from those disclosed in Note 13, “BORROWINGS,” of the Notes to Consolidated Financial Statements contained in “ITEM 8.

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

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

As of October 30, 2021, availability under the ABL Facility was $ 301.0 million, net of $ 0.8 million in outstanding stand-by letters of credit.

As the Company must maintain excess availability equal to the greater of 10% of the loan cap or $30 million under the ABL Facility, borrowing capacity available to the Company under the ABL Facility was $ 270.8 million as of October 30, 2021.

The terms of the Senior Secured Notes have remained unchanged from those disclosed in Note 13, “BORROWINGS,” of the Notes to Consolidated Financial Statements contained in “ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of on the Fiscal 2021 Form 10-K.

The terms of the Company’s senior secured revolving credit facility of up to $ 400.0 million (the “ABL Facility”) remained unchanged from those disclosed in Note 13, “BORROWINGS,” of the Notes to Consolidated Financial Statements contained in “ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of the Fiscal 2021 Form 10-K.

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

As of April 30, 2022, availability under the ABL Facility was $ 349.4 million, net of $ 0.8 million in outstanding stand-by letters of credit.

Representations, warranties and covenants

6 unchanged sentences

change the nature of their business;

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

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

and consolidate or merge with or into, or sell substantially all of the assets of the Company or Abercrombie & Fitch Management Co.

(“A&F Management”), a wholly-owned indirect subsidiary of A&F, to another entity.

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

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

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

SHARE-BASED COMPENSATION

Financial statement impact

The following table details share-based compensation expense and the related income tax impacts for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

The following table details share-based compensation expense and the related income tax impacts for the thirteen weeks ended April 30, 2022 and May 1, 2021:

Thirteen Weeks Ended

(in thousands) April 30, 2022 May 1, 2021

Share-based compensation expense $ 8,356 $ 8,450

Income tax benefit associated with share-based compensation expense recognized 965 298

$ 806 $ — $ 2,492 $ —

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

The following table details discrete income tax benefits and charges related to share-based compensation awards during the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

The following table details discrete income tax benefits and charges related to share-based compensation awards during the thirteen weeks ended April 30, 2022 and May 1, 2021:

Thirteen Weeks Ended

(in thousands) April 30, 2022 May 1, 2021

Income tax discrete benefits realized for tax deductions related to the issuance of shares $ 2,111 $ 3,190

$ 150 $ — $ 4,166 $ —

Income tax discrete charges realized upon cancellation of stock appreciation rights ( 195 ) ( 3 )

Total income tax discrete benefits related to share-based compensation awards $ 1,916 $ 3,187

$ 150 $ — $ 4,163 $ —

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

The following table details the amount of employee tax withheld by the Company upon the issuance of shares associated with restricted stock units vesting and the exercise of stock appreciation rights for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

Thirteen Weeks Ended

(in thousands) April 30, 2022 May 1, 2021

Employee tax withheld upon issuance of shares (1)

2 unchanged sentences

Restricted stock units

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

The following table summarizes activity for restricted stock units for the thirteen weeks ended April 30, 2022:

Service-based Restricted

16 unchanged sentences

Forfeited ( 28,840 ) 17.38 — — — —

Unvested at October 30, 2021 (1)

Unvested at April 30, 2022 (1)

2,412,824 $ 21.84 316,615 $ 32.08 668,416 $ 23.67

1 unchanged sentence

Unvested shares related to restricted stock units with performance-based and market-based vesting conditions can be achieved at up to 200% of their target vesting amount.

The following table details unrecognized compensation cost and the remaining weighted-average period over which these costs are expected to be recognized for restricted stock units as of October 30, 2021:

(in thousands) Service-based Restricted

3 unchanged sentences

Remaining weighted-average period cost is expected to be recognized (years) 1.4 0.0 1.1

Additional information pertaining to restricted stock units for the thirty-nine weeks ended October 30, 2021 and October 31, 2020 follows:

(in thousands) October 30, 2021 October 31, 2020

Additional information pertaining to restricted stock units for the thirteen weeks ended April 30, 2022 and May 1, 2021 follows:

(in thousands) April 30, 2022 May 1, 2021

Service-based restricted stock units:

7 unchanged sentences

Total grant date fair value of awards vested 4,105 3,390

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

October 30, 2021 October 31, 2020

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

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

April 30, 2022 May 1, 2021

Grant date market price $ 32.07 $ 31.78

7 unchanged sentences

Stock appreciation rights

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

The following table summarizes stock appreciation rights activity for the thirteen weeks ended April 30, 2022:

Shares Weighted-Average

3 unchanged sentences

Outstanding at January 29, 2022 236,139 $ 32.55

Exercised ( 109,768 ) 26.78

Forfeited or expired ( 33,300 ) 52.75

Outstanding at October 30, 2021

Outstanding at April 30, 2022

202,839 $ 29.24 $ 1,523,587 2.4

Stock appreciation rights exercisable at October 30, 2021 240,839 $ 32.80 $ 2,258,144 2.6

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

Information pertaining to stock appreciation rights exercised during the thirty-nine weeks ended October 30, 2021 follows:

(in thousands) October 30, 2021

Total grant date fair value of awards exercised $ 1,042

Stock appreciation rights exercisable at April 30, 2022 202,839 $ 29.24 $ 1,523,587 2.4

No stock appreciation rights were exercised during the thirteen weeks ended April 30, 2022 or May 1, 2021.

DERIVATIVE INSTRUMENTS

11 unchanged sentences

Fluctuations in foreign currency exchange rates result in transaction gains or losses being recorded in earnings, as U.S.

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

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

As of October 30, 2021, the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge either a portion, or all, of forecasted foreign-currency-denominated intercompany inventory sales, the resulting settlement of the foreign-currency-denominated intercompany accounts receivable, or both:

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

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

As of April 30, 2022, the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge either a portion, or all, of forecasted foreign-currency-denominated intercompany inventory transactions, the resulting settlement of the foreign-currency-denominated intercompany accounts receivable, or both:

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

(in thousands) Notional Amount (1)

3 unchanged sentences

Japanese yen 3,978

(1) Amount reported is the U.S.

Dollar notional amount outstanding as of October 30, 2021.

(1) Amounts reported are the U.S.

Dollar notional amounts outstanding as of April 30, 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 Condensed Consolidated Balance Sheets as of October 30, 2021 and January 30, 2021 were as follows:

(in thousands) Location October 30, 2021 January 30, 2021 Location October 30, 2021 January 30, 2021

Derivatives designated as cash flow hedging instruments

Other current assets $ 5,082 $ 79 Accrued expenses $ 86 $ 4,694

The location and amounts of derivative fair values of foreign currency exchange forward contracts on the Condensed Consolidated Balance Sheets as of April 30, 2022 and January 29, 2022 were as follows:

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

Derivatives designated as cash flow hedging instruments Other current assets $ 6,958 $ 4,973 Accrued expenses $ — $ —

Derivatives not designated as hedging instruments

1 unchanged sentence

$ 6,958 $ 4,973 $ — $ —

Information pertaining to derivative gains or losses from foreign currency exchange forward contracts designated as cash flow hedging instruments for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 follows:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

Information pertaining to derivative gains or losses from foreign currency exchange forward contracts designated as cash flow hedging instruments for the thirteen weeks ended April 30, 2022 and May 1, 2021 follows:

Thirteen Weeks Ended

(in thousands) April 30, 2022 May 1, 2021

Gain recognized in AOCL (1)

2 unchanged sentences

3,684 ( 1,455 )

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

As a result of COVID-19, there was a significant change in the expected timing of previously hedged intercompany sales transactions, resulting in a dedesignation of the related hedge instruments during the thirty-nine weeks ended October 31, 2020.

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

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

Subsequent to the dedesignation of these hedges, these hedge contracts were settled in Fiscal 2020.

(1) Amount represents the change in fair value of derivative instruments.

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

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

Additional information pertaining to derivative gains or losses from foreign currency exchange forward contracts not designated as hedging instruments for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 follows:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

Additional information pertaining to derivative gains or losses from foreign currency exchange forward contracts not designated as hedging instruments for the thirteen weeks ended April 30, 2022 and May 1, 2021 follows:

Thirteen Weeks Ended

(in thousands) April 30, 2022 May 1, 2021

Gain (loss) recognized in other operating income, net $ 1,141 $ ( 468 )

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

ACCUMULATED OTHER COMPREHENSIVE LOSS

Fo r the thirteen and thirty-nine weeks ended October 30, 2021, the activity in AOCL was as follows:

Thirteen Weeks Ended October 30, 2021

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

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

Fo r the thirteen weeks ended April 30, 2022, the activity in AOCL was as follows:

Thirteen Weeks Ended April 30, 2022

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

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

Other comprehensive (loss) income before reclassifications ( 10,403 ) 5,363 ( 5,040 )

3 unchanged sentences

Other comprehensive (loss) income after reclassifications ( 10,403 ) 1,712 ( 8,691 )

Ending balance at October 30, 2021 $ ( 106,661 ) $ 5,183 $ ( 101,478 )

Thirty-nine Weeks Ended October 30, 2021

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

Ending balance at April 30, 2022 $ ( 131,092 ) $ 7,695 $ ( 123,397 )

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

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

Thirteen Weeks Ended May 1, 2021

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

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

2 unchanged sentences

— 1,455 1,455

Tax effect — ( 110 ) ( 110 )

Other comprehensive (loss) income after reclassifications (2)

Ending balance at October 30, 2021 $ ( 106,661 ) $ 5,183 $ ( 101,478 )

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

For the thirteen and thirty-nine weeks ended October 31, 2020, the activity in AOCL was as follows:

Thirteen Weeks Ended October 31, 2020

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

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

Other comprehensive income before reclassifications 2,142 93 2,235

Reclassified gain from AOCL (1)

( 1,274 ) 2,599 1,325

Other comprehensive income (loss) after reclassifications (2)

2,142 ( 5,234 ) ( 3,092 )

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

Thirty-nine Weeks Ended October 31, 2020

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

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

Other comprehensive income before reclassifications 5,477 12,328 17,805

Reclassified gain from AOCL (1)

— ( 11,104 ) ( 11,104 )

Other comprehensive income after reclassifications (2)

5,477 1,224 6,701

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

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

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

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

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

4 unchanged sentences

Amounts shown below include net sales from wholesale, franchise and licensing operations, which are not a significant component of total revenue, and are aggregated within their respective operating segment and geographic area.

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

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

The Company’s net sales by operating segment for the thirteen weeks ended April 30, 2022 and May 1, 2021 were as follows:

Thirteen Weeks Ended

(in thousands) April 30, 2022 May 1, 2021

Hollister $ 428,834 $ 442,408

1 unchanged sentence

Total $ 812,762 $ 781,405

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

The Company’s net sales by geographic area for the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 were as follows:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

The Company’s net sales by geographic area for the thirteen weeks ended April 30, 2022 and May 1, 2021 were as follows:

Thirteen Weeks Ended

(in thousands) April 30, 2022 May 1, 2021

$ 585,106 $ 553,846

EMEA 179,156 190,214 528,998 474,165

163,969 159,002

29,897 46,046

Other 33,790 22,511

1 unchanged sentence

Total $ 812,762 $ 781,405

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

(2) Asia-Pacific Region (“APAC”)

FLAGSHIP STORE EXIT CHARGES (BENEFITS)

Reflecting a continued focus on one of the Company’s key transformation initiatives ‘Global Store Network Optimization,’ the Company continues to pivot away from its large format flagship stores and strives to open smaller, more productive omnichannel focused brand experiences.

As a result, the Company has closed certain of its flagship stores and may have additional closures as it executes against this strategy.

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

Details of the charges (benefits) recognized during the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 related to this initiative follow:

Thirteen Weeks Ended Thirty-nine Weeks Ended

(in thousands) October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

Operating lease cost — ( 1,729 ) ( 841 ) ( 6,959 )

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

Asset disposals and other store-closure benefits (1)

— ( 405 ) ( 514 ) ( 3,610 )

Employee severance and other employee transition costs (benefits) 11 ( 692 ) 178 3,316

Total flagship store exit charges (benefits) $ 11 $ ( 8,063 ) $ ( 1,177 ) $ ( 12,490 )

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

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

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

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

This cash outflow was classified within operating lease right-of-use assets and liabilities within operating activities on the Condensed Consolidated Statement of Cash Flows during the thirty-nine weeks ended October 30, 2021.

The Company recognized a gain of $ 0.9 million in flagship store exit benefits on the Consolidated Statement of Operations and Comprehensive Income (Loss) related to this transaction.

In addition, during Fiscal 2020, the Company announced the early exit of four European Abercrombie & Fitch flagship locations, Three of the leases were transferred through assignment while the fourth lease has been subleased to a new tenant.

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

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

As the Company continues its ‘Global Store Network Optimization’ efforts, it may incur future cash expenditures or incremental charges or realize benefits not currently contemplated due to events that may occur as a result of, or that are associated with, previously announced flagship store closures and flagship store closures that have not yet been finalized.

At this time, the Company is not able to quantify the amount of future impacts, including any cash expenditures that may take place in future periods resulting from any potential flagship store closures given the unpredictable nature of lease exit negotiations and ultimate lease renewal decisions.

SUBSEQUENT EVENTS

In November 2021, the A&F Board of Directors approved a new share repurchase program of $500 million of outstanding common stock, replacing the prior 2021 share repurchase program of 10.0 million shares, which had approximately 3.9 million shares remaining.

The timing and actual number of common shares to be repurchased will depend on market conditions, eligibility to trade, and other factors.

Abercrombie & Fitch Co.

2022 1Q Form 10-Q

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

What changed 10-Q

Item 1. Financial Statements