What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-27 compared with 2022-03-28 · 256 added, 271 removed, 962 unchanged (35% of the section changed)

1 unchanged sentence

Abercrombie & Fitch Co.

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Operations and Comprehensive (Loss) Income

(Thousands, except per share amounts)

5 unchanged sentences

Marketing, general and administrative expense 517,602 536,815 463,843

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

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

Asset impairment 14,031 12,100 72,937

Other operating Income, net ( 2,674 ) ( 8,327 ) ( 5,054 )

12 unchanged sentences

Diluted 52,327 62,636 62,551

Other comprehensive income (loss)

Other comprehensive (loss) income

Foreign currency translation, net of tax $ ( 11,964 ) $ ( 22,917 ) $ 12,195

2 unchanged sentences

Other comprehensive (loss) income ( 22,821 ) ( 12,399 ) 6,579

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

Comprehensive (loss) income ( 12,436 ) 257,667 ( 102,375 )

Comprehensive income attributable to noncontrolling interests 7,569 7,056 5,067

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

Comprehensive (loss) income attributable to A&F $ ( 20,005 ) $ 250,611 $ ( 107,442 )

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

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Consolidated Balance Sheets

38 unchanged sentences

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Consolidated Statements of Stockholders’ Equity

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

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

6 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 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 ($ 0.28 per share)

— — — — ( 12,556 ) — — — ( 12,556 )

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

6 unchanged sentences

Purchase of common stock ( 4,770 ) — — — — — 4,770 ( 125,775 ) ( 125,775 )

Dividends ($ 0.00 per share)

— — — — — — — — —

Share-based compensation issuances and exercises 787 — ( 25,930 ) — ( 20,157 ) — ( 787 ) 31,623 ( 14,464 )

6 unchanged sentences

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Consolidated Statements of Cash Flows

2 unchanged sentences

Net income (loss) $ 10,385 $ 270,066 $ ( 108,954 )

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

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

Depreciation and amortization 132,243 144,035 166,281

1 unchanged sentence

Loss on disposal 552 5,020 16,353

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

Provision (benefit) for deferred income taxes 11,500 ( 31,922 ) 23,986

Share-based compensation 28,995 29,304 18,682

Loss on extinguishment of debt 5,347 — —

(Gain) loss on extinguishment of debt ( 52 ) 5,347 —

Changes in assets and liabilities

5 unchanged sentences

Other liabilities 9,458 ( 14,340 ) 1,889

Net cash provided by operating activities 277,782 404,918 300,685

Net cash (used for) provided by operating activities ( 2,343 ) 277,782 404,918

Investing activities

Purchases of property and equipment ( 164,566 ) ( 96,979 ) ( 101,910 )

Proceeds from the sale of property and equipment 11,891 — —

Withdrawal of funds from Rabbi Trust assets 12,000 — 50,000

26 unchanged sentences

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Index for Notes to Consolidated Financial Statements

1 unchanged sentence

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

IMPACT OF COVID-19

REVENUE RECOGNITION

8 unchanged sentences

SEGMENT REPORTING

FLAGSHIP STORE EXIT (BENEFITS) CHARGES

CONTINGENCIES

SUBSEQUENT EVENT

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Notes to Consolidated Financial Statements

5 unchanged sentences

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.

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2 unchanged sentences

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

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

(“MAF”) and a “U.S.” business venture with Dixar L.L.C.

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

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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 Consolidated Statements of Operations and Comprehensive Income (Loss) 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 (Loss) Income and the NCI portion of stockholders 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 52 week year, but occasionally gives rise to an additional week, resulting in a 53 week year.

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 by the calendar year in which the fiscal year commences.

5 unchanged sentences

Fiscal 2022 January 28, 2023 52

Fiscal 2023 February 3, 2024 53

Use of Estimates

2 unchanged sentences

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

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

Additionally, these estimates and assumptions may change as a result of the impact of global economic conditions such as the uncertainty regarding a slowing economy, rising interest rates, continued inflation, fluctuation in foreign exchange rates, the ongoing conflict in Ukraine which could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Reclassifications

The Company reclassified flagship store exit (benefits) charges into stores and distribution expense on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

There were no changes to operating income (loss) or net income (loss).

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

Cash and Equivalents

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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 29, 2022 January 30, 2021 February 1, 2020

(in thousands) Location January 28, 2023 January 29, 2022 January 30, 2021

Cash and equivalents Cash and equivalents $ 517,602 $ 823,139 $ 1,104,862

5 unchanged sentences

(1) Restricted cash and equivalents primarily consists of amounts on deposit with banks that are used as collateral for customary non-debt banking commitments and deposits into trust accounts to conform to standard insurance security requirements.

Receivables on the Consolidated Balance Sheets primarily include credit card receivables, lessor construction allowances, value added tax (“VAT”) receivables, trade receivables, income tax receivables and other tax credits or refunds.

Receivables on the Consolidated Balance Sheets primarily include credit card receivables, lessor construction allowance and lease incentive receivables, value added tax (“VAT”) receivables, trade receivables, income tax receivables and other tax credits or refunds.

As part of the normal course of business, the Company has approximately three to four days of proceeds from sales transactions outstanding with its third-party credit card vendors at any point.

5 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 Income (Loss).

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.

2 unchanged sentences

Refer to Note 5, “ INVENTORIES .”

The Company’s global sourcing of merchandise is generally negotiated and settled in U.S.

The Company’s global sourcing of merchandise is generally negotiated, contracted, and settled in U.S.

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Other Current Assets

Other current assets on the Consolidated Balance Sheets consists of:

Other current assets on the Consolidated Balance Sheets consist of:

prepaid expenses including those related to rent, information technology maintenance and taxes;

2 unchanged sentences

short-term restricted cash and other.

Abercrombie & Fitch Co.

Property and Equipment, Net

7 unchanged sentences

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 Income (Loss).

Maintenance and repairs are charged to expense as incurred.

Major remodels and improvements that extend the service lives of the related assets are capitalized.

The Company capitalizes certain direct costs associated with the development and purchase of internal-use software within property and equipment.

The Company capitalizes certain direct costs associated with the development and purchase of internal-use software within property and equipment and other assets.

Capitalized costs are amortized on a straight-line basis over the estimated useful lives of the software, generally not exceeding seven years.

4 unchanged sentences

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 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.

The measurement of operating lease right-of-use assets and liabilities includes amounts related to:

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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 Income (Loss);

• 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 Income (Loss);

• 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.

2022 Form 10-K

Abercrombie & Fitch Co.

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

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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 Income (Loss) until a new agreement has been executed.

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 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.

1 unchanged sentence

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 Income (Loss).

Depending on the nature of the operating lease, amortization and interest expense are primarily recorded within stores and distribution expense, marketing, or general and administrative expense, 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 7, “ LEASES .”

7 unchanged sentences

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 the Company’s fair value analysis are estimated sales growth rate and comparable market rents.

The key assumptions used in the Company’s fair value analyses 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.

2 unchanged sentences

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Rabbi Trust Assets

3 unchanged sentences

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).

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 (Loss) Income.

Refer to Note 9, “ 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 Income (Loss).

Refer to Note 11, “ INCOME TAXES .”

Foreign Currency Translation and Transactions

The functional currencies of the Company’s foreign subsidiaries are generally the respective local currencies in the countries in which they operate.

Assets and liabilities denominated in foreign currencies are translated into U.S.

Dollars (the reporting currency) at the exchange rate prevailing at the balance sheet date.

Equity accounts denominated in foreign currencies are translated into U.S.

Dollars at historical exchange rates.

Revenues and expenses denominated in foreign currencies are translated into U.S.

Dollars at the monthly average exchange rate for the period.

Gains and losses resulting from foreign currency transactions are included in other operating income, net;

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).

The functional currencies of the Company’s foreign subsidiaries are generally the currencies of the environments in which each subsidiary primarily generates and expends cash, which is often the local currency of the country in which each subsidiary operates.

The financial statements of the Company’s foreign subsidiaries with functional currencies other than the U.S.

Dollar are translated into U.S.

Dollars (the Company’s reporting currency), as follows:

assets and liabilities are translated at the exchange rate prevailing at the balance sheet date, equity accounts are translated at historical exchange rates, and revenues and expenses are translated at the monthly average exchange rate for the period.

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Foreign currency transactions, which are transactions denominated in a currency other than the entity’s functional currency, are initially measured in the functional currency of the recording entity using the exchange rate in effect at that date.

Subsequently, assets and liabilities associated with foreign currency transactions are remeasured into the entity’s functional currency using historical exchange rates when remeasuring nonmonetary assets and liabilities and current exchange rates when remeasuring monetary assets and liabilities.

Gains and losses resulting from the remeasurement of monetary assets and liabilities are included in other operating income, net;

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).

Derivative Instruments

8 unchanged sentences

If the cash flow hedge relationship is terminated, the derivative instrument gains or losses that are deferred in OCI will be recognized in earnings when the hedged cash flows occur.

However, for cash flow hedges that are terminated because the forecasted transaction is not expected to occur in the original specified time period, or a two-month period thereafter, the derivative instrument gains or losses are immediately recognized in earnings, except as allowable under certain extenuating circumstances.

The Company uses derivative instruments, primarily forward contracts designated as cash flow hedges, to hedge the foreign currency exchange rate exposure associated with forecasted foreign-currency-denominated intercompany inventory transactions with foreign subsidiaries before inventory is sold to third parties.

11 unchanged sentences

Refer to Note 14, “ DERIVATIVE INSTRUMENTS .

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Stockholders’ Equity

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:

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

(in thousands) January 28, 2023 January 29, 2022

6 unchanged sentences

(1) No shares were issued or outstanding as of each of January 28, 2023 and January 29, 2022 .

Abercrombie & Fitch Co.

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.

3 unchanged sentences

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 Income (Loss).

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

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

The Company estimates reserves for sales returns based on historical experience among other factors.

The sales return reserve is classified in accrued expenses on the Consolidated Balance Sheets.

The sales return reserve is classified in accrued expenses with a corresponding asset related to the projected returned merchandise recorded in inventory on the Consolidated Balance Sheets.

The Company accounts for gift cards sold to customers by recognizing an unearned revenue liability at the time of sale, which is recognized as net sales when redeemed by the customer or when the Company has determined the likelihood of redemption to be remote, referred to as gift card breakage.

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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 3, “ REVENUE RECOGNITION .”

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

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

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 Income (Loss).

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

For a discussion of the disaggregation of revenue, refer to Note 17, “ SEGMENT REPORTING .

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Cost of Sales, Exclusive of Depreciation and Amortization

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.

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 Income (Loss).

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.

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 Income (Loss) primarily consists of:

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

store payroll;

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Marketing, General and Administrative Expense

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

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

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

6 unchanged sentences

Other Operating Income, Net

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:

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.

A summary of foreign-currency-denominated transaction (losses) gains, including those related to derivative instruments, follows:

(in thousands) Fiscal 2022 Fiscal 2021 Fiscal 2020

Foreign-currency-denominated transaction gains $ 4,232 $ 3,933 $ 348

Foreign-currency-denominated transaction (losses) gains $ ( 1,626 ) $ 4,232 $ 3,933

Interest Expense, Net

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.

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

Interest income primarily consists 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, net $ 25,632 $ 34,110 $ 28,274

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Advertising Costs

6 unchanged sentences

Share-based Compensation

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.

The Company issues shares of Class A Common Stock, $ 0.01 par value (the “Common Stock”) from treasury stock upon exercise of stock appreciation rights and vesting of restricted stock units, including those converted from performance share awards.

As of January 28, 2023, the Company had sufficient treasury stock available to settle restricted stock units and stock appreciation rights outstanding.

Settlement of stock awards in Common Stock also requires that the Company have sufficient shares available in stockholder-approved plans at the applicable time.

In the event, at each reporting date as of which share-based compensation awards remain outstanding, there are not sufficient shares of Common Stock available to be issued under the Abercrombie & Fitch Co.

In the event there are not sufficient shares of Common Stock available to be issued under the Abercrombie & Fitch Co.

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 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.

2016 Long-Term Incentive Plan for Associates (as amended effective June 8, 2022, the “2016 Associates LTIP”), or under a successor or replacement plan at each reporting date as of which share-based compensation awards remain outstanding, 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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Estimates of expected terms, which represent the expected periods of time the Company believes stock appreciation rights will be outstanding, are based on historical experience.

Estimates of expected future stock price volatility are based on the volatility of the Company’s Common Stock price for the most recent historical period equal to the expected term of the stock appreciation rights, as appropriate.

Estimates of expected future stock price volatility are based on the volatility of the Common Stock price for the most recent historical period equal to the expected term of the stock appreciation rights, as appropriate.

The Company calculates the volatility as the annualized standard deviation of the differences in the natural logarithms of the weekly closing price of the Common Stock, adjusted for stock splits and dividends.

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Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

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.

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

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

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Recent Accounting Pronouncements

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

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.

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.

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 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.

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.

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.

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 a material impact on the Company’s consolidated financial statements.

The following table provides a brief description of certain recent accounting pronouncements that the Company has adopted or that could affect the Company’s financial statements.

Accounting Standards Update (ASU) Description Effect on the financial statements or other significant matters

Standards not yet adopted

ASU 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations

The update related to disclosure requirements for buyers in supplier finance programs.

The amendments in the update require that a buyer disclose qualitative and quantitative information about their supplier finance programs.

Interim and annual requirements include disclosure of outstanding amounts under the obligations as of the end of the reporting period, and annual requirements include a rollforward of those obligations for the annual reporting period, as well as a description of payment and other key terms of the programs.

This update is effective for annual periods beginning after December 15, 2022, and interim periods within those fiscal years, except for the requirement to disclose rollforward information, which is effective for fiscal years beginning after December 15, 2023.

The Company is currently evaluating the impact that this guidance will have on its consolidated financial statements and accompanying notes

REVENUE RECOGNITION

Disaggregation of revenue

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

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

For information regarding the disaggregation of revenue, refer to Note 17, “ SEGMENT REPORTING .

5 unchanged sentences

Loyalty programs liability 25,640 22,757

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

The following table details recognized revenue associated with the Company’s gift card program and loyalty programs for Fiscal 2022 and Fiscal 2021:

5 unchanged sentences

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.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

11 unchanged sentences

Derivative instruments (2)

— 4,973 — 4,973

Rabbi Trust assets (3)

3 unchanged sentences

Total assets $ 52,055 $ 56,887 $ — $ 108,942

Derivative instruments (2)

$ — $ 4,986 $ — $ 4,986

Total liabilities $ — $ 4,986 $ — $ 4,986

Assets and Liabilities at Fair Value as of January 29, 2022

3 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.

7 unchanged sentences

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

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

• 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.

5 unchanged sentences

Gross borrowings outstanding, fair value 304,975 327,732

Abercrombie & Fitch Co.

Inventories consisted of:

2 unchanged sentences

Lower of cost and net realizable value adjustment ( 35,678 ) ( 17,196 )

Shrink estimate ( 5,970 ) ( 4,864 )

Inventories (1)

$ 505,621 $ 525,864

(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.

(1) Included $ 93.7 million and $ 142.7 million of inventory in transit, merchandise owned by the Company that has not yet been received at a Company DC, as of January 28, 2023 and January 29, 2022, respectively.

A summary of the Company’s vendors based on location and the percentage of dollar cost of merchandise receipts during Fiscal 2022, and Fiscal 2021 follows:

7 unchanged sentences

tariffs on imported consumer goods that were effective beginning in Fiscal 2019.

The Company estimates approximately 9 %, 7 % and 15 % of total merchandise receipts were directly imported to the U.S.

from China in Fiscal 2021, Fiscal 2020 and Fiscal 2019, respectively.

The Company estimates approximately 9 %, 9 % and 7 % of total merchandise receipts were directly imported to the United States from China in Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively.

(3) No country included within this category sourced more than 10% of total merchandise receipts during any fiscal year presented above .

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.

2022 Form 10-K

Abercrombie & Fitch Co.

PROPERTY AND EQUIPMENT, NET

14 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.

Abercrombie & Fitch Co.

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

The following table provides a summary of the Company’s operating lease costs for Fiscal 2022, Fiscal 2021 and Fiscal 2020 :

9 unchanged sentences

(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 $ 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.

(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 $ 3.9 million, $ 14.1 million and $ 30.1 million of rent abatements in Fiscal 2022, 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 2022, Fiscal 2021 and Fiscal 2020 was $ 3.9 million, $ 17.9 million and $ 30.7 million, respectively.

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

3 unchanged sentences

Weighted-average discount rate 6.3 % 5.6 %

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

The following table provides a maturity analysis of the Company’s operating lease liabilities, based on undiscounted cash flows, as of January 28, 2023:

9 unchanged sentences

Present value of operating lease liabilities $ 927,340

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.

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

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.

2 unchanged sentences

The Company had minimum commitments related to operating lease contracts that have not yet commenced, primarily for its Company-operated retail stores, of approximately $ 28.3 million as of January 28, 2023.

Abercrombie & Fitch Co.

ASSET IMPAIRMENT

2 unchanged sentences

Operating lease right-of-use asset impairment $ 6,248 $ 9,509 $ 57,026

$ 9,509 $ 57,026 $ 15,812

Property and equipment asset impairment (1)

7,783 2,591 15,911

Total asset impairment $ 14,031 $ 12,100 $ 72,937

(1) Includes $3.2 million of operating lease right-of-use asset impairment included in flagship store exit charges on the Consolidated Statement of Operations and Comprehensive Income for Fiscal 2019.

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

(1) Amounts for Fiscal 2022 include store asset impairment of $ 4.8 million and other asset impairment of $ 3.0 million.

Amounts for Fiscal 2021 and Fiscal 2020 only include store asset impairment.

Asset impairment charges for Fiscal 2022 were related to certain of the Company’s assets including stores across brands, geographies and store formats and other assets.

The impairment charges for Fiscal 2022 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $ 39.7 million, including $ 37.0 million related to operating lease right-of-use assets.

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

2 unchanged sentences

The impairment charges for Fiscal 2020 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $ 95.0 million, including $ 87.2 million related to operating lease right-of-use assets.

Asset impairment charges for Fiscal 2019 primarily related to certain of the Company’s international flagship stores.

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.

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.

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

RABBI TRUST ASSETS

8 unchanged sentences

Refer to Note 2, “ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Rabbi Trust Assets ,” for further discussion related to the Company’s Rabbi Trust assets.

Abercrombie & Fitch Co.

ACCRUED EXPENSES

9 unchanged sentences

Refer to Note 3, “ REVENUE RECOGNITION .”

Impact of valuation allowances and other tax charges

Impact of valuation allowances and other tax benefits during Fiscal 2022

During Fiscal 2022, the Company did not recognize income tax benefits on $ 136.5 million of pre-tax losses, primarily in Switzerland, resulting in adverse tax impacts of $ 20.0 million.

As of January 28, 2023, the Company had net deferred tax assets of approximately $ 8.0 million, $ 9.1 million, and $ 15.6 million in China, Japan, and the United Kingdom, respectively.

In China, while the Company believes these net deferred tax assets are more-likely-than-not to be realized, it is not a certainty, as the Company continues to evaluate and respond to emerging situations, such as the COVID-19 pandemic.

The company is closely monitoring its operations on China.

Should circumstances change, the net deferred tax assets may become subject to valuation allowances in the future, which would result in additional tax expense.

Impact of valuation allowances and other tax benefits during Fiscal 2021

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.

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.

As of January 29, 2022, the Company had net deferred tax assets of approximately $ 9.7 million, $ 12.2 million, and $ 20.1 million in China, Japan, and the United Kingdom, respectively.

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Impact of valuation allowances and other tax charges during Fiscal 2020

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.

Further details regarding these adverse tax impacts are as follows:

• Due to the significant adverse impacts of COVID-19, the Company did not recognize income tax benefits on $ 203.4 million of pre-tax losses during Fiscal 2020, resulting in an adverse tax impact of $ 39.5 million.

During Fiscal 2020, due to the significant adverse impacts of COVID-19, the Company did not recognize income tax benefits on $ 203.4 million of pre-tax losses, resulting in an adverse tax impact of $ 39.5 million.

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.

Swiss Tax Reform

In May 2019, Switzerland voted to approve the Federal Act on Tax Reform and AHV Financing (“Swiss Tax Reform”), effective at the federal level beginning January 2020, which resulted in the abolishment of preferential tax regimes by the cantons.

In addition to the abolishment of the preferential tax regimes, the cantons needed to implement new, mandatory tax provisions in their cantonal tax law which were subject to a referendum process as well.

As a result of these changes and actions taken by the Company, both of which occurred in the third quarter of Fiscal 2019, the Company increased its deferred income tax assets and liabilities, which are recorded on the Consolidated Balance Sheets within other assets and other liabilities, respectively, by $ 38.0 million during the third quarter of Fiscal 2019.

In the fourth quarter of Fiscal 2019, the canton of Ticino formally enacted the tax reform effective January 1, 2020.

As a result, the tax reform went into effect on January 1, 2020.

The Company decreased its deferred income tax assets and liabilities by $ 13.1 million during the fourth quarter of Fiscal 2019 for a net increase of deferred income tax assets and liabilities during Fiscal 2019 of $ 24.9 million as a result of Swiss Tax Reform.

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 Income (Loss) or the Company’s cash flows during Fiscal 2021, Fiscal 2020 or Fiscal 2019.

Abercrombie & Fitch Co.

Components of Income Taxes

18 unchanged sentences

(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.

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

federal income tax.

2 unchanged sentences

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Reconciliation between the statutory federal income tax rate and the effective tax rate is as follows:

Fiscal 2022 Fiscal 2021 Fiscal 2020

federal corporate income tax rate 21.0 % 21.0 % 21.0 %

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

Federal income tax rate 21.0 % 21.0 % 21.0 %

Net change in valuation allowances 30.7 ( 19.7 ) ( 177.2 )

Foreign taxation of non-U.S.

operations (1)

16.2 3.5 32.7

State income tax, net of U.S.

federal income tax effect 12.4 4.4 2.6

Audit and other adjustments to prior years' accruals, net 5.9 4.7 2.6

Internal Revenue Code Section 162(m) 4.6 1.6 ( 5.5 )

Additional U.S.

taxation of non-U.S.

operations 0.6 ( 0.2 ) ( 1.4 )

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)

taxation of non-U.S.operations 1.3 0.6 ( 0.2 )

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

( 2.6 ) ( 1.3 ) ( 7.5 )

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

Credit for increasing research activities ( 2.5 ) ( 0.6 ) 2.6

Net income attributable to noncontrolling interests ( 2.4 ) ( 0.5 ) 2.2

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

Credit items — 0.2 ( 0.8 )

Write-off of stock basis in subsidiary — — 3.2

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

Other items, net ( 0.1 ) 0.1 0.9

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

Total 84.5 % 12.6 % ( 123.5 ) %

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

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

As a result, income from these operations do not create reconciling items..

Effective in 2019, only Puerto Rico continues to be a branch of the U.S.

(2) Refer to Note 13, “ SHARE-BASED COMPENSATION ,” for details on discrete income tax benefits and charges related to share-based compensation awards during Fiscal 2022, Fiscal 2021, and Fiscal 2020.

4 unchanged sentences

operations reported separately in the appropriate corresponding line items.

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

For Fiscal 2022, 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.

For Fiscal 2019, the impact of taxation of non-U.S.

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

For Fiscal 2019, the Company’s Japan subsidiary earned pre-tax income of $ 12.0 million with a jurisdictional effective tax rate of 35.1 %.

With respect to the NCI, the subsidiary incurred pre-tax income of $ 5.6 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.

2022 Form 10-K

Abercrombie & Fitch Co.

Components of Deferred Income Tax Assets and Deferred Income Tax Liabilities

9 unchanged sentences

Inventory 5,475 3,578

Other 45 2,171

Valuation allowances ( 130,622 ) ( 110,057 )

8 unchanged sentences

Rent — ( 360 )

Inventory — ( 1,499 )

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

3 unchanged sentences

$ 62,981 $ 80,383

(1) The deferred tax asset relates to a step-up in basis associated with the intra-entity transfer of intangible assets to Switzerland which are being amortized for Swiss local tax purposes.

As this subsidiary’s income is also taxable in the U.S., a corresponding U.S.

deferred tax liability was recognized to reflect lower resulting foreign tax credit due to the amortization of the Swiss step-up in basis.

Included in the liability section is the remaining portion of deferred tax liabilities which are properly categorized in the table above.

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

(1) 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.

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

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

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 28, 2023 and January 29, 2022, AOCL included deferred tax assets of $0.9 million and deferred tax liabilities of $1.1 million, respectively.

As of January 28, 2023, the Company had deferred tax assets related to foreign and state NOL and credit carryforwards of $ 68.6 million and $ 0.3 million, respectively, that could be utilized to reduce future years’ tax liabilities.

2 unchanged sentences

As of January 28, 2023, the Company did not have any deferred tax assets related to federal NOL and credit carryforwards that could be utilized to reduce future years’ tax liabilities.

As of January 29, 2022, valuation allowances of $ 110.1 million have been established against deferred tax assets.

The valuation allowances for Fiscal 2022, 2021, 2020 and 2019 was $ 130.6 million, $ 110.1 million, $ 174.3 million and $ 8.9 million, respectively.

The valuation allowances as of Fiscal 2022 have been established against deferred tax assets, primarily in Japan and Switzerland.

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

3 unchanged sentences

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Share-based Compensation

Refer to Note 13, “ SHARE-BASED COMPENSATION ,” for details on income tax benefits and charges related to share-based compensation awards during Fiscal 2022, Fiscal 2021 and Fiscal 2020.

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:

The amount of uncertain tax positions as of January 28, 2023, January 29, 2022 and January 30, 2021, 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 2022 Fiscal 2021 Fiscal 2020

1 unchanged sentence

Gross addition for tax positions of the current year 339 490 235

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

Gross addition (reduction) for tax positions of prior years 907 ( 136 ) 395

Reductions of tax positions of prior years for:

3 unchanged sentences

The IRS is currently conducting an examination of the Company’s U.S.

federal income tax return for Fiscal 2021 as part of the IRS’ Compliance Assurance Process program.

federal income tax returns for Fiscal 2022 and Fiscal 2021 as part of the IRS’ Compliance Assurance Process program.

The IRS examinations for Fiscal 2020 and prior years have been completed.

12 unchanged sentences

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

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

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

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.

2 unchanged sentences

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).

During Fiscal 2022 and 2021, A&F Management purchased $ 8.0 million and $ 42.3 million, respectively, of outstanding Senior Secured Notes and incurred $ 0.1 million of gain and $ 5.3 million of loss, respectively, on extinguishment of debt, recognized in interest expense, net on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The Company used the net proceeds from the offering of the Senior Secured Notes to repay outstanding borrowings and

Abercrombie & Fitch Co.

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

2022 Form 10-K

Abercrombie & Fitch Co.

accrued interest of $ 223.6 million and $ 110.8 million under its prior term loan facility and the ABL Facility (defined below), respectively, with the remaining net proceeds used towards fees and expenses in connection with such repayments and the offering of the Senior Secured Notes.

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

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).

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 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) extended the maturity date of the ABL Facility to April 29, 2026 ;

and (ii) modified 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).

On March 15, 2023, the Company entered into the First Amendment to the Amended and Restated Credit Agreement to eliminate LIBO rate based loans and to use the current market definitions with respect to the Secured Overnight Financing Rate (“SOFR”), as well as to reflect other conforming changes.

The Company did not have any borrowings outstanding under the ABL Facility as of January 28, 2023 or as of January 29, 2022.

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As of January 28, 2023, the Company had availability under the ABL Facility of $ 386.8 million, net of $ 0.6 million in outstanding stand-by letters of credit.

As the Company must maintain excess availability equal to the greater of 10% of the loan cap or $30 million under the ABL Facility, borrowing available to the Company under the ABL Facility was $ 248.3 million as of January 29, 2022.

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

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 $ 348.1 million as of January 28, 2023.

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

The ABL Facility is secured by a first-priority security interest in certain working capital of the borrowers and guarantors consisting of inventory, accounts receivable and certain other assets.

The Amended ABL Facility is also secured by a second-priority security interest in certain property and assets of the borrowers and guarantors, including certain fixed assets, intellectual property, stock of subsidiaries and certain after-acquired material real property.

The ABL Facility is also secured by a second-priority security interest in certain property and assets of the borrowers and guarantors, including certain fixed assets, intellectual property, stock of subsidiaries and certain after-acquired material real property.

At the Company’s option, borrowings under the ABL Facility will bear interest at either (a) an adjusted LIBO rate plus a margin of 1.25 % to 1.50 % per annum, or (b) an alternate base rate plus a margin of 0.25 % to 0.50 % per annum.

As of January 28, 2023, 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.

Following the March 15, 2023 amendment, borrowings under the ABL will bear interest using the current market SOFR rate.

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

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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.

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

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

The 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.

2022 Form 10-K

Abercrombie & Fitch Co.

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 28, 2023.

SHARE-BASED COMPENSATION

As of January 28, 2023, the Company had two primary share-based compensation plans:

(i) the 2016 Directors LTIP, with 900,000 shares of the Company’s Common Stock authorized for issuance, under which the Company is authorized to grant restricted stock, restricted stock units, stock appreciation rights, stock options and deferred stock awards to non-associate members of the Company’s Board of Directors;

and (ii) the 2016 Associates LTIP, with 10,350,000 shares of the Company’s Common Stock authorized for issuance, under which the Company is authorized to grant restricted stock, restricted stock units, performance share awards, stock appreciation rights and stock options to associates of the Company.

The Company also has outstanding shares from four other share-based compensation plans under which the Company granted restricted stock units, performance share awards, stock appreciation rights and stock options to associates of the Company and restricted stock units, stock options and deferred stock awards to non-associate members of the Company’s Board of Directors in prior years.

(i) the 2016 Directors LTIP, with 900,000 shares of Common Stock authorized for issuance, under which the Company is authorized to grant restricted stock, restricted stock units, stock appreciation rights, stock options and deferred stock awards to non-associate members of the Board of Directors;

and (ii) the 2016 Associates LTIP, with 10,665,000 shares of Common Stock authorized for issuance, under which the Company is authorized to grant restricted stock, restricted stock units, performance share awards, stock appreciation rights and stock options to associates of the Company.

The Company also has outstanding shares from two other share-based compensation plans under which the Company granted restricted stock units, performance share awards, stock appreciation rights and stock options to associates of the Company and restricted stock units, stock options and deferred stock awards to non-associate members of the Board of Directors in prior years.

No new shares may be granted under these previously-authorized plans and any outstanding awards continue in effect in accordance with their respective terms.

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Any stock appreciation rights or stock options granted under this plan have the same minimum vesting period requirements as restricted stock units and, in addition, must have a term that does not exceed a period of ten years from the grant date, subject to forfeiture under the terms of the 2016 Directors LTIP.

The 2016 Associates LTIP, a stockholder-approved plan, permits the Company to annually grant one or more types of awards covering up to an aggregate for all awards of 1.0 million of underlying shares of the Company’s Common Stock to any associate of the Company.

The 2016 Associates LTIP, a stockholder-approved plan, permits the Company to annually grant one or more types of awards covering up to an aggregate for all awards of 1.0 million underlying shares of the Common Stock to any associate of the Company.

Under the 2016 Associates LTIP, for restricted stock units that have performance-based vesting, performance must be measured over a period of at least one year and for restricted stock units that do not have performance-based vesting, vesting in full may not occur more quickly than in pro-rata installments over a period of three years from the date of the grant, with the first installment vesting no sooner than the first anniversary of the date of the grant.

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Each of the 2016 Directors LTIP and the 2016 Associates LTIP provides for accelerated vesting of awards if there is a change of control and certain other conditions specified in each plan are met.

Abercrombie & Fitch Co.

Financial Statement Impact

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The following table details discrete income tax benefits and charges related to share-based compensation awards during Fiscal 2022, Fiscal 2021 and Fiscal 2020:

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

(in thousands) Fiscal 2022 Fiscal 2021 Fiscal 2020

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Unvested at January 29, 2022

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

Adjustments for performance achievement

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

Granted 1,012,916 28.51 185,197 30.24 92,603 41.60

Change due to performance criteria achievement — — 5,668 23.05 18,881 36.24

Vested ( 930,944 ) 18.04 ( 194,465 ) 23.05 ( 113,284 ) 36.24

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Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

Additional information pertaining to restricted stock units for Fiscal 2022, Fiscal 2021 and Fiscal 2020 follows:

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Stock appreciation rights exercisable at January 28, 2023 190,589 $ 29.43 $ 1,262 1.7

No stock appreciation rights were exercised during Fiscal 2020.

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

(in thousands) Fiscal 2021 Fiscal 2019

No stock appreciation rights were exercised during Fiscal 2022 or Fiscal 2020.

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

(in thousands) Fiscal 2021

Total grant date fair value of awards exercised $ 1,069

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Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

DERIVATIVE INSTRUMENTS

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(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.

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.

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

(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.

(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 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 28, 2023 will be recognized within the Consolidated Statements of Operations and Comprehensive (Loss) Income 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 2022, Fiscal 2021 and Fiscal 2020 follows:

(in thousands) Fiscal 2022 Fiscal 2021 Fiscal 2020

Gain (loss) recognized in other operating income, net $ 1,205 $ 742 $ ( 298 )

Gain recognized in other operating income, net $ 1,226 $ 1,205 $ 742

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.

2022 Form 10-K

Abercrombie & Fitch Co.

ACCUMULATED OTHER COMPREHENSIVE LOSS

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Beginning balance at January 29, 2022

$ ( 120,689 ) $ 5,983 $ ( 114,706 )

Other comprehensive (loss) income before reclassifications ( 11,964 ) 2,844 ( 9,120 )

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Tax effect — 80 80

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

Other comprehensive loss after reclassifications ( 11,964 ) ( 10,857 ) ( 22,821 )

Ending balance at January 28, 2023

$ ( 132,653 ) $ ( 4,874 ) $ ( 137,527 )

(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.

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(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)

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Tax effect — ( 206 ) ( 206 )

Other comprehensive income (loss) after reclassifications (2)

12,195 ( 5,616 ) 6,579

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

Ending balance at January 29, 2022

(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.

$ ( 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.

Fo r Fiscal 2020, the activity in AOCL was as follows:

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Beginning balance at February 1, 2020

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

$ ( 109,967 ) $ 1,081 $ ( 108,886 )

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

Reclassified gain from AOCL (1)

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Tax effect (2)

Other comprehensive (loss) income 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 Income (Loss).

Other comprehensive income (loss) after reclassifications 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 (Loss) Income.

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

Abercrombie & Fitch Co.

2022 Form 10-K

Abercrombie & Fitch Co.

SAVINGS AND RETIREMENT PLANS

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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.

These operating segments have similar economic characteristics, classes of consumers, products, and production and distribution methods, operate in the same regulatory environments, and have been aggregated into one reportable segment.

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

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APAC 122,367 171,701 176,636

Other 133,837 111,894 125,174

151,262 133,837 111,894

Total international $ 939,457 $ 1,060,610 $ 997,981

Total $ 3,697,751 $ 3,712,768 $ 3,125,384

(1) Other includes all sales that do not fall within the United States, EMEA, or APAC regions, which are derived primarily in Canada.

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 28, 2023 and January 29, 2022 were as follows:

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APAC 49,771 83,830

Other 23,599 33,575

18,685 23,599

Total international $ 386,168 $ 379,777

Total $ 1,296,864 $ 1,229,075

(1) Other includes amounts that do not fall within the United States, EMEA, or APAC regions, which are derived primarily in Canada.

Abercrombie & Fitch Co.

FLAGSHIP STORE EXIT (BENEFITS) CHARGES

Global Store Network Optimization

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

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

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

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

(in thousands) Fiscal 2021 Fiscal 2020 Fiscal 2019

Operating lease cost $ ( 841 ) $ ( 6,959 ) $ 46,716

Gain on lease assignment — ( 5,237 ) —

Asset disposals and other store-closure benefits (1)

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

Employee severance and other employee transition costs 202 3,218 2,228

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

(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.

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.

2022 Form 10-K

Abercrombie & Fitch Co.

CONTINGENCIES

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Abercrombie & Fitch Co.

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.

2022 Form 10-K

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 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”).

and its subsidiaries (the “Company”) as of January 28, 2023 and January 29, 2022, 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 28, 2023, 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 28, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 28, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases on February 3, 2019.

Basis for Opinions

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Abercrombie & Fitch Co.

2022 Form 10-K

Critical Audit Matters

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As described in Notes 2, 6 and 8 to the consolidated financial statements, the Company’s consolidated property and equipment, net balance was $551.6 million and consolidated operating lease right-of-use assets balance was $723.6 million as of January 28, 2023.

During fiscal 2021, the Company recognized long-lived asset store impairment charges of $12.1 million.

During the year ended January 28, 2023, the Company recognized long-lived asset store impairment charges of

$11.0 million.

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.

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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.

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, 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 evaluating of the reasonableness of the comparable market rents significant assumption.

/s/ PricewaterhouseCoopers LLP

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We have served as the Company’s auditor since 1996.

Abercrombie & Fitch Co.

2022 Form 10-K

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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