What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-12-06 compared with 2024-09-06 · 165 added, 150 removed, 472 unchanged (40% of the section changed)

12 unchanged sentences

• risks related to natural disasters and other unforeseen catastrophic events;

• risks related to our failure to engage our customers, anticipate customer demand and changing fashion trends, and manage our inventory;

• risks related to our failure to engage our customers, anticipate customer demand, expectations, and changing fashion trends, and manage our inventory and product delivery;

• risks related to our ability to successfully invest in and execute on our customer, digital and omnichannel initiatives;

3 unchanged sentences

• risks related to our ability to execute on, and maintain the success of, our strategic and growth initiatives, including those outlined in our 2025 Always Forward Plan;

• risks related to global operations, including changes in the economic or political conditions where we sell or source our products or changes in import tariffs or trade restrictions;

• risks related to global operations, including changes in the economic or political conditions where we sell or source our products or changes in import tariffs or trade restrictions, including implications related to the change in administration as a result of the 2024 U.S.

presidential election;

• risks and uncertainty related to adverse public health developments;

9 unchanged sentences

Except as may be required by applicable law, the Company assumes no obligation to publicly update or revise its forward-looking statements, including any financial targets and estimates, whether as a result of new information, future events, or otherwise.

As used herein, “Abercrombie & Fitch Co.,” “the Company,” “we,” “us,” “our,” and similar terms include Abercrombie & Fitch Co.

(“A&F”) and its subsidiaries, unless the context indicates otherwise.

As used herein, “Abercrombie & Fitch Co.,” “A&F,” “the Company,” “we,” “us,” “our,” and similar terms include Abercrombie & Fitch Co.

and its subsidiaries, unless the context indicates otherwise.

Abercrombie & Fitch Co.

4 unchanged sentences

• Current Trends and Outlook .

A discussion related to certain of the Company’s focus areas for the current fiscal year and a discussion of certain risks and challenges, as well as a summary of the Company’s performance for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023.

A discussion related to certain of the Company’s focus areas for the current fiscal year and a discussion of certain risks and challenges, as well as a summary of the Company’s performance for the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023.

• Results of Operations .

An analysis of certain components of the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023.

An analysis of certain components of the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income for the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023.

• Liquidity and Capital Resources .

A discussion of the Company’s financial condition, changes in financial condition and liquidity as of August 3, 2024, which includes (i) an analysis of financial condition as compared to February 3, 2024;

(ii) an analysis of changes in cash flows for the twenty-six weeks ended August 3, 2024, as compared to the twenty-six weeks ended July 29, 2023;

A discussion of the Company’s financial condition, changes in financial condition and liquidity as of November 2, 2024, which includes (i) an analysis of financial condition as compared to February 3, 2024;

(ii) an analysis of changes in cash flows for the thirty-nine weeks ended November 2, 2024, as compared to the thirty-nine weeks ended October 28, 2023;

and (iii) an analysis of liquidity, including availability under the Company’s ABL Facility (as defined below), the Company’s share repurchase program, and outstanding debt and covenant compliance.

49 unchanged sentences

Current macroeconomic conditions and impact of inflation

Macroeconomic conditions, including inflation, higher interest rates, the geopolitical landscape, political uncertainty including elections in several countries, foreign exchange rate fluctuations, and declines in consumer discretionary spending continue to negatively impact the global economy.

In periods of perceived or actual unfavorable economic conditions, consumers may reallocate available discretionary spending, which may adversely impact demand for our products.

In addition, while cotton and raw material costs stabilized during the second quarter of Fiscal 2024, freight costs have been increasing since the start of the second quarter of Fiscal 2024.

Macroeconomic conditions, that include inflation, a volatile interest rate environment, the geopolitical landscape, global political uncertainty, including as a result of the 2024 U.S.

presidential and congressional elections, uncertainty regarding significant changes in legislation, regulations, and tariffs, foreign exchange rate fluctuations, and evolving habits in consumer discretionary spending continue to impact the global economy.

In periods of perceived or actual unfavorable economic conditions, consumers may reallocate available discretionary spending or determine that they have fewer funds available for discretionary spending, which may adversely impact demand for our products.

In addition, while cotton and raw material costs stabilized since the second quarter of Fiscal 2024, freight costs have been increasing since the start of the second quarter of Fiscal 2024.

Continued inflationary pressures and pricing volatility could further impact expenses and have a long-term impact on the Company because increasing costs may impact its ability to maintain satisfactory margins.

1 unchanged sentence

As a global multi-brand omnichannel specialty retailer, with operations in North America, Europe, the Middle East, and Asia, among other regions, management is mindful of macroeconomic risks, global challenges and the changing global geopolitical environment.

Starting in late Fiscal 2023, disruptions to ocean vessels in the Red Sea resulted in delayed deliveries to the EMEA region.

Such disruptions have also increased freight costs, which may continue to impact the Company through the remainder of Fiscal 2024.

The global supply chain also continues to be negatively impacted by various factors, including disruptions in major maritime routes, port congestion, higher operational costs, and increased competition for supply chain availability due to uncertainty regarding potential tariffs.

The Company has taken certain mitigating actions in response to these disruptions, including increasing air freight usage where appropriate and prioritizing critical orders earlier to allow for longer lead times.

Further mitigating actions may be needed, particularly if there is prolonged or escalating conflict in the Red Sea.

Further mitigating actions may be needed, particularly if there is prolonged port congestion or transportation delays, and could result in higher freight costs in the near-term and beyond.

Management continues to monitor global events and assess the potential impacts that these and similar events may have on the business in future periods.

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The Company continues to use data to inform its focus on aligning store square footage with digital penetration, and has delivered new store experiences across brands during Fiscal 2024.

Through the end of the second fiscal quarter, the Company opened 18 new stores, remodeled 23 stores and right-sized seven stores while closing 26 stores.

As part of this focus, the Company’ store investment plan includes delivering approximately 60 new stores, along with approximately 60 remodels and rightsizes, while closing approximately 40 stores, during Fiscal 2024, pending negotiations with our landlord partners.

Through the end of the third fiscal quarter, the Company opened 39 new stores, remodeled 30 stores and right-sized eight stores while closing 31 stores.

As part of this focus, the Company’s store investment plan includes delivering approximately 20 net store openings during Fiscal 2024 consisting of opening approximately 60 new stores, while closing approximately 40 stores, pending negotiations with our landlord partners.

Additionally, the Company expects approximately 60 remodels and rightsizes, during Fiscal 2024, pending negotiations with our landlord partners.

Future closures could be completed through natural lease expirations, while certain other leases include early termination options that can be exercised under specific conditions.

12 unchanged sentences

Summary of results

The following provides a summary of results for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023:

The following provides a summary of results for the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023:

GAAP Non-GAAP (1)

Thirteen Weeks Ended August 3, 2024

July 29, 2023

August 3, 2024

July 29, 2023

Thirteen Weeks Ended November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Net sales (in thousands)

6 unchanged sentences

Operating income margin

14.8 % 13.1 %

Net income attributable to A&F (in thousands)

1 unchanged sentence

Net income per share attributable to A&F 2.50 1.83

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

Net sales $ 3,363,670 $ 2,827,770

10 unchanged sentences

Refer to the discussion below in “ NON-GAAP FINANCIAL MEASURES ,” for further details on the comparable sales calculation.

Certain components of the Company’s Condensed Consolidated Balance Sheets as of August 3, 2024 and February 3, 2024 were as follows:

(in thousands) August 3, 2024 February 3, 2024

Certain components of the Company’s Condensed Consolidated Balance Sheets as of November 2, 2024 and February 3, 2024 were as follows:

(in thousands) November 2, 2024 February 3, 2024

Cash and equivalents $ 683,089 $ 900,884

1 unchanged sentence

Gross long-term borrowings outstanding, carrying amount — 223,214

Certain components of the Company’s Condensed Consolidated Statements of Cash Flows for the twenty-six week periods ended August 3, 2024 and July 29, 2023 were as follows:

(in thousands) August 3, 2024 July 29, 2023

Certain components of the Company’s Condensed Consolidated Statements of Cash Flows for the thirty-nine week periods ended November 2, 2024 and October 28, 2023 were as follows:

(in thousands) November 2, 2024 October 28, 2023

Net cash provided by operating activities $ 402,756 $ 350,142

6 unchanged sentences

Net sales by segment are presented by attributing revenues on the basis of the segment that fulfills the order.

The Company’s net sales by reportable segment for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023 were as follows:

The Company’s net sales by reportable segment for the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023 were as follows:

Thirteen Weeks Ended

(in thousands, except ratios) August 3, 2024 July 29, 2023 $ Change % Change Comparable

(in thousands, except ratios) November 2, 2024 October 28, 2023 $ Change % Change Comparable

Americas $ 986,449 $ 867,566 $ 118,883 14 % 16 %

2 unchanged sentences

Total $ 1,208,966 $ 1,056,431 $ 152,535 14 16

Twenty-Six Weeks Ended

(in thousands, except ratios) August 3, 2024 July 29, 2023 $ Change % Change Comparable

Thirty-Nine Weeks Ended

(in thousands, except ratios) November 2, 2024 October 28, 2023 $ Change % Change Comparable

Americas $ 2,707,794 $ 2,264,415 $ 443,379 20 % 18 %

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2024 3Q Form 10-Q

For the second quarter of Fiscal 2024, net sales increased 21% as compared to the second quarter of Fiscal 2023.

The increase was primarily attributable to a double-digit increase in average unit retail (“AUR”) from lower promotional activity and category mix into higher ticket items.

Mid-single digit growth in unit volume also contributed to the increase in net sales, following increases in traffic and transactions in company owned and operated channels.

Additionally, there was a benefit of approximately $30 million due to the timing of sales volume based on the impact of the calendar shift in Fiscal 2024 due to the 53rd selling week in Fiscal 2023.

The year-over-year increase in net sales reflects positive comparable sales of 18%, as compared to the second quarter of Fiscal 2023.

For the third quarter of Fiscal 2024, net sales increased 14% as compared to the third quarter of Fiscal 2023.

The increase was primarily attributable to a high-single digit growth in unit volume from traffic growth in comparable company owned and operated stores and digital channels.

Mid-single digit increase in average unit retail (“AUR”) from lower promotional activity and category mix into higher ticket items also contributed to the increase in net sales.

The increase was partially offset by approximately $10 million due to the timing of sales volume based on the impact of the calendar shift in fiscal 2024 due to the 53rd selling week in fiscal 2023.

The year-over-year increase in net sales reflects positive comparable sales of 16%, as compared to the third quarter of Fiscal 2023.

• Net sales growth in the Americas region of 14%.

The increase was attributable to a higher AUR from lower promotional activity and category mix into higher ticket items.

Growth in unit volume as a result of increased traffic and transactions in company owned and operated stores and digital channels also contributed to the increase in net sales.

The increase was attributable to both higher AUR from lower promotional activity and category mix into higher ticket items and direct channel unit volume growth from increased traffic and transactions in company owned and operated stores and digital channels.

• Net sales growth in the EMEA region of 15%.

The increase was attributable to a higher AUR from lower promotional activity and category mix into higher ticket items.

Growth in unit volume as a result of increased traffic and transactions in company owned and operated stores and digital channels also contributed to the increase in net sales.

The increase was attributable to both higher AUR from lower promotional activity and category mix into higher ticket items and unit volume growth from increased traffic and transactions in company owned and operated stores and digital channels.

• In the APAC region net sales grew 32% and 16% on a comparable sales basis.

Comparable sales growth percentage is higher than net sales growth percentage, as comparable sales excludes the impact of store closures during the period and the effects of foreign currency, both of which had a negative impact on net sales growth.

In the third quarter, APAC net sales growth had an outsized benefit relative to total company from the calendar shift of the 53rd selling week.

This third quarter benefit will be offset in the fourth quarter.

Comparable sales growth led by high unit sales across company owned and operated stores and digital channels.

For the year-to-date period of Fiscal 2024, net sales increased 19%, as compared to the year-to-date period of Fiscal 2023.

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The year-over-year increase in net sales reflects positive comparable sales of 18%, as compared to the year-to-date period of Fiscal 2023.

• Net sales growth in the Americas region of 23%.

• Net sales growth in the Americas region of 20% and 18% on a comparable basis.

The increase was attributable to a higher AUR from lower promotional activity and category mix into higher ticket items.

Growth in unit volume as a result of increased traffic and transactions in company owned and operated stores and digital channels also contributed to the increase in net sales.

• Net sales growth in the EMEA region of 18%.

• Net sales growth in the EMEA region of 17% on both a reported and comparable sales basis.

The increase was attributable to a higher AUR from lower promotional activity and category mix into higher ticket items.

Growth in unit volume as a result of increased traffic and transactions in company owned and operated stores and digital channels also contributed to the increase in net sales.

Growth in unit volume as a result of increased traffic and transactions in company owned and operated stores and digital channels contributed to the increase in net sales.

• In the APAC region net sales grew 15% and 20% on a comparable sales basis.

The Company’s net sales by brand for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023 were as follows:

The Company’s net sales by brand for the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023 were as follows:

Thirteen Weeks Ended

(in thousands, except ratios) August 3, 2024 July 29, 2023 $ Change % Change Comparable

(in thousands, except ratios) November 2, 2024 October 28, 2023 $ Change % Change Comparable

Abercrombie (2)

3 unchanged sentences

Total $ 1,208,966 $ 1,056,431 $ 152,535 14 16

Twenty-Six Weeks Ended

(in thousands, except ratios) August 3, 2024 July 29, 2023 $ Change % Change Comparable

Thirty-Nine Weeks Ended

(in thousands, except ratios) November 2, 2024 October 28, 2023 $ Change % Change Comparable

Abercrombie (2)

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Thirteen Weeks Ended

August 3, 2024 July 29, 2023

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net sales % of Net sales BPS Change

Cost of sales, exclusive of depreciation and amortization $ 422,034 34.9 % $ 370,762 35.1 % (20)

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change

Cost of sales, exclusive of depreciation and amortization $ 1,163,019 34.6 % $ 1,047,927 37.1 % (250)

For the second quarter of Fiscal 2024, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased by approximately 240 basis points, as compared to the second quarter of Fiscal 2023.

The percentage decline was primarily attributable to cost of sales leverage from a higher AUR on reduced promotions, as well as a benefit in product costs, as certain raw material prices have declined.

These benefits were partially offset by higher freight costs compared to the second quarter of Fiscal 2023.

For the third quarter of Fiscal 2024, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased by approximately 20 basis points, as compared to the third quarter of Fiscal 2023.

The percentage decline was primarily attributable to cost of sales leverage from a higher AUR on reduced promotions, partially offset by higher freight costs compared to the third quarter of Fiscal 2023.

For the year-to-date period of Fiscal 2024, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased by approximately 250 basis points as compared to the year-to-date period of Fiscal 2023.

3 unchanged sentences

Thirteen Weeks Ended

August 3, 2024 July 29, 2023

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net sales % of Net sales BPS Change

Gross profit, exclusive of depreciation and amortization $ 786,932 65.1 % $ 685,669 64.9 % 20

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change

4 unchanged sentences

Thirteen Weeks Ended

August 3, 2024 July 29, 2023

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net sales % of Net sales BPS Change

Stores and distribution expense $ 419,235 34.7 % $ 383,883 36.3 % (160)

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change

Stores and distribution expense $ 1,181,154 35.1 % $ 1,072,662 37.9 % (280)

For the second quarter of Fiscal 2024, stores and distribution expense increased by $38 million compared to the second quarter of 2023.

Stores and distribution expense as a percentage of net sales decreased 330 basis points, as compared to the second quarter of Fiscal 2023.

The decrease in rate was primarily driven by expense leverage as a result of net sales growth, including approximately 300 basis points in stores expense, primarily relating to store occupancy and store payroll, and 30 basis points in distribution center and order fulfillment costs as compared to the second quarter of Fiscal 2023.

For the third quarter of Fiscal 2024, stores and distribution expense increased by $35 million compared to the third quarter of 2023.

Stores and distribution expense as a percentage of net sales decreased 160 basis points, as compared to the third quarter of Fiscal 2023.

The decrease in rate was primarily driven by expense leverage from higher net sales, including approximately 110 basis points in stores expense, primarily relating to store occupancy and store payroll, and approximately 60 basis points in distribution center and order fulfillment costs as compared to the third quarter of Fiscal 2023.

For the year-to-date period of Fiscal 2024, stores and distribution expense increased by $108 million and decreased 280 basis points, as a percentage of net sales, as compared to the year-to-date period of Fiscal 2023.

The decrease as a percent of net sales was primarily driven by expense leverage as a result of net sales growth, including approximately 340 basis points in stores expense, primarily relating to store occupancy and store payroll, and 20 basis points in distribution center costs compared to the year-to-date period of Fiscal 2023.

The decrease as a percent of net sales was primarily driven by expense leverage from higher net sales, including approximately 250 basis points in stores expense, primarily relating to store occupancy and store payroll, and 30 basis points in distribution center and order fulfillment costs compared to the year-to-date period of Fiscal 2023.

Marketing, general and administrative expense

Thirteen Weeks Ended

August 3, 2024 July 29, 2023

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net sales % of Net sales BPS Change

Marketing, general and administrative expense $ 190,001 15.7 % $ 162,510 15.4 % 30

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change

Marketing, general and administrative expense $ 538,352 16.0 % $ 449,643 15.9 % 10

For the second quarter of Fiscal 2024, marketing, general and administrative expense increased by $26 million compared to the second quarter of Fiscal 2023.

Marketing, general and administrative expense as a percentage of net sales decreased 40 basis points, as compared to the second quarter of Fiscal 2023.

The decrease in rate was primarily driven by expense leverage as a result of net sales growth, including approximately 40 basis points in compensation expense slightly offset by a 30 basis point increase in marketing expense.

For the year-to-date period of Fiscal 2024, marketing, general and administration expense increased by $61 million and remained approximately flat, as a percentage of net sales, as compared to the year-to-date period of Fiscal 2023, with a 20 basis point decrease in compensation and other expense, offset by a 30 basis point increase in marketing expense.

Other operating income, net

For the third quarter of Fiscal 2024, marketing, general and administrative expense increased by $27 million compared to the third quarter of Fiscal 2023.

Marketing, general and administrative expense as a percentage of net sales increased 30 basis points, as compared to the third quarter of Fiscal 2023.

The increase in expense rate was primarily driven by an 80 basis point increase in marketing expense, primarily due to media campaigns and content, partially offset by 50 basis points of other general and administrative costs primarily relating to payroll expense leverage from higher net sales.

For the year-to-date period of Fiscal 2024, marketing, general and administration expense increased by $89 million and increased 10 basis points as a percentage of net sales, as compared to the year-to-date period of Fiscal 2023, with a 50 basis point increase in marketing expense, primarily due to media campaigns and content, partially offset by a 40 basis point decrease in other general and administrative costs primarily relating to payroll expense leverage from higher net sales.

Other operating (income) loss, net

Thirteen Weeks Ended

August 3, 2024 July 29, 2023

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net sales % of Net sales BPS Change

Other operating income, net $ 67 — % $ 2,694 0.3 % (30)

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

Other operating (income) loss, net $ (1,586) (0.1) % $ 1,256 0.1 % (20)

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change

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Thirteen Weeks Ended

August 3, 2024 July 29, 2023

(in thousands, except ratios) % of Net sales % of Net sales BPS Change

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net sales (1)

% of Net sales (1)

Americas $ 304,542 30.9 % $ 257,440 29.7 % 120

EMEA 21,708 12.0 20,795 13.2 (120)

APAC (4,181) (10.2) (3,261) (10.6) 40

Operating loss not attributed to segments (142,787) (136,954)

Operating income $ 179,282 14.8 $ 138,020 13.1 170

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net Sales (1)

% of Net Sales (1)

Americas $ 832,009 30.7 % $ 590,948 26.1 % 460

EMEA 84,249 15.4 49,170 10.5 490

APAC (7,748) (7.1) (6,272) (6.6) (50)

Operating loss not attributed to segments (423,754) (371,976)

Operating income $ 484,756 14.4 $ 261,870 9.3 510

3 unchanged sentences

Adjusted non-GAAP operating income $ 484,756 14.4 $ 266,306 9.4 500

(1) Segment operating income as a percentage of net sales is calculated by attributing the segment’s operating income with the respective net sales in the segment.

(2) Refer to “ NON-GAAP FINANCIAL MEASURES ” for further details.

For the second quarter of Fiscal 2024, operating income increased by $86 million, or 590 basis points, as a percentage of net sales, as compared to the second quarter of Fiscal 2023.

• Operating income for the Americas region increased $98 million or 630 basis points as a percentage of net sales, as compared to the second quarter of Fiscal 2023.

The increase as a percent of sales primarily relates to positive comparable sales of 18%, relating to higher unit volume, increased AUR on reduced promotions, and expense leverage relating to payroll and occupancy expenses.

• Operating income for the EMEA region increased $8 million or 170 basis points as a percentage of net sales, as compared to the second quarter of Fiscal 2023.

For the third quarter of Fiscal 2024, operating income increased by $41 million, or 170 basis points, as a percentage of net sales, as compared to the third quarter of Fiscal 2023.

• Operating income for the Americas region increased $47 million or 120 basis points as a percentage of region net sales, as compared to the third quarter of Fiscal 2023.

The increase as a percent of sales primarily relates to positive comparable sales of 16%, relating to higher unit volume, increased AUR on reduced promotions, and expense leverage relating to payroll and occupancy expenses.

• Operating (loss) for the APAC region increased by $(3) million or (840) basis points as a percentage of net sales, as compared to the second quarter of Fiscal 2023.

The decrease as a percent of sales primarily relates to increased marketing investments.

• Operating income for the EMEA region increased $1 million and decreased 120 basis points as a percentage of region net sales, as compared to the third quarter of Fiscal 2023.

The decrease as a percent of net sales is primarily attributed to higher freight costs and increased marketing expense, partially offset by expense leverage from comparable sales growth of 13%.

• Operating (loss) for the APAC region increased by $(1) million or 40 basis points as a percentage of region net sales, as compared to the third quarter of Fiscal 2023.

The loss was impacted by store impairments taken during the quarter, which more than offset the expense leverage from comparable sales growth of 16%.

For the year-to-date period of Fiscal 2024, operating income increased by $223 million, or 510 basis points, as a percentage of net sales as compared to the year-to-date period of Fiscal 2023.

• Operating income for the Americas increased $194 million or 680 basis points as a percentage of net sales as compared to the year-to-date period of Fiscal 2023.

• Operating income for the Americas increased $241 million or 460 basis points as a percentage of region net sales as compared to the year-to-date period of Fiscal 2023.

• Operating income for EMEA increased $34 million or 800 basis points as a percentage of net sales as compared to the year-to-date period of Fiscal 2023.

• Operating income for EMEA increased $35 million or 490 basis points as a percentage of region net sales as compared to the year-to-date period of Fiscal 2023.

The increase as a percent of sales primarily relates to positive comparable sales of 17%, relating to higher unit volume, increased AUR on reduced promotions, and expense leverage relating to payroll and occupancy expenses.

• Operating (loss) for APAC increased $(1) million or (50) basis points as a percentage of net sales as compared to the year-to-date period of Fiscal 2023 as a result of increased marketing investments.

• Operating (loss) for APAC increased $(1) million or 50 basis points as a percentage of region net sales as compared to the year-to-date period of Fiscal 2023.

The loss was impacted by store impairments and marketing investments, which more than offset the expense leverage from comparable sales growth of 20%.

Abercrombie & Fitch Co.

2 unchanged sentences

Thirteen Weeks Ended

August 3, 2024 July 29, 2023

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net sales % of Net sales BPS Change

2 unchanged sentences

Interest (income) expense, net $ (8,733) (0.7) $ 671 0.1 (80)

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change

2 unchanged sentences

Interest (income) expense, net $ (18,959) (0.6) $ 5,211 0.2 (80)

For the second quarter of Fiscal 2024, interest (income) expense, net increased $6.3 million, as compared to the second quarter of Fiscal 2023.

The increase was a result of an increase in interest income due to the increase in balance and rates received on deposits and money market accounts as well as lower borrowings due to repurchases of Senior Secured Notes in the open market.

For the year-to-date period of Fiscal 2024, interest expense, net increased $14.8 million, as compared to the year-to-date period of Fiscal 2023.

The increase was a result of higher interest income due to the increase in balance and rates received on deposits and money market accounts as well as lower borrowings due to repurchases of Senior Secured Notes in the open market.

For the third quarter of Fiscal 2024, interest (income) expense, net increased $9.4 million, as compared to the third quarter of Fiscal 2023.

The increase in interest income was due to the increased balance on time deposits and money market accounts compared to the third quarter of Fiscal 2023.

Additionally, interest expense decreased compared to the third quarter of Fiscal 2023 as result of the repurchases in late Fiscal 2023 and Fiscal 2024 and redemption of the remaining outstanding Senior Secured Notes on July 15, 2024.

For the year-to-date period of Fiscal 2024, interest (income) expense, net increased $24.2 million, as compared to the year-to-date period of Fiscal 2023.

The increase was a result of higher interest income due to the increased balance on time deposits and money market accounts.

Additionally, interest expense decreased compared to the year-to-date period Fiscal 2023 as result of the repurchases in late Fiscal 2023 and Fiscal 2024 and redemption of the remaining outstanding Senior Secured Notes on July 15, 2024.

Income tax expense

Thirteen Weeks Ended

August 3, 2024 July 29, 2023

November 2, 2024 October 28, 2023

(in thousands, except ratios) Effective Tax Rate Effective Tax Rate

Income tax expense $ 54,151 28.8 % $ 39,617 28.8 %

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

(in thousands, except ratios) Effective Tax Rate Effective Tax Rate

5 unchanged sentences

Refer to “ Operating income ” and “ NON-GAAP FINANCIAL MEASURES ” for details of pre-tax excluded items.

Compared with the second quarter of Fiscal 2023, the change in the effective tax rates during the second quarter of Fiscal 2024 is due to jurisdictional mix and higher levels of pre-tax income.

Compared with the year-to-date period of 2023, the change in the effective tax rates during Fiscal 2024 is due to jurisdictional mix and higher levels of pre-tax income offset by a larger tax benefit on share-based compensation.

4 unchanged sentences

Thirteen Weeks Ended

August 3, 2024 July 29, 2023

November 2, 2024 October 28, 2023

(in thousands) % of Net sales % of Net sales BPS Change

Net income attributable to A&F $ 131,979 10.9 % $ 96,211 9.1 % 180

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

(in thousands) % of Net Sales % of Net Sales BPS Change

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Thirteen Weeks Ended

August 3, 2024 July 29, 2023 $ Change

November 2, 2024 October 28, 2023 $ Change

Net income per diluted share attributable to A&F

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$ 2.50 $ 1.90 $ 0.60

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023 $ Change

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023 $ Change

Net income per diluted share attributable to A&F

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Thirteen Weeks Ended

August 3, 2024 July 29, 2023

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net sales % of Net sales BPS Change

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$ 218,848 18.1 $ 171,156 16.2 190

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

(in thousands, except ratios) % of Net sales % of Net sales BPS Change

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LIQUIDITY AND CAPITAL RESOURCES

The Company’s capital allocation strategy and priorities are reviewed by A&F’s Board of Directors quarterly, considering both liquidity and valuation factors.

The Company’s capital allocation strategy and priorities are reviewed by the Board of Directors quarterly, considering both liquidity and valuation factors.

The Company believes that it will have adequate liquidity to fund operating activities for the next twelve months.

The Company monitors market conditions and may in the future determine whether and when to repurchase shares of its Common Stock.

For a discussion of the Company’s share repurchase activity and suspended dividend program, please see below under “ Share repurchases and dividends .”

For a discussion of the Company’s share repurchase activity, please see below under “ Share repurchases and dividends .”

Primary sources and uses of cash

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Over the next twelve months, the Company expects its primary cash requirements to be directed towards prioritizing investments in the business and continuing to fund operating activities, including the acquisition of inventory, obligations related to compensation, marketing, data and technology, leases and any lease buyouts or modifications it may exercise, taxes and other operating activities.

In addition, management continuously evaluates potential opportunities to strategically deploy excess cash and/or deleverage the balance sheet, in consideration of on various factors, such as market and business conditions, and the Company’s ability to accelerate investments in the business.

In addition, management continuously evaluates potential opportunities to strategically deploy excess cash and/or deleverage the balance sheet, in consideration of various factors, such as market and business conditions, and the Company’s ability to accelerate investments in the business.

Such opportunities may include, but are not limited to, share repurchases.

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Historically, the Company has utilized free cash flow generated from operations to fund any discretionary capital expenditures, which have been prioritized towards new store experiences, as well as digital and omnichannel investments, and information technology.

For the year-to-date period ended August 3, 2024, the Company invested $81.6 million towards capital expenditures.

For the year-to-date period ended November 2, 2024, the Company invested $132.0 million towards capital expenditures.

Total capital expenditures for Fiscal 2024 are expected to be approximately $170 million.

The Company measures liquidity using total cash and cash equivalents and incremental borrowing available under the ABL Facility.

As of August 3, 2024, the Company had cash and cash equivalents of $738.4 million and total liquidity of approximately $1.2 billion, compared with cash and cash equivalents of $900.9 million and total liquidity of approximately $1.2 billion at the beginning of Fiscal 2024.

As of November 2, 2024, the Company had cash and cash equivalents of $683.1 million and total liquidity of approximately $1.1 billion, compared with cash and cash equivalents of $900.9 million and total liquidity of approximately $1.2 billion at the beginning of Fiscal 2024.

Share repurchases and dividends

In November 2021, A&F’s Board of Directors approved a $500 million share repurchase authorization, replacing the prior 2021 share repurchase authorization of 10.0 million shares, which had approximately 3.9 million shares remaining available.

During the year-to-date period ended August 3, 2024, the Company repurchased approximately 0.2 million shares of its Common Stock pursuant to this share repurchase authorization for approximately $30.0 million.

As of August 3, 2024 t he Company had $202 million in share repurchases remaining under the authorization approved in November 2021.

In November 2021, the Board of Directors approved a $500 million share repurchase authorization, replacing the prior 2021 share repurchase authorization of 10.0 million shares, which had approximately 3.9 million shares remaining available.

During the year-to-date period ended November 2, 2024, the Company repurchased approximately 0.9 million shares of its Common Stock pursuant to this share repurchase authorization for approximately $129.8 million.

As of November 2, 2024 t he Company had $102 million in share repurchases remaining under the authorization approved in November 2021.

Historically, the Company has repurchased shares of its Common Stock from time to time, which repurchases are dependent on excess liquidity, market conditions and business conditions, with the objectives of returning excess cash to shareholders and offsetting dilution from issuances of Common Stock associated with the exercise of employee stock appreciation rights and the vesting of restricted stock units.

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The Company may in the future review its dividend program to determine, in light of facts and circumstances at that time, whether and when to reinstate.

Any dividends are declared at the discretion of A&F’s Board of Directors.

A&F’s Board of Directors reviews and establishes a dividend amount, if at all, based on A&F’s financial condition, results of operations, capital requirements, current and projected cash flows, business prospects and other factors, including any restrictions under the Company’s agreements related to the ABL Facility.

Any dividends are declared at the discretion of the Company’s Board of Directors.

The Board of Directors reviews and establishes a dividend amount, if at all, based on the Company’s financial condition, results of operations, capital requirements, current and projected cash flows, business prospects and other factors, including any restrictions under the Company’s agreements related to the ABL Facility.

There can be no assurance that the Company will declare and pay dividends in the future or, if dividends are paid, that they will be in amounts similar to past dividends.

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Credit facility

On August 2, 2024, A&F, as parent and a guarantor, A&F Management, as lead borrower, and certain of A&F’s direct and indirect wholly-owned subsidiaries, as additional borrowers and guarantors, entered into the Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”), together with the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent for the lenders.

The Second Amendment amends the existing Amended and Restated Credit Agreement, dated as of April 29, 2021 (the “ABL Credit Agreement”), which provided for a $400 million senior secured asset-based revolving credit facility.

On August 2, 2024, A&F, as parent and a guarantor, A&F Management, as lead borrower, and certain of A&F’s direct and indirect wholly-owned subsidiaries, as additional borrowers and guarantors, entered into the Second Amendment, together with the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent for the lenders.

The Second Amendment amends the existing ABL Credit Agreement, which provided for a $400 million senior secured asset-based revolving credit facility.

The Company incurred customary fees and expenses in connection with the entry into the Second Amendment.

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• from 1.50% to 1.75% when average availability is less than 50% of the Loan Cap.

As of August 3, 2024, the Company did not have any borrowings outstanding under the ABL Facility.

Details regarding the remaining borrowing capacity under the ABL Facility as of August 3, 2024 are as follows:

(in thousands) August 3, 2024

As of November 2, 2024, the Company did not have any borrowings outstanding under the ABL Facility.

Details regarding the remaining borrowing capacity under the ABL Facility as of November 2, 2024 are as follows:

(in thousands) November 2, 2024

Loan cap $ 500,000

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

As of August 3, 2024, $286.2 million of the Company’s $738.4 million of cash and equivalents were held by foreign affiliates.

As of November 2, 2024, $262.8 million of the Company’s $683.1 million of cash and equivalents were held by foreign affiliates.

Refer to Note 9, “ INCOME TAXES .”

2 unchanged sentences

Analysis of cash flows

The table below provides certain components of the Company’s Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended August 3, 2024 and July 29, 2023:

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

The table below provides certain components of the Company’s Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended November 2, 2024 and October 28, 2023:

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

(in thousands)

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Cash and equivalents, and restricted cash and equivalents, end of period $ 690,997 $ 658,128

Operating activities - During the year-to-date period ended August 3, 2024, net cash provided by operating activities included increased cash receipts as a result of the 22% year-over-year increase in net sales.

During the year-to-date period ended July 29, 2023, net cash used for operating activities included increased cash receipts as a result of the 9% year-over-year increase in net sales, as well as increased payments to vendors in the fourth quarter of Fiscal 2022, which resulted in lower cash payments in the first quarter of Fiscal 2023.

Investing activities - During the year-to-date period ended August 3, 2024, net cash used for investing activities was primarily used for capital expenditures of $81.6 million, as well as the purchase of $15 million of marketable securities.

Net cash used for investing activities for the year-to-date period ended July 29, 2023 was primarily used for capital expenditures of $89.8 million.

Financing activities - During the year-to-date period ended August 3, 2024, net cash used for financing activities included the repurchase of $9.3 million in the open market and redemption of $214.0 million of outstanding Senior Secured Notes, $67 million related to shares of Common Stock withheld (repurchased) to cover tax withholdings upon vesting of share-based compensation awards, and the purchase of approximately 0.2 million shares of Common Stock with a market value of approximately $30.0 million.

During the year-to-date period ended July 29, 2023, net cash used for financing activities included amounts related to shares of Common Stock withheld (repurchased) to cover tax withholdings upon vesting of share-based compensation awards.

Operating activities - During the year-to-date period ended November 2, 2024, net cash provided by operating activities included increased cash receipts as a result of the 19% year-over-year increase in net sales.

During the year-to-date period ended October 28, 2023, net cash used for operating activities included increased cash receipts as a result of the 13% year-over-year increase in net sales, as well as increased payments to vendors in the fourth quarter of Fiscal 2022, which resulted in lower cash payments in the first quarter of Fiscal 2023.

Investing activities - During the year-to-date period ended November 2, 2024, net cash used for investing activities was primarily used for capital expenditures of $132 million, as well as the purchase of $55 million of marketable securities.

Net cash used for investing activities for the year-to-date period ended October 28, 2023 was primarily used for capital expenditures of $128.6 million.

Financing activities - During the year-to-date period ended November 2, 2024, net cash used for financing activities included the repurchase of $9.3 million in the open market and the complete redemption of $214 million of outstanding Senior Secured Notes, $70 million related to shares of Common Stock withheld (repurchased) to cover tax withholdings upon vesting of share-based compensation awards, and the purchase of approximately 0.9 million shares of Common Stock with a market value of approximately $129.8 million.

During the year-to-date period ended October 28, 2023, net cash used for financing activities included amounts related to shares of Common Stock withheld (repurchased) to cover tax withholdings upon vesting of share-based compensation awards, the repurchase of Senior Secured Notes in the open market.

Contractual obligations

41 unchanged sentences

The per diluted share effect from foreign currency exchange rates is calculated using a 26% effective tax rate.

Reconciliations of non-GAAP financial metrics on a constant currency basis to financial measures calculated and presented in accordance with GAAP for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023 were as follows:

(in thousands, except change in net sales, gross profit rate, operating margin and per share data) Thirteen Weeks Ended Twenty-Six Weeks Ended

Net sales August 3, 2024 July 29, 2023 % Change August 3, 2024 July 29, 2023 % Change

Reconciliations of non-GAAP financial metrics on a constant currency basis to financial measures calculated and presented in accordance with GAAP for the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023 were as follows:

(in thousands, except change in net sales, gross profit rate, operating margin and per share data) Thirteen Weeks Ended Thirty-Nine Weeks Ended

Net sales November 2, 2024 October 28, 2023 % Change November 2, 2024 October 28, 2023 % Change

GAAP $ 1,208,966 $ 1,056,431 14 % $ 3,363,670 $ 2,827,770 19 %

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Non-GAAP on a constant currency basis $ 1,208,966 $ 1,061,720 14 % $ 3,363,670 $ 2,830,148 19 %

Gross profit, exclusive of depreciation and amortization expense August 3, 2024 July 29, 2023 BPS Change (1)

August 3, 2024 July 29, 2023 BPS Change (1)

Gross profit, exclusive of depreciation and amortization expense November 2, 2024 October 28, 2023 BPS Change (1)

November 2, 2024 October 28, 2023 BPS Change (1)

GAAP $ 786,932 $ 685,669 20 $ 2,200,651 $ 1,779,843 250

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Non-GAAP on a constant currency basis $ 786,932 $ 690,988 — $ 2,200,651 $ 1,785,972 230

Operating income August 3, 2024 July 29, 2023 BPS Change (1)

August 3, 2024 July 29, 2023 BPS Change (1)

Operating income November 2, 2024 October 28, 2023 BPS Change (1)

November 2, 2024 October 28, 2023 BPS Change (1)

GAAP $ 179,282 $ 138,020 170 $ 484,756 $ 261,870 510

4 unchanged sentences

Adjusted non-GAAP on a constant currency basis $ 179,282 $ 142,935 130 $ 484,756 $ 270,218 490

Net income per share attributable to A&F August 3, 2024 July 29, 2023 $ Change August 3, 2024 July 29, 2023 $ Change

Net income per share attributable to A&F November 2, 2024 October 28, 2023 $ Change November 2, 2024 October 28, 2023 $ Change

GAAP $ 2.50 $ 1.83 $ 0.67 $ 7.13 $ 3.25 $ 3.88

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(1) The estimated basis point change has been rounded based on the change in the percentage of net sales.

(2) Excluded items for the twenty-six weeks ended July 29, 2023 consisted of pre-tax store asset impairment charges and the tax effect of pre-tax excluded items.

(2) Excluded items for the thirty-nine weeks ended October 28, 2023 consisted of pre-tax store asset impairment charges and the tax effect of pre-tax excluded items.

Abercrombie & Fitch Co.

3 unchanged sentences

We also believe these supplemental performance measures are meaningful information for investors and other interested parties to use in computing the Company's core financial performance over multiple periods and with other companies by excluding the impact of differences in tax jurisdictions, debt service levels and capital investment.

Reconciliations of non-GAAP EBITDA and adjusted EBITDA to financial measures calculated and presented in accordance with GAAP for the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023 were as follows:

Reconciliations of non-GAAP EBITDA and adjusted EBITDA to financial measures calculated and presented in accordance with GAAP for the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023 were as follows:

Thirteen Weeks Ended

August 3, 2024 % of

Net Sales July 29, 2023 % of

(in thousands, except ratios) November 2, 2024 % of

Net Sales October 28, 2023 % of

Net income $ 133,864 11.1 % $ 97,732 9.3 %

3 unchanged sentences

$ 218,848 18.1 $ 171,156 16.2

Twenty-Six Weeks Ended

August 3, 2024 % of

Net Sales July 29, 2023 % of

Thirty-Nine Weeks Ended

(in thousands, except ratios) November 2, 2024 % of

Net Sales October 28, 2023 % of

Net income $ 384,321 11.4 % $ 174,310 6.2 %

14 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis