Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with the Company’s Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q in “ Item 1. Financial Statements (Unaudited) ,” to which all references to Notes in MD&A are made.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Company cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this Quarterly Report on Form 10-Q or made by the Company or its management and authorized spokespeople involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond the Company’s and management’s control. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “should,” “are confident,” “will,” “could,” “outlook,” or the negative versions of those words or other comparable words, and similar expressions may identify forward-looking statements. Future economic and industry trends that could potentially impact revenue and profitability are difficult to predict. Therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. Factors that could cause results to differ from those expressed in the Company’s forward-looking statements include, but are not limited to, the risks described or referenced in Part I, Item 1A. “Risk Factors,” in the Company’s Fiscal 2025 Form 10-K and otherwise in our subsequent reports and filings with the SEC, as well as the following:
• risks and uncertainties related to global trade policy and international trade disputes, including the impact of the imposition or threat of imposition of new or increased tariffs or modification of existing tariffs by the United States or foreign governments, uncertainty regarding the timing and implementation of changes to existing tariff programs, the availability, timing, and amount of tariff refunds, or other changes to trade policies or arrangements;
• risks related to changes in global economic and financial conditions, including inflation, and resulting impacts on consumer confidence and spending, and on our operating results, financial condition, and expense management;
• risks and uncertainties related to the effectiveness and optimization of recently implemented enterprise resource planning (“ERP”) systems, including the ability to realize expected benefits and manage post-implementation activities;
• risks related to our global operations and supply chain, including political or climate-related conditions in the countries where we sell or source our products, and the resulting impacts on transportation and freight costs;
• risks related to the geopolitical landscape and ongoing armed conflicts, acts of terrorism, mass casualty events, social unrest, civil disturbance or disobedience, including regional conflicts in the Middle East, and the impact of such conflicts or events on international trade, consumer demand, supplier delivery, energy costs, or freight costs;
• risks related to natural disasters and other unforeseen catastrophic events;
• 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 failure to operate effectively in a highly competitive and constantly evolving industry;
• risks related to our ability to successfully invest in and execute on our customer, digital and omnichannel initiatives;
• risks related to our ability to successfully execute technology initiatives and partnerships, including those relating to artificial intelligence (“AI”) technology;
• risks related to our ability to execute on, and maintain the success of, our current or any future strategic and growth initiatives, including risks related to the review of strategic alternatives for our APAC business;
• risks related to the effects of seasonal fluctuations on our sales and our performance during the back-to-school and holiday selling seasons;
• risks related to fluctuations in foreign currency exchange rates;
• risks related to fluctuations in our tax obligations and effective tax rate, including as a result of earnings and losses generated from our global operations, may result in volatility in our results of operations;
• risks and uncertainty related to adverse public health developments;
• risks related to cybersecurity threats and privacy or data security breaches, and the potential loss or disruption of our information technology systems;
• risks related to the continued validity of our trademarks and our ability to protect our intellectual property;
• risks associated with corporate responsibility, including those associated with climate change;
• risks related to reputational harm to the Company, its officers, and directors;
• risks related to actual or threatened litigation; and
• uncertainties related to future legislation, regulatory reform, policy changes, or interpretive guidance on existing laws and regulations.
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In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company, or any other person, that the objectives of the Company will be achieved. The forward-looking statements included herein are based on information presently available to the management of the Company. 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.,” “A&F,” the “Company,” “we,” “us,” “our,” and similar terms include Abercrombie & Fitch Co. and its subsidiaries, unless the context indicates otherwise.
INTRODUCTION
MD&A is provided as a supplement to the accompanying Condensed Consolidated Financial Statements and notes thereto to help provide an understanding of the Company’s results of operations, financial condition, and liquidity. MD&A is organized as follows:
• Overview . A general description of the Company’s business and certain segment information.
• 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 1, 2026 and August 2, 2025.
• 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 1, 2026 and August 2, 2025.
• Liquidity and Capital Resources . A discussion of the Company’s financial condition, changes in financial condition and liquidity as of August 1, 2026, which includes (i) an analysis of financial condition as compared to January 31, 2026; (ii) an analysis of changes in cash flows for the twenty-six weeks ended August 1, 2026, as compared to the twenty-six weeks ended August 2, 2025; and (iii) an analysis of liquidity, including availability under the Company’s ABL Facility (as defined below), the Company’s share repurchase program, and covenant compliance.
• Recent Accounting Pronouncements . A discussion, as applicable, of the recent accounting pronouncements that the Company has adopted or is currently evaluating, including the dates of adoption and/or expected dates of adoption, and their anticipated effects on the Company’s Condensed Consolidated Financial Statements.
• Critical Accounting Estimates . A discussion of the accounting estimates considered to be important to the Company’s results of operations and financial condition, which typically require significant judgment and estimation on the part of management in their application.
• Non-GAAP Financial Measures . MD&A provides a discussion of certain financial measures that have been determined to not be presented in accordance with GAAP. This section includes certain reconciliations between GAAP and non-GAAP financial measures and additional details on non-GAAP financial measures, including information as to why the Company believes that the non-GAAP financial measures provided within MD&A are useful to investors.
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OVERVIEW
Business summary
The Company is a global, digitally-led omnichannel retailer. The Company offers a broad assortment of apparel, personal care products and accessories for men, women and kids, which are sold primarily through its Company-owned stores and digital channels, as well as through various third-party arrangements.
The Company manages its business on a geographic basis, consisting of three reportable segments: Americas; Europe, the Middle East and Africa (“EMEA”); and Asia-Pacific (“APAC”). Corporate functions and other income and expenses are evaluated on a consolidated basis and are not allocated to the Company’s segments, and therefore are included as a reconciling item between segment and total operating income.
The Company operates a family of brands, including Abercrombie brands and Hollister, with a shared commitment to offering products of enduring quality and exceptional comfort that support global customers on their journey to being and becoming who they are.
The Company’s fiscal year ends on the Saturday closest to January 31. All references herein to the Company’s fiscal years are as follows:
Fiscal year Year ended/ending Number of weeks
Fiscal 2025 January 31, 2026 52
Fiscal 2026 January 30, 2027 52
Fiscal 2027 January 29, 2028 52
Seasonality
Historically, the Company’s operations have been seasonal in nature and consist of two principal selling seasons: the spring season, which includes the first and second fiscal quarters (“Spring”), and the fall season, which includes the third and fourth fiscal quarters (“Fall”). Due to the seasonal nature of the retail apparel industry, the results of operations for any current period are not necessarily indicative of the results expected for the full fiscal year, and the Company could have significant fluctuations in certain asset and liability accounts. The Company historically experiences its greatest sales activity during the Fall season due to back-to-school and holiday sales periods, respectively.
CURRENT TRENDS AND OUTLOOK
Focus areas for Fiscal 2026
Over the last several years, A&F has worked to successfully transform its brands, business and culture, while delivering on its financial commitments. As the Company looks forward, it is focused on evaluating opportunities that continue to deliver sustainable, profitable growth. The Company expects to:
• Deliver Consistent Global Growth Across Brands by investing in owned-and-operated channels with the expectation of continued net sales growth, including through net new store openings, digital fulfillment, and marketing
• Expand Channels and Categories by increasing net sales growth in new and select markets through the use of franchise, wholesale, and licensing partnerships. The Company also plans to expand into new, adjacent product categories that resonate with each brand’s target customer.
• Execute a Multifaceted Strategy that includes evaluating sourcing footprint, adjusting pricing or promotions, and expense reduction initiatives to stabilize product and operating costs in attempt to meaningfully mitigate external cost pressure, including near-term tariff impacts.
• Enhance and Modernize our Key Systems and Leverage Technology to support operational productivity and to improve the customer journey.
• Execute Financial Discipline to maintain double-digit operating margins and expand net income per diluted share.
Tariffs
Changes in trade policy and related uncertainty, including enacted and proposed tariffs affecting countries from which we source a significant portion of our merchandise, have resulted in a dynamic and unpredictable trade environment that has adversely impacted our business and operations. These impacts include volatility in duties on merchandise sourced from impacted countries and added complexity to our supply chain and sourcing processes.
While certain tariffs have been struck down, modified, or replaced, other tariffs remain in effect or have subsequently been imposed under various trade authorities, including tariffs imposed pursuant to Section 301 of the Trade Act of 1974, and additional tariffs may be imposed in the future. Such tariffs may increase the cost of merchandise or materials sourced from impacted countries, adversely affect our supply chain, and negatively impact our results of operations.
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During the thirteen weeks ended August 1, 2026, the Company recognized approximately $100 million in refunds plus accrued interest of $3 million of IEEPA tariffs previously paid. The refunds received were reflected as a reduction of cost of sales, with the accrued interest reflected in interest income in the Condensed Consolidated Statements of Operations and Comprehensive Income. Subsequent to August 1, 2026, the Company received approximately $18 million in refunds related to IEEPA tariffs, of which approximately $4 million had been recognized as a receivable as of the end of the second quarter of 2026. The remaining $14 million received will be reflected as a reduction of cost of sales in the third quarter of 2026, with accrued interest reflected in interest income, in the Condensed Consolidated Statements of Operations and Comprehensive Income.
The Company continues to evaluate the impact of tariffs and other trade policies on its business and is executing against our playbook of mitigation strategies, which includes evaluating supply chain footprint changes, supply chain vendor negotiations, pursuing operating expense reductions, and determining ways to increase average unit retail (“AUR”).
Current macroeconomic conditions and global events
Macroeconomic conditions such as a volatile interest rate environment, ongoing inflation, the geopolitical landscape, and foreign exchange rate fluctuations, continue to impact the global economy. Recently, the global markets have experienced fluctuations in fuel and other energy related costs, which could lead to greater uncertainty regarding the overall economic environment and consumer spending. During periods of unfavorable economic conditions, consumers may reallocate available discretionary spending or determine that they have fewer funds available for discretionary spending, which may also adversely impact demand for our products. Continued inflationary pressures could further impact expenses and have a longer-term impact on our ability to maintain satisfactory margins.
In addition, as a global multi-brand omnichannel specialty retailer, with operations in North America, Europe, the Middle East, and Asia, among other regions, we are exposed to global events and geopolitical developments, including armed conflicts in certain regions, that may adversely impact our operations and consumer demand in affected markets. For example, armed conflicts in the Middle East have disrupted, and may continue to affect, consumer demand patterns in affected markets. Management continues to monitor global events and assess the potential impacts that these and similar events may have on the business in future periods. These events could further adversely affect its business and results of operations.
Supply chain disruptions
Global supply chain conditions continue to be affected by disruptions in major maritime routes, higher transportation and logistics costs, and increased competition for supply chain capacity due to uncertainty in the global trade environment and ongoing armed conflicts. For example, armed conflicts in the Middle East have contributed to elevated freight rates and longer transit times compared to historical levels, and prolonged or escalating conflicts could result in additional supply chain disruption, including higher energy and transportation costs (such as fuel related charges), shipping delays, or increased air freight usage to mitigate inventory delays.
Store Count
As of August 1, 2026, the Company operated 846 retail stores and the Company’s franchisees operated 61 franchise stores across the Company’s regions and brands as detailed in the table below.
Americas EMEA
APAC
Total
Company-owned
Abercrombie
246 39 30 315
Hollister
405 102 24 531
Company-owned total
651 141 54 846
Franchise
Abercrombie 19 9 9 37
Hollister 9 10 5 24
Franchise total
28 19 14 61
Total
679 160 68 907
For Company-owned gross square footage by geographic region and brand as of January 31, 2026, and February 1, 2025, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Fiscal 2025 Form 10-K.
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Global store network modernization and growth
The Company has a goal of finding the right size, right location and right economics for omni-enabled stores that cater to local customers. 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 2026 .
During the twenty-six weeks ended August 1, 2026, the Company opened 24 new stores, remodeled 40 stores and right-sized five stores, while closing seven stores. As part of this focus, the Company’s store investment plan includes delivering approximately 30 net store openings during Fiscal 2026 consisting of opening approximately 50 new stores, while closing approximately 20 stores, pending negotiations with our landlord partners. Additionally, the Company expects approximately 80 remodels and right-sizes during Fiscal 2026 , 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. The Company may also elect to exit or modify other leases, and could incur charges related to these actions.
For a discussion of material risks that have the potential to cause our actual results to differ materially from our expectations, refer to Part I, “Item 1A. Risk Factors” on the Fiscal 2025 Form 10-K.
Summary of results
The following provides a summary of results for the thirteen and twenty-six weeks ended August 1, 2026 and August 2, 2025:
GAAP Non-GAAP (1)
Thirteen Weeks Ended August 1, 2026
August 2, 2025
August 1, 2026
August 2, 2025
Net sales (in thousands)
$ 1,266,689 $ 1,208,560
Change in net sales 5 % 7 %
Comparable sales (2)
— % 3 %
Operating income (in thousands)
$ 252,700 $ 206,658 $ 168,084
Operating income margin
19.9 % 17.1 % 13.9 %
Net income attributable to A&F (in thousands)
$ 183,720 $ 141,383 $ 112,758
Net income per diluted share attributable to A&F
4.17 2.91 2.32
Twenty-Six Weeks Ended
Net sales (in thousands)
$ 2,380,510 $ 2,305,871
Change in net sales 3 % 7 %
Comparable sales (2)
— % 4 %
Operating income (in thousands)
$ 341,497 $ 308,191 $ 269,617
Operating income margin
14.3 % 13.4 % 11.7 %
Net income attributable to A&F (in thousands)
$ 250,854 $ 221,796 $ 193,171
Net income per diluted share attributable to A&F
5.59 4.47 3.90
(1) Discussion as to why the Company believes that these non-GAAP financial measures are useful to investors and a reconciliation of the non-GAAP measures to the most directly comparable financial measure calculated and presented in accordance with GAAP are provided below under “ NON-GAAP FINANCIAL MEASURES .”
(2) Comparable sales are calculated on a constant currency basis and exclude revenue other than store and digital sales. 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 1, 2026 and January 31, 2026 were as follows:
(in thousands) August 1, 2026 January 31, 2026
Cash and equivalents $ 627,716 $ 759,540
Marketable securities 10,283 25,036
Inventories 591,662 601,218
Certain components of the Company’s Condensed Consolidated Statements of Cash Flows for the twenty-six-week periods ended August 1, 2026 and August 2, 2025 were as follows:
(in thousands) August 1, 2026 August 2, 2025
Net cash provided by operating activities $ 313,401 $ 112,893
Net cash used for investing activities (114,357) (31,943)
Net cash used for financing activities (329,816) (290,713)
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RESULTS OF OPERATIONS
The estimated basis point (“BPS”) change disclosed throughout this Results of Operations section has been rounded based on the change in the percentage of net sales.
Net sales
Net sales by segment are presented by attributing revenues to a physical store location or geographical region that fulfills the order. The Company’s net sales by reportable segment for the thirteen and twenty-six weeks ended August 1, 2026 and August 2, 2025 were as follows:
Thirteen Weeks Ended
(in thousands, except ratios) August 1, 2026 August 2, 2025 $ Change % Change Comparable
Sales (1 )
By segment:
Americas $ 1,020,537 $ 974,200 $ 46,337 5 % 1 %
EMEA 201,990 197,210 4,780 2 (4)
APAC 44,162 37,150 7,012 19 13
Total $ 1,266,689 $ 1,208,560 $ 58,129 5 —
Twenty-Six Weeks Ended
(in thousands, except ratios) August 1, 2026 August 2, 2025 $ Change % Change Comparable
Sales (1)
By segment:
Americas $ 1,920,481 $ 1,849,004 $ 71,477 4 % 1 %
EMEA 369,363 382,246 (12,883) (3) (8)
APAC 90,666 74,621 16,045 22 14
Total $ 2,380,510 $ 2,305,871 $ 74,639 3 —
(1) Comparable sales are calculated on a constant currency basis. Refer to “ NON-GAAP FINANCIAL MEASURES , ” for further details on the comparable sales calculation.
For the second quarter of Fiscal 2026, net sales increased 5% on a reported basis and were flat on a comparable sales basis, as compared to the second quarter of Fiscal 2025. The reported increase was primarily attributable to mid-single-digit AUR growth, driven by selected changes to tickets and promotions, and an increase in new owned and operated stores, which was partially offset by a low-single-digit decline in unit volume. The spread between net sales and comparable net sales is primarily attributable to net new store openings and third-party channel performance. On a geographic basis for the second quarter of Fiscal 2026:
• Net sales growth in the Americas region of 5% and 1% on a reported and comparable sales basis, respectively. The increase on a reported basis was primarily attributable to mid-single-digit AUR growth, with selected changes to tickets and promotions, partially offset by a low-single-digit decline in unit volume. The spread between net sales and comparable net sales is primarily attributable to net new store openings and third-party channel performance.
• Net sales growth in the EMEA region of 2% on a reported basis and net sales decline of 4% on a comparable sales basis. The increase on a reported basis was primarily attributable to low-single-digit AUR growth, with selected lower promotional activity, partially offset by a low-single-digit decline in unit volume. The spread between net sales and comparable net sales is primarily attributable to net new store openings and third-party channel performance.
• Net sales growth in the APAC region of 19% and 13% on a reported and comparable sales basis, respectively. The increase on a reported basis was led by low-double-digit AUR growth, lower promotional activity, higher third-party volume, and mid-single-digit growth in unit volume. The spread between net sales and comparable net sales is primarily attributable to third-party channel performance and favorable foreign currency.
For the year-to-date period of Fiscal 2026 , net sales increased 3% on a reported basis and were flat on a comparable sales basis, as compared to the year-to-date period of Fiscal 2025. The increase on a reported basis was primarily attributable to mid-single-digit AUR growth, driven by selected changes to tickets and promotions, as well as the addition of new owned and operated stores and favorable foreign currency impacts, partially offset by a low-single-digit decline in unit volume. The spread between net sales and comparable net sales is primarily attributable to net new store openings and third-party channel performance. On a geographic basis for the year-to-date period of Fiscal 2026:
• Net sales growth in the Americas region of 4% and 1% on a reported and comparable basis, respectively. The increase on a reported basis was led by mid-single-digit AUR growth, with selected changes to tickets and promotions, with around flat unit volume. The spread between net sales and comparable net sales is primarily attributable to net new store openings.
• Net sales decline in the EMEA region of 3% and 8% on a reported and comparable basis, respectively. The decline on a reported basis was attributable to lower third-party volume, and a mid-single-digit decline in unit volume, partially offset by low-single-digit AUR growth and favorable foreign currency. The spread between net sales and comparable net sales is primarily attributable to net new store openings, third-party channel performance and favorable foreign currency.
• Net sales growth in the APAC region of 22% and 14% on a reported and comparable sales basis, respectively. The increase on a reported basis was attributable to high-single digit AUR growth and high-single-digit unit volume growth, coupled with higher third-party volume and favorable foreign currency. The spread between net sales and comparable net sales is primarily attributable to third-party channel performance, and favorable foreign currency.
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The Company’s net sales by brand for the thirteen and twenty-six weeks ended August 1, 2026 and August 2, 2025 were as follows:
Thirteen Weeks Ended
(in thousands, except ratios) August 1, 2026 August 2, 2025 $ Change % Change Comparable
Sales (1)
Abercrombie
$ 596,808 $ 551,868 $ 44,940 8 % 4 %
Hollister
669,881 656,692 13,189 2 (3)
Total $ 1,266,689 $ 1,208,560 $ 58,129 5 —
Twenty-Six Weeks Ended
(in thousands, except ratios) August 1, 2026 August 2, 2025 $ Change % Change Comparable
Sales (1)
Abercrombie
$ 1,161,527 $ 1,099,815 $ 61,712 6 % 2 %
Hollister
1,218,983 1,206,056 12,927 1 (2)
Total $ 2,380,510 $ 2,305,871 $ 74,639 3 —
(1) Comparable sales are calculated on a constant currency basis. Refer to “ NON-GAAP FINANCIAL MEASURES , ” for further details on the comparable sales calculation.
Cost of sales, exclusive of depreciation and amortization
Thirteen Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) % of Net sales % of Net sales BPS Change
Cost of sales, exclusive of depreciation and amortization $ 366,109 28.9 % $ 451,590 37.4 % (850)
Twenty-Six Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change
Cost of sales, exclusive of depreciation and amortization $ 779,947 32.8 % $ 868,723 37.7 % (490)
For the second quarter of Fiscal 2026, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased by approximately 850 basis points, as compared to the second quarter of Fiscal 2025. The percentage decrease was primarily attributable to cost of sales leverage from 690 basis points net tariff benefit which includes the impact of IEEPA tariff refunds and ongoing tariff expense, AUR growth driven by selected changes to tickets and promotions, partially offset by an approximate 20 basis point increase in freight costs.
For the year-to-date period of Fiscal 2026, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased by approximately 490 basis points, as compared to the year-to-date period of Fiscal 2025. The percentage decrease was primarily attributable to cost of sales leverage from 290 basis points net tariff benefit which includes the impact of IEEPA tariff refunds and ongoing tariff expense, AUR growth driven by selected changes to tickets and promotions, and an approximate 70 basis point decline in freight costs.
Selling expense
Thirteen Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) % of Net sales % of Net sales BPS Change
Selling expense $ 444,042 35.1 % $ 375,356 31.1 % 400
Excluded item:
Litigation Settlement (1)
— — 42,874 3.5 (350)
Adjusted non-GAAP selling expense
$ 444,042 35.1 $ 418,230 34.6 50
Twenty-Six Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change
Selling expense $ 875,237 36.8 % $ 775,293 33.6 % 320
Excluded item:
Litigation Settlement (1)
— — 42,874 1.9 (190)
Adjusted non-GAAP selling expense
$ 875,237 36.8 $ 818,167 35.5 130
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(1) Refer to “ NON-GAAP FINANCIAL MEASURES ” for further details.
For the second quarter of Fiscal 2026, selling expense increased by $69 million, as compared to the second quarter of Fiscal 2025 . Selling expense as a percentage of net sales increased 400 basis points, as compared to the second quarter of Fiscal 2025. The increase in rate was primarily driven by expense deleverage, including an approximate 350 basis point prior year benefit resulting from the favorable settlement of claims to resolve payment card interchange fee litigation (the “Litigation Settlement”), and an approximate 80 basis point increase in total fulfillment expense.
For the year-to-date period of Fiscal 2026, selling expense increased by $100 million, as compared to the year-to-date period of Fiscal 2025 . Selling expense as a percentage of net sales increased 320 basis points, as compared to the year-to-date period of Fiscal 2025. The increase in rate was primarily driven by expense deleverage, including an approximate 190 basis point prior year benefit resulting from the Litigation Settlement, an approximate 110 basis point increase in store occupancy, payroll and other controllable costs, and an approximate 70 basis point increase in marketing.
General and administrative expense
Thirteen Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) % of Net sales % of Net sales BPS Change
General and administrative expense
$ 204,784 16.2 % $ 175,325 14.5 % 170
Excluded item:
Litigation Settlement (1)
— — (4,300) (0.4) 40
Adjusted non-GAAP general and administrative expense
$ 204,784 16.2 $ 171,025 14.2 200
Twenty-Six Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change
General and administrative expense
$ 387,538 16.3 % $ 350,250 15.2 % 110
Excluded item:
Litigation Settlement (1)
— — (4,300) (0.2) 20
Adjusted non-GAAP general and administrative expense
$ 387,538 16.3 $ 345,950 15.0 130
(1) Refer to “ NON-GAAP FINANCIAL MEASURES ” for further details.
For the second quarter of Fiscal 2026, general and administrative expense increased by $29 million, as compared to the second quarter of Fiscal 2025 . General and administrative expense as a percentage of net sales increased 170 basis points, as compared to the second quarter of Fiscal 2025. The increase in expense rate was primarily driven by a 120 basis point increase in total employee compensation costs, and a 70 basis point increase in other outside services, partially offset by an approximate adverse 40 basis point impact in prior year legal fees relating to the Litigation Settlement.
For the year-to-date period of Fiscal 2026, general and administrative expense increased by $37 million, as compared to the year-to-date period of Fiscal 2025. General and administrative expense as a percentage of net sales increased 110 basis points as compared to the year-to-date period of Fiscal 2025. The increase in expense rate was primarily driven by an approximate 80 basis point increase in total employee compensation costs an approximate 40 basis point increase in other outside services, offset by an approximate adverse 20 basis point impact in legal fees relating to the Litigation Settlement.
Other operating (income) loss, net
Thirteen Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) % of Net sales % of Net sales BPS Change
Other operating income, net $ (946) (0.1) % $ (369) — % (10)
Twenty-Six Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change
Other operating (income) loss, net $ (3,709) (0.2) % $ 3,414 0.1 % (30)
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Operating income
Thirteen Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) % of Net sales (1)
% of Net sales (1)
BPS Change
Americas $ 382,599 37.5 % $ 319,829 32.8 % 470
EMEA 27,244 13.5 24,530 12.4 110
APAC (3,396) (7.7) (5,967) (16.1) 840
Operating loss not attributed to segments (153,747) (131,734)
Operating income $ 252,700 19.9 $ 206,658 17.1 280
Excluded item:
Litigation Settlement (2)
— 0.0 38,574 3.2 (320)
Adjusted non-GAAP operating income
$ 252,700 19.9 $ 168,084 13.9 600
Twenty-Six Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) % of Net Sales (1)
% of Net Sales (1)
BPS Change
Americas $ 613,528 31.9 % $ 546,789 29.6 % 230
EMEA 30,648 8.3 40,564 10.6 (230)
APAC (4,281) (4.7) (10,377) (13.9) 920
Operating loss not attributed to segments (298,398) (268,785)
Operating income $ 341,497 14.3 $ 308,191 13.4 90
Excluded item:
Litigation Settlement (2)
— 0.0 38,574 1.7 (170)
Adjusted non-GAAP operating income
$ 341,497 14.3 $ 269,617 11.7 260
(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 2026, operating income increased by $46 million, or 280 basis points as a percentage of net sales, as compared to the second quarter of Fiscal 2025.
• Operating income for the Americas region increased $63 million, or 470 basis points as a percentage of region net sales, as compared to the second quarter of Fiscal 2025. The increase as a percent of sales was primarily attributed to an increase in AUR, cost of sales leverage, inclusive of IEEPA tariff refunds, partially offset by a prior year benefit from the Litigation Settlement included in selling expense, as well as deleverage in fulfillment expenses.
• Operating income for the EMEA region increased $2.7 million, or 110 basis points as a percentage of region net sales, as compared to the second quarter of Fiscal 2025. The increase as a percent of sales was primarily attributed to cost of sales leverage, partially offset by deleverage in store-related and marketing investment.
• Operating (loss) for the APAC region decreased $2.6 million or 840 basis points as a percentage of region net sales, as compared to the second quarter of Fiscal 2025. The decrease as a percent of sales was primarily attributed to leverage in cost of sales on higher AUR, as well as leverage of store-related, marketing and administrative expenses.
• Operating (loss) not attributed to segments increased primarily related to an increase in employee compensation and technology costs.
For the year-to-date period of Fiscal 2026, operating income increased by $33 million compared to the year-to-date period of Fiscal 2025. As a percentage of net sales, operating income increased 90 basis points compared to the year-to-date period of Fiscal 2025.
• Operating income for the Americas increased $67 million, or 230 basis points as a percentage of region net sales, as compared to the year-to-date period of Fiscal 2025. The increase as a percent of sales was primarily attributed to cost of sales leverage, inclusive of IEEPA tariff refunds, partially offset by a prior year benefit from the Litigation Settlement included in selling expense and deleverage on store-related, and fulfillment expenses.
• Operating income for EMEA decreased $10 million, or 230 basis points as a percentage of region net sales, as compared to the year-to-date period of Fiscal 2025. The decrease as a percent of sales primarily related to deleverage in store-related and marketing investments, partially offset by cost of sales leverage.
• Operating (loss) for APAC decreased $6 million, or 920 basis points as a percentage of region net sales, as compared to the year-to-date period of Fiscal 2025. The decrease as a percent of sales was primarily attributed to leverage in cost of sales and store-related expenses.
• Operating (loss) not attributed to segments increased primarily related to an increase in employee compensation and technology costs.
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Interest income, net
Thirteen Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) % of Net sales % of Net sales BPS Change
Interest expense $ 561 — % $ 620 0.1 % (10)
Interest income (8,152) (0.6) (3,094) (0.3) (30)
Interest income, net $ (7,591) (0.6) $ (2,474) (0.2) (40)
Twenty-Six Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change
Interest expense $ 1,011 — % $ 1,281 0.1 % (10)
Interest income (13,889) (0.5) (10,538) (0.5) —
Interest income, net $ (12,878) (0.5) $ (9,257) (0.4) (10)
For the second quarter of Fiscal 2026, interest income, net increased $5.1 million, as compared to the second quarter of Fiscal 2025. The net increase was a result of interest income recognized on IEEPA tariff refunds, and an increase in balance and yield on time deposits and money market accounts compared to the second quarter of Fiscal 2025.
For the year-to-date period of Fiscal 2026, interest income, net increased $3.6 million, as compared to the year-to-date period of Fiscal 2025. The net increase was primarily a result of interest income recognized on IEEPA tariff refunds compared to the year-to-date period of Fiscal 2025.
Income tax expense
Thirteen Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) Effective Tax Rate Effective Tax Rate
Income tax expense $ 74,752 28.7 % $ 65,744 31.4 %
Excluded item:
Tax effect of pre-tax excluded items (1)
— (9,949)
Adjusted non-GAAP income tax expense $ 74,752 28.7 $ 55,795 32.7
Twenty-Six Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) Effective Tax Rate Effective Tax Rate
Income tax expense $ 100,717 28.4 % $ 92,321 29.1 %
Excluded item:
Tax effect of pre-tax excluded items (1)
— (9,949)
Adjusted non-GAAP income tax expense $ 100,717 28.4 $ 82,372 29.5
(1) The tax effect of pre-tax excluded items is the difference between the tax provision calculation on a GAAP basis and on an adjusted non-GAAP basis. Refer to “ NON-GAAP FINANCIAL MEASURES ,” for details of pre-tax excluded items.
The change in the effective tax rate for the second quarter and year-to-date period of Fiscal 2026, as compared with the second quarter and year-to-date period of Fiscal 2025, is due to higher pre-tax income compared with the prior-year period.
Refer to Note 10, “ INCOME TAXES .”
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Net income attributable to A&F
Thirteen Weeks Ended
August 1, 2026 August 2, 2025
(in thousands) % of Net sales % of Net sales BPS Change
Net income attributable to A&F $ 183,720 14.5 % $ 141,383 11.7 % 280
Excluded item, net of tax (1)
— — (28,625) (2.4) 240
Adjusted non-GAAP net income attributable to A&F
$ 183,720 14.5 $ 112,758 9.3 520
Twenty-Six Weeks Ended
August 1, 2026 August 2, 2025
(in thousands) % of Net Sales % of Net Sales BPS Change
Net income attributable to A&F $ 250,854 10.5 % $ 221,796 9.6 % 90
Excluded item, net of tax (1)
— — (28,625) (1.2) 120
Adjusted non-GAAP net income attributable to A&F
$ 250,854 10.5 $ 193,171 8.4 210
(1) Excluded items presented above under “Operating income,” and “Income tax expense.” Refer to “ NON-GAAP FINANCIAL MEASURES ” for further details.
Net income per share attributable to A&F
Thirteen Weeks Ended
August 1, 2026 August 2, 2025 $ Change
Net income per diluted share attributable to A&F
$ 4.17 $ 2.91 $ 1.26
Excluded item, net of tax (1) (2)
— (0.59) 0.59
Adjusted non-GAAP net income per diluted share attributable to A&F
4.17 2.32 1.85
Impact from changes in foreign currency exchange rates — 0.01 (0.01)
Adjusted non-GAAP net income per diluted share attributable to A&F on a constant currency basis (2)
$ 4.17 $ 2.33 $ 1.84
Twenty-Six Weeks Ended
August 1, 2026 August 2, 2025 $ Change
Net income per diluted share attributable to A&F
$ 5.59 $ 4.47 $ 1.12
Excluded item, net of tax (1) (2)
— (0.58) 0.58
Adjusted non-GAAP net income per diluted share attributable to A&F
$ 5.59 $ 3.90 $ 1.69
Impact from changes in foreign currency exchange rates — 0.12 (0.12)
Adjusted non-GAAP net income per diluted share attributable to A&F on a constant currency basis (2)
$ 5.59 $ 4.02 $ 1.57
(1) Excluded items presented above under “Operating income” and “Income tax expense”.
(2) Refer to “ NON-GAAP FINANCIAL MEASURES ” for further details.
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EBITDA AND ADJUSTED EBITDA
Thirteen Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) % of Net sales % of Net sales BPS Change
Net income $ 185,539 14.6 % $ 143,388 11.9 % 270
Income tax expense 74,752 5.9 65,744 5.4 50
Interest income, net
(7,591) (0.6) (2,474) (0.2) (40)
Depreciation and amortization 43,279 3.5 37,424 3.1 40
EBITDA (1)
$ 295,979 23.4 $ 244,082 20.2 320
Excluded item:
Litigation Settlement (2)
— — (38,574) (3.2) 320
Adjusted EBITDA (1)
$ 295,979 23.4 $ 205,508 17.0 640
Twenty-Six Weeks Ended
August 1, 2026 August 2, 2025
(in thousands, except ratios) % of Net sales % of Net sales BPS Change
Net income $ 253,658 10.7 % $ 225,127 9.8 % 90
Income tax expense 100,717 4.2 92,321 4.0 20
Interest income, net
(12,878) (0.5) (9,257) (0.4) (10)
Depreciation and amortization 85,583 3.5 76,000 3.3 20
EBITDA (1)
$ 427,080 17.9 $ 384,191 16.7 120
Excluded item:
Litigation Settlement (2)
— — (38,574) (1.7) 170
Adjusted EBITDA (1)
$ 427,080 17.9 $ 345,617 15.0 290
(1) EBITDA and Adjusted EBITDA are supplemental financial measures that are not defined or prepared in accordance with GAAP. EBITDA is defined as net income before interest, income taxes and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for excluded items.
(2) Refer to “ NON-GAAP FINANCIAL MEASURES ” for further details.
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LIQUIDITY AND CAPITAL RESOURCES
Overview
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 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, please see below under “ Share repurchases .”
Primary sources and uses of cash
The Company’s business has two principal selling seasons: Spring and Fall. The Company generally experiences its greatest sales activity during the Fall season due to the back-to-school and holiday sales periods. The Company relies on excess operating cash flows, which are largely generated in Fall, to fund operations throughout the fiscal year and to reinvest in the business to support future growth. The Company also has the ABL Facility available as a source of additional funding, which is described further below under “ Credit facility. ”
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 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.
When evaluating opportunities for investments in the business, management considers alignment with initiatives that position the business for sustainable long-term growth and with the Company’s strategic priorities as described within Part I, “Item 1. Business - STRATEGY AND KEY BUSINESS PRIORITIES” included in the Fiscal 2025 Form 10-K, including being opportunistic regarding areas for growth. Examples of potential investment opportunities include, but are not limited to, new store experiences, and investments in the Company’s digital and omnichannel initiatives. 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 marketing, digital and omnichannel investments, and information technology. For the year-to-date period ended August 1, 2026, the Company invested $129.4 million towards capital expenditures. Total capital expenditures for Fiscal 2026 are expected to be around $250 million.
The Company measures liquidity using total cash and cash equivalents and incremental borrowing available under the ABL Facility. As of August 1, 2026, the Company had cash and cash equivalents of $627.7 million and total liquidity of approximately $1.1 billion, compared with cash and cash equivalents of $759.5 million and total liquidity of approximately $1.2 billion at the beginning of Fiscal 2026 .
Share repurchases
In March 2025, the Company announced that the Board of Directors approved a $1.3 billion share repurchase program (the “2025 Authorization”), which replaced the prior share repurchase program of $500 million authorized by the Board of Directors in 2021. The 2025 Authorization does not have an expiration date.
During the fiscal year-to-date period ended August 1, 2026, the Company repurchased approximately 3.2 million shares of its Common Stock pursuant to the 2025 Authorization for approximately $282 million. As of August 1, 2026, the Company had $568 million in share repurchases remaining under the 2025 Authorization.
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 vesting of restricted stock units. Shares may be repurchased from time to time in the open market or private transactions in such manner as may be deemed advisable from time to time (including, without limitation, pursuant to accelerated share repurchase programs, one or more 10b5-1 trading plans, or any other method deemed advisable) and may be discontinued at any time. The timing and amount of any such repurchases will be determined based on an evaluation of market conditions, the Company’s share price, legal requirements, and other factors. The Company is not obligated to repurchase any specific amount of shares of its Common Stock.
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Credit facility
On August 2, 2024, A&F, as parent and a guarantor, A&F Management Co., 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 the Amended and Restated Credit Agreement (as amended, the “ABL Credit Agreement”). The ABL Credit Agreement provides for a senior secured asset-based revolving credit facility of up to $500 million (the “ABL Facility”), which matures on August 2, 2029. The ABL Facility is subject to a borrowing base, consisting primarily of inventory located in the U.S., the United Kingdom, and the Netherlands, with a letter of credit sub-limit of $62.5 million, a swing line loan sub-limit of $30 million, and an accordion feature allowing A&F to increase the revolving commitment by up to $150 million subject to specified conditions.
As of August 1, 2026, 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 1, 2026 are as follows:
(in thousands) August 1, 2026
Loan cap $ 500,000
Less: Outstanding stand-by letters of credit (466)
Borrowing capacity 499,534
Less: Minimum excess availability (1)
(50,000)
Borrowing capacity available $ 449,534
(1) Under the ABL Facility, the Company must maintain excess availability equal to the greater of 10% of the loan cap or $36 million.
Refer to Note 11, “ BORROWINGS .”
Income taxes
The Company’s earnings and profits from its foreign subsidiaries could be repatriated to the U.S. without incurring additional federal income tax. The Company determined that the balance of the Company’s undistributed earnings and profits from its foreign subsidiaries as of February 2, 2019 are considered indefinitely reinvested outside of the U.S., and if these funds were to be repatriated to the U.S., the Company would expect to incur an insignificant amount of state income taxes and foreign withholding taxes. The Company accrues for both state income taxes and foreign withholding taxes with respect to earnings and profits earned after February 2, 2019, in such a manner that these funds could be repatriated without incurring additional tax expense. As of August 1, 2026, $208.5 million of the Company’s $627.7 million of cash and equivalents were held by foreign affiliates.
Refer to Note 10, “ INCOME TAXES .”
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 1, 2026 and August 2, 2025:
Twenty-Six Weeks Ended
August 1, 2026 August 2, 2025
(in thousands)
Cash and equivalents, and restricted cash and equivalents, beginning of period $ 766,916 $ 780,395
Net cash provided by operating activities 313,401 112,893
Net cash used for investing activities (114,357) (31,943)
Net cash used for financing activities (329,816) (290,713)
Effect of foreign currency exchange rates on cash (1,159) 9,700
Net decrease in cash and equivalents, and restricted cash and equivalents (131,931) (200,063)
Cash and equivalents, and restricted cash and equivalents, end of period $ 634,985 $ 580,332
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Operating activities - For the fiscal year-to-date period ended August 1, 2026, net cash provided by operating activities increased by $200.5 million, primarily related to an increase in net income due to the 3% year-over-year increase in net sales and recognition of IEEPA tariff refunds, partially offset by expense deleverage, including the impact of the prior-year benefit resulting from the favorable settlement of claims to resolve payment card interchange fee litigation. Additionally, operating cash flow benefited from $64.2 million related to changes in accounts payable and accrued expenses, primarily related to the timing of merchandise payables and decreased incentive compensation payments, $45.7 million related to the timing of tax liabilities and resulting payments, $40.3 million primarily related to the timing of collection of receivables, as well as $24.0 million in lower inventory receipts. During the fiscal y ear-to-date period ended August 2, 2025, net cash provided by operating activities included an increase in cash outflows related to the timing of merchandise and advertising payables and higher inventory product costs, partially offset by increased cash receipts as a result of the 7% year-over-year increase in net sales.
Investing activities - For the fiscal year-to-date period ended August 1, 2026, net cash used for investing activities increased by $82.4 million primarily related to capital expenditures of $129.4 million, partially offset by the maturity of $34.6 million of marketable securities. Net cash used for investing activities for the fiscal year-to-date period ended August 2, 2025 was primarily used for capital expenditures of $116.9 million, partially offset by the maturity of $85.0 million of marketable securities.
Financing activities - For the fiscal year-to-date period ended August 1, 2026, net cash used for financing activities included the purchase of approximately 3.2 million shares of Common Stock with a market value of approximately $286.4 million and $38.6 million related to shares of Common Stock withheld (repurchased) to cover tax withholdings upon vesting of share-based compensation awards. During the fiscal year-to-date period ended August 2, 2025, net cash used for financing activities included the purchase of approximately 3.2 million shares of Common Stock with a market value of approximately $251.2 million and $34.8 million related to shares of Common Stock withheld (repurchased) to cover tax withholdings upon vesting of share-based compensation awards.
Contractual obligations
The Company’s contractual obligations consist primarily of operating leases, purchase orders for merchandise inventory, unrecognized tax benefits, certain retirement obligations, lease deposits, and other agreements to purchase goods and services that are legally binding and that require minimum quantities to be purchased. These contractual obligations impact the Company’s short-term and long-term liquidity and capital resource needs.
There have been no material changes in the Company’s contractual obligations since January 31, 2026, with the exception of those obligations which occurred in the normal course of business (primarily changes in the Company’s merchandise inventory-related purchases and lease obligations, which fluctuate throughout the year as a result of the seasonal nature of the Company’s operations).
RECENT ACCOUNTING PRONOUNCEMENTS
The Company describes its significant accounting policies in Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES , ” of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” included on the Fiscal 2025 Form 10-K. The Company reviews recent accounting pronouncements on a quarterly basis and has excluded discussion of those not applicable to the Company and those that did not have, or are not expected to have, a material impact on the Company’s consolidated financial statements.
CRITICAL ACCOUNTING ESTIMATES
The Company describes its critical accounting estimates in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included on the Fiscal 2025 Form 10-K. There have been no significant changes in critical accounting policies and estimates since the end of Fiscal 2025.
NON-GAAP FINANCIAL MEASURES
This Quarterly Report on Form 10-Q includes discussion of certain financial measures calculated and presented on both a GAAP and a non-GAAP basis. The Company believes that each of the non-GAAP financial measures presented in this “ Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ” is useful to investors as it provides a meaningful basis to evaluate the Company’s operating performance excluding the effect of certain items that the Company believes may not reflect its future operating outlook, thereby supplementing investors’ understanding of comparability of operations across periods. Management used these non-GAAP financial measures during the periods presented to assess the Company’s performance and to develop expectations for future operating performance. These non-GAAP financial measures should be used as a supplement to, and not as an alternative to, the Company’s GAAP financial results, and may not be calculated in the same manner as similar measures presented by other companies.
Comparable sales
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The Company provides comparable sales, defined as the year-over-year percentage change in the aggregate of (1) net sales for stores that have been open as the same brand at least one year and square footage has not been expanded or reduced by more than 20% within the past year, with the prior year’s net sales converted at the current year’s foreign currency exchange rates to remove the impact of foreign currency exchange rate fluctuations, and (2) digital net sales with the prior year’s net sales converted at the current year’s foreign currency exchange rates to remove the impact of foreign currency exchange rate fluctuations. Comparable sales excludes revenue other than store and digital sales. Management uses comparable sales to understand the drivers of year-over-year changes in net sales and believes that comparable sales can be a useful metric as it can assist investors in distinguishing the portion of the Company’s revenue attributable to existing locations from the portion attributable to the opening or closing of stores. The most directly comparable GAAP financial measure is change in net sales.
Excluded items
The following financial measures are disclosed on a GAAP and on an adjusted non-GAAP basis excluding the following items, as applicable:
Financial measures (1)
Excluded items
Selling expense Litigation Settlement
General and administrative expense Legal fees in connection with the Litigation Settlement
Operating income Litigation Settlement, net of legal fees
Income tax expense (2)
Tax effect of pre-tax excluded items
Net income and net income per share attributable to A&F (2)
Pre-tax excluded items and the tax effect of pre-tax excluded items
(1) Certain of these financial measures are also expressed as a percentage of net sales.
(2) The tax effect of excluded items is the difference between the tax provision calculation on a GAAP basis and on an adjusted non-GAAP basis.
Financial information on a constant currency basis
The Company provides certain financial information on a constant currency basis to enhance investors’ understanding of underlying business trends and operating performance by removing the impact of foreign currency exchange rate fluctuations. Management also uses financial information on a constant currency basis to award employee performance-based compensation. The effect from foreign currency exchange rates, calculated on a constant currency basis, is determined by applying the current period’s foreign currency exchange rates to the prior year’s results and is net of the year-over-year impact from hedging. 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 1, 2026 and August 2, 2025 were as follows:
(in thousands, except change in net sales, operating income margin and per share data)
Thirteen Weeks Ended Twenty-Six Weeks Ended
Net sales August 1, 2026 August 2, 2025 % Change August 1, 2026 August 2, 2025 % Change
GAAP $ 1,266,689 $ 1,208,560 5 % $ 2,380,510 $ 2,305,871 3 %
Impact from changes in foreign currency exchange rates — (223) — — 10,795 —
Non-GAAP on a constant currency basis $ 1,266,689 $ 1,208,337 5 % $ 2,380,510 $ 2,316,666 3 %
Operating income August 1, 2026 August 2, 2025 BPS Change (1)
August 1, 2026 August 2, 2025 BPS Change (1)
GAAP $ 252,700 $ 206,658 280 $ 341,497 $ 308,191 90
Excluded items (2)
— 38,574 (320) — 38,574 (170)
Adjusted non-GAAP $ 252,700 $ 168,084 600 $ 341,497 $ 269,617 260
Impact from changes in foreign currency exchange rates — 787 (10) — 8,273 (30)
Non-GAAP on a constant currency basis $ 252,700 $ 168,871 590 $ 341,497 $ 277,890 230
Net income per share attributable to A&F August 1, 2026 August 2, 2025 $ Change August 1, 2026 August 2, 2025 $ Change
GAAP $ 4.17 $ 2.91 $ 1.26 $ 5.59 $ 4.47 $ 1.12
Excluded items, net of tax (2)
— 0.59 (0.59) — 0.58 (0.58)
Adjusted non-GAAP $ 4.17 $ 2.32 $ 1.85 $ 5.59 $ 3.90 $ 1.69
Impact from changes in foreign currency exchange rates — 0.01 (0.01) — 0.12 (0.12)
Non-GAAP on a constant currency basis $ 4.17 $ 2.33 $ 1.84 $ 5.59 $ 4.02 $ 1.57
(1) The estimated basis point change has been rounded based on the change in the percentage of net sales.
(2) Excluded item consists of the favorable Litigation Settlement, net of legal fees
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EBITDA AND ADJUSTED EBITDA
The Company provides EBITDA and Adjusted EBITDA as supplemental measures used by the Company’s executive management to assess the Company’s performance. 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.
A reconciliation of non-GAAP EBITDA to net income, a financial measure calculated and presented in accordance with GAAP, and the adjustments made in calculating Adjusted EBITDA for the thirteen and twenty-six weeks ended August 1, 2026 and August 2, 2025 were as follows:
Thirteen Weeks Ended
(in thousands, except ratios) August 1, 2026 % of
Net Sales August 2, 2025 % of
Net Sales
Net income $ 185,539 14.6 % $ 143,388 11.9 %
Income tax expense 74,752 5.9 65,744 5.4
Interest income, net
(7,591) (0.6) (2,474) (0.2)
Depreciation and amortization 43,279 3.5 37,424 3.1
EBITDA (1)
$ 295,979 23.4 $ 244,082 20.2
Adjustments to EBITDA
Litigation Settlement (2)
— — (38,574) (3.2)
Adjusted EBITDA (1)
$ 295,979 23.4 $ 205,508 17.0
Twenty-Six Weeks Ended
(in thousands, except ratios) August 1, 2026 % of
Net Sales August 2, 2025 % of
Net Sales
Net income $ 253,658 10.7 % $ 225,127 9.8 %
Income tax expense 100,717 4.2 92,321 4.0
Interest income, net
(12,878) (0.5) (9,257) (0.4)
Depreciation and amortization 85,583 3.5 76,000 3.3
EBITDA (1)
$ 427,080 17.9 $ 384,191 16.7
Adjustments to EBITDA
Litigation Settlement (2)
— — (38,574) (1.7)
Adjusted EBITDA (1)
$ 427,080 17.9 $ 345,617 15.0
(1) EBITDA and Adjusted EBITDA are supplemental financial measures that are not defined or prepared in accordance with GAAP. EBITDA is defined as net income before interest, income taxes and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for excluded items.
(2) Refer to “ NON-GAAP FINANCIAL MEASURES ” for further details.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.