Table of Contents PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) 3 Condensed Consolidated Balance Sheets 4 Condensed Consolidated Statements of Stockholders’ Equity 5 Condensed Consolidated Statements of Cash Flows 6 Index for Notes to Condensed Consolidated Financial Statements 7 Notes to Condensed Consolidated Financial Statements 8 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19 Item 3. Quantitative and Qualitative Disclosures About Market Risk 31 Item 4. Controls and Procedures 32 PART II. OTHER INFORMATION Item 1. Legal Proceedings 33 Item 1A. Risk Factors 33 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 33 Item 6. Exhibits 34 Signatures 35 Abercrombie & Fitch Co. 2 2023 1Q Form 10-Q Table of Contents PART I. FINANCIAL INFORMATION Item 1.     Financial Statements (Unaudited) Abercrombie & Fitch Co. Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Thousands, except per share amounts) (Unaudited) Thirteen Weeks Ended April 29, 2023 April 30, 2022 Net sales $ 835,994 $ 812,762 Cost of sales, exclusive of depreciation and amortization 326,200 363,216 Gross profit 509,794 449,546 Stores and distribution expense 331,613 337,543 Marketing, general and administrative expense 142,631 122,149 Asset impairment 4,436 3,422 Other operating income, net ( 2,894 ) ( 3,842 ) Operating income (loss) 34,008 ( 9,726 ) Interest expense, net 3,443 7,307 Income (loss) before income taxes 30,565 ( 17,033 ) Income tax expense (benefit) 12,718 ( 2,187 ) Net income (loss) 17,847 ( 14,846 ) L Net income attributable to noncontrolling interests 1,276 1,623 Net income (loss) attributable to A&F $ 16,571 $ ( 16,469 ) Net income (loss) per share attributable to A&F Basic $ 0.33 $ ( 0.32 ) Diluted $ 0.32 $ ( 0.32 ) Weighted-average shares outstanding Basic 49,574 52,077 Diluted 51,467 52,077 Other comprehensive income (loss) Foreign currency translation adjustments, net of tax $ 311 $ ( 10,403 ) Derivative financial instruments, net of tax 405 1,712 Other comprehensive income (loss) 716 ( 8,691 ) Comprehensive income (loss) 18,563 ( 23,537 ) L Comprehensive income attributable to noncontrolling interests 1,276 1,623 Comprehensive income (loss) attributable to A&F $ 17,287 $ ( 25,160 ) The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. Abercrombie & Fitch Co. 3 2023 1Q Form 10-Q Table of Contents Abercrombie & Fitch Co. Condensed Consolidated Balance Sheets (Thousands, except par value amounts) (Unaudited) April 29, 2023 January 28, 2023 Assets Current assets: Cash and equivalents $ 446,952 $ 517,602 Receivables 106,149 104,506 Inventories 447,806 505,621 Other current assets 107,684 100,289 Total current assets 1,108,591 1,228,018 Property and equipment, net 550,810 551,585 Operating lease right-of-use assets 692,699 723,550 Other assets 205,978 209,947 Total assets $ 2,558,078 $ 2,713,100 Liabilities and stockholders’ equity Current liabiliti Accounts payable $ 221,587 $ 258,895 Accrued expenses 340,331 413,303 Short-term portion of operating lease liabilities 188,520 213,979 Income taxes payable 19,023 16,023 Total current liabilities 769,461 902,200 Long-term liabiliti Long-term portion of operating lease liabilities 682,996 713,361 Long-term borrowings, net 297,172 296,852 Other liabilities 97,476 94,118 Total long-term liabilities 1,077,644 1,104,331 Stockholders’ equity Class A Common Stoc $ 0.01 par val 150,000 shares authorized and 103,300 shares issued for all periods presented 1,033 1,033 Paid-in capital 400,699 416,255 Retained earnings 2,344,522 2,368,815 Accumulated other comprehensive loss, net of tax (“AOCL”) ( 136,811 ) ( 137,527 ) Treasury stock, at average  53,238 and 54,298 shares as of April 29, 2023 and January 28, 2023, respectively ( 1,907,586 ) ( 1,953,735 ) Total Abercrombie & Fitch Co. stockholders’ equity 701,857 694,841 Noncontrolling interests 9,116 11,728 Total stockholders’ equity 710,973 706,569 Total liabilities and stockholders’ equity $ 2,558,078 $ 2,713,100 The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. Abercrombie & Fitch Co. 4 2023 1Q Form 10-Q Table of Contents Abercrombie & Fitch Co. Condensed Consolidated Statements of Stockholders’ Equity (Thousands, except per share amounts) (Unaudited) Thirteen Weeks Ended April 29, 2023 Common Stock Paid-in capital Non-controlling interests Retained earnings AOCL Treasury stock Total stockholders’ equity Shares outstanding Par value Shares At average cost Balance, January 28, 2023 49,002 $ 1,033 $ 416,255 $ 11,728 $ 2,368,815 $ ( 137,527 ) 54,298 $ ( 1,953,735 ) $ 706,569 Net income — — — 1,276 16,571 — — — 17,847 Share-based compensation issuances and exercises 1,060 — ( 23,644 ) — ( 40,864 ) — ( 1,060 ) 46,149 ( 18,359 ) Share-based compensation expense — — 8,088 — — — — — 8,088 Derivative financial instruments, net of tax — — — — — 405 — — 405 Foreign currency translation adjustments, net of tax — — — — — 311 — — 311 Distributions to noncontrolling interests, net — — — ( 3,888 ) — — — — ( 3,888 ) Ending balance at April 29, 2023 50,062 $ 1,033 $ 400,699 $ 9,116 $ 2,344,522 $ ( 136,811 ) 53,238 $ ( 1,907,586 ) $ 710,973 Thirteen Weeks Ended April 30, 2022 Common Stock Paid-in capital Non-controlling interests Retained earnings AOCL Treasury stock Total stockholders’ equity Shares outstanding Par value Shares At average cost Balance, January 29, 2022 52,985 $ 1,033 $ 413,190 $ 11,234 $ 2,386,156 $ ( 114,706 ) 50,315 $ ( 1,859,583 ) $ 837,324 Net income (loss) — — — 1,623 ( 16,469 ) — — — ( 14,846 ) Purchase of Common Stock ( 3,260 ) — — — 3,260 ( 100,000 ) ( 100,000 ) Share-based compensation issuances and exercises 717 — ( 23,134 ) — ( 18,880 ) — ( 717 ) 28,089 ( 13,925 ) Share-based compensation expense — — 8,356 — — — — — 8,356 Derivative financial instruments, net of tax — — — — — 1,712 — — 1,712 Foreign currency translation adjustments, net of tax — — — — — ( 10,403 ) — — ( 10,403 ) Distributions to noncontrolling interests, net — — — ( 3,413 ) — — — — ( 3,413 ) Ending balance at April 30, 2022 50,442 $ 1,033 $ 398,412 $ 9,444 $ 2,350,807 $ ( 123,397 ) 52,858 $ ( 1,931,494 ) $ 704,805 Abercrombie & Fitch Co. 5 2023 1Q Form 10-Q Table of Contents Abercrombie & Fitch Co. Condensed Consolidated Statements of Cash Flows (Thousands) (Unaudited) Thirteen Weeks Ended April 29, 2023 April 30, 2022 Operating activities Net income (loss) $ 17,847 $ ( 14,846 ) Adjustments to reconcile net income (loss)  to net cash used for operating activiti Depreciation and amortization 36,028 33,888 Asset impairment 4,436 3,422 Loss (gain) on disposal 489 ( 2,798 ) Provision for (benefit from) deferred income taxes 9,689 ( 5,853 ) Share-based compensation 8,088 8,356 Changes in assets and liabiliti Inventories 57,662 ( 38,475 ) Accounts payable and accrued expenses ( 100,802 ) ( 138,774 ) Operating lease right-of-use assets and liabilities ( 26,152 ) ( 32,127 ) Income taxes 3,000 2,664 Other assets ( 10,957 ) ( 33,475 ) Other liabilities 112 231 Net cash used for operating activities ( 560 ) ( 217,787 ) Investing activities Purchases of property and equipment ( 46,391 ) ( 26,292 ) Proceeds from the sale of property and equipment — 7,751 Net cash used for investing activities ( 46,391 ) ( 18,541 ) Financing activities Purchases of Common Stock — ( 100,000 ) Other financing activities ( 21,956 ) ( 16,945 ) Net cash used for financing activities ( 21,956 ) ( 116,945 ) Effect of foreign currency exchange rates on cash ( 1,998 ) ( 2,617 ) Net decrease in cash and equivalents, and restricted cash and equivalents ( 70,905 ) ( 355,890 ) Cash and equivalents, and restricted cash and equivalents, beginning of period 527,569 834,368 Cash and equivalents, and restricted cash and equivalents, end of period $ 456,664 $ 478,478 Supplemental information related to non-cash activities Purchases of property and equipment not yet paid at end of period $ 48,006 $ 33,035 Operating lease right-of-use assets additions, net of terminations, impairments and other reductions 17,857 35,521 Supplemental information related to cash activities Cash paid for income taxes 3,007 2,887 Cash received from income tax refunds 411 114 Cash paid for amounts included in measurement of operating lease liabilities, net of abatements 85,156 88,322 The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. Abercrombie & Fitch Co. 6 2023 1Q Form 10-Q Table of Contents Abercrombie & Fitch Co. Index for Notes to Condensed Consolidated Financial Statements (Unaudited) Page No. Note 1. NATURE OF BUSINESS 8 Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 8 Note 3. REVENUE RECOGNITION 10 Note 4. NET INCOME (L OSS) PER SHARE 10 Note 5. FAIR VALUE 11 Note 6. PROPERTY AND EQUIPMENT, NET 12 Note 7. LEASES 12 Note 8. ASSET IMPAIRMENT 12 Note 9. INCOME TAXES 13 Note 10. BORROWINGS 13 Note 11. SHARE-BASED COMPENSATION 14 Note 12. DERIVATIVE INSTRUMENTS 16 Note 13. ACCUMULATED OTHER COMPREHENSIVE LOSS 17 Note 14. SEGMENT REPORTING 18 Note 15. SUBSEQUENT EVENTS 18 Abercrombie & Fitch Co. 7 2023 1Q Form 10-Q Table of Contents Abercrombie & Fitch Co. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. NATURE OF BUSINESS Abercrombie & Fitch Co. (“A&F”), a company incorporated in Delaware in 1996, through its subsidiaries (collectively, A&F and its subsidiaries are referred to as “Abercrombie & Fitch” or the “Company”), is a global, 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 digital channels and Company-owned stores, as well as through various third-party arrangements. The Company’s two brand-based operating segments are Abercrombie, which includes the Company’s Abercrombie & Fitch and abercrombie kids brands, and Hollister, which includes the Company’s Hollister, Gilly Hicks, and Social Tourist brands. These brands share a commitment to offering unique products of enduring quality and exceptional comfort that allow customers around the world to express their own individuality and style. The Company operates primarily in North America, Europe, Middle East, and Asia. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The accompanying Condensed Consolidated Financial Statements include historical financial statements of, and transactions applicable to, the Company and reflect its financial position, results of operations and cash flows. The Company has interests in an Emirati business venture, in a Kuwaiti business venture with Majid al Futtaim Fashion L.L.C. (“MAF”) and in a United States of America (the “U.S.”) business venture with Dixar L.L.C. (“Dixar”), each of which meets the definition of a variable interest entity (“VIE”). The purpose of the business ventures with MAF is to operate stores in the United Arab Emirates and Kuwait and the purpose of the business venture with Dixar is to hold the intellectual property related to the Social Tourist brand. The Company is deemed to be the primary beneficiary of these VIEs; therefore, the Company has consolidated the operating results, assets and liabilities of these VIEs, with the noncontrolling interests’ (“NCI”) portions of net income (loss) presented as net income attributable to NCI on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and the NCI portion of stockholders’ equity presented as NCI on the Condensed Consolidated Balance Sheets. Fiscal year The Company’s fiscal year ends on the Saturday closest to January 31. This typically results in a fifty-two week year, but occasionally gives rise to an additional week, resulting in a fifty-three week year. Fiscal years are designated in the Condensed Consolidated Financial Statements and notes, as well as the remainder of this Quarterly Report on Form 10-Q, by the calendar year in which the fiscal year commences. All references herein to the Company’s fiscal years are as follows: Fiscal year Year ended/ ending Number of weeks Fiscal 2022 January 28, 2023 52 Fiscal 2023 February 3, 2024 53 Fiscal 2024 February 1, 2025 52 Interim financial statements The Condensed Consolidated Financial Statements as of April 29, 2023, and for the thirteen week periods ended April 29, 2023 and April 30, 2022, are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim consolidated financial statements. Accordingly, the Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto contained in A&F’s Annual Report on Form 10-K for Fiscal 2022 filed with the SEC on March 27, 2023 (the “Fiscal 2022 Form 10-K”). The January 28, 2023 consolidated balance sheet data, included herein, were derived from audited consolidated financial statements, but do not include all disclosures required by accounting principles generally accepted in the U.S. (“GAAP”). In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments (which are of a normal recurring nature) necessary to state fairly, in all material respects, the financial position, results of operations and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for Fiscal 2023. Abercrombie & Fitch Co. 8 2023 1Q Form 10-Q Table of Contents Use of estimates The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. Due to the inherent uncertainty involved with estimates, actual results may differ.  Additionally, these estimates and assumptions may change as a result of the impact of global economic conditions, such as the uncertainty regarding a slowing economy, rising interest rates, continued inflation, fluctuation in foreign exchange rates, and the ongoing conflict in Ukraine, and result in material impacts to the Company’s consolidated financial statements in future reporting periods. Recent accounting pronouncements The Company reviews recent accounting pronouncements on a quarterly basis and has excluded discussion of those not applicable to the Company and those that did not have, or are not expected to have, a material impact on the Company’s consolidated financial statements. The following table provides a brief description of certain accounting pronouncements that the company has adopted. Accounting Standards Update (ASU) Description Date of adoption Effect on the financial statements or other significant matters ASU 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations The update relates to disclosure requirements for buyers in supplier finance programs. The amendments in the update require that a buyer disclose qualitative and quantitative information about their supplier finance programs. Interim and annual requirements include disclosure of outstanding amounts under the obligations as of the end of the reporting period, and annual requirements include a roll-forward of those obligations for the annual reporting period, as well as a description of payment and other key terms of the programs. This update is effective for annual periods beginning after December 15, 2022, and interim periods within those fiscal years, except for the requirement to disclose roll-forward information, which is effective for fiscal years beginning after December 15, 2023. January 29, 2023 The Company adopted the changes to the  standard under the   retrospective method in the first quarter of Fiscal 2023, except for roll-forward information, which is effective for fiscal years beginning after December 15, 2023.  The adoption of this guidance did not have a significant impact on the Company's condensed consolidated financial statements. Supply Chain Finance Program On January 29, 2023, the Company adopted the changes to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) described in Accounting Standards Update (“ASU”) No. ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which enhances the transparency of supplier finance programs and requires certain disclosures for a buyer in a supplier finance program. Under the supply chain finance (“SCF”) program, which is administered by a third party, the Company’s vendors, at their sole discretion,  are given the opportunity to sell receivables from the Company to a participating financial institution at a discount that leverages the Company’s credit profile. The commercial terms negotiated by the Company with its vendors are consistent, irrespective of whether a vendor participates in the SCF program. A participating vendor has the option to be paid by the financial institution earlier than the original invoice due date. The Company’s responsibility is limited to making payment on the terms originally negotiated by the Company with each vendor, regardless of whether the vendor sells its receivable to a financial institution. If a vendor chooses to participate in the SCF program, the Company pays the financial institution the stated amount of confirmed merchandise invoices on the stated maturity date, which is 75 days from the invoice date. The agreement with the financial institution does not require the Company to provide assets pledged as security or other forms of guarantees for the SCF program. As of April 29, 2023 and January 28, 2023, $ 58.1 million and $ 68.4 million of SCF program liabilities were recorded in “Accounts payable” in the Condensed Consolidated Balance Sheet, respectively, and reflected as a cash flow from operating activities in the Condensed Consolidated Statements of Cash Flows when settled. Abercrombie & Fitch Co. 9 2023 1Q Form 10-Q Table of Contents Condensed Consolidated Statements of Cash Flows reconciliation The following table provides a reconciliation of cash and equivalents and restricted cash and equivalents to the amounts shown on the Condensed Consolidated Statements of Cash Flows: (in thousands) Location April 29, 2023 January 28, 2023 April 30, 2022 January 29, 2022 Cash and equivalents Cash and equivalents $ 446,952 $ 517,602 $ 468,378 $ 823,139 Long-term restricted cash and equivalents Other assets 9,712 9,967 10,100 11,229 Cash and equivalents and restricted cash and equivalents $ 456,664 $ 527,569 $ 478,478 $ 834,368 3. REVENUE RECOGNITION Disaggregation of revenue All revenues are recognized in net sales in the Condensed Consolidated Statements of Operations and Comprehensive Income. For information regarding the disaggregation of revenue, refer to Note 14, “ SEGMENT REPORTING . ” Contract liabilities The following table details certain contract liabilities representing unearned revenue as of April 29, 2023, January 28, 2023, April 30, 2022 and January 29, 2022: (in thousands) April 29, 2023 January 28, 2023 ⁽¹⁾ April 30, 2022 January 29, 2022 ⁽¹⁾ Gift card liability (1) $ 37,630 $ 39,235 $ 35,665 $ 36,984 Loyalty programs liability 23,552 25,640 22,177 22,757 (1) Includes $ 13.4 million and $ 12.1 million of revenue recognized during the thirteen weeks ended April 29, 2023 and April 30, 2022, respectively, that was included in the gift card liability at the beginning of January 28, 2023 and January 29, 2022, respectively . The following table details recognized revenue associated with the Company’s gift card program and loyalty programs for the thirteen weeks ended April 29, 2023 and April 30, 2022: Thirteen Weeks Ended (in thousands) April 29, 2023 April 30, 2022 Revenue associated with gift card redemptions and gift card breakage $ 24,224 $ 23,001 Revenue associated with reward redemptions and breakage related to the Company’s loyalty programs 12,282 10,181 4. NET INCOME (LOSS) PER SHARE Net income (loss) per basic and diluted share attributable to A&F is computed based on the weighted-average number of outstanding shares of Class A Common Stock (“Common Stock”). Additional information pertaining to net income (loss) per share attributable to A&F follows: Thirteen Weeks Ended (in thousands) April 29, 2023 April 30, 2022 Shares of Common Stock issued 103,300 103,300 Weighted-average treasury shares ( 53,726 ) ( 51,223 ) Weighted-average — basic shares 49,574 52,077 Dilutive effect of share-based compensation awards 1,893 — Weighted-average — diluted shares 51,467 52,077 Anti-dilutive shares (1) 2,834 3,598 (1) Reflects the total number of shares related to outstanding share-based compensation awards that have been excluded from the computation of net income (loss) per diluted share because the impact would have been anti-dilutive. Unvested shares related to restricted stock units with performance-based and market-based vesting conditions can achieve up to 200% of their target vesting amount and are reflected at the maximum vesting amount less any dilutive portion. Abercrombie & Fitch Co. 10 2023 1Q Form 10-Q Table of Contents 5. FAIR VALUE Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The inputs used to measure fair value are prioritized based on a three-level hierarchy. The three levels of inputs to measure fair value are as follows: • Level 1—inputs are unadjusted quoted prices for identical assets or liabilities that are available in active markets that the Company can access at the measurement date. • Level 2—inputs are other than quoted market prices included within Level 1 that are observable for assets or liabilities, directly or indirectly. • Level 3—inputs to the valuation methodology are unobservable. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. The three levels of the hierarchy and the distribution of the Company’s assets measured at fair value on a recurring basis, as of April 29, 2023 and January 28, 2023, were as follows: Assets and Liabilities at Fair Value as of April 29, 2023 (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents (1) $ 52,383 $ 9,900 $ — $ 62,283 Derivative instruments (2) — 7 — 7 Rabbi Trust assets (3) 1 52,014 — 52,015 Restricted cash equivalents (1) 1,373 5,191 — 6,564 Total assets $ 53,757 $ 67,112 $ — $ 120,869 Liabiliti Derivative instruments (2) $ — $ 4,139 $ — $ 4,139 Total liabilities $ — $ 4,139 $ — $ 4,139 Assets and Liabilities at Fair Value as of January 28, 2023 (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents (1) $ 50,364 $ — $ — $ 50,364 Derivative instruments (2) — 32 — 32 Rabbi Trust assets (3) 1 51,681 — 51,682 Restricted cash equivalents (1) 1,690 5,174 — 6,864 Total assets $ 52,055 $ 56,887 $ — $ 108,942 Liabiliti Derivative instruments (2) $ — $ 4,986 $ — $ 4,986 Total liabilities $ — $ 4,986 $ — $ 4,986 (1) Level 1 assets consisted of investments in money market funds and U.S. treasury bills. Level 2 assets consisted of time deposits. (2) Level 2 assets consisted primarily of foreign currency exchange forward contracts. (3) Level 1 assets consisted of investments in money market funds. Level 2 assets consisted of trust-owned life insurance policies. The Company’s Level 2 assets consisted o • Trust-owned life insurance policies, which were valued using the cash surrender value of the life insurance policies; • Time deposits, which were valued at cost, approximating fair value, due to the short-term nature of these investments; and • Derivative instruments, primarily foreign currency exchange forward contracts, which were valued using quoted market prices of the same or similar instruments, adjusted for counterparty risk. Fair value of long-term borrowings The Company’s borrowings under its senior secured notes, which have a fixed 8.75 % interest rate and mature on July 15, 2025 (the “Senior Secured Notes”) are carried at historical cost in the accompanying Condensed Consolidated Balance Sheets. The carrying amount and fair value of the Company’s long-term gross borrowings were as follows: (in thousands) April 29, 2023 January 28, 2023 Gross borrowings outstanding, carrying amount $ 299,730 $ 299,730 Gross borrowings outstanding, fair value 304,975 304,975 Abercrombie & Fitch Co. 11 2023 1Q Form 10-Q Table of Contents 6. PROPERTY AND EQUIPMENT, NET Property and equipment, net consisted o (in thousands) April 29, 2023 January 28, 2023 Property and equipment, at cost $ 2,532,642 $ 2,517,862 L Accumulated depreciation and amortization ( 1,981,832 ) ( 1,966,277 ) Property and equipment, net $ 550,810 $ 551,585 R efer to Note 8, “ ASSET IMPAIRMENT ,” for details related to property and equipment impairment charges incurred during the thirteen weeks ended April 29, 2023 and April 30, 2022. 7. LEASES The Company is a party to leases related to its Company-operated retail stores as well as for certain of its distribution centers, office space, information technology and equipment. The following table provides a summary of the Company’s operating lease costs for the thirteen weeks ended April 29, 2023 and April 30, 2022: Thirteen Weeks Ended (in thousands) April 29, 2023 April 30, 2022 Single lease cost (1) $ 58,340 $ 57,580 Variable lease cost (2) 35,695 33,158 Operating lease right-of-use asset impairment (3) 1,414 1,915 Sublease income (4) ( 984 ) ( 1,009 ) Total operating lease cost $ 94,465 $ 91,644 (1) Included amortization and interest expense associated with operating lease right-of-use assets and the impact from remeasurement of operating lease liabilities. (2) Includes variable payments related to both lease and nonlease components, such as contingent rent payments made by the Company based on performance, and payments related to taxes, insurance, and maintenance costs, as well as the benefit of $ 0.1 million of rent abatements during the thirteen weeks ended April 29, 2023, respectively, related to the effects of the COVID-19 pandemic that resulted in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract. The benefit related to rent abatements recognized during the thirteen weeks ended April 30, 2022 was $ 1.7 million. (3) Refer to Note 8, “ ASSET IMPAIRMENT ,” for details related to operating lease right-of-use asset impairment charges. (4) The terms of the sublease agreement entered into by the Company with a third party during Fiscal 2020 related to one of its previous flagship store locations have not changed materially from that disclosed in Note 8, “LEASES,” of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of the Fiscal 2022 Form 10-K. Sublease income is recognized in other operating income, net on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The Company had minimum commitments related to operating lease contracts that have not yet commenced, primarily for certain Company-operated retail stores, of approximately $ 11.5 million as of April 29, 2023. 8. ASSET IMPAIRMENT Asset impairment charges for the thirteen weeks ended April 29, 2023 and April 30, 2022 were as follows: Thirteen Weeks Ended (in thousands) April 29, 2023 April 30, 2022 Operating lease right-of-use asset impairment $ 1,414 $ 1,915 Property and equipment asset impairment 3,022 1,507 Total asset impairment $ 4,436 $ 3,422 Asset impairment charges for the thirteen weeks ended April 29, 2023 and April 30, 2022 related to certain of the Company’s assets including stores across brands, geographies and store formats. The store impairment charges for the thirteen weeks ended April 29, 2023 reduced the then carrying amount of the impaired stores’ assets to their fair value of approximately $ 12.4 million, including $ 8.8 million related to operating lease right-of-use assets. Abercrombie & Fitch Co. 12 2023 1Q Form 10-Q Table of Contents 9. INCOME TAXES The quarterly provision for income taxes is based on the current estimate of the annual effective income tax rate and the tax effect of discrete items occurring during the quarter. The Company’s quarterly provision and the estimate of the annual effective tax rate are subject to significant variation due to several factors. These factors include variability in the pre-tax jurisdictional mix of earnings, changes in how the Company does business including entering into new businesses or geographies, changes in foreign currency exchange rates, changes in laws, regulations, interpretations and administrative practices, relative changes in expenses or losses for which tax benefits are not recognized and the impact of discrete items. In addition, jurisdictions where the Company anticipates an ordinary loss for the fiscal year for which the Company does not anticipate future tax benefits are excluded from the overall computation of estimated annual effective tax rate and no tax benefits are recognized in the period related to losses in such jurisdictions. The impact of these items on the effective tax rate will be greater at lower levels of pre-tax earnings. Impact of valuation allowances and other tax charges During the thirteen weeks ended April 29, 2023, the Company did not recognize income tax benefits on $ 20.3 million of pretax losses, primarily in Switzerland, resulting in adverse tax impacts of $ 3.1 million. As of April 29, 2023, the Company had net deferred tax assets of approximately $ 9.8 million, $ 8.5 million, and $ 15.4 million in China, Japan and United Kingdom, respectively. While the Company believes that these net deferred tax assets are more-likely-than-not to be realized, it is not a certainty, as the Company continues to evaluate and respond to emerging situations. Should circumstances change, the net deferred tax assets may become subject to additional valuation allowances in the future. Additional valuation allowances would result in additional tax expense. During the thirteen weeks ended April 30, 2022, the Company did not recognize income tax benefits on $ 13.4 million of pretax losses, primarily in Switzerland, resulting in adverse tax impacts of $ 2.4 million. As of April 30, 2022, there were approximately $ 11.4 million, $ 10.4 million, and $ 17.9 million of net deferred tax assets in China, Japan, and the United Kingdom, respectively. Share-based compensation Refer to Note 11, “ SHARE-BASED COMPENSATION ,” for details on income tax benefits and charges related to share-based compensation awards during the thirteen weeks ended April 29, 2023 and April 30, 2022. 10. BORROWINGS Details on the Company’s long-term borrowings, net, as of April 29, 2023 and January 28, 2023 are as follows: (in thousands) April 29, 2023 January 28, 2023 Long-term portion of borrowings, gross at carrying amount $ 299,730 $ 299,730 Unamortized fees ( 2,558 ) ( 2,878 ) Long-term borrowings, net $ 297,172 $ 296,852 Senior Secured Notes The terms of the Senior Secured Notes have remained unchanged from those disclosed in Note 13, “BORROWINGS,” of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of on the Fiscal 2022 Form 10-K. ABL Facility The terms of the Company’s senior secured revolving credit facility of up to $ 400.0 million (the “ABL Facility”) have remained unchanged from those disclosed in Note 13, “BORROWINGS,” of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Dat a ” of the Fiscal 2022 Form 10-K. The Company did not have any borrowings outstanding under the ABL Facility as of April 29, 2023 or as of January 28, 2023. As of April 29, 2023, availability under the ABL Facility was $ 345.4 million, net of $ 0.6 million in outstanding stand-by letters of credit. As the Company must maintain excess availability equal to the greater of 10% of the loan cap or $30 million under the ABL Facility, borrowing capacity available to the Company under the ABL Facility was $ 310.8 million as of April 29, 2023. Abercrombie & Fitch Co. 13 2023 1Q Form 10-Q Table of Contents Representations, warranties and covenants The agreements related to the Senior Secured Notes and the ABL Facility contain various representations, warranties and restrictive covenants that, among other things and subject to specified exceptions, restrict the ability of the Company and its subsidiaries t grant or incur liens; incur, assume or guarantee additional indebtedness; sell or otherwise dispose of assets, including capital stock of subsidiaries; make investments in certain subsidiaries; pay dividends, make distributions or redeem or repurchase capital stock; change the nature of their business; and consolidate or merge with or into, or sell substantially all of the assets of the Company or A&F Management to another entity. The Senior Secured Notes are guaranteed on a senior secured basis, jointly and severally, by A&F and each of the existing and future wholly-owned domestic restricted subsidiaries of A&F that guarantee or will guarantee A&F Management’s Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) or certain future capital markets indebtedness. Certain of the agreements related to the Senior Secured Notes and the ABL Facility also contain certain affirmative covenants, including reporting requirements such as delivery of financial statements, certificates and notices of certain events, maintaining insurance and providing additional guarantees and collateral in certain circumstances. The Company was in compliance with all debt covenants under these agreements as of April 29, 2023. 11. SHARE-BASED COMPENSATION Financial statement impact The following table details share-based compensation expense and the related income tax impacts for the thirteen weeks ended April 29, 2023 and April 30, 2022: Thirteen Weeks Ended (in thousands) April 29, 2023 April 30, 2022 Share-based compensation expense $ 8,088 $ 8,356 Income tax benefit associated with share-based compensation expense recognized 1,005 965 The following table details discrete income tax benefits and charges related to share-based compensation awards during the thirteen weeks ended April 29, 2023 and April 30, 2022: Thirteen Weeks Ended (in thousands) April 29, 2023 April 30, 2022 Income tax discrete benefits realized for tax deductions related to the issuance of shares $ 1,117 $ 2,111 Income tax discrete charges realized upon cancellation of stock appreciation rights ( 101 ) ( 195 ) Total income tax discrete benefits related to share-based compensation awards $ 1,016 $ 1,916 The following table details the amount of employee tax withheld by the Company upon the issuance of shares associated with restricted stock units vesting and the exercise of stock appreciation rights for the thirteen weeks ended April 29, 2023 and April 30, 2022: Thirteen Weeks Ended (in thousands) April 29, 2023 April 30, 2022 Employee tax withheld upon issuance of shares (1) $ 18,359 $ 13,925 (1) Classified within other financing activities on the Condensed Consolidated Statements of Cash Flows. Abercrombie & Fitch Co. 14 2023 1Q Form 10-Q Table of Contents Restricted stock units The following table summarizes activity for restricted stock units for the thirteen weeks ended April 29, 2023: Service-based Restricted Stock Units Performance-based Restricted Stock Units Market-based Restricted Stock Units Number of Underlying Shares Weighted- Average Grant Date Fair Value Number of Underlying Shares Weighted- Average Grant Date Fair Value Number of Underlying Shares Weighted- Average Grant Date Fair Value Unvested at January 28, 2023 2,461,395 $ 21.30 336,549 $ 31.08 662,137 $ 23.68 Granted 840,987 28.35 222,144 28.36 111,077 41.20 Adjustments for performance achievement — — — — 493,854 16.24 Vested ( 803,312 ) 19.37 — — ( 987,708 ) 16.24 Forfeited ( 35,766 ) 26.65 — — — — Unvested at April 29, 2023 (1) 2,463,304 $ 24.29 558,693 $ 30.00 279,360 $ 43.81 (1) Unvested shares related to restricted stock units with performance-based and market-based vesting conditions are reflected at 100% of their target vesting amount in the table above. Unvested shares related to restricted stock units with performance-based and market-based vesting conditions can be achieved at up to 200% of their target vesting amount. The following table details unrecognized compensation cost and the remaining weighted-average period over which these costs are expected to be recognized for restricted stock units as of April 29, 2023: (in thousands) Service-based Restricted Stock Units Performance-based Restricted Stock Units Market-based Restricted Stock Units Unrecognized compensation cost $ 51,262 $ 8,601 $ 8,085 Remaining weighted-average period cost is expected to be recognized (years) 1.4 1.3 1.2 Additional information pertaining to restricted stock units for the thirteen weeks ended April 29, 2023 and April 30, 2022 follows: (in thousands) April 29, 2023 April 30, 2022 Service-based restricted stock units: Total grant date fair value of awards granted $ 23,842 $ 23,342 Total grant date fair value of awards vested 15,560 13,622 Performance-based restricted stock units: Total grant date fair value of awards granted 6,300 5,300 Total grant date fair value of awards vested — 4,482 Market-based restricted stock units: Total grant date fair value of awards granted 4,576 3,731 Total grant date fair value of awards vested 16,040 4,105 The weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the thirteen weeks ended April 29, 2023 and April 30, 2022 were as follows: April 29, 2023 April 30, 2022 Grant date market price $ 28.36 $ 32.07 Fair value 41.20 45.15 Price volatility 63 % 66 % Expected term (years) 2.9 2.9 Risk-free interest rate 4.6 % 2.3 % Dividend yield — — Average volatility of peer companies 66.0 72.9 Average correlation coefficient of peer companies 0.5295 0.5146 Abercrombie & Fitch Co. 15 2023 1Q Form 10-Q Table of Contents Stock appreciation rights The following table summarizes stock appreciation rights activity for the thirteen weeks ended April 29, 2023: Number of Underlying Shares Weighted-Average Exercise Price Aggregate Intrinsic Value Weighted-Average Remaining Contractual Life (years) Outstanding at January 28, 2023 190,589 $ 29.43 Exercised ( 7,700 ) 24.05 Forfeited or expired ( 23,700 ) 45.69 Outstanding at April 29, 2023 159,189 $ 27.27 $ 106,556 1.6 Stock appreciation rights exercisable at April 29, 2023 159,189 $ 27.27 $ 106,556 1.6 No stock appreciation rights were exercised during the thirteen weeks ended  April 30, 2022. 12. DERIVATIVE INSTRUMENTS The Company is exposed to risks associated with changes in foreign currency exchange rates and uses derivative instruments, primarily forward contracts, to manage the financial impacts of these exposures. The Company does not use forward contracts to engage in currency speculation and does not enter into derivative financial instruments for trading purposes. The Company uses derivative instruments, primarily foreign currency exchange forward contracts designated as cash flow hedges, to hedge the foreign currency exchange rate exposure associated with forecasted foreign-currency-denominated intercompany inventory sales to foreign subsidiaries and the related settlement of the foreign-currency-denominated intercompany receivables. Fluctuations in foreign currency exchange rates will either increase or decrease the Company’s intercompany equivalent cash flows and affect the Company’s U.S. Dollar earnings. Gains or losses on the foreign currency exchange forward contracts that are used to hedge these exposures are expected to partially offset this variability. Foreign currency exchange forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed upon settlement date. These foreign currency exchange forward contracts typically have a maximum term of twelve months. The sale of the inventory to the Company’s customers will result in the reclassification of related derivative gains and losses that are reported in AOCL into earnings. The Company also uses foreign currency exchange forward contracts to hedge certain foreign-currency-denominated net monetary assets/liabilities. Examples of monetary assets/liabilities include cash balances, receivables and payables. Fluctuations in foreign currency exchange rates result in transaction gains or losses being recorded in earnings, as GAAP requires that monetary assets/liabilities be remeasured at the spot exchange rate at quarter-end and upon settlement. The Company has chosen not to apply hedge accounting to these instruments because there are no anticipated differences in the timing of gain or loss recognition on the hedging instruments and the hedged items. As of April 29, 2023, the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge either a portion, or all, of forecasted foreign-currency-denominated intercompany inventory transactions, the resulting settlement of the foreign-currency-denominated intercompany accounts receivable, or  (in thousands) Notional Amount (1) Euro $ 83,749 British pound 61,030 Canadian dollar — Japanese yen — (1) Amounts reported are the U.S. Dollar notional amounts outstanding as of April 29, 2023. The fair value of derivative instruments is determined using quoted market prices of the same or similar instruments, adjusted for counterparty risk. The location and amounts of derivative fair values of foreign currency exchange forward contracts on the Condensed Consolidated Balance Sheets as of April 29, 2023 and January 28, 2023 were as follows: (in thousands) Location April 29, 2023 January 28, 2023 Location April 29, 2023 January 28, 2023 Derivatives designated as cash flow hedging instruments Other current assets $ 7 $ 32 Accrued expenses $ 4,139 $ 4,986 Abercrombie & Fitch Co. 16 2023 1Q Form 10-Q Table of Contents Information pertaining to derivative gains or losses from foreign currency exchange forward contracts designated as cash flow hedging instruments for the thirteen weeks ended April 29, 2023 and April 30, 2022 follows: Thirteen Weeks Ended (in thousands) April 29, 2023 April 30, 2022 (Loss) gain recognized in AOCL (1) $ ( 507 ) $ 5,363 (Loss) gain reclassified from AOCL to cost of sales, exclusive of depreciation and amortization (2) ( 906 ) 3,684 (1) Amount represents the change in fair value of derivative instruments. (2) Amount represents gain (loss) reclassified from AOCL to cost of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) when the hedged item affects earnings, which is when merchandise is converted to cost of sales, exclusive of depreciation and amortization. Substantially all of the unrealized gain will be recognized in costs of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) over the next twelve months . Additional information pertaining to derivative gains or losses from foreign currency exchange forward contracts not designated as hedging instruments for the thirteen weeks ended April 29, 2023 and April 30, 2022 follows: Thirteen Weeks Ended (in thousands) April 29, 2023 April 30, 2022 (Gain) loss, net recognized in other operating income, net $ ( 547 ) $ 1,141 13. ACCUMULATED OTHER COMPREHENSIVE LOSS Fo r the thirteen weeks ended April 29, 2023, the activity in AOCL was as follows: Thirteen Weeks Ended April 29, 2023 (in thousands) Foreign Currency Translation Adjustment Unrealized Gain (Loss) on Derivative Financial Instruments Total Beginning balance at January 28, 2023 $ ( 132,653 ) $ ( 4,874 ) $ ( 137,527 ) Other comprehensive income (loss) before reclassifications 311 ( 507 ) ( 196 ) Reclassified loss from AOCL (1) — 906 906 Tax effect — 6 6 Other comprehensive income after reclassifications 311 405 716 Ending balance at April 29, 2023 $ ( 132,342 ) $ ( 4,469 ) $ ( 136,811 ) (1) Amount represents loss reclassified from AOCL to cost of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). For the thirteen weeks ended April 30, 2022, the activity in AOCL was as follows: Thirteen Weeks Ended April 30, 2022 (in thousands) Foreign Currency Translation Adjustment Unrealized Gain (Loss) on Derivative Financial Instruments Total Beginning balance at January 29, 2022 $ ( 120,689 ) $ 5,983 $ ( 114,706 ) Other comprehensive (loss) income before reclassifications ( 10,403 ) 5,363 ( 5,040 ) Reclassified gain from AOCL (1) — ( 3,684 ) ( 3,684 ) Tax effect — 33 33 Other comprehensive (loss) income after reclassifications ( 10,403 ) 1,712 ( 8,691 ) Ending balance at April 30, 2022 $ ( 131,092 ) $ 7,695 $ ( 123,397 ) (1) Amount represents loss reclassified from AOCL to cost of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Abercrombie & Fitch Co. 17 2023 1Q Form 10-Q Table of Contents 14. SEGMENT REPORTING The Company’s two operating segments are brand-bas Abercrombie, which includes the Company’s Abercrombie & Fitch and abercrombie kids brands, and Hollister, which includes the Company’s Hollister, Gilly Hicks, and Social Tourist brands. These operating segments have similar economic characteristics, classes of consumers, products, and production and distribution methods, operate in the same regulatory environments, and have been aggregated into one reportable segment. Amounts shown below include net sales from wholesale, franchise and licensing operations, which are not a significant component of total revenue, and are aggregated within their respective operating segment and geographic area. The Company’s net sales by operating segment for the thirteen weeks ended April 29, 2023 and April 30, 2022 were as follows: Thirteen Weeks Ended (in thousands) April 29, 2023 April 30, 2022 Abercrombie 436,044 383,928 Hollister $ 399,950 $ 428,834 Total $ 835,994 $ 812,762 Net sales by geographic area are presented by attributing revenues to an individual country on the basis of the country in which the merchandise was sold for in-store purchases and on the basis of the shipping location provided by customers for digital and wholesale orders. The Company’s net sales by geographic area for the thirteen weeks ended April 29, 2023 and April 30, 2022 were as follows: Thirteen Weeks Ended (in thousands) April 29, 2023 April 30, 2022 U.S. $ 636,117 $ 585,106 EMEA (1) 139,258 163,969 APAC (2) 33,333 29,897 Other (3) 27,286 33,790 International $ 199,877 $ 227,656 Total $ 835,994 $ 812,762 (1) Europe, Middle East and Africa region (“EMEA”). (2) Asia-Pacific region (“APAC”). (3) Other includes all sales that do not fall within the United States, EMEA, or APAC regions, which are derived primarily in Canada. 15. SUBSEQUENT EVENT During the second quarter of Fiscal 2023, operating segments were reorganized into three geographic operating segments: Americas, Asia-Pacific (APAC), and Europe, the Middle East and Africa (EMEA).  Beginning with the second quarter of Fiscal 2023, all periods presented will be recast to conform to this classification. Abercrombie & Fitch Co. 18 2023 1Q Form 10-Q Table of Contents 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 thereto 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, its management or spokespeople involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond the Company’s control. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “should,” “are confident,” “will,” “could,” “outlook,” or the negative versions of these 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 2022 Form 10-K and otherwise in our reports and filings with the SEC, as well as the followin • risks related to changes in global economic and financial conditions, including volatility in the financial markets as a result of the failure, or rumored failure, of financial institutions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits; • risks related to recent inflationary pressures with respect to labor and raw materials and global supply chain constraints that have, and could continue to, affect freight, transit and other costs; • risks related to geopolitical conflict, including the on-going hostilities in Ukraine, acts of terrorism, mass casualty events, social unrest, civil disturbance or disobedience; • 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 ability to successfully invest in and execute on our customer, digital and omnichannel initiatives; • 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 international operations; • risks related to our ability to execute on our strategic and growth initiatives, including those outlined in our Always Forward Plan; • risks related to international 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 and uncertainty related to the COVID-19 pandemic and any other adverse public health developments: • risks related to cybersecurity threats and privacy or data security breaches; • risks related to the potential loss or disruption of our information systems; • risks related to the continued validity of our trademarks and our ability to protect our intellectual property; • risks associated with climate change and other corporate responsibility issues; and • uncertainties related to future legislation, regulatory reform, policy changes, or interpretive guidance on existing legislation. 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. Abercrombie & Fitch Co. 19 2023 1Q Form 10-Q Table of Contents 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 discussion of certain risks and challenges, as well as a summary of the Company’s performance for the thirteen weeks ended April 29, 2023 and April 30, 2022. • Results of Operations . An analysis of certain components of the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirteen weeks ended April 29, 2023 and April 30, 2022. • Liquidity and Capital Resources . A discussion of the Company’s financial condition, changes in financial condition and liquidity as of April 29, 2023, which includes (i) an analysis of financial condition as compared to January 28, 2023; (ii) an analysis of changes in cash flows for the thirteen weeks ended April 29, 2023, as compared to the thirteen weeks ended April 30, 2022; and (iii) an analysis of liquidity, including availability under the Company’s ABL Facility, the Company’s share repurchase program, and outstanding debt and covenant compliance. • Recent Accounting Pronouncements . A discussion, as applicable, of the recent accounting pronouncements the Company has adopted or is currently evaluating, including the dates of adoption and/or expected dates of adoption, and 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 the non-GAAP financial measures provided within MD&A are useful to investors. Abercrombie & Fitch Co. 20 2023 1Q Form 10-Q Table of Contents 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 digital channels and Company-owned stores, as well as through various third-party arrangements. The Company’s two brand-based operating segments are Abercrombie, which includes the Company’s Abercrombie & Fitch and abercrombie kids brands, and Hollister, which includes the Company’s Hollister, Gilly Hicks, and Social Tourist brands. These brands share a commitment to offering unique products of enduring quality and exceptional comfort that allow customers around the world to express their own individuality and style. The Company operates primarily in North America, Europe, Middle East, and Asia. 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 2022 January 28, 2023 52 Fiscal 2023 February 3, 2024 53 Fiscal 2024 February 1, 2025 52 Seasonality Historically, the Company’s operations have been seasonal in nature and consist of two principal selling seaso 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 2023 The Company remains committed to, and confident in, its long-term vision of being a digitally-led global omnichannel apparel retailer and continues to evaluate opportunities to make progress toward initiatives that support this vision as outlined in its Always Forward Plan. The Always Forward Plan, which outlines the Company’s long-term strategic goals, including growing shareholder value is anchored on three strategic growth principles, which are t • Execute focused brand growth plans; • Accelerate an enterprise-wide digital revolution; and • Operate with financial discipline. The following focus areas for Fiscal 2023 serve as a framework for the Company achieving sustainable growth and progressing toward the Always Forward Pl • Execute brand growth plans • Drive Abercrombie brands through marketing and store investment; • Optimize the Hollister product and brand voice to enable second half growth; and • Support Gilly Hicks growth with an evolved assortment mix • Accelerate an enterprise-wide digital revolution • Complete current phase of our modernization efforts around key data platforms; • Continue to progress on our multi-year enterprise resource planning (“ERP”) transformation and cloud migration journey; and • Improve our digital and app experience across key parts of the customer journey • Operate with financial discipline • Maintain appropriately lean inventory levels that put Abercrombie and Hollister in a position to chase inventory throughout the year; and • Properly balance investments, inflation and efficiency efforts to improve profitability Abercrombie & Fitch Co. 21 2023 1Q Form 10-Q Table of Contents Supply chain and impact of inflation Previously, the Company experienced inflationary pressures with respect to labor, cotton, freight and other raw materials and other costs, which has negatively impacted expenses and margins. While freight costs have stabilized and supply chain constraints are waning, there continues to be inflationary pressures with respect to cotton and other raw materials, as well as other operating costs. Continued inflationary pressures could further impact expenses and have a long-term impact on the Company because increasing costs may impact its ability to maintain satisfactory margins. The Company may be unsuccessful in passing these increased costs on to its customers through higher AUR. Furthermore, increases in inflation may not be matched by growth in consumer income, which also could have a negative impact on discretionary spending. In periods of perceived or actual unfavorable economic conditions, consumers may reallocate available discretionary spending, which may adversely impact demand for our products. The adverse consequences of the current economic environment continue to impact the Company and may persist for some time.  The Company will continue to assess impacts on its operations and financial condition, and will respond as it deems appropriate. Global Store Network Optimization The Company has a goal of opening smaller, 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 during the year-to-date period of Fiscal 2023, the Company opened six new stores, while closing 10 stores. As part of this focus, the Company plans to be a net store opener again this year with approximately 35-40 new stores, while closing approximately 20-25 stores, during Fiscal 2023, 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. Additional details related to store count and gross square footage fol Abercrombie (1) Hollister (2) Total Company (3) U.S. International U.S. International U.S. International Total Number of sto January 28, 2023 180 53 380 149 560 202 762 New 1 2 1 2 2 4 6 Permanently closed (2) (1) (4) (3) (6) (4) (10) April 29, 2023 179 54 377 148 556 202 758 Gross square footage (in thousands) : April 29, 2023 1,146 350 2,407 1,120 3,553 1,470 5,023 (1) Abercrombie includes the Company's Abercrombie & Fitch and abercrombie kids brands. Locations with abercrombie kids carveouts within Abercrombie & Fitch stores are represented as a single store count. Excludes 22 international franchise stores as of April 29, 2023 and 23 international franchise stores as of January 28, 2023. Excludes three Company-operated temporary stores as of each of April 29, 2023 and January 28, 2023. (2) Hollister includes the Company’s Hollister and Gilly Hicks brands. Locations with Gilly Hicks carveouts within Hollister stores are represented as a single store count. Excludes 13 international franchise stores as of April 29, 2023 and 12 international franchise stores as of January 28, 2023.  Excludes 20 Company-operated temporary stores as of April 29, 2023 and 16 Company-operated temporary stores as of January 28, 2023. (3) This store count excludes one international third-party operated multi-brand outlet store as of each of April 29, 2023 and January 28, 2023. Impact of global events and uncertainty As we are a global multi-brand omnichannel specialty retailer, with operations in North America, Europe, Middle East and Asia, among other regions, management is mindful of macroeconomic risks, global challenges and the changing global geopolitical environment, including the on-going conflict in Ukraine, that could adversely impact certain areas of the business. As a result, management continues to monitor global events. The Company continues to assess the potential impacts these events and similar events may have on the business in future periods and continues to develop and update contingency plans to assist in mitigating potential impacts. It is possible that the Company’s preparations for such events are not adequate to mitigate their impact, and that these events could further adversely affect its business and results of operations. For a discussion of material risks that have the potential to cause our actual results to differ materially from our expectations, refer to the disclosures under the heading “Forward-looking Statements and Risk Factors” in “Item 1A. Risk Factors” on the Fiscal 2022 Form 10-K. Abercrombie & Fitch Co. 22 2023 1Q Form 10-Q Table of Contents Summary of results A summary of results for the thirteen weeks ended April 29, 2023 and April 30, 2022 follows: GAAP Non-GAAP (1) (in thousands, except change in net sales, gross profit rate, operating income (loss) margin and per share amounts) April 29, 2023 April 30, 2022 April 29, 2023 April 30, 2022 Thirteen Weeks Ended Net sales $ 835,994 $ 812,762 Change in net sales 2.9 % 4.0 % Gross profit rate 61.0 % 55.3 % Operating income (loss) $ 34,008 $ (9,726) $ 38,444 $ (6,304) Operating income (loss) margin 4.1 % (1.2) % 4.6 % (0.8) % Net income (loss) attributable to A&F $ 16,571 $ (16,469) $ 19,820 $ (13,965) Net income (loss) per share attributable to A&F 0.32 (0.32) 0.39 (0.27) (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 .” Certain components of the Company’s Condensed Consolidated Balance Sheets as of April 29, 2023 and January 28, 2023 were as follows: (in thousands) April 29, 2023 January 28, 2023 Cash and equivalents $ 446,952 $ 517,602 Gross long-term borrowings outstanding, carrying amount 299,730 299,730 Inventories 447,806 505,621 Certain components of the Company’s Condensed Consolidated Statements of Cash Flows for the thirteen week periods ended April 29, 2023 and April 30, 2022 were as follows: (in thousands) April 29, 2023 April 30, 2022 Net cash used for operating activities $ (560) $ (217,787) Net cash used for investing activities (46,391) (18,541) Net cash used for financing activities (21,956) (116,945) 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 The Company’s net sales by operating segment for the thirteen weeks ended April 29, 2023 and April 30, 2022 were as follows: Thirteen Weeks Ended (in thousands) April 29, 2023 April 30, 2022 $ Change % Change Comparable Sales (1) Abercrombie (2) $ 436,044 $ 383,928 $ 52,116 14 % 14 % Hollister (3) 399,950 428,834 (28,884) (7) (6) Total $ 835,994 $ 812,762 $ 23,232 3 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. (2) Includes Abercrombie & Fitch and abercrombie kids brands. (3) Includes Hollister, Gilly Hicks, and Social Tourist brands. Abercrombie & Fitch Co. 23 2023 1Q Form 10-Q Table of Contents Net sales by geographic area are presented by attributing revenues to an individual country on the basis of the country in which the merchandise was sold for in-store purchases and the shipping location provided by customers for digital orders. The Company’s net sales by geographic area for the thirteen weeks ended April 29, 2023 and April 30, 2022 were as follows: Thirteen Weeks Ended (in thousands) April 29, 2023 April 30, 2022 $ Change % Change Comparable Sales (1 ) U.S. $ 636,117 $ 585,106 $ 51,011 9 % 4 % EMEA 139,258 163,969 (24,711) (15) (4) APAC 33,333 29,897 3,436 11 22 Other (2) 27,286 33,790 (6,504) (19) (2) International $ 199,877 $ 227,656 $ (27,779) (12) 0 Total $ 835,994 $ 812,762 $ 23,232 3 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. (2) Other includes all sales that do not fall within the United States, EMEA, or APAC regions, which are derived primarily in Canada. For the first quarter of Fiscal 2023, net sales increased 3% primarily due to an increase in AUR. The year-over-year increase in net sales reflects a positive comparable sales of 3%, as compared to the first quarter of Fiscal 2022, with growth in the U.S. partially offset by a decline in International. This was partially offset by the adverse impact from changes in foreign currency exchange rates of approximately 1% or  $9 million. Cost of sales, exclusive of depreciation and amortization Thirteen Weeks Ended April 29, 2023 April 30, 2022 (in thousands) % of Net sales % of Net sales BPS Change Cost of sales, exclusive of depreciation and amortization $ 326,200 39.0 % $ 363,216 44.7 % (570) For the first quarter of Fiscal 2023, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased by approximately 570 basis points, as compared to the first quarter of Fiscal 2022. The year-over-year decrease was primarily driven by a benefit of 760 basis points from lower freight costs and 230 basis points from year-over-year AUR growth partially offset by 320 basis points from higher cotton costs and 100 basis points from the adverse impact from changes in foreign currency exchange rates. Gross profit, exclusive of depreciation and amortization Thirteen Weeks Ended April 29, 2023 April 30, 2022 (in thousands) % of Net sales % of Net sales BPS Change Gross profit, exclusive of depreciation and amortization $ 509,794 61.0 % $ 449,546 55.3 % 570 Stores and distribution expense Thirteen Weeks Ended April 29, 2023 April 30, 2022 (in thousands) % of Net sales % of Net sales BPS Change Stores and distribution expense $ 331,613 39.7 % $ 337,543 41.5 % (180) For the first quarter of Fiscal 2023, stores and distribution expense decreased 180 basis points, as compared to the first quarter of Fiscal 2022. The $6 million decrease was primarily driven by a decrease in digital marketing and fulfillment costs as compared to the first quarter of Fiscal 2022. Abercrombie & Fitch Co. 24 2023 1Q Form 10-Q Table of Contents Marketing, general and administrative expense Thirteen Weeks Ended April 29, 2023 April 30, 2022 (in thousands) % of Net sales % of Net sales BPS Change Marketing, general and administrative expense $ 142,631 17.1 % $ 122,149 15.0 % 210 For the first quarter of Fiscal 2023, marketing, general and administrative expense, as a percentage of net sales, increased 210 basis points, as compared to the first quarter of Fiscal 2022, primarily driven by an increase in technology expenses and incentive-based compensation. Asset impairment Thirteen Weeks Ended April 29, 2023 April 30, 2022 (in thousands) % of Net sales % of Net sales BPS Change Asset impairment $ 4,436 0.5% $ 3,422 0.4% 10 Excluded items: Asset impairment charges (1) (4,436) (0.5) (3,422) (0.4) (10) Adjusted non-GAAP asset impairment $ — — $ — — — (1) Refer to “ NON-GAAP FINANCIAL MEASURES ” for further details. Refer to Note 8, “ ASSET IMPAIRMENT .” Other operating income, net Thirteen Weeks Ended April 29, 2023 April 30, 2022 (in thousands) % of Net sales % of Net sales BPS Change Other operating income, net $ 2,894 0.3 % $ 3,842 0.5 % 20 Operating income (loss) Thirteen Weeks Ended April 29, 2023 April 30, 2022 (in thousands) % of Net sales % of Net sales BPS Change Operating income (loss) $ 34,008 4.1 % $ (9,726) (1.2) % 530 Excluded items: Asset impairment charges (1) 4,436 0.5 3,422 0.4 10 Adjusted non-GAAP operating income (loss) ⁽¹⁾ $ 38,444 4.6 $ (6,304) (0.8) 540 (1) Refer to “ NON-GAAP FINANCIAL MEASURES ” for further details. Abercrombie & Fitch Co. 25 2023 1Q Form 10-Q Table of Contents Interest expense, net Thirteen Weeks Ended April 29, 2023 April 30, 2022 (in thousands) % of Net sales % of Net sales BPS Change Interest expense $ 7,458 0.9 % $ 7,809 1.0 % (10) Interest income (4,015) (0.5) (502) (0.1) (40) Interest expense, net $ 3,443 0.4 $ 7,307 0.9 (50) For the first quarter of Fiscal 2023, interest expense, net was lower, as a result of higher interest income due to the increase in rates received on deposits and money market accounts, compared to the first quarter of Fiscal 2022. Income tax expense (benefit) Thirteen Weeks Ended April 29, 2023 April 30, 2022 (in thousands, except ratios) Effective Tax Rate Effective Tax Rate Income tax expense (benefit) $ 12,718 41.6 % $ (2,187) 12.8 % Excluded items: Tax effect of pre-tax excluded items (1) 1,187 918 Adjusted non-GAAP income tax expense (benefit) ⁽¹⁾ $ 13,905 39.7 % $ (1,269) 9.3 % (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 “ Operating income (loss) ” and “ NON-GAAP FINANCIAL MEASURES ” for details of pre-tax excluded items. Refer to Note 9, “ INCOME TAXES .” Net income (loss) attributable to A&F Thirteen Weeks Ended April 29, 2023 April 30, 2022 (in thousands) % of Net sales % of Net sales BPS Change Net income (loss) attributable to A&F $ 16,571 2.0 % $ (16,469) (2.0) % 400 Excluded items, net of tax (1) 3,249 0.4 2,504 0.3 10 Adjusted non-GAAP net income (loss) attributable to A&F (2) $ 19,820 2.4 $ (13,965) (1.7) 410 (1) Excluded items presented above under “ Operating income (loss) ,” and “ Income tax expense (benefit) ” (2) Refer to “ NON-GAAP FINANCIAL MEASURES ” for further details. Net income (loss) per share attributable to A&F Thirteen Weeks Ended April 29, 2023 April 30, 2022 $ Change Net income (loss) per diluted share attributable to A&F $ 0.32 $ (0.32) $ 0.64 Excluded items, net of tax (1) 0.06 0.05 0.01 Adjusted non-GAAP net income (loss) per diluted share attributable to A&F 0.39 (0.27) 0.66 Impact from changes in foreign currency exchange rates — (0.12) 0.12 Adjusted non-GAAP net income (loss) per diluted share attributable to A&F on a constant currency basis (2) 0.39 (0.39) 0.78 (1) Excluded items presented above under “ Operating income (loss) ,” and “ Income tax expense (benefit) . ” (2) Refer to “ NON-GAAP FINANCIAL MEASURES ” for further details. Abercrombie & Fitch Co. 26 2023 1Q Form 10-Q Table of Contents LIQUIDITY AND CAPITAL RESOURCES Overview The Company’s capital allocation strategy, priorities and investments are reviewed by A&F’s Board of Directors considering both liquidity and valuation factors. The Company believes that it will have adequate liquidity to fund operating activities for the next 12 months. The Company monitors financing market conditions and may in the future determine whether and when to amend, modify, or restructure its ABL Facility and/or the Senior Secured Notes. For a discussion of the Company’s share repurchase activity and suspended dividend program, please see below under “Share repurchases and dividends.” Primary sources and uses of cash The Company’s business has two principal selling seaso 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”). 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 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 and Senior Secured Notes ”. 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, and obligations related to compensation, marketing, leases and any lease buyouts or modifications it may exercise, taxes and other operating activities. The Company evaluates opportunities for investments in the business that are in line with initiatives that position the business for sustainable long-term growth that align with its strategic pillars as described within “Item 1. Business - STRATEGY AND KEY BUSINESS PRIORITIES” included on the Fiscal 2022 Form 10-K, including being opportunistic regarding growth opportunities. Examples of potential investment opportunities include, but are not limited to, new store experiences, and investments in its 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 digital and omnichannel investments, information technology, and other projects. For the year-to-date period ended April 29, 2023, the Company used $46.4 million towards capital expenditures. Total capital expenditures for Fiscal 2023 are expected to be approximately $160 million. The Company measures liquidity using total cash and cash equivalents and incremental borrowing available under the ABL Facility.  As of April 29, 2023, the Company had cash and cash equivalents of $447.0 million and total liquidity of approximately $757.7 million, compared with cash and cash equivalents of $517.6 million and total liquidity of approximately $865.7 million at the beginning of Fiscal 2023. This allows the Company to evaluate potential opportunities to strategically deploy excess cash and/or deleverage the balance sheet, depending on various factors, such as market and business conditions, including the Company’s ability to accelerate investments in the business. Such opportunities include, but are not limited to, returning cash to shareholders through share repurchases or purchasing outstanding Senior Secured Notes. 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 April 29, 2023, the Company did not repurchase any shares of its common stock. Historically, the Company has repurchased shares of its Common Stock from time to time, 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. Shares may be repurchased in the open market, including pursuant to trading plans established in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), through privately negotiated transactions or other transactions or by a combination of such methods. Refer to “ Item 2. Unregistered Sales of Equity Securities and Use of Proceeds ” of Part II of this Quarterly Report on Form 10-Q for the amount remaining available for purchase under the Company’s publicly announced stock repurchase authorization. In May 2020, the Company announced that it had suspended its dividend program in order to preserve liquidity and maintain financial flexibility in light of COVID-19. 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 Senior Secured Notes and 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. Abercrombie & Fitch Co. 27 2023 1Q Form 10-Q Table of Contents Credit facility and Senior Secured Notes As of April 29, 2023, the Company had $299.7 million of gross borrowings outstanding under the Senior Secured Notes. In addition, the Amended and Restated Credit Agreement, as amended by the First Amendment (as defined below) provides for the ABL Facility, which is a senior secured asset-based revolving credit facility of up to $400 million. As of April 29, 2023, the Company did not have any borrowings outstanding under the ABL Facility. The ABL Facility matures on April 29, 2026. Details regarding the remaining borrowing capacity under the ABL Facility as of April 29, 2023 are as follows: (in thousands) April 29, 2023 Loan cap $ 345,995 L Outstanding stand-by letters of credit (610) Borrowing capacity 345,385 L Minimum excess availability (1) (34,600) Borrowing capacity available $ 310,785 (1) The Company must maintain excess availability equal to the greater of 10% of the loan cap or $30 million under the ABL Facility. Refer to Note 10, “ 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 April 29, 2023, $184.3 million of the Company’s $447.0 million of cash and equivalents were held by foreign affiliates. Refer to Note 9, “ INCOME TAXES .” Analysis of cash flows The table below provides certain components of the Company’s Condensed Consolidated Statements of Cash Flows for the thirteen weeks ended April 29, 2023 and April 30, 2022: Thirteen Weeks Ended April 29, 2023 April 30, 2022 (in thousands) Cash and equivalents, and restricted cash and equivalents, beginning of period $ 527,569 $ 834,368 Net cash used for operating activities (560) (217,787) Net cash used for investing activities (46,391) (18,541) Net cash used for financing activities (21,956) (116,945) Effect of foreign currency exchange rates on cash (1,998) (2,617) Net decrease in cash and equivalents, and restricted cash and equivalents (70,905) (355,890) Cash and equivalents, and restricted cash and equivalents, end of period $ 456,664 $ 478,478 Operating activities - During the year-to-date period ended April 29, 2023, net cash used for operating activities included increased cash receipts as a result of the 3% 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 April 29, 2023, net cash used for investing activities was primarily used for capital expenditures of $46.4 million.  This compared to net cash used for investing activities of $26.3 million for the year-to-date period ended April 30, 2022, which was primarily used for capital expenditures, partially offset by the proceeds from the sale of property and equipment of $7.8 million. Financing activities - During the year-to-date period ended April 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.  During the year-to-date period ended April 30, 2022, net cash used by financing activities included the purchase of approximately 3.3 million shares of Common Stock with a market value of approximately $100.0 million. Abercrombie & Fitch Co. 28 2023 1Q Form 10-Q Table of Contents 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 28, 2023, 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 2022 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 2022 Form 10-K. There have been no significant changes in critical accounting policies and estimates since the end of Fiscal 2022. 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, such as certain asset impairment charges, 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 At times, 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 exclude 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 comparable sales is 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 applicab Financial measures (1) Excluded items Operating income (loss) Asset impairment charges Income tax expense (benefit) (2) Tax effect of pre-tax excluded items Net income (loss) and net income (loss) 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. Abercrombie & Fitch Co. 29 2023 1Q Form 10-Q Table of Contents 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. A reconciliation of non-GAAP financial metrics on a constant currency basis to financial measures calculated and presented in accordance with GAAP for the thirteen weeks ended April 29, 2023 and April 30, 2022 follows: (in thousands, except change in net sales, gross profit rate, operating margin and per share data) Thirteen Weeks Ended Net sales April 29, 2023 April 30, 2022 % Change GAAP $ 835,994 $ 812,762 3 % Impact from changes in foreign currency exchange rates — (8,597) 1 Non-GAAP on a constant currency basis $ 835,994 $ 804,165 4 Gross profit, exclusive of depreciation and amortization expense April 29, 2023 April 30, 2022 BPS Change (1) GAAP $ 509,794 $ 449,546 570 Impact from changes in foreign currency exchange rates — (12,601) 100 Non-GAAP on a constant currency basis $ 509,794 $ 436,945 670 Operating income (loss) April 29, 2023 April 30, 2022 BPS Change (1) GAAP $ 34,008 $ (9,726) 530 Excluded items (2) (4,436) (3,422) (10) Adjusted non-GAAP $ 38,444 $ (6,304) 540 Impact from changes in foreign currency exchange rates — (8,639) 110 Adjusted non-GAAP on a constant currency basis $ 38,444 $ (14,943) 650 Net income (loss) per share attributable to A&F April 29, 2023 April 30, 2022 $ Change GAAP $ 0.32 $ (0.32) $ 0.64 Excluded items, net of tax (2) (0.06) (0.05) (0.01) Adjusted non-GAAP $ 0.39 $ (0.27) $ 0.66 Impact from changes in foreign currency exchange rates — (0.12) 0.12 Adjusted non-GAAP on a constant currency basis $ 0.39 $ (0.39) $ 0.78 (1) The estimated basis point change has been rounded based on the change in the percentage of net sales. (2) Excluded items for the thirteen weeks ended April 29, 2023 and April 30, 2022 consisted of pre-tax store asset impairment charges and the tax effect of pre-tax excluded items. Abercrombie & Fitch Co. 30 2023 1Q Form 10-Q Table of Contents Item 3. Quantitative and Qualitative Disclosures About Market Risk INVESTMENT SECURITIES The Company maintains its cash equivalents in financial instruments, primarily time deposits and money market funds, with original maturities of three months or less. Due to the short-term nature of these instruments, changes in interest rates are not expected to materially affect the fair value of these financial instruments. The Rabbi Trust includes amounts to meet funding obligations to participants in the Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan I, the Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan II, and the Supplemental Executive Retirement Plan. The Rabbi Trust assets primarily consist of trust-owned life insurance policies, which are recorded at cash surrender value. The change in cash surrender value of the trust-owned life insurance policies held in the Rabbi Trust resulted in realized gains of $0.3 million and $0.4 million for each of the thirteen weeks ended April 29, 2023 and April 30, 2022, respectively which are recorded in interest expense, net on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The Rabbi Trust assets were included in other assets on the Condensed Consolidated Balance Sheets as of April 29, 2023 and January 28, 2023 and are restricted in their use as noted above. INTEREST RATE RISK Prior to July 2, 2020, the Company’s exposure to market risk due to changes in interest rates related primarily to the increase or decrease in the amount of interest expense from fluctuations in the LIBO rate, or an alternate base rate associated with the Company’s former term loan facility (the “Term Loan Facility”) and the ABL Facility. On July 2, 2020, the Company issued the Senior Secured Notes and repaid all outstanding borrowings under the Term Loan Facility and the ABL Facility, thereby eliminating any then-existing cash flow market risk due to changes in interest rates. The Senior Secured Notes are exposed to interest rate risk that is limited to changes in fair value. This analysis for Fiscal 2023 may differ from the actual results due to potential changes in gross borrowings outstanding under the ABL Facility and potential changes in interest rate terms and limitations described within the Amended and Restated Credit Agreement. In July 2017, the Financial Conduct Authority (the authority that regulates LIBO rate) announced it intended to stop compelling banks to submit rates for the calculation of LIBO rate after 2021. Certain publications of the LIBO rate were phased out at the end of 2021 and all LIBO rate publications will cease after June 30, 2023. On March 15, 2023, the Company entered into the First Amendment to the Amended and Restated Credit Agreement (the “First Amendment”) to eliminate LIBO rate based loans and to use the current market definitions with respect to the Secured Overnight Financing Rate, as well as to make other conforming changes. FOREIGN CURRENCY EXCHANGE RATE RISK A&F’s international subsidiaries generally operate with functional currencies other than the U.S. Dollar. Since the Company’s Condensed Consolidated Financial Statements are presented in U.S. Dollars, the Company must translate all components of these financial statements from functional currencies into U.S. Dollars at exchange rates in effect during or at the end of the reporting period. The fluctuation in the value of the U.S. Dollar against other currencies affects the reported amounts of revenues, expenses, assets, and liabilities. The potential impact of foreign currency exchange rate fluctuations increases as international operations relative to domestic operations increase. A&F and its subsidiaries have exposure to changes in foreign currency exchange rates associated with foreign currency transactions and forecasted foreign currency transactions, including the purchase of inventory between subsidiaries and foreign-currency-denominated assets and liabilities. The Company has established a program that primarily utilizes foreign currency exchange forward contracts to partially offset the risks associated with the effects of certain foreign currency transactions and forecasted transactions. Under this program, increases or decreases in foreign currency exchange rate exposures are partially offset by gains or losses on foreign currency exchange forward contracts, to mitigate the impact of foreign currency exchange gains or losses. The Company does not use forward contracts to engage in currency speculation. Outstanding foreign currency exchange forward contracts are recorded at fair value at the end of each fiscal period. Foreign currency exchange forward contracts are sensitive to changes in foreign currency exchange rates. As of April 29, 2023, the Company assessed the risk of loss in fair values from the effect of a hypothetical 10% devaluation of the U.S. Dollar against the exchange rates for foreign currencies under contract. Such a hypothetical devaluation would decrease derivative contract fair values by approximately $14.8 million. As the Company’s foreign currency exchange forward contracts are primarily designated as cash flow hedges of forecasted transactions, the hypothetical change in fair values would be expected to be largely offset by the net change in fair values of the underlying hedged items. Refer to Note 12, “ DERIVATIVE INSTRUMENTS ,” for the fair value of any outstanding foreign currency exchange forward contracts included in other current assets and accrued expenses as of April 29, 2023 and January 28, 2023. Abercrombie & Fitch Co. 31 2023 1Q Form 10-Q Table of Contents Item 4. Controls and Procedures DISCLOSURE CONTROLS AND PROCEDURES A&F maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in the reports that A&F files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to A&F’s management, including A&F’s Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met. A&F’s management, including the Chief Executive Officer of A&F (who serves as Principal Executive Officer of A&F) and the Executive Vice President and Chief Financial Officer and Chief Operating Officer of A&F (who serves as Principal Financial Officer and Principal Accounting Officer of A&F), evaluated the effectiveness of A&F’s design and operation of its disclosure controls and procedures as of the end of the fiscal quarter ended April 29, 2023. The Chief Executive Officer of A&F (in such individual’s capacity as the Principal Executive Officer of A&F) and the Executive Vice President and Chief Financial Officer of A&F (in such individual’s capacity as the Principal Financial Officer of A&F) concluded that A&F’s disclosure controls and procedures were effective at a reasonable level of assurance as of April 29, 2023. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There were no changes in A&F’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended April 29, 2023 that materially affected, or are reasonably likely to materially affect, A&F’s internal control over financial reporting. Abercrombie & Fitch Co. 32 2023 1Q Form 10-Q Table of Contents PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business. The Company’s legal costs incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, and the Company establishes estimated liabilities for the outcome of litigation where losses are deemed probable and the amount of loss, or range of loss, is reasonably estimable. The Company also determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess of related accrued liabilities, if any, when it has determined that a loss is reasonably possible, and it is able to determine such estimates. The Company’s accrued charges for certain legal contingencies are classified within accrued expenses on the Condensed Consolidated Balance Sheets included in “ Item 1. Financial Statements (Unaudited) ,” of Part I of this Quarterly Report on Form 10-Q. Based on currently available information, the Company cannot estimate a range of reasonably possible losses in excess of the accrued charges for legal contingencies. In addition, the Company has not established accruals for certain claims and legal proceedings pending against the Company where it is not possible to reasonably estimate the outcome or potential liability, and the Company cannot estimate a range of reasonably possible losses for these legal matters. Actual liabilities may differ from the amounts recorded, due to uncertainties regarding final settlement agreement negotiations, court approvals and the terms of any approval by the courts, and there can be no assurance that the final resolution of legal matters will not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows. The Company’s assessment of the current exposure could change in the event of the discovery of additional facts. In addition, pursuant to Item 103(c)(3)(iii) of Regulation S-K under the Exchange Act, the Company is required to disclose certain information about environmental proceedings to which a governmental authority is a party if the Company reasonably believes such proceedings may result in monetary sanctions, exclusive of interest and costs, above a stated threshold. The Company has elected to apply a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is required. Item 1A. Risk Factors The Company’s risk factors as of April 29, 2023 have not changed materially from those disclosed in Part I, “Item 1A. Risk Factors” of the Fiscal 2022 Form 10-K. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no sales of equity securities during the first quarter of Fiscal 2023 that were not registered under the Securities Act of 1933, as amended. The following table provides information regarding the purchase of shares of Common Stock made by or on behalf of A&F or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Exchange Act during each fiscal month of the thirteen weeks ended April 29, 2023: Period (fiscal month) Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2)(3) January 29, 2023 through February 25, 2023 631 $ 31.35 — $ 232,184,768 February 26, 2023 through April 1, 2023 729,177 24.96 — 232,184,768 April 2, 2023 through April 29, 2023 2,697 25.14 — 232,184,768 Total 732,505 27.15 — 232,184,768 (1) An aggregate of 732,505 shares of Common Stock purchased during the thirteen weeks ended April 29, 2023 were withheld for tax payments due upon the vesting of employee restricted stock units and the exercise of employee stock appreciation rights. (2) On November 23, 2021, we announced that A&F’s Board of Directors approved a new $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 for repurchase. (3) The number shown represents, as of the end of each period, the approximate dollar value of Common Stock that may yet be purchased under A&F’s publicly announced stock repurchase authorization described in footnote 2 above. The shares may be purchased, from time to time depending on business and market conditions. Abercrombie & Fitch Co. 33 2023 1Q Form 10-Q Table of Contents Item 6. Exhibits Exhibit Document 3.1 Amended and Restated Certificate of Incorporation of Abercrombie & Fitch Co., reflecting amendments through the date of this Quarterly Report on Form 10-Q, incorporated herein by reference to Exhibit 3.2 to A&F’s Quarterly Report on Form 10-Q for the quarterly period ended July 30, 2011 (File No. 001-12107). [This document represents the Amended and Restated Certificate of Incorporation of Abercrombie & Fitch Co. in compiled form incorporating all amendments. This compiled document has not been filed with the Delaware Secretary of State.] 3.2 Amended and Restated Bylaws of Abercrombie & Fitch Co. reflecting amendments through the date of this Quarterly Report on Form 10-Q, incorporated herein by reference to Exhibit 3.1 to to A&F’s Current Report on Form 8-K dated and filed November 22, 2022 (File No. 001-12107) [This document represents the Amended and Restated Bylaws of Abercrombie & Fitch Co. in compiled form incorporating all amendments.] 10.1 First Amendment to Amended and Restated Credit Agreement and First Amendment to Security Agreement, dated as of March 15, 2023, among Abercrombie & Fitch Management Co., as Lead Borrower; the other Borrowers and Guarantors party thereto, and Wells Fargo Bank, National Association, as administrative agent for the Lenders, incorporated herein by reference to Exhibit 10.12 to A&F’s Annual Report on Form 10-K dated and filed March 27, 2023 (File No. 001-12107). 31.1 Certifications by Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 31.2 Certifications by Executive Vice President and Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 32.1 Certifications by Chief Executive Officer (who serves as Principal Executive Officer) and Executive Vice President and Chief Financial Officer (who serves as Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its Inline XBRL tags are embedded within the Inline XBRL document.* 101.SCH Inline XBRL Taxonomy Extension Schema Document.* 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.* 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.* 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.* 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.* 104 Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).* *     Filed herewith. **    Furnished herewith. Abercrombie & Fitch Co. 34 2023 1Q Form 10-Q Table of Contents Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Abercrombie & Fitch Co. Date: June 6, 2023 By: /s/ Scott D. Lipesky Scott D. Lipesky Executive Vice President, Chief Financial Officer and Chief Operating Officer (Principal Financial Officer, Principal Accounting Officer and Authorized Officer) Abercrombie & Fitch Co. 35 2023 1Q Form 10-Q