UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~Amendment No. 1~~



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~April 29, 2017~~May 5, 2018



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-12107

ABERCROMBIE & FITCH CO.

(Exact name of Registrant as specified in its charter)



Delaware	31-1469076
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6301 Fitch Path, New Albany, Ohio	43054
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (614) 283-6500

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or aan emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class A Common Stock		Outstanding at June ~~1, 2017~~5, 2018
$.01 Par Value		~~68,016,186~~67,790,465 Shares

~~Table of Contents~~

~~Explanatory Note~~

This amendment (Form 10-Q/A) is being provided for the sole purpose of amending the original Form 10-Q for the period ended April 29, 2017, as filed on June 5, 2017, to correct the number of Class A Common Stock shares outstanding as of June 1, 2017. The cover page of the original Form 10-Q inadvertently misstated the number of Class A Common Stock shares outstanding as of June 1, 2017, to be 86,016,786. The actual number of Class A Common Stock shares outstanding as of that date was 68,016,186.

No other changes have been made to the Form 10-Q. This Form 10-Q/A does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update any related disclosures made in the Form 10-Q. For convenience, the entire Form 10-Q, as amended, is being re-filed.

Table of Contents

ABERCROMBIE & FITCH CO.

TABLE OF CONTENTS

Table of Contents

PART I. FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)

ABERCROMBIE & FITCH CO.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(Thousands, except per share amounts)

(Unaudited)


	Thirteen Weeks Ended						Thirteen Weeks Ended
	April 29, 2017			April 30, 2016			May 5, 2018			April 29, 2017
Net sales	$	661,099		$	685,483		$	730,899		$	661,099
Cost of sales, exclusive of depreciation and amortization	262,174			259,762			288,554			262,174
Gross profit	398,925			425,721			442,345			398,925
Stores and distribution expense	359,929			369,118			361,155			359,929
Marketing, general and administrative expense	109,893			114,447			124,897			109,893
Asset impairment	730			—			1,056			730
Other operating income, net	(1,686		)	(2,933		)	(2,560		)	(1,686		)
Operating loss	(69,941		)	(54,911		)	(42,203		)	(69,941		)
Interest expense, net	4,120			4,506			3,018			4,120
Loss before taxes	(74,061		)	(59,417		)	(45,221		)	(74,061		)
Income tax benefit	(13,052		)	(20,787		)	(3,713		)	(13,052		)
Net loss	(61,009		)	(38,630		)	(41,508		)	(61,009		)
Less: Net income attributable to noncontrolling interests	691			957			953			691
Net loss attributable to Abercrombie & Fitch Co.	$	(61,700	)	$	(39,587	)
Net loss attributable to A&F							$	(42,461	)	$	(61,700	)

Net loss per share attributable to Abercrombie & Fitch Co.
Net loss per share attributable to A&F
Basic	$	(0.91	)	$	(0.59	)	$	(0.62	)	$	(0.91	)
Diluted	$	(0.91	)	$	(0.59	)	$	(0.62	)	$	(0.91	)

Weighted-average shares outstanding
Basic	68,073			67,625			68,500			68,073
Diluted	68,073			67,625			68,500			68,073

Dividends declared per share	$	0.20		$	0.20		$	0.20		$	0.20

Other comprehensive income
Foreign currency translation, net of tax	$	5,607		$	20,425		$	(8,339	)	$	5,607
Derivative financial instruments, net of tax	(4,600		)	(9,955		)	12,260			(4,600		)
Other comprehensive income	1,007			10,470			3,921			1,007
Comprehensive loss	(60,002		)	(28,160		)	(37,587		)	(60,002		)
Less: Comprehensive income attributable to noncontrolling interests	691			957			953			691
Comprehensive loss attributable to Abercrombie & Fitch Co.	$	(60,693	)	$	(29,117	)
Comprehensive loss attributable to A&F							$	(38,540	)	$	(60,693	)

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

Table of Contents

ABERCROMBIE & FITCH CO.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands, except par value amounts)

(Unaudited)


	April 29, 2017			January 28, 2017			May 5, 2018			February 3, 2018
Assets
Current assets:
Cash and equivalents	$	421,441		$	547,189		$	591,960		$	675,558
Receivables	90,346			93,384			72,795			79,724
Inventories, net	398,750			399,795
Inventories							405,107			424,393
Other current assets	91,565			98,932			104,806			84,863
Total current assets	1,002,102			1,139,300			1,174,668			1,264,538
Property and equipment, net	806,057			824,738			709,007			738,182
Other assets	349,806			331,719			327,844			322,972
Total assets	$	2,157,965		$	2,295,757		$	2,211,519		$	2,325,692
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	147,531		$	187,017		$	166,577		$	168,868
Accrued expenses	248,915			273,044			262,964			308,601
Short-term portion of deferred lease credits	19,522			20,076			19,269			19,751
Income taxes payable	5,264			5,863			12,784			10,326
Total current liabilities	421,232			486,000			461,594			507,546
Long-term liabilities:
Long-term portion of deferred lease credits	75,886			76,321			73,660			75,648
Long-term portion of borrowings, net	263,353			262,992			249,962			249,686
Leasehold financing obligations	47,120			46,397			48,955			50,653
Other liabilities	169,588			172,008			188,502			189,688
Total long-term liabilities	555,947			557,718			561,079			565,675
Stockholders’ equity
Class A Common Stock - $0.01 par value: 150,000 shares authorized and 103,300 shares issued at each of April 29, 2017 and January 28, 2017	1,033			1,033
Class A Common Stock - $0.01 par value: 150,000 shares authorized and 103,300 shares issued at each of May 5, 2018 and February 3, 2018							1,033			1,033
Paid-in capital	387,394			396,590			399,860			406,351
Retained earnings	2,393,693			2,474,703			2,356,880			2,420,552
Accumulated other comprehensive loss, net of tax	(120,295		)	(121,302		)	(91,133		)	(95,054		)
Treasury stock, at average cost: 35,288 and 35,542 shares at April 29, 2017 and January 28, 2017, respectively	(1,489,853		)	(1,507,589		)
Treasury stock, at average cost: 35,484 and 35,105 shares at May 5, 2018 and February 3, 2018, respectively							(1,488,373		)	(1,490,503		)
Total Abercrombie & Fitch Co. stockholders’ equity	1,171,972			1,243,435			1,178,267			1,242,379
Noncontrolling interests	8,814			8,604			10,579			10,092
Total stockholders’ equity	1,180,786			1,252,039			1,188,846			1,252,471
Total liabilities and stockholders’ equity	$	2,157,965		$	2,295,757		$	2,211,519		$	2,325,692

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

Table of Contents

ABERCROMBIE & FITCH CO.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands)

(Unaudited)


	Thirteen Weeks Ended						Thirteen Weeks Ended
	April 29, 2017			April 30, 2016			May 5, 2018			April 29, 2017
Operating activities
Net loss	$	(61,009	)	$	(38,630	)	$	(41,508	)	$	(61,009	)
Adjustments to reconcile net loss to net cash used by operating activities:
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization	48,789			50,866			47,647			48,789
Asset impairment	730			—			1,056			730
Loss on disposal	2,378			1,287			1,239			2,378
Amortization of deferred lease credits	(5,325		)	(6,506		)	(5,040		)	(5,325		)
Benefit from deferred income taxes	(15,100		)	(21,195		)	(12,290		)	(15,100		)
Share-based compensation	4,880			6,599			4,783			4,880
Net tax deficit on share-based compensation	(9,264		)	(951		)
Changes in assets and liabilities
Inventories, net	1,316			3,547
Inventories							11,444			1,316
Accounts payable and accrued expenses	(62,120		)	(63,748		)	(32,186		)	(62,120		)
Lessor construction allowances	2,940			1,881			1,778			2,940
Income taxes	8,630			(3,888		)	2,526			(634		)
Long-term lease deposits	(41		)	23,309			1,469			(41		)
Other assets	8,367			(10,283		)	2,655			8,497
Other liabilities	(9,433		)	(17,996		)	256			(9,433		)
Net cash used by operating activities	(84,262		)	(75,708		)
Net cash used for operating activities							(16,171		)	(84,132		)
Investing activities
Purchases of property and equipment	(32,081		)	(25,983		)	(23,700		)	(32,081		)
Proceeds from sale of property and equipment	203			4,098			—			203
Net cash used for investing activities	(31,878		)	(21,885		)	(23,700		)	(31,878		)
Financing activities
Purchase of treasury stock							(18,670		)	—
Dividends paid	(13,554		)	(13,471		)	(13,642		)	(13,554		)
Other financing activities	(551		)	(372		)	(5,176		)	(551		)
Net cash used for financing activities	(14,105		)	(13,843		)	(37,488		)	(14,105		)
Effect of exchange rates on cash	4,497			13,833			(5,914		)	4,497
Net decrease in cash and equivalents	(125,748		)	(97,603		)
Cash and equivalents, beginning of period	547,189			588,578
Cash and equivalents, end of period	$	421,441		$	490,975
Net decrease in cash and equivalents, and restricted cash							(83,273		)	(125,618		)
Cash and equivalents, and restricted cash, beginning of period							697,955			567,632
Cash and equivalents, and restricted cash, end of period							$	614,682		$	442,014
Significant non-cash investing activities										��
Change in accrual for construction in progress	$	(4,297	)	$	(21	)	$	1,658		$	(4,297	)
Supplemental information
Cash paid for interest	$	3,391		$	3,763		$	3,492		$	3,391
Cash paid for income taxes, net of refunds	$	3,364		$	15,969
Cash paid for income taxes							$	6,683		$	3,550
Cash received from income taxes							$	6,762		$	186

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

Table of Contents

ABERCROMBIE & FITCH CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION

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, multi-brand, specialty retailer, ~~of branded apparel and accessories. The Company operates~~which primarily sells its products through its wholly-owned store and direct-to-consumer ~~operations,~~channels, as well as through various third-party wholesale, franchise and licensing arrangements. The Company offers a broad assortment of apparel, personal care products and accessories for men, women and kids under the Hollister, Abercrombie & Fitch and abercrombie kids brands. The Company has operations in North America, Europe, Asia and the Middle East.

Principles of Consolidation

The accompanying Condensed Consolidated Financial Statements include historical financial statements of, and transactions applicable to, the Company and reflect its assets, liabilities, results of operations and cash flows.

The Company has interests in a United Arab Emirates business venture and in a Kuwait business venture with Majid al Futtaim Fashion L.L.C. (“MAF”), each of which meets the definition of a variable interest entity (“VIE”). The Company is deemed to be the primary beneficiary of these VIEs; therefore, the Company has consolidated the operating results, assets ~~liabilities, results of operations~~ and ~~cash flows~~liabilities of these ~~VIEs.~~VIEs, with MAF’s portion of net income presented as net income attributable to noncontrolling interests (“NCI”) on the Condensed Consolidated Statements of Operations and Comprehensive Loss and MAF’s portion of equity presented as NCI in the Consolidated Balance Sheets.

Fiscal Year

The Company’s fiscal year ends on the Saturday closest to January 31. All references herein to “Fiscal ~~2017”~~2018” and “Fiscal ~~2016”~~2017” represent the ~~fifty-three~~fifty-two week fiscal year ending on February ~~3, 2018~~2, 2019 and the ~~fifty-two~~fifty-three week fiscal year ended on ~~January 28, 2017,~~February 3, 2018, respectively.

Interim Financial Statements

The Condensed Consolidated Financial Statements as of ~~April 29, 2017,~~May 5, 2018, and for the ~~thirteen week~~thirteen-week periods ended May 5, 2018 and April 29, 2017, ~~and April 30, 2016,~~ are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these 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 ~~2016~~2017 filed with the SEC on ~~March 27, 2017.~~April 2, 2018. The ~~January 28, 2017~~February 3, 2018 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 United States of America (“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 and 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 ~~2017.~~2018.

Table of Contents

Recent Accounting Pronouncements

The Company reviews recent accounting pronouncements on a quarterly basis and has excluded discussion of those not applicable to the Company and those not expected to have a material impact on the Company’s financial statements. The following table provides a brief description of recent accounting pronouncements the Company has adopted or that could affect the Company’s financial ~~statements:~~statements.



Accounting Standards Update (ASU)	Description	Date of Adoption	Effect on the Financial Statements or Other Significant Matters
Standards adopted
ASU ~~2015-11,~~ ~~Simplifying the Measurement of Inventory~~	~~This update amends ASC 330,~~ ~~Inventory~~. The new guidance applies to inventory measured using first-in, first-out (FIFO) or average cost. Under this amendment, inventory is to be measured at the lower of cost and net realizable value, which is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.	January 29, 2017*	~~The adoption of this guidance did not have any impact on the Company's consolidated financial statements.~~
~~ASU 2016-09,~~ ~~Compensation—Stock Compensation~~	~~This update amends ASC 718,~~ ~~Compensation~~. Under the new guidance, tax benefits and certain tax deficiencies arising from the vesting of share-based payments are to be recognized as income tax benefits or expenses in the statement of operations; whereas, under the previous guidance, such benefits and deficiencies were recorded in additional paid-in-capital. The cash flow effects of the tax benefit are to be reported in cash flows from operating activities; whereas, they were previously reported in cash flows from financing activities. This guidance also allows for entities to make a policy election to estimate forfeitures or account for them when they occur.	January 29, 2017*	As required by the update, all excess tax benefits and tax deficiencies recognized on share-based compensation expense are reflected in the condensed consolidated statements of income as a component of the provision for income taxes on a prospective basis. This update resulted in additional non-cash income tax expense of $9.3 million in the first quarter of Fiscal 2017. In addition, excess tax benefits and tax deficiencies recognized on share-based compensation expense are now classified as an operating activity on the condensed consolidated statements of cash flows. The Company has applied this provision on a retrospective basis. For the first quarter of Fiscal 2016, net cash used by operating activities decreased by $0.6 million with a corresponding offset to net cash used for financing activities. The Company has elected to maintain its practice of estimating forfeitures when recognizing expense for share-based payment awards rather than accounting for forfeitures when they occur. Based on share-based compensation awards currently outstanding at current stock prices, the adoption of this guidance will result in non-cash income tax expense of approximately $11 million for Fiscal 2017 and $20 million for Fiscal 2018.
~~Standards not yet adopted~~
~~ASU~~ 2014-09, Revenue from Contracts with Customers	This update ~~supersedes~~superseded the revenue recognition ~~requirements~~guidance in ASC 605, Revenue Recognition. The new guidance requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods or services.	February 4, 2018	The Company ~~is currently evaluating the impact that~~adopted this guidance ~~will~~and all related amendments using the modified retrospective method, and applied the standard to contracts that were not complete as of the adoption date. Comparative period information has not been restated and continues to be reported under the account standards in effect for those periods. This guidance primarily impacts the classification and timing of the recognition of the Company's gift card breakage and timing of direct-to-consumer revenue. Adoption of this guidance had an immaterial impact on net loss attributable to A&F in the Company's Condensed Consolidated Statements of Operations and Comprehensive Loss. The cumulative effect of applying the new standard on the Condensed Consolidated Balance Sheets as of May 5, 2018 was recognized as an adjustment to the opening balance of retained earnings, increasing beginning retained earnings by $6.9 million, with corresponding reductions in accrued expenses, inventories, and other assets of $4.7 million, $6.4 million, and $2.2 million, respectively, and increases to receivables and other current assets of $6.4 million and $4.4 million, respectively. In accordance with the new guidance, expected gift card breakage is now recognized as net sales as gift cards are redeemed. Previously, gift card breakage was recognized as other operating income when the Company determined that the likelihood of redemption was remote. Under the new guidance, direct-to-consumer revenue is recognized when control is passed to the customer, typically upon shipment or pick-up of goods. Previously, direct-to-consumer revenue was recognized upon customer acceptance, which typically occurred upon the customer's possession of the merchandise. The Company does not expect this guidance to have a material impact on ~~its consolidated financial statements.~~store, direct-to-consumer, wholesale, franchise or license revenues on an ongoing basis. The Company's revenue recognition accounting policies are discussed further in this Note 1 under “Revenue Recognition.”
ASU 2016-18, Statement of Cash Flows	This update amends the guidance in ASC 230, Statement of Cash Flows. The new guidance requires an entity to show the changes in total cash, cash equivalents and restricted cash in the statement of cash flows. Consequently, an entity is no longer required to present transfers between cash and equivalents and restricted cash.	February 4, 2018	The Company adopted this guidance under the retrospective method. For the thirteen weeks ended April 29, 2017, adoption of this guidance resulted in a $0.1 million increase to net cash used for operating activities and increases of $20.4 million and $20.6 million to beginning and ending cash and equivalents, and restricted cash, respectively. In addition, captions have been updated in the Condensed Consolidated Statements of Cash Flows to reflect the inclusion of restricted cash. Restricted cash is classified as other assets on the Condensed Consolidated Balance Sheets, as was the case at year-end.
Standards not yet adopted
ASU 2016-02, Leases	This update supersedes the leasing ~~requirements~~guidance in ASC 840, Leases. The new guidance requires an entity to recognize lease assets and lease liabilities on the balance sheet and disclose key leasing information that depicts the lease rights and obligations of an entity.	February 3, 2019*	The Company expects that this guidance will result in a ~~significant~~material increase in the Company’s long-term assets and long-term liabilities on the ~~Company's consolidated balance sheets,~~Company’s Condensed Consolidated Balance Sheets, and is currently evaluating additional impacts that itthis guidance may have on its consolidated financial statements. The Company will not be early adopting this guidance.
ASU 2017-12, Derivatives and Hedging — Targeted Improvements to Accounting for Hedging Activities	This update amends ASC 815, Derivatives and Hedging. The new guidance simplifies certain aspects of hedge accounting for both financial and commodity risks to more accurately present the economic effects of an entity’s risk management activities in its financial statements. Under the new standard, more hedging strategies will be eligible for hedge accounting, including hedges of the benchmark rate component of the contractual coupon cash flows of fixed-rate assets or liabilities and partial-term hedges of fixed-rate assets or liabilities. For cash flow and net investment hedges, the guidance requires a modified retrospective approach while the amended presentation and disclosure guidance requires a prospective approach.	February 3, 2019*	The Company is currently evaluating the impact that this guidance will have on its consolidated financial statements. The Company will not be early adopting this guidance.

* Early adoption is permitted.

Table of Contents

The Company's significant accounting policies as of May 5, 2018 have not changed materially from those disclosed in Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” of the Notes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Annual Report on Form 10-K for Fiscal 2017, with the exception of those discussed below:

Revenue recognition

The Company recognizes revenue from product sales when control of the good is transferred to the customer, generally upon pick up at, or shipment from, a Company location.

The Company provides shipping and handling services to customers in certain direct-to-consumer transactions. Revenue associated with the related shipping and handling obligations is deferred until the obligation is fulfilled, typically upon the customer’s receipt of the merchandise. The related shipping and handling costs are classified in stores and distribution expense on the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Revenue is recorded net of estimated returns, associate discounts, promotions and other similar customer incentives. The Company estimates reserves for sales returns based on historical experience among other factors. The sales return reserve is classified in accrued expenses on the Condensed Consolidated Balance Sheets.

The Company accounts for gift cards sold to customers by recognizing an unearned revenue liability at the time of sale, which remains until income from gift cards not expected to be redeemed, referred to as gift card breakage, is recognized as revenue proportionally with gift card redemptions. Gift cards sold to customers do not expire or lose value over periods of inactivity and the Company is not required by law to escheat the value of unredeemed gift cards to the jurisdictions in which it operates.

The Company also maintains loyalty programs, which primarily provides customers with the opportunity to earn points toward future merchandise discount rewards with qualifying purchases. The Company accounts for expected future reward redemptions by recognizing an unearned revenue liability when customers reach certain point thresholds, which remains until revenue is recognized at the earlier of redemption or expiration.

Unearned revenue liabilities are primarily recorded when prepayments for future merchandise are received through gift card purchases or when loyalty rewards are earned by a customer in a sales transaction, and are classified in accrued expenses on the Condensed Consolidated Balance Sheets and are typically recognized as revenue within a 12-month period. Unearned revenue liabilities as of the beginning of the period and May 5, 2018 were approximately $38.7 million and $36.0 million, respectively, which included an adjustment related to the adoption of new revenue recognition standards that decreased the beginning of period balance $6.2 million. During the thirteen weeks ended May 5, 2018, the Company recognized revenue of approximately $21.0 million related to previous deferrals of revenue resulting from the Company’s gift cards and loyalty programs.

The Company also recognizes revenue under wholesale arrangements, which is generally recognized upon shipment, when control passes to the wholesale partner. Revenue from the Company’s franchise and license arrangements, primarily royalties earned upon sale of merchandise, is generally recognized at the time merchandise is sold to the franchisees’ retail customers.

All revenues are recognized in net sales in the Condensed Consolidated Statements of Operations and Comprehensive Loss. For discussion on the disaggregation of revenue, refer to Note 9, “SEGMENT REPORTING.” The Company does not include tax amounts collected from customers on behalf of third parties, including sales and indirect taxes, in net sales.

Table of Contents

2. NET LOSS PER SHARE

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

~~The following table presents weighted-average shares outstanding and anti-dilutive shares:~~Additional information pertaining to net income per share attributable to A&F is as follows:


	Thirteen Weeks Ended				Thirteen Weeks Ended
(in thousands)	April 29, 2017		April 30, 2016		May 5, 2018		April 29, 2017
Shares of common stock issued	103,300		103,300
Shares of Common Stock issued					103,300		103,300
Weighted-average treasury shares	(35,227	)	(35,675	)	(34,800	)	(35,227	)
Weighted-average — basic shares	68,073		67,625		68,500		68,073
Dilutive effect of share-based compensation awards	—		—		—		—
Weighted-average — diluted shares	68,073		67,625		68,500		68,073
Anti-dilutive shares ⁽¹⁾	5,263		7,954		4,599		5,263


⁽¹⁾	Reflects the total number of shares related to outstanding share-based compensation awards that have been excluded from the computation of net loss per diluted share because the impact would have been anti-dilutive.

3. 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 within it of the Company’s assets and liabilities, which are measured at fair value on a recurring basis, were as follows:


	Assets and Liabilities at Fair Value as of April 29, 2017								Assets and Liabilities at Fair Value as of May 5, 2018
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Trust-owned life insurance policies (at cash surrender value)	$	—	$	100,417	$	—	$	100,417	$	—	$	103,544	$	—	$	103,544
Money market funds	21		—		—		21		60,367		—		—		60,367
Derivative financial instruments	—		2,415		—		2,415		—		6,078		—		6,078
Total assets	$	21	$	102,832	$	—	$	102,853	$	60,367	$	109,622	$	—	$	169,989

Liabilities:
Derivative financial instruments	$	—	$	1,243	$	—	$	1,243	$	—	$	1,166	$	—	$	1,166
Total liabilities	$	—	$	1,243	$	—	$	1,243	$	—	$	1,166	$	—	$	1,166


	Assets at Fair Value as of January 28, 2017								Assets and Liabilities at Fair Value as of February 3, 2018
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Trust-owned life insurance policies (at cash surrender value)	$	—	$	99,654	$	—	$	99,654	$	—	$	102,784	$	—	$	102,784
Money market funds	94,026		—		—		94,026		330,649		—		—		330,649
Derivative financial instruments	—		6,042		—		6,042		—		37		—		37
Total assets	$	94,026	$	105,696	$	—	$	199,722	$	330,649	$	102,821	$	—	$	433,470

Liabilities:
Derivative financial instruments	$	—	$	492	$	—	$	492	$	—	$	9,147	$	—	$	9,147
Total liabilities	$	—	$	492	$	—	$	492	$	—	$	9,147	$	—	$	9,147

Table of Contents

The Level 2 assets and liabilities consist of trust-owned life insurance policies and derivative financial instruments, primarily foreign currency exchange forward contracts. The fair value of foreign currency exchange forward contracts is determined by using quoted market prices of the same or similar instruments, adjusted for counterparty risk.

Fair value of borrowings:

The Company’s borrowings under the Company’s credit facilities are carried at historical cost in the accompanying Condensed Consolidated Balance Sheets. ~~For disclosure purposes, the Company estimated the fair value of borrowings outstanding based on market rates for similar types of debt, which are considered to be Level 2 inputs.~~

The carrying amount and fair value of the Company’s borrowings under the term loan facility were as follows:


(in thousands)	April 29, 2017		January 28, 2017		May 5, 2018		February 3, 2018
Gross borrowings outstanding, carrying amount	$	268,250	$	268,250	$	253,250	$	253,250
Gross borrowings outstanding, fair value	$	258,861	$	260,551	$	254,516	$	253,250

No borrowings were outstanding under the Company’s senior secured revolving credit facility as of ~~April 29, 2017~~May 5, 2018 or ~~January 28, 2017.~~February 3, 2018.

4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of:

(in thousands) April 29, 2017 January 28, 2017
Property and equipment, at cost $ 2,766,557
$ 2,772,139
Less: Accumulated depreciation and amortization (1,960,500 ) (1,947,401 )
Property and equipment, net $ 806,057
$ 824,738

Long-lived assets, primarily comprised of leasehold improvements, furniture, fixtures and equipment, are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the long-lived assets might not be recoverable. These include, but are not limited to, material declines in operational performance, a history of losses, an expectation of future losses, adverse market conditions and store closure or relocation decisions. On at least a quarterly basis, the Company reviews for indicators of impairment at the individual store level, the lowest level for which cash flows are identifiable.

Stores that display an indicator of impairment are subjected to an impairment assessment. The Company’s impairment assessment requires management to make assumptions and judgments related, but not limited, to management’s expectations for future operations and projected cash flows. The key assumptions used in the Company’s undiscounted future cash flow models include sales, gross profit and, to a lesser extent, operating expenses.

An impairment loss would be recognized when these undiscounted future cash flows are less than the carrying amount of the asset group. In the circumstance of impairment, the loss would be measured as the excess of the carrying amount of the asset group over its fair value. The key assumptions used in estimating the fair value of impaired assets include projected cash flows and discount rate.



(in thousands)	May 5, 2018			February 3, 2018
Property and equipment, at cost	$	2,799,842		$	2,821,709
Less: Accumulated depreciation and amortization	(2,090,835		)	(2,083,527		)
Property and equipment, net	$	709,007		$	738,182

The Company incurred store asset impairment charges of $1.1 million and $0.7 million for the thirteen weeks ended May 5, 2018 and April 29, ~~2017. There were no asset impairment charges for~~2017, respectively, primarily related to certain of the ~~thirteen weeks ended April 30, 2016.~~Company’s international Abercrombie & Fitch flagship stores.

The Company had ~~$35.9~~$37.0 million and ~~$35.6~~$38.7 million of construction project assets in property and equipment, net at ~~April 29, 2017~~May 5, 2018 and ~~January 28, 2017,~~February 3, 2018, respectively, related to the construction of buildings in certain lease arrangements where the Company is deemed to be the owner of the construction project.

Table of Contents

5. INCOME TAXES

The Company’s quarterly tax provision and the estimate of the annual effective tax rate are subject to significant variation due to several factors. These 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 law, regulations, and administrative practices, relative changes of expenses or losses for which tax benefits are not recognized and the impact of discrete items. The impact of these items on the effective tax rate will be greater at lower levels of pre-tax income (loss).

InTax Cuts and Jobs Act of 2017

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law. The Act makes broad and significantly complex changes to the U.S. corporate income tax system by, among other things: reducing the U.S. federal corporate income tax rate from 35% to 21%; transitioning U.S. international taxation to a modified territorial tax system; and imposing a mandatory one-time deemed repatriation tax, payable over eight years, on accumulated undistributed foreign subsidiary earnings and profits as of December 31, 2017. The Company recognized provisional discrete net tax charges of $19.9 million related to the enactment of the Act in the fourth quarter of Fiscal 2017. Given the significant changes resulting from and complexities associated with the Act, the estimated financial impacts in Fiscal 2017 and Fiscal 2018 are provisional and assessed as of May 22, 2018, and as of this date the Company had not recognized any adjustments to the provisional amounts recognized in the fourth quarter of Fiscal 2017. The ultimate outcome may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued and actions the Company may take as a result of the Act. Provisional amounts are expected to be finalized after the Company’s Fiscal 2017 U.S. corporate income tax return is filed in the fourth quarter of Fiscal 2018, but no later than one year from the enactment of the Act.

Other

The Company incurred $8.2 million and $9.3 million of discrete non-cash income tax charges for the thirteen weeks ended May 5, 2018 and April 29, 2017, respectively, related to the expiration of certain share-based compensation awards, recognized in income tax benefit due to changes in share-based compensation accounting standards adopted by the Company in the first quarter of Fiscal 2017, the provision for income taxes also differs from the tax computed at the U.S. federal statutory tax rate due to the tax effects of stock-based compensation. In the first quarter of Fiscal 2017, the Company adopted ASU 2016-09, “Compensation—Stock Compensation,” which resulted in a discrete non-cash income tax charge of $9.3 million recognized in income tax benefit on the Condensed Consolidated Statements of Operations and Comprehensive Loss. Refer to Note 1, “~~BASIS OF PRESENTATION--Recent Accounting Pronouncements” for further discussion regarding the adoption of this standard.~~2017.

6. SHARE-BASED COMPENSATION

The Company recognized share-based compensation expense of $4.8 million and $4.9 million for the thirteen weeks ended May 5, 2018 and April 29, 2017, ~~and $6.6 million for the thirteen weeks ended April 30, 2016.~~respectively. The Company recognized tax ~~benefit~~benefits associated with share-based compensation expense ~~was~~of $0.9 million and $1.9 million for the thirteen weeks ended May 5, 2018 and April 29, 2017, ~~and $2.5 million for the thirteen weeks ended April 30, 2016.~~

~~Stock Options~~

~~The following table summarizes stock option activity for the thirteen weeks ended April 29, 2017:~~

Number of
Underlying
Shares

Weighted-Average
Exercise Price

Aggregate
Intrinsic Value

Weighted-Average
Remaining
Contractual Life
Outstanding at January 28, 2017 189,800
$ 76.62

Granted —
—

Exercised —
—

Forfeited or expired (75,000 ) 73.42

Outstanding at April 29, 2017 114,800
$ 78.71
$ —
0.8
Stock options exercisable at April 29, 2017 114,800
$ 78.71
$ —
0.8

~~Stock Appreciation Rights~~

~~The following table summarizes stock appreciation rights activity for the thirteen weeks ended April 29, 2017:~~

Number of
Underlying
Shares

Weighted-Average
Exercise Price

Aggregate
Intrinsic Value

Weighted-Average
Remaining
Contractual Life
Outstanding at January 28, 2017 4,079,050
$ 47.49

Granted —
—

Exercised —
—

Forfeited or expired (888,197 ) 44.34

Outstanding at April 29, 2017 3,190,853
$ 48.50
$ —
3.0
Stock appreciation rights exercisable at April 29, 2017 2,841,662
$ 51.22
$ —
2.5
Stock appreciation rights expected to become exercisable in the future as of April 29, 2017 267,161
$ 26.63
$ —
7.7

As of April 29, 2017, there was $2.1 million of total unrecognized compensation cost, net of estimated forfeitures, related to stock appreciation rights. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 11 months.

~~The grant date fair value of stock appreciation rights that vested during the thirteen weeks ended April 29, 2017 and April 30, 2016 was $1.9 million and $3.7 million,~~ respectively.

~~Table of Contents~~

Restricted Stock Units

The following table summarizes activity for restricted stock units for the thirteen weeks ended ~~April 29, 2017:~~May 5, 2018:


	Service-based Restricted Stock Units				Performance-based Restricted Stock Units				Market-based Restricted Stock Units				Service-based Restricted Stock Units				Performance-based Restricted Stock Units				Market-based Restricted Stock Units
	Number of Underlying Shares⁽¹⁾		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		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, 2017	1,915,461		$	25.47	203,923		$	22.53	184,892		$	26.89
Unvested at February 3, 2018													2,520,160		$	15.35	690,174		$	11.82	383,980		$	16.50
Granted	1,408,972		9.61		524,030		9.11		236,872		11.79		674,690		21.68		142,008		21.31		142,014		33.69
Adjustments for performance achievement	—		—		—		—		—		—		—		—		(43,999	)	20.10		(36,817	)	19.04
Vested	(466,291	)	28.86		—		—		—		—		(599,888	)	17.96		—		—		(7,185	)	19.04
Forfeited	(122,813	)	22.37		(5,163	)	25.15		(5,165	)	29.55		(105,827	)	13.21		(6,687	)	9.11		(6,688	)	11.79
Unvested at April 29, 2017	2,735,329		$	16.81	722,790		$	12.26	416,599		$	17.25
Unvested at May 5, 2018 ⁽¹⁾													2,489,135		$	16.51	781,496		$	13.10	475,304		$	21.47

⁽¹⁾

~~This includes 786,449~~Includes 562,435 unvested service-based restricted stock units ~~as of April 29, 2017 that are~~ subject to vesting requirement related to the ~~requirement that the Company must achieve at least $1.00~~achievement of ~~GAAP~~certain performance metrics, such as operating income and net income, ~~attributable to A&F~~ for the fiscal year immediately preceding the vesting date. Holders of these restricted stock units have the opportunity to earn back one or more installments of the award if the cumulative performance requirements are met in ~~order~~a subsequent year. Unvested shares related to ~~vest.~~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 100% of their target vesting amount in the table above.

Table of Contents

Fair value of both service-based and performance-based restricted stock units is calculated using the market price of the underlying ~~common stock~~Common Stock on the date of grant reduced for anticipated dividend payments on unvested shares. In determining fair value, the Company does not take into account performance-based vesting requirements. Performance-based vesting requirements are taken into account in determining the number of awards expected to vest. For market-based restricted stock units, fair value is calculated using a Monte Carlo simulation with the number of shares that ultimately vest dependent on the Company’s total stockholder return measured against the total stockholder return of a select group of peer companies over a three-year period. For ~~an award~~awards with performance-based or market-based vesting requirements, the number of shares that ultimately vest can vary from 0% to 200% of target depending on the level of achievement of performance criteria. ~~Unvested shares related to restricted stock units with performance-based vesting conditions are reflected at 100% of their target vesting amount in the table above.~~

Service-based restricted stock units are expensed on a straight-line basis over the total awards’ requisite service ~~period, net of forfeitures.~~period. Performance-based restricted stock units subject to graded vesting are expensed on an accelerated attribution ~~basis, net~~basis. Performance share award expense is primarily recognized in the performance period of ~~forfeitures.~~the awards’ requisite service period. Market-based restricted stock units without graded vesting features are expensed on a straight-line basis over the requisite service period. Compensation expense for stock options and stock appreciation rights is recognized on a straight-line basis over the awards’ requisite service period, net of forfeitures. The Company adjusts share-based compensation expense on a quarterly basis for actual forfeitures. Unrecognized compensation expense presented excludes the effect of potential forfeitures, and will be adjusted for actual forfeitures as they occur.

As of ~~April 29, 2017,~~May 5, 2018, there was ~~$30.1~~$34.4 million, ~~$4.9~~$7.5 million and ~~$4.8~~$7.2 million of total unrecognized compensation cost ~~net of estimated forfeitures,~~ related to service-based, performance-based and market-based restricted stock units, respectively. The unrecognized compensation cost is expected to be recognized over a weighted-average period of ~~17 months,~~ 18 months, 14 months and 1615 months for service-based, performance-based and market-based restricted stock units, respectively.

The actual tax benefit realized for tax deductions related to the issuance of shares associated with restricted stock unit vesting ~~during~~was $3.4 million and $2.1 million for the thirteen weeks ended May 5, 2018 and April 29, 2017, ~~and April 30, 2016 was $2.1 million and $4.9 million,~~ respectively.

Additional information pertaining to restricted stock units for the thirteen weeks ended May 5, 2018 and April 29, 2017 ~~and April 30, 2016~~ follows:

(in thousands) April 29, 2017 April 30, 2016
Service-based restricted stock units:
Total grant date fair value of awards granted $ 13,540
$ 21,445
Total grant date fair value of awards vested 13,457
12,892

Performance-based restricted stock units:
Total grant date fair value of awards granted $ 4,774
$ 2,762
Total grant date fair value of awards vested —
1,151

Market-based restricted stock units:
Total grant date fair value of awards granted $ 2,793
$ 3,601
Total grant date fair value of awards vested —
—

~~Table of Contents~~



(in thousands)	May 5, 2018		April 29, 2017
Service-based restricted stock units:
Total grant date fair value of awards granted	$	14,627	$	13,540
Total grant date fair value of awards vested	$	10,774	$	13,457

Performance-based restricted stock units:
Total grant date fair value of awards granted	$	3,026	$	4,774
Total grant date fair value of awards vested	$	—	$	—

Market-based restricted stock units:
Total grant date fair value of awards granted	$	4,784	$	2,793
Total grant date fair value of awards vested	$	137	$	—

The weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the thirteen weeks ended May 5, 2018 and April 29, 2017 ~~and April 30, 2016~~ were as follows:


	April 29, 2017			April 30, 2016			May 5, 2018			April 29, 2017
Grant date market price	$	11.43		$	31.67		$	23.59		$	11.43
Fair value	$	11.79		$	38.22		$	33.69		$	11.79
Assumptions:
Price volatility	47		%	44		%	54		%	47		%
Expected term (years)	2.9			2.8			2.9			2.9
Risk-free interest rate	1.5		%	1.1		%	2.4		%	1.5		%
Dividend yield	7.0		%	2.5		%	3.4		%	7.0		%
Average volatility of peer companies	35.2		%	34.4		%	37.4		%	35.2		%
Average correlation coefficient of peer companies	0.2664			0.3382			0.2709			0.2664

Table of Contents

Stock Appreciation Rights

The following table summarizes stock appreciation rights activity for the thirteen weeks ended May 5, 2018:



	Number of Underlying Shares		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Life
Outstanding at February 3, 2018	3,010,720		$	49.35
Granted	—		—
Exercised	(41,653	)	22.24
Forfeited or expired	(1,609,646	)	54.69
Outstanding at May 5, 2018	1,359,421		$	44.00	$	1,043,513	3.6
Stock appreciation rights exercisable at May 5, 2018	1,235,825		$	45.87	$	734,472	3.3
Stock appreciation rights expected to become exercisable in the future as of May 5, 2018	116,408		$	25.46	$	284,639	6.8

As of May 5, 2018, there was $0.7 million of total unrecognized compensation cost related to stock appreciation rights. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 6 months.

The grant date fair value of stock appreciation rights that vested during the thirteen weeks ended May 5, 2018 and April 29, 2017 was $0.9 million and $1.9 million, respectively.

Stock Options

The following table summarizes stock option activity for the thirteen weeks ended May 5, 2018:



	Number of Underlying Shares		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Life
Outstanding at February 3, 2018	87,200		$	78.20
Granted	—		—
Exercised	—		—
Forfeited or expired	(77,200	)	78.65
Outstanding at May 5, 2018	10,000		$	74.74	$	—	0.0
Stock options exercisable at May 5, 2018	10,000		$	74.74	$	—	0.0

As of May 5, 2018, there was no unrecognized compensation cost related to currently outstanding stock options.

7. 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 accumulated other comprehensive loss (“AOCL”). Substantially all of the unrealized gains or losses related to designated cash flow hedges as of ~~April 29, 2017~~May 5, 2018 will be recognized in cost of sales, exclusive of depreciation and amortization over the next twelve months.

The Company presents its derivative assets and derivative liabilities at their gross fair values on the Condensed Consolidated Balance Sheets. However, the ~~Company's Master International Swap Dealers Association, Inc., Agreement and other similar arrangements~~Company’s derivative contracts allow net settlements under certain conditions.

Table of Contents

As of ~~April 29, 2017,~~May 5, 2018, the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge either a portion, or all, of forecasted foreign-currency-denominated intercompany inventory sales, the resulting settlement of the foreign-currency-denominated intercompany accounts receivable, or both:


(in thousands)	Notional Amount⁽¹⁾		Notional Amount ⁽¹⁾
Euro	$	81,038	$	158,613
British pound	$	30,243	$	68,633
Canadian dollar	$	15,119	$	30,812
Japanese yen	$	7,934	$	14,074


⁽¹⁾	Amounts reported are the U.S. Dollar notional amounts outstanding as of ~~April 29, 2017.~~May 5, 2018.

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/(losses) being recorded in earnings, as U.S. GAAP requires that monetary assets/liabilities be remeasured at the spot exchange rate at quarter-end or upon settlement. The Company has chosen not to apply hedge accounting to these instruments because there are no differences in the timing of gain or loss recognition on the hedging instruments and the hedged items.

~~Table of Contents~~

As of ~~April 29, 2017,~~May 5, 2018, the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge foreign-currency-denominated net monetary assets/liabilities:


(in thousands)	Notional Amount⁽¹⁾		Notional Amount ⁽¹⁾
Euro	$	13,895	$	14,525
British pound	$	1,283
Canadian dollar			$	4,768
Japanese yen			$	3,342


⁽¹⁾	Amounts reported are the U.S. Dollar notional amounts outstanding as of ~~April 29, 2017.~~May 5, 2018.

The location and amounts of derivative fair values on the Condensed Consolidated Balance Sheets as of ~~April 29, 2017~~May 5, 2018 and ~~January 28, 2017~~February 3, 2018 were as follows:


(in thousands)	Location	April 29, 2017		January 28, 2017		Location	April 29, 2017		January 28, 2017		Location	May 5, 2018		February 3, 2018		Location	May 5, 2018		February 3, 2018
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:										Derivatives designated as hedging instruments:
Foreign currency exchange forward contracts	Other current assets	$	2,415	$	5,920	Accrued expenses	$	1,226	$	486		$	5,924	$	37		$	1,151	$	9,108
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:										Derivatives not designated as hedging instruments:
Foreign currency exchange forward contracts	Other current assets	$	—	$	122	Accrued expenses	$	17	$	6		$	154	$	—		$	15	$	39
Total	Other current assets	$	2,415	$	6,042	Accrued expenses	$	1,243	$	492	Other current assets	$	6,078	$	37	Accrued expenses	$	1,166	$	9,147

Refer to Note 3, “FAIR VALUE,” for further discussion of the determination of the fair value of derivative instruments.

Table of Contents

The location and amounts of derivative gains and losses for the thirteen weeks ended May 5, 2018 and April 29, 2017 ~~and April 30, 2016~~ on the Condensed Consolidated Statements of Operations and Comprehensive Loss were as follows:

Thirteen Weeks Ended

April 29, 2017

April 30, 2016

May 5, 2018

April 29, 2017

(in thousands)

Location

Gain/(Loss)

Location

Gain (Loss)

Derivatives not designated as hedging instruments:

Foreign currency exchange forward contracts

Other operating income, net

(1,777

)

Other operating income, net

2,702


	Effective Portion											Ineffective Portion and Amount Excluded from Effectiveness Testing					Effective Portion											Ineffective Portion and Amount Excluded from Effectiveness Testing
	Amount of Loss Recognized in OCI on Derivative Contracts ⁽¹⁾						Location of Gain Reclassified from AOCL into Earnings	Amount of Gain Reclassified from AOCL into Earnings ⁽²⁾				Location of Gain Recognized in Earnings on Derivative Contracts	Amount of Gain Recognized in Earnings on Derivative Contracts ⁽³⁾				Amount of Gain (Loss) Recognized in AOCL on Derivative Contracts ⁽¹⁾					Location of Gain (Loss) Reclassified from AOCL into Earnings	Amount of Gain (Loss) Reclassified from AOCL into Earnings ⁽²⁾					Location of Gain Recognized in Earnings on Derivative Contracts	Amount of Gain Recognized in Earnings on Derivative Contracts ⁽³⁾
	Thirteen Weeks Ended																Thirteen Weeks Ended
(in thousands)	April 29, 2017			April 30, 2016				April 29, 2017		April 30, 2016			April 29, 2017		April 30, 2016		May 5, 2018		April 29, 2017				May 5, 2018			April 29, 2017			May 5, 2018		April 29, 2017
Derivatives in cash flow hedging relationships:	Derivatives in cash flow hedging relationships:																Derivatives in cash flow hedging relationships:
Foreign currency exchange forward contracts	$	(1,373	)	$	(9,382	)	Cost of sales, exclusive of depreciation and amortization	$	3,535	$	2,305	Other operating income, net	$	528	$	355	$	8,607	$	(1,373	)	Cost of sales, exclusive of depreciation and amortization	$	(5,072	)	$	3,535	Other operating income, net	$	1,370	$	528


⁽¹⁾	The amount represents the change in fair value of derivative contracts due to changes in spot rates.


⁽²⁾	The amount represents the reclassification from AOCL into earnings when the hedged item affects earnings, which is when merchandise is sold to the Company’s customers.


⁽³⁾	The amount represents the change in fair value of derivative contracts due to changes in the difference between the spot price and forward price that is excluded from the assessment of hedge effectiveness and, therefore, recognized in earnings.

1315

Table of Contents

8. ACCUMULATED OTHER COMPREHENSIVE LOSS

The activity in accumulated other comprehensive loss for the thirteen weeks ended ~~April 29, 2017~~May 5, 2018 was as follows:

Thirteen Weeks Ended April 29, 2017
(in thousands) Foreign Currency Translation Adjustment Unrealized Gain (Loss) on Derivative Financial Instruments Total
Beginning balance at January 28, 2017 $ (126,127 ) $ 4,825
$ (121,302 )
Other comprehensive income (loss) before reclassifications 5,607
(1,373 ) 4,234
Reclassified from accumulated other comprehensive loss ⁽¹⁾
—
(3,535 ) (3,535 )
Tax effect —
308
308
Other comprehensive income (loss) 5,607
(4,600 ) 1,007
Ending balance at April 29, 2017 $ (120,520 ) $ 225
$ (120,295 )



	Thirteen Weeks Ended May 5, 2018
(in thousands)	Foreign Currency Translation Adjustment			Unrealized Gain (Loss) on Derivative Financial Instruments			Total
Beginning balance at February 3, 2018	$	(84,947	)	$	(10,107	)	$	(95,054	)
Other comprehensive (loss) income before reclassifications	(8,339		)	8,607			268
Reclassified from accumulated other comprehensive loss ⁽¹⁾	—			5,072			5,072
Tax effect	—			(1,419		)	(1,419		)
Other comprehensive income	(8,339		)	12,260			3,921
Ending balance at May 5, 2018	$	(93,286	)	$	2,153		$	(91,133	)


⁽¹⁾	For the thirteen weeks ended May 5, 2018, a loss was reclassified from accumulated other comprehensive loss to cost of sales, exclusive of depreciation and amortization on the Condensed Consolidated Statement of Operations and Comprehensive Loss.

The activity in accumulated other comprehensive loss for the thirteen weeks ended April 29, 2017 was as follows:



	Thirteen Weeks Ended April 29, 2017
(in thousands)	Foreign Currency Translation Adjustment			Unrealized Gain (Loss) on Derivative Financial Instruments			Total
Beginning balance at January 28, 2017	$	(126,127	)	$	4,825		$	(121,302	)
Other comprehensive income (loss) before reclassifications	5,607			(1,373		)	4,234
Reclassified from accumulated other comprehensive loss ⁽¹⁾	—			(3,535		)	(3,535		)
Tax effect	—			308			308
Other comprehensive income	5,607			(4,600		)	1,007
Ending balance at April 29, 2017	$	(120,520	)	$	225		$	(120,295	)


⁽¹⁾	For the thirteen weeks ended April 29, 2017, a gain was reclassified from accumulated other comprehensive loss to cost of sales, exclusive of depreciation and amortization on the Condensed Consolidated Statement of Operations and Comprehensive Loss.

~~The activity in accumulated other comprehensive loss for the thirteen weeks ended April 30, 2016 was as follows:~~

Thirteen Weeks Ended April 30, 2016
(in thousands) Foreign Currency Translation Adjustment Unrealized Gain (Loss) on Derivative Financial Instruments Total
Beginning balance at January 30, 2016 $ (119,196 ) $ 4,577
$ (114,619 )
Other comprehensive income (loss) before reclassifications 25,660
(9,382 ) 16,278
Reclassified from accumulated other comprehensive loss ⁽²⁾
—
(2,305 ) (2,305 )
Tax effect (5,235 ) 1,732
(3,503 )
Other comprehensive income (loss) 20,425
(9,955 ) 10,470
Ending balance at April 30, 2016 $ (98,771 ) $ (5,378 ) $ (104,149 )


⁽²⁾	For the thirteen weeks ended April 30, 2016, a gain was reclassified from accumulated other comprehensive loss to cost of sales, exclusive of depreciation and amortization on the Condensed Consolidated Statement of Operations and Comprehensive Loss.

9. SEGMENT REPORTING

The ~~Company has~~Company’s two operating ~~segments: Hollister;~~segments are brand-based: Hollister and Abercrombie, the latter of which includes the Company’s Abercrombie & Fitch and abercrombie kids 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 areas.

The ~~following table provides the~~ Company’s net sales by operating segment for the thirteen weeks ended May 5, 2018 and April 29, 2017 ~~and April 30, 2016.~~were as follows:

Thirteen Weeks Ended
(in thousands) April 29, 2017 April 30, 2016
Hollister $ 374,677
$ 362,147
Abercrombie 286,422
323,336
Total $ 661,099
$ 685,483

~~Table of Contents~~



	Thirteen Weeks Ended
(in thousands)	May 5, 2018		April 29, 2017
Hollister	$	423,628	$	374,677
Abercrombie	307,271		286,422
Total	$	730,899	$	661,099

The ~~following table provides the~~ Company’s net sales by geographic area for the thirteen weeks ended May 5, 2018 and April 29, 2017 ~~and April 30, 2016.~~were as follows:


	Thirteen Weeks Ended				Thirteen Weeks Ended
(in thousands)	April 29, 2017		April 30, 2016		May 5, 2018		April 29, 2017
United States	$	409,068	$	425,429	$	449,126	$	409,068
Europe	154,984		161,457		169,660		154,984
Other	97,047		98,597		112,113		97,047
Total	$	661,099	$	685,483	$	730,899	$	661,099

Table of Contents

10. CONTINGENCIES

The Company is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business. Legal costs incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, and the Company establishes ~~reserves~~estimated liabilities for the outcome of litigation where losses are deemed probable and reasonably estimable. The Company’s assessment of the current exposure could change in the event of the discovery of additional facts. As of May 5, 2018, the Company had accrued charges for legal contingencies, including the certain legal matters detailed below, of approximately $23 million, which are classified within other current liabilities on the accompanying Condensed Consolidated Balance Sheet. The estimated liability represents what the Company believes to be reasonable estimates of the loss exposures related to its legal matters. Actual liabilities may ~~exceed~~differ from the amounts ~~reserved,~~recorded, due to uncertainties regarding final settlement agreement negotiations, actual claims rate experience, court approvals and the terms of any approval by the courts, and there can be no assurance that final resolution of ~~these~~legal matters will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows. The Company may be subject to estimated incremental losses of as much as approximately $20 million. There are certain claims and legal proceedings pending against the Company for which accruals have not been established.

Certain Legal Matters

The Company is a defendant in two separate class action lawsuits filed by former associates of the Company who are represented by the same counsel. The first lawsuit, filed in 2013, alleges failure to indemnify business expenses and a series of derivative claims for compelled patronization, inaccurate wage statements, waiting time penalties, minimum wage violations and unfair competition under California state law on behalf of all non-exempt hourly associates at Abercrombie & Fitch, abercrombie kids, Hollister and Gilly Hicks stores in California. Four subclasses of associates were certified, and the matter was before a U.S. District Court of California. The second lawsuit, filed in 2015, alleges that associates were required to purchase uniforms without reimbursement in violation of federal law, and laws of the states of New York, Florida and Massachusetts, as well as derivative putative state law claims and seeks to pursue such claims on a class and collective basis. On December 12, 2017, a U.S. District Court of California granted the parties’ stipulation to transfer the first lawsuit pending and combine it with the second lawsuit then pending before a U.S. District Court of Ohio.

Both matters were mediated and the parties signed a $25.0 million claims-made settlement agreement which, subject to final approval by a U.S. District Court of Ohio, is intended to result in a full and final settlement of all claims in both lawsuits on a class-wide basis. On February 16, 2018, a U.S. District Court of Ohio granted preliminary approval of the proposed settlement and ordered that notice of the proposed settlement be given to the absent members of the settlement class. The ultimate settlement amount is dependent upon the actual claims made by members of the class and is also subject to final approval by the U.S. District Court of Ohio. A final approval hearing is set to occur in the third quarter of Fiscal 2018.

In addition to the matters discussed above, the Company is a defendant in certain other class action lawsuits filed by former associates of the Company. These lawsuits allege non-exempt hourly associates of the Company were not properly compensated, in violation of federal and California law, for call-in practices requiring associates to engage in certain pre-shift activities in order to determine whether they should report to work and the Company’s alleged failure to pay reporting time pay and all wages earned at termination. In addition, these lawsuits include derivative claims alleging inaccurate wage statements and unfair competition under California state law on behalf of non-exempt hourly associates. One of these lawsuits was mediated and the parties involved have reached a framework for settling the case on a class-wide basis through a proposed settlement agreement, subject to a final settlement agreement, which will require approval by a court of competent jurisdiction. These lawsuits are currently assigned to the same judge in a U.S. District Court of California.

There can be no absolute assurance that settlements will be finalized or approved or of the ultimate outcomes of the litigations.

Table of Contents


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

BUSINESS SUMMARY

The Company is a global, multi-brand specialty retailer ~~who~~that primarily sells its products through its wholly-owned store and direct-to-consumer ~~operations,~~channels, as well as through various third-party wholesale, franchise and licensing arrangements. The Company offers a broad ~~array~~assortment of apparel, ~~products, including knit tops, woven shirts, graphic t-shirts, fleece, sweaters, jeans, woven pants, shorts, outerwear, dresses, intimates and swimwear; and~~ personal care products and accessories for men, women and kids under the Hollister, Abercrombie & Fitch and abercrombie kids brands. The Company has operations in North America, Europe, Asia and the Middle East.

The Company’s fiscal year ends on the Saturday closest to January 31. Fiscal years are designated in the consolidated financial statements and notes by the calendar year in which the fiscal year commences. All references herein to “Fiscal ~~2017”~~2018” represent the ~~fifty-three week~~fifty-two-week fiscal year that will end on February ~~3, 2018,~~2, 2019, and to “Fiscal ~~2016”~~2017” represent the ~~fifty-two week~~fifty-three-week fiscal year that ended ~~January 28, 2017.~~February 3, 2018.

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. The seasonality of the Company’s operations may also lead to significant fluctuations in certain asset and liability accounts.

SUMMARY RESULTS OF OPERATIONS

The table below summarizes the ~~Company's~~Company’s results of operations and reconciles financial measures determined in accordance with accounting principles generally accepted in the U.S. (“GAAP”) to non-GAAP financial measures for the thirteen ~~week periods~~weeks ended May 5, 2018 and April 29, ~~2017 and April 30, 2016.~~2017. Additional discussion about why the Company believes that these non-GAAP financial measures are useful to investors is provided below under “NON-GAAP FINANCIAL MEASURES.”


(in thousands, except change in comparable sales, gross profit rate and per share amounts)	April 29, 2017			April 30, 2016
							Thirteen Weeks Ended
							May 5, 2018									April 29, 2017
(in thousands, except change in net sales, change in comparable sales, gross profit rate and per share amounts)							GAAP			Excluded Items ⁽¹⁾			Non-GAAP			GAAP			Non-GAAP
Net sales	$	661,099		$	685,483		$	730,899								$	661,099
Change in comparable sales⁽¹⁾	(3		)%	(4		)%
Change in net sales							11		%							(4		)%
Change in comparable sales ⁽²⁾													5		%				(3	)%
Gross profit rate	60.3		%	62.1		%	60.5		%							60.3		%
Operating loss	$	(69,941	)	$	(54,911	)	$	(42,203	)	$	(5,600	)	$	(36,603	)	$	(69,941	)
Net loss attributable to A&F	$	(61,700	)	$	(39,587	)	$	(42,461	)	$	(4,059	)	$	(38,402	)	$	(61,700	)
Net loss per diluted share attributable to A&F	$	(0.91	)	$	(0.59	)	$	(0.62	)	$	(0.06	)	$	(0.56	)	$	(0.91	)


⁽¹⁾	~~Changes~~ Refer to “RESULTS OF OPERATIONS” in ~~comparable~~“ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” for details on excluded items.

⁽²⁾

Comparable sales are calculated on a constant currency ~~basis by converting prior year store and online~~basis. Due to the calendar shift resulting from the 53^rd week in Fiscal 2017, comparable sales ~~at current year exchange rates. For inclusion~~for the 13 weeks ended May 5, 2018 are compared to the 13 weeks ended May 6, 2017. Refer to “NON-GAAP FINANCIAL MEASURES” in ~~this calculation, a store must have been open as~~“ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” for further details on the ~~same brand at least one year and its square footage must not have been expanded or reduced by more than 20% within the past year.~~comparable sales calculation.

As of ~~April 29, 2017,~~May 5, 2018, the Company had ~~$421.4~~$592.0 million in cash and equivalents, and ~~$268.3~~$253.3 million in gross borrowings outstanding under its term loan facility. Net cash used byfor operating activities was ~~$84.3~~$16.2 million for the thirteen weeks ended May 5, 2018. The Company used cash of $23.7 million for capital expenditures, $13.6 million to pay dividends and $18.7 million to repurchase approximately 0.8 million shares of A&F’s Common Stock in the open market during the thirteen weeks ended May 5, 2018.

As of February 3, 2018, the Company had $675.6 million in cash and equivalents, and $253.3 million in gross borrowings outstanding under its term loan facility. Net cash used for operating activities was $84.1 million for the thirteen weeks ended April 29, 2017. The Company ~~also~~ used cash of $32.1 million for capital expenditures and $13.6 million to pay dividends during the thirteen weeks ended April 29, 2017.

1618

Table of Contents

CURRENT TRENDS AND OUTLOOK

~~Our results for~~We are pleased with our performance across all brands, with the ~~first~~consistent execution of our playbooks delivering a solid quarter of ~~Fiscal 2017 reflect comparable~~ sales ~~improvement over the prior quarter~~growth, and bottom-line improvement. Results exceeded our expectations driven by a 11% increase in net sales, with a ~~continued challenging, promotional environment. Hollister, our largest brand, delivered an~~5% increase in comparable ~~sales. At~~sales, gross margin expansion, and 460 basis points of operating expense leverage. Hollister continued to drive strong sales growth across channels and geographies and Abercrombie built momentum with another quarter of positive comparable sales ~~results were~~led by strength in ~~line with our expectations as we continue to lay the foundation for its revitalization.~~North America.

~~While we anticipate the second quarter retail environment~~Our efforts are focused on transforming our operating model to ~~remain promotional and generally challenging, we expect comparable sales trend improvement in the second half of the year, as we gain traction from our~~deliver an improved customer experience, with strategic investments in omnichannel experience, marketing, ~~loyalty programs~~ and ~~omnichannel capabilities.~~tools and technology to strengthen our execution and customer engagement. We ~~continue~~are off to ~~maintain~~ a ~~disciplined approach~~strong start in Fiscal 2018 and we are committed to ~~our cost structure, with a balanced focus between dealing with short-term realities~~delivering top and ~~driving~~bottom line growth, as we work towards our ~~long-term ambition, and remain confident in our strategic direction and our ability to execute on our plans.~~goal of being a leading global omnichannel apparel retailer.

For Fiscal ~~2017,~~2018, we expect:

Comparable sales to ~~remain challenging~~be up in the range of 2% to 4%.

Net sales to be up in the range of 2% to 4%, with net sales in the second quarter ~~with trend improvement~~to be up high-single digits, including benefits from changes in ~~the second half of the year~~.

~~Continued adverse impact from~~ foreign currency exchange rates based on ~~sales~~third-party consensus estimates and ~~operating income~~.the calendar shift.


–	The calendar shift and the loss of Fiscal 2017’s 53^rd week to adversely impact net sales by approximately $40 million, with benefits to first quarter and second quarter net sales of approximately $10 million and $30 million, respectively, to be more than offset by adverse impacts to third quarter and fourth quarter net sales of approximately $20 million and $60 million, respectively.

A gross profit rate ~~down~~up slightly ~~to last year's adjusted non-GAAP~~from the Fiscal 2017 rate of ~~61.0%, with continued pressure in the second quarter.~~59.7%.

~~Operating~~GAAP operating expense, including certain legal charges of $5.6 million, lease termination charges of $3.9 million and volume-related expenses from higher sales, to be ~~down at least 3%~~up approximately 2% from ~~last year's~~Fiscal 2017 adjusted ~~non-GAAP~~ operating expense of ~~$2.025 billion, with approximately 65% of the full year reduction to occur in~~$2 billion. For the second ~~half~~quarter, operating expense is expected to be up mid-single digits from Fiscal 2017 adjusted operating expense of ~~the year~~.

~~Net income attributable to noncontrolling interests of approximately $4 million~~.

$479 million.

A weighted average ~~diluted~~fully-diluted share count of approximately 6870 million shares, excluding the effect of potential share buybacks.

In addition, we expect to end the second quarter of Fiscal 2018 with inventory up low-single digits.

For Fiscal 2018, we expect the full year effective tax rate to be in the mid-30s, including discrete non-cash income tax charges of approximately $9 million related to share-based compensation accounting standards that went into effect in Fiscal 2017, of which approximately $8 million was recognized during the first quarter. For the ~~full~~remainder of the year, we expect the effective tax rate to ~~reflect a core tax rate~~be in the low 30s, which remains highly sensitive at lower levels of pre-tax earnings. Additionally, we expect discrete non-cash income tax charges for the full year of approximately $11 million primarily related to a change in share-based compensation accounting standards.mid-to-upper 20s.

~~We expect~~With regard to capital allocation, we are targeting capital expenditures to be ~~approximately $100~~in the range of $135 million to $140 million for the full ~~year.~~year, which are expected to include approximately $85 million for store updates and new stores and between $50 million to $55 million for direct-to-consumer and omnichannel investments, information technology and other projects.

We plan to open ~~approximately seven~~22 full-price stores in Fiscal ~~2017,~~2018, including ~~six in the U.S.~~13 Hollister and ~~one in international markets. We also plan to open two new outlet~~nine Abercrombie stores. In addition, we expect to remodel 32 stores to the new prototype format and right-size 17 stores to the new, smaller square-foot prototype formats. We also anticipate closing ~~approximately~~up to 60 stores in the U.S. during ~~the fiscal year~~Fiscal 2018 through natural lease expirations.

Table of Contents

STORE ACTIVITY

Store count and gross square footage by brand and geography for the thirteen weeks ended May 5, 2018 and April 29, 2017, respectively, were as follows:



	Hollister ⁽¹⁾			Abercrombie ⁽²⁾				Total
	United States		International	United States		International		United States		International
February 3, 2018	394		144	285		45		679		189
New	1		—	—		—		1		—
Closed	—		—	—		—		—		—
May 5, 2018	395		144	285		45		680		189
Gross square footage (in thousands):
May 5, 2018	2,685		1,200	2,206		619		4,891		1,819

	Hollister ⁽¹⁾			Abercrombie ⁽²⁾				Total
	United States		International	United States		International		United States		International
January 28, 2017	398		145	311		44		709		189
New	1		—	2		—		3		—
Closed	(2	)	—	(5	)	(1	)	(7	)	(1	)
April 29, 2017	397		145	308		43		705		188
Gross square footage (in thousands):
April 29, 2017	2,717		1,216	2,396		610		5,113		1,826


⁽¹⁾	Excludes six international franchise stores as of May 5, 2018, five international franchise stores as of February 3, 2018 and April 29, 2017, and three international franchise stores as of January 28, 2017.


⁽²⁾	Includes Abercrombie & Fitch and abercrombie kids brands. Excludes six international franchise stores as of May 5, 2018, four international franchise stores as of February 3, 2018, three international franchise stores as of April 29, 2017, and one international franchise store as of January 28, 2017.

Table of Contents

NON-GAAP FINANCIAL MEASURES

This Quarterly Report on Form 10-Q includes discussion of certain financial measures under ~~“RESULTS~~“RESULTS OF ~~OPERATIONS”~~OPERATIONS” 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” ~~are~~is useful to investors as ~~they provide~~it provides a measure of the Company’s operating performance excluding the effect of certain items ~~which~~that the Company believes do not reflect its future operating outlook, and therefore supplements 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 ~~supplemental~~as a supplement to, 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.

~~Changes in comparable sales are~~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. The effect from foreign currency exchange rates, calculated on a constant currency basis, is determined by ~~converting~~applying the current period’s foreign currency exchange rates to the prior ~~year store~~year’s results and ~~online~~is net of the year-over-year impact from hedging.

In addition, the Company provides comparable sales, ~~at current year exchange rates. For~~defined as the ~~purpose~~aggregate of ~~this calculation, a store must~~(1) year-over-year sales for stores that have been open as the same brand at least one year and ~~its~~whose square footage ~~must~~has not ~~have~~ been expanded or reduced by more than 20% within the past ~~year.~~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 fluctuation, and (2) year-over-year direct-to-consumer 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 fluctuation. Comparable sales excludes revenue other than store and direct-to-consumer sales. Due to the calendar shift in Fiscal 2018, resulting from the 53^rd week in Fiscal 2017, comparable sales for the Fiscal 2018 quarterly periods ended May 5, 2018, August 4, 2018, November 3, 2018 and February 2, 2019 are to be compared to the 13 weeks ended May 6, 2017, August 5, 2017, November 4, 2017 and February 3, 2018, respectively. Management uses comparable sales to understand the drivers of net sales year-over-year changes as well as a performance metric for certain performance-based restricted stock units. The Company 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.

The impact on net sales from the calendar shift, resulting from the loss of Fiscal 2017’s 53^rd week, is the difference between net sales for the 13 weeks ended May 6, 2017, August 5, 2017, November 4, 2017 and February 3, 2018 and reported net sales for the fiscal quarters ended April 29, 2017, July 29, 2017, October 28, 2017 and February 3, 2018, respectively.

The following financial measures are disclosed on a GAAP and on an adjusted non-GAAP basis excluding the following items, as applicable:



Financial measures ⁽¹⁾		Excluded items
Marketing, general and administrative expense		Certain legal charges
Operating loss		Certain legal charges
Net loss and net loss per share attributable to A&F ⁽²⁾		Certain legal charges; and the tax effect of excluded items


⁽¹⁾	Certain of these financial measures are also expressed as a percentage of net sales.


⁽²⁾	The Company also presents income tax benefit and the effective tax rate on both a GAAP and on an adjusted non-GAAP basis excluding the items listed under “Operating loss,” as applicable, in the table above. The Company computed the tax effect of excluded items as the difference between the tax provision calculation on a GAAP basis and an adjusted non-GAAP basis.

1721

Table of Contents

RESULTS OF OPERATIONS

~~STORE ACTIVITY~~

~~Store count and gross square footage by brand for the thirteen weeks ended April 29, 2017 and April 30, 2016, respectively, were as follows:~~

Hollister ⁽¹⁾

Abercrombie ⁽²⁾
Total
United States International United States International United States International
January 28, 2017 398
145
311
44
709
189
New 1
—
2
—
3
—
Closed (2 ) —
(5 ) (1 ) (7 ) (1 )
April 29, 2017 397
145
308
43
705
188
Gross square feet (in thousands):

April 29, 2017 2,717
1,216
2,396
610
5,113
1,826

Hollister⁽¹⁾

Abercrombie ⁽²⁾
Total
United States International United States International United States International
January 30, 2016 414
139
340
39
754
178
New —
2
1
—
1
2
Closed (3 ) —
(7 ) —
(10 ) —
April 30, 2016 411
141
334
39
745
180
Gross square feet (in thousands):

April 30, 2016 2,834
1,195
2,561
619
5,395
1,814


⁽¹⁾	Excludes five international franchise stores as of April 29, 2017, three international franchise stores as of January 28, 2017 and two international franchise stores as of April 30, 2016 and January 30, 2016.


⁽²⁾	Includes Abercrombie & Fitch and abercrombie kids brands. Excludes three international franchise stores as of April 29, 2017 and one international franchise store as of January 28, 2017, April 30, 2016 and January 30, 2016.

THIRTEEN WEEKS ENDED MAY 5, 2018 VERSUS APRIL 29, 2017 ~~VERSUS THIRTEEN WEEKS ENDED APRIL 30, 2016~~

Net Sales


	Thirteen Weeks Ended										Thirteen Weeks Ended
	April 29, 2017			April 30, 2016							May 5, 2018		April 29, 2017
(in thousands)	Net Sales		Change in Comparable Sales⁽¹⁾	Net Sales		Change in Comparable Sales⁽¹⁾	Net Sales $ Change			Net Sales % Change					$ Change		% Change	Change in Comparable Sales ⁽¹⁾
Hollister	$	374,677	3%	$	362,147	—%	$	12,530		3%	$	423,628	$	374,677	$	48,951	13%	6%
Abercrombie⁽²⁾	286,422		(10)%	323,336		(8)%	(36,914		)	(11)%	307,271		286,422		20,849		7%	3%
Total net sales	$	661,099	(3)%	$	685,483	(4)%	$	(24,384	)	(4)%	$	730,899	$	661,099	$	69,800	11%	5%

United States	$	409,068	(3)%	$	425,429	(2)%	$	(16,361	)	(4)%	$	449,126	$	409,068	$	40,058	10%	8%
International	252,031		(2)%	260,054		(7)%	(8,023		)	(3)%	281,773		252,031		29,742		12%	0%
Total net sales	$	661,099	(3)%	$	685,483	(4)%	$	(24,384	)	(4)%	$	730,899	$	661,099	$	69,800	11%	5%

⁽¹⁾

~~Changes in comparable~~


⁽²⁾	Includes Abercrombie & Fitch and abercrombie kids brands.

For the first quarter of Fiscal ~~2017,~~2018, net sales ~~decreased 4%~~increased 11% as compared to the first quarter of Fiscal ~~2016,~~2017, primarily attributable to a ~~3% decrease~~5% increase in comparable sales, ~~driven~~with a 6% increase in comparable sales for Hollister and a 3% increase in comparable sales for Abercrombie. Changes in foreign currency exchange rates and the calendar shift resulting from Fiscal 2017’s 53^rd week benefited first quarter of Fiscal 2018 net sales by ~~the Abercrombie brand.~~

~~Table of Contents~~

approximately $25 million, or 4%, and approximately $10 million, or 1%, respectively.

Cost of Sales, Exclusive of Depreciation and Amortization


	Thirteen Weeks Ended						Thirteen Weeks Ended
	April 29, 2017			April 30, 2016			May 5, 2018			April 29, 2017
(in thousands)			% of Net Sales			% of Net Sales			% of Net Sales			% of Net Sales
Cost of sales, exclusive of depreciation and amortization	$	262,174	39.7%	$	259,762	37.9%	$	288,554	39.5%	$	262,174	39.7%

Gross profit	$	398,925	60.3%	$	425,721	62.1%	$	442,345	60.5%	$	398,925	60.3%

For the first quarter of Fiscal ~~2017,~~2018, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales increased by approximately 180 basis points as compared to the first quarter of Fiscal 2016, primarily due to lower average unit retail, which includes the adverse effects from changes in foreign currency exchange rates of approximately 50 basis points, partially offset by lower average unit cost.

~~Stores and Distribution Expense~~

Thirteen Weeks Ended
April 29, 2017 April 30, 2016
(in thousands) % of Net Sales % of Net Sales
Stores and distribution expense $ 359,929
54.4% $ 369,118
53.8%

For the first quarter of Fiscal 2017, stores and distribution expense as a percentage of net sales increased by approximately 60 basis points as compared to the first quarter of Fiscal 2016, primarily due to the deleveraging effect from negative comparable sales and higher direct-to-consumer expense, partially offset by expense reduction efforts.

For the first quarter of Fiscal 2017, shipping and handling costs, including costs incurred to store, move and prepare product for shipment and costs incurred to physically move product to the customer, associated with direct-to-consumer operations were $29.7 million as compared to $22.8 million for the first quarter of Fiscal 2016.

For the first quarter of Fiscal 2017, handling costs, including costs incurred to store, move and prepare product for shipment to stores, were $8.1 million as compared to $10.4 million for the first quarter of Fiscal 2016.

~~Shipping and handling costs are included in stores and distribution expense on the Condensed Consolidated Statements of Operations and Comprehensive Loss.~~

~~Marketing, General and Administrative Expense~~

Thirteen Weeks Ended
April 29, 2017 April 30, 2016
(in thousands) % of Net Sales % of Net Sales
Marketing, general and administrative expense $ 109,893
16.6% $ 114,447
16.7%

For the first quarter of Fiscal 2017, marketing, general and administrative expense as a percentage of net sales decreased by approximately 10 basis points as compared to the first quarter of Fiscal 2016, primarily due to expense reduction efforts, partially offset by higher marketing expenses and the deleveraging effect from negative comparable sales.

~~Asset Impairment~~

~~For the first quarter of Fiscal 2017, the Company incurred asset impairment charges of $0.7 million. There were no asset impairment charges for the first quarter of Fiscal 2016.~~

~~Table of Contents~~

~~Other Operating Income, Net~~

Thirteen Weeks Ended
April 29, 2017 April 30, 2016
(in thousands) % of Net Sales % of Net Sales
Other operating income, net $ 1,686
0.3% $ 2,933
0.4%

~~For the first quarter of Fiscal 2017, other operating income, net~~ as a percentage of net sales decreased by approximately 20 basis points as compared to the first quarter of Fiscal ~~2016, primarily due to lower~~2017, including benefits from changes in foreign currency ~~related gains.~~exchange rates of approximately 20 basis points, net of hedging.

~~Operating Loss~~Stores and Distribution Expense


	Thirteen Weeks Ended								Thirteen Weeks Ended
	April 29, 2017				April 30, 2016				May 5, 2018			April 29, 2017
(in thousands)				% of Net Sales				% of Net Sales			% of Net Sales			% of Net Sales
Operating loss	$	(69,941	)	(10.6)%	$	(54,911	)	(8.0)%
Stores and distribution expense									$	361,155	49.4%	$	359,929	54.4%

For the first quarter of Fiscal ~~2017, operating loss~~2018, stores and distribution expense as a percentage of net sales ~~increased~~decreased by approximately ~~260~~500 basis points as compared to the first quarter of Fiscal ~~2016,~~2017, primarily ~~driven by a reduction in~~due to the ~~gross profit rate, the deleveraging~~leveraging effect from ~~negative comparable~~higher net sales and ~~higher direct-to-consumer and marketing expenses,~~expense reductions, partially offset by ~~expense reduction efforts.~~

~~Interest Expense, Net~~

Thirteen Weeks Ended
April 29, 2017 April 30, 2016
(in thousands) % of Net Sales % of Net Sales
Interest expense $ 5,333
0.8% $ 5,613
0.8%
Interest income (1,213 ) (0.2)% (1,107 ) (0.2)%
Interest expense, net $ 4,120
0.6% $ 4,506
0.7%

~~Income Tax Benefit~~

Thirteen Weeks Ended
April 29, 2017 April 30, 2016
(in thousands, except ratios) Effective Tax Rate Effective Tax Rate
Income tax benefit $ (13,052 ) 17.6% $ (20,787 ) 35.0%
$3.9 million of lease termination charges related to the A&F flagship store lease in Copenhagen.

For the first quarter of Fiscal ~~2017,~~2018, shipping and handling costs associated with direct-to-consumer operations, including costs incurred to physically move product to the ~~Company's income tax benefit as a percentage of loss before taxes was 17.6%~~customer and costs to store, move and prepare product for shipment, were $32.2 million as compared to ~~35.0%~~$29.7 million for the first quarter of Fiscal ~~2016. The change in tax rate was primarily driven~~2017.

Table of Contents

Marketing, General and Administrative Expense



	Thirteen Weeks Ended
	May 5, 2018				April 29, 2017
(in thousands)				% of Net Sales			% of Net Sales
Marketing, general and administrative expense	$	124,897		17.1%	$	109,893	16.6%
Deduct:
Certain legal charges ⁽¹⁾	(5,600		)	(0.8)%	—		0.0%
Adjusted non-GAAP marketing, general and administrative expense	$	119,297		16.3%	$	109,893	16.6%


⁽¹⁾	Includes legal charges in connection with a proposed settlement of a class action claim related to alleged wage and hour practices. Refer to Note 10, “CONTINGENCIES.”

For the first quarter of Fiscal 2018, marketing, general and administrative expense as a percentage of net sales increased by ~~a discrete non-cash income tax charge of $9.3 million related~~approximately 50 basis points as compared to ~~the adoption of ASU 2016-09 in~~ the first quarter of Fiscal 2017, primarily due to $5.6 million of certain legal charges in Fiscal 2018 and increases in marketing and performance-based compensation expenses that more than offset the leveraging effect from increased net sales and expense reduction efforts. Excluding $5.6 million of certain legal charges in Fiscal 2018, first quarter Fiscal 2018 adjusted non-GAAP marketing, general and administrative expense as ~~well~~a percentage of net sales decreased by approximately 30 basis points as ~~changes~~compared to the first quarter of Fiscal 2017.

Asset Impairment

For the first quarter of Fiscal 2018 and for the first quarter of Fiscal 2017, the Company incurred store asset impairment charges of $1.1 million and $0.7 million, respectively, primarily related to certain of the Company’s international Abercrombie & Fitch flagship stores.

Other Operating Income, Net



	Thirteen Weeks Ended
	May 5, 2018			April 29, 2017
(in thousands)			% of Net Sales			% of Net Sales
Other operating income, net	$	2,560	0.4%	$	1,686	0.3%

For the first quarter of Fiscal 2018, other operating income, net as a percentage of net sales increased by approximately 10 basis points as compared to the first quarter of Fiscal 2017, primarily due to higher foreign currency exchange rate related gains, partially offset by a change in classification of gift card breakage which was previously recognized in other operating income, but beginning in Fiscal 2018 is recognized in net sales on the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Operating Loss



	Thirteen Weeks Ended
	May 5, 2018				April 29, 2017
(in thousands)				% of Net Sales				% of Net Sales
Operating loss	$	(42,203	)	(5.8)%	$	(69,941	)	(10.6)%
Deduct:
Certain legal charges ⁽¹⁾	5,600			0.8%	—			0.0%
Adjusted non-GAAP operating loss	$	(36,603	)	(5.0)%	$	(69,941	)	(10.6)%


⁽¹⁾	Includes legal charges in connection with a proposed settlement of a class action claim related to alleged wage and hour practices. Refer to Note 10, “CONTINGENCIES.”

For the first quarter of Fiscal 2018, operating loss as a percentage of net sales decreased by approximately 480 basis points as compared to the first quarter of Fiscal 2017, primarily driven by the leveraging effect on operating expenses from increased net sales and expense reduction efforts, partially offset by increases in marketing and performance-based compensation expenses. Excluding $5.6 million of certain legal charges in Fiscal 2018, first quarter Fiscal 2018 adjusted non-GAAP operating loss as a percentage of net sales decreased by approximately 560 basis points as compared to the first quarter of Fiscal 2017. Changes in foreign currency exchange rates benefited operating loss by approximately $3 million.

Table of Contents

Interest Expense, Net



	Thirteen Weeks Ended
	May 5, 2018				April 29, 2017
(in thousands)				% of Net Sales				% of Net Sales
Interest expense	$	5,662		0.8%	$	5,333		0.8%
Interest income	(2,644		)	(0.4)%	(1,213		)	(0.2)%
Interest expense, net	$	3,018		0.4%	$	4,120		0.6%

For the first quarter of Fiscal 2018, interest expense, net was $3.0 million as compared to $4.1 million for the first quarter of Fiscal 2017. In each year, interest expense, net primarily consisted of interest on borrowings outstanding under the Company’s term loan facility, partially offset by realized gains from the trust-owned life insurance policies held in the ~~level~~irrevocable rabbi trust (the “Rabbi Trust”) and ~~mix~~interest income earned on the Company’s investments and cash holdings.

Income Tax Benefit



	Thirteen Weeks Ended
	May 5, 2018				April 29, 2017
(in thousands, except ratios)				Effective Tax Rate				Effective Tax Rate
Income tax benefit	$	(3,713	)	8.2%	$	(13,052	)	17.6%
Deduct:
Tax effect of excluded items ⁽¹⁾	1,541				—
Adjusted non-GAAP income tax benefit	$	(2,172	)	5.5%	$	(13,052	)	17.6%


⁽¹⁾	Refer to “Operating Loss” for details of excluded items. The tax effect of excluded items is the difference between the tax provision calculation on a GAAP basis and an adjusted non-GAAP basis.

For the first quarter of ~~consolidated pre-tax earnings between operating~~Fiscal 2018, the effective tax rate was 8.2% as compared to 17.6% for the first quarter of Fiscal 2017. In the first quarter of Fiscal 2018 and ~~valuation allowance jurisdictions. The Company's~~for the first quarter of Fiscal 2017, the effective tax rate was impacted by discrete non-cash income tax charges of $8.2 million and $9.3 million, respectively, primarily related to the expiration of certain share-based compensation awards. Excluding the tax effect of items presented above under “Operating Loss,” the adjusted non-GAAP effective tax rate ~~remains sensitive at lower levels~~for the first quarter of ~~full year pre-tax earnings.~~Fiscal 2018 was 5.5%.

Net Loss and Net Loss per Share Attributable to A&F

For the first quarter of Fiscal 2017, net loss and net loss per diluted share attributable to A&F were $61.7 million and $0.91, respectively, as compared to net loss and net loss per diluted share attributable to A&F of $39.6 million and $0.59, respectively, for the first quarter of Fiscal 2016.



	Thirteen Weeks Ended
	May 5, 2018				April 29, 2017
(in thousands)				% of Net Sales				% of Net Sales
Net loss attributable to A&F	$	(42,461	)	(5.8)%	$	(61,700	)	(9.3)%
Adjusted non-GAAP net loss attributable to A&F ⁽¹⁾	$	(38,402	)	(5.3)%	$	(61,700	)	(9.3)%

Net loss per diluted share attributable to A&F	$	(0.62	)		$	(0.91	)
Adjusted non-GAAP net loss per diluted share attributable to A&F⁽¹⁾	$	(0.56	)		$	(0.91	)


⁽¹⁾	Excludes items presented above under “Operating Loss” and “Income Tax Benefit.”

2024

Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

HISTORICAL SOURCES AND USES OF CASH

Seasonality of Cash Flows

The Company’s business has two principal selling seasons: the Spring season, which includes the first and second fiscal quarters (“Spring”), and the Fall season, which includes the third and fourth fiscal quarters (“Fall”). As is typical in the apparel industry, the Company experiences its greatest sales activity during the Fall season due to Back-to-School and ~~Holiday~~Back-to-Fall sales periods for Hollister and Abercrombie, respectively, and the holiday sales periods. The Company relies on excess operating cash flows, which are largely generated in the Fall season, to fund operations throughout the year and to reinvest in the business to support future growth. The Company also has aan asset-based revolving credit facility available as a source of additional funding.

~~Asset-Based Revolving~~ Credit ~~Facility~~Facilities

~~The~~On August 7, 2014, A&F, through its subsidiary Abercrombie & Fitch Management Co. (“A&F Management”) as the lead borrower (with A&F and certain other subsidiaries as borrowers or guarantors), entered into an asset-based revolving credit agreement.

As of October 19, 2017, the Company, ~~has~~through A&F Management, entered into a Second Amendment to Credit Agreement (the “ABL Second Amendment”), amending and extending the maturity date of the asset-based revolving credit agreement. As amended, the asset-based revolving credit agreement continues to provide for a senior secured revolving credit facility ~~with availability~~ of up to $400 million (the ~~“ABL~~“Amended ABL Facility”), subject to a borrowing base. The ABL Facility is available for working capital, capital expenditures and other general corporate purposes. The ABL Facility will mature on August 7, 2019. No borrowings were outstanding under the ABL Facility as of April 29, 2017.

Amounts borrowed under the ABL Facility bear interest, at the Company’s option, at either an adjusted LIBOR rate plus a margin of 1.25% to 1.75% per annum, or an alternate base rate plus a margin of 0.25% to 0.75% per annum based on average historical excess availability during the preceding quarter. The Company is also required to pay a fee of 0.25% per annum on undrawn commitments under the ABL Facility. Customary agency fees and letter of credit fees are also payable in respect of the ABL Facility..

As of ~~April 29, 2017,~~May 5, 2018, the borrowing base on the Amended ABL Facility was ~~$253.7~~$271.1 million.

The Company uses, in the ordinary course of business, stand-by letters of credit under the Amended ABL Facility. As of May 5, 2018 and June ~~1, 2017,~~5, 2018, the Company had not drawn on the Amended ABL Facility, but had ~~approximately $1.8 million in~~ outstanding stand-by letters of credit under the Amended ABL ~~Facility.~~Facility of approximately $1.1 million, as of each of these dates. The Company has no other off-balance sheet arrangements.

~~Term Loan Facility~~

~~The Company has~~A&F, through its subsidiary A&F Management as the borrower (with A&F and certain other subsidiaries as guarantors), also entered into a term loan agreement on August 7, 2014, which provides for a term loan facility of $300 million (the “Term Loan Facility” and, together with the Amended ABL Facility, the ~~“2014 Credit~~“Credit Facilities”).

The interest rate on borrowings under the Term Loan Facility was ~~issued at a $3 million or 1.0% discount. In addition, the Company recorded deferred financing fees associated with the issuance~~5.66% as of the 2014 Credit Facilities of $5.8 million in aggregate, of which $3.2 million was paid to lenders. The Company is amortizing the debt discount and deferred financing fees over the respective contractual terms of the 2014 Credit Facilities.May 5, 2018.

The Company’s Term Loan debt is presented in the Condensed Consolidated Balance Sheets, net of the unamortized discount and ~~deferred financing~~ fees. Net borrowings as of ~~April 29, 2017~~May 5, 2018 and ~~April 30, 2016~~February 3, 2018 were as follows:


(in thousands)	April 29, 2017			April 30, 2016			May 5, 2018			February 3, 2018
Borrowings, gross at carrying amount	$	268,250		$	293,250		$	253,250		$	253,250
Unamortized discount	(1,666		)	(2,250		)	(1,099		)	(1,184		)
Unamortized fees	(3,231		)	(4,385		)	(2,189		)	(2,380		)
Borrowings, net	263,353			286,615			249,962			249,686
Less: short-term portion of borrowings, net	—			(733		)	—			—
Long-term portion of borrowings, net	$	263,353		$	285,882		$	249,962		$	249,686

The ~~Term Loan Facility will mature on August 7, 2021 and amortizes at a rate equal to 0.25%~~Credit Facilities have not changed materially from that disclosed in Note 11, “BORROWINGS,” of the ~~original principal amount per quarter, beginning with the fourth quarter~~Notes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Annual Report on Form 10-K for Fiscal 2014. The Term Loan Facility is subject to (a) beginning in 2016, an annual mandatory prepayment in an amount equal to 0% to 50% of the Company’s excess cash flows in the preceding fiscal year, depending on the Company’s leverage ratio and (b) certain other mandatory prepayments upon receipt by the Company of proceeds of certain debt issuances, asset sales and casualty events, subject to certain exceptions specified therein, including reinvestment rights, less any voluntary payments made. The Company made a repayment of $25 million in January 2017, in prepayment of its scheduled Fiscal 2017 through Fiscal 2021 amortization and a portion of the amount of principal due at maturity.2017.

2125

Table of Contents

At the Company’s option, borrowings under the Term Loan Facility will bear interest at either (a) an adjusted LIBOR rate no lower than 1.00% plus a margin of 3.75% per annum or (b) an alternate base rate plus a margin of 2.75% per annum. Customary agency fees are also payable pursuant to the Term Loan Facility. The interest rate on borrowings under the Term Loan Facility was 4.75% as of April 29, 2017.

Operating Activities

~~Net~~For the thirteen weeks ended May 5, 2018, net cash used byfor operating activities was ~~$84.3~~$16.2 million as compared to $84.1 million for the thirteen weeks ended April 29, ~~2017 compared to $75.7 million for the thirteen weeks ended April 30, 2016.~~2017. The year-over-year change in cash flow associated with operating activities was primarily ~~driven by greater~~due to higher cash receipts from increased net ~~loss net~~sales, increased payments to vendors in the fourth quarter of ~~non-cash adjustments and lease deposits that were returned~~Fiscal 2017 which resulted in lower cash payments in the first quarter of Fiscal ~~2016,~~2018 as compared to the prior year, and lease termination payments in the first quarter of Fiscal 2017 related to the exercise of lease kick-out option for a previous A&F flagship store in Hong Kong. These year-over-year changes were partially offset ~~by year-over-year decreases in income tax and~~ incentive compensation ~~payments.~~payments and payments related the Company's transformation initiatives, specifically towards marketing and omnichannel experiences in the first quarter of Fiscal 2018.

Investing Activities

~~Cash outflows for investing activities for~~For the thirteen weeks ended May 5, 2018 and April 29, 2017, ~~and April 30, 2016~~cash used for investing activities included capital expenditures of ~~$32.1~~$23.7 million and ~~$26.0~~$32.1 million, respectively, primarily for store updates and new stores, as well as direct-to-consumer and omnichannel capabilities and information technology investments.

Financing Activities

For the thirteen weeks ended ~~April 29, 2017 and April 30, 2016,~~May 5, 2018, cash ~~outflows~~used for financing activities consisted primarily of dividend payments of $13.6 million and ~~$13.5~~the repurchase of approximately 0.8 million ~~respectively.~~

Asshares of A&F’s Common Stock in the open market with a market value of approximately $18.7 million. For the thirteen weeks ended April 29, 2017, ~~A&F had approximately 6.5 million remaining shares available~~cash used for ~~repurchase as part~~financing activities consisted primarily of ~~the A&F Board~~dividend payments of ~~Directors’ previously approved authorization.~~$13.6 million.

FUTURE CASH REQUIREMENTS AND SOURCES OF CASH

The Company’s capital allocation strategy remains to prioritize investments in the business to build on the foundation for sustainable long-term growth. These investments include the continued development of highly differentiated brand offerings and staying at the forefront of customer engagement. In addition, the Company prioritizes returning cash to stockholders through dividends and share repurchases as appropriate. Capital allocation priorities and investments are reviewed by the Company’s Board of Directors considering both liquidity and valuation factors.

To execute on these priorities, the Company relies on excess operating cash flows, which are largely generated in the Fall season, to fund operations throughout the fiscal year and to reinvest in the business to support future growth. The Company also has availability under the Amended ABL Facility as a source of additional funding. Over the next twelve months, the Company’s primary cash requirements will be to fund operating activities, including the acquisition of inventory, and obligations related to compensation, leases, taxes and other operating activities, as well as to fund capital expenditures, marketing initiatives, quarterly dividends to stockholders subject to approval by A&F’s Board of Directors and debt service requirements, including voluntary debt prepayments, or required repayments, if any, based on annual excess cash flows, as defined in the term loan agreement. ~~The Company has availability under the ABL Facility as a source of additional funding.~~

~~The Company expects total~~ ~~capital expenditures to be approximately $100 million~~ ~~for Fiscal 2017, primarily for store updates and new stores, as well as direct-to-consumer and omnichannel and information technology investments to support growth initiatives.~~

The Company may repurchase shares of its Common Stock and, if it were to do so, would anticipate funding such repurchases by utilizing free cash flow generated from operations or proceeds from the Amended ABL Facility. As of May 5, 2018, A&F had the ability to repurchase up to 5.7 million shares as part of the A&F Board of Directors’ previously approved authorization.

Income Taxes

As of ~~April 29, 2017, $289.0~~May 5, 2018, certain foreign subsidiaries have lent approximately $267.2 million to certain U.S. subsidiaries resulting in

$387.7 million of the Company’s ~~$421.4~~$592.0 million of cash and equivalents ~~was~~being held by ~~foreign affiliates.~~U.S. subsidiaries. The Company is not dependent on dividends from its foreign affiliates to fund its U.S. operations or pay dividends to A&F’s stockholders. ~~Unremitted~~As a result of the adoption of a modified territorial system under the Act, future earnings from foreign ~~affiliates~~subsidiaries are generally ~~would become~~not subject to ~~U.S. income~~additional federal tax upon repatriation. Additionally, if ~~remitted as dividends or lent~~funds were to ~~A&F or a~~be legally repatriated to the U.S. ~~affiliate.~~, there could be implications at the state and foreign levels. Because of the complexities associated with the Act, the Company has not fully concluded on its position with respect to reinvestment of foreign earnings and whether its existing international structure for the various jurisdictions is the optimal structure for the future, but expects to complete this assessment in Fiscal 2018.

~~OFF-BALANCE SHEET ARRANGEMENTS~~Capital Expenditures

~~The~~For Fiscal 2018, the Company ~~uses,~~expects capital expenditures to be in the ~~ordinary course~~range of ~~business, stand-by letters of credit under the existing ABL Facility. The Company had $1.8~~$135 million ~~in stand-by letters of credit outstanding~~to $140 million, primarily for store updates and new stores, as ~~of April 29, 2017. The Company has no other off-balance sheet arrangements.~~well as direct-to-consumer and omnichannel capabilities and information technology investments.

2226

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. During the thirteen weeks ended ~~April 29, 2017,~~May 5, 2018, there were no material changes in the contractual obligations as of ~~January 28, 2017,~~February 3, 2018, 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

~~See Note 1, “BASIS OF PRESENTATION--Recent Accounting Pronouncements~~” of the Notes to Condensed Consolidated Financial Statements included in “ITEM 1. FINANCIAL STATEMENTS,” of this Quarterly Report on Form 10-Q for recent accounting pronouncements, including the expected dates of adoption and estimated effects on our Condensed Consolidated Financial Statements.

~~CRITICAL ACCOUNTING POLICIES AND ESTIMATES~~

~~We describe our~~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” of A&F’s Annual Report on Form 10-K for Fiscal ~~2016. We discuss our~~2017. Refer to Note 1, “BASIS OF PRESENTATION--Recent Accounting Pronouncements” of the Notes to Condensed Consolidated Financial Statements included in “ITEM 1. FINANCIAL STATEMENTS (UNAUDITED),” of this Quarterly Report on Form 10-Q for recent accounting pronouncements, including the dates of adoption or expected dates of adoption, as applicable, and estimated effects on the Condensed Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company describes its critical accounting policies and estimates in “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF ~~OPERATIONS”,~~OPERATIONS,” of ~~our~~A&F’s Annual Report on Form 10-K for Fiscal ~~2016.~~2017. There have been no other significant changes in ~~our significant~~critical accounting policies ~~or critical accounting~~and estimates since the end of Fiscal ~~2016.~~2017, except as described in Note 1, “BASIS OF PRESENTATION--Recent Accounting Pronouncements” of the Notes to Condensed Consolidated Financial Statements included in “ITEM 1. FINANCIAL STATEMENTS (UNAUDITED),” of this Quarterly Report on Form 10-Q.

2327

Table of Contents

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

~~The Company cautions~~We caution that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K or made by ~~the Company, its~~us, our management or our spokespeople involve risks and uncertainties and are subject to change based on various ~~important~~ factors, many of which may be beyond ~~the Company’s~~our control. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” ~~“intend,”~~“intend” and similar expressions may identify forward-looking statements. Except as may be required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements.

The following factors, categorized by the primary nature of the associated risk, including the disclosures under the heading “FORWARD-LOOKING STATEMENTS AND RISK FACTORS” in “ITEM 1A. RISK FACTORS” of A&F’s Annual Report on Form 10-K for Fiscal ~~2016, and the disclosures under the heading “ITEM 1A. RISK FACTORS” in Part II of this Quarterly Report on Form 10-Q,~~2017, in some cases have affected and in the future could affect the Company’s financial performance and could cause actual results for Fiscal ~~2017~~2018 and beyond to differ materially from those expressed or implied in any of the forward-looking statements included in this Quarterly Report on Form 10-Q or otherwise made by management:

~~changes~~Macroeconomic and industry risks include:

Changes in global economic and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits, could have a material adverse effect on our business, results of operations and liquidity;

~~our inability~~Failure to anticipate customer demand and changing fashion trends and to manage our inventory commensurately could adversely impact our sales levels and profitability;

~~our~~Our market share may be negatively impacted by increasing competition and pricing pressures from companies with brands or merchandise competitive with ours;

Fluctuations in foreign currency exchange rates could adversely impact our financial condition and results of operations;

Our ability to attract customers to our stores depends, in part, on the success of the shopping malls or area attractions that our stores are located in or around; and,

The impact of war, acts of terrorism or civil unrest could have a material adverse effect on our operating results and financial condition.

Strategic risks include:

The expansion of our direct-to-consumer sales channels and omnichannel initiatives are a significant ~~component~~components of our growth strategy, and the failure to successfully develop our position ~~in these~~across all channels could have an adverse impact on our results of operations;

~~our~~Our international growth strategy and ability to conduct business in international markets may be adversely affected by legal, regulatory, political and economic risks; and,

~~our inability~~Failure to successfully implement our strategic plans could have a negative impact on our growth and ~~profitability;~~profitability.

~~our failure~~

Operational risks include:

Failure to protect our reputation could have a material adverse effect on our brands;

~~our~~Our business could suffer if our information technology systems are disrupted or cease to operate effectively;

weWe may be exposed to risks and costs associated with cyber-attacks, credit card fraud and identity theft that would cause us to incur unexpected expenses and reputation loss;

~~fluctuations~~Our reliance on DCs makes us susceptible to disruptions or adverse conditions affecting our supply chain;

Changes in ~~foreign currency exchange rates could adversely impact our financial condition and results of operations;~~

~~changes in the~~ cost, availability and quality of raw materials, labor, transportation, and trade relations could cause manufacturing delays and increase our costs;

weWe depend upon independent third parties for the manufacture and delivery of all our merchandise, and a disruption of the manufacture or delivery of our merchandise could result in lost sales and could increase our costs;

~~our ability to attract customers to our stores depends, in part, on the success of the shopping malls or area attractions that our stores are located in or around;~~

weWe rely on the experience and skills of our senior executive officers and associates, the loss of whom could have a material adverse effect on our business; and,

Extreme weather conditions, including natural disasters, pandemic disease and other unexpected events, could negatively impact our ~~reliance on DCs makes us susceptible~~facilities, systems and stores, as well as the facilities and systems of our vendors and manufacturers, which could result in an interruption to ~~disruptions or adverse conditions affecting~~ our ~~supply chain;~~business and adversely affect our operating results.

Table of Contents

Legal, tax, regulatory and compliance risks include:

Fluctuations in our tax obligations and effective tax rate may result in volatility in our results of operations;

Our litigation exposure could have a material adverse effect on our financial condition and results of operations;

~~our inability or failure~~Failure to adequately protect our trademarks could have a negative impact on our brand image and limit our ability to penetrate new markets;

~~fluctuations in our tax obligations and effective tax rate may result in volatility in our operating results;~~

~~extreme weather conditions and the seasonal nature of our business may cause net sales to fluctuate and negatively impact our results of operations;~~

our facilities, systems and stores, as well as the facilities and systems of our vendors and manufacturers, are vulnerable to natural disasters, pandemic disease and other unexpected events, any of which could result in an interruption to our business and adversely affect our operating results;

~~the impact of war or acts of terrorism could have a material adverse effect on our operating results and financial condition;~~

~~changes~~Changes in the regulatory or compliance landscape and compliance with changing regulations for accounting, corporate governance and public disclosure could adversely affect our business, ~~and~~ results of ~~operations;~~operations and reported financial results; and,

~~our~~Our Asset-Based Revolving Credit Agreement and our Term Loan Agreement include restrictive covenants that limit our flexibility in operating our ~~business;~~business.

The factors listed above are not our only risks. Additional risks may arise and

~~compliance with changing regulations and standards for accounting, corporate governance and public disclosure~~ current evaluations of risks may change, which could ~~adversely affect~~lead to material, adverse effects on our business, operating results ~~of operations~~ and ~~reported~~ financial ~~results.~~

~~This list of important factors is not exclusive.~~

~~Table of Contents~~

condition.

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. 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 even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Investment Securities

The ~~irrevocable rabbi trust (the “Rabbi Trust”) is intended~~Rabbi Trust includes amounts to ~~be used as a source of funds to match respective~~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 $0.8 million for each of the thirteen weeks ended May 5, 2018 and April 29, 2017, ~~and April 30, 2016, respectively,~~ which are recorded in interest expense, net on the Condensed Consolidated Statements of Operations and Comprehensive Loss.

The Rabbi Trust assets are included in other assets on the Condensed Consolidated Balance Sheets as of ~~April 29, 2017~~May 5, 2018 and ~~January 28, 2017,~~February 3, 2018, and are restricted in their use as noted above.

Interest Rate Risks

~~The~~As of May 5, 2018, the Company has approximately ~~$268.3~~$253.3 million in gross borrowings outstanding under its term loan facility (the “Term Loan Facility”) and no borrowings outstanding under its senior secured revolving credit facility (the ~~“ABL~~“Amended ABL Facility” and, together with the Term Loan Facility, the ~~“2014 Credit~~“Credit Facilities”). The ~~2014~~ Credit Facilities carry interest rates that are tied to LIBOR, or an alternate base rate, plus a margin. The interest rate on the Term Loan Facility has a 100 basis point LIBOR floor, and assuming no changes in the Company’s financial structure as it stands, an increase in market interest rates of 100 basis points would increase annual interest expense by approximately ~~$2.7~~$2.6 million. This hypothetical analysis for the ~~fifty-three~~fifty-two weeks ending February ~~3, 2018~~2, 2019 may differ from the actual change in interest expense due to ~~various conditions which may result in~~potential changes in interest rates or gross borrowings outstanding under the Company’s ~~2014~~ Credit Facilities.

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 revenues, expenses, assets and liabilities 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 currency fluctuation increases as international expansion increases.

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 sale of inventory between subsidiaries and ~~foreign-currency-denominated~~foreign-currency-

Table of Contents

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 forward contracts, to mitigate the impact of foreign currency gains or losses. The Company does not use forward contracts to engage in currency speculation. All outstanding foreign currency exchange forward contracts are recorded at fair value at the end of each fiscal period.

~~Table of Contents~~

The fair value of outstanding foreign currency exchange forward contracts included in other current assets was ~~$2.4 million and $6.0~~$6.1 million as of ~~April 29, 2017~~May 5, 2018 and ~~January 28, 2017, respectively.~~insignificant as of February 3, 2018. The fair value of outstanding foreign currency exchange forward contracts included in ~~accrued expenses~~other liabilities was $1.2 million and ~~$0.5~~$9.1 million as of ~~April 29, 2017~~May 5, 2018 and ~~January 28, 2017,~~February 3, 2018, respectively. Foreign currency exchange forward contracts are sensitive to changes in foreign currency exchange rates. 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. The results would decrease derivative contract fair values by approximately ~~$14.8~~$28.7 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 value would be largely offset by the net change in fair values of the underlying hedged items.


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 Securities Exchange Act of 1934, as amended (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 the principal executive officer and the 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)~~Officer of A&F) and the ~~Executive~~Senior Vice President ~~Chief Operating Officer~~ and Chief Financial 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, 2017.~~May 5, 2018. The Chief Executive Officer of A&F (in such individual’s capacity as the Principal Executive Officer of A&F) and the ~~Executive~~Senior Vice President ~~Chief Operating Officer~~ 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, 2017,~~May 5, 2018, the end of the period covered by this Quarterly Report on Form 10-Q.

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) that occurred during A&F’s fiscal quarter ended ~~April 29, 2017~~May 5, 2018 that materially affected, or are reasonably likely to materially affect, A&F’s internal control over financial reporting.

2630

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. Legal costs incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, and the Company establishes ~~reserves~~estimated liabilities for the outcome of litigation where losses are deemed probable and reasonably estimable. The Company’s assessment of the current exposure could change in the event of the discovery of additional facts. As of May 5, 2018, the Company had accrued charges of approximately $23 million for certain legal contingencies, which are classified within other current liabilities on the Condensed Consolidated Balance Sheet included in “ITEM 1. FINANCIAL STATEMENTS (UNAUDITED),” of this Quarterly Report on Form 10-Q. Actual liabilities may ~~exceed~~differ from the amounts ~~reserved,~~recorded, and there can be no assurance that final resolution of these matters will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows. There are certain claims and legal proceedings pending against the Company for which accruals have not been established.


ITEM 1A.	RISK FACTORS

The ~~Company's~~Company’s risk factors as of ~~April 29, 2017~~May 5, 2018 have not changed materially from those disclosed in Part I, “ITEM 1A. RISK FACTORS” of A~~&F's~~&F’s Annual Report on Form 10-K for Fiscal ~~2016.~~2017.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no sales of equity securities during the first quarter of Fiscal ~~2017~~2018 that were not registered under the Securities Act of 1933.

The following table provides information regarding the purchase of shares of Common Stock of A&F made by or on behalf of A&F or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during each fiscal month of the thirteen weeks ended ~~April 29, 2017:~~May 5, 2018:

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 of Shares that May Yet Be Purchased under the Plans or Programs ⁽³⁾
January 29, 2017 through February 25, 2017 1,032
$ 12.07
—
6,503,656
February 26, 2017 through April 1, 2017 150,735
$ 11.79
—
6,503,656
April 2, 2017 through April 29, 2017 2,264
$ 11.40
—
6,503,656
Total 154,031
$ 11.79
—
6,503,656



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 of Shares that May Yet Be Purchased under the Plans or Programs ⁽³⁾
February 4, 2018 through March 3, 2018	5,125	$	21.79	—	6,503,656
March 4, 2018 through April 7, 2018	881,930	$	23.50	675,962	5,827,694
April 8, 2018 through May 5, 2018	103,821	$	26.67	102,200	5,725,494
Total	990,876	$	23.81	778,162	5,725,494


⁽¹⁾	~~All~~212,714 of the ~~154,031~~ shares of A&F’s Common Stock purchased during the thirteen weeks ended ~~April 29, 2017~~May 5, 2018 represented shares which were withheld for tax payments due upon the exercise of employee stock appreciation rights and vesting of employee restricted stock units.


⁽²⁾	No778,162 shares of A&F’s Common Stock were repurchased during the thirteen weeks ended ~~April 29, 2017~~May 5, 2018 pursuant to A&F’s publicly announced stock repurchase authorization. On August 14, 2012, A&F’s Board of Directors authorized the repurchase of 10.0 million shares of A&F’s Common Stock, which was announced on August 15, 2012.


⁽³⁾	The number shown represents, as of the end of each period, the maximum number of shares of A&F’s 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 market conditions.

2731

Table of Contents

ITEM 6. EXHIBITS



Exhibit No.	Document
~~10.1~~3.1	~~Form~~ Certificate regarding Adoption of ~~Agreement entered into between~~Amendments to Section 2.04 of Amended and Restated Bylaws of Abercrombie & Fitch ~~Management~~ Co. ~~and each~~by Board of ~~Joanne C. Crevoiserat and Fran Horowitz as~~Directors of ~~May 10, 2017, the execution date by~~ Abercrombie & Fitch ~~Management~~ Co., on February 23, 2018, incorporated herein by reference to Exhibit ~~10.1~~3.1 to the Current Report on Form 8-K of Abercrombie & Fitch Co. dated and filed ~~on May 12, 2017 (SEC File~~February 27, 2018 (File No. 001-12107).
~~10.2~~3.2	~~Form~~ Amended and Restated Bylaws of ~~Agreement entered into between~~ Abercrombie & Fitch ~~Management~~ Co. ~~and each~~reflecting amendments through the date of ~~Kristin Scott, Stacia Andersen and Robert E. Bostrom as of May 10, 2017, the execution date by Abercrombie & Fitch Management Co.,~~this Quarterly Report on Form 10-Q, incorporated herein by reference to Exhibit ~~10.2~~3.10 to the ~~Current~~Annual Report on Form ~~8-K~~10-K of Abercrombie & Fitch Co. ~~dated and filed on May 12, 2017 (SEC File~~for the fiscal year ended February 3, 2018 (File No. 001-12107).
~~10.3~~10.1	Form of ~~Director and Officer Indemnification~~Performance Share Award Agreement ~~entered into by~~used to evidence the grant of performance shares to associates (employees) of Abercrombie & Fitch Co. ~~with directors~~ and ~~officers of international~~its subsidiaries ~~and other key individuals~~under the Abercrombie & Fitch Co. 2016 Long-Term Incentive Plan for Associates on or after May 11, 2017.*March 27, 2018, incorporated herein by reference to Exhibit 10.67 to the Annual Report on Form 10-K of Abercrombie & Fitch Co. for the fiscal year ended February 3, 2018 (File No. 001-12107).
~~10.4~~10.2	Summary of Compensation Structure for Non-Associate Directors of Abercrombie & Fitch Co. for Fiscal ~~2017.~~2018.*
~~10.5~~10.3	Summary of Terms of the Annual Restricted Stock Unit Grants made and to be made to the Non-Associate Directors of Abercrombie & Fitch Co. under the Abercrombie & Fitch Co. 2016 Long-Term Incentive Plan for Directors in Fiscal ~~2017.~~2018.*
10.4	Agreement entered into between Abercrombie & Fitch Co. and Arthur C. Martinez, as of April 2, 2018 (the execution date by Mr. Martinez)*
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~~Senior Vice President ~~Chief Operating Officer~~ 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 (Principal Executive Officer) and ~~Executive~~Senior Vice President ~~Chief Operating Officer~~ and Chief Financial Officer (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	The following materials from Abercrombie & Fitch Co.’s Quarterly Report on Form 10-Q for the quarterly period ended ~~April 29, 2017,~~May 5, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations and Comprehensive Loss for the Thirteen Weeks Ended May 5, 2018 and April 29, ~~2017 and April 30, 2016;~~2017; (ii) Condensed Consolidated Balance Sheets at ~~April 29, 2017~~May 5, 2018 and ~~January 28, 2017;~~February 3, 2018; (iii) Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks Ended May 5, 2018 and April 29, ~~2017 and April 30, 2016;~~2017; and (iv) Notes to Condensed Consolidated Financial Statements.*


*	Filed herewith.


**	Furnished herewith.

2832

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, 2017~~8, 2018	By	/s/ ~~Joanne C. Crevoiserat~~Scott Lipesky
		~~Joanne C. Crevoiserat~~Scott Lipesky
		~~Executive~~Senior Vice President ~~Chief Operating Officer~~ and Chief Financial Officer (Principal Financial Officer, Principal Accounting Officer and Authorized Officer)

2933

~~Table of Contents~~

~~EXHIBIT INDEX~~



~~Exhibit No.~~	~~Document~~
~~10.1~~	Form of Agreement entered into between Abercrombie & Fitch Management Co. and each of Joanne C. Crevoiserat and Fran Horowitz as of May 10, 2017, the execution date by Abercrombie & Fitch Management Co., incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Abercrombie & Fitch Co. dated and filed on May 12, 2017 (SEC File No. 001-12107).
~~10.2~~	Form of Agreement entered into between Abercrombie & Fitch Management Co. and each of Kristin Scott, Stacia Andersen and Robert E. Bostrom as of May 10, 2017, the execution date by Abercrombie & Fitch Management Co., incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Abercrombie & Fitch Co. dated and filed on May 12, 2017 (SEC File No. 001-12107).
~~10.3~~	Form of Director and Officer Indemnification Agreement entered into by Abercrombie & Fitch Co. with directors and officers of international subsidiaries and other key individuals on or after May 11, 2017.*
~~10.4~~	Summary of Compensation Structure for Non-Associate Directors of Abercrombie & Fitch Co. for Fiscal 2017.*
~~10.5~~	Summary of Terms of the Annual Restricted Stock Unit Grants made and to be made to the Non-Associate Directors of Abercrombie & Fitch Co. under the Abercrombie & Fitch Co. 2016 Long-Term Incentive Plan for Directors in Fiscal 2017.*
~~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, Chief Operating Officer 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 (Principal Executive Officer) and Executive Vice President, Chief Operating Officer and Chief Financial Officer (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~~	The following materials from Abercrombie & Fitch Co.’s Quarterly Report on Form 10-Q for the quarterly period ended April 29, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations and Comprehensive Loss for the Thirteen Weeks Ended April 29, 2017 and April 30, 2016; (ii) Condensed Consolidated Balance Sheets at April 29, 2017 and January 28, 2017; (iii) Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks Ended April 29, 2017 and April 30, 2016; and (iv) Notes to Condensed Consolidated Financial Statements.*


*	~~Filed herewith.~~


**	~~Furnished herewith.~~



		Page No.
Part I

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Operations and Comprehensive Loss	3

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Cash Flows	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1618

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2529

Item 4.	Controls and Procedures	2630

Part II

Item 1.	Legal Proceedings	2731

Item 1A.	Risk Factors	2731

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2731

Item 6.	Exhibits	2832

	Signatures	33



	Thirteen Weeks Ended April 30, 2016
(in thousands)	Foreign Currency Translation Adjustment			Unrealized Gain (Loss) on Derivative Financial Instruments			Total
Beginning balance at January 30, 2016	$	(119,196	)	$	4,577		$	(114,619	)
Other comprehensive income (loss) before reclassifications	25,660			(9,382		)	16,278
Reclassified from accumulated other comprehensive loss ⁽²⁾	—			(2,305		)	(2,305		)
Tax effect	(5,235		)	1,732			(3,503		)
Other comprehensive income (loss)	20,425			(9,955		)	10,470
Ending balance at April 30, 2016	$	(98,771	)	$	(5,378	)	$	(104,149	)