ABERCROMBIE FITCH CO DE

RESULTS OF OPERATIONS

The estimated basis point (“BPS”) change disclosed throughout this Results of Operations section has been rounded based on the change in the percentage of net sales.

Net sales

Net sales by segment are presented by attributing revenues on the basis of the segment that fulfills the order. The Company’s net sales by reportable segment for the thirteen weeks ended May 4, 2024 and April 29, 2023 were as follows:

(1)Comparable sales are calculated on a constant currency basis. Refer to“NON-GAAP FINANCIAL MEASURES,” for further details on the comparable sales calculation.

For the first quarter of Fiscal 2024, net sales increased 22%, as compared to the first quarter of Fiscal 2023, primarily due to broad-based net sales growth across segments, mainly driven by a higher AUR as a result of lower promotional activity. The year-over-year increase in net sales reflects a positive comparable sales of 21%, as compared to the first quarter of Fiscal 2023, with double-digit comparable sales growth in the Americas, EMEA and APAC segments.

The Company’s net sales by brand for the thirteen weeks ended May 4, 2024 and April 29, 2023 were as follows:

(1)Comparable sales are calculated on a constant currency basis. Refer to“NON-GAAP FINANCIAL MEASURES,” for further details on the comparable sales calculation.

(2)Includes Abercrombie & Fitch and abercrombie kids.

(3)Includes Hollister and Gilly Hicks.

Cost of sales, exclusive of depreciation and amortization

For the first quarter of Fiscal 2024, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased by approximately 540 basis points, as compared to the first quarter of Fiscal 2023. The year-over-year percentage decline was primarily attributable to lower cotton and raw material costs as well as increased average unit retail. Year-over-year decreases in the Americas and EMEA region were primarily driven by lower discounts and clearance selling. The APAC region also benefited from lower raw material costs, partially offset by the impact of changes in foreign currency.

Gross profit, exclusive of depreciation and amortization

Stores and distribution expense

For the first quarter of Fiscal 2024, stores and distribution expense, as a percentage of net sales decreased, as compared to the first quarter of Fiscal 2023. The decrease was primarily driven by expense leverage as a result of net sales growth, slightly offset with increases in distribution center and order fulfillment costs as compared to the first quarter of 2023.

Marketing, general and administrative expense

For the first quarter of Fiscal 2024, marketing, general and administrative expense, as a percentage of net sales, increased 30 basis points, as compared to the first quarter of Fiscal 2023, primarily driven by an increase in marketing expense and investments in technology and people.

Other operating income, net

Operating income

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

Interest (income) expense, net

For the first quarter of Fiscal 2024, interest (income) expense, net decreased $8.5 million, as compared to the first quarter of Fiscal 2023, as a result of lower borrowings due to the purchase of Senior Secured Notes as well as an increase in interest income due to the increase in balance and rates received on deposits and money market accounts.

Income tax expense

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

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

Refer to Note 9, “INCOME TAXES.”

Net income attributable to A&F

(1)Excluded items presented above under “Operating income,” and “Income tax expense”

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

Net income per share attributable to A&F

(1)Excluded items presented above under “Operating income,” and “Income tax expense.”

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

EBITDA and adjusted EBITDA

(1)EBITDA and Adjusted EBITDA are supplemental financial measures that are not defined or prepared in accordance with GAAP. EBITDA is defined as net income before interest, income taxes and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for asset impairment.