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 and twenty-six weeks ended August 3, 2024 and July 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 second quarter of Fiscal 2024, net sales increased 21% as compared to the second quarter of Fiscal 2023. The increase was primarily attributable to a double-digit increase in average unit retail (“AUR”) from lower promotional activity and category mix into higher ticket items. Mid-single digit growth in unit volume also contributed to the increase in net sales, following increases in traffic and transactions in company owned and operated channels. Additionally, there was a benefit of approximately $30 million due to the timing of sales volume based on the impact of the calendar shift in Fiscal 2024 due to the 53rd selling week in Fiscal 2023. The year-over-year increase in net sales reflects positive comparable sales of 18%, as compared to the second quarter of Fiscal 2023.

•Net sales growth in the Americas region of 23%. The increase was attributable to a higher AUR from lower promotional activity and category mix into higher ticket items. Growth in unit volume as a result of increased traffic and transactions in company owned and operated stores and digital channels also contributed to the increase in net sales.

•Net sales growth in the EMEA region of 16%. The increase was attributable to a higher AUR from lower promotional activity and category mix into higher ticket items. Growth in unit volume as a result of increased traffic and transactions in company owned and operated stores and digital channels also contributed to the increase in net sales.

•In the APAC region net sales grew 3% and 21% on a comparable sales basis. Comparable sales growth percentage is higher than net sales growth percentage, as comparable sales excludes the impact of store closures during the period and the effects of foreign currency, both of which had a negative impact on net sales growth.

For the year-to-date period of Fiscal 2024, net sales increased 22%, as compared to the year-to-date period of Fiscal 2023. The increase was primarily attributable to a double-digit increase in AUR from lower promotional activity and category mix into higher ticket items. Mid-single digit growth in unit volume also contributed to the increase in net sales, following increases in traffic and transactions in company owned and operated channels. Additionally, there was a benefit of approximately $40 million due to the timing of sales volume based on the impact of the calendar shift in Fiscal 2024 due to the 53rd selling week in Fiscal 2023. The year-over-year increase in net sales reflects positive comparable sales of 19%, as compared to the year-to-date period of Fiscal 2023.

•Net sales growth in the Americas region of 23%. The increase was attributable to a higher AUR from lower promotional activity and category mix into higher ticket items. Growth in unit volume as a result of increased traffic and transactions in company owned and operated stores and digital channels also contributed to the increase in net sales.

•Net sales growth in the EMEA region of 18%. The increase was attributable to a higher AUR from lower promotional activity and category mix into higher ticket items. Growth in unit volume as a result of increased traffic and transactions in company owned and operated stores and digital channels also contributed to the increase in net sales.

•In the APAC region net sales grew 7% and 21% on a comparable sales basis. Comparable sales growth percentage is higher than net sales growth percentage, as comparable sales excludes the impact of store closures during the period and the effects of foreign currency, both of which had a negative impacts on net sales growth.

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

(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 second quarter of Fiscal 2024, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased by approximately 240 basis points, as compared to the second quarter of Fiscal 2023. The percentage decline was primarily attributable to cost of sales leverage from a higher AUR on reduced promotions, as well as a benefit in product costs, as certain raw material prices have declined. These benefits were partially offset by higher freight costs compared to the second quarter of Fiscal 2023.

For the year-to-date period of Fiscal 2024, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased by approximately 380 basis points as compared to the year-to-date period of Fiscal 2023. The percentage decline was primarily attributable to cost of sales leverage from a higher AUR on reduced promotions, as well as a benefit in product costs, as certain raw material prices have declined. These benefits were partially offset by higher freight costs compared to the year-to-date period of Fiscal 2023.

Gross profit, exclusive of depreciation and amortization

Stores and distribution expense

For the second quarter of Fiscal 2024, stores and distribution expense increased by $38 million compared to the second quarter of 2023. Stores and distribution expense as a percentage of net sales decreased 330 basis points, as compared to the second quarter of Fiscal 2023. The decrease in rate was primarily driven by expense leverage as a result of net sales growth, including approximately 300 basis points in stores expense, primarily relating to store occupancy and store payroll, and 30 basis points in distribution center and order fulfillment costs as compared to the second quarter of Fiscal 2023.

For the year-to-date period of Fiscal 2024, stores and distribution expense increased by $73 million and decreased 350 basis points, as a percentage of net sales, as compared to the year-to-date period of Fiscal 2023. The decrease as a percent of net sales was primarily driven by expense leverage as a result of net sales growth, including approximately 340 basis points in stores expense, primarily relating to store occupancy and store payroll, and 20 basis points in distribution center costs compared to the year-to-date period of Fiscal 2023.

Marketing, general and administrative expense

For the second quarter of Fiscal 2024, marketing, general and administrative expense increased by $26 million compared to the second quarter of Fiscal 2023. Marketing, general and administrative expense as a percentage of net sales decreased 40 basis points, as compared to the second quarter of Fiscal 2023. The decrease in rate was primarily driven by expense leverage as a result of net sales growth, including approximately 40 basis points in compensation expense slightly offset by a 30 basis point increase in marketing expense.

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

Other operating income, net

Operating income

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

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

•Operating income for the Americas region increased $98 million or 630 basis points as a percentage of net sales, as compared to the second quarter of Fiscal 2023. The increase as a percent of sales primarily relates to positive comparable sales of 18%, relating to higher unit volume, increased AUR on reduced promotions, and expense leverage relating to payroll and occupancy expenses.

•Operating income for the EMEA region increased $8 million or 170 basis points as a percentage of net sales, as compared to the second quarter of Fiscal 2023. The increase as a percent of sales primarily relates to positive comparable sales of 17%, relating to higher unit volume, increased AUR on reduced promotions, and expense leverage relating to payroll and occupancy expenses.

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

For the year-to-date period of Fiscal 2024, operating income increased by $182 million, or 720 basis points, as a percentage of net sales as compared to the year-to-date period of Fiscal 2023.

•Operating income for the Americas increased $194 million or 680 basis points as a percentage of net sales as compared to the year-to-date period of Fiscal 2023. The increase as a percent of sales primarily relates to positive comparable sales of 19%, relating to higher unit volume, increased AUR on reduced promotions, and expense leverage relating to payroll and occupancy expenses.

•Operating income for EMEA increased $34 million or 800 basis points as a percentage of net sales as compared to the year-to-date period of Fiscal 2023. The increase as a percent of sales primarily relates to positive comparable sales of 19%, relating to higher unit volume, increased AUR on reduced promotions, and expense leverage relating to payroll and occupancy expenses.

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

Interest (income) expense, net

For the second quarter of Fiscal 2024, interest (income) expense, net increased $6.3 million, as compared to the second quarter of Fiscal 2023. The increase was a result of an increase in interest income due to the increase in balance and rates received on deposits and money market accounts as well as lower borrowings due to repurchases of Senior Secured Notes in the open market.

For the year-to-date period of Fiscal 2024, interest expense, net increased $14.8 million, as compared to the year-to-date period of Fiscal 2023. The increase was a result of higher interest income due to the increase in balance and rates received on deposits and money market accounts as well as lower borrowings due to repurchases of Senior Secured Notes in the open market.

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

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