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 thirty-nine weeks ended November 2, 2024 and October 28, 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 third quarter of Fiscal 2024, net sales increased 14% as compared to the third quarter of Fiscal 2023. The increase was primarily attributable to a high-single digit growth in unit volume from traffic growth in comparable company owned and operated stores and digital channels. Mid-single digit increase in average unit retail (“AUR”) from lower promotional activity and category mix into higher ticket items also contributed to the increase in net sales. The increase was partially offset by approximately $10 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 16%, as compared to the third quarter of Fiscal 2023.

•Net sales growth in the Americas region of 14%. The increase was attributable to both higher AUR from lower promotional activity and category mix into higher ticket items and direct channel unit volume growth from increased traffic and transactions in company owned and operated stores and digital channels.

•Net sales growth in the EMEA region of 15%. The increase was attributable to both higher AUR from lower promotional activity and category mix into higher ticket items and unit volume growth from increased traffic and transactions in company owned and operated stores and digital channels.

•In the APAC region net sales grew 32% and 16% on a comparable sales basis. In the third quarter, APAC net sales growth had an outsized benefit relative to total company from the calendar shift of the 53rd selling week. This third quarter benefit will be offset in the fourth quarter. Comparable sales growth led by high unit sales across company owned and operated stores and digital channels.

For the year-to-date period of Fiscal 2024, net sales increased 19%, 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 $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 year-to-date period of Fiscal 2023.

•Net sales growth in the Americas region of 20% and 18% on a comparable basis. 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 17% on both a reported and comparable sales basis. 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 contributed to the increase in net sales.

•In the APAC region net sales grew 15% and 20% 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 negative impacts on net sales growth.

The Company’s net sales by brand for the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 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 third quarter of Fiscal 2024, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased by approximately 20 basis points, as compared to the third quarter of Fiscal 2023. The percentage decline was primarily attributable to cost of sales leverage from a higher AUR on reduced promotions, partially offset by higher freight costs compared to the third 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 250 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 third quarter of Fiscal 2024, stores and distribution expense increased by $35 million compared to the third quarter of 2023. Stores and distribution expense as a percentage of net sales decreased 160 basis points, as compared to the third quarter of Fiscal 2023. The decrease in rate was primarily driven by expense leverage from higher net sales, including approximately 110 basis points in stores expense, primarily relating to store occupancy and store payroll, and approximately 60 basis points in distribution center and order fulfillment costs as compared to the third quarter of Fiscal 2023.

For the year-to-date period of Fiscal 2024, stores and distribution expense increased by $108 million and decreased 280 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 from higher net sales, including approximately 250 basis points in stores expense, primarily relating to store occupancy and store payroll, and 30 basis points in distribution center and order fulfillment costs compared to the year-to-date period of Fiscal 2023.

Marketing, general and administrative expense

For the third quarter of Fiscal 2024, marketing, general and administrative expense increased by $27 million compared to the third quarter of Fiscal 2023. Marketing, general and administrative expense as a percentage of net sales increased 30 basis points, as compared to the third quarter of Fiscal 2023. The increase in expense rate was primarily driven by an 80 basis point increase in marketing expense, primarily due to media campaigns and content, partially offset by 50 basis points of other general and administrative costs primarily relating to payroll expense leverage from higher net sales.

For the year-to-date period of Fiscal 2024, marketing, general and administration expense increased by $89 million and increased 10 basis points as a percentage of net sales, as compared to the year-to-date period of Fiscal 2023, with a 50 basis point increase in marketing expense, primarily due to media campaigns and content, partially offset by a 40 basis point decrease in other general and administrative costs primarily relating to payroll expense leverage from higher net sales.

Other operating (income) loss, net

Operating income

(1) Segment operating income as a percentage of net sales is calculated by attributing the segment’s operating income with the respective net sales in the segment.

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

For the third quarter of Fiscal 2024, operating income increased by $41 million, or 170 basis points, as a percentage of net sales, as compared to the third quarter of Fiscal 2023.

•Operating income for the Americas region increased $47 million or 120 basis points as a percentage of region net sales, as compared to the third quarter of Fiscal 2023. The increase as a percent of sales primarily relates to positive comparable sales of 16%, 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 $1 million and decreased 120 basis points as a percentage of region net sales, as compared to the third quarter of Fiscal 2023. The decrease as a percent of net sales is primarily attributed to higher freight costs and increased marketing expense, partially offset by expense leverage from comparable sales growth of 13%.

•Operating (loss) for the APAC region increased by $(1) million or 40 basis points as a percentage of region net sales, as compared to the third quarter of Fiscal 2023. The loss was impacted by store impairments taken during the quarter, which more than offset the expense leverage from comparable sales growth of 16%.

For the year-to-date period of Fiscal 2024, operating income increased by $223 million, or 510 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 $241 million or 460 basis points as a percentage of region 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 18%, relating to higher unit volume, increased AUR on reduced promotions, and expense leverage relating to payroll and occupancy expenses.

•Operating income for EMEA increased $35 million or 490 basis points as a percentage of region 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 17%, 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 region net sales as compared to the year-to-date period of Fiscal 2023. The loss was impacted by store impairments and marketing investments, which more than offset the expense leverage from comparable sales growth of 20%.

Interest (income) expense, net

For the third quarter of Fiscal 2024, interest (income) expense, net increased $9.4 million, as compared to the third quarter of Fiscal 2023. The increase in interest income was due to the increased balance on time deposits and money market accounts compared to the third quarter of Fiscal 2023. Additionally, interest expense decreased compared to the third quarter of Fiscal 2023 as result of the repurchases in late Fiscal 2023 and Fiscal 2024 and redemption of the remaining outstanding Senior Secured Notes on July 15, 2024.

For the year-to-date period of Fiscal 2024, interest (income) expense, net increased $24.2 million, as compared to the year-to-date period of Fiscal 2023. The increase was a result of higher interest income due to the increased balance on time deposits and money market accounts. Additionally, interest expense decreased compared to the year-to-date period Fiscal 2023 as result of the repurchases in late Fiscal 2023 and Fiscal 2024 and redemption of the remaining outstanding Senior Secured Notes on July 15, 2024.

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 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.