ABERCROMBIE & FITCH CO /DE/

Overview

The Company’s capital allocation strategy and priorities are reviewed by A&F’s Board of Directors quarterly considering both liquidity and valuation factors. The Company believes that it will have adequate liquidity to fund operating activities for the next twelve months. The Company monitors financing market conditions and may in the future determine whether and when to repurchase shares of its Common Stock. For a discussion of the Company’s share repurchase activity, please see below under“Share Repurchases.”

Primary Sources and Uses of Cash

The Company’s business has two principal selling seasons: Spring and Fall. The Company generally experiences its greatest sales activity during the Fall season, due to the back-to-school and holiday sales periods. The Company relies on excess operating cash flows, which are largely generated in Fall, to fund operations throughout the fiscal year and to reinvest in the business to support future growth. The Company also has the ABL Facility available as a source of additional funding, which is described further below under “Credit Facility.”

Over the next twelve months, the Company expects its primary cash requirements to be directed towards prioritizing investments in the business and continuing to fund operating activities, including the acquisition of inventory, and obligations related to compensation, marketing, data and technology, leases and any lease buyouts or modifications it may exercise, taxes and other operating activities. In addition, management continuously evaluates potential opportunities to strategically deploy excess cash and/or deleverage the balance sheet, in consideration on various factors, such as market and business conditions, and the Company’s ability to accelerate investments in the business. Such opportunities may include, but are not limited to, share repurchases.

When evaluating opportunities for investments in the business, management considers alignment with initiatives that position the business for sustainable long-term growth that align with its strategic pillars as described within “ITEM 1. BUSINESS - STRATEGY AND KEY BUSINESS PRIORITIES.” Examples of potential investment opportunities include, but are not limited to, new store experiences, and investments in the Company’s digital and omnichannel initiatives. Historically, the Company has utilized free cash flow generated from operations to fund any discretionary capital expenditures, which have been prioritized towards new store experiences, as well as marketing, digital and omnichannel investments, information technology, and other projects. For Fiscal 2024, the Company used $182.9 million towards capital expenditures, up from $157.8 million of capital expenditures in Fiscal 2023. Total capital expenditures for Fiscal 2025 are expected to be approximately $200 million.

Share Repurchases

In November 2021, A&F’s Board of Directors approved a $500 million share repurchase authorization (the “2021 Authorization”). During Fiscal 2024, the Company repurchased $230 million, or 1.6 million shares, of its Common Stock pursuant to the 2021 Authorization. On March 5, 2025, the Company announced that A&F’s Board of Directors approved a new $1.3 billion share repurchase authorization program (the “2025 Authorization”). The 2025 Authorization has no expiration date. In addition, the 2025 Authorization replaced the 2021 Authorization, and shares may no longer be repurchased pursuant to the 2021 Authorization.

Historically, the Company has repurchased shares of its Common Stock from time to time, which repurchases are dependent on excess liquidity, market conditions, and business conditions, with the objectives of returning excess cash to shareholders and offsetting dilution from issuances of Common Stock associated with the vesting of restricted stock units. Shares may be repurchased in the open market or in private transactions in such manner as be deemed advisable from time to time (including, without limitation, pursuant to accelerated share repurchase programs, one or more trading plans established in accordance with Rule 10b5-1 of the Exchange Act, or any other method deemed advisable) and may be discontinued at any time. Refer to “ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES” of this Annual Report on Form 10-K for additional information regarding the Company’s publicly announced share repurchase authorization programs.

Senior Secured Notes

On July 15, 2024 (the “Redemption Date”), Abercrombie & Fitch Management Co (“A&F Management”) redeemed all of its outstanding 8.75% Senior Secured Notes due in 2025 (the “Senior Secured Notes”), which had an aggregate principal amount of $214 million, pursuant to the terms of the indenture governing the Senior Secured Notes, at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest to, but excluding, the Redemption Date. As of the Redemption Date, the Senior Secured Notes were no longer deemed outstanding and interest on the Senior Secured Notes ceased to accrue.

Credit Facility

On August 2, 2024, A&F, as parent and a guarantor, A&F Management, as lead borrower, and certain of A&F’s direct and indirect wholly-owned subsidiaries, as additional borrowers and guarantors, entered into the Second Amendment to the Amended and Restated Credit Agreement (the “Second Amendment”), together with the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent for the lenders. The Second Amendment amended the Amended and Restated Credit Agreement, dated as of April 29, 2021 (the “ABL Credit Agreement”), to, among other things (as described in greater detail below), provide for a $500 million senior secured asset-based revolving credit facility (the “ABL Facility”). The Company incurred customary fees and expenses in connection with the entry into the Second Amendment.

The Second Amendment amended the ABL Credit Agreement to, among other things:

•increase the aggregate commitments thereunder from $400 million to $500 million;

•establish a $100 million sub-facility for the benefit of Abfico Netherlands Distribution B.V. (“Abfico”) and AFH Stores UK Limited (“AFH UK”) that is (i) secured by a first priority security interest in all assets (subject to specified exclusions) of each of Abfico and AFH UK, (ii) guaranteed by A&F and certain of its domestic direct and indirect wholly-owned subsidiaries, and (iii) subject to a borrowing base as described therein;

•extend the maturity date from April 29, 2026 to August 2, 2029;

•increase the letter of credit sub-limit from $50 million to $62.5 million;

•decrease the swing line availability from $50 million to $30 million;

•decrease the unused line fee from a variable rate of 25 basis points to 37.5 basis points to a flat rate of 25 basis points; and

•increase pricing of the interest rate margin applicable to borrowings as follows:

•from 1.25% to 1.50% when average availability is greater than or equal to 50% of the Loan Cap (as defined in the Second Amendment); and

•from 1.50% to 1.75% when average availability is less than 50% of the Loan Cap.

The Company did not have any borrowings outstanding under the ABL Facility as of February 1, 2025 or as of February 3, 2024.

Details regarding the remaining borrowing capacity under the ABL Facility as of February 1, 2025 follow:

(1)Under the ABL Facility, the Company must maintain excess availability equal to the greater of 10% of the Loan Cap or $36 million.

Refer to Note 12,“BORROWINGS,” for additional information.

Income Taxes

The Company’s earnings and profits from its foreign subsidiaries could be repatriated to the U.S., without incurring additional federal income tax. The Company determined that the balance of the Company’s undistributed earnings and profits from its foreign subsidiaries as of February 2, 2019, are considered indefinitely reinvested outside of the U.S., and if these funds were to be repatriated to the U.S., the Company would expect to incur an insignificant amount of state income taxes and foreign withholding taxes. The Company accrues for both state income taxes and foreign withholding taxes with respect to earnings and profits earned after February 2, 2019, in such a manner that these funds may be repatriated without incurring additional tax expense. As of February 1, 2025, $257.5 million of the Company’s $772.7 million of cash and equivalents were held by foreign affiliates.

Refer to Note 11, “INCOME TAXES,” for additional details regarding the impact certain events related to the Company’s income taxes had on the Company’s Consolidated Financial Statements.

Analysis of Cash Flows

The table below provides certain components of the Company’s Consolidated Statements of Cash Flows for Fiscal 2024 and Fiscal 2023:

Operating activities -For Fiscal 2024, net cash provided by operating activities included increased cash receipts as a result of the 16% year-over-year increase in net sales as compared to net cash provided by operating activities in Fiscal 2023.

Investing activities -For Fiscal 2024, net cash used for investing activities was primarily attributable to capital expenditures of $182.9 million, as well as the purchase of $140 million in marketable securities and maturity of $25 million in marketable securities as compared to net cash used for investing activities of $157.8 million in Fiscal 2023, primarily attributable to capital expenditures.

Financing activities -For Fiscal 2024, net cash used for financing activities primarily consisted of the repurchase of approximately 1.6 million shares of Common Stock in the open market with a market value of approximately $229.8 million, the repurchase of $9.3 million in the open market and the complete redemption of $214 million of outstanding Senior Secured Notes, and $70.2 million related to shares of Common Stock withheld (repurchased) to cover tax withholdings upon vesting of share-based compensation awards. For Fiscal 2023, net cash used for financing activities primarily consisted of the purchase of $76.5 million of outstanding Senior Secured Notes for $78.0 million, as well as $29.5 million related to shares of Common Stock withheld (repurchased) to cover tax withholdings upon vesting of share-based compensation awards.

Contractual Obligations

As of February 1, 2025, the Company’s contractual obligations were as follows:

(1)Operating lease obligations consist of the Company’s future undiscounted operating lease payments. Operating lease obligations do not include variable payments related to both lease and nonlease components, such as contingent rent payments made by the Company based on performance, and payments related to taxes, insurance, and maintenance costs. Total variable lease cost was $186.8 million in Fiscal 2024. Refer to Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Leases,” and Note 8, “LEASES,” for further discussion.

(2)Purchase obligations primarily consist of non-cancelable purchase orders for merchandise to be delivered during Fiscal 2025 and commitments for fabric expected to be used during upcoming seasons. In addition, purchase obligations include agreements to purchase goods or services, including, but not limited to, information technology, digital and marketing contracts, as well as estimated obligations related to the Company’s 13-year, 100% renewable energy supply agreement for its global home office and Company-owned distribution centers.

(3)Other obligations consist of: estimated asset retirement obligations; known and scheduled payments related to the Company’s deferred compensation and supplemental retirement plans; and minimum contractual obligations related to leases signed but not yet commenced, primarily related to the Company’s stores. Refer to Note 8, “LEASES,” and Note 16, “SAVINGS AND RETIREMENT PLANS,” for further discussion.

Due to uncertainty as to the amounts and timing of future payments, tax related to uncertain tax positions, including accrued interest and penalties, of $4.9 million as of February 1, 2025, is excluded from the contractual obligations table. Deferred taxes are also excluded in the contractual obligations table. For further discussion, refer to Note 11, “INCOME TAXES.”

As of February 1, 2025, the Company had recorded $4.4 million and $42.0 million of obligations related to its deferred compensation and supplemental retirement plans in accrued expenses and other liabilities on the Consolidated Balance Sheet, respectively. Amounts payable with known payment dates of $15.7 million have been classified in the contractual obligations table based on those scheduled payment dates. However, it is not reasonably practicable to estimate the timing and amounts for the remainder of these obligations; therefore, those amounts have been excluded in the contractual obligations table.