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 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, 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 of 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 and with the Company’s strategic priorities as described within Part I, “Item 1. Business - STRATEGY AND KEY BUSINESS PRIORITIES” included in the Fiscal 2025 Form 10-K, including being opportunistic regarding areas for growth. 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, and information technology. For the year-to-date period ended August 1, 2026, the Company invested $129.4 million towards capital expenditures. Total capital expenditures for Fiscal 2026 are expected to be around $250 million.

The Company measures liquidity using total cash and cash equivalents and incremental borrowing available under the ABL Facility. As of August 1, 2026, the Company had cash and cash equivalents of $627.7 million and total liquidity of approximately $1.1 billion, compared with cash and cash equivalents of $759.5 million and total liquidity of approximately $1.2 billion at the beginning of Fiscal 2026.

Share repurchases

In March 2025, the Company announced that the Board of Directors approved a $1.3 billion share repurchase program (the “2025 Authorization”), which replaced the prior share repurchase program of $500 million authorized by the Board of Directors in 2021. The 2025 Authorization does not have an expiration date.

During the fiscal year-to-date period ended August 1, 2026, the Company repurchased approximately 3.2 million shares of its Common Stock pursuant to the 2025 Authorization for approximately $282 million. As of August 1, 2026, the Company had $568 million in share repurchases remaining under the 2025 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 from time to time in the open market or private transactions in such manner as may be deemed advisable from time to time (including, without limitation, pursuant to accelerated share repurchase programs, one or more 10b5-1 trading plans, or any other method deemed advisable) and may be discontinued at any time. The timing and amount of any such repurchases will be determined based on an evaluation of market conditions, the Company’s share price, legal requirements, and other factors. The Company is not obligated to repurchase any specific amount of shares of its Common Stock.

Credit facility

On August 2, 2024, A&F, as parent and a guarantor, A&F Management Co., 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 (as amended, the “ABL Credit Agreement”). The ABL Credit Agreement provides for a senior secured asset-based revolving credit facility of up to $500 million (the “ABL Facility”), which matures on August 2, 2029. The ABL Facility is subject to a borrowing base, consisting primarily of inventory located in the U.S., the United Kingdom, and the Netherlands, with a letter of credit sub-limit of $62.5 million, a swing line loan sub-limit of $30 million, and an accordion feature allowing A&F to increase the revolving commitment by up to $150 million subject to specified conditions.

As of August 1, 2026, the Company did not have any borrowings outstanding under the ABL Facility.

Details regarding the remaining borrowing capacity under the ABL Facility as of August 1, 2026 are as follows:

(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 11, “BORROWINGS.”

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 could be repatriated without incurring additional tax expense. As of August 1, 2026, $208.5 million of the Company’s $627.7 million of cash and equivalents were held by foreign affiliates.

Refer to Note 10, “INCOME TAXES.”

Analysis of cash flows

The table below provides certain components of the Company’s Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended August 1, 2026 and August 2, 2025:

Operating activities - For the fiscal year-to-date period ended August 1, 2026, net cash provided by operating activities increased by $200.5 million, primarily related to an increase in net income due to the 3% year-over-year increase in net sales and recognition of IEEPA tariff refunds, partially offset by expense deleverage, including the impact of the prior-year benefit resulting from the favorable settlement of claims to resolve payment card interchange fee litigation. Additionally, operating cash flow benefited from $64.2 million related to changes in accounts payable and accrued expenses, primarily related to the timing of merchandise payables and decreased incentive compensation payments, $45.7 million related to the timing of tax liabilities and resulting payments, $40.3 million primarily related to the timing of collection of receivables, as well as $24.0 million in lower inventory receipts. During the fiscal year-to-date period ended August 2, 2025, net cash provided by operating activities includedan increase in cash outflows related to the timing of merchandise and advertising payables and higher inventory product costs, partially offset byincreased cash receipts as a result of the 7%year-over-year increase in net sales.

Investing activities -For the fiscal year-to-date period ended August 1, 2026, net cash used for investing activities increased by $82.4 million primarily related to capital expenditures of $129.4 million, partially offset by the maturity of $34.6 million of marketable securities. Net cash used for investing activities for the fiscal year-to-date period ended August 2, 2025 was primarily used for capital expenditures of $116.9 million, partially offset by the maturity of $85.0 million of marketable securities.

Financing activities -For the fiscal year-to-date period ended August 1, 2026, net cash used for financing activities included the purchase of approximately 3.2 million shares of Common Stock with a market value of approximately $286.4 million and $38.6 million related to shares of Common Stock withheld (repurchased) to cover tax withholdings upon vesting of share-based compensation awards. During the fiscal year-to-date period ended August 2, 2025, net cash used for financing activities included the purchase of approximately 3.2 million shares of Common Stock with a market value of approximately $251.2 million and $34.8 million related to shares of Common Stock withheld (repurchased) to cover tax withholdings upon vesting of share-based compensation awards.

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.

There have been no material changes in the Company’s contractual obligations since January 31, 2026, 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).