ABERCROMBIE & FITCH CO /DE/ (Form: 10-Q, Received: 06/12/2019 16:53:38)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 4, 2019



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-12107

ABERCROMBIE & FITCH CO.

(Exact name of Registrant as specified in its charter)



Delaware		31-1469076
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6301 Fitch Path, New Albany, Ohio		43054
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (614) 283-6500

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 Par Value	ANF	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). x Yes ¨ No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class A Common Stock		Outstanding at June 7, 2019
$.01 Par Value		65,687,994 Shares

Table of Contents

ABERCROMBIE & FITCH CO.

TABLE OF CONTENTS



		Page No.
Part I

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Operations and Comprehensive Loss	3

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Stockholders’ Equity	5

	Condensed Consolidated Statements of Cash Flows	6

	Index for Notes to Condensed Consolidated Financial Statements	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	38

Part II

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 6.	Exhibits	40

	Signatures	41

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PART I. FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)

ABERCROMBIE & FITCH CO.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(Thousands, except per share amounts)

(Unaudited)



	Thirteen Weeks Ended
	May 4, 2019			May 5, 2018
Net sales	$	733,972		$	730,899
Cost of sales, exclusive of depreciation and amortization	289,882			288,554
Gross profit	444,090			442,345
Stores and distribution expense	358,356			361,155
Marketing, general and administrative expense	111,947			124,897
Asset impairment	1,662			1,056
Other operating income, net	(617		)	(2,560		)
Operating loss	(27,258		)	(42,203		)
Interest expense, net	616			3,018
Loss before income taxes	(27,874		)	(45,221		)
Income tax benefit	(9,588		)	(3,713		)
Net loss	(18,286		)	(41,508		)
Less: Net income attributable to noncontrolling interests	869			953
Net loss attributable to A&F	$	(19,155	)	$	(42,461	)

Net loss per share attributable to A&F
Basic	$	(0.29	)	$	(0.62	)
Diluted	$	(0.29	)	$	(0.62	)

Weighted-average shares outstanding
Basic	66,540			68,500
Diluted	66,540			68,500

Other comprehensive (loss) income
Foreign currency translation, net of tax	$	(2,786	)	$	(8,339	)
Derivative financial instruments, net of tax	(53		)	12,260
Other comprehensive (loss) income	(2,839		)	3,921
Comprehensive loss	(21,125		)	(37,587		)
Less: Comprehensive income attributable to noncontrolling interests	869			953
Comprehensive loss attributable to A&F	$	(21,994	)	$	(38,540	)

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

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ABERCROMBIE & FITCH CO.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands, except par value amounts)

(Unaudited)



	May 4, 2019			February 2, 2019
Assets
Current assets:
Cash and equivalents	$	586,133		$	723,135
Receivables	82,026			73,112
Inventories	432,350			437,879
Other current assets	71,803			101,824
Total current assets	1,172,312			1,335,950
Property and equipment, net	633,686			694,855
Operating lease right-of-use assets	1,252,249			—
Other assets	364,719			354,788
Total assets	$	3,422,966		$	2,385,593
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	180,041		$	226,878
Accrued expenses	240,050			293,579
Short-term portion of operating lease liabilities	278,392			—
Income taxes payable	16,022			18,902
Short-term portion of deferred lease credits	—			19,558
Total current liabilities	714,505			558,917
Long-term liabilities:
Long-term portion of operating lease liabilities	1,207,103			—
Long-term portion of borrowings, net	250,736			250,439
Long-term portion of deferred lease credits	—			76,134
Leasehold financing obligations	—			46,337
Other liabilities	145,659			235,145
Total long-term liabilities	1,603,498			608,055
Stockholders’ equity
Class A Common Stock - $0.01 par value: 150,000 shares authorized and 103,300 shares issued for all periods presented	1,033			1,033
Paid-in capital	395,974			405,379
Retained earnings	2,296,347			2,418,544
Accumulated other comprehensive loss, net of tax	(105,291		)	(102,452		)
Treasury stock, at average cost: 36,663 and 37,073 shares as of May 4, 2019 and February 2, 2019, respectively	(1,493,224		)	(1,513,604		)
Total Abercrombie & Fitch Co. stockholders’ equity	1,094,839			1,208,900
Noncontrolling interests	10,124			9,721
Total stockholders’ equity	1,104,963			1,218,621
Total liabilities and stockholders’ equity	$	3,422,966		$	2,385,593

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

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ABERCROMBIE & FITCH CO.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Thousands, except per share amounts)

(Unaudited)



	Thirteen Weeks Ended May 4, 2019
	Common Stock				Paid-in capital			Non-controlling interests			Retained earnings			Accumulated other comprehensive loss			Treasury stock					Total stockholders’ equity
	Shares outstanding		Par value														Shares		At average cost
Balance, February 2, 2019	66,227		$	1,033	$	405,379		$	9,721		$	2,418,544		$	(102,452	)	37,073		$	(1,513,604	)	$	1,218,621
Impact from adoption of the new lease accounting standard (Refer to Note 2 “Summary of Significant Accounting Policies”)	—		—		—			—			(75,165		)	—			—		—			(75,165		)
Net loss	—		—		—			869			(19,155		)	—			—		—			(18,286		)
Dividends ($0.20 per share)	—		—		—			—			(13,246		)	—			—		—			(13,246		)
Share-based compensation issuances and exercises	410		—		(12,037		)	—			(14,631		)	—			(410	)	20,380			(6,288		)
Share-based compensation expense	—		—		2,632			—			—			—			—		—			2,632
Derivative financial instruments, net of tax	—		—		—			—			—			(53		)	—		—			(53		)
Foreign currency translation adjustments, net of tax	—		—		—			—			—			(2,786		)	—		—			(2,786		)
Distributions to noncontrolling interests, net	—		—		—			(466		)	—			—			—		—			(466		)
Balance, May 4, 2019	66,637		$	1,033	$	395,974		$	10,124		$	2,296,347		$	(105,291	)	36,663		$	(1,493,224	)	$	1,104,963

	Thirteen Weeks Ended May 5, 2018
	Common Stock				Paid-in capital			Non-controlling interests			Retained earnings			Accumulated other comprehensive loss			Treasury stock					Total stockholders’ equity
	Shares outstanding		Par value														Shares		At average cost
Balance, February 3, 2018	68,195		$	1,033	$	406,351		$	10,092		$	2,420,552		$	(95,054	)	35,105		$	(1,490,503	)	$	1,252,471
Impact from adoption of the new revenue recognition accounting standard	—		—		—			—			6,944			—			—		—			6,944
Net loss	—		—		—			953			(42,461		)	—			—		—			(41,508		)
Purchase of Common Stock	(778	)	—		—			—			—			—			778		(18,670		)	(18,670		)
Dividends ($0.20 per share)	—		—		—			—			(13,642		)	—			—		—			(13,642		)
Share-based compensation issuances and exercises	399		—		(11,274		)	—			(14,513		)	—			(399	)	20,800			(4,987		)
Share-based compensation expense	—		—		4,783			—			—			—			—		—			4,783
Derivative financial instruments, net of tax	—		—		—			—			—			12,260			—		—			12,260
Foreign currency translation adjustments, net of tax	—		—		—			—			—			(8,339		)	—		—			(8,339		)
Distributions to noncontrolling interests, net	—		—		—			(466		)	—			—			—		—			(466		)
Balance, May 5, 2018	67,816		$	1,033	$	399,860		$	10,579		$	2,356,880		$	(91,133	)	35,484		$	(1,488,373	)	$	1,188,846

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

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ABERCROMBIE & FITCH CO.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands)

(Unaudited)



	Thirteen Weeks Ended
	May 4, 2019			May 5, 2018
Operating activities
Net loss	$	(18,286	)	$	(41,508	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization	41,042			47,647
Non-cash portion of operating lease expense	(8,196		)	—
Amortization of deferred lease credits prior to adoption of new lease accounting standard	—			(5,040		)
Asset impairment	1,662			1,056
Loss on disposal	1,991			1,239
Benefit from deferred income taxes	(9,895		)	(12,290		)
Share-based compensation	2,632			4,783
Changes in assets and liabilities:
Inventories	4,962			11,444
Accounts payable and accrued expenses	(74,199		)	(32,186		)
Operating lease right-of-use assets and liabilities	(2,666		)	—
Income taxes	855			2,526
Other assets	(10,287		)	5,902
Other liabilities	(931		)	256
Net cash used for operating activities	(71,316		)	(16,171		)
Investing activities
Purchases of property and equipment	(43,872		)	(23,700		)
Net cash used for investing activities	(43,872		)	(23,700		)
Financing activities
Purchases of common stock	—			(18,670		)
Dividends paid	(13,246		)	(13,642		)
Other financing activities	(7,076		)	(5,176		)
Net cash used for financing activities	(20,322		)	(37,488		)
Effect of exchange rates on cash	(2,638		)	(5,914		)
Net decrease in cash and equivalents, and restricted cash and equivalents	(138,148		)	(83,273		)
Cash and equivalents, and restricted cash and equivalents, beginning of period	745,829			697,955
Cash and equivalents, and restricted cash and equivalents, end of period	$	607,681		$	614,682
Supplemental information related to non-cash activities
Purchases of property and equipment not yet paid at end of period	$	22,771		$	15,874
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities	$	117,829		$	—
Supplemental information related to cash activities
Cash paid for interest related to Abercrombie & Fitch Co.’s term loan facility	$	3,881		$	3,492
Cash paid for income taxes	$	2,872		$	6,683
Cash received from income tax refunds	$	7,049		$	6,762
Cash paid for amounts included in the measurement of operating lease liabilities	$	94,245		$	—

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

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ABERCROMBIE & FITCH CO.

INDEX FOR NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



		Page No.

Note 1.	Nature of Business	8

Note 2.	Summary of Significant Accounting Policies	8

Note 3.	Revenue Recognition	13

Note 4.	Net Loss Per Share	13

Note 5.	Fair Value	14

Note 6.	Property and Equipment, Net	15

Note 7.	Leases	15

Note 8.	Income Taxes	16

Note 9.	Share-based Compensation	17

Note 10.	Derivative Instruments	19

Note 11.	Accumulated Other Comprehensive Loss	20

Note 12.	Segment Reporting	20

Note 13.	Subsequent Events	21

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ABERCROMBIE & FITCH CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. NATURE OF BUSINESS

Abercrombie & Fitch Co. (“A&F”), a company incorporated in Delaware in 1996, through its subsidiaries (collectively, A&F and its subsidiaries are referred to as the “Company”, or “we”) is a global multi-brand omnichannel specialty retailer, whose products are sold primarily through its wholly-owned store and direct-to-consumer channels, as well as through various third-party wholesale, franchise and licensing arrangements. The Company offers a broad assortment of apparel, personal care products and accessories for Men, Women and Kids under the Hollister, Abercrombie & Fitch and abercrombie kids brands.The brands share a commitment to offering unique products of enduring quality and exceptional comfort that allow customers around the world to express their own individuality and style. The Company has operations in North America, Europe and Asia, among other regions.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The accompanying Condensed Consolidated Financial Statements include historical financial statements of, and transactions applicable to, the Company and reflect its financial position, results of operations and cash flows.

The Company has interests in an Emirati business venture and in a Kuwaiti business venture with Majid al Futtaim Fashion L.L.C. (“MAF”), each of which meets the definition of a variable interest entity (“VIE”). The Company is deemed to be the primary beneficiary of these VIEs; therefore, the Company has consolidated the operating results, assets and liabilities of these VIEs, with MAF’s portion of net income presented as net income attributable to noncontrolling interests (“NCI”) on the Condensed Consolidated Statements of Operations and Comprehensive Loss and MAF’s portion of equity presented as NCI on the Condensed Consolidated Balance Sheets.

Fiscal year

The Company’s fiscal year ends on the Saturday closest to January 31. This typically results in a fifty-two week year, but occasionally gives rise to an additional week, resulting in a fifty-three week year, as was the case for the year ended February 3, 2018. Fiscal years are designated in the consolidated financial statements and notes, as well as the remainder of this Quarterly Report on Form 10-Q, by the calendar year in which the fiscal year commenced. All references herein to the Company’s fiscal years are as follows:



Fiscal year	Year ended	Number of weeks
Fiscal 2017	February 3, 2018	53
Fiscal 2018	February 2, 2019	52
Fiscal 2019	February 1, 2020	52
Fiscal 2020	January 30, 2021	52

Interim financial statements

The Condensed Consolidated Financial Statements as of May 4, 2019 , and for the thirteen week periods ended May 4, 2019 and May 5, 2018 , are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, the Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto contained in A&F’s Annual Report on Form 10-K for Fiscal 2018 filed with the SEC on April 1, 2019 . The February 2, 2019 consolidated balance sheet data, included herein, were derived from audited consolidated financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”).

In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments (which are of a normal recurring nature) necessary to state fairly, in all material respects, the financial position, results of operations and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for Fiscal 2019 .

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Recent accounting pronouncements

The Company reviews recent accounting pronouncements on a quarterly basis and has excluded discussion of those not applicable to the Company and those not expected to have a material impact on the Company’s consolidated financial statements. The following table provides a brief description of certain recent accounting pronouncements the Company has adopted.



Accounting Standards Update (ASU)	Description	Date of adoption	Effect on the financial statements or other significant matters
ASU 2016-02, Leases	This update supersedes the leasing standard in Accounting Standards Codification (“ASC”) 840, Leases . The new standard requires an entity to recognize lease assets and lease liabilities on the balance sheet and disclose key leasing information that depicts the lease rights and obligations of an entity.	February 3, 2019	The Company adopted this standard using a modified retrospective transition method and elected to not restate comparative periods. In conjunction with the adoption of this standard, the Company elected: Ÿ the package of practical expedients which, among other things, allowed the Company to carry forward historical lease classification for leases existing before the date of adoption; and Ÿ to combine lease and nonlease components for leases existing before the date of adoption, as well as for any new leases. However, the Company did not elect the practical expedient to use hindsight when determining the lease term or assessing impairment. Adoption of this standard resulted in the Company’s total assets and total liabilities on the Condensed Consolidated Balance Sheet each increasing by approximately $1.2 billion, primarily due to the recognition of operating lease right-of-use assets and liabilities. The Company also recognized a cumulative adjustment decreasing the opening balance of retained earnings by $0.1 billion on the date of adoption. The adoption of this standard did not have a significant impact on the Condensed Consolidated Statements of Operations and Comprehensive Loss for the thirteen weeks ended May 4, 2019. The adoption of this standard did not have a significant impact on the timing or classification of the Company’s Consolidated Statement of Cash Flows, the Company’s liquidity or the Company’s debt covenant compliance under current agreements. Additional information regarding the impact from adoption of the new lease accounting standard and updated accounting policies related to leases are provided further in this Note 2.
ASU 2017-12, Derivatives and Hedging — Targeted Improvements to Accounting for Hedging Activities	This update amends ASC 815, Derivatives and Hedging . The new standard simplifies certain aspects of hedge accounting for both financial and commodity risks to more accurately present the economic effects of an entity’s risk management activities in its financial statements.	February 3, 2019	The Company adopted this standard using a modified retrospective transition approach, while the amended presentation and disclosure standard requires a prospective approach. Upon adoption of this standard, the Company elected to include time value in its assessment of effectiveness for derivative instruments designated as cash flow hedges. Updated accounting policies related to derivatives have been updated and are provided further in this Note 2. The adoption of this standard did not have a significant impact on the Company’s Condensed Consolidated Financial Statements for the thirteen weeks ended May 4, 2019, and is not expected to have a significant impact on the Company’s consolidated financial statements for Fiscal 2019.
ASU 2018-15. Intangibles — Goodwill and Other —Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract	This update amends ASC 350, Intangibles — Goodwill and Other —Internal-Use Software. The new standard allows companies to defer certain direct costs related to software as a service (“SaaS”) implementation costs and amortize them to operating expense over the term of the related SaaS arrangement. The criteria for determining whether costs associated with SaaS can be capitalized is now the same criteria applied to internal software development costs in order to assess eligibility for deferral.	February 3, 2019	The Company early adopted this standard on a prospective basis and comparative periods have not been restated. The adoption of this standard did not have a significant impact on the Company’s Condensed Consolidated Financial Statements for the thirteen weeks ended May 4, 2019. The Company expects to capitalize up to $10 million of SaaS implementation costs in Fiscal 2019.

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The following table provides the impact from adoption of the new lease accounting standard on the Company’s Condensed Consolidated Balance Sheet:



(in thousands)	February 2, 2019 (as reported under previous lease accounting standard)			Impact from adoption of new lease accounting standard			Upon adoption on February 3, 2019 (under new lease accounting standard) ⁽¹⁾
Assets
Current assets:
Cash and equivalents	$	723,135		$	—		$	723,135
Receivables	73,112			—			73,112
Inventories	437,879			—			437,879
Other current assets ⁽²⁾	101,824			(31,310		)	70,514
Total current assets	1,335,950			(31,310		)	1,304,640
Property and equipment, net ⁽³⁾	694,855			(46,624		)	648,231
Operating lease right-of-use assets ⁽²⁾	—			1,234,515			1,234,515
Other assets ^{(2) (5)}	354,788			15,553			370,341
Total assets	$	2,385,593		$	1,172,134		$	3,557,727
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	226,878		$	—		$	226,878
Accrued expenses ⁽²⁾	293,579			(13,508		)	280,071
Short-term portion of operating lease liabilities ⁽⁴⁾	—			280,108			280,108
Short-term portion of deferred lease credits ⁽²⁾	19,558			(19,558		)	—
Income taxes payable	18,902			—			18,902
Total current liabilities	558,917			247,042			805,959
Long-term liabilities:
Long-term portion of operating lease liabilities ⁽⁴⁾	—			1,193,946			1,193,946
Long-term portion of borrowings, net	250,439			—			250,439
Long-term portion of deferred lease credits ⁽²⁾	76,134			(76,134		)	—
Leasehold financing obligations ⁽³⁾	46,337			(46,337		)	—
Other liabilities ^{(2) (5)}	235,145			(71,218		)	163,927
Total long-term liabilities	608,055			1,000,257			1,608,312
Stockholders’ equity
Class A Common Stock	1,033			—			1,033
Paid-in capital	405,379			—			405,379
Retained earnings ⁽⁶⁾	2,418,544			(75,165		)	2,343,379
Accumulated other comprehensive loss, net of tax	(102,452		)	—			(102,452		)
Treasury stock, at average cost	(1,513,604		)	—			(1,513,604		)
Total Abercrombie & Fitch Co. stockholders’ equity	1,208,900			(75,165		)	1,133,735
Noncontrolling interests	9,721			—			9,721
Total stockholders’ equity	1,218,621			(75,165		)	1,143,456
Total liabilities and stockholders’ equity	$	2,385,593		$	1,172,134		$	3,557,727


⁽¹⁾	Amounts under “Upon adoption on February 3, 2019 (under new lease accounting standard),” are calculated as February 2, 2019 reported balances adjusted for the impact of adoption on the first day of Fiscal 2019, February 3, 2019.

⁽²⁾

Upon adoption, the Company recognized assets for the rights to use its operating leases on the Condensed Consolidated Balance Sheet. In conjunction with this recognition, the Company reclassified amounts to operating lease right-of-use assets including: short-term prepaid rent from other current assets; key money, long-term prepaid rent and leasehold acquisition costs from other assets; short-term and long-term portions of deferred lease credits; accrued rent and accrued straight-line rent from accrued expenses and other liabilities, respectively.

⁽³⁾

Upon adoption, the Company derecognized construction project assets and related leasehold financing obligations that previously failed to qualify for sale and leaseback accounting. In certain instances, these construction project assets had shielded other assets included within their respective asset groups from impairment, as the fair value of the construction project assets had exceeded the carrying values of their respective asset groups. In such instances, the Company recognized impairment of certain leasehold improvements and store assets upon adoption.


⁽⁴⁾	Upon adoption, the Company recognized operating lease liabilities on the Condensed Consolidated Balance Sheet.


⁽⁵⁾	Upon adoption, the Company established net deferred tax assets for operating lease right-of-use assets and operating lease liabilities.

⁽⁶⁾

Upon adoption, the Company recognized a cumulative adjustment decreasing the opening balance of retained earnings, primarily related to right-of-use asset impairment charges for certain of the Company’s stores where it was previously determined that the carrying value of assets was not recoverable, partially offset by benefits to retained earnings to establish net deferred tax assets and a net gain resulting from the derecognition of certain leased building assets and related leasehold financing obligations that previously failed to qualify for sale and leaseback accounting.

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The Company’s significant accounting policies as of May 4, 2019 have not changed materially from those disclosed in Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” of the Notes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Annual Report on Form 10-K for Fiscal 2018 , with the exception of those discussed below which have been updated to reflect new accounting standards adopted in Fiscal 2019.

Leases

The Company determines if an arrangement is a lease at inception and on the lease commencement date, the Company recognizes an asset for the right to use a leased asset and a liability based on the present value of remaining lease payments over the lease term.

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate. For leases existing before the adoption of the new lease accounting standard, the Company used its incremental borrowing rate as of the date of adoption, determined using the remaining lease term as of the date of adoption. For leases commencing on or after the adoption of the new lease accounting standard, the incremental borrowing rate is determined using the remaining lease term as of the lease commencement date.

The Company has elected to combine lease and nonlease components for all leases existing before the adoption of the new lease accounting standard, as well as for any new leases.

The measurement of lease right-of-use assets and liabilities includes amounts related to:


•	Lease payments made prior to the lease commencement date;


•	Incentives from landlords received by the Company for signing a lease, including construction allowances or deferred lease credits paid to the Company by landlords towards construction and tenant improvement costs, which are presented as a reduction to the right-of-use asset recorded;


•	Fixed payments related to lease components, such as rent escalation payments scheduled at the lease commencement date;


•	Fixed payments related to nonlease components, such as taxes, insurance, and maintenance costs; and


•	Unamortized initial direct costs incurred in conjunction with securing a lease, including key money, which are amounts paid directly to a landlord in exchange for securing the lease, and leasehold acquisition costs, which are amounts paid to parties other than the landlord, such as an existing tenant, to secure the desired lease.

The measurement of lease right-of-use assets and liabilities excludes amounts related to:


•	Costs expected to be incurred to return a leased asset to its original condition, also referred to as asset retirement obligations, which are classified within other liabilities on the Condensed Consolidated Balance Sheets;


•	Variable payments related to lease components, such as contingent rent payments made by the Company based on performance, the expense of which is recognized in the period incurred on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss);


•	Variable payments related to nonlease components, such as taxes, insurance, and maintenance costs, the expense of which is recognized in the period incurred in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss); and


•	Leases not related to Company-operated retail stores with an initial term of 12 months or less, the expense of which is recognized in the period incurred in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Certain of the Company’s leases include options to extend the lease or to terminate the lease. The Company assesses these leases and, depending on the facts and circumstances, may or may not include these options in the measurement of the Company’s lease right-of-use assets and liabilities. Generally, the Company’s options to extend its leases are at the Company’s sole discretion and at the time of lease commencement are not reasonably certain of being exercised. There may be instances in which a lease is being renewed on a month-to-month basis and, in these instances, the Company will recognize lease expense in the period incurred in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) until a new agreement has been executed.

Amortization and interest expense related to lease right-of-use assets and liabilities are generally calculated on a straight-line basis over the lease term. Amortization and interest expense related to previously impaired lease right-of-use assets are calculated on a front-loaded pattern. Depending on the nature of the lease, amortization and interest expense is recorded in either stores and distribution expense or marketing, general and administrative expense in the Consolidated Statements of Operations and Comprehensive Income (Loss).

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The Company’s lease right-of-use assets are assessed for indicators of impairment at least quarterly, in accordance with the long-lived asset impairment policy disclosed in Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and equipment, net ,” of the Notes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA,” of A&F’s Annual Report on Form 10-K for Fiscal 2018 .

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. In addition, the Company does not have any sublease arrangements with any related party or third-party.

Refer to Note 7, “ LEASES .”

Derivative instruments

The Company is exposed to risks associated with changes in foreign currency exchange rates and uses derivative instruments, primarily forward contracts, to manage the financial impacts of these exposures. The Company does not use forward contracts to engage in currency speculation and does not enter into derivative financial instruments for trading purposes.

In order to qualify for hedge accounting treatment, a derivative instrument must be considered highly effective at offsetting changes in either the hedged item’s cash flows or fair value. Additionally, the hedge relationship must be documented to include the risk management objective and strategy, the hedging instrument, the hedged item, the risk exposure, and how hedge effectiveness will be assessed prospectively and retrospectively. The extent to which a hedging instrument has been, and is expected to continue to be, effective at offsetting changes in fair value or cash flows is assessed and documented at least quarterly. If the underlying hedged item is no longer probable of occurring, hedge accounting is discontinued.

For derivative instruments that either do not qualify for hedge accounting or are not designated as hedges, all changes in the fair value of the derivative instrument are recognized in earnings. For qualifying cash flow hedges, the change in the fair value of the derivative instrument is recorded as a component of other comprehensive income (loss) (“OCI”) and recognized in earnings when the hedged cash flows affect earnings. If the cash flow hedge relationship is terminated, the derivative instrument gains or losses that are deferred in OCI will be recognized in earnings when the hedged cash flows occur. However, for cash flow hedges that are terminated because the forecasted transaction is not expected to occur in the original specified time period, or a two-month period thereafter, the derivative instrument gains or losses are immediately recognized in earnings.

The Company uses derivative instruments, primarily forward contracts designated as cash flow hedges, to hedge the foreign currency exchange rate exposure associated with forecasted foreign-currency-denominated intercompany inventory transactions with foreign subsidiaries before inventory is sold to third parties. Fluctuations in exchange rates will either increase or decrease the Company’s intercompany equivalent cash flows and affect the Company’s U.S. Dollar earnings. Gains or losses on the foreign currency exchange forward contracts that are used to hedge these exposures are expected to partially offset this variability. Foreign currency exchange forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed upon settlement date. These forward contracts typically have a maximum term of twelve months . The conversion of the inventory to cost of sales, exclusive of depreciation and amortization, will result in the reclassification of related derivative gains and losses that are reported in accumulated other comprehensive loss (“AOCL”) into earnings on the Condensed Consolidated Balance Sheets.

The Company also uses foreign currency exchange forward contracts to hedge certain foreign-currency-denominated net monetary assets and liabilities, such as cash balances, receivables and payables. Fluctuations in foreign currency exchange rates result in transaction gains and losses being recorded in earnings as monetary assets and liabilities are remeasured at the spot exchange rate at quarter-end or upon settlement. The Company has chosen not to apply hedge accounting to these foreign currency exchange forward contracts because there are no differences in the timing of gain or loss recognition on the hedging instruments and the hedged items.

The Company presents its derivative assets and derivative liabilities at their gross fair values within other current assets and accrued liabilities, respectively, on the Condensed Consolidated Balance Sheets. However, the Company’s derivative contracts allow net settlements under certain conditions.

Refer to Note 10, “ DERIVATIVE INSTRUMENTS .”

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Condensed Consolidated Statements of Cash Flows reconciliation

The following table provides a reconciliation of cash and equivalents and restricted cash and equivalents, which is recorded in other assets on the Condensed Consolidated Balance Sheets, to the amounts shown on the Condensed Consolidated Statements of Cash Flows.



(in thousands)	May 4, 2019		February 2, 2019		May 5, 2018		February 3, 2018
Cash and equivalents	$	586,133	$	723,135	$	591,960	$	675,558
Restricted cash and equivalents	21,548		22,694		22,722		22,397
Cash and equivalents and restricted cash and equivalents	$	607,681	$	745,829	$	614,682	$	697,955

3. REVENUE RECOGNITION

Contract liabilities

The following table details contract liabilities representing unearned revenue as of May 4, 2019 , February 2, 2019, May 5, 2018 and February 3, 2018 :



(in thousands)	May 4, 2019		February 2, 2019		May 5, 2018		February 3, 2018
Unearned revenue liabilities related to the Company’s gift card program	$	22,067	$	26,062	$	19,246	$	28,939
Unearned revenue liabilities related to the Company’s loyalty programs	$	19,830	$	19,904	$	16,708	$	15,965

For the thirteen weeks ended May 4, 2019 and May 5, 2018 , the Company recognized revenue of approximately $15.3 million and $13.8 million , respectively, associated with gift card redemptions and gift card breakage.

For the thirteen weeks ended May 4, 2019 and May 5, 2018 , the Company recognized revenue of approximately $6.5 million and $7.2 million , respectively, associated with reward redemptions and breakage related to the Company’s loyalty programs.

Disaggregation of revenue

All revenues are recognized in net sales in the Condensed Consolidated Statements of Operations and Comprehensive Loss. For information regarding the disaggregation of revenue, refer to Note 12, “ SEGMENT REPORTING . ”

4. NET LOSS PER SHARE

Net loss per basic and diluted share attributable to A&F is computed based on the weighted-average number of outstanding shares of Class A Common Stock (“Common Stock”).

Additional information pertaining to net loss per share attributable to A&F is as follows:



	Thirteen Weeks Ended
(in thousands)	May 4, 2019		May 5, 2018
Shares of Common Stock issued	103,300		103,300
Weighted-average treasury shares	(36,760	)	(34,800	)
Weighted-average — basic shares	66,540		68,500
Dilutive effect of share-based compensation awards	—		—
Weighted-average — diluted shares	66,540		68,500
Anti-dilutive shares ⁽¹⁾	2,812		4,599


⁽¹⁾	Reflects the total number of shares related to outstanding share-based compensation awards that have been excluded from the computation of net loss per diluted share because the impact would have been anti-dilutive.

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5. FAIR VALUE

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The inputs used to measure fair value are prioritized based on a three-level hierarchy. The three levels of inputs to measure fair value are as follows:


•	Level 1—inputs are unadjusted quoted prices for identical assets or liabilities that are available in active markets that the Company can access at the measurement date.


•	Level 2—inputs are other than quoted market prices included within Level 1 that are observable for assets or liabilities, directly or indirectly.


•	Level 3—inputs to the valuation methodology are unobservable.

The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. The three levels of the hierarchy and the distribution of the Company’s assets and liabilities that are measured at fair value on a recurring basis, were as follows:



	Assets and Liabilities at Fair Value as of May 4, 2019
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents ⁽¹⁾	$	10,149	$	39,660	$	—	$	49,809
Derivative instruments ⁽²⁾	—		2,508		—		2,508
Rabbi Trust assets ⁽³⁾	3		106,668		—		106,671
Restricted cash equivalents ⁽⁴⁾	10,114		4,571		—		14,685
Total assets	$	20,266	$	153,407	$	—	$	173,673

Liabilities:
Derivative instruments ⁽²⁾	$	—	$	316	$	—	$	316
Total liabilities	$	—	$	316	$	—	$	316



	Assets and Liabilities at Fair Value as of February 2, 2019
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents ⁽¹⁾	$	55,558	$	34,440	$	—	$	89,998
Derivative instruments ⁽²⁾	—		2,162		—		2,162
Rabbi Trust assets ⁽³⁾	5		105,877		—		105,882
Restricted cash equivalents ⁽⁴⁾	10,910		4,588		—		15,498
Total assets	$	66,473	$	147,067	$	—	$	213,540

Liabilities:
Derivative instruments ⁽²⁾	$	—	$	332	$	—	$	332
Total liabilities	$	—	$	332	$	—	$	332


⁽¹⁾	Level 1 assets consist of investments in money market funds. Level 2 assets consist of time deposits.


⁽²⁾	Level 2 assets and liabilities consist primarily of foreign currency exchange forward contracts.


⁽³⁾	Level 1 assets consist of investments in money market funds. Level 2 assets consist of trust-owned life insurance policies.


⁽⁴⁾	Level 1 assets consist of investments in U.S. treasury bills and money market funds. Level 2 assets consist of time deposits.

The Company’s Level 2 assets and liabilities consist of:


•	Time deposits, which are valued at cost approximating fair value due to the short-term nature of these investments;


•	Trust-owned life insurance policies which are valued using the cash surrender value of the life insurance policies; and


•	Derivative instruments, primarily foreign currency exchange forward contracts, which are valued using quoted market prices of the same or similar instruments, adjusted for counterparty risk.

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Fair value of borrowings

The Company’s borrowings under the Company’s credit facilities are carried at historical cost in the accompanying Condensed Consolidated Balance Sheets. The carrying amount and fair value of gross borrowings under the Company’s term loan credit facility were as follows:



(in thousands)	May 4, 2019		February 2, 2019
Gross borrowings outstanding, carrying amount	$	253,250	$	253,250
Gross borrowings outstanding, fair value	$	253,250	$	252,933

No borrowings were outstanding under the Company’s senior secured revolving credit facility as of May 4, 2019 or February 2, 2019 .

6. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of:



(in thousands)	May 4, 2019			February 2, 2019
Property and equipment, at cost	$	2,740,339		$	2,829,250
Less: Accumulated depreciation and amortization	(2,106,653		)	(2,134,395		)
Property and equipment, net	$	633,686		$	694,855

The Company incurred store asset impairment charges of $1.7 million and $1.1 million for the thirteen weeks ended May 4, 2019 , and May 5, 2018 , respectively.

The Company had $34.7 million of construction project assets in property and equipment, net as of February 2, 2019 , related to the construction of buildings in certain lease arrangements where, under the previous lease accounting standard, the Company was deemed to be the owner of the construction project. Upon adoption of the new lease accounting standard, described further in Note 2, “ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES , ” the Company derecognized these construction project assets.

7. LEASES

The Company has leases related to its Company-operated retail stores as well as for certain of its distribution centers, office space, information technology and equipment.

The following table provides a summary of the Company’s operating lease costs for the thirteen weeks ended May 4, 2019 :



(in thousands)	May 4, 2019
Single lease cost ⁽¹⁾	$	92,274
Variable lease cost ⁽²⁾	42,845
Total operating lease cost	$	135,119


⁽¹⁾	Includes amortization and interest expense associated with operating lease right-of-use assets and liabilities.


⁽²⁾	Includes 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.

The following table provides the weighted-average remaining lease term of the Company’s operating leases and the weighted-average discount rates used to calculate the Company’s operating lease liabilities as of May 4, 2019 :



	May 4, 2019
Weighted-average remaining lease term (years)	6.2
Weighted-average discount rate	5.4	%

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The following table provides a maturity analysis of the Company’s operating lease liabilities, based on undiscounted cash flows, as of May 4, 2019 :



(in thousands)
Fiscal 2019 (excluding the thirteen weeks ended May 4, 2019)	$	265,232
Fiscal 2020	328,707
Fiscal 2021	281,713
Fiscal 2022	233,274
Fiscal 2023	189,987
Fiscal 2024 and thereafter	466,402
Total undiscounted operating lease payments	$	1,765,315
Less: Imputed interest	(279,820		)
Present value of operating lease liabilities	$	1,485,495

As of May 4, 2019 , the Company had minimum commitments related to additional operating lease contracts that have not yet commenced, primarily for its Company-operated retail stores, of approximately $21.1 million .

As reported under the previous accounting standard, the following table provides a summary of operating lease commitments, including leasehold financing obligations, under noncancelable leases as of February 2, 2019 :



(in thousands)
Fiscal 2019	$	367,622
Fiscal 2020	$	304,270
Fiscal 2021	$	205,542
Fiscal 2022	$	159,617
Fiscal 2023	$	128,626
Fiscal 2024 and thereafter	$	310,003

8. INCOME TAXES

The quarterly tax provision for income taxes is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for discrete quarterly events. The Company’s quarterly tax provision and the estimate of the annual effective tax rate are subject to significant variation due to several factors. These include variability in the pre-tax jurisdictional mix of earnings, changes in how the Company does business including entering into new businesses or geographies, changes in foreign currency exchange rates, changes in law, regulations, interpretations and administrative practices, relative changes in expenses or losses for which tax benefits are not recognized and the impact of discrete items. The impact of these items on the effective tax rate will be greater at lower levels of pre-tax earnings.

The Company incurred $1.1 million of discrete income tax benefits for the thirteen weeks ended May 4, 2019 , primarily related to the exercise of certain share-based compensation awards. The Company incurred $8.2 million of discrete non-cash income tax charges for the thirteen weeks ended May 5, 2018 , primarily related to the expiration of certain share-based compensation awards.

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9. SHARE-BASED COMPENSATION

Financial statement impact

The Company recognized share-based compensation expense of $2.6 million and $4.8 million for the thirteen weeks ended May 4, 2019 and May 5, 2018 , respectively. The Company recognized tax benefits associated with share-based compensation expense of $0.5 million and $0.9 million for the thirteen weeks ended May 4, 2019 and May 5, 2018 , respectively.

Restricted stock units

The following table summarizes activity for restricted stock units for the thirteen weeks ended May 4, 2019 :



	Service-based Restricted Stock Units				Performance-based Restricted Stock Units				Market-based Restricted Stock Units
	Number of Underlying Shares ⁽¹⁾		Weighted- Average Grant Date Fair Value		Number of Underlying Shares		Weighted- Average Grant Date Fair Value		Number of Underlying Shares		Weighted- Average Grant Date Fair Value
Unvested at February 2, 2019	2,020,030		$	16.76	801,527		$	13.65	435,970		$	21.24
Granted	617,986		23.42		230,464		23.05		115,238		36.24
Adjustments for performance achievement	—		—		(90,616	)	24.06		(72,497	)	28.20
Vested	(629,090	)	17.44		—		—		(18,125	)	28.20
Forfeited	(55,590	)	16.12		(4,903	)	22.94		—		—
Unvested at May 4, 2019	1,953,336		$	18.67	936,472		$	14.88	460,586		$	23.63

⁽¹⁾

Includes 370,616 unvested restricted stock units as of May 4, 2019 , subject to vesting requirements related to the achievement of certain performance metrics, such as operating income and net income, for the fiscal year immediately preceding the vesting date. Holders of these restricted stock units have the opportunity to earn back one or more installments of the award if the cumulative performance requirements are met in a subsequent year. Unvested shares related to restricted stock units with performance-based and market-based vesting conditions can achieve up to 200% of their target vesting amount and are reflected at 100% of their target vesting amount in the table above.

Fair value of both service-based and performance-based restricted stock units is calculated using the market price of the underlying Common Stock on the date of grant reduced for anticipated dividend payments on unvested shares. In determining fair value, the Company does not take into account performance-based vesting requirements. Performance-based vesting requirements are taken into account in determining the number of awards expected to vest. For market-based restricted stock units, fair value is calculated using a Monte Carlo simulation with the number of shares that ultimately vest dependent on the Company’s total stockholder return measured against the total stockholder return of a select group of peer companies over a three-year period. For awards with performance-based or market-based vesting requirements, the number of shares that ultimately vest can vary from 0% to 200% of target depending on the level of achievement of performance criteria.

Service-based restricted stock units are expensed on a straight-line basis over the award’s requisite service period. Performance-based restricted stock units subject to graded vesting are expensed on an accelerated attribution basis. Performance share award expense is primarily recognized in the performance period of the award’s requisite service period. Market-based restricted stock units without graded vesting features are expensed on a straight-line basis over the award’s requisite service period. Compensation expense for stock appreciation rights is recognized on a straight-line basis over the award’s requisite service period. The Company adjusts share-based compensation expense on a quarterly basis for actual forfeitures. Unrecognized compensation expense presented excludes the effect of potential forfeitures, and will be adjusted for actual forfeitures as they occur.

As of May 4, 2019 , there was $32.5 million , $8.6 million and $7.3 million of total unrecognized compensation cost, related to service-based, performance-based and market-based restricted stock units, respectively. The unrecognized compensation cost is expected to be recognized over a remaining weighted-average period of 17 months , 14 months and 15 months for service-based, performance-based and market-based restricted stock units, respectively.

The actual tax benefit realized for tax deductions related to the issuance of shares associated with restricted stock units vesting was $4.0 million and $3.4 million for the thirteen weeks ended May 4, 2019 and May 5, 2018 , respectively.

The amount of employee tax withheld by the Company upon the issuance of shares associated with restricted stock units vesting and the exercise of stock appreciation rights was $6.3 million and $5.0 million for the thirteen weeks ended May 4, 2019 and May 5, 2018 , respectively, and is classified within other financing activities on the Condensed Consolidated Statements of Cash Flows.

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Additional information pertaining to restricted stock units for the thirteen weeks ended May 4, 2019 and May 5, 2018 follows:



(in thousands)	May 4, 2019		May 5, 2018
Service-based restricted stock units:
Total grant date fair value of awards granted	$	14,473	$	14,627
Total grant date fair value of awards vested	10,971		10,774

Performance-based restricted stock units:
Total grant date fair value of awards granted	$	5,312	$	3,026
Total grant date fair value of awards vested	—		—

Market-based restricted stock units:
Total grant date fair value of awards granted	$	4,176	$	4,784
Total grant date fair value of awards vested	511		137

The weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the thirteen weeks ended May 4, 2019 and May 5, 2018 were as follows:



	May 4, 2019			May 5, 2018
Grant date market price	$	25.34		$	23.59
Fair value	$	36.24		$	33.69
Assumptions:
Price volatility	57		%	54		%
Expected term (years)	2.9			2.9
Risk-free interest rate	2.2		%	2.4		%
Dividend yield	3.2		%	3.4		%
Average volatility of peer companies	40.0		%	37.4		%
Average correlation coefficient of peer companies	0.2407			0.2709

Stock appreciation rights

The following table summarizes stock appreciation rights activity for the thirteen weeks ended May 4, 2019 :



	Number of Underlying Shares		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Life (years)
Outstanding at February 2, 2019	1,041,867		$	37.81
Granted	—		—
Exercised	(43,463	)	22.41
Forfeited or expired	(52,725	)	33.96
Outstanding at May 4, 2019	945,679		$	38.75	$	2,217,851	3.4
Stock appreciation rights exercisable at May 4, 2019	936,341		$	38.93	$	2,126,591	3.4
Stock appreciation rights expected to become exercisable in the future as of May 4, 2019	8,989		$	20.72	$	87,773	6.3

As of May 4, 2019 , total unrecognized compensation cost related to stock appreciation rights was insignificant and is expected to be recognized over a weighted-average period of 3 months .

The grant date fair value of stock appreciation rights that vested during the thirteen weeks ended May 4, 2019 and May 5, 2018 was $2.4 million and $0.9 million , respectively.

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10. DERIVATIVE INSTRUMENTS

As of May 4, 2019 , the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge either a portion, or all, of forecasted foreign currency denominated intercompany inventory sales, the resulting settlement of the foreign currency denominated intercompany accounts receivable, or both:



(in thousands)	Notional Amount ⁽¹⁾
Euro	$	61,003
British pound	$	28,562
Canadian dollar	$	11,890
Japanese yen	$	6,654


⁽¹⁾	Amounts reported are the U.S. Dollar notional amounts outstanding as of May 4, 2019 .

As of May 4, 2019 , foreign currency exchange forward contracts that were entered into to hedge foreign-currency-denominated net monetary assets and liabilities were as follows:



(in thousands)	Notional Amount ⁽¹⁾
Chinese yuan	$	22,218
Japanese yen	$	896


⁽¹⁾	Amount reported is the U.S. Dollar notional amount outstanding as of May 4, 2019 .

The location and amounts of derivative fair values on the Condensed Consolidated Balance Sheets as of May 4, 2019 and February 2, 2019 were as follows:



(in thousands)	Location	May 4, 2019		February 2, 2019		Location	May 4, 2019		February 2, 2019
Derivatives designated as hedging instruments:
Foreign currency exchange forward contracts	Other current assets	$	2,508	$	2,162	Accrued expenses	$	258	$	15
Derivatives not designated as hedging instruments:
Foreign currency exchange forward contracts	Other current assets	$	—	$	—	Accrued expenses	$	58	$	317
Total		$	2,508	$	2,162		$	316	$	332

Refer to Note 5, “ FAIR VALUE , ” for further discussion of the determination of the fair value of derivative instruments.

The location and amounts of derivative gains and losses for the thirteen weeks ended May 4, 2019 and May 5, 2018 on the Condensed Consolidated Statements of Operations and Comprehensive Loss were as follows:



(in thousands)		Thirteen Weeks Ended
Derivatives not designated as hedging instruments:	Location	May 4, 2019		May 5, 2018
Foreign currency exchange forward contracts gain	Other operating income, net	$	275	$	2,702



	Gain Recognized in AOCL on Derivative Contracts ⁽¹⁾				Location	Gain (Loss) Reclassified from AOCL into Earnings ⁽²⁾
	Thirteen Weeks Ended
(in thousands)	May 4, 2019		May 5, 2018			May 4, 2019		May 5, 2018
Derivatives in cash flow hedging relationships:
Foreign currency exchange forward contracts	$	2,263	$	8,607	Cost of sales, exclusive of depreciation and amortization	$	2,541	$	(5,072	)


⁽¹⁾	The amount represents the change in fair value of derivative contracts.


⁽²⁾	The amount represents the reclassification from AOCL into earnings when the hedged item affects earnings, which is when merchandise is converted to cost of sales, exclusive of deprecation and amortization.

Substantially all of the unrealized gains or losses related to designated cash flow hedges as of May 4, 2019 will be recognized in cost of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) over the next twelve months .

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11. ACCUMULATED OTHER COMPREHENSIVE LOSS

The activity in accumulated other comprehensive loss for the thirteen weeks ended May 4, 2019 was as follows:



	Thirteen Weeks Ended May 4, 2019
(in thousands)	Foreign Currency Translation Adjustment			Unrealized Gain (Loss) on Derivative Financial Instruments			Total
Beginning balance at February 2, 2019	$	(104,887	)	$	2,435		$	(102,452	)
Other comprehensive (loss) income before reclassifications	(2,786		)	2,263			(523		)
Reclassified from accumulated other comprehensive loss ⁽¹⁾	—			(2,541		)	(2,541		)
Tax effect	—			225			225
Other comprehensive loss	(2,786		)	(53		)	(2,839		)
Ending balance at May 4, 2019	$	(107,673	)	$	2,382		$	(105,291	)


⁽¹⁾	Amount represents gain reclassified from accumulated other comprehensive loss to cost of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statement of Operations and Comprehensive Loss.

The activity in accumulated other comprehensive loss for the thirteen weeks ended May 5, 2018 was as follows:



	Thirteen Weeks Ended May 5, 2018
(in thousands)	Foreign Currency Translation Adjustment			Unrealized Gain (Loss) on Derivative Financial Instruments			Total
Beginning balance at February 3, 2018	$	(84,947	)	$	(10,107	)	$	(95,054	)
Other comprehensive (loss) income before reclassifications	(8,339		)	8,607			268
Reclassified from accumulated other comprehensive loss ⁽¹⁾	—			5,072			5,072
Tax effect	—			(1,419		)	(1,419		)
Other comprehensive (loss) income	(8,339		)	12,260			3,921
Ending balance at May 5, 2018	$	(93,286	)	$	2,153		$	(91,133	)


⁽¹⁾	Amount represents loss reclassified from accumulated other comprehensive loss to cost of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statement of Operations and Comprehensive Loss.

12. SEGMENT REPORTING

The Company’s two operating segments are brand-based: Hollister and Abercrombie, the latter of which includes the Company’s Abercrombie & Fitch and abercrombie kids brands. These operating segments have similar economic characteristics, classes of consumers, products, and production and distribution methods, operate in the same regulatory environments, and have been aggregated into one reportable segment. Amounts shown below include net sales from wholesale, franchise and licensing operations, which are not a significant component of total revenue, and are aggregated within their respective operating segment and geographic area.

The following table provides the Company’s net sales by operating segment for the thirteen weeks ended May 4, 2019 and May 5, 2018 .



	Thirteen Weeks Ended
(in thousands)	May 4, 2019		May 5, 2018
Hollister	$	428,448	$	423,628
Abercrombie	305,524		307,271
Total	$	733,972	$	730,899

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The following table provides the Company’s net sales by geographic area for the thirteen weeks ended May 4, 2019 and May 5, 2018 .



	Thirteen Weeks Ended
(in thousands)	May 4, 2019		May 5, 2018
United States	$	469,658	$	449,126
Europe	158,245		169,660
Other	106,069		112,113
Total	$	733,972	$	730,899

13. SUBSEQUENT EVENTS

On May 22, 2019, the Company determined that it will be ceasing operations of its SoHo Hollister flagship store in New York City, and expects to close this store in the second quarter of Fiscal 2019. In addition, on May 28, 2019, the Company exercised an option to terminate its Fukuoka, Japan A&F flagship store lease, and expects to close this store in the second half of Fiscal 2020. These actions represent important ongoing steps in the Company’s global store network optimization efforts as it continues to pivot away from large format stores to smaller, omnichannel focused brand experiences.

As a result of these store closures, the Company expects to incur pre-tax net lease-related charges of $45 million during the second quarter of Fiscal 2019, primarily related to the present value of future lease payments associated with these stores that will be due subsequent to their closure. The Company expects future lease payments associated with these stores of approximately $105 million , which are expected to be paid subsequent to the dates of the respective actions through the fiscal year ending January 30, 2029 (“Fiscal 2028”). These future lease payments are not expected to exceed $15 million in any fiscal year.

The estimated amounts for the charges and future cash expenditures described above are preliminary and are dependent on the Company fulfilling certain obligations required pursuant to the related lease agreements. Actual amounts may be materially different from these estimates and the Company may also incur additional charges or future cash expenditures not currently contemplated due to events that may occur as a result of, or that are associated with, these store closures.

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ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with the Company’s unaudited Condensed Consolidated Financial Statements and notes thereto, which are included in this Quarterly Report on Form 10-Q in “ ITEM 1. FINANCIAL STATEMENTS .”

INTRODUCTION

MD&A is provided as a supplement to the accompanying Condensed Consolidated Financial Statements and notes thereto to help provide an understanding of the Company’s results of operations, financial condition, and liquidity. MD&A is organized as follows:


•	Overview . This section provides a general description of the Company’s business and certain segment information.


•	Current Trends and Outlook . This section provides a summary of the Company’s performance for the thirteen weeks ended May 4, 2019 and May 5, 2018 . In addition, this section discusses certain of management’s expectations for the upcoming fiscal year.


•	Results of Operations . This section provides an analysis of certain components of the Company’s Consolidated Statements of Operations and Comprehensive Loss for the thirteen weeks ended May 4, 2019 and May 5, 2018 .

•

Liquidity and Capital Resources . This section provides a discussion of the Company’s financial condition and liquidity as of May 4, 2019 , which includes (i) an analysis of financial condition as compared to February 2, 2019 ; (ii) an analysis of changes in cash flows for the thirteen weeks ended May 4, 2019 as compared to the thirteen weeks ended May 5, 2018 ; (iii) and an analysis of liquidity, including the availability under credit facilities, payments of dividends, and outstanding debt and covenant compliance.


•	Recent Accounting Pronouncements . The recent accounting pronouncements the Company has adopted including the dates of adoption and anticipated effects on the Company’s unaudited Condensed Consolidated Financial Statements are included in this Quarterly Report on Form 10-Q in “ ITEM 1. FINANCIAL STATEMENTS .”


•	Critical Accounting Policies and Estimates . This section discusses accounting policies considered to be important to the Company’s results of operations and financial condition, which typically require significant judgment and estimation on the part of management in their application.


•	Non-GAAP Financial Measures . This section provides a discussion of certain financial measures provided with MD&A that have been determined to not be in accordance with accounting principles generally accepted in the U.S. (“GAAP”), including information on why the Company believes the non-GAAP financial measures provided within MD&A are useful to investors.

Safe harbor statement under the Private Securities Litigation Reform Act of 1995

The Company cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this Quarterly Report on Form 10-Q or made by the Company, its management or spokespeople involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond the Company’s control. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” and similar expressions may identify forward-looking statements. Future economic and industry trends that could potentially impact revenue and profitability are difficult to predict. Therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company, or any other person, that the objectives of the Company will be achieved. The forward-looking statements included herein are based on information presently available to the management of the Company. Except as may be required by applicable law, the Company assumes no obligation to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

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The following factors, categorized by the primary nature of the associated risk, including the disclosures under the heading “FORWARD-LOOKING STATEMENTS AND RISK FACTORS” in “ITEM 1A. RISK FACTORS” of A&F’s Annual Report on Form 10-K for Fiscal 2018 , in some cases have affected and in the future could affect the Company’s financial performance and could cause actual results for Fiscal 2019 and beyond to differ materially from those expressed or implied in any of the forward-looking statements included in this Quarterly Report on Form 10-Q or otherwise made by management:

Macroeconomic and industry risks include:


•	Changes in global economic and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits, could have a material adverse effect on our business, results of operations and liquidity;


•	Failure to anticipate customer demand and changing fashion trends and to manage our inventory commensurately could adversely impact our sales levels and profitability;


•	Our market share may be negatively impacted by increasing competition and pricing pressures from companies with brands or merchandise competitive with ours;


•	Fluctuations in foreign currency exchange rates could adversely impact our financial condition and results of operations;


•	Our ability to attract customers to our stores depends, in part, on the success of the shopping malls or area attractions that our stores are located in or around; and


•	The impact of war, acts of terrorism or civil unrest could have a material adverse effect on our operating results and financial condition.

Strategic risks include:


•	The expansion of our direct-to-consumer sales channels and omnichannel initiatives are significant components of our growth strategy, and the failure to successfully develop our position across all channels could have an adverse impact on our results of operations;


•	Our international growth strategy and ability to conduct business in international markets may be adversely affected by legal, regulatory, political and economic risks; and


•	Failure to successfully implement our strategic plans could have a negative impact on our growth and profitability.

Operational risks include:


•	Failure to protect our reputation could have a material adverse effect on our brands;


•	Our business could suffer if our information technology systems are disrupted or cease to operate effectively;


•	We may be exposed to risks and costs associated with cyber-attacks, data protection, credit card fraud and identity theft that would cause us to incur unexpected expenses and reputation loss;


•	Our reliance on DCs makes us susceptible to disruptions or adverse conditions affecting our supply chain;


•	Changes in the cost, availability and quality of raw materials, labor, transportation, and trade relations could cause manufacturing delays and increase our costs;


•	We depend upon independent third parties for the manufacture and delivery of all our merchandise, and a disruption of the manufacture or delivery of our merchandise could result in lost sales and could increase our costs;


•	We rely on the experience and skills of our senior executive officers and associates, the loss of whom could have a material adverse effect on our business; and


•	Extreme weather conditions, including natural disasters, pandemic disease and other unexpected events, could negatively impact our facilities, systems and stores, as well as the facilities and systems of our vendors and manufacturers, which could result in an interruption to our business and adversely affect our operating results.

Legal, tax, regulatory and compliance risks include:


•	Fluctuations in our tax obligations and effective tax rate may result in volatility in our results of operations;


•	Our litigation exposure could have a material adverse effect on our financial condition and results of operations;


•	Failure to adequately protect our trademarks could have a negative impact on our brand image and limit our ability to penetrate new markets;


•	Changes in the regulatory or compliance landscape and compliance with changing regulations for accounting, corporate governance and public disclosure could adversely affect our business, results of operations and reported financial results; and


•	Our Asset-Based Revolving Credit Agreement and our Term Loan Agreement include restrictive covenants that limit our flexibility in operating our business.

The factors listed above are not our only risks. Additional risks may arise and current evaluations of risks may change, which could lead to material, adverse effects on our business, operating results and financial condition. These risk factors could cause actual results to differ materially from those expressed or implied in any of our forward-looking statements.

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OVERVIEW

Business summary

The Company is a global multi-brand omnichannel specialty retailer, whose products are sold primarily through its wholly-owned store and direct-to-consumer channels, as well as through various third-party wholesale, franchise and licensing arrangements. The Company offers a broad assortment of apparel, personal care products and accessories for Men, Women and Kids under the Hollister, Abercrombie & Fitch and abercrombie kids brands.The brands share a commitment to offering unique products of enduring quality and exceptional comfort that allow customers around the world to express their own individuality and style. The Company has operations in North America, Europe and Asia, among other regions.

The Company’s fiscal year ends on the Saturday closest to January 31. Fiscal years are designated in the Condensed Consolidated Financial Statements and notes by the calendar year in which the fiscal year commences. All references herein to “Fiscal 2019 ” represent the fifty-two-week fiscal year that will end on February 1, 2020 , and to “Fiscal 2018” represent the fifty-two-week fiscal year that ended February 2, 2019 .

Due to the seasonal nature of the retail apparel industry, the results of operations for any current period are not necessarily indicative of the results expected for the full fiscal year. The seasonality of the Company’s operations may also lead to significant fluctuations in certain asset and liability accounts.

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CURRENT TRENDS AND OUTLOOK

Throughout the lifetime of our Company, we have taken strides to transform our brands as consumer habits and shopping preferences change. We aim to keep pace with and anticipate our customers’ needs through a test-and-learn mentality, which has been embedded throughout our organization. Our plans for long-term growth are centered around our strategic pillars and are best categorized into three planned phases:


•	Phase I: Stabilizing while Transforming


–	Fiscal 2015 through Fiscal 2017


•	Phase II: Growing while Transforming


–	Fiscal 2018 through Fiscal 2020


•	Phase III: Accelerating Growth


–	Fiscal 2021 and thereafter

Fiscal 2019 is the second year of Phase II, “ Growing while Transforming,” which we expect to continue through Fiscal 2020. We have developed the following key transformation initiatives in order to deliver on our previously disclosed Fiscal 2020 targets:


•	Optimizing our global store network;


•	Enhancing digital and omnichannel capabilities;


•	Increasing the speed and efficiency of our concept-to-consumer product life cycle by further investing in capabilities to position our supply chain for greater speed, agility and efficiency, while leveraging data and analytics to offer the right product at the right time and the right price; and


•	Improving our customer engagement through our loyalty programs and marketing optimization.

We are pleased with our first quarter performance, with net sales up slightly despite adverse impacts from changes in foreign currency exchange rates. We delivered our seventh consecutive quarter of positive comparable sales, with growth in both Hollister and Abercrombie. During the first quarter, we saw operating loss margin improvement and a net loss reduction compared to last year, driven by top-line growth and operating expense leverage.

For the full year of Fiscal 2019 , we expect:


•	Net sales to be up in the range of 2% to 4%, driven by positive comparable sales and net new store contribution, partially offset by an adverse impact from changes in foreign currency exchange rates;


•	Comparable sales to be up low-single digits, on top of 3% last year;


•	Gross profit rate to be up slightly from the Fiscal 2018 rate of 60.2%, assuming no changes from the tariffs in place as of May 4, 2019;

•

Operating expense, excluding other operating income, to be up in the range of 4% to 5% from Fiscal 2018 adjusted non-GAAP operating expense of $2.03 billion, including net lease-related charges related to the flagship store actions discussed below of approximately $45 million . If not for the $45 million resulting from these actions, we would have expected operating expense to be consistent with previously issued expectations of up approximately 2% from Fiscal 2018 adjusted non-GAAP operating expense;


•	The effective tax rate to be in the mid 20s;


•	A weighted average diluted share count of approximately 68 million shares, excluding the effect of potential share buybacks; and


•	Capital investments of approximately $200 million.

We remain on track for our Fiscal 2020 targets, which were previously disclosed at our 2018 Investor Day, including doubling our Fiscal 2017 adjusted non-GAAP operating income margin of 2.9%.

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Global store network optimization

Reflecting our continued focus on global store network optimization, during the second quarter of Fiscal 2019 we determined that we will be ceasing operations of our SoHo Hollister flagship store in New York City, and we exercised an option to terminate our Fukuoka, Japan A&F flagship store lease. We also announced that we have exercised an option to terminate our Milan, Italy A&F flagship store lease. These actions build on the completed closures of the Pedder Street, Hong Kong and Copenhagen, Denmark A&F flagship locations and represent important ongoing steps in the our global store network optimization efforts as we continue to pivot away from large format stores to smaller, omnichannel focused brand experiences.

Details related to the timing of these store closures are as follows:


•	Pedder Street, Hong Kong A&F flagship store closure was completed in the first quarter of Fiscal 2017.


•	Copenhagen, Denmark A&F flagship store closure was completed in the first quarter of Fiscal 2019.


•	SoHo Hollister flagship store in New York City is expected to close in the second quarter of Fiscal 2019.


•	Milan, Italy A&F flagship store is expected to close by the end of Fiscal 2019.


•	Fukuoka, Japan A&F flagship store is expected to close in the second half of Fiscal 2020.

As a result of the SoHo and Fukuoka store closures, we expect to incur pre-tax net lease-related charges of approximately $45 million during the second quarter of Fiscal 2019, primarily related to the present value of future lease payments associated with these stores that will be due subsequent to their closure. We expect future lease payments associated with these stores of approximately $105 million , which are expected to be paid subsequent to the dates of the respective actions through the fiscal year ending January 30, 2029 (“Fiscal 2028”). These future lease payments are not expected to exceed $15 million in any fiscal year. The Copenhagen and Milan store closures are not expected to result in significant charges in Fiscal 2019.

We plan to continue our global store network optimization efforts and expect to deliver approximately 85 new store experiences in Fiscal 2019 across brands, including approximately 40 new stores, approximately 25 remodeled stores and approximately 20 right-sizes. We also expect to close up to 40 stores in Fiscal 2019, primarily in the U.S., primarily through natural lease expirations. In addition to natural lease expirations, certain other of our leases also include early termination options that can be exercised under specific conditions, allowing for significant lease flexibility. We may also elect to exit or modify its other leases, and could incur charges related to these actions.

Certain risks and challenges

There has been greater uncertainty with respect to trade policies, tariffs and government regulations affecting trade between the U.S. and other countries, such as the threat of additional tariffs on imported consumer goods from China.

In May 2019, tariffs on certain imported merchandise from China to the U.S. increased from 10% to 25%. Our products affected by this increase include fashion accessories, handbags and hats, and we do not expect this increase to have a material impact on our business and results of operations for Fiscal 2019. In addition, additional tariffs of up to 25% were proposed on certain other imported merchandise from China to the U.S., including apparel and footwear. The imposition of these additional tariffs or retaliatory trade measures in response to existing or future tariffs imposed, may have a material adverse effect on our business and results of operations, including an adverse effect on economic growth in both our domestic and international markets.

To mitigate this risk, our team has taken actions to proactively prepare for potential impacts, including shifting production into other countries and regions to both existing and new partners as necessary. We believe we have a number of tools available to help further mitigate this risk and we continue to focus on the diversification of our global supply chain. For context, in Fiscal 2018, approximately 25% of our merchandise receipts were imported from China to the U.S. We continue to believe we have the ability to reduce this percentage to under 20% in Fiscal 2019.

In addition, the June 2016 decision by the United Kingdom to leave the European Union continues to result in uncertainty related to the free movement of goods, services, people and capital between the United Kingdom and the European Union, consumer behavior, economic conditions and foreign currency exchange rates. The potential impacts of United Kingdom’s withdrawal from the European Union remain unclear and could adversely impact certain areas of our business, including, but not limited to, an increase in duties and delays in the delivery of merchandise from our Netherlands DC to our stores and direct-to-consumer customers in the United Kingdom if trade barriers materialize at ports of entry and departure. The potential impacts of United Kingdom’s withdrawal from the European Union could also adversely impact the operations of our vendors.

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To mitigate this risk, our team has begun to proactively prepare for potential adverse impacts by collaborating across the organization as well as working with external partners to develop the necessary contingency plans. We have also taken actions to reduce, to the extent possible, the potential material impact of any incremental duty exposure.

It is possible that our preparations for these events are not adequate and that these events could adversely affect our business and results of operations. For further discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations, refer to “ITEM 1A. RISK FACTORS,” included in A&F’s Annual Report on Form 10-K for Fiscal 2018.

SUMMARY OF RESULTS

The table below summarizes our results of operations determined in accordance with GAAP and non-GAAP financial measures, and other financial data for the thirteen week periods ended May 4, 2019 and May 5, 2018 . Discussion on why the Company believes that these non-GAAP financial measures are useful to investors is provided below under “NON-GAAP FINANCIAL MEASURES.”



	Thirteen Weeks Ended
	May 4, 2019						May 5, 2018
(in thousands, except change in net sales, comparable sales, gross profit rate, operating loss margin and per share amounts)	GAAP			Non-GAAP ⁽¹⁾			GAAP			Non-GAAP ⁽¹⁾
Statements of operations data
Net sales	$	733,972					$	730,899
Change in net sales	0		%				11		%
Comparable sales ⁽²⁾				1		%				5		%
Gross profit rate	60.5		%				60.5		%
Operating loss	$	(27,258	)	$	(27,258	)	$	(42,203	)	$	(36,603	)
Operating loss margin	(3.7		)%	(3.7		)%	(5.8		)%	(5.0		)%
Net loss attributable to A&F	$	(19,155	)	$	(19,155	)	$	(42,461	)	$	(38,402	)
Net loss per diluted share attributable to A&F	$	(0.29	)	$	(0.29	)	$	(0.62	)	$	(0.56	)
Statements of cash flows data
Net cash used for operating activities	$	(71,316	)				$	(16,171	)
Purchases of property and equipment	$	(43,872	)				$	(23,700	)
Dividends paid	$	(13,246	)				$	(13,642	)
Purchase of treasury stock	$	—					$	(18,670	)


⁽¹⁾	Refer to “ RESULTS OF OPERATIONS ” for details on excluded items.


⁽²⁾	Comparable sales are calculated on a constant currency basis and exclude revenue other than store and digital sales. Refer to the discussion below in “ NON-GAAP FINANCIAL MEASURES ,” for further details on the comparable sales calculation.

The table below provides certain components of the Company’s Condensed Consolidated Balance Sheets as of May 4, 2019 and February 2, 2019 .



(in thousands)	May 4, 2019		February 2, 2019
Cash and equivalents	$	586,133	$	723,135
Borrowings, gross at carrying amount	$	253,250	$	253,250
Inventories	$	432,350	$	437,879

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STORE ACTIVITY

Store count and gross square footage by brand and geography for the thirteen weeks ended May 4, 2019 and May 5, 2018 , respectively, were as follows:



	Hollister ⁽¹⁾			Abercrombie ⁽²⁾				Total Company
	United States		International	United States		International		United States		International		Total
February 2, 2019	393		149	270		49		663		198		861
New	1		—	—		—		1		—		1
Closed	(1	)	—	(3	)	(1	)	(4	)	(1	)	(5	)
May 4, 2019	393		149	267		48		660		197		857
Gross square footage (in thousands) :
May 4, 2019	2,656		1,231	1,991		625		4,647		1,856		6,503

	Hollister ⁽¹⁾			Abercrombie ⁽²⁾				Total Company
	United States		International	United States		International		United States		International		Total
February 3, 2018	394		144	285		45		679		189		868
New	1		—	—		—		1		—		1
Closed	—		—	—		—		—		—		—
May 5, 2018	395		144	285		45		680		189		869
Gross square footage (in thousands) :
May 5, 2018	2,685		1,200	2,206		619		4,891		1,819		6,710


⁽¹⁾	Locations with Gilly Hicks carveouts within Hollister stores are represented as a single store count. Excludes nine international franchise stores as of May 4, 2019 , eight international franchise stores as of February 2, 2019, six international franchise stores as of May 5, 2018 , and five international franchise stores as of February 3, 2018.

⁽²⁾

Abercrombie includes the Company’s Abercrombie & Fitch and abercrombie kids brands. Locations with abercrombie kids carveouts within Abercrombie & Fitch stores are represented as a single store count. Excludes seven international franchise stores as of May 4, 2019 , seven international franchise stores as of February 2, 2019, six international franchise stores as of May 5, 2018 , and four international franchise stores as of February 3, 2018.

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RESULTS OF OPERATIONS

THIRTEEN WEEKS ENDED MAY 4, 2019 VERSUS MAY 5, 2018

Net sales



	Thirteen Weeks Ended
	May 4, 2019		May 5, 2018
(in thousands)	Net Sales		Net Sales		$ Change			% Change	Comparable Sales ⁽¹⁾
Hollister	$	428,448	$	423,628	$	4,820		1%	2%
Abercrombie ⁽²⁾	305,524		307,271		(1,747		)	(1)%	1%
Total company	$	733,972	$	730,899	$	3,073		0%	1%

United States	$	469,658	$	449,126	$	20,532		5%	4%
International	264,314		281,773		(17,459		)	(6)%	(4)%
Total company	$	733,972	$	730,899	$	3,073		0%	1%


⁽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 brands.

For the first quarter of Fiscal 2019 , net sales increased slightly as compared to the first quarter of Fiscal 2018 , with an increase in units sold partially offset by a decrease in average unit retail. The year-over-year change in net sales reflects:


•	Changes in foreign currency exchange rates, which adversely impacted net sales by approximately $16 million , or 2% ; and


•	Positive comparable sales of 1% .

Cost of sales, exclusive of depreciation and amortization



	Thirteen Weeks Ended
	May 4, 2019			May 5, 2018
(in thousands)			% of Net Sales			% of Net Sales
Cost of sales, exclusive of depreciation and amortization	$	289,882	39.5%	$	288,554	39.5%

Gross profit	$	444,090	60.5%	$	442,345	60.5%

For the first quarter of Fiscal 2019 , cost of sales, exclusive of depreciation and amortization, as a percentage of net sales was approximately flat as compared to the first quarter of Fiscal 2018 .

Stores and distribution expense



	Thirteen Weeks Ended
	May 4, 2019			May 5, 2018
(in thousands)			% of Net Sales			% of Net Sales
Stores and distribution expense	$	358,356	48.8%	$	361,155	49.4%

For the first quarter of Fiscal 2019 , stores and distribution expense as a percentage of net sales decreased by approximately 60 basis points as compared to the first quarter of Fiscal 2018 , primarily due to decreased store occupancy expense as a percentage of net sales resulting in approximately 120 basis points of leverage, partially offset by increased direct-to-consumer expense as a percentage of total net sales. The year-over-year decrease in store occupancy expense as a percentage of net sales was primarily driven by reductions in depreciation expense and rent expense, the latter of which was driven by the impact of the $3.9 million of lease termination charges related to the Copenhagen A&F flagship store on last year’s results.

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Marketing, general and administrative expense



	Thirteen Weeks Ended
	May 4, 2019			May 5, 2018
(in thousands)			% of Net Sales				% of Net Sales
Marketing, general and administrative expense	$	111,947	15.3%	$	124,897		17.1%
Deduct:
Charges related to certain legal matters ⁽¹⁾	—		0.0%	(5,600		)	(0.8)%
Adjusted non-GAAP marketing, general and administrative expense	$	111,947	15.3%	$	119,297		16.3%


⁽¹⁾	Includes legal charges in connection with a then proposed settlement of a class action claim, which received final court approval and was paid in the fourth quarter of Fiscal 2018.

For the first quarter of Fiscal 2019 , marketing, general and administrative expense as a percentage of net sales decreased by approximately 180 basis points as compared to the first quarter of Fiscal 2018 , primarily due to the impact of the $5.6 million of charges related to certain legal matters on last year’s results, decreased compensation costs, and a reduction in depreciation expense on information technology assets. Excluding the $5.6 million of charges related to certain legal matters presented above, first quarter of Fiscal 2019 adjusted non-GAAP marketing, general and administrative expense as a percentage of net sales decreased by approximately 100 basis points as compared to the first quarter of Fiscal 2018 .

Asset impairment



	Thirteen Weeks Ended
	May 4, 2019			May 5, 2018
(in thousands)			% of Net Sales			% of Net Sales
Asset impairment	$	1,662	0.2%	$	1,056	0.1%

The Company incurred store asset impairment charges of $1.7 million and $1.1 million for the first quarter of Fiscal 2019 and Fiscal 2018 , respectively.

Other operating income, net



	Thirteen Weeks Ended
	May 4, 2019			May 5, 2018
(in thousands)			% of Net Sales			% of Net Sales
Other operating income, net	$	617	0.1%	$	2,560	0.4%

For the first quarter of Fiscal 2019 , other operating income, net as a percentage of net sales decreased by approximately 30 basis points as compared to the first quarter of Fiscal 2018 , primarily due to lower foreign currency exchange rate related gains, including the impact resulting from the adoption of the new derivative accounting standard. Refer to Note 2, “ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ” for further discussion of the new derivative accounting standard.

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Operating loss



	Thirteen Weeks Ended
	May 4, 2019				May 5, 2018
(in thousands)				% of Net Sales				% of Net Sales
Operating loss	$	(27,258	)	(3.7)%	$	(42,203	)	(5.8)%
Deduct:
Charges related to certain legal matters ⁽¹⁾	—			0.0%	5,600			0.8%
Adjusted non-GAAP operating loss	$	(27,258	)	(3.7)%	$	(36,603	)	(5.0)%


⁽¹⁾	Includes legal charges in connection with a then proposed settlement of a class action claim, which received final court approval and was paid in the fourth quarter of Fiscal 2018.

For the first quarter of Fiscal 2019 , operating loss as a percentage of net sales improved 210 basis points as compared to the first quarter of Fiscal 2018 . Excluding items presented above, first quarter of Fiscal 2019 adjusted non-GAAP operating loss as a percentage of net sales improved 130 basis points as compared to the first quarter of Fiscal 2018 . The year-over-year change in operating income reflects changes in foreign currency exchange rates, which adversely impacted operating loss by approximately $2 million , net of hedging.

Interest expense, net



	Thirteen Weeks Ended
	May 4, 2019				May 5, 2018
(in thousands)				% of Net Sales				% of Net Sales
Interest expense	$	4,532		0.6%	$	5,662		0.8%
Interest income	(3,916		)	(0.5)%	(2,644		)	(0.4)%
Interest expense, net	$	616		0.1%	$	3,018		0.4%

For the first quarter of Fiscal 2019 , interest expense, net as a percentage of net sales decreased as compared to the first quarter of Fiscal 2018 by approximately 30 basis points. This decrease is primarily due to the elimination of leasehold financing obligations and corresponding interest expense related to these obligations upon adoption of the new lease accounting standard. In addition, higher interest income earned on the Company’s investments and cash holdings contributed to the decrease in interest expense, net as a percentage of net sales.

Income tax benefit



	Thirteen Weeks Ended
	May 4, 2019				May 5, 2018
(in thousands, except ratios)				Effective Tax Rate				Effective Tax Rate
Income tax benefit	$	(9,588	)	34.4%	$	(3,713	)	8.2%
Deduct:
Tax effect of excluded items ⁽¹⁾	—				1,541
Adjusted non-GAAP income tax benefit	$	(9,588	)	34.4%	$	(2,172	)	5.5%


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

For the first quarter of Fiscal 2019 , the year-over-year change in the effective tax rate as compared to the first quarter of Fiscal 2018 , which is highly sensitive at lower levels of pre-tax earnings, was primarily driven by changes in the level and mix of consolidated pre-tax earnings between operating and valuation allowance jurisdictions. In the first quarter of Fiscal 2019 , the effective tax rate was impacted by discrete income tax benefits of $1.1 million as compared to discrete non-cash income tax charges of $8.2 million in the first quarter of Fiscal 2018 , related to the exercise and expiration of certain share-based compensation awards.

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Net loss and Net loss per share attributable to A&F



	Thirteen Weeks Ended
	May 4, 2019				May 5, 2018
(in thousands)				% of Net Sales				% of Net Sales
Net loss attributable to A&F	$	(19,155	)	(2.6)%	$	(42,461	)	(5.8)%
Adjusted non-GAAP net loss attributable to A&F ⁽¹⁾	$	(19,155	)	(2.6)%	$	(38,402	)	(5.3)%

Net loss per diluted share attributable to A&F	$	(0.29	)		$	(0.62	)
Adjusted non-GAAP net loss per diluted share attributable to A&F ⁽¹⁾	$	(0.29	)		$	(0.56	)


⁽¹⁾	Excludes items presented above under “ Operating loss , ” and “ Income tax benefit . ”

For the first quarter of Fiscal 2019 , net loss per diluted share attributable to A&F was $0.29 as compared to $0.62 for the first quarter of Fiscal 2018 . Excluding items presented above under “ Operating loss , ” and “ Income tax benefit , ” first quarter of Fiscal 2018 adjusted non-GAAP net loss per diluted share attributable to A&F was $0.56 . The year-over-year change in net loss per diluted share attributable to A&F reflects changes in foreign currency exchange rates, which adversely impacted net loss per diluted share attributable to A&F by approximately $0.02 , net of hedging.

LIQUIDITY AND CAPITAL RESOURCES

HISTORICAL SOURCES AND USES OF CASH

Seasonality of cash flows

The Company’s business has two principal selling seasons: the spring season, which includes the first and second fiscal quarters (“Spring”) and the fall season, which includes the third and fourth fiscal quarters (“Fall”). As is typical in the apparel industry, the Company experiences its greatest sales activity during Fall due to 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 year and to reinvest in the business to support future growth. The Company also has a revolving credit facility available as a source of additional funding.

Credit Facilities

On August 7, 2014, A&F, through its subsidiary Abercrombie & Fitch Management Co. (“A&F Management”) as the lead borrower (with A&F and certain other subsidiaries as borrowers or guarantors), entered into an asset-based revolving credit agreement.

On October 19, 2017, the Company, through its subsidiary A&F Management, entered into the Second Amendment to Credit Agreement (the “ABL Second Amendment”), amending and extending the maturity date of the asset-based revolving credit agreement to October 19, 2022. As amended, the asset-based revolving credit agreement continues to provide for a senior secured credit facility of up to $400 million (the “Amended ABL Facility”).

As of May 4, 2019 , the borrowing base on the Amended ABL Facility was $277.0 million .

The Company uses, in the ordinary course of business, stand-by letters of credit under the existing Amended ABL Facility. As of both May 4, 2019 and February 2, 2019 , the Company had not drawn on the Amended ABL Facility, but had approximately $0.4 million of outstanding stand-by letters of credit under the Amended ABL Facility.

A&F, through its subsidiary A&F Management as the borrower (with A&F and certain other subsidiaries as guarantors), also entered into a term loan agreement on August 7, 2014, which provides for a term loan facility of $300 million (the “Term Loan Facility” and, together with the Amended ABL Facility, the “Credit Facilities”).

On June 22, 2018, A&F, through its subsidiary A&F Management, entered into the Term Loan Second Amendment, which, among other things, repriced the Term Loan Facility by reducing the applicable margins for term loans by 0.25% .

The interest rate on borrowings under the Term Loan Facility was 5.99% as of May 4, 2019 .

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The Company’s Term Loan debt is presented in the Condensed Consolidated Balance Sheets, net of the unamortized discount and fees. Net borrowings as of May 4, 2019 and February 2, 2019 were as follows:



(in thousands)	May 4, 2019			February 2, 2019
Borrowings, gross at carrying amount	$	253,250		$	253,250
Unamortized discount	(761		)	(845		)
Unamortized fees	(1,753		)	(1,966		)
Borrowings, net	250,736			250,439
Less: short-term portion of borrowings, net	—			—
Long-term portion of borrowings, net	$	250,736		$	250,439

The material provisions of the Credit Facilities have not changed from those disclosed in Note 10, “ BORROWINGS ,” of the Notes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Annual Report on Form 10-K for Fiscal 2018 .

Operating activities

For the thirteen weeks ended May 4, 2019 , net cash used for operating activities was $71.3 million as compared to net cash used for operating activities of $16.2 million for the thirteen weeks ended May 5, 2018 . The year-over-year change in cash flow associated with operating activities was primarily driven by increased payments to vendors in the first quarter of Fiscal 2019 as compared to the prior year, partially offset by decreased incentive compensation payments in Fiscal 2019 as compared to the prior year.

Investing activities

For the thirteen weeks ended May 4, 2019 and May 5, 2018 , net cash outflows for investing activities were used primarily for purchases of property and equipment of $43.9 million and $23.7 million , respectively.

Financing activities

For the thirteen weeks ended May 4, 2019 , net cash used for financing activities primarily consisted of dividend payments of $13.2 million . For the thirteen weeks ended May 5, 2018 , cash used for financing activities consisted primarily of the repurchase of approximately 0.8 million shares of A&F’s Common Stock in the open market with a market value of approximately $18.7 million and dividend payments of $13.6 million .

FUTURE CASH REQUIREMENTS AND SOURCES OF CASH

The Company’s capital allocation strategy remains to prioritize investments in the business to build on the foundation for sustainable long-term growth and seeks to invest in projects that have high expected returns. The Company also evaluates opportunities to accelerate potential investments, including improvements in customer experience, both in stores and online. These improvements include store remodels and right-sizes, new store openings, and acceleration of our transformation efforts. The Company also evaluates store closures, including flagship lease buyouts and options to early terminate its store leases. In addition, the Company returns cash to stockholders through dividends and completes share repurchases as deemed appropriate. Dividends are declared at the discretion of A&F’s Board of Directors. A&F’s Board of Directors reviews the dividend on a quarterly basis and establishes the dividend rate based on A&F’s financial condition, results of operations, capital requirements, current and projected cash flows, business prospects and other factors which the Board of Directors deems relevant. Capital allocation priorities and investments are reviewed by the Company’s Board of Directors considering both liquidity and valuation factors.

To execute its capital allocation strategy, the Company relies on excess operating cash flows, which are largely generated in the Fall season, to fund operations throughout the fiscal year and to reinvest in the business to support future growth. The Company also has availability under the Amended ABL Facility as a source of additional funding. Over the next twelve months, the Company’s primary cash requirements will be to fund operating activities, including the acquisition of inventory, and obligations related to compensation, leases, any lease buyouts or options to terminate store leases the Company may exercise, taxes and other operating activities, as well as to fund capital expenditures, marketing initiatives, quarterly dividends to stockholders subject to approval by A&F’s Board of Directors and debt service requirements, including voluntary debt prepayments, or required repayments, if any, based on annual excess cash flows, as defined in the term loan agreement applicable to the Term Loan Facility.

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The Company may repurchase shares of its Common Stock from time to time, dependent on market and business conditions, with the primary objective to offset dilution from issuances of Common Stock associated with the exercise of employee stock appreciation rights and vesting of restricted stock units. Shares may be repurchased in the open market, including pursuant to any trading plans established in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, through privately negotiated transactions or other transactions or by a combination of such methods. The Company would anticipate funding such repurchases by utilizing free cash flow generated from operations or proceeds from the Amended ABL Facility.

As of May 4, 2019 , the Company had the authority to repurchase approximately 3.6 million shares as part of the A&F Board of Directors’ previously approved authorization. On June 12, 2019, the A&F Board of Directors authorized the repurchase of an additional 5.0 million shares, bringing the shares available for purchase as of June 12, 2019 under its publicly announced share repurchase authorizations to approximately 7.6 million shares.

Income taxes

The Company has determined that the remaining balance of the Company’s undistributed earnings and profits from its foreign subsidiaries are considered indefinitely reinvested outside of the U.S., and that these earnings and profits could be repatriated without incurring additional federal income tax. If additional funds were to be repatriated to the U.S., the Company could incur an insignificant amount of state income taxes and foreign withholding taxes.

As of May 4, 2019 , $247.7 million of the Company’s $586.1 million of cash and equivalents was held by foreign affiliates. The Company is not dependent on dividends from its foreign affiliates to fund its U.S. operations or pay dividends to A&F’s stockholders.

Capital investments

For Fiscal 2019 , the Company expects capital investments to be approximately $200 million , prioritized towards new store experiences, as well as direct-to-consumer and omnichannel investments, information technology, and other projects.

OFF-BALANCE SHEET ARRANGEMENTS

The Company uses, in the ordinary course of business, stand-by letters of credit under the Amended ABL Facility. The Company has no other off-balance sheet arrangements.

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. During the thirteen weeks ended May 4, 2019 , there were no material changes in the contractual obligations as of February 2, 2019 , 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).

RECENT ACCOUNTING PRONOUNCEMENTS

The Company describes its significant accounting policies in Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES , ” of the Notes to Consolidated Financial Statements contained in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of A&F’s Annual Report on Form 10-K for Fiscal 2018 . Refer to Note 2, “ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ” of the Notes to Condensed Consolidated Financial Statements included in “ITEM 1. FINANCIAL STATEMENTS (UNAUDITED),” of this Quarterly Report on Form 10-Q for recent accounting pronouncements, including the dates of adoption and estimated effects on the Condensed Consolidated Financial Statements.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company describes its critical accounting policies and estimates in “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” of A&F’s Annual Report on Form 10-K for Fiscal 2018 . There have been no other significant changes in critical accounting policies and estimates since the end of Fiscal 2018 , except as described below and in Note 1, “ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Recent accounting pronouncements ” of the Notes to Condensed Consolidated Financial Statements included in “ITEM 1. FINANCIAL STATEMENTS (UNAUDITED),” of this Quarterly Report on Form 10-Q.



Policy		Effect if Actual Results Differ from Assumptions
Impairment of long-lived assets
Long-lived assets, primarily lease right-of-use assets, leasehold improvements, furniture, fixtures and equipment, are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset group might not be recoverable. These include, but are not limited to, material declines in operational performance, a history of losses, an expectation of future losses, adverse market conditions and store closure or relocation decisions. On at least a quarterly basis, the Company reviews for indicators of impairment at the individual store level, the lowest level for which cash flows are identifiable. Stores that display an indicator of impairment are subjected to an impairment assessment. The Company’s impairment assessment requires management to make assumptions and judgments related, but not limited, to management’s expectations for future operations and projected cash flows. The key assumptions used in the Company’s undiscounted future cash flow models include sales, gross profit and, to a lesser extent, operating expenses. An impairment loss may be recognized when these undiscounted future cash flows are less than the carrying amount of the asset group. In the circumstance of impairment, any loss would be measured as the excess of the carrying amount of the asset group over its fair value. The fair value of the asset group is determined based on the highest and best use of the asset group, which may include consideration of market rent for the right to use leased assets included in the asset group. The Company also may utilize assumptions related to projected store cash flows when estimating the fair value of impaired assets.		If actual results are not consistent with the estimates and assumptions used, there may be a material impact on the Company’s financial condition or results of operation. Store assets that were tested for impairment and not impaired as of May 4, 2019, had long-lived assets with a net book value of $115.0 million, which included $99.0 million of operating lease right-of-use assets under the new lease accounting standard. These stores had undiscounted cash flows which were in the range of 100% to 150% of their respective net asset values. Store assets that were impaired as of May 4, 2019 had a remaining net book value of $140.3 million, which included $139.0 million of operating lease right-of-use assets under the new lease accounting standard.
Leases
The Company’s lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term. The Company’s lease liabilities represent the Company’s obligation to make lease payments arising from the lease. At the lease commencement date, the Company’s lease right-of-use assets and liabilities are recognized on the Condensed Consolidated Balance Sheets, based on the present value of remaining lease payments over the lease term. In measuring the Company’s lease liabilities, the remaining lease payments are discounted to present value using a discount rate. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the remaining lease term as of the date of adoption. The Company estimates its incremental borrowing rate on a quarterly basis, based on the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.		The Company does not expect material changes to the underlying assumptions used to measure its lease liabilities as of May 4, 2019. However, actual results could vary from estimates and could result in material gains or losses. An increase or decrease of 10% in the Company’s weighted-average discount rate as of May 4, 2019, would impact both the Company’s total assets and total liabilities by less than 1% and would not have a material impact on the Company’s pre-tax income for Fiscal 2019.

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NON-GAAP FINANCIAL MEASURES

This Quarterly Report on Form 10-Q includes discussion of certain financial measures under “ RESULTS OF OPERATIONS ” on both a GAAP and a non-GAAP basis. The Company believes that each of the non-GAAP financial measures presented in this “ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” is useful to investors as it provides a meaningful basis to evaluate the Company’s operating performance excluding the effect of certain items that the Company believes do not reflect its future operating outlook, and thereby supplementing investors’ understanding of comparability of operations across periods. Management used these non-GAAP financial measures during the periods presented to assess the Company’s performance and to develop expectations for future operating performance. These non-GAAP financial measures should be used as a supplement to, and not as an alternative to, the Company’s GAAP financial results, and may not be calculated in the same manner as similar measures presented by other companies.

Financial information on a constant currency basis

The Company provides certain financial information on a constant currency basis to enhance investors’ understanding of underlying business trends and operating performance by removing the impact of foreign currency exchange rate fluctuations. The effect from foreign currency exchange rates, calculated on a constant currency basis, is determined by applying the current period’s foreign currency exchange rates to the prior year’s results and is net of the year-over-year impact from hedging. The per diluted share effect from foreign currency exchange rates for the thirteen weeks ended May 4, 2019 and May 5, 2018 is calculated using a 27% effective tax rate.

Comparable sales

In addition, the Company provides comparable sales, defined as the percentage year-over-year change in the aggregate of (1) sales for stores that have been open as the same brand at least one year and whose square footage has not been expanded or reduced by more than 20% within the past year, with the prior year’s net sales converted at the current year’s foreign currency exchange rates to remove the impact of foreign currency exchange rate fluctuations, and (2) direct-to-consumer sales with the prior year’s net sales converted at the current year’s foreign currency exchange rates to remove the impact of foreign currency exchange rate fluctuations. Comparable sales exclude revenue other than store and direct-to-consumer sales. Management uses comparable sales to understand the drivers of year-over-year changes in net sales as well as a performance metric for certain performance-based restricted stock units. The Company believes comparable sales is a useful metric as it can assist investors in distinguishing the portion of the Company’s revenue attributable to existing locations from the portion attributable to the opening or closing of stores. The most directly comparable GAAP financial measure is change in net sales.

Excluded items

The following financial measures are disclosed on a GAAP and on an adjusted non-GAAP basis excluding the following items, as applicable:



Financial measures ⁽¹⁾		Excluded items
Marketing, general and administrative expense		Certain legal charges
Operating loss		Certain legal charges
Net loss and net loss per share attributable to A&F ⁽²⁾		Certain legal charges; and the tax effect of pre-tax excluded items


⁽¹⁾	Certain of these financial measures are also expressed as a percentage of net sales.


⁽²⁾	The Company also presents income tax benefit and the effective tax rate on both a GAAP and on an adjusted non-GAAP basis excluding the items listed under “ Operating loss ,” as applicable, in the table above. The tax effect of excluded items is the difference between the tax provision calculation on a GAAP basis and on an adjusted non-GAAP basis.

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ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Investment securities

The Company maintains its cash equivalents in financial instruments, primarily time deposits and money market funds, with original maturities of three months or less. Due to the short-term nature of these instruments, changes in interest rates are not expected to materially affect the fair value of these financial instruments.

The Rabbi Trust includes amounts to meet funding obligations to participants in the Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan I, the Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan II and the Supplemental Executive Retirement Plan. The Rabbi Trust assets primarily consist of trust-owned life insurance policies which are recorded at cash surrender value. The change in cash surrender value of the trust-owned life insurance policies held in the Rabbi Trust resulted in realized gains of $0.8 million for each of the thirteen weeks ended May 4, 2019 and May 5, 2018 , respectively, which are recorded in interest expense, net on the Condensed Consolidated Statements of Operations and Comprehensive Loss.

The Rabbi Trust assets are included in other assets on the Condensed Consolidated Balance Sheets as of May 4, 2019 and February 2, 2019 , and are restricted in their use as noted above.

Interest rate risks

As of May 4, 2019 , the Company has approximately $253.3 million in gross borrowings outstanding under its Term Loan Facility and no borrowings outstanding under its Amended ABL Facility. The Credit Facilities carry interest rates that are tied to LIBO rate, or an alternate base rate, plus a margin. The interest rate on the Term Loan Facility has a 100 basis point LIBO rate floor, and assuming no changes in the Company’s financial structure as it stands, an increase in the interest rate on borrowings under the Term Loan Facility as of May 4, 2019 of 100 basis points would increase Fiscal 2019 annual interest expense by approximately $2.6 million . This hypothetical analysis for Fiscal 2019 may differ from the actual change in interest expense due to potential changes in interest rates or gross borrowings outstanding under the Company’s Credit Facilities. The expected transition from the widespread use of LIBO rate to alternative rates over the next several years is not expected to have a material impact on interest expense on borrowings outstanding under the Company’s Credit Facilities.

Foreign exchange rate risk

A&F’s international subsidiaries generally operate with functional currencies other than the U.S. Dollar. Since the Company’s Condensed Consolidated Financial Statements are presented in U.S. Dollars, the Company must translate all components of these financial statements from functional currencies into U.S. Dollars at exchange rates in effect during or at the end of the reporting period. The fluctuation in the value of the U.S. Dollar against other currencies affects the reported amounts of revenues, expenses, assets and liabilities. The potential impact of foreign currency exchange rate fluctuations increases as international operations relative to domestic operations increase.

A&F and its subsidiaries have exposure to changes in foreign currency exchange rates associated with foreign currency transactions and forecasted foreign currency transactions, including the sale of inventory between subsidiaries and foreign-currency-denominated assets and liabilities. The Company has established a program that primarily utilizes foreign currency exchange forward contracts to partially offset the risks associated with the effects of certain foreign currency transactions and forecasted transactions. Under this program, increases or decreases in foreign currency exchange rate exposures are partially offset by gains or losses on foreign currency exchange forward contracts, to mitigate the impact of foreign currency exchange gains or losses. The Company does not use forward contracts to engage in currency speculation. All outstanding foreign currency exchange forward contracts are recorded at fair value at the end of each fiscal period.

The fair value of outstanding foreign currency exchange forward contracts included in other current assets was $2.5 million as of May 4, 2019 and was $2.2 million as of February 2, 2019 . The fair value of outstanding foreign currency exchange forward contracts included in accrued expenses was $0.3 million as of each of May 4, 2019 and February 2, 2019 . Foreign currency exchange forward contracts are sensitive to changes in foreign currency exchange rates. The Company assessed the risk of loss in fair values from the effect of a hypothetical 10% devaluation of the U.S. Dollar against the exchange rates for foreign currencies under contract. Such a hypothetical devaluation would decrease derivative contract fair values by approximately $12.8 million . As the Company’s foreign currency exchange forward contracts are primarily designated as cash flow hedges of forecasted transactions, the hypothetical change in fair value would be largely offset by the net change in fair values of the underlying hedged items.

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ITEM 4.	CONTROLS AND PROCEDURES

Disclosure controls and procedures

A&F maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the reports that A&F files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to A&F’s management, including the principal executive officer and the principal financial officer, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.

A&F’s management, including the Chief Executive Officer of A&F (who serves as Principal Executive Officer of A&F) and the Senior Vice President and Chief Financial Officer of A&F (who serves as Principal Financial Officer and Principal Accounting Officer of A&F), evaluated the effectiveness of A&F’s design and operation of its disclosure controls and procedures as of the end of the fiscal quarter ended May 4, 2019 . The Chief Executive Officer of A&F (in such individual’s capacity as the Principal Executive Officer of A&F) and the Senior Vice President and Chief Financial Officer of A&F (in such individual’s capacity as the Principal Financial Officer of A&F) concluded that A&F’s disclosure controls and procedures were effective at a reasonable level of assurance as of May 4, 2019 , the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in internal control over financial reporting

There were no changes during A&F’s fiscal quarter ended May 4, 2019 that materially affected, or are reasonably likely to materially affect, A&F’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) except for those described below:


•	On February 3, 2019, the Company adopted the new lease accounting standard, ASU 2016-02, Leases . As part of the adoption of the new lease accounting standard, the Company completed upgrades to its lease administration software, modified certain existing internal controls and processes and implemented new internal controls and processes.

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PART II. OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

The Company is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business. The Company’s legal costs incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, and the Company establishes estimated liabilities for the outcome of litigation where losses are deemed probable and the amount of loss, or range of loss, is reasonably estimable. The Company also determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess of related accrued liabilities, if any, when it has determined that a loss is reasonably possible and it is able to determine such estimates. The Company’s accrued charges for certain legal contingencies are classified within accrued expenses on the Condensed Consolidated Balance Sheet included in “ITEM 1. FINANCIAL STATEMENTS (UNAUDITED),” of this Quarterly Report on Form 10-Q. In addition, the Company has not established accruals for certain claims and legal proceedings pending against the Company where it is not possible to reasonably estimate the outcome or potential liability, and cannot estimate a range of reasonably possible losses for these legal matters.

Actual liabilities may differ from the amounts recorded, due to uncertainties regarding final settlement agreement negotiations, court approvals and the terms of any approval by the courts, and there can be no assurance that final resolution of legal matters will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows. The Company’s assessment of the current exposure could change in the event of the discovery of additional facts.


ITEM 1A.	RISK FACTORS

The Company’s risk factors as of May 4, 2019 have not changed materially from those disclosed in Part I, “ITEM 1A. RISK FACTORS” of A&F’s Annual Report on Form 10-K for Fiscal 2018 .


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no sales of equity securities during the first quarter of Fiscal 2019 that were not registered under the Securities Act of 1933, as amended.

The following table provides information regarding the purchase of shares of Common Stock of A&F made by or on behalf of A&F or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during each fiscal month of the thirteen weeks ended May 4, 2019 :



Period (Fiscal Month)	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾	Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs ⁽³⁾
February 3, 2019 through March 2, 2019	3,125	$	20.75	—	3,571,938
March 3, 2019 through April 6, 2019	238,473	$	25.86	—	3,571,938
April 7, 2019 through May 4, 2019	2,184	$	27.34	—	3,571,938
Total	243,782	$	25.80	—	3,571,938


⁽¹⁾	243,782 shares of A&F’s Common Stock purchased during the thirteen weeks ended May 4, 2019 represented shares withheld for tax payments due upon the vesting of employee restricted stock units and the exercise of employee stock appreciation rights.


⁽²⁾	No shares of A&F’s Common Stock were repurchased during the thirteen weeks ended May 4, 2019 pursuant to A&F’s publicly announced stock repurchase authorization. On August 14, 2012, A&F’s Board of Directors authorized the repurchase of 10.0 million shares of A&F’s Common Stock, which was announced on August 15, 2012.


⁽³⁾	The number shown represents, as of the end of each period, the maximum number of shares of A&F’s Common Stock that may yet be purchased under A&F’s publicly announced stock repurchase authorization described in footnote 2 above. The shares may be purchased, from time to time, depending on market conditions.

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ITEM 6. EXHIBITS



Exhibit No.	Document
10.1	Form of Performance Share Award Agreement used to evidence the grant of performance shares to associates (employees) of Abercrombie & Fitch Co. and its subsidiaries under the Abercrombie & Fitch Co. 2016 Long-Term Incentive Plan for Associates on or after March 26, 2019.*
10.2	Summary of Compensation Structure for Non-Associate Directors of Abercrombie & Fitch Co. for Fiscal 2019.*
10.3	Summary of Terms of the Annual Restricted Stock Unit Grants made and to be made to the Non-Associate Directors of Abercrombie & Fitch Co. under the Abercrombie & Fitch Co. 2016 Long-Term Incentive Plan for Directors in Fiscal 2019.*
31.1	Certifications by Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certifications by Senior Vice President and Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certifications by Chief Executive Officer (Principal Executive Officer) and Senior Vice President and Chief Financial Officer (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101	The following materials from Abercrombie & Fitch Co.’s Quarterly Report on Form 10-Q for the quarterly period ended May 4, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations and Comprehensive Loss for the Thirteen Weeks Ended May 4, 2019 and May 5, 2018; (ii) Condensed Consolidated Balance Sheets at May 4, 2019 and February 2, 2019; (iii) Condensed Consolidated Statements of Stockholders’ Equity for the Thirteen Weeks Ended May 4, 2019 and May 5, 2018 (iv) Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks Ended May 4, 2019 and May 5, 2018; and (v) Notes to Condensed Consolidated Financial Statements.*


*	Filed herewith.


**	Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	ABERCROMBIE & FITCH CO.
Date: June 12, 2019	By	/s/ Scott Lipesky
		Scott Lipesky
		Senior Vice President and Chief Financial Officer (Principal Financial Officer and Authorized Officer)

EXHIBIT 10.1

PERFORMANCE SHARE AWARD AGREEMENT

(2016 Long-Term Incentive Plan for Associates)

This PERFORMANCE SHARE AWARD AGREEMENT (this “AGREEMENT”) is made to be effective as of ______________ (the date on which the COMMITTEE (as defined below) approves the award, referred to as the “GRANT DATE”), by and between Abercrombie & Fitch Co., a Delaware corporation (the “COMPANY”), and ___________ , an employee of the COMPANY or one of the COMPANY’s subsidiaries or affiliates (“PARTICIPANT”).

WITNESSETH :

WHEREAS, pursuant to the provisions of the 2016 Long-Term Incentive Plan for Associates of the COMPANY (the “PLAN”), the Compensation and Organization Committee (the “COMMITTEE”) of the Board of Directors of the COMPANY (the “BOARD”) administers the PLAN; and

WHEREAS, the COMMITTEE has determined that PARTICIPANT should be granted rights to earn a target number of shares of Class A Common Stock, $0.01 par value (the “SHARES”), of the COMPANY equal to _________ SHARES (such rights, the “AWARD”), subject to the restrictions, conditions and other terms set forth in this AGREEMENT;

NOW, THEREFORE, in consideration of the premises, the parties hereto make the following agreement, intending to be legally bound thereby:

1. Grant of AWARD . Pursuant to, and subject to, the terms and conditions set forth in this AGREEMENT and in the PLAN, the COMPANY hereby grants to PARTICIPANT an AWARD with a target number of SHARES of the COMPANY (the “TARGET AWARD”) equal to _________ SHARES (subject to adjustment as provided in Section 11(c) of the PLAN and Section 5(F) of this AGREEMENT, if applicable). The AWARD represents the right to earn up to 200% of the target number of SHARES of the COMPANY subject to the AWARD, subject to the restrictions, conditions and other terms set forth in this AGREEMENT.

2. Terms and Conditions of the AWARD .

(A) EARNED UNITS . The issuance of SHARES of the COMPANY pursuant to this AGREEMENT shall be subject to the COMPANY’s achievement with respect to the performance goals of (i) RELATIVE TOTAL SHAREHOLDER RETURN, (ii) GAAP NET SALES COMPOUND ANNUAL GROWTH RATE , and (iii) AVERAGE RETURN ON INVESTED CAPITAL as set forth in the tables below (each and collectively, the “PERFORMANCE GOALS”). Each PERFORMANCE GOAL metric will be equally weighted. If any of the PERFORMANCE GOALS for the three-fiscal-year period ending ______________ does not exceed the respective THRESHOLD performance level set forth in the respective table below, the portion of the AWARD associated with such PERFORMANCE GOAL shall be forfeited. If all three of the PERFORMANCE GOALS fall below the respective THRESHOLD performance level set forth in the respective table below, the AWARD and PARTICIPANT’s right to receive any SHARES of the COMPANY pursuant to this AGREEMENT shall expire and be forfeited without payment of any additional consideration, effective as of the last day of the fiscal year ending ______________. Subject to the foregoing, the number of “EARNED UNITS” for purposes of this AGREEMENT shall be determined in accordance with the following schedule:

(i) RELATIVE TOTAL SHAREHOLDER RETURN :



Performance Level	FY ____ through FY ____ Relative Total Shareholder Return ⁽¹⁾ Required to Achieve Performance Level	% of TARGET AWARD Earned
BELOW THRESHOLD	Below __ ^th percentile	0%
THRESHOLD	__th percentile as compared to INDEX	25%
TARGET	__th percentile as compared to INDEX	100%
MAXIMUM	At or above __th percentile as compared to INDEX	200%

⁽¹⁾ Relative Total Shareholder Return is measured against those companies in the full S&P Retail Select Industry Index (the “INDEX”) as of the first day of the COMPANY’s ____ fiscal year, and shall be measured as follows:


(a)	Total Shareholder Return shall be measured using an average of the closing stock price for the 20 trading days immediately before the first day of the COMPANY’s ____ fiscal year and an average of the closing stock price for the 20 trading days immediately before the last day of the COMPANY’s ____ fiscal year.


(b)	For companies that are in the INDEX as of the first day of the COMPANY’s ____ fiscal year but that do not remain in the INDEX through the last day of the COMPANY’s ____ fiscal year, treatment will be as follows:


i.	Acquisition - For a company that is acquired during the performance period, it shall be removed entirely from the INDEX and thus not considered for measurement purposes;


ii.	Merger - For a company that is impacted by merger activity during the performance period:


1.	Such company shall be removed from the INDEX (and thus not considered for measurement purposes) if it is not the surviving company following a merger with either a non-INDEX company or another INDEX company; or


2.	Such company shall be included in the INDEX if it is the surviving company following a merger with another INDEX company; or


3.	Such company shall be included in the INDEX if it is the surviving company in a merger with a non-INDEX company (unless 50% or more of its post-merger business has a non-retail GICS code, in which case such company shall be removed from the INDEX and thus not considered for measurement purposes).


iii.	Spin-Off - For a company that is spun-off during the performance period, such company shall be removed from the INDEX (and thus not considered for measurement purposes); however, the parent company of such spin-off shall be included for measurement purposes if such parent company remains in the INDEX and remains at least 50% of its pre-spin-off size as measured by revenues.


iv.	Bankruptcy or Failure to Meet Market Cap Threshold - For a company that goes bankrupt during the performance period, or that drops below any required market cap threshold established by S&P for purposes of INDEX membership, such company shall be placed at the bottom of the INDEX for measurement purposes, with a negative total Shareholder Return of (-100%).


(c)	Payout with respect to this performance metric shall be capped at TARGET if COMPANY Total Shareholder Return over the performance period is negative.

(ii) GAAP NET SALES COMPOUND ANNUAL GROWTH RATE :



Performance Level	FY ____ through FY ____ GAAP Net Sales Compound Annual Growth Rate ⁽¹⁾ Required to Achieve Performance Level	% of TARGET AWARD Earned
BELOW THRESHOLD	Less than or equal to ____%	0%
TARGET	____%	100%
MAXIMUM	____% or greater	200%

⁽¹⁾ For purposes of this Agreement, “GAAP Net Sales Compound Annual Growth Rate” is defined as the compound annual growth rate of net sales as reported in the Company’s consolidated financial statements in accordance with generally accepted accounting principles as in effect on _______________.

(iii) AVERAGE RETURN ON INVESTED CAPITAL :



Performance Level	FY ____ through FY ____ Average Return on Invested Capital ⁽¹⁾ Required to Achieve Performance Level	% of TARGET AWARD Earned
BELOW THRESHOLD	Less than or equal to ____%	0%
TARGET	____%	100%
MAXIMUM	____% or greater	200%

⁽¹⁾ For purposes of this Agreement, “Average Return on Invested Capital” is defined as the three-year average of the Return on Invested Capital results for the each of the three years (respectively) of the performance period, where “Return on Invested Capital” is defined as EBITDAR divided by Invested Capital for each such year; “EBITDAR” is defined as net income less depreciation, amortization, rent costs, interest and taxes as reported in the Company’s consolidated financial statements for each such year in accordance with generally accepted accounting principles as in effect on _____________; and “Invested Capital” is defined as working capital less cash, current portion of deferred lease credits and income taxes payable plus gross property and equipment and a 6x multiple of annual operating lease expense as reported in the Company’s consolidated financial statements for each such year in accordance with generally accepted accounting principles in effect on ____________. The measurement of Average Return on Invested Capital performance against the goals established herein shall exclude or adjust for the impact of the following:


(a)	impact of changes in accounting principles ( i.e. , cumulative effect of U.S. GAAP changes);


(b)	impact from changes in accounting policies approved by the Audit Committee of the Board that were not contemplated in the initial targets;


(c)	impact of changes in lease accounting;


(d)	impacts from unanticipated changes in legal or tax structure or unanticipated changes in jurisdictional tax rates of a subsidiary;


(e)	all items of gain, loss or expense for the performance period related to an exit activity (including flagship closures);


(f)	all items of gain, loss or expense for the performance period related to discontinued operations as defined under current generally accepted accounting principle;


(g)	impacts of an acquired business’s income statement and balance sheet;


(h)	any profit or loss item attributable to the business operations divested by the Company during the performance period; and


(i)	impairment of long-lived assets

In the event that performance for one, two, or three of the performance goals is between the THRESHOLD and the TARGET performance levels, or between the TARGET and the MAXIMUM performance levels, linear interpolation will be used to determine the number of EARNED UNITS with respect to that metric. Any portion of the TARGET AWARD not earned based upon the

actual performance achieved shall expire and be forfeited without payment of any additional consideration, effective as of the last day of the fiscal year ending _______________. The achievement of the performance goals set forth in this Section 2(A) (and the extent or lack thereof) shall be evidenced by the COMMITTEE’s written certification.

(B) RESTRICTED PERIOD . Except as provided under Sections 3 and 4 of this AGREEMENT, the period of restriction (the “RESTRICTED PERIOD”), after which the EARNED UNITS shall become vested and no longer be subject to forfeiture to the COMPANY, shall lapse according to the following terms. The VESTING DATE shall be defined as the date for vesting which is approved by the COMMITTEE following completion of the three-year performance period and then recorded and communicated through the System of Record, but not later than 60 days after the close of the performance period (or the date of filing of Form 10-K, if sooner). The RESTRICTED PERIOD shall lapse as to one-hundred percent of the EARNED UNITS (subject to adjustment as provided in Section 11(c) of the PLAN), and such EARNED UNITS shall become vested, on the VESTING DATE, provided PARTICIPANT is employed by the COMPANY or a subsidiary or affiliate of the COMPANY on such date;

(C) Non-Transferability of AWARD . The AWARD and any EARNED UNITS may not be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of PARTICIPANT to any party (other than the COMPANY or a subsidiary or affiliate of the COMPANY), or assigned or transferred (whether by operation of law or otherwise) by PARTICIPANT, otherwise than by will or by the applicable laws of descent and distribution, and the AWARD and any EARNED UNITS shall not be subject to execution, attachment or similar process.

(D) Lapse of RESTRICTED PERIOD . Upon the lapse of the RESTRICTED PERIOD applicable to any EARNED UNITS, as promptly as is reasonably practicable, and in no case later than the 15th day of the third month immediately following the completion of the three-year performance period, SHARES of the COMPANY shall be issued to PARTICIPANT and the COMPANY shall deliver a stock certificate or other appropriate documentation evidencing the number of SHARES of the COMPANY issued in settlement of such vested EARNED UNITS to PARTICIPANT (with each EARNED UNIT representing the right to receive one SHARE of the COMPANY).

(E) Tax Withholding . The COMPANY shall have the right to require PARTICIPANT to remit to the COMPANY an amount sufficient to satisfy any applicable federal, state, local and foreign tax withholding requirements in respect of the settlement of the AWARD. Unless PARTICIPANT is notified otherwise, the COMPANY will withhold SHARES of the COMPANY otherwise deliverable upon settlement of the AWARD having a FAIR MARKET VALUE (as defined in the PLAN) on the date of settlement equal to the amount required to be withheld (but only to the extent of the minimum amount that must be withheld to comply with applicable federal, state, local and foreign income, employment and wage tax laws).

(F) Rights as Holder of AWARD . With respect to the AWARD, PARTICIPANT shall have no rights as a stockholder of the COMPANY (including no right to vote or receive dividends) with respect to any SHARES of the COMPANY covered by the AWARD until the date of issuance to PARTICIPANT of a certificate or other evidence of ownership representing such SHARES in settlement thereof. In addition, dividend equivalents will not be paid or payable with respect to the SHARES of the COMPANY and/or the EARNED UNITS subject to this AGREEMENT until such date of issuance.

3. Change of Control . Unless the BOARD or the COMMITTEE provides otherwise prior to a “Change of Control” (as such term is defined in the PLAN), upon a Change of Control, Section 9 of the PLAN shall govern the treatment of the AWARD. For the avoidance of doubt, the performance period under this AGREEMENT for purposes of Section 9(b) of the PLAN shall be the three-fiscal-year period ending January 29, 2022. Notwithstanding anything in Section 9(b) of the PLAN to the contrary, for all purposes under this AGREEMENT, in the event of a Change of Control in which fifty percent (50%) or more of the performance period applicable to the AWARD has elapsed as of the date of the Change of Control, the PARTICIPANT shall be entitled to a pro-rata payment, vesting or settlement of such AWARD based upon actual performance of each of the three performance goals. In the event of a Change of Control in which less than fifty percent (50%) of the performance period applicable to the AWARD has elapsed as of the date of the Change of Control, the PARTICIPANT shall be entitled to a pro-rata payment, vesting or settlement of such AWARD based upon a TARGET level of performance of each of the three performance goals.

4. Effect of Termination of Employment .

(A) The grant of the AWARD shall not confer upon PARTICIPANT any right to continue in the employment of the COMPANY or any of the subsidiaries or affiliates of the COMPANY or interfere with or limit in any way the right of the COMPANY or any of the subsidiaries or affiliates of the COMPANY to modify the terms of or terminate the employment of PARTICIPANT at any time in accordance with applicable law and the COMPANY’s or the subsidiary’s or affiliate’s governing corporate documents.

(B) Except as the COMMITTEE may at any time provide, if the employment of PARTICIPANT with the COMPANY and the subsidiaries and affiliates of the COMPANY is terminated by the COMPANY for “CAUSE” or as a result of PARTICIPANT’S resignation for any reason other than “retirement” (as defined below), in either case, prior to the lapsing of the RESTRICTED PERIOD applicable to the AWARD and/or any EARNED UNITS, such AWARD and/or the EARNED UNITS shall be forfeited to the COMPANY. For purposes of this AGREEMENT only, “CAUSE” shall mean: (i) PARTICIPANT’S conviction of, or entrance of a plea of guilty or nolo contendere to, a felony under federal or state law; or (ii) fraudulent conduct by PARTICIPANT in connection with the business affairs of the COMPANY; or (iii) PARTICIPANT’S willful refusal to materially perform PARTICIPANT’S duties; or (iv) PARTICIPANT’S willful misconduct which has, or would have if generally known, a materially adverse effect on the business or reputation of the COMPANY; or (v) PARTICIPANT’S material breach of a covenant, representation, warranty or obligation of PARTICIPANT to the COMPANY. As to the grounds stated in the above-mentioned clauses (iii), (iv), and (v), such grounds will only constitute CAUSE once the COMPANY has provided PARTICIPANT written notice and PARTICIPANT has failed to cure such issue within 30 days.

(C) If PARTICIPANT’s employment is terminated by the COMPANY without CAUSE prior to the lapsing of the RESTRICTED PERIOD, such RESTRICTED PERIOD shall immediately lapse and (1) if such termination occurs within the first year of the three-year performance period, the AWARD and/or the EARNED UNITS shall be forfeited to the COMPANY, or (2) if such termination occurs after the first year of the three-year performance period, the AWARD shall remain outstanding, the number of EARNED UNITS shall be earned based upon the actual achievement of the respective performance goals over the full three-fiscal-year period and then pro-rated for the number of days PARTICIPANT was employed during the performance period, and such pro-rated number of EARNED UNITS shall become vested upon the COMMITTEE’s written certification of the achievement of such goals and payable as of the VESTING DATE notwithstanding the fact that PARTICIPANT is not employed as of the VESTING DATE and any remaining portion of the AWARD shall be forfeited to the COMPANY.

(D) If PARTICIPANT becomes totally disabled prior to the lapsing of the RESTRICTED PERIOD, such RESTRICTED PERIOD shall immediately lapse and (1) if such termination occurs after the end of the three-year performance period, the EARNED UNITS shall become fully vested and payable immediately, or (2) if such termination occurs prior to the end of the three-year performance period, the TARGET AWARD shall become fully vested and payable immediately.

(E) If PARTICIPANT dies while employed by the COMPANY or one of the subsidiaries or affiliates of the COMPANY prior to the lapsing of the RESTRICTED PERIOD, such RESTRICTED PERIOD shall immediately lapse and (1) if PARTICIPANT’s death occurs after the end of the three-year performance period, the EARNED UNITS shall become fully vested and payable immediately, or (2) if PARTICIPANT’s death occurs prior to the end of the three-year performance period, the TARGET AWARD shall become fully vested and payable immediately.

(F) If PARTICIPANT retires from employment with the COMPANY and the subsidiaries and affiliates of the COMPANY at or after attaining the age of 65 (such termination of employment, a “retirement”) prior to the lapsing of the RESTRICTED PERIOD applicable to any EARNED UNITS, such RESTRICTED PERIOD shall immediately lapse and the EARNED UNITS shall become fully vested and payable as of the VESTING DATE notwithstanding the fact that PARTICIPANT is not employed as of the VESTING DATE (and, if such termination occurs prior to January 29, 2022, the number of EARNED UNITS shall be based upon the actual achievement of the respective performance goals over the full three-fiscal-year period and such EARNED UNITS shall become fully vested upon the COMMITTEE’s written certification of the achievement of such goals and payable as of the VESTING DATE notwithstanding the fact that PARTICIPANT is not employed as of the VESTING DATE and any remaining portion of the AWARD shall be forfeited to the COMPANY.

(G) For purposes of this AGREEMENT, “total disability” shall have the definition set forth in the Abercrombie & Fitch Co. Long Term Disability Plan, which definition is incorporated herein by reference.

5. Forfeiture of AWARD .

(A) The AWARD and any EARNED UNITS shall be subject to the following additional forfeiture conditions, to which PARTICIPANT, by accepting the AWARD, agrees. If any of the events specified in Section 5(B)(i), (ii), (iii) or (iv) of this AGREEMENT occurs (a “FORFEITURE EVENT”), the following forfeiture will result:

(i) the AWARD and any EARNED UNITS held by PARTICIPANT and not then settled will be immediately forfeited and canceled upon the occurrence of the FORFEITURE EVENT; and

(ii) PARTICIPANT will be obligated to repay to the COMPANY, in cash, within five business days after demand is made therefor by the COMPANY, the total amount of “AWARD GAIN” (as defined below) realized by PARTICIPANT upon settlement of the AWARD that occurred on or after (x) the date that is twenty-four months prior to the

occurrence of the FORFEITURE EVENT, if the FORFEITURE EVENT occurred while PARTICIPANT was employed by the COMPANY or a subsidiary or affiliate of the COMPANY, or (y) the date that is twenty-four months prior to the date PARTICIPANT’s employment by the COMPANY or a subsidiary or affiliate of the COMPANY terminated, if the FORFEITURE EVENT occurred after PARTICIPANT ceased to be so employed. For purposes of this Section 5, the term “AWARD GAIN” shall mean, in respect of any settlement of the AWARD granted to PARTICIPANT, the FAIR MARKET VALUE of the cash and/or SHARES of the COMPANY paid or payable to PARTICIPANT (regardless of any elective deferrals).

(B) The forfeitures specified in Section 5(A) of this AGREEMENT will be triggered upon the occurrence of any one of the following FORFEITURE EVENTS at any time during PARTICIPANT’s employment by the COMPANY or a subsidiary or affiliate of the COMPANY, or during the twenty-four - month period following termination of such employment:

(i) PARTICIPANT, acting alone or with others, directly or indirectly, (I) engages, either as employee, employer, consultant, advisor, or director, or as an owner, investor, partner, or stockholder unless PARTICIPANT’s interest is insubstantial, in any business in an area or region in which the COMPANY or any subsidiary or affiliate of the COMPANY conducts business at the date the event occurs, which is directly in competition with a business then conducted by the COMPANY or a subsidiary or affiliate of the COMPANY; (II) induces any customer or supplier of the COMPANY or a subsidiary or affiliate of the COMPANY, with which the COMPANY or a subsidiary or affiliate of the COMPANY has a business relationship, to curtail, cancel, not renew, or not continue his or her or its business with the COMPANY or any subsidiary or affiliate of the COMPANY; or (III) induces, or attempts to influence, any employee of or service provider to the COMPANY or a subsidiary or affiliate of the COMPANY to terminate such employment or service. The COMMITTEE shall, in its discretion, determine which lines of business the COMPANY and the subsidiaries and affiliates of the COMPANY conduct on any particular date and which third parties may reasonably be deemed to be in competition with the COMPANY or any subsidiary or affiliate of the COMPANY. For purposes of this Section 5(B)(i), PARTICIPANT’s interest as a stockholder is insubstantial if it represents beneficial ownership of less than five percent of the outstanding class of stock, and PARTICIPANT’s interest as an owner, investor, or partner is insubstantial if it represents ownership, as determined by the COMMITTEE in its discretion, of less than five percent of the outstanding equity of the entity;

(ii) PARTICIPANT discloses, uses, sells, or otherwise transfers, except in the course of employment with or other service to the COMPANY or any subsidiary or affiliate of the COMPANY, any confidential or proprietary information of the COMPANY or any subsidiary or affiliate of the COMPANY, including but not limited to information regarding the COMPANY’s or any subsidiary’s or affiliate’s current and potential customers, organization, employees, finances, and methods of operations and investments, so long as such information has not otherwise been disclosed to the public or is not otherwise in the public domain (other than by PARTICIPANT’s breach of this provision), except as required by law or pursuant to legal process, or PARTICIPANT makes statements or representations, or otherwise communicates, directly or indirectly, in writing, orally, or otherwise, or takes any other action which may, directly or indirectly, disparage or be damaging to the COMPANY or any of the subsidiaries or affiliates of the COMPANY or their respective officers, directors, employees, advisors, businesses or reputations, except as required by law or pursuant to legal process;

(iii) PARTICIPANT fails to cooperate with the COMPANY or any subsidiary or affiliate of the COMPANY in any way, including, without limitation, by making PARTICIPANT available to testify on behalf of the COMPANY or such subsidiary or affiliate of the COMPANY in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, or otherwise fails to assist the COMPANY or any subsidiary or affiliate of the COMPANY in any way, including, without limitation, in connection with any such action, suit, or proceeding by providing information and meeting and consulting with members of management of, other representatives of, or counsel to, the COMPANY or such subsidiary or affiliate of the COMPANY, as reasonably requested; or

(iv) PARTICIPANT, during the period PARTICIPANT is employed by the COMPANY or any subsidiary or affiliate of the COMPANY and for twenty-four months thereafter (the “NON-SOLICITATION PERIOD”), alone or in conjunction with another person, (I) interferes with or harms, or attempts to interfere with or harm, the relationship of the COMPANY or any subsidiary or affiliate of the COMPANY with any person who at any time was a customer or supplier of the COMPANY or any subsidiary or affiliate of the COMPANY or otherwise had a business relationship with the COMPANY or any subsidiary or affiliate of the COMPANY; or (II) hires, solicits for hire, aids in or facilitates the hire, or causes to be hired, either as an employee, contractor or consultant, any person who is currently employed, or was employed at any time during the six-month period prior thereto, as an employee, contractor or consultant of the COMPANY or any subsidiary or affiliate of the COMPANY.

(C) Despite the conditions set forth in this Section 5, PARTICIPANT is not hereby prohibited from engaging in any activity set forth in Section 5(B)(i) of this AGREEMENT, including but not limited to competition with the COMPANY and the subsidiaries and affiliates of the COMPANY. Rather, the non-occurrence of the FORFEITURE EVENTS set forth in Section 5(B) of this AGREEMENT is a condition to PARTICIPANT’s right to realize and retain value from the AWARD, and the consequences under the PLAN and this AGREEMENT if PARTICIPANT engages in an activity giving rise to any such FORFEITURE EVENTS are the forfeitures specified therein and as otherwise provided in this AGREEMENT. The COMPANY

and PARTICIPANT shall not be precluded by this provision or otherwise from entering into other agreements concerning the subject matter of Sections 5(A) and 5(B) of this AGREEMENT.

(D) The COMMITTEE may, in its discretion, waive in whole or in part the COMPANY’s right to forfeiture under this Section 5, but no such waiver shall be effective unless evidenced by a writing signed by a duly authorized officer of the COMPANY.

(E) In addition to the above, PARTICIPANT agrees that any of the conduct described in Sections 5(B), (ii) and (iv) of this AGREEMENT would result in irreparable injury and damage to the COMPANY for which the COMPANY would have no adequate remedy at law. PARTICIPANT agrees that in the event of such occurrence or any threat thereof, the COMPANY shall be entitled to an immediate injunction and restraining order to prevent such conduct and threatened conduct and/or continued conduct by PARTICIPANT and/or any and all persons and/or entities acting for and/or with PARTICIPANT, and without having to prove damages and to all costs and expenses incurred by the COMPANY in seeking to enforce the COMPANY’s rights under this AGREEMENT. These remedies are in addition to any other remedies to which the COMPANY may be entitled at law or in equity. PARTICIPANT agrees that the covenants of PARTICIPANT contained in Section 5(B) of this AGREEMENT are reasonable.

(F) If the COMMITTEE determines that the earlier determination as to the achievement of any performance goal or performance-based vesting criteria hereunder was based on incorrect data and that in fact the performance goal or performance-based vesting criteria had not been achieved or had been achieved to a lesser extent than originally determined and a number of the EARNED UNITS would not have been granted, earned and/or vested, given the correct data, then (i) the aggregate number of SHARES of the COMPANY subject to the TARGET AWARD set forth in Section 1 of this AGREEMENT, and/or the aggregate number of EARNED UNITS earned hereunder, shall be reduced by such number of EARNED UNITS that would not have been granted, earned and/or vested (such EARNED UNITS, the “EXCESS UNITS”), (ii) any EXCESS UNITS that have not yet vested in accordance with the terms of this AGREEMENT shall be forfeited and (iii) any SHARES of the COMPANY received upon settlement of vested EXCESS UNITS (or if such SHARES were disposed of, the cash equivalent) shall be returned to the COMPANY as provided by the COMMITTEE.

6. Restrictions on Transfers of SHARES . Anything contained in this AGREEMENT or elsewhere to the contrary notwithstanding, the COMPANY may postpone the issuance and delivery of SHARES of the COMPANY upon any settlement of the AWARD until completion of any stock exchange listing or registration or other qualification of such SHARES under any state, federal or foreign law, rule or regulation as the COMPANY may consider appropriate; and may require PARTICIPANT in connection with the issuance of the SHARES to make such representations and furnish such information as the COMPANY may consider appropriate in connection with the issuance of the SHARES in compliance with applicable laws, rules and regulations. SHARES of the COMPANY issued and delivered upon settlement of the AWARD shall be subject to such restrictions on trading, including appropriate legending of certificates to that effect, as the COMPANY, in its discretion, shall determine are necessary to satisfy applicable laws, rules and regulations.

7. PLAN as Controlling; PARTICIPANT Acknowledgments . All terms and conditions of the PLAN applicable to the AWARD which are not set forth in this AGREEMENT shall be deemed incorporated herein by reference. In the event that any term or condition of this AGREEMENT is inconsistent with the terms and conditions of the PLAN, the PLAN shall be deemed controlling. PARTICIPANT acknowledges receipt of a copy of the PLAN and of the Prospectus related to the PLAN. PARTICIPANT also acknowledges that all decisions, determinations and interpretations of the COMMITTEE in respect of the PLAN, this AGREEMENT and the AWARD shall be final, conclusive and binding on PARTICIPANT, all other persons interested in the PLAN and stockholders of the COMPANY.

8. Governing Law . To the extent not preempted by applicable federal or foreign law, this AGREEMENT shall be governed by and construed in accordance with the laws of the State of Delaware, except with respect to provisions relating to the covenants set forth in Section 5 of this AGREEMENT, which shall be governed by the laws of the State of Ohio.

9. Rights and Remedies Cumulative . All rights and remedies of the COMPANY and of PARTICIPANT enumerated in this AGREEMENT shall be cumulative and, except as expressly provided otherwise in this AGREEMENT, none shall exclude any other rights or remedies allowed by law or in equity, and each of said rights or remedies may be exercised and enforced concurrently.

10. Captions . The captions contained in this AGREEMENT are included only for convenience of reference and do not define, limit, explain or modify this AGREEMENT or its interpretation, construction or meaning and are in no way to be construed as a part of this AGREEMENT.

11. Severability . If any provision of this AGREEMENT or the application of any provision hereof to any person or any circumstance shall be determined to be invalid or unenforceable, then such determination shall not affect any other provision of this AGREEMENT or the application of said provision to any other person or circumstance, all of which other provisions shall remain in full force and effect, and it is the intention of each party to this AGREEMENT that if any provision of this AGREEMENT is susceptible of two or more constructions, one of which would render the provision enforceable and the other or others of which would render the provision unenforceable, then the provision shall have the meaning which renders it enforceable.

12. Number and Gender . When used in this AGREEMENT, the number and gender of each pronoun shall be construed to be such number and gender as the context, circumstances or its antecedent may require.

13. Entire Agreement . This AGREEMENT, including the PLAN incorporated herein by reference, constitutes the entire agreement between the COMPANY and PARTICIPANT in respect of the subject matter of this AGREEMENT, and this AGREEMENT supersedes all prior and contemporaneous agreements between the parties hereto in connection with the subject matter of this AGREEMENT. No officer, employee or other servant or agent of the COMPANY, and no servant or agent of PARTICIPANT, is authorized to make any representation, warranty or other promise not contained in this AGREEMENT. Other than as set forth in Section 11(e) of the PLAN, no change, termination or attempted waiver of any of the provisions of this AGREEMENT shall be binding upon either party hereto unless contained in a writing signed by the party to be charged.

14. Successors and Assigns of the COMPANY . The obligations of the COMPANY under this AGREEMENT shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the COMPANY, or upon any successor corporation or organization succeeding to substantially all of the assets and businesses of the COMPANY.

[Remainder of page intentionally left blank; signature page follows]

IN WITNESS WHEREOF, the COMPANY has caused this AGREEMENT to be executed by its duly authorized officer, and PARTICIPANT has executed this AGREEMENT, in each case effective as of the GRANT DATE.

COMPANY :

ABERCROMBIE & FITCH CO.

By:

___________________________________________________

Its: __________________________

Title: _______________________

PARTICIPANT :

___________________________________________________

Printed Name:

___________________________________________________

Address:

______________________________________

EXHIBIT 10.2

Summary of Compensation Structure for

Non-Associate Directors of Abercrombie & Fitch Co. for Fiscal 2019

Non-Associate Directors

Any officer of Abercrombie & Fitch Co. (the “Company”) who is also a member of the Board of Directors (the “Board”) of the Company receives no additional compensation for services rendered as a director. Directors of the Company who are not employees, or as referred to by the Company, “associates,” of the Company or of a subsidiary of the Company (“non-associate directors”) are to receive:


•	an annual cash retainer of $65,000 for Board service (paid quarterly in arrears):

•

an additional annual cash retainer for each standing committee Chair and member: (i) the Chair and the members of the Audit and Finance Committee are to receive an additional annual cash retainer of $40,000 and $25,000, respectively; (ii) the Chair and the members of the Compensation and Organization Committee are to receive an additional annual cash retainer of $30,000 and $12,500, respectively; and (iii) the Chairs and the members of all other standing committees are to receive an additional annual cash retainer of $25,000 and $12,500, respectively. In each case, the retainers are paid quarterly in arrears;


•	an additional annual cash retainer for the Company's Non-Executive Chairman of the Board as described below uder the caption for "Non-Executive Chairman of the Board Compensation";

•

an annual grant of restricted stock units ("RSUs"), to be granted on the date of the annual meeting of stockholders of the Company (if the non-associate directors continue to serve after the annual meeting of stockholders) pursuant to the Abercrombie & Fitch Co. Long-Term Incentive Plan for Directors (or any successor plan approved by the Company's stockholders), and which will vest on the earlier of (i) the first anniversary of the grant date or (ii) the date of the next regularly scheduled annual meeting of stockholders of the Company after the grant date; in each case, subject to earlier vesting in the event of a non-associate director's death or total disability or upon termination of service in connection with a change of control of the Company; and


•	an additional grant of RSUs for the Company's Non-Executive Chairman of the Board as described below under the caption for "Non-Executive Chairman of the Board Compensation."

For the fiscal year ending February 1, 2020 (“Fiscal 2019”), non-associate directors are eligible to receive an annual grant of RSUs on the date of the 2019 Annual Meeting of Stockholders to be held on June 12, 2019 (the “2019 Annual Meeting”) if they continue to serve after the 2019 Annual Meeting, with the market value of the underlying shares of the Company’s Class A Common Stock, $0.01 par value (the “Common Stock”), on the grant date to be $150,000.

All non-associate directors are reimbursed for their expenses for attending meetings of the Board and Board committees and receive the discount on purchases of the Company’s merchandise extended to all Company associates.

Non-Executive Chairman of the Board Compensation

In connection with Terry L. Burman’s assumption of the role of Non-Executive Chairman of the Board on February 3, 2018, Mr. Burman received and will continue to receive the following compensation:


•	an additional annual cash retainer of $100,000, paid quarterly in arrears;

•

an additional annual grant of RSUs, with the market value of the shares of Common Stock underlying this annual grant being equal to $100,00 on the grant date (the "Non-Executive RSU Retainer"), to be granted on the date of the annual meeting of stockholders (if Mr. Burman continues to serve after the annual meeting of stockholders) pursuant to the Abercrombie & Fitch Co. 2016 Long-Term Incentive Plan for Directors (or any successor plan approved by the Company's stockholders), and which will vest on the earlier of (i) the first anniversary of the grant date or (ii) the date of the next regularly scheduled annual meeting of stockholders of the Company after the grant date; in each case, subject to earlier vesting in the event of Mr. Burman's death or total disability or upon a change of control of the Company; and


•	if Mr Burman's service as Non-Executive Chairman of the Board ends for any reason other than his death or total disability, a pro-rata portion of unvested RSUs subject to the Non-Executive Chairman RSU Retainer will vest to reflect the portion of the year that has elapsed between the grant date and the date on which his service as Non-Executive Chairman of the Board ends.

EXHIBIT 10.3

Summary of Terms of the Annual Restricted Stock Unit Grants made and to be made to the Non-Associate Directors of Abercrombie & Fitch Co. under the Abercrombie & Fitch Co. 2016 Long-Term Incentive Plan for Directors in Fiscal 2019

Non-Associate Directors

For the fiscal year ending February 1, 2020 (“Fiscal 2019”), members of the Board of Directors (the “Board”) of Abercrombie & Fitch Co. (the “Company”) who are not employees, or as referred to by the Company, “associates”, of the Company or of a subsidiary of the Company (“non-associate directors”) are eligible to receive an annual grant of restricted stock units (“RSUs”) as part of their compensation. Each RSU represents the right to receive one share of Class A Common Stock, $0.01 par value, of the Company (the “Common Stock”), upon vesting. The market value of the shares of Common Stock underlying the RSUs on the grant date is to be $150,000 (the “Non-Associate Director RSU Retainer”).

The annual Non-Associate Director RSU Retainer has been and will continue to be subject to the following provisions:


•	RSUs are to be granted annually on the date of the annual meeting of stockholders of the Company (if the non-associate directors continue to serve after the annual meeting of stockholders) pursuant to the Abercrombie & Fitch Co. 2016 Long-Term Incentive Plan for Directors (or any successor plan approved by the Company's stockholders); and


•	RSUs will vest on the earlier of (i) the first anniversary of the grant date or (ii) the date of the next regularly scheduled annual meeting of stockholders of the Company after the grant date, subject to earlier vesting in the event of a non-associate director's death or total disability or upon termination of service in connection with a change of control of the Company.

Non-Executive Chairman of the Board

Effective February 3, 2018, the Board elected Terry L. Burman to serve as Non-Executive Chairman of the Board of the Company. In his capacity as Non-Executive Chairman of the Board of the Company, Mr. Burman is to receive the following equity compensation for Fiscal 2019:

•

an additional annual grant of RSUs, with the market value of the shares of Common Stock underlying this annual grant being equal to $100,000 on the grant date (the "Non-Executive Chairman RSU Retainer"), to be granted on the date of the annual meeting of stockholders of the Company (if Mr. Burman continues to serve after the annual meeting of stockholders) pursuant to the Abercrombie & Fitch Co. 2016 Long-Term Incentive Plan for Directors (or any successor plan approved by the Company's stockholders), and which will vest on the earlier of (i) the first anniversary of the grant date or (ii) the date of the next regularly scheduled annual meeting of stockholders of the Company after the grant date; in each case, subject to earlier vesting in the event of Mr. Burman's death or total disability or upon a change of control of the Company; and

•

if Mr. Burman's service as Non-Executive Chairman of the Board of the Company ends for any reason other than his death or total disability, a pro-rata portion of unvested RSUs subject to the Non-Executive Chairman RSU Retainer will vest to reflect the portion of the period that has elapsed between the grant date and the date on which his service as Non-Executive Chairman of the Board of the Company ends.

EXHIBIT 31.1

CERTIFICATIONS

I, Fran Horowitz , certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Abercrombie & Fitch Co. for the quarterly period ended May 4, 2019 ;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



	ABERCROMBIE & FITCH CO.

Date: June 12, 2019	By:	/s/ Fran Horowitz
		Fran Horowitz
		Chief Executive Officer
		(Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATIONS

I, Scott Lipesky , certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Abercrombie & Fitch Co. for the quarterly period ended May 4, 2019 ;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



	ABERCROMBIE & FITCH CO.

Date: June 12, 2019	By:	/s/ Scott Lipesky
		Scott Lipesky
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

EXHIBIT 32.1

Certifications by Chief Executive Officer (who serves as Principal Executive Officer) and Senior Vice President and Chief Financial Officer (who serves as Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

In connection with the Quarterly Report of Abercrombie & Fitch Co. (the “Corporation”) on Form 10-Q for the quarterly period ended May 4, 2019 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Fran Horowitz, Chief Executive Officer of the Corporation (serving as Principal Executive Officer of the Corporation) and Scott Lipesky, Senior Vice President and Chief Financial Officer of the Corporation (serving as Principal Financial Officer of the Corporation), certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1)	The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and


(2)	The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Corporation and its subsidiaries.



/s/ Fran Horowitz		/s/ Scott Lipesky
Fran Horowitz Chief Executive Officer (Principal Executive Officer)		Scott Lipesky Senior Vice President and Chief Financial Officer (Principal Financial Officer)

Date: June 12, 2019		Date: June 12, 2019

These certifications are being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. These certifications shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Corporation specifically incorporates these certifications by reference in such filing.