ABERCROMBIE & FITCH CO /DE/

The estimated basis point (“BPS”) changes disclosed throughout this Results of Operations have been rounded based on the change in the percentage of net sales.

Net Sales

Net sales by segment are presented by attributing revenues to a physical store location or geographical region that fulfills the order. The Company’s net sales by reportable segment for Fiscal 2024 and Fiscal 2023 were as follows:

(1)Comparable sales are calculated on a constant currency basis. Refer to“NON-GAAP FINANCIAL MEASURES,” for further details on the comparable sales calculation.

For Fiscal 2024, net sales increased 16%, as compared to Fiscal 2023. The increase was primarily attributable to a high-single-digit increase in AUR from lower promotional activity and category mix into higher ticket items. High-single-digit growth in unit volume also contributed to the increase in net sales, following increases in traffic and transactions in Company-owned and operated channels. Additionally, there was a headwind of approximately $50 million due to the timing of sales volume based on the impact of the calendar shift in Fiscal 2024 as a result of the 53rd selling week in Fiscal 2023. The year-over-year increase in net sales reflects positive comparable sales of 17%, as compared to Fiscal 2023.

•Net sales growth in the Americas region of 17% on both a reported and comparable sales basis. The increase was attributable to a higher AUR from lower promotional activity and category mix into higher ticket items and direct channel unit volume growth from increased traffic and transactions in company owned and operated stores and digital channels.

•Net sales growth in the EMEA region of 12% and 16% on a reported and comparable sales basis, respectively. The increase was attributable to a higher AUR from lower promotional activity and category mix into higher ticket items and unit volume growth from increased traffic and transactions in company owned and operated stores and digital channels. Comparable sales growth percentage is higher than net sales growth percentage, as comparable sales exclude the net impact of store closures during the period and the effects of foreign currency, both of which had negative impacts on net sales growth.

•Net sales growth in the APAC region of 9% and 19% on a reported and comparable sales basis, respectively. Comparable sales growth percentage is higher than net sales growth percentage, as comparable sales exclude the net impact of store closures during the period and the effects of foreign currency, both of which had negative impacts on net sales growth.

The Company’s net sales by brand for Fiscal 2024 and Fiscal 2023 were as follows:

(1)Comparable sales are calculated on a constant currency basis. Refer to“NON-GAAP FINANCIAL MEASURES,” for further details on the comparable sales calculation.

Cost of Sales, Exclusive of Depreciation and Amortization

For Fiscal 2024, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased approximately 130 basis points as compared to Fiscal 2023. The percentage decrease was primarily attributable to cost of sales leverage from a higher AUR on reduced promotions, as well as a benefit in product costs, as certain raw material prices have declined. These benefits were partially offset by higher freight costs compared to Fiscal 2023.

Selling Expense

For Fiscal 2024, selling expense increased by $157 million compared to Fiscal 2023. Selling expense as a percentage of net sales, decreased 160 basis points as compared to Fiscal 2023. The decrease as a percent of net sales was primarily driven by expense leverage from higher net sales, including 190 basis points in stores expense, primarily relating to store occupancy and store employee compensation costs, and 10 basis points in distribution center and order fulfillment costs. The decrease as a percent of net sales was partially offset by an increase of 40 basis points in marketing expense, primarily due to media campaigns and content, as compared to Fiscal 2023.

General and Administrative Expense

For Fiscal 2024, general and administrative expense increased by $69 million compared to Fiscal 2023. General and administrative expense, as a percentage of net sales decreased 70 basis points as compared to Fiscal 2023. The decrease in expense rate was primarily driven by expense leverage from higher net sales, including 100 basis points in employee compensation costs, partially offset by 40 basis points in information technology expense.

Other Operating Income, Net

For Fiscal 2024, other operating income, net, increased as compared to Fiscal 2023, primarily due to $0.7 million foreign currency gains recognized in Fiscal 2024.

Operating Income

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

For Fiscal 2024, operating income increased by $256 million or 370 basis points, as a percentage of net sales, as compared to Fiscal 2023.

•Operating income for the Americas increased $270 million or 250 basis points as a percentage of region net sales as compared to Fiscal 2023. The increase as a percent of sales primarily relates to positive comparable sales of 17%, relating to higher unit volume, increased AUR on reduced promotions, and expense leverage relating to employee compensation costs and store occupancy expenses.

•Operating income for EMEA increased $29 million or 30 basis points as a percentage of region net sales as compared to Fiscal 2023. The increase as a percent of sales primarily relates to positive comparable sales of 16%, relating to higher unit volume, increased AUR on reduced promotions, and expense leverage relating to employee compensation costs and store occupancy expenses.

•Operating (loss) for APAC increased $(1) million or 0 basis points as a percentage of region net sales as compared to Fiscal 2023. The loss was impacted by marketing, occupancy, and general and administrative investments, which more than offset the expense leverage from comparable sales growth of 19%.

Interest (Income) Expense, Net

For Fiscal 2024, interest (income) expense, net, increased 60 basis points as compared to Fiscal 2023. The net increase was a result of lower interest expense in Fiscal 2024 compared to Fiscal 2023 as result of the repurchases of Senior Secured Notes in late Fiscal 2023 and Fiscal 2024 and redemption of the remaining outstanding balance on July 15, 2024. Additionally, interest income increased due to the increase in balance and rates received on time deposits and money market accounts as compared to Fiscal 2023.

Income Tax Expense

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

The increase in income tax expense compared to Fiscal 2023 can be attributed to higher domestic income resulting from higher sales volume and higher AURs. The decrease in effective tax rate compared to Fiscal 2023 can be attributed to higher domestic income, a higher tax benefit recognized on vesting of share based compensation awards, and continued business improvement in the EMEA and APAC segments.

During Fiscal 2024, the Company did not recognize income tax benefits on $53.8 million of pre-tax losses, primarily in Switzerland, resulting in adverse tax impacts of $8.2 million. The primary driver relates to expense deleverage within the APAC and EMEA regions.

During Fiscal 2023, the Company did not recognize income tax benefits on $103.0 million of pre-tax losses, primarily in Switzerland, resulting in adverse tax impacts of $15.6 million. The primary driver relates to expense deleverage within the APAC and EMEA regions, although to a lesser extent than in Fiscal 2022.

Refer to Note 11, “INCOME TAXES,” for further discussion on factors that impacted the effective tax rate in Fiscal 2024 and Fiscal 2023.

Net Income Attributable to A&F

(1)Excludes items presented above under “Operating Income,” and “Income Tax Expense.”

Net Income Per Diluted Share Attributable to A&F

(1) Excludes items presented above under “Operating Income,” and “Income Tax Expense.”

EBITDA and Adjusted EBITDA

(1)EBITDA and Adjusted EBITDA are supplemental financial measures that are not defined or prepared in accordance with GAAP. EBITDA is defined as net income before interest, income taxes and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for asset impairment.