Abercrombie & Fitch Co.

09/05/2025 | Press release | Distributed by Public on 09/05/2025 15:16

Quarterly Report for Quarter Ending August 2, 2025 (Form 10-Q)

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 Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q in "Item 1. Financial Statements (Unaudited)," to which all references to Notes in MD&A are made.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
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 or its management and authorized spokespeople involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond the Company's and management's control. Words such as "estimate," "project," "plan," "believe," "expect," "anticipate," "intend," "should," "are confident," "will," "could," "outlook," or the negative versions of those words or other comparable words, 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. Factors that could cause results to differ from those expressed in the Company's forward-looking statements include, but are not limited to, the risks described or referenced in Part I, Item 1A. "Risk Factors," in the Company's Fiscal 2024Form 10-K and otherwise in our subsequent reports and filings with the SEC, as well as the following:
•risks related to global trade policy, including the impact of the imposition or threat of imposition of new or increased tariffs by the United States or foreign governments, other changes to trade policies or arrangements and continued uncertainties relating to such policies and arrangements, including as a result of litigation and court rulings, or a global trade war;
•risks related to changes in global economic and financial conditions, including inflation, and the resulting impact on consumer spending and our operating results, financial condition, and expense management;
•risks related to global operations, including changes in the economic or political conditions where we sell or source our products;
•risks related to the geopolitical landscape and ongoing armed conflicts, acts of terrorism, mass casualty events, social unrest, civil disturbance or disobedience and the impact of such conflicts or events on international trade, supplier delivery or increased freight costs;
•risks related to natural disasters and other unforeseen catastrophic events;
•risks related to our failure to engage our customers, anticipate customer demand, expectations, and changing fashion trends, and manage our inventory and product delivery;
•risks related to our failure to operate effectively in a highly competitive and constantly evolving industry;
•risks related to our ability to successfully invest in and execute on our customer, digital and omnichannel initiatives;
•risks related to our ability to execute on, and maintain the success of, our strategic and growth initiatives;
•risks related to the effects of seasonal fluctuations on our sales and our performance during the back-to-school and holiday selling seasons;
•risks related to fluctuations in foreign currency exchange rates;
•risks related to fluctuations in our tax obligations and effective tax rate, including as a result of earnings and losses generated from our global operations, may result in volatility in our results of operations;
•risks related to our ability to execute on, and maintain the success of, our strategic and growth initiatives;
•risks and uncertainty related to adverse public health developments;
•risks related to cybersecurity threats and privacy or data security breaches, and the potential loss or disruption of our information technology systems;
•risks related to the continued validity of our trademarks and our ability to protect our intellectual property;
•risks associated with climate change and other corporate responsibility issues;
•risks related to reputational harm to the Company, its officers, and directors;
•risks related to actual or threatened litigation; and
•uncertainties related to future legislation, regulatory reform, policy changes, or interpretive guidance on existing laws and regulations.
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, including any financial targets and estimates, whether as a result of new information, future events,
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
or otherwise. As used herein, "Abercrombie & Fitch Co.," "A&F," "the Company," "we," "us," "our," and similar terms include Abercrombie & Fitch Co. and its subsidiaries, unless the context indicates otherwise.
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. A general description of the Company's business and certain segment information.
•Current Trends and Outlook. A discussion related to certain of the Company's focus areas for the current fiscal year and a discussion of certain risks and challenges, as well as a summary of the Company's performance for the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024.
•Results of Operations. An analysis of certain components of the Company's Condensed Consolidated Statements of Operations and Comprehensive Income for the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024.
•Liquidity and Capital Resources. A discussion of the Company's financial condition, changes in financial condition and liquidity as of August 2, 2025, which includes (i) an analysis of financial condition as compared to February 1, 2025; (ii) an analysis of changes in cash flows for the twenty-six weeks ended August 2, 2025, as compared to the twenty-six weeks ended August 3, 2024; and (iii) an analysis of liquidity, including availability under the Company's ABL Facility (as defined below), the Company's share repurchase program, and covenant compliance.
•Recent Accounting Pronouncements. A discussion, as applicable, of the recent accounting pronouncements that the Company has adopted or is currently evaluating, including the dates of adoption and/or expected dates of adoption, and their anticipated effects on the Company's Condensed Consolidated Financial Statements.
•Critical Accounting Estimates. A discussion of the accounting estimates 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. MD&A provides a discussion of certain financial measures that have been determined to not be presented in accordance with GAAP. This section includes certain reconciliations between GAAP and non-GAAP financial measures and additional details on non-GAAP financial measures, including information as to why the Company believes that the non-GAAP financial measures provided within MD&A are useful to investors.
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
OVERVIEW
Business summary
The Company is a global, digitally-led omnichannel retailer. The Company offers a broad assortment of apparel, personal care products and accessories for men, women and kids, which are sold primarily through its Company-owned stores and digital channels, as well as through various third-party arrangements.
The Company manages its business on a geographic basis, consisting of three reportable segments: Americas; Europe, the Middle East and Africa ("EMEA"); and Asia-Pacific ("APAC"). Corporate functions and other income and expenses are evaluated on a consolidated basis and are not allocated to the Company's segments, and therefore are included as a reconciling item between segment and total operating income.
The Company's brand families include Abercrombie brands and Hollister brands. These 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's fiscal year ends on the Saturday closest to January 31. All references herein to the Company's fiscal years are as follows:
Fiscal year Year ended/ending Number of weeks
Fiscal 2024 February 1, 2025 52
Fiscal 2025 January 31, 2026 52
Fiscal 2026 January 30, 2027 52
Seasonality
Historically, the Company's operations have been seasonal in nature and consist of 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"). 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, and the Company could have significant fluctuations in certain asset and liability accounts. The Company historically experiences its greatest sales activity during the Fall season due to back-to-school and holiday sales periods, respectively.
CURRENT TRENDS AND OUTLOOK
Focus areas for Fiscal 2025
The Company introduced the Always Forward Plan in June 2022. The Always Forward Plan is anchored on our strategic growth principles, which are to:
•Execute focused growth plans;
•Accelerate an enterprise-wide digital revolution; and
•Operate with financial discipline.
While the Company has significantly outperformed certain financial targets set forth in the Always Forward Plan, the growth principles continue to serve as a framework for the Company achieving sustainable and profitable growth.
The Company's strategic priorities continue to evolve based on changing consumer demands and new strategic opportunities, and management reviews and prioritizes investments and strategic focus areas to address such demands and opportunities.
The Company's focus areas for Fiscal 2025are to:
Execute focused growth plans by:
•driving sales growth across regions and brand families primarily through marketing and store investments in our owned and operating channels, while pursuing new geographies and markets via franchise, wholesale and licensing partnerships;
•using our regionally relevant brand playbooks globally to align the brands' products, voices, and experiences with customers, both digitally and in-store; and
•using testing and chase strategies to deliver compelling assortments and product collections across genders.
Accelerate an enterprise-wide digital revolution to improve the customer and associate experience by:
•continuing to progress on our multi-year enterprise resource planning ("ERP") transformation and cloud migration journey; and
•investing in digital and technology to improve experiences across key parts of the customer journey while delivering a consistent omnichannel experience.
Operate with financial discipline by:
•using our agile inventory model and pricing strategies to position the Company to support customer demand throughout the year; and
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
•maintaining our durable balance sheet and consistent free cash flow profile, underpinned by our disciplined investment philosophy while balancing against macro environment impacts and efficiency efforts.
Current macroeconomic conditions and tariffs
Macroeconomic conditions, such as a volatile interest rate environment, ongoing inflation, the geopolitical landscape, and foreign exchange rate fluctuations continue to impact the global economy. In addition, recent changes in legislative and regulatory developments, including enacted and proposed tariffs and other trade policies, have introduced additional uncertainty in the global economy and impacted our business and operations. For example, during Fiscal 2025, the U.S. announced a new universal baseline tariff on all U.S. imports, plus additional country-specific tariffs for select countries, including the countries from which we source a predominant portion of our merchandise, including Vietnam, Cambodia, and India. As a result, certain countries have imposed retaliatory tariffs on U.S. exports. The U.S. has reached trade agreements with certain countries, however U.S. tariff rates on imports from certain other countries remained subject to ongoing trade negotiations as of the date of this filing. It is also possible that further tariffs may be introduced or increased, or that existing tariffs may further change, resulting in continued uncertainty regarding the future of global trade relations. Additionally, recent court rulings bring additional uncertainty regarding the enforceability of the aforementioned tariffs. These continued uncertainties could disrupt our ability to procure, and/or result in increases to the cost of merchandise sourced from impacted countries. Uncertainties regarding tariffs, together with geopolitical tensions, may affect our business and operations or could lead to weakened business conditions for our industry. With continued uncertainty surrounding the geopolitical and trade environment, we continue to evaluate the impact of tariffs and other trade policies on our business and are continuing to build our playbook of mitigation strategies. Current mitigation strategies include evaluating supply chain footprint changes, negotiating with our supply chain vendors, pursuing operating expense reductions and determining ways to increase average unit retail ("AUR") primarily through lower promotions and lower clearance selling. Assuming the estimated impact from the tariffs on goods imported into the U.S. based on with trade policies as of August 25, 2025, and factoring in certain planned mitigation strategies, we expect to incur approximately $90 million of net tariff expense, or 170 basis points as a percent of net sales, which will correspondingly negatively impact our operating profit in Fiscal 2025.
Further, in periods of perceived or actual unfavorable economic conditions, consumers may reallocate available discretionary spending or determine that they have fewer funds available for discretionary spending, which may also adversely impact demand for our products. Continued inflationary pressures could further impact expenses and have a long-term impact on the Company as increasing costs may impact its ability to maintain satisfactory margins.
Global events and supply chain disruptions
As a global multi-brand omnichannel specialty retailer, with operations in North America, Europe, the Middle East, and Asia, among other regions, management is mindful of macroeconomic risks, global challenges and the changing global geopolitical environment. The global supply chain also continues to be negatively impacted by various factors, including disruptions in major maritime routes, higher operational costs, and increased competition for supply chain availability due to uncertainty regarding tariffs and trade policy. In the past, the Company has taken certain mitigating actions in response to these disruptions, including increasing air freight usage where appropriate and prioritizing critical orders earlier to allow for longer lead times. During times of supply chain disruption, the Company may elect to pull forward product calendars which limits the effectiveness of our inventory chase model. Further mitigating actions may be needed and could result in higher freight costs in the near-term and beyond.
Management continues to monitor global events and assess the potential impacts that these and similar events may have on the business in future periods. Although management also develops and updates contingency plans to assist in mitigating potential impacts, it is possible that the Company's preparations for such events are not adequate to mitigate their impact, and that these events could further adversely affect its business and results of operations.
Global store network modernization and growth
The Company has a goal of finding the right size, right location and right economics for omni-enabled stores that cater to local customers. The Company continues to use data to inform its focus on aligning store square footage with digital penetration, and has delivered new store experiences across brands during Fiscal 2025.
Through the end of the second fiscal quarter, the Company opened 26 new stores, remodeled 16 stores and right-sized five store, while closing eight stores. As part of this focus, the Company's store investment plan includes delivering approximately 40 net store openings during Fiscal 2025consisting of opening approximately 60 new stores, while closing approximately 20 stores, pending negotiations with our landlord partners. Additionally, the Company expects approximately 40 remodels and rightsizes, during Fiscal 2025, pending negotiations with our landlord partners.
Future closures could be completed through natural lease expirations, while certain other leases include early termination options that can be exercised under specific conditions. The Company may also elect to exit or modify other leases, and could incur charges related to these actions.
Recent Tax Law Changes
On July 4, 2025, House Resolution 1, also known as the One Big Beautiful Bill Act ("OBBBA"), was signed into law. The OBBBA includes, among other provisions, changes to U.S. corporate income tax law impacting the taxation of domestic and international business operations, including permanently extending certain expiring provisions of the Tax Cuts and Jobs Act, restoration of accelerated depreciation on capital expenditures, deductible research and experimental expenditures, and modifications to the international tax framework. The enactment of the OBBBA did not have a material impact on the consolidated financial statements and disclosures.
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
Pillar Two Model Rules
In 2021, the Organization for Economic Cooperation and Development ("OECD") released Pillar Two Global Anti-Base Erosion model rules ("Pillar Two Rules"), designed to ensure large corporations are taxed at a minimum rate of 15% in all countries of operation. Although the U.S. withdrew from the OECD's global tax agreement in January 2025, other countries where the Company does business, including the U.K. and Germany, have enacted legislation implementing Pillar Two Rules, which are effective from January 1, 2024. The implementation of Pillar Two Rules in each jurisdiction in which the Company operates did not have a material impact on the Company's effective tax rate for Fiscal 2024, and the Company does not project a material impact on the effective tax rate for Fiscal 2025. The Company will continue to evaluate the impact as additional jurisdictions enact legislation and provide further guidance.
For a discussion of material risks that have the potential to cause our actual results to differ materially from our expectations, refer to Part I, "Item 1A. Risk Factors" on the Fiscal 2024 Form 10-K.
Summary of results
The following provides a summary of results for the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024:
GAAP
Non-GAAP (1)
Thirteen Weeks Ended
August 2, 2025
August 3, 2024
August 2, 2025
August 3, 2024
Net sales (in thousands)
$ 1,208,560 $ 1,133,974
Change in net sales 7 % 21 %
Comparable sales (2)
3 % 18 %
Operating income (in thousands)
$ 206,658 $ 175,625 $ 168,084
Operating income margin
17.1 % 15.5 % 13.9 %
Net income attributable to A&F (in thousands)
$ 141,383 $ 133,168 $ 112,758
Net income per share attributable to A&F 2.91 2.50 2.32
Twenty-Six Weeks Ended
Net sales $ 2,305,871 $ 2,154,704
Change in net sales 7 % 22 %
Comparable sales (2)
4 % 19 %
Operating income $ 308,191 $ 305,474 $ 269,617
Operating income margin
13.4 % 14.2 % 11.7 %
Net income attributable to A&F $ 221,796 $ 247,018 $ 193,171
Net income per share attributable to A&F 4.47 4.64 3.90
(1)Discussion as to why the Company believes that these non-GAAP financial measures are useful to investors and a reconciliation of the non-GAAP measures to the most directly comparable financial measure calculated and presented in accordance with GAAP are provided below under "NON-GAAP FINANCIAL MEASURES."
(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.
Certain components of the Company's Condensed Consolidated Balance Sheets as of August 2, 2025 and February 1, 2025 were as follows:
(in thousands) August 2, 2025 February 1, 2025
Cash and equivalents $ 572,730 $ 772,727
Marketable securities 30,795 116,221
Inventories 592,966 575,005
Certain components of the Company's Condensed Consolidated Statements of Cash Flows for the twenty-six-week periods ended August 2, 2025 and August 3, 2024 were as follows:
(in thousands) August 2, 2025 August 3, 2024
Net cash provided by operating activities $ 112,893 $ 260,119
Net cash used for investing activities (31,943) (96,649)
Net cash used for financing activities (290,713) (326,961)
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
RESULTS OF OPERATIONS
The estimated basis point ("BPS") change disclosed throughout this Results of Operations section has been rounded based on the change in the percentage of net sales.
Net sales
Net sales by segment are presented by attributing revenues to a physical store location or geographical region that fulfills the order. The Company's net sales by reportable segment for the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024 were as follows:
Thirteen Weeks Ended
(in thousands, except ratios) August 2, 2025 August 3, 2024 $ Change % Change
Comparable
Sales (1)
By segment:
Americas $ 974,200 $ 901,224 $ 72,976 8 % 5 %
EMEA 197,210 199,682 (2,472) (1) (5)
APAC 37,150 33,068 4,082 12 1
Total $ 1,208,560 $ 1,133,974 $ 74,586 7 3
Twenty-Six Weeks Ended
(in thousands, except ratios) August 2, 2025 August 3, 2024 $ Change % Change
Comparable
Sales (1)
By segment:
Americas $ 1,849,004 $ 1,721,345 $ 127,659 7 % 5 %
EMEA 382,246 364,460 17,786 5 0
APAC 74,621 68,899 5,722 8 2
Total $ 2,305,871 $ 2,154,704 $ 151,167 7 4
(1)Comparable sales are calculated on a constant currency basis. Refer to "NON-GAAP FINANCIAL MEASURES,"for further details on the comparable sales calculation.
For the second quarter of Fiscal 2025, net sales increased 7%, as compared to the second quarter of Fiscal 2024. The increase was primarily attributable to high-single digit unit volume growth, with increases in company owned and operated stores digital channels and net new stores, partially offset by reduced AUR. The year-over-year increase in net sales reflects positive comparable sales of 3%, as compared to the second quarter of Fiscal 2024. On a geographic basis for the second quarter of Fiscal 2025:
•Net sales growth in the Americas region of 8% and 5% on a comparable basis. The increase was attributable to low-double digit unit volume growth, with increases in company owned and operated stores and digital channels and net new owned and operated stores.
•Net sales decline in the EMEA region of (1)% and (5)% on a comparable basis. The decrease was attributable to lower comparable AUR from increased promotional activity, partially offset by low single-digit unit volume growth, with increases in company owned and operated stores and digital channels, new stores and favorable foreign currency.
•Net sales growth in the APAC region of 12% and 1% on a comparable basis. Sales growth was led by low single-digit unit volume growth, with increases in owned and operated store and digital channels and new owned and operated stores.
For the year-to-date period of Fiscal 2025, net sales increased 7%, as compared to the year-to-date period of Fiscal 2024. The increase was primarily attributable to high-single digit growth unit volume growth, with increases in company owned and operated stores and digital channels. The year-over-year increase in net sales reflects positive comparable sales of 4%, as compared to the year-to-date period of Fiscal 2024. On a geographic basis for the year-to-date-period of Fiscal 2025:
•Net sales growth in the Americas region of 7% and 5% on a comparable basis. Sales growth was led by high single-digit unit volume growth, with increases in company owned and operated stores and digital channels and net new owned and operated stores.
•Net sales growth in the EMEA region of 5% and flat on a comparable basis. The increase was attributable to new store sales, low single-digit unit volume growth with an increase in in digital channels, and foreign currency partially offset by lower AUR.
•Net sales growth in the APAC region of 8% and 2% on a comparable sales basis. The increase was attributable to new store sales and low-single digit unit volume growth, with an increase in digital, partially offset by a decrease in owned and operated stores.
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
The Company's net sales by brand for the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024 were as follows:
Thirteen Weeks Ended
(in thousands, except ratios) August 2, 2025 August 3, 2024 $ Change % Change
Comparable
Sales (1)
Abercrombie
$ 551,868 $ 582,416 $ (30,548) (5) % (11) %
Hollister
656,692 551,558 105,134 19 19
Total $ 1,208,560 $ 1,133,974 $ 74,586 7 3
Twenty-Six Weeks Ended
(in thousands, except ratios) August 2, 2025 August 3, 2024 $ Change % Change
Comparable
Sales (1)
Abercrombie
$ 1,099,815 $ 1,153,929 $ (54,114) (5) % (10) %
Hollister
1,206,056 1,000,775 205,281 21 20
Total $ 2,305,871 $ 2,154,704 $ 151,167 7 4
(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
Thirteen Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios) % of Net sales % of Net sales BPS Change
Cost of sales, exclusive of depreciation and amortization $ 451,590 37.4 % $ 397,712 35.1 % 230
Twenty-Six Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change
Cost of sales, exclusive of depreciation and amortization $ 868,723 37.7 % $ 740,985 34.4 % 330
For the second quarter of Fiscal 2025, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales increased by approximately 230 basis points, as compared to the second quarter of Fiscal 2024. The percentage increase was primarily attributable to cost of sales deleverage from single-digit AUR decreases driven by volume mix and targeted promotions, and higher average unit cost ("AUC") partially due to an approximate 40 basis point adverse tariff impact compared to the second quarter of Fiscal 2024.
For the year-to-date period of Fiscal 2025, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales increased by approximately 330 basis points, as compared to the year-to-date period of Fiscal 2024. The percentage increase was primarily attributable to cost of sales deleverage from single-digit AUR decreases driven by volume mix and targeted promotions, and higher AUC primarily related to 120 basis points in higher freight costs and an approximate 20 basis point adverse tariff impact compared to the year-to-date period of Fiscal 2024.
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
Selling expense
Thirteen Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios) % of Net sales % of Net sales BPS Change
Selling expense $ 375,356 31.1 % $ 382,557 33.7 % (260)
Excluded item:
Litigation Settlement (1)
42,874 3.5 - - 350
Adjusted non-GAAP selling expense
$ 418,230 34.6 $ 382,557 33.7 90
Twenty-Six Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change
Selling expense $ 775,293 33.6 % $ 742,575 34.5 % (90)
Excluded item:
Litigation Settlement (1)
42,874 1.9 - - 190
Adjusted non-GAAP selling expense
$ 818,167 35.5 $ 742,575 34.5 100
(1) Refer to "NON-GAAP FINANCIAL MEASURES" for further details.
For the second quarter of Fiscal 2025, selling expense decreased by $7 million, as compared to the second quarter of Fiscal 2024. Selling expense as a percentage of net sales decreased 260 basis points, as compared to the second quarter of Fiscal 2024. The decrease in rate was primarily driven by expense leverage, including an approximate 350 basis point benefit resulting from the favorable settlement of claims to resolve payment card interchange fee litigation (the "Litigation Settlement"), partially offset by an approximate 90 basis point increase in store occupancy and payrolls costs. Excluding 350 basis points of benefits related to the Litigation Settlement, adjusted non-GAAP selling expense as a percentage of net sales increased by approximately 90 basis points during the second quarter of Fiscal 2025, as compared to the second quarter of Fiscal 2024.
For the year-to-date period of Fiscal 2025, selling expense increased by $33 million as compared to the year-to-date period of Fiscal 2024. Selling expense as a percentage of net sales decreased 90 basis points as compared to the year-to-date period of Fiscal 2024. The decrease in rate was primarily driven by expense leverage, including an approximate 190 basis point benefit resulting from the Litigation Settlement, partially offset by an approximate 60 basis point increase in store occupancy and payroll costs and an approximate 40 basis point increase in marketing. Excluding 190 basis points of benefits related to the Litigation Settlement, adjusted non-GAAP selling expense as a percentage of net sales increased by approximately 100 basis points during the year-to-date period of Fiscal 2025, as compared to the year-to-date period of Fiscal 2024.
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
General and administrative expense
Thirteen Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios) % of Net sales % of Net sales BPS Change
General and administrative expense
$ 175,325 14.5 % $ 178,147 15.7 % (120)
Excluded item:
Litigation Settlement (1)
(4,300) (0.4) - - (40)
Adjusted non-GAAP general and administrative expense
$ 171,025 14.2 $ 178,147 15.7 (150)
Twenty-Six Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change
General and administrative expense
$ 350,250 15.2 % $ 367,695 17.1 % (190)
Excluded item:
Litigation Settlement (1)
(4,300) (0.2) - - (20)
Adjusted non-GAAP general and administrative expense
$ 345,950 15.0 $ 367,695 17.1 (210)
(1) Refer to "NON-GAAP FINANCIAL MEASURES" for further details.
For the second quarter of Fiscal 2025, general and administrative expense decreased by $3 million, as compared to the second quarter of Fiscal 2024. General and administrative expense as a percentage of net sales decreased 120 basis points, as compared to the second quarter of Fiscal 2024. The decrease in expense rate was primarily driven by a 190 basis point decrease in employee compensation costs, partially offset by approximately 40 basis points in legal fees relating to the Litigation Settlement, and 30 basis points in other administrative expenses. Excluding 40 basis points of legal fees related to the Litigation Settlement, adjusted non-GAAP general and administrative expense as a percentage of net sales decreased by approximately 150 basis points during the second quarter of Fiscal 2025, as compared to the second quarter of Fiscal 2024.
For the year-to-date period of Fiscal 2025, general and administration expense decreased by $17 million, as compared to the year-to-date period of Fiscal 2024. General and administrative expense as a percentage of net sales decreased 190 basis points as compared to the year-to-date period of Fiscal 2024. The decrease in expense rate was primarily driven by an approximate 200 basis point decrease in employee compensation costs, approximately 20 basis points in legal fees relating to the Litigation Settlement, partially offset by approximately 30 basis points in outside services and other administrative expenses. Excluding 20 basis points of legal fees related to the Litigation Settlement, adjusted non-GAAP general and administrative expense as a percentage of net sales during the year-to-date period of Fiscal 2025, decreased by approximately 210 basis points, as compared to the year-to-date period of Fiscal 2024.
Other operating income, net
Thirteen Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios) % of Net sales % of Net sales BPS Change
Other operating income, net $ (369) - % $ (67) - % -
Twenty-Six Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change
Other operating (loss) income, net $ 3,414 0.1 % $ (2,025) (0.1) % 20
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
Operating income
Thirteen Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios)
% of Net sales(1)
% of Net sales(1)
BPS Change
Americas $ 319,829 32.8 % $ 275,120 30.5 % 230
EMEA 24,530 12.4 38,040 19.1 (670)
APAC (5,967) (16.1) (3,245) (9.8) (630)
Operating loss not attributed to segments (131,734) (134,290)
Operating income $ 206,658 17.1 $ 175,625 15.5 160
Excluded item:
Litigation Settlement (2)
38,574 3.2 - - 320
Adjusted non-GAAP operating income
$ 168,084 13.9 $ 175,625 15.5 (160)
Twenty-Six Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios)
% of Net Sales(1)
% of Net Sales(1)
BPS Change
Americas $ 546,789 29.6 % $ 527,467 30.6 % (100)
EMEA 40,564 10.6 62,541 17.2 (660)
APAC (10,377) (13.9) (3,567) (5.2) (870)
Operating loss not attributed to segments (268,785) (280,967)
Operating income $ 308,191 13.4 $ 305,474 14.2 (80)
Excluded item:
Litigation Settlement (2)
38,574 1.7 - - 170
Adjusted non-GAAP operating income
$ 269,617 11.7 $ 305,474 14.2 (250)
(1) Segment operating income as a percentage of net sales is calculated by attributing the segment's operating income with the respective net sales in the segment.
(2) Refer to "NON-GAAP FINANCIAL MEASURES" for further details.
For the second quarter of Fiscal 2025, operating income increased by $31 million, or 160 basis points, as a percentage of net sales, as compared to the second quarter of Fiscal 2024.
•Operating income for the Americas region increased $45 million, or 230 basis points as a percentage of region net sales, as compared to the second quarter of Fiscal 2024. The increase as a percent of sales was primarily attributed to a benefit from the Litigation Settlement included in selling expense, partially offset by higher cost of sales, inclusive of tariffs, and deleverage on store occupancy expenses.
•Operating income for the EMEA region decreased $14 million or 670 basis points as a percentage of region net sales, as compared to the second quarter of Fiscal 2024. The decrease as a percent of sales is primarily attributed to lower comparable AUR and deleverage on stores and distribution center related fulfillment expenses.
•Operating (loss) for the APAC region increased by $3 million or 630 basis points as a percentage of region net sales, as compared to the second quarter of Fiscal 2024. The decrease as a percent of sales is primarily attributed to deleverage on higher stores and distribution expenses.
Excluding the benefits related to the Litigation Settlement, adjusted non-GAAP operating income as a percentage of net sales decreased by approximately 160 basis points during the second quarter of Fiscal 2025, as compared to the second quarter of Fiscal 2024.
For the year-to-date period of Fiscal 2025, operating income increased by $3 million compared to the year-to-date period of Fiscal 2024. As a percentage of net sales operating income decreased 80 basis points compared to the year-to-date period of Fiscal 2024.
•Operating income for the Americas increased $19 million and decreased 100 basis points as a percentage of region net sales as compared to the year-to-date period of Fiscal 2024. The decrease as a percent of sales was primarily attributed to higher cost of sales, inclusive of tariffs, and deleverage on store occupancy expenses, partially offset by a benefit from the Litigation Settlement included in selling expense.
•Operating (loss) for EMEA increased $22 million, or 660 basis points as a percentage of region net sales as compared to the year-to-date period of Fiscal 2024. The decrease as a percent of sales primarily relates to higher freight costs, marketing and deleverage on distribution center related fulfillment expenses.
•Operating (loss) for APAC increased $7 million, or 870 basis points as a percentage of region net sales, as compared to the year-to-date period of Fiscal 2024. The decrease as a percent of sales is primarily attributed to deleverage on higher stores and distribution expenses.
Excluding the benefits related to the Litigation Settlement, adjusted non-GAAP operating income as a percentage of net sales decreased by approximately 250 basis points during the year-to-date period of Fiscal 2025, as compared to the year-to-date period of Fiscal 2024.
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
Interest income, net
Thirteen Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios) % of Net sales % of Net sales BPS Change
Interest expense $ 620 0.1 % $ 5,189 0.5 % (40)
Interest income (3,094) (0.3) (10,392) (1.0) 70
Interest income, net $ (2,474) (0.2) $ (5,203) (0.5) 30
Twenty-Six Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios) % of Net Sales % of Net Sales BPS Change
Interest expense $ 1,281 0.1 % $ 10,969 0.5 % (40)
Interest income (10,538) (0.5) (21,195) (1.0) 50
Interest income, net $ (9,257) (0.4) $ (10,226) (0.5) 10
For the second quarter of Fiscal 2025, interest income, net decreased $2.7 million, as compared to the second quarter of Fiscal 2024. The net decrease was a result of a reduction in interest income due to the decrease in balance on time deposits and money market accounts compared to the second quarter of Fiscal 2024. This was partially offset by lower interest expense in Fiscal 2025 compared to Fiscal 2024 as a result of the redemption of the remaining outstanding balance of the 8.75% Senior Secured Notes on July 15, 2024.
For the year-to-date period of Fiscal 2025, interest income, net decreased $1.0 million, as compared to the year-to-date period of Fiscal 2024. The net decrease was a result of a reduction in interest income due to the decrease in balance on time deposits and money market accounts compared to the year-to-date period of Fiscal 2024. This was partially offset by lower interest expense in Fiscal 2025 compared to Fiscal 2024 as a result of the redemption of the remaining outstanding balance of the 8.75% Senior Secured Notes on July 15, 2024.
Income tax expense
Thirteen Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios) Effective Tax Rate Effective Tax Rate
Income tax expense $ 65,744 31.4 % $ 45,449 25.1 %
Excluded item:
Tax effect of pre-tax excluded items (1)
(9,949) -
Adjusted non-GAAP income tax expense $ 55,795 32.7 $ 45,449 25.1
Twenty-Six Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios) Effective Tax Rate Effective Tax Rate
Income tax expense $ 92,321 29.1 % $ 65,243 20.7 %
Excluded item:
Tax effect of pre-tax excluded items (1)
(9,949) -
Adjusted non-GAAP income tax expense $ 82,372 29.5 $ 65,243 20.7
(1) The tax effect of pre-tax excluded items is the difference between the tax provision calculation on a GAAP basis and on an adjusted non-GAAP basis. Refer to "NON-GAAP FINANCIAL MEASURES," for details of pre-tax excluded items.
The change in the effective tax rate for the second quarter and year-to-date period of Fiscal 2025, as compared with the second quarter and the year-to-date period of Fiscal 2024, is due to jurisdictional mix, a lower tax benefit on share-based compensation compared with the prior year, and the establishment of an additional valuation allowance in Japan.
Refer to Note 10, "INCOME TAXES."
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
Net income attributable to A&F
Thirteen Weeks Ended
August 2, 2025 August 3, 2024
(in thousands) % of Net sales % of Net sales BPS Change
Net income attributable to A&F $ 141,383 11.7 % $ 133,168 11.7 % -
Excluded item, net of tax (1)
(28,625) (2.4) - - (240)
Adjusted non-GAAP net income attributable to A&F
$ 112,758 9.3 $ 133,168 11.7 (240)
Twenty-Six Weeks Ended
August 2, 2025 August 3, 2024
(in thousands) % of Net Sales % of Net Sales BPS Change
Net income attributable to A&F $ 221,796 9.6 % $ 247,018 11.5 % (190)
Excluded item, net of tax (1)
(28,625) (1.2) - 0.0 (120)
Adjusted non-GAAP net income attributable to A&F
$ 193,171 8.4 $ 247,018 11.5 (310)
(1) Excluded items presented above under "Operating income," and "Income tax expense". Refer to "NON-GAAP FINANCIAL MEASURES" for further details.
Net income per share attributable to A&F
Thirteen Weeks Ended
August 2, 2025 August 3, 2024 $ Change
Net income per diluted share attributable to A&F
$ 2.91 $ 2.50 $ 0.41
Excluded item, net of tax (1) (2)
(0.59) - (0.59)
Adjusted non-GAAP net income per diluted share attributable to A&F
2.32 2.50 (0.18)
Impact from changes in foreign currency exchange rates - 0.03 (0.03)
Adjusted non-GAAP net income per diluted share attributable to A&F on a constant currency basis (2)
$ 2.32 $ 2.53 $ (0.21)
Twenty-Six Weeks Ended
August 2, 2025 August 3, 2024 $ Change
Net income per diluted share attributable to A&F
$ 4.47 $ 4.64 $ (0.17)
Excluded item, net of tax (1) (2)
(0.58) - (0.58)
Adjusted non-GAAP net income per diluted share attributable to A&F
$ 3.90 $ 4.64 $ (0.74)
Impact from changes in foreign currency exchange rates - (0.04) 0.04
Adjusted non-GAAP net income per diluted share attributable to A&F on a constant currency basis (2)
$ 3.90 $ 4.60 $ (0.70)
(1) Excluded items presented above under "Operating income," and "Income tax expense".
(2) Refer to "NON-GAAP FINANCIAL MEASURES" for further details.
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
EBITDA AND ADJUSTED EBITDA
Thirteen Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios) % of Net sales % of Net sales BPS Change
Net income $ 143,388 11.9 % $ 135,379 11.9 % -
Income tax expense 65,744 5.4 45,449 4.0 140
Interest (income) expense, net (2,474) (0.2) (5,203) (0.5) 30
Depreciation and amortization 37,424 3.1 39,355 3.6 (50)
EBITDA (1)
$ 244,082 20.2 $ 214,980 19.0 120
Excluded item:
Litigation Settlement (2)
(38,574) (3.2) - - (320)
Adjusted EBITDA (1)
$ 205,508 17.0 $ 214,980 19.0 (200)
Twenty-Six Weeks Ended
August 2, 2025 August 3, 2024
(in thousands, except ratios) % of Net sales % of Net sales BPS Change
Net income $ 225,127 9.8 % $ 250,457 11.6 % (180)
Income tax expense 92,321 4.0 65,243 3.0 100
Interest (income) expense, net (9,257) (0.4) (10,226) (0.5) 10
Depreciation and amortization 76,000 3.3 77,044 3.7 (40)
EBITDA (1)
$ 384,191 16.7 $ 382,518 17.8 (110)
Excluded item:
Litigation Settlement (2)
(38,574) (1.7) - 0.0 (170)
Adjusted EBITDA (1)
$ 345,617 15.0 $ 382,518 17.8 (280)
(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 excluded items.
(2)Refer to "NON-GAAP FINANCIAL MEASURES" for further details.
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Company's capital allocation strategy and priorities are reviewed by the Board of Directors quarterly, considering both liquidity and valuation factors. The Company believes that it will have adequate liquidity to fund operating activities for the next twelve months. The Company monitors market conditions and may in the future determine whether and when to repurchase shares of its Common Stock. For a discussion of the Company's share repurchase activity, please see below under "Share repurchases."
Primary sources and uses of cash
The Company's business has two principal selling seasons: Spring and Fall. The Company generally experiences its greatest sales activity during the Fall season due to the back-to-school and holiday sales periods. The Company relies on excess operating cash flows, which are largely generated in Fall, to fund operations throughout the year and to reinvest in the business to support future growth. The Company also has the ABL Facility available as a source of additional funding, which is described further below under "Credit facility".
Over the next twelve months, the Company expects its primary cash requirements to be directed towards prioritizing investments in the business and continuing to fund operating activities, including the acquisition of inventory, obligations related to compensation, marketing, data and technology, leases and any lease buyouts or modifications it may exercise, taxes and other operating activities. In addition, management continuously evaluates potential opportunities to strategically deploy excess cash and/or deleverage the balance sheet, in consideration of various factors, such as market and business conditions, and the Company's ability to accelerate investments in the business. Such opportunities may include, but are not limited to, share repurchases.
When evaluating opportunities for investments in the business, management considers alignment with initiatives that position the business for sustainable long-term growth and with the Company's strategic pillars as described within Part I, "Item 1. Business - STRATEGY AND KEY BUSINESS PRIORITIES" included in the Fiscal 2024 Form 10-K, including being opportunistic regarding growth opportunities. Examples of potential investment opportunities include, but are not limited to, new store experiences, and investments in the Company's digital and omnichannel initiatives. Historically, the Company has utilized free cash flow generated from operations to fund any discretionary capital expenditures, which have been prioritized towards new store experiences, as well as digital and omnichannel investments, and information technology. For the year-to-date period ended August 2, 2025, the Company invested $116.9 million towards capital expenditures. Total capital expenditures for Fiscal 2025are expected to be approximately $225 million.
The Company measures liquidity using total cash and cash equivalents and incremental borrowing available under the ABL Facility. As of August 2, 2025, the Company had cash and cash equivalents of $572.7 million and total liquidity of approximately $1.0 billion, compared with cash and cash equivalents of $772.7 million and total liquidity of approximately $1.2 billion at the beginning of Fiscal 2025.
Share repurchases
In March 2025, the Company announced that the Board of Directors approved a $1.3 billion share repurchase program (the "2025 Authorization"), which replaced the prior share repurchase program of $500 million authorized by the Board of Directors in 2021. The 2025 Authorization does not have an expiration date.
During the year-to-date period ended August 2, 2025, the Company repurchased approximately 3.2 million shares of its Common Stock pursuant to this share repurchase authorization for approximately $250 million. As of August 2, 2025, the Company had $1.1 billion in share repurchases remaining under the 2025 Authorization.
Historically, the Company has repurchased shares of its Common Stock from time to time, which repurchases are dependent on excess liquidity, market conditions and business conditions, with the objectives of returning excess cash to shareholders and offsetting dilution from issuances of Common Stock associated with the vesting of restricted stock units. Shares may be repurchased from time to time in open market or private transactions in such manner as may be deemed advisable from time to time (including, without limitation, pursuant to accelerated share repurchase programs, one or more 10b5-1 trading plans, or any other method deemed advisable) and may be discontinued at any time. The timing and amount of any such repurchases will be determined based on an evaluation of market conditions, the Company's share price, legal requirements, and other factors.
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
Credit facility
On August 2, 2024, A&F, as parent and a guarantor, A&F Management Co., as lead borrower, and certain of A&F's direct and indirect wholly-owned subsidiaries, as additional borrowers and guarantors, entered into the Second Amendment to the Amended and Restated Credit Agreement (as amended, the "ABL Credit Agreement"). The ABL Credit Agreement provides for the ABL Facility, which is a senior secured asset-based revolving credit facility of up to $500 million. As of August 2, 2025, the Company did not have any borrowings outstanding under the ABL Facility.
Details regarding the remaining borrowing capacity under the ABL Facility as of August 2, 2025 are as follows:
(in thousands) August 2, 2025
Loan cap $ 500,000
Less: Outstanding stand-by letters of credit (452)
Borrowing capacity 499,548
Less: Minimum excess availability (1)
(50,000)
Borrowing capacity available $ 449,548
(1) Under the ABL Facility, the Company must maintain excess availability equal to the greater of 10% of the loan cap or $36 million.
Refer to Note 11, "BORROWINGS."
Income taxes
The Company's earnings and profits from its foreign subsidiaries could be repatriated to the U.S. without incurring additional federal income tax. The Company determined that the balance of the Company's undistributed earnings and profits from its foreign subsidiaries as of February 2, 2019 are considered indefinitely reinvested outside of the U.S., and if these funds were to be repatriated to the U.S., the Company would expect to incur an insignificant amount of state income taxes and foreign withholding taxes. The Company accrues for both state income taxes and foreign withholding taxes with respect to earnings and profits earned after February 2, 2019, in such a manner that these funds could be repatriated without incurring additional tax expense. As of August 2, 2025, $209.1 million of the Company's $572.7 million of cash and equivalents were held by foreign affiliates.
Refer to Note 10, "INCOME TAXES."
Analysis of cash flows
The table below provides certain components of the Company's Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended August 2, 2025 and August 3, 2024:
Twenty-Six Weeks Ended
August 2, 2025 August 3, 2024
(in thousands)
Cash and equivalents, and restricted cash and equivalents, beginning of period $ 780,395 $ 909,685
Net cash provided by operating activities 112,893 260,119
Net cash used for investing activities (31,943) (96,649)
Net cash used for financing activities (290,713) (326,961)
Effect of foreign currency exchange rates on cash 9,700 101
Net decrease in cash and equivalents, and restricted cash and equivalents (200,063) (163,390)
Cash and equivalents, and restricted cash and equivalents, end of period $ 580,332 $ 746,295
Operating activities-During the fiscal year-to-date period ended August 2, 2025, net cash provided by operating activities included an increase in cash outflows related to the timing of merchandise and advertising payables and higher inventory product costs, partially offset by increased cash receipts as a result of the 7% year-over-year increase in net sales. During the fiscal year-to-date period ended August 3, 2024, net cash provided by operating activities included increased cash receipts as a result of the 22% year-over-year increase in net sales.
Investing activities- During the fiscal year-to-date period ended August 2, 2025, net cash used for investing activities was primarily used for capital expenditures of $117 million, partially offset by the maturity of $85 million of marketable securities. Net cash used for investing activities for the fiscal year-to-date period ended August 3, 2024 was primarily used for capital expenditures of $81.6 million.
Financing activities- During the fiscal year-to-date period ended August 2, 2025, net cash used for financing activities included the purchase of approximately 3.2 million shares of Common Stock with a market value of approximately $251 million and $35 million related to shares of Common Stock withheld (repurchased) to cover tax withholdings upon vesting of share-based compensation awards. During the fiscal year-to-date period ended August 3, 2024, net cash used for financing activities included
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
the repurchase of $9.3 million in the open market and redemption of $214.0 million of outstanding Senior Secured Notes, $67 million related to shares of Common Stock withheld (repurchased) to cover tax withholdings upon vesting of share-based compensation awards, and the purchase of approximately 0.2 million shares of Common Stock with a market value of approximately $30 million.
Contractual obligations
The Company's contractual obligations consist primarily of operating leases, purchase orders for merchandise inventory, unrecognized tax benefits, certain retirement obligations, lease deposits, and other agreements to purchase goods and services that are legally binding and that require minimum quantities to be purchased. These contractual obligations impact the Company's short-term and long-term liquidity and capital resource needs.
There have been no material changes in the Company's contractual obligations since February 1, 2025, 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" included on the Fiscal 2024 Form 10-K. The Company reviews recent accounting pronouncements on a quarterly basis and has excluded discussion of those not applicable to the Company and those that did not have, or are not expected to have, a material impact on the Company's consolidated financial statements.
CRITICAL ACCOUNTING ESTIMATES
The Company describes its critical accounting estimates in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included on the Fiscal 2024 Form 10-K. There have been no significant changes in critical accounting policies and estimates since the end of Fiscal 2024.
NON-GAAP FINANCIAL MEASURES
This Quarterly Report on Form 10-Q includes discussion of certain financial measures calculated and presented 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 may not reflect its future operating outlook, 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.
Comparable sales
The Company provides comparable sales, defined as the year-over-year percentage change in the aggregate of (1) net sales for stores that have been open as the same brand at least one year and 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) digital net 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 excludes revenue other than store and digital sales. Management uses comparable sales to understand the drivers of year-over-year changes in net sales and believes that comparable sales can be 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.
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
Excluded item
The following financial measures are disclosed on a GAAP and on an adjusted non-GAAP basis excluding the following item, as applicable:
Financial measures (1)
Excluded items
Selling expense
Settlement of claims to resolve payment card interchange fee litigation
General and administrative expense
Legal fees in connection with settlement of claims to resolve payment card interchange fee litigation
Operating income
Settlement, net of legal fees, of claims to resolve payment card interchange fee litigation
Income tax expense (2)
Tax effect of pre-tax excluded item
Net income and net income per share attributable to A&F (2)
Pre-tax excluded items and the tax effect of pre-tax excluded item
(1) Certain of these financial measures are also expressed as a percentage of net sales.
(2) 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.
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. Management also uses financial information on a constant currency basis to award employee performance-based compensation. 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 is calculated using a 26% effective tax rate.
Reconciliations of non-GAAP financial metrics on a constant currency basis to financial measures calculated and presented in accordance with GAAP for the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024 were as follows:
(in thousands, except change in net sales, operating income margin and per share data)
Thirteen Weeks Ended Twenty-Six Weeks Ended
Net sales August 2, 2025 August 3, 2024 % Change August 2, 2025 August 3, 2024 % Change
GAAP $ 1,208,560 $ 1,133,974 7 % $ 2,305,871 $ 2,154,704 7 %
Impact from changes in foreign currency exchange rates - 10,707 (1) - 10,499 -
Non-GAAP on a constant currency basis $ 1,208,560 $ 1,144,681 6 % $ 2,305,871 $ 2,165,203 6 %
Operating income August 2, 2025 August 3, 2024
BPS Change (1)
August 2, 2025 August 3, 2024
BPS Change (1)
GAAP $ 206,658 $ 175,625 160 $ 308,191 $ 305,474 (80)
Excluded items (2)
38,574 - 320 38,574 - 170
Adjusted non-GAAP $ 168,084 $ 175,625 (160) $ 269,617 $ 305,474 (250)
Impact from changes in foreign currency exchange rates - 2,272 0 - (2,962) 20
Adjusted non-GAAP on a constant currency basis $ 168,084 $ 177,897 (160) $ 269,617 $ 302,512 (230)
Net income per share attributable to A&F August 2, 2025 August 3, 2024 $ Change August 2, 2025 August 3, 2024 $ Change
GAAP $ 2.91 $ 2.50 $ 0.41 $ 4.47 $ 4.64 $ (0.17)
Excluded items, net of tax (2)
0.59 - 0.59 0.58 - 0.58
Adjusted non-GAAP $ 2.32 $ 2.50 $ (0.18) $ 3.90 $ 4.64 $ (0.74)
Impact from changes in foreign currency exchange rates - 0.03 (0.03) - (0.04) 0.04
Adjusted non-GAAP on a constant currency basis $ 2.32 $ 2.53 $ (0.21) $ 3.90 $ 4.60 $ (0.70)
(1) The estimated basis point change has been rounded based on the change in the percentage of net sales.
(2) Excluded item consists of a favorable settlement, net of legal fees, of payment card interchange fee litigation
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
EBITDA AND ADJUSTED EBITDA
The Company provides EBITDA and adjusted EBITDA as supplemental measures used by the Company's executive management to assess the Company's performance. We also believe these supplemental performance measures are meaningful information for investors and other interested parties to use in computing the Company's core financial performance over multiple periods and with other companies by excluding the impact of differences in tax jurisdictions, debt service levels and capital investment.
A reconciliation of non-GAAP EBITDA to net income, a financial measure calculated and presented in accordance with GAAP, and the adjustments made in calculating adjusted EBITDA for the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024 were as follows:
Thirteen Weeks Ended
(in thousands, except ratios) August 2, 2025 % of
Net Sales 		August 3, 2024 % of
Net Sales
Net income $ 143,388 11.9 % $ 135,379 11.9 %
Income tax expense 65,744 5.4 45,449 4.0
Interest income, net
(2,474) (0.2) (5,203) (0.5)
Depreciation and amortization 37,424 3.1 39,355 3.6
EBITDA (1)
$ 244,082 20.2 $ 214,980 19.0
Adjustments to EBITDA
Litigation Settlement (2)
(38,574) (3.2) - -
Adjusted EBITDA (1)
$ 205,508 17.0 $ 214,980 19.0
Twenty-Six Weeks Ended
(in thousands, except ratios) August 2, 2025 % of
Net Sales 		August 3, 2024 % of
Net Sales
Net income $ 225,127 9.8 % $ 250,457 11.6 %
Income tax expense 92,321 4.0 65,243 3.0
Interest (income) expense, net (9,257) (0.4) (10,226) (0.5)
Depreciation and amortization 76,000 3.3 77,044 3.7
EBITDA (1)
$ 384,191 16.7 $ 382,518 17.8
Adjustments to EBITDA
Litigation settlement (2)
(38,574) (1.7) - -
Adjusted EBITDA (1)
$ 345,617 15.0 $ 382,518 17.8
(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 excluded items.
(2)Refer to "NON-GAAP FINANCIAL MEASURES" for further details.
Abercrombie & Fitch Co.
2025 2Q Form 10-Q
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