QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||
(Address of principal executive offices) | (Zip Code) | ||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
Emerging growth company | |||
Class A Common Stock | Shares outstanding as of September 6, 2019 | |
$.01 Par Value | ||
Page No. | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 6. | ||
ITEM 1. | FINANCIAL STATEMENTS (UNAUDITED) |
Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||
August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | ||||||||||||
Net sales | $ | $ | $ | $ | |||||||||||
Cost of sales, exclusive of depreciation and amortization | |||||||||||||||
Gross profit | |||||||||||||||
Stores and distribution expense | |||||||||||||||
Marketing, general and administrative expense | |||||||||||||||
Flagship store exit charges | |||||||||||||||
Asset impairment, exclusive of flagship store exit charges | |||||||||||||||
Other operating loss (income), net | ( | ) | ( | ) | ( | ) | |||||||||
Operating (loss) income | ( | ) | ( | ) | ( | ) | |||||||||
Interest expense, net | |||||||||||||||
Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Income tax (benefit) expense | ( | ) | ( | ) | ( | ) | |||||||||
Net loss | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Less: Net income attributable to noncontrolling interests | |||||||||||||||
Net loss attributable to A&F | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Net loss per share attributable to A&F | |||||||||||||||
Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Weighted-average shares outstanding | |||||||||||||||
Basic | |||||||||||||||
Diluted | |||||||||||||||
Other comprehensive (loss) income | |||||||||||||||
Foreign currency translation, net of tax | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Derivative financial instruments, net of tax | |||||||||||||||
Other comprehensive (loss) income | ( | ) | ( | ) | ( | ) | |||||||||
Comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Less: Comprehensive income attributable to noncontrolling interests | |||||||||||||||
Comprehensive loss attributable to A&F | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
August 3, 2019 | February 2, 2019 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and equivalents | $ | $ | |||||
Receivables | |||||||
Inventories | |||||||
Other current assets | |||||||
Total current assets | |||||||
Property and equipment, net | |||||||
Operating lease right-of-use assets | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | $ | |||||
Accrued expenses | |||||||
Short-term portion of operating lease liabilities | |||||||
Income taxes payable | |||||||
Short-term portion of deferred lease credits | |||||||
Total current liabilities | |||||||
Long-term liabilities: | |||||||
Long-term portion of operating lease liabilities | |||||||
Long-term portion of borrowings, net | |||||||
Long-term portion of deferred lease credits | |||||||
Leasehold financing obligations | |||||||
Other liabilities | |||||||
Total long-term liabilities | |||||||
Stockholders’ equity | |||||||
Class A Common Stock - $0.01 par value: 150,000 shares authorized and 103,300 shares issued for all periods presented | |||||||
Paid-in capital | |||||||
Retained earnings | |||||||
Accumulated other comprehensive loss, net of tax | ( | ) | ( | ) | |||
Treasury stock, at average cost: 40,154 and 37,073 shares as of August 3, 2019 and February 2, 2019, respectively | ( | ) | ( | ) | |||
Total Abercrombie & Fitch Co. stockholders’ equity | |||||||
Noncontrolling interests | |||||||
Total stockholders’ equity | |||||||
Total liabilities and stockholders’ equity | $ | $ | |||||
Thirteen Weeks Ended August 3, 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, May 4, 2019 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Net loss | — | — | — | ( | ) | — | — | — | ( | ) | |||||||||||||||
Purchase of Common Stock | ( | ) | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||
Dividends ($0.20 per share) | — | — | — | — | ( | ) | — | — | — | ( | ) | ||||||||||||||
Share-based compensation issuances and exercises | — | ( | ) | — | ( | ) | — | ( | ) | ( | ) | ||||||||||||||
Share-based compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||
Derivative financial instruments, net of tax | — | — | — | — | — | — | — | ||||||||||||||||||
Foreign currency translation adjustments, net of tax | — | — | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||
Distributions to noncontrolling interests, net | — | — | — | ( | ) | — | — | — | — | ( | ) | ||||||||||||||
Balance, August 3, 2019 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Thirteen Weeks Ended August 4, 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, May 5, 2018 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Net loss | — | — | — | ( | ) | — | — | — | ( | ) | |||||||||||||||
Purchase of Common Stock | ( | ) | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||
Dividends ($0.20 per share) | — | — | — | — | ( | ) | — | — | — | ( | ) | ||||||||||||||
Share-based compensation issuances and exercises | — | ( | ) | — | ( | ) | — | ( | ) | ( | ) | ||||||||||||||
Share-based compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||
Derivative financial instruments, net of tax | — | — | — | — | — | — | — | ||||||||||||||||||
Foreign currency translation adjustments, net of tax | — | — | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||
Distributions to noncontrolling interests, net | — | — | — | ( | ) | — | — | — | — | ( | ) | ||||||||||||||
Balance, August 4, 2018 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Twenty-six Weeks Ended August 3, 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 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Impact from adoption of the new lease accounting standard (Refer to Note 2 “Summary of Significant Accounting Policies”) | — | — | — | — | ( | ) | — | — | — | ( | ) | ||||||||||||||
Net loss | — | — | — | ( | ) | — | — | — | ( | ) | |||||||||||||||
Purchase of Common Stock | ( | ) | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||
Dividends ($0.40 per share) | — | — | — | — | ( | ) | — | — | — | ( | ) | ||||||||||||||
Share-based compensation issuances and exercises | — | ( | ) | — | ( | ) | — | ( | ) | ( | ) | ||||||||||||||
Share-based compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||
Derivative financial instruments, net of tax | — | — | — | — | — | — | — | ||||||||||||||||||
Foreign currency translation adjustments, net of tax | — | — | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||
Distributions to noncontrolling interests, net | — | — | — | ( | ) | — | — | — | — | ( | ) | ||||||||||||||
Balance, August 3, 2019 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Twenty-six Weeks Ended August 4, 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 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Impact from adoption of the new revenue recognition accounting standard | — | — | — | — | — | — | — | ||||||||||||||||||
Net loss | — | — | — | ( | ) | — | — | — | ( | ) | |||||||||||||||
Purchase of Common Stock | ( | ) | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||
Dividends ($0.40 per share) | — | — | — | — | ( | ) | — | — | — | ( | ) | ||||||||||||||
Share-based compensation issuances and exercises | — | ( | ) | — | ( | ) | — | ( | ) | ( | ) | ||||||||||||||
Share-based compensation expense | — | — | — | — | — | — | — | ||||||||||||||||||
Derivative financial instruments, net of tax | — | — | — | — | — | — | — | ||||||||||||||||||
Foreign currency translation adjustments, net of tax | — | — | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||
Distributions to noncontrolling interests, net | — | — | — | ( | ) | — | — | — | — | ( | ) | ||||||||||||||
Balance, August 4, 2018 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Twenty-six Weeks Ended | |||||||
August 3, 2019 | August 4, 2018 | ||||||
Operating activities | |||||||
Net loss | $ | ( | ) | $ | ( | ) | |
Adjustments to reconcile net loss to net cash used for operating activities: | |||||||
Depreciation and amortization | |||||||
Amortization of deferred lease credits prior to adoption of new lease accounting standard | ( | ) | |||||
Asset impairment | |||||||
Loss on disposal | |||||||
Benefit from deferred income taxes | ( | ) | ( | ) | |||
Share-based compensation | |||||||
Changes in assets and liabilities: | |||||||
Inventories | ( | ) | ( | ) | |||
Accounts payable and accrued expenses | |||||||
Operating lease right-of-use assets and liabilities | |||||||
Income taxes | ( | ) | ( | ) | |||
Other assets | ( | ) | ( | ) | |||
Other liabilities | ( | ) | |||||
Net cash (used for) provided by operating activities | ( | ) | |||||
Investing activities | |||||||
Purchases of property and equipment | ( | ) | ( | ) | |||
Net cash used for investing activities | ( | ) | ( | ) | |||
Financing activities | |||||||
Purchases of common stock | ( | ) | ( | ) | |||
Dividends paid | ( | ) | ( | ) | |||
Other financing activities | ( | ) | ( | ) | |||
Net cash used for financing activities | ( | ) | ( | ) | |||
Effect of exchange rates on cash | ( | ) | ( | ) | |||
Net decrease in cash and equivalents, and restricted cash and equivalents | ( | ) | ( | ) | |||
Cash and equivalents, and restricted cash and equivalents, beginning of period | |||||||
Cash and equivalents, and restricted cash and equivalents, end of period | $ | $ | |||||
Supplemental information related to non-cash activities | |||||||
Purchases of property and equipment not yet paid at end of period | $ | $ | |||||
Operating lease right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | |||||
Supplemental information related to cash activities | |||||||
Cash paid for interest related to Abercrombie & Fitch Co.’s term loan facility | $ | $ | |||||
Cash paid for income taxes | $ | $ | |||||
Cash received from income tax refunds | $ | $ | |||||
Cash paid for operating lease liabilities | $ | $ | |||||
Page No. | ||
Note 1. | ||
Note 2. | ||
Note 3. | ||
Note 4. | ||
Note 5. | ||
Note 6. | ||
Note 7. | ||
Note 8. | ||
Note 9. | ||
Note 10. | ||
Note 11. | ||
Note 12. | ||
Note 13. | ||
Note 14. | ||
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 | ||
Accounting Standards Update (ASU) | Description | Effect on the financial statements or other significant matters | ||
Leases (ASU 2016-02) Date of adoption: February 3, 2019 | 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. | 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: - 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 - 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 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. | ||
Derivatives and Hedging — Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12) Date of adoption: February 3, 2019 | 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. | 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 and twenty-six weeks ended August 3, 2019, and is not expected to have a significant impact on the Company’s consolidated financial statements for Fiscal 2019. | ||
Intangibles — Goodwill and Other —Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (ASU 2018-15) Date of adoption: February 3, 2019 | 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. | The Company early adopted this standard on a prospective basis and comparative periods have not been restated. The Company expects to capitalize up to $10 million of SaaS implementation costs in Fiscal 2019, of which $2.2 million has been capitalized in the twenty-six weeks ended August 3, 2019. Amortization expense related to capitalized SaaS implementation costs was immaterial for each of the thirteen and twenty-six weeks ended August 3, 2019. | ||
(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 | $ | $ | $ | ||||||||
Receivables | |||||||||||
Inventories | |||||||||||
Other current assets (2) | ( | ) | |||||||||
Total current assets | ( | ) | |||||||||
Property and equipment, net (3) | ( | ) | |||||||||
Operating lease right-of-use assets (2) | |||||||||||
Other assets (2) (5) | |||||||||||
Total assets | $ | $ | $ | ||||||||
Liabilities and stockholders’ equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | $ | ||||||||
Accrued expenses (2) | ( | ) | |||||||||
Short-term portion of operating lease liabilities (4) | |||||||||||
Short-term portion of deferred lease credits (2) | ( | ) | |||||||||
Income taxes payable | |||||||||||
Total current liabilities | |||||||||||
Long-term liabilities: | |||||||||||
Long-term portion of operating lease liabilities (4) | |||||||||||
Long-term portion of borrowings, net | |||||||||||
Long-term portion of deferred lease credits (2) | ( | ) | |||||||||
Leasehold financing obligations (3) | ( | ) | |||||||||
Other liabilities (2) (5) | ( | ) | |||||||||
Total long-term liabilities | |||||||||||
Stockholders’ equity | |||||||||||
Class A Common Stock | |||||||||||
Paid-in capital | |||||||||||
Retained earnings (6) | ( | ) | |||||||||
Accumulated other comprehensive loss, net of tax | ( | ) | ( | ) | |||||||
Treasury stock, at average cost | ( | ) | ( | ) | |||||||
Total Abercrombie & Fitch Co. stockholders’ equity | ( | ) | |||||||||
Noncontrolling interests | |||||||||||
Total stockholders’ equity | ( | ) | |||||||||
Total liabilities and stockholders’ equity | $ | $ | $ | ||||||||
(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. |
• | 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. |
• | 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). |
(in thousands) | Location | August 3, 2019 | February 2, 2019 | August 4, 2018 | February 3, 2018 | ||||||||||||
Cash and equivalents | Cash and equivalents | $ | $ | $ | $ | ||||||||||||
Long-term restricted cash and equivalents | Other assets | ||||||||||||||||
Short-term restricted cash and equivalents | Other current assets | $ | $ | $ | $ | ||||||||||||
Cash and equivalents and restricted cash and equivalents | $ | $ | $ | $ | |||||||||||||
(in thousands) | August 3, 2019 | February 2, 2019 | August 4, 2018 | February 3, 2018 | |||||||||||
Unearned revenue liabilities related to the Company’s gift card program | $ | $ | $ | $ | |||||||||||
Unearned revenue liabilities related to the Company’s loyalty programs | $ | $ | $ | $ | |||||||||||
Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||
(in thousands) | August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | |||||||
Shares of Common Stock issued | |||||||||||
Weighted-average treasury shares | ( | ) | ( | ) | ( | ) | ( | ) | |||
Weighted-average — basic shares | |||||||||||
Dilutive effect of share-based compensation awards | |||||||||||
Weighted-average — diluted shares | |||||||||||
Anti-dilutive shares (1) | |||||||||||
(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. |
• | 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. |
Assets and Liabilities at Fair Value as of August 3, 2019 | |||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets: | |||||||||||||||
Cash equivalents (1) | $ | $ | $ | $ | |||||||||||
Derivative instruments (2) | |||||||||||||||
Rabbi Trust assets (3) | |||||||||||||||
Restricted cash equivalents (4) | |||||||||||||||
Total assets | $ | $ | $ | $ | |||||||||||
Liabilities: | |||||||||||||||
Derivative instruments (2) | $ | $ | $ | $ | |||||||||||
Total liabilities | $ | $ | $ | $ | |||||||||||
Assets and Liabilities at Fair Value as of February 2, 2019 | |||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets: | |||||||||||||||
Cash equivalents (1) | $ | $ | $ | $ | |||||||||||
Derivative instruments (2) | |||||||||||||||
Rabbi Trust assets (3) | |||||||||||||||
Restricted cash equivalents (4) | |||||||||||||||
Total assets | $ | $ | $ | $ | |||||||||||
Liabilities: | |||||||||||||||
Derivative instruments (2) | $ | $ | $ | $ | |||||||||||
Total liabilities | $ | $ | $ | $ | |||||||||||
(1) |
(2) |
(3) |
(4) | Level 1 assets consist of investments in U.S. treasury bills and money market funds. Level 2 assets consist of time deposits. |
• | 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. |
(in thousands) | August 3, 2019 | February 2, 2019 | |||||
Gross borrowings outstanding, carrying amount | $ | $ | |||||
Gross borrowings outstanding, fair value | $ | $ | |||||
(in thousands) | August 3, 2019 | February 2, 2019 | |||||
Property and equipment, at cost | $ | $ | |||||
Less: Accumulated depreciation and amortization | ( | ) | ( | ) | |||
Property and equipment, net | $ | $ | |||||
Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||
(in thousands) | August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | |||||||
Store asset impairment | |||||||||||
(in thousands) | Thirteen Weeks Ended | Twenty-six Weeks Ended | |||||
Single lease cost (1) | $ | $ | |||||
Variable lease cost (2) | |||||||
Operating lease right-of-use asset impairment (3) | |||||||
Total operating lease cost | $ | $ | |||||
(1) | Includes amortization and interest expense associated with operating lease right-of-use assets and liabilities. Includes $23.3 million of charges related to flagship store exit charges for each of the thirteen and twenty-six weeks ended August 3, 2019. Refer to Note 14, “FLAGSHIP STORE EXIT CHARGES.” |
(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. Includes $20.2 million of charges related to flagship store exit charges for each of the thirteen and twenty-six weeks ended August 3, 2019. Refer to Note 14, “FLAGSHIP STORE EXIT CHARGES.” |
(3) | Includes $3.2 million of charges related to flagship store exit charges for each of the thirteen and twenty-six weeks ended August 3, 2019. Refer to Note 14, “FLAGSHIP STORE EXIT CHARGES.” |
August 3, 2019 | ||
Weighted-average remaining lease term (years) | ||
Weighted-average discount rate | % | |
(in thousands) | |||
Fiscal 2019 (excluding the twenty-six weeks ended August 3, 2019) | $ | ||
Fiscal 2020 | |||
Fiscal 2021 | |||
Fiscal 2022 | |||
Fiscal 2023 | |||
Fiscal 2024 and thereafter | |||
Total undiscounted operating lease payments | $ | ||
Less: Imputed interest | ( | ) | |
Present value of operating lease liabilities | $ | ||
(in thousands) | |||
Fiscal 2019 | $ | ||
Fiscal 2020 | $ | ||
Fiscal 2021 | $ | ||
Fiscal 2022 | $ | ||
Fiscal 2023 | $ | ||
Fiscal 2024 and thereafter | $ | ||
Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||
(in thousands) | August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | |||||||||||
Operating lease right-of-use asset impairment (1) | $ | $ | $ | $ | |||||||||||
Store asset impairment | |||||||||||||||
Total asset impairment | $ | $ | $ | $ | |||||||||||
(1) | Includes $3.2 million of operating lease right-of-use asset impairment related to flagship store exit charges for each of the thirteen and twenty-six weeks ended August 3, 2019. Refer to Note 14, “FLAGSHIP STORE EXIT CHARGES.” |
Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||
(in thousands) | August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | |||||||||||
Share-based compensation expense | $ | $ | $ | $ | |||||||||||
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 | $ | $ | $ | |||||||||||||||||
Granted | ||||||||||||||||||||
Adjustments for performance achievement | ( | ) | ( | ) | ||||||||||||||||
Vested | ( | ) | ( | ) | ||||||||||||||||
Forfeited | ( | ) | ( | ) | ( | ) | ||||||||||||||
Unvested at August 3, 2019 | $ | $ | $ | |||||||||||||||||
(1) | Includes |
(in thousands) | August 3, 2019 | August 4, 2018 | |||||
Service-based restricted stock units: | |||||||
Total grant date fair value of awards granted | $ | $ | |||||
Total grant date fair value of awards vested | |||||||
Performance-based restricted stock units: | |||||||
Total grant date fair value of awards granted | $ | $ | |||||
Total grant date fair value of awards vested | |||||||
Market-based restricted stock units: | |||||||
Total grant date fair value of awards granted | $ | $ | |||||
Total grant date fair value of awards vested | |||||||
August 3, 2019 | August 4, 2018 | ||||||
Grant date market price | $ | $ | |||||
Fair value | $ | $ | |||||
Assumptions: | |||||||
Price volatility | % | % | |||||
Expected term (years) | |||||||
Risk-free interest rate | % | % | |||||
Dividend yield | % | % | |||||
Average volatility of peer companies | % | % | |||||
Average correlation coefficient of peer companies | |||||||
Number of Underlying Shares | Weighted-Average Exercise Price | Aggregate Intrinsic Value | Weighted-Average Remaining Contractual Life (years) | |||||||||
Outstanding at February 2, 2019 | $ | |||||||||||
Granted | ||||||||||||
Exercised | ( | ) | ||||||||||
Forfeited or expired | ( | ) | ||||||||||
Outstanding at August 3, 2019 | $ | $ | ||||||||||
Stock appreciation rights exercisable at August 3, 2019 | $ | $ | ||||||||||
Stock appreciation rights expected to become exercisable in the future as of August 3, 2019 | $ | $ | ||||||||||
(in thousands) | Notional Amount (1) | ||
Euro | $ | ||
British pound | $ | ||
Canadian dollar | $ | ||
Japanese yen | $ | ||
(1) | Amounts reported are the U.S. Dollar notional amounts outstanding as of August 3, 2019. |
(in thousands) | Notional Amount (1) | ||
Chinese yuan | $ | ||
Euro | $ | ||
(1) | Amount reported is the U.S. Dollar notional amount outstanding as of August 3, 2019. |
(in thousands) | Location | August 3, 2019 | February 2, 2019 | Location | August 3, 2019 | February 2, 2019 | |||||||||||||
Derivatives designated as cash flow hedging instruments | Other current assets | $ | $ | Accrued expenses | $ | $ | |||||||||||||
Derivatives not designated as hedging instruments | Other current assets | Accrued expenses | |||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||
Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||
(in thousands) | August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | |||||||||||
Gain recognized in AOCL (1) | $ | $ | $ | $ | |||||||||||
Gain (loss) reclassified from AOCL into cost of sales, exclusive of depreciation and amortization (2) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
(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 depreciation and amortization. |
Thirteen Weeks Ended | Twenty-six Weeks Ended | |||||||||||||||
(in thousands) | August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | ||||||||||||
Gain recognized in other operating income, net | $ | $ | $ | $ | ||||||||||||
Thirteen Weeks Ended August 3, 2019 | |||||||||||
(in thousands) | Foreign Currency Translation Adjustment | Unrealized Gain (Loss) on Derivative Financial Instruments | Total | ||||||||
Beginning balance at May 4, 2019 | $ | ( | ) | $ | $ | ( | ) | ||||
Other comprehensive (loss) income before reclassifications | ( | ) | |||||||||
Reclassified from accumulated other comprehensive loss (1) | ( | ) | ( | ) | |||||||
Tax effect | |||||||||||
Other comprehensive (loss) income | ( | ) | ( | ) | |||||||
Ending balance at August 3, 2019 | $ | ( | ) | $ | $ | ( | ) | ||||
Twenty-six Weeks Ended August 3, 2019 | |||||||||||
(in thousands) | Foreign Currency Translation Adjustment | Unrealized Gain (Loss) on Derivative Financial Instruments | Total | ||||||||
Beginning balance at February 2, 2019 | $ | ( | ) | $ | $ | ( | ) | ||||
Other comprehensive (loss) income before reclassifications | ( | ) | |||||||||
Reclassified from accumulated other comprehensive loss (1) | ( | ) | ( | ) | |||||||
Tax effect | |||||||||||
Other comprehensive (loss) income | ( | ) | ( | ) | |||||||
Ending balance at August 3, 2019 | $ | ( | ) | $ | $ | ( | ) | ||||
(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. |
Thirteen Weeks Ended August 4, 2018 | |||||||||||
(in thousands) | Foreign Currency Translation Adjustment | Unrealized Gain (Loss) on Derivative Financial Instruments | Total | ||||||||
Beginning balance at May 5, 2018 | $ | ( | ) | $ | $ | ( | ) | ||||
Other comprehensive (loss) income before reclassifications | ( | ) | ( | ) | |||||||
Reclassified from accumulated other comprehensive loss (1) | |||||||||||
Tax effect | ( | ) | ( | ) | |||||||
Other comprehensive (loss) income | ( | ) | ( | ) | |||||||
Ending balance at August 4, 2018 | $ | ( | ) | $ | $ | ( | ) | ||||
Twenty-six Weeks Ended August 4, 2018 | |||||||||||
(in thousands) | Foreign Currency Translation Adjustment | Unrealized Gain (Loss) on Derivative Financial Instruments | Total | ||||||||
Beginning balance at February 3, 2018 | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Other comprehensive (loss) income before reclassifications | ( | ) | ( | ) | |||||||
Reclassified from accumulated other comprehensive loss (1) | |||||||||||
Tax effect | ( | ) | ( | ) | |||||||
Other comprehensive (loss) income | ( | ) | |||||||||
Ending balance at August 4, 2018 | $ | ( | ) | $ | $ | ( | ) | ||||
(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. |
Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||
(in thousands) | August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | |||||||||||
Hollister | $ | $ | $ | $ | |||||||||||
Abercrombie | |||||||||||||||
Total | $ | $ | $ | $ | |||||||||||
Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||
(in thousands) | August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | |||||||||||
United States | $ | $ | $ | $ | |||||||||||
Europe | |||||||||||||||
Other | |||||||||||||||
Total | $ | $ | $ | $ | |||||||||||
Location | Brand | Actual or expected closure date | ||
Pedder Street, Hong Kong | Abercrombie | Closed in the first quarter of Fiscal 2017 | ||
Copenhagen, Denmark | Abercrombie | Closed in the first quarter of Fiscal 2019 | ||
SoHo in New York City | Hollister | Closed in the second quarter of Fiscal 2019 | ||
Milan, Italy | Abercrombie | Expected to close by the end of Fiscal 2019 | ||
Fukuoka, Japan | Abercrombie | Expected to close in the second half of Fiscal 2020 | ||
Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||
(in thousands) | August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | |||||||||||
Single lease cost (1) | $ | $ | $ | $ | |||||||||||
Variable lease cost (2) | |||||||||||||||
Operating lease right-of-use asset impairment | |||||||||||||||
Operating lease cost | |||||||||||||||
Lease termination fees (3) | |||||||||||||||
Asset disposals and other store-closure costs (4) | ( | ) | ( | ) | |||||||||||
Employee severance and other employee transition costs | ( | ) | |||||||||||||
Total flagship store exit charges | $ | $ | $ | $ | |||||||||||
(1) | Amounts represent accelerated amortization associated with the operating lease right-of-use assets and liabilities and the impact from remeasurement of operating lease liabilities. |
(2) | Amounts represent the remeasurement of the lease liability to reflect variable lease costs that became fixed upon decision to close aforementioned flagship stores. |
(3) | Under the new lease accounting standard, which the Company adopted on February 3, 2019, similar charges would be incorporated into the above table as a component of operating lease cost. |
(4) | Amounts represent costs incurred in returning the store to its original condition, including updates to previous accruals for asset retirement obligations and costs to remove inventory and store assets. |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | 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 and twenty-six weeks ended August 3, 2019 and August 4, 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 Condensed Consolidated Statements of Operations and Comprehensive Loss for the thirteen and twenty-six weeks ended August 3, 2019 and August 4, 2018. |
• | Liquidity and Capital Resources. This section provides a discussion of the Company’s financial condition and liquidity as of August 3, 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 twenty-six weeks ended August 3, 2019 as compared to the twenty-six weeks ended August 4, 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. |
• | 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. |
• | 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. |
• | 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. |
• | 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. |
• | 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 |
• | 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. |
• | Net sales decreased 0.2% to $841.1 million, and increased 1% on a constant currency basis as compared to last year. |
• | Comparable sales were flat against positive comparable sales of 3% last year. |
• | Gross profit rate of 59.3% was down 90 basis points to last year. |
• | Operating expense, excluding other operating income, of $537.8 million included $45.0 million of flagship store exit charges. Operating expense deleveraged 370 basis points and 470 basis points on a GAAP and an adjusted non-GAAP basis, respectively, reflecting a 530 basis point adverse impact from flagship store exit charges. |
• | Operating loss of $39.5 million. Operating margin decreased 470 basis points from last year to a loss of 4.7%, primarily driven by the adverse impact of flagship store exit charges of 530 basis points. Excluding asset impairment charges last year, adjusted non-GAAP operating margin decreased 580 basis points or 530 basis points on a constant currency basis as compared to last year. |
• | Net loss per diluted share was $0.48, reflecting the estimated adverse impact from flagship store exit charges of $0.50. This compares to GAAP net loss per diluted share of $0.06, adjusted non-GAAP net income per diluted share of $0.06 or $0.01 per diluted share on a constant currency basis. |
• | Net sales to be in the range of flat to up 2%, driven by comparable sales and net new store contribution, partially offset by an adverse impact from changes in foreign currency exchange rates of approximately $45 million; |
• | Comparable sales to be in the range of flat to up 2%, against positive comparable sales of 3% last year; |
• | Gross profit rate to be down in the range of 50 to 90 basis points from the Fiscal 2018 rate of 60.2% reflecting adverse impacts from changes in foreign currency exchange rates of approximately 40 basis points and anticipated China tariffs of approximately 20 basis points; |
• | Operating expense, excluding other operating income, to be up in the range of 2% to 3% from Fiscal 2018 adjusted non-GAAP operating expense of $2.03 billion, including flagship store exit charges in the second quarter of Fiscal 2019 of $45 million; |
• | The effective tax rate to be in the mid 20s; |
• | Diluted weighted average shares outstanding of approximately 66 million shares, excluding the effect of potential share buybacks; and |
• | Capital investments of approximately $200 million. |
Location | Brand | Actual or expected flagship store closure date | ||
Pedder Street, Hong Kong | Abercrombie | Closed in the first quarter of Fiscal 2017 | ||
Copenhagen, Denmark | Abercrombie | Closed in the first quarter of Fiscal 2019 | ||
SoHo in New York City | Hollister | Closed in the second quarter of Fiscal 2019 | ||
Milan, Italy | Abercrombie | Expected to close by the end of Fiscal 2019 | ||
Fukuoka, Japan | Abercrombie | Expected to close in the second half of Fiscal 2020 | ||
August 3, 2019 | August 4, 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) | ||||||||||||
Thirteen Weeks Ended | ||||||||||||||||
Net sales | $ | 841,078 | $ | 842,414 | ||||||||||||
Change in net sales | (0.2 | )% | 8 | % | ||||||||||||
Comparable sales (2) | 0 | % | 3 | % | ||||||||||||
Gross profit rate | 59.3 | % | 60.2 | % | ||||||||||||
Operating (loss) income | $ | (39,484 | ) | $ | (39,484 | ) | $ | 223 | $ | 8,894 | ||||||
Operating (loss) income margin | (4.7 | )% | (4.7 | )% | 0.0 | % | 1.1 | % | ||||||||
Net (loss) income attributable to A&F | $ | (31,142 | ) | $ | (31,142 | ) | $ | (3,853 | ) | $ | 4,171 | |||||
Net (loss) income per diluted share attributable to A&F | $ | (0.48 | ) | $ | (0.48 | ) | $ | (0.06 | ) | $ | 0.06 | |||||
Twenty-six Weeks Ended | ||||||||||||||||
Net sales | $ | 1,575,050 | $ | 1,573,313 | ||||||||||||
Change in net sales | 0.1 | % | 9 | % | ||||||||||||
Comparable sales (2) | 1 | % | 4 | % | ||||||||||||
Gross profit rate | 59.9 | % | 60.3 | % | ||||||||||||
Operating loss | $ | (66,742 | ) | $ | (66,742 | ) | $ | (41,980 | ) | $ | (27,709 | ) | ||||
Operating loss margin | (4.2 | )% | (4.2 | )% | (2.7 | )% | (1.8 | )% | ||||||||
Net loss attributable to A&F | $ | (50,297 | ) | $ | (50,297 | ) | $ | (46,314 | ) | $ | (34,231 | ) | ||||
Net loss per diluted share attributable to A&F | $ | (0.76 | ) | $ | (0.76 | ) | $ | (0.68 | ) | $ | (0.50 | ) | ||||
Net cash (used for) provided by operating activities | $ | (36,055 | ) | $ | 50,526 | |||||||||||
Purchases of property and equipment | $ | (94,224 | ) | $ | (54,115 | ) | ||||||||||
Dividends paid | $ | (26,385 | ) | $ | (27,196 | ) | ||||||||||
Purchase of Common Stock | $ | (57,812 | ) | $ | (43,670 | ) | ||||||||||
(1) |
(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. |
(in thousands) | August 3, 2019 | February 2, 2019 | ||||||
Cash and equivalents | $ | 499,757 | $ | 723,135 | ||||
Borrowings, gross at carrying amount | $ | 253,250 | $ | 253,250 | ||||
Inventories | $ | 487,109 | $ | 437,879 | ||||
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 | 5 | 3 | 1 | — | 6 | 3 | 9 | |||||||||||||
Closed | (3 | ) | — | (3 | ) | (1 | ) | (6 | ) | (1 | ) | (7 | ) | |||||||
August 3, 2019 | 395 | 152 | 268 | 48 | 663 | 200 | 863 | |||||||||||||
Gross square footage (in thousands): | ||||||||||||||||||||
August 3, 2019 | 2,622 | 1,250 | 1,980 | 624 | 4,602 | 1,874 | 6,476 | |||||||||||||
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 | 2 | — | 1 | 2 | 3 | 2 | 5 | |||||||||||||
Closed | — | — | (3 | ) | — | (3 | ) | — | (3 | ) | ||||||||||
August 4, 2018 | 396 | 144 | 283 | 47 | 679 | 191 | 870 | |||||||||||||
Gross square footage (in thousands): | ||||||||||||||||||||
August 4, 2018 | 2,685 | 1,196 | 2,182 | 631 | 4,867 | 1,827 | 6,694 | |||||||||||||
(1) | Locations with Gilly Hicks carveouts within Hollister stores are represented as a single store count. Excludes nine international franchise stores as of August 3, 2019, eight international franchise stores as of February 2, 2019, seven international franchise stores as of August 4, 2018, and five international franchise stores as of February 3, 2018. Excludes six U.S. company operated Gilly Hicks temporary stores as of August 3, 2019. |
(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 each of August 3, 2019 and February 2, 2019, six international franchise stores as of August 4, 2018, and four international franchise stores as of February 3, 2018. Excludes four U.S. company operated abercrombie kids temporary stores as of August 3, 2019. |
Thirteen Weeks Ended | |||||||||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||||||||
(in thousands) | Net Sales | Net Sales | $ Change | % Change | Constant Currency % Change (1) | Comparable Sales (1) | |||||||||||
Hollister | $ | 504,758 | $ | 500,836 | $ | 3,922 | 1% | 2% | 0% | ||||||||
Abercrombie (2) | 336,320 | 341,578 | (5,258 | ) | (2)% | (1)% | 0% | ||||||||||
Total company | $ | 841,078 | $ | 842,414 | $ | (1,336 | ) | 0% | 1% | 0% | |||||||
United States | $ | 543,472 | $ | 531,446 | $ | 12,026 | 2% | 2% | 2% | ||||||||
International | 297,606 | 310,968 | (13,362 | ) | (4)% | (1)% | (3)% | ||||||||||
Total company | $ | 841,078 | $ | 842,414 | $ | (1,336 | ) | 0% | 1% | 0% | |||||||
Twenty-six Weeks Ended | |||||||||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||||||||
(in thousands) | Net Sales | Net Sales | $ Change | % Change | Constant Currency % Change (1) | Comparable Sales (1) | |||||||||||
Hollister | $ | 933,203 | $ | 924,464 | $ | 8,739 | 1% | 3% | 1% | ||||||||
Abercrombie (2) | 641,847 | 648,849 | (7,002 | ) | (1)% | 0% | 0% | ||||||||||
Total net sales | $ | 1,575,050 | $ | 1,573,313 | $ | 1,737 | 0% | 2% | 1% | ||||||||
United States | $ | 1,013,130 | $ | 980,572 | $ | 32,558 | 3% | 3% | 3% | ||||||||
International | 561,920 | 592,741 | (30,821 | ) | (5)% | (1)% | (3)% | ||||||||||
Total net sales | $ | 1,575,050 | $ | 1,573,313 | $ | 1,737 | 0% | 2% | 1% | ||||||||
(1) | Calculated on a constant currency basis. Refer to “NON-GAAP FINANCIAL MEASURES,” for further details. |
(2) | Includes Abercrombie & Fitch and abercrombie kids brands. |
Thirteen Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Cost of sales, exclusive of depreciation and amortization | $ | 342,445 | 40.7% | $ | 335,519 | 39.8% | |||||
Gross profit | $ | 498,633 | 59.3% | $ | 506,895 | 60.2% | |||||
Gross profit on a constant currency basis (1) | $ | 498,633 | 59.3% | $ | 498,870 | 59.9% | |||||
Twenty-six Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Cost of sales, exclusive of depreciation and amortization | $ | 632,327 | 40.1% | $ | 624,073 | 39.7% | |||||
Gross profit | $ | 942,723 | 59.9% | $ | 949,240 | 60.3% | |||||
Gross profit on a constant currency basis (1) | $ | 942,723 | 59.9% | $ | 932,770 | 60.3% | |||||
(1) | Refer to “NON-GAAP FINANCIAL MEASURES,” for further details. |
Thirteen Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Stores and distribution expense | $ | 376,347 | 44.7% | $ | 374,552 | 44.5% | |||||
Twenty-six Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Stores and distribution expense | $ | 732,959 | 46.5% | $ | 731,899 | 46.5% | |||||
Thirteen Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Marketing, general and administrative expense | $ | 115,694 | 13.8% | $ | 123,883 | 14.7% | |||||
Twenty-six Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Marketing, general and administrative expense | $ | 227,641 | 14.5% | $ | 248,780 | 15.8% | |||||
Deduct: | |||||||||||
Charges related to certain legal matters (1) | — | 0.0% | (5,600 | ) | (0.4)% | ||||||
Adjusted non-GAAP marketing, general and administrative expense | $ | 227,641 | 14.5% | $ | 243,180 | 15.5% | |||||
(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. |
Thirteen Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Flagship store exit charges | $ | 44,994 | 5.3% | $ | — | 0.0% | |||||
Twenty-six Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Flagship store exit charges | $ | 46,738 | 3.0% | $ | 3,808 | 0.2% | |||||
Thirteen Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Asset impairment, exclusive of flagship store exit charges | $ | 715 | 0.1% | $ | 8,671 | 1.0% | |||||
Twenty-six Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Asset impairment, exclusive of flagship store exit charges | $ | 2,377 | 0.2% | $ | 9,727 | 0.6% | |||||
Thirteen Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Other operating (loss) income, net | $ | (367 | ) | 0.0% | $ | 434 | 0.1% | ||||
Twenty-six Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Other operating income, net | $ | 250 | 0.0% | $ | 2,994 | 0.2% | |||||
Thirteen Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Operating (loss) income | $ | (39,484 | ) | (4.7)% | $ | 223 | 0.0% | ||||
Deduct: | |||||||||||
Certain asset impairment charges | — | 0.0% | 8,671 | 1.0% | |||||||
Adjusted non-GAAP operating (loss) income | $ | (39,484 | ) | (4.7)% | $ | 8,894 | 1.1% | ||||
Adjusted non-GAAP operating (loss) income on a constant currency basis (1) | $ | (39,484 | ) | (4.7)% | $ | 4,587 | 0.6% | ||||
Twenty-six Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Operating loss | $ | (66,742 | ) | (4.2)% | $ | (41,980 | ) | (2.7)% | |||
Deduct: | |||||||||||
Certain asset impairment charges | — | 0.0% | 8,671 | 0.6% | |||||||
Charges related to certain legal matters (2) | — | 0.0% | 5,600 | 0.4% | |||||||
Adjusted non-GAAP operating loss | $ | (66,742 | ) | (4.2)% | $ | (27,709 | ) | (1.8)% | |||
Adjusted non-GAAP operating loss on a constant currency basis (1) | $ | (66,742 | ) | (4.2)% | $ | (34,338 | ) | (2.2)% | |||
(1) | Refer to “NON-GAAP FINANCIAL MEASURES,” for further details. |
(2) | 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. |
Thirteen Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Interest expense | $ | 4,479 | 0.5% | $ | 5,695 | 0.7% | |||||
Interest income | (3,109 | ) | (0.4)% | (2,672 | ) | (0.3)% | |||||
Interest expense, net | $ | 1,370 | 0.2% | $ | 3,023 | 0.4% | |||||
Twenty-six Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Interest expense | $ | 9,011 | 0.6% | $ | 11,357 | 0.7% | |||||
Interest income | (7,025 | ) | (0.4)% | (5,316 | ) | (0.3)% | |||||
Interest expense, net | $ | 1,986 | 0.1% | $ | 6,041 | 0.4% | |||||
Thirteen Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands, except ratios) | Effective Tax Rate | Effective Tax Rate | |||||||||
Income tax (benefit) expense | $ | (11,330 | ) | 27.7% | $ | 24 | (0.9)% | ||||
Deduct: | |||||||||||
Tax effect of excluded items (1) | — | 2,689 | |||||||||
Tax Cuts and Jobs Act of 2017 charges | — | (2,042 | ) | ||||||||
Adjusted non-GAAP income tax (benefit) expense | $ | (11,330 | ) | 27.7% | $ | 671 | 11.4% | ||||
Twenty-six Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands, except ratios) | Effective Tax Rate | Effective Tax Rate | |||||||||
Income tax benefit | $ | (20,918 | ) | 30.4% | $ | (3,689 | ) | 7.7% | |||
Deduct: | |||||||||||
Tax effect of excluded items (1) | — | 4,230 | |||||||||
Tax Cuts and Jobs Act of 2017 charges | — | (2,042 | ) | ||||||||
Adjusted non-GAAP income tax benefit | $ | (20,918 | ) | 30.4% | $ | (1,501 | ) | 4.4% | |||
(1) | Refer to “Operating (loss) income” 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. |
Thirteen Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Net loss attributable to A&F | $ | (31,142 | ) | (3.7)% | $ | (3,853 | ) | (0.5)% | |||
Adjusted non-GAAP net (loss) income attributable to A&F (1) | $ | (31,142 | ) | (3.7)% | $ | 4,171 | 0.5% | ||||
Net loss per diluted share attributable to A&F | $ | (0.48 | ) | $ | (0.06 | ) | |||||
Adjusted non-GAAP net (loss) income per diluted share attributable to A&F (1) | $ | (0.48 | ) | $ | 0.06 | ||||||
Adjusted non-GAAP net (loss) income per diluted share attributable to A&F on a constant currency basis (2) | $ | (0.48 | ) | $ | 0.01 | ||||||
Twenty-six Weeks Ended | |||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Net loss attributable to A&F | $ | (50,297 | ) | (3.2)% | $ | (46,314 | ) | (2.9)% | |||
Adjusted non-GAAP net loss attributable to A&F (1) | $ | (50,297 | ) | (3.2)% | $ | (34,231 | ) | (2.2)% | |||
Net loss per diluted share attributable to A&F | $ | (0.76 | ) | $ | (0.68 | ) | |||||
Adjusted non-GAAP net loss per diluted share attributable to A&F (1) | $ | (0.76 | ) | $ | (0.50 | ) | |||||
Adjusted non-GAAP net loss per diluted share attributable to A&F on a constant currency basis (2) | $ | (0.76 | ) | $ | (0.57 | ) | |||||
(1) | Excludes items presented above under “Operating (loss) income,” and “Income tax (benefit) expense.” |
(2) | Refer to “NON-GAAP FINANCIAL MEASURES,” for further details. |
(in thousands) | August 3, 2019 | February 2, 2019 | |||||
Borrowings, gross at carrying amount | $ | 253,250 | $ | 253,250 | |||
Unamortized discount | (676 | ) | (845 | ) | |||
Unamortized fees | (1,541 | ) | (1,966 | ) | |||
Borrowings, net | 251,033 | 250,439 | |||||
Less: short-term portion of borrowings, net | — | — | |||||
Long-term portion of borrowings, net | $ | 251,033 | $ | 250,439 | |||
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 during the thirteen weeks ended August 3, 2019, had long-lived assets with a net book value of $129.8 million, which included $116.8 million of operating lease right-of-use assets under the new lease accounting standard as of August 3, 2019. 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 August 3, 2019 had a remaining net book value of $116.5 million, which included $113.1 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 August 3, 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 August 3, 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. | |
Financial measures (1) | Excluded items | |
Marketing, general and administrative expense | Certain legal charges | |
Asset impairment, exclusive of flagship store exit charges | Certain asset impairment charges | |
Operating (loss) income | Certain legal and asset impairment charges | |
Net (loss) income and net (loss) income per share attributable to A&F (2) | Certain legal and asset impairment charges; discrete net tax charges related to the Tax Cuts and Jobs Act of 2017; 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) income,” 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. |
(in thousands, except change in net sales, gross profit rate, operating margin and per share data) | Thirteen Weeks Ended | Twenty-six Weeks Ended | |||||||||||||||||||||
Net sales | August 3, 2019 | August 4, 2018 | % Change | August 3, 2019 | August 4, 2018 | % Change | |||||||||||||||||
Total company: | |||||||||||||||||||||||
GAAP | $ | 841,078 | $ | 842,414 | 0 | % | $ | 1,575,050 | $ | 1,573,313 | 0 | % | |||||||||||
Impact from changes in foreign currency exchange rates | — | (9,957 | ) | 1 | % | — | (26,246 | ) | 2 | % | |||||||||||||
Net sales on a constant currency basis | $ | 841,078 | $ | 832,457 | 1 | % | $ | 1,575,050 | $ | 1,547,067 | 2 | % | |||||||||||
Hollister: | |||||||||||||||||||||||
GAAP | $ | 504,758 | $ | 500,836 | 1 | % | $ | 933,203 | $ | 924,464 | 1 | % | |||||||||||
Impact from changes in foreign currency exchange rates | — | (6,984 | ) | 1 | % | — | (17,831 | ) | 2 | % | |||||||||||||
Net sales on a constant currency basis | $ | 504,758 | $ | 493,852 | 2 | % | $ | 933,203 | $ | 906,633 | 3 | % | |||||||||||
Abercrombie: | |||||||||||||||||||||||
GAAP | $ | 336,320 | $ | 341,578 | (2 | )% | $ | 641,847 | $ | 648,849 | (1 | )% | |||||||||||
Impact from changes in foreign currency exchange rates | — | (2,973 | ) | 1 | % | — | (8,415 | ) | 1 | % | |||||||||||||
Net sales on a constant currency basis | $ | 336,320 | $ | 338,605 | (1 | )% | $ | 641,847 | $ | 640,434 | 0 | % | |||||||||||
United States: | |||||||||||||||||||||||
GAAP | $ | 543,472 | $ | 531,446 | 2 | % | $ | 1,013,130 | $ | 980,572 | 3 | % | |||||||||||
Impact from changes in foreign currency exchange rates | — | * | * | — | * | * | |||||||||||||||||
Net sales on a constant currency basis | $ | 543,472 | $ | 531,446 | 2 | % | $ | 1,013,130 | $ | 980,572 | 3 | % | |||||||||||
International: | |||||||||||||||||||||||
GAAP | $ | 297,606 | $ | 310,968 | (4 | )% | $ | 561,920 | $ | 592,741 | (5 | )% | |||||||||||
Impact from changes in foreign currency exchange rates | — | (9,957 | ) | 3 | % | — | (26,246 | ) | 4 | % | |||||||||||||
Net sales on a constant currency basis | $ | 297,606 | $ | 301,011 | (1 | )% | $ | 561,920 | $ | 566,495 | (1 | )% | |||||||||||
Gross profit (2) | August 3, 2019 | August 4, 2018 | BPS Change (1) | August 3, 2019 | August 4, 2018 | BPS Change (1) | |||||||||||||||||
GAAP | $ | 498,633 | $ | 506,895 | (90 | ) | $ | 942,723 | $ | 949,240 | (40 | ) | |||||||||||
Impact from changes in foreign currency exchange rates | — | (8,025 | ) | 30 | — | (16,470 | ) | — | |||||||||||||||
Gross profit on a constant currency basis | $ | 498,633 | $ | 498,870 | (60 | ) | $ | 942,723 | $ | 932,770 | (40 | ) | |||||||||||
Operating (loss) income | August 3, 2019 | August 4, 2018 | BPS Change (1) | August 3, 2019 | August 4, 2018 | BPS Change (1) | |||||||||||||||||
GAAP | $ | (39,484 | ) | $ | 223 | (470 | ) | $ | (66,742 | ) | $ | (41,980 | ) | (150 | ) | ||||||||
Excluded items (3) | — | (8,671 | ) | 110 | — | (14,271 | ) | 90 | |||||||||||||||
Adjusted non-GAAP | $ | (39,484 | ) | $ | 8,894 | (580 | ) | $ | (66,742 | ) | $ | (27,709 | ) | (240 | ) | ||||||||
Impact from changes in foreign currency exchange rates | — | (4,307 | ) | 50 | — | (6,629 | ) | 40 | |||||||||||||||
Adjusted non-GAAP on a constant currency basis | $ | (39,484 | ) | $ | 4,587 | (530 | ) | $ | (66,742 | ) | $ | (34,338 | ) | (200 | ) | ||||||||
Net (loss) income per diluted share attributable to Abercrombie & Fitch Co. | August 3, 2019 | August 4, 2018 | $ Change | August 3, 2019 | August 4, 2018 | $ Change | |||||||||||||||||
GAAP | $ | (0.48 | ) | $ | (0.06 | ) | $ | (0.42 | ) | $ | (0.76 | ) | $ | (0.68 | ) | $ | (0.08 | ) | |||||
Excluded items, net of tax (3) | — | (0.12 | ) | 0.12 | — | (0.18 | ) | 0.18 | |||||||||||||||
Adjusted non-GAAP | $ | (0.48 | ) | $ | 0.06 | $ | (0.54 | ) | $ | (0.76 | ) | $ | (0.50 | ) | $ | (0.26 | ) | ||||||
Impact from changes in foreign currency exchange rates | — | (0.05 | ) | 0.05 | — | (0.07 | ) | 0.07 | |||||||||||||||
Adjusted non-GAAP on a constant currency basis | $ | (0.48 | ) | $ | 0.01 | $ | (0.49 | ) | $ | (0.76 | ) | $ | (0.57 | ) | $ | (0.19 | ) | ||||||
* | Not applicable. |
(1) | The estimated basis point change has been rounded based on the change in the percentage of net sales. |
(2) | Gross profit is derived from cost of sales, exclusive of depreciation and amortization. |
(3) |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
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) | ||||||||
May 5, 2019 through June 1, 2019 | 2,874 | $ | 25.64 | — | 3,571,938 | |||||||
June 2, 2019 through July 6, 2019 | 3,444,815 | $ | 16.26 | 3,440,417 | 5,131,521 | |||||||
July 7, 2019 through August 3, 2019 | 104,834 | $ | 17.91 | 104,414 | 5,027,107 | |||||||
Total | 3,552,523 | $ | 16.32 | 3,544,831 | 5,027,107 | |||||||
(1) | 7,692 shares of A&F’s Common Stock purchased during the thirteen weeks ended August 3, 2019 represented shares withheld for tax payments due upon the vesting of employee restricted stock units. |
(2) | 3,544,831 shares of A&F’s Common Stock were repurchased during the thirteen weeks ended August 3, 2019 pursuant to A&F’s publicly announced stock repurchase authorizations. 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. On June 12, 2019, A&F’s Board of Directors authorized the repurchase of an additional 5.0 million shares of A&F’s Common Stock, which was announced on June 12, 2019. |
(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 authorizations described in footnote 2 above. The shares may be purchased, from time to time, depending on business and market conditions. |
Exhibit No. | Document |
3.1 | |
3.2 | |
10.1 | |
10.2 | |
10.3 | |
31.1 | |
31.2 | |
32.1 | |
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.* |
101.SCH | Inline XBRL Taxonomy Extension Schema Document.* |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document.* |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document.* |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document.* |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document.* |
104 | Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).* |
* | Filed herewith. |
** | Furnished herewith. |
ABERCROMBIE & FITCH CO. | ||
Date: September 11, 2019 | By | /s/ Scott Lipesky |
Scott Lipesky | ||
Senior Vice President and Chief Financial Officer (Principal Financial Officer and Authorized Officer) | ||
(1) | The Company will continue to pay the Executive's Base Salary (as defined below) during the period beginning on the Executive's Termination Date and continuing for eighteen months thereafter ("Salary Continuation"). This Salary Continuation payment shall be paid in bi-weekly installments, consistent with the Company's payroll practices. Subject to Sections 4(c) and 4(d) hereof, the first such payment shall be made on the first payroll date following the Release Effective |
(2) | The Company will pay to the Executive, at such time as those executives who are actively employed with the Company would receive payments under the Company's short-term cash bonus plan in which the Executive was eligible to participate immediately prior to the Termination Date (but in no event later than the 15th day of the third month of the fiscal year following the fiscal year in which the Termination Date occurred), a pro-rated amount of the Executive's bonus under such plan, based on the actual performance during the applicable period, determined in accordance with the terms of the Plan and subject to the approval of the Compensation and Organization Committee of the Board of Directors. The pro-rated amount shall be calculated using a fraction where the numerator is the number of days from the beginning of the applicable bonus period through the Termination Date and the denominator is the total number of days in the applicable bonus period. |
(3) | Subject to the Executive's timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), during the period in which Salary Continuation is in effect, the Company shall reimburse the Executive for 100% of the monthly premium costs of COBRA coverage, less applicable withholding taxes on such reimbursement; provided, however, that the Company's obligation to provide such benefits shall cease upon the earlier of (i) the Executive's becoming eligible for such benefits as the result of employment with another employer and (ii) the expiration of the Executive's right to continue such medical and detail benefits under applicable law (such as COBRA); provided, further, that notwithstanding the foregoing, the Company shall not be obligated to provide the continuation coverage contemplated by this Section 2(a)(3) if it would result in the imposition of excise taxes on the Company for failure to comply with the nondiscrimination requirements of the Patient Protection and Affordable Care Act of 2010, as amended, and the Health Care and Education Reconciliation Act of 2010, as amended (to the extent applicable). |
(2) | The Company will pay Executive an amount equal to 1.5 times the Executive's Target Bonus. Subject to Sections 4(c) and 4(d) hereof, such amount shall be payable in a lump sum on the sixtieth (60th) day following the Termination Date. |
(3) | Subject to the Executive's timely election of continuation coverage under COBR A for a period of eighteen months following the Termination Date, the Company shall reimburse the Executive for 100% of the monthly premium costs of COBRA coverage, less applicable withholding taxes on such reimbursement; provided, however, that the Company's obligation to provide such benefits shall cease upon the earlier of (i) the Executive's becoming eligible for such benefits as the result of employment with another employer and (ii) the expiration of the Executive's right to continue such medical and dental benefits under applicable law (such as COBRA); provided, further, that notwithstanding the foregoing, the Company shall not be obligated to provide the continuation coverage contemplated by this Section 2(d)(3) if it would result in the imposition of excise taxes on the Company for failure to comply with the nondiscrimination requirements of the Patient Protection and Affordable Care Act of 2010, as amended, and the Health Care and Education Reconciliation Act of 2010, as amended (to the extent applicable). |
(1) | Base Salary. For the purpose of this Agreement, "Base Salary" shall mean the Executive's annual rate of base salary as in effect on the applicable date; provided, however, that if the Executive's employment with the Company is being terminated by the Executive for Good Reason as a result of a reduction in the Executive's Base Salary, then "Base Salary" shall, for purposes of the definition of "Good Reason" and Section 3 of this Agreement, constitute the Executive's Base Salary as in effect prior to such reduction. |
(2) | Cause. For purposes of this Agreement, "Cause" shall mean: (i) the Executive's conviction of, or entrance of a plea of guilty or nolo contendere to, a felony under federal or state law; (ii) fraudulent conduct by the Executive in connection with the business affairs of the Company; (iii) the Executive's willful refusal to materially perform the Executive's duties hereunder; (iv) the Executive'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) the Executive's material breach of a covenant, representation, warranty or obligation of the Executive to the Company. With respect to the circumstances in subsections (iii), (iv), and (v), above, such circumstances will only constitute "Cause" once the Company has provided the Executive written notice and the Executive has failed to cure such issue within 30 days. No act or failure to act on the Executive's part shall be considered "willful" unless done, or omitted to be done, by the Executive in bad faith and without reasonable |
(3) | Change of Control. For purposes of this Agreement, "Change of Control" shall have the same meaning as such term is defined in the Company's 2016 Long-Term Incentive Plan for Associates; provided, however, that for purposes of this Agreement, such definition shall only apply to the extent that the event that constitutes such a "Change of Control" also constitutes a "change in ownership or control" as such term is defined in Section 409A of the United States Internal Revenue Code of 1986, as amended (the "Code"), and the regulations and guidance issued thereunder ("Section 409A of the Code"). |
(4) | Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without the Executive's written consent: (i) a reduction in the Executive's Base Salary or Target Bonus as in effect from time to time; (ii) a material reduction (including as a result of any co-sharing of responsibilities arrangement) of the Executive's authority, responsibilities, or duties, (iii) a requirement that the Executive be based at a location in excess of 50 miles from the location of its principal executive office as of the date of this Agreement; (iv) the Company fails to obtain the written assumption of its obligations to the Executive under this Agreement by a successor no later than the consummation of a Change of Control; (v) a material breach by the Company of its obligations to the Executive under this Agreement; or (vi) in anticipation or contemplation of or following a Change of Control, as defined above, a material adverse change in the Executive's reporting structure; which in each of the circumstances described above, is not remedied by the Company within 30 days of receipt of written notice by the Executive to the |
(5) | Target Bonus. "Target Bonus" shall mean the percentage of the Executive's Base Salary equal to the Executive's short-term cash bonus opportunity under the terms of the applicable short-term cash bonus program in which the Executive is entitled to participate in respect of the fiscal year of the Company in which the Termination Date occurs (if any); provided, however, that if the Executive's employment with the Company is terminated by the Executive for Good Reason as a result of a reduction in the Executive's Target Bonus, then "Target Bonus" shall mean the Executive's Target Bonus as in effect immediately prior to such reduction. |
4. | Section 409A of the Code: Withholding. |
(a) | This Agreement is intended to avoid the imposition of taxes and/or penalties under Section 409A of the Code. The parties agree that this Agreement shall at all times be interpreted, construed and operated in a manner to avoid the imposition of taxes and/or penalties under with Section 409A of the Code. To the extent required for compliance with Section 409A of the Code, all references to a termination of employment and separation from service shall mean "separation from service" as defined in Section 409A of the Code, and the date of such "separation from service" shall be referred to as the "Termination Date". |
(b) | All reimbursements provided under this Agreement shall comply with Section 409A of the Code and shall be subject to the following requirement: (i) the amount of expenses eligible for reimbursement, during the Executive's taxable year may not affect the expenses eligible for reimbursement to be provided in another taxable year; and (ii) the reimbursement of an eligible expense must be made by December 31 following the taxable year in which the expense was incurred. The right to reimbursement is not subject to liquidation or exchange for another benefit. |
(c) | Notwithstanding anything in this Agreement to the contrary, for purposes of the period specified in this Agreement relating to the timing of the Executive's execution of the Release as a condition of the Company's obligation to provide any severance payments or benefits, if such period would begin in one taxable year and end in a second taxable year, any payment otherwise due to the Executive upon execution of the Release shall be made in the second taxable year and without regard to when the Release was executed or became irrevocable. |
(d) | If the Executive is a "specified employee" (as defined under Section 409A of the Code) on the Executive's Termination Date, to the extent that any amount payable under this Agreement constitutes "non-qualified deferred compensation" under Section 409A of the Code (and is not otherwise excepted from Section 409A of the Code coverage by virtue of being considered "separation pay" or a "short term deferral" or otherwise) and is payable to Executive based upon a separation from service, such amount shall not be paid until the first day following the six (6) month anniversary of the Executive's Termination Date or the Executive's death, if earlier. |
(e) | To the maximum extent permitted under Section 409A of the Code, the payments and benefits under this Agreement are intended to meet the requirements of the short-term deferral exemption under Section 409A of the Code and the "separation pay exception" under Treasury Regulation §l.409A-l(b)(9)(iii). Any right to a series of installment payments shall be treated as a right to a series of separate payments for purposes of Section 409A of the Code. |
(f) | All amounts due and payable under this Agreement shall be paid less all amounts required to be withheld by law, including all applicable federal, state and local withholding taxes and deductions. |
6. | Executive Covenants. |
(a) | For the purposes of this Section 6, the term "Company" shall include Abercrombie & Fitch Management Co. and all of its subsidiaries, parent companies and affiliates thereof. |
(b) | Non-Disclosure and Non-Use. The Executive shall not, during the Term and at all times thereafter, without the written authorization of the Chief Executive Officer ("CEO") of the Company or such other executive governing body as may exist in lieu |
(c) | Non-Disparagement and Cooperation. Neither the Executive nor any officer, director of the Company, nor any other spokesperson authorized as a spokesperson by any officer or director of the Company, shall, during the Term or at any time thereafter, intentionally state or otherwise publish anything about the other party which would adversely affect the reputation, image or business relationships and goodwill of the other party in the market and community at large. During the Term and at all times thereafter, the Executive shall fully cooperate with the Company in defense of legal claims asserted against the Company and other matters requiring the testimony or input and knowledge of the Executive. If at any time the Executive should be required to cooperate with the Company pursuant to this Section 6(c), the Company agrees to promptly reimburse the Executive for reasonable documented costs and expenses incurred as a result thereof. The Executive agrees that, during the Term and at all times thereafter, the Executive will not speak or communicate with any party or representative of any party, who is known to the Executive to be either adverse to the Company in litigation or administrative proceedings or to have threatened to |
(d) | Non-Competition. For the period of Executive's employment with the Company and its subsidiaries and for twelve (12) months following Executive's Termination Date with the Company and its subsidiaries for any reason (the "Non-Competition Period"), Executive shall not, directly or indirectly, without the Executive Approval, own, manage, operate, join, control, be employed by, consult with or participate in the ownership, management, operation or control of, or be connected with (as a stockholder, partner, or otherwise), any entity listed on Appendix A attached to this Agreement, or any of their current or future divisions, subsidiaries or affiliates (whether majority or minority owned), even if said division, subsidiary or affiliate becomes unrelated to the entity on Appendix A at some future date, or any other entity engaged in a business that is competitive with the Company in any part of the world in which the Company conducts business or is actively preparing or considering conducting business ("Competing Entity"); provided, however, that the "beneficial ownership" by the Executive, either individually or by a "group" in which the Executive is a member (as such terms are used in Rule 13d of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), of less than 2% of the voting stock of any publicly held corporation shall not be a violation of this Section 6(d). The Executive acknowledges and agrees that any consideration that the Executive received in respect of any non-competition covenant in favor of the Company or its subsidiaries entered into prior to the date hereof shall be incorporated herein as consideration for the promises set forth in this Section 6(d) and that the provisions contained in this Section 6(d) shall supersede any prior non competition covenants between the Executive and the Company or its subsidiaries. |
(e) | Non-Solicitation. For the period of Executive's employment with the Company and its subsidiaries and for twenty-four (24) months following Executive's Termination Date with the Company and its subsidiaries for any reason ("Non-Solicitation Period"), the Executive shall not, either directly or indirectly, alone or in conjunction with another party, interfere with or harm, or attempt to interfere with or harm, the relationship of the Company with any person who at any time was a customer or supplier of the Company or otherwise had a business relationship with the Company. During the Non Solicitation Period, the Executive shall not hire, solicit for hire, aid in or facilitate the hire, or cause 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. The Executive acknowledges and agrees that any consideration that the Executive received for in respect of any non-solicitation covenant in favor of the Company or its subsidiaries entered into prior to the date hereof shall be incorporated herein as consideration for the promises set forth in this Section 6(e) and that the provisions contained in this Section 6(e) shall supersede any prior non-solicitation covenants between the |
(f) | Confidentiality of this Agreement. Unless this Agreement is required to be publicly disclosed under applicable U.S. securities laws, the Executive agrees that, during the Term and at all times thereafter, the Executive shall not speak about, write about, or otherwise publicize or disclose to any third party the terms of this Agreement or any fact concerning its negotiation, execution or implementation, except with (i) an attorney, accountant, or other advisor engaged by the Executive; (ii) the Internal Revenue Service or other governmental agency upon proper request; or (iii) the Executive's immediate family; provided, that all such persons agree in advance to keep said information confidential and not to disclose it to others. This Section 6(f) shall not prohibit Executive from disclosing the terms of this Section 6 to a prospective employer. |
(g) | Remedies. The Executive agrees that any breach of the terms of this Section 6 would result in irreparable injury and damage to the Company for which the Company would have no adequate remedy at law; the Executive therefore also agrees that in the event of said breach or any threat of breach, the Company shall be entitled to an immediate injunction and restraining order to prevent such breach and/or threatened breach and/or continued breach by the Executive and/or any and all persons and/or entities acting for and/or with the Executive, without having to prove damages. The terms of this Section 6(g) shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach hereof, including but not limited to the recovery of damages from the Executive. The Executive and the Company further agree that the confidentiality provisions and the covenants not to compete and solicit contained in this Section 6 are reasonable and that the Company would not have entered into this Agreement but for the inclusion of such covenants herein. The parties agree that the prevailing party shall be entitled to all costs and expenses, including reasonable attorneys' fees and costs, in addition to any other remedies to which either may be entitled at law or in equity in connection with the enforcement of the covenants set forth in this Section 6. Should a court with jurisdiction determine , however, that all or any portion of the covenants set forth in this Section 6 is unreasonable, either in period of time, geographical area, or otherwise, the parties hereto agree that such covenants or portion thereof should be interpreted and enforced to the maximum extent that such court deems reasonable. In the event of any violation of the provisions of this Section 6, the Executive acknowledges and agrees that the post-termination restrictions contained in this Section 6 shall be extended by a period of time equal to the period of such violation, it being the intention of the parties hereto that the running of the applicable post-termination of employment restriction period shall be tolled during any period of such violation. In the event of a material violation by the Executive of this Section 6, any severance being paid to the Executive pursuant to Section 2 of this Agreement or otherwise shall immediately cease, and the aggregate gross amount of any severance previously paid to the Executive shall be immediately repaid to the Company. |
(h) | The provisions of this Section 6 shall survive any termination of this Agreement and any termination of the Executive's employment, and the existence of any claim or cause of action by the Executive against the Company, whether predicated on this |
7. | Successors and Assigns. |
(a) | This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns, and the Company shall require any successor or assign to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. The term "the Company" as used herein shall include any such successors and assigns to the Company's business and/or assets. The term "successors and assigns" as used herein shall mean a corporation or other entity acquiring or otherwise succeeding to, directly or indirectly, all or substantially all the assets and business of the Company (including this Agreement) whether by operation of law or otherwise. |
(b) | Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, the Executive's beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal personal representative. |
/s/ John Gabrielli |
John Gabrielli |
/s/ Arthur C. Martinez |
Arthur C. Martinez |
American Eagle Outfitters, Inc. | Gap, Inc. |
J. Crew Group, Inc. | Pacific Sunwear of California, Inc. |
Urban Outfitters, Inc. | Aeropostale, Inc. |
Polo Ralph Lauren Corporation | Ascena Retail Group |
Lululemon Athletica, Inc. | Levi Strauss & Co. |
L Brands (formerly known as Limited Brands, including, without limitation,Victoria's Secret, Pink, Bath & Body Works, La Senza and Henri Bendel) | Express, Inc. |
Nike, Inc. | Under Armour, Inc. |
Amazon.com, Inc. | |
1. | I have reviewed this Quarterly Report on Form 10-Q of Abercrombie & Fitch Co. for the quarterly period ended August 3, 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 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 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: September 11, 2019 | By: | /s/ Fran Horowitz |
Fran Horowitz | ||
Chief Executive Officer | ||
(Principal Executive Officer) | ||
1. | I have reviewed this Quarterly Report on Form 10-Q of Abercrombie & Fitch Co. for the quarterly period ended August 3, 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 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 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: September 11, 2019 | By: | /s/ Scott Lipesky |
Scott Lipesky | ||
Senior Vice President and Chief Financial Officer | ||
(Principal Financial Officer) | ||
(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: September 11, 2019 | Date: September 11, 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. |
Revenue Recognition (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
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Aug. 03, 2019 |
Aug. 04, 2018 |
Aug. 03, 2019 |
Aug. 04, 2018 |
Feb. 02, 2019 |
Feb. 03, 2018 |
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| Revenue Recognition [Abstract] | ||||||
| Gift Card Liability, Current | $ 20,056 | $ 17,478 | $ 20,056 | $ 17,478 | $ 26,062 | $ 28,939 |
| Customer Loyalty Program Liability, Current | 21,073 | 20,042 | 21,073 | 20,042 | $ 19,904 | $ 15,965 |
| Revenue recognized from Gift Card Program | 12,800 | 12,000 | 28,100 | 25,800 | ||
| Revenue recognized from Customer Loyalty Program Liability | $ 8,000 | $ 8,200 | $ 14,500 | $ 15,400 | ||
Flagship Store Exit Charges (Tables) |
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| Flagship Store Exit Charges [Table Text Block] | The following table provides additional details related to these charges incurred during the thirteen and twenty-six weeks ended August 3, 2019 and August 4, 2018.
(4) Amounts represent costs incurred in returning the store to its original condition, including updates to previous accruals for asset retirement obligations and costs to remove inventory and store assets.
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Share-Based Compensation (Tables) |
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| Share-based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block] | The following table details share-based compensation expense for the thirteen and twenty-six weeks ended August 3, 2019 and August 4, 2018:
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| Schedule of Restricted Stock Unit Activity | The following table summarizes activity for restricted stock units for the twenty-six weeks ended August 3, 2019:
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| Schedule of Stock Appreciation Rights Activity | follows:
Stock appreciation rights The following table summarizes stock appreciation rights activity for the twenty-six weeks ended August 3, 2019:
As of August 3, 2019, total unrecognized compensation cost related to stock appreciation rights was insignificant and is expected to be recognized over a weighted-average period of 2 months. The grant date fair value of stock appreciation rights that vested during the twenty-six weeks ended August 3, 2019 was $0.6 million. The grant date fair value of stock appreciation rights that were exercised during the twenty-six weeks ended August 4, 2018 was $1.2 million.
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| Schedule of Weighted-Average Estimated Fair Value and Assumptions of Restricted Stock Units with Market Vesting Conditions | Additional information pertaining to restricted stock units for the twenty-six weeks ended August 3, 2019 and August 4, 2018 follows:
The weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the twenty-six weeks ended August 3, 2019 and August 4, 2018 were as follows:
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Property and Equipment, Net |
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT, NET | PROPERTY AND EQUIPMENT, NET Property and equipment, net consisted of:
Details related to store asset impairment charges incurred during the thirteen and twenty-six weeks ended August 3, 2019 and August 4, 2018 are as follows:
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.
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Derivative Instruments |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS As of August 3, 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:
As of August 3, 2019, foreign currency exchange forward contracts that were entered into to hedge foreign-currency-denominated net monetary assets and liabilities were as follows:
The location and amounts of derivative fair values of foreign currency exchange forward contracts on the Condensed Consolidated Balance Sheets as of August 3, 2019 and February 2, 2019 were as follows:
Refer to Note 5, “FAIR VALUE,” for further discussion of the determination of the fair value of derivative instruments. Additional information pertaining to derivative gains or losses from foreign currency exchange forward contracts designated as cash flow hedging instruments for the thirteen and twenty-six weeks ended August 3, 2019 and August 4, 2018 follows:
Substantially all of the unrealized gains or losses related foreign currency exchange forward contracts designated as cash flow hedging instruments as of August 3, 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. Additional information pertaining to derivative gains or losses from foreign currency exchange forward contracts not designated as hedging instruments for the thirteen and twenty-six weeks ended August 3, 2019 and August 4, 2018 follows:
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Derivative Instruments (Outstanding Foreign Exchange Forward Contracts) (Details) - Cash Flow Hedging - Forward Contracts $ in Thousands |
Aug. 03, 2019
USD ($)
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|---|---|---|---|---|---|---|---|---|
| Inter-company Inventory and Accounts Receivables | Euro Member Countries, Euro | ||||||||
| Derivative [Line Items] | ||||||||
| Notional Amount | $ 86,139 | [1] | ||||||
| Inter-company Inventory and Accounts Receivables | United Kingdom, Pounds | ||||||||
| Derivative [Line Items] | ||||||||
| Notional Amount | 42,892 | [1] | ||||||
| Inter-company Inventory and Accounts Receivables | Canada, Dollars | ||||||||
| Derivative [Line Items] | ||||||||
| Notional Amount | 15,742 | [1] | ||||||
| Inter-company Inventory and Accounts Receivables | Japan, Yen | ||||||||
| Derivative [Line Items] | ||||||||
| Notional Amount | 9,140 | [1] | ||||||
| Assets and Liabilities | Japan, Yen | ||||||||
| Derivative [Line Items] | ||||||||
| Notional Amount | 21,763 | [2] | ||||||
| Assets and Liabilities | Euro Member Countries, Euro | ||||||||
| Derivative [Line Items] | ||||||||
| Notional Amount | $ 9,485 | [3] | ||||||
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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 03, 2019 |
Aug. 04, 2018 |
Aug. 03, 2019 |
Aug. 04, 2018 |
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| Accumulated Other Comprehensive Loss [Roll Forward] | ||||||||||||
| Beginning balance | $ (105,291) | $ (91,133) | $ (102,452) | $ (95,054) | ||||||||
| Other comprehensive (loss) income before reclassifications | 1,003 | (3,148) | 479 | (2,880) | ||||||||
| Reclassified from accumulated other comprehensive loss (1) | (1,763) | [1] | 150 | [2] | (4,303) | [1] | 5,222 | [2] | ||||
| Tax effect | 105 | (761) | 330 | (2,180) | ||||||||
| Other comprehensive (loss) income | (655) | (3,759) | (3,494) | 162 | ||||||||
| Ending balance at August 3, 2019 | (105,946) | (94,892) | (105,946) | (94,892) | ||||||||
| Foreign Currency Translation Adjustment | ||||||||||||
| Accumulated Other Comprehensive Loss [Roll Forward] | ||||||||||||
| Beginning balance | (107,673) | (93,286) | (104,887) | (84,947) | ||||||||
| Other comprehensive (loss) income before reclassifications | (3,788) | (11,206) | (6,574) | (19,545) | ||||||||
| Reclassified from accumulated other comprehensive loss (1) | 0 | 0 | 0 | 0 | ||||||||
| Tax effect | 0 | 0 | 0 | 0 | ||||||||
| Other comprehensive (loss) income | (3,788) | (11,206) | (6,574) | (19,545) | ||||||||
| Ending balance at August 3, 2019 | (111,461) | (104,492) | (111,461) | (104,492) | ||||||||
| Unrealized Gain (Loss) on Derivative Financial Instruments | ||||||||||||
| Accumulated Other Comprehensive Loss [Roll Forward] | ||||||||||||
| Beginning balance | 2,382 | 2,153 | 2,435 | (10,107) | ||||||||
| Other comprehensive (loss) income before reclassifications | 4,791 | 8,058 | 7,053 | 16,665 | ||||||||
| Reclassified from accumulated other comprehensive loss (1) | (1,763) | 150 | (4,303) | 5,222 | ||||||||
| Tax effect | 105 | (761) | 330 | (2,180) | ||||||||
| Other comprehensive (loss) income | 3,133 | 7,447 | 3,080 | 19,707 | ||||||||
| Ending balance at August 3, 2019 | $ 5,515 | $ 9,600 | $ 5,515 | $ 9,600 | ||||||||
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Flagship Store Exit Charges (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 03, 2019 |
Aug. 04, 2018 |
Aug. 03, 2019 |
Aug. 04, 2018 |
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| Flagship Store Exit Charges [Abstract] | |||||||||||||
| Single Lease Cost from Flagship Store Exits | [1] | $ 23,269 | $ 0 | $ 23,269 | $ 0 | ||||||||
| Variable Lease Cost from Flagship Store Exits | [2] | 20,218 | 0 | 20,218 | 0 | ||||||||
| Operating lease right-of-use asset impairment from Flagship Store Exits | 3,229 | 0 | 3,229 | 0 | |||||||||
| Lease Cost from Flagship Store Exits | 46,716 | 0 | 46,716 | 0 | |||||||||
| Lease Termination Fees | [3] | 0 | 0 | 0 | 3,688 | ||||||||
| Property, Plant and Equipment, Disposals | [4] | (1,675) | 0 | (1,687) | 0 | ||||||||
| Severance Costs | (47) | 0 | 1,709 | 120 | |||||||||
| Flagship store exit charges | 44,994 | $ 0 | 46,738 | $ 3,808 | |||||||||
| Maximum Annual Cash Payments | $ 15,000 | $ 15,000 | |||||||||||
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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Aug. 03, 2019 |
Feb. 02, 2019 |
|---|---|---|
| Stockholders’ equity | ||
| Treasury Stock, at Average Cost (in shares) | 40,154,000 | 37,073,000 |
| Class A Common Stock | ||
| Stockholders’ equity | ||
| Class A Common Stock, par value | $ 0.01 | $ 0.01 |
| Class A Common Stock, shares authorized | 150,000,000 | 150,000,000 |
| Class A Common Stock, shares issued | 103,300,000 | 103,300,000 |
Borrowings (Details) - USD ($) |
Aug. 03, 2019 |
Feb. 03, 2019 |
[1] | Feb. 02, 2019 |
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|---|---|---|---|---|---|---|
| Long-Term Borrowings [Line Items] | ||||||
| Long-term portion of borrowings, net | $ 251,033,000 | $ 250,439,000 | $ 250,439,000 | |||
| Term Loan Facility | ||||||
| Long-Term Borrowings [Line Items] | ||||||
| Gross borrowings outstanding, carrying amount | 253,250,000 | 253,250,000 | ||||
| ABL Facility | ||||||
| Long-Term Borrowings [Line Items] | ||||||
| Credit facility, amount outstanding | $ 0 | $ 0 | ||||
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Summary of Significant Accounting Policies |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Significant Accounting Policies [Text Block] | 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:
Interim financial statements The Condensed Consolidated Financial Statements as of August 3, 2019, and for the thirteen and twenty-six week periods ended August 3, 2019 and August 4, 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. Certain prior year amounts have been reclassified for consistency with the current year presentation of flagship store exit charges on the Condensed Consolidated Statements of Operations and Comprehensive Loss. 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.
The following table provides the impact from adoption of the new lease accounting standard on the Company’s Condensed Consolidated Balance Sheet:
The Company’s significant accounting policies as of August 3, 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. 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 based on the transactional currency of the lease and the lease term. 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:
The measurement of lease right-of-use assets and liabilities excludes amounts related to:
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). 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. 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. Condensed Consolidated Statements of Cash Flows reconciliation The following table provides a reconciliation of cash and equivalents and restricted cash and equivalents to the amounts shown on the Condensed Consolidated Statements of Cash Flows.
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| BASIS OF PRESENTATION | Interim financial statements The Condensed Consolidated Financial Statements as of August 3, 2019, and for the thirteen and twenty-six week periods ended August 3, 2019 and August 4, 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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Summary of Significant Accounting Policies Principles of Consolidation (Policies) |
6 Months Ended |
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Aug. 03, 2019 | |
| Basis of Presentation [Abstract] | |
| Consolidation, Policy [Policy Text Block] | 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. |
Summary of Significant Accounting Policies Condensed Consolidated Statements of Cash Flows reconciliation (Tables) |
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| Reconciliation of Cash and Equivalents to Restricted cash and Equivalents [Table Text Block] | Condensed Consolidated Statements of Cash Flows reconciliation The following table provides a reconciliation of cash and equivalents and restricted cash and equivalents to the amounts shown on the Condensed Consolidated Statements of Cash Flows.
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Property and Equipment, Net (Tables) |
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| Property and Equipment, Net | Property and equipment, net consisted of:
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| Property, Plant and Equipment, Impairment [Policy Text Block] | Details related to store asset impairment charges incurred during the thirteen and twenty-six weeks ended August 3, 2019 and August 4, 2018 are as follows:
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