UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 2, 2013
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-12107
ABERCROMBIE & FITCH CO.
(Exact name of registrant as specified in its charter)
Delaware
31-1469076
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
6301 Fitch Path, New Albany, Ohio
43054
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (614) 283-6500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Class A Common Stock, $.01 Par Value
New York Stock Exchange
Series A Participating Cumulative Preferred
Stock Purchase Rights
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes No
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the Registrant was required to submit and post such files).) Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act:
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
Aggregate market value of the Registrant’s Class A Common Stock (the only outstanding common equity of the Registrant) held by non-
affiliates of the Registrant (for this purpose, executive officers and directors of the Registrant are considered affiliates) as of July 27, 2012:
$2,991,111,716.
Number of shares outstanding of the Registrant’s common stock as of March 22, 2013: 78,166,993 shares of Class A Common Stock.
DOCUMENT INCORPORATED BY REFERENCE:
Portions of the Registrant’s definitive proxy statement for the Annual Meeting of Stockholders, to be held on June 20, 2013, are
incorporated by reference into Part III of this Annual Report on Form 10-K.
Table of Contents
ABERCROMBIE & FITCH CO.
TABLE OF CONTENTS
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
SUPPLEMENTAL ITEM.
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
ITEM 15.
Table of Contents
PART I
BUSINESS 3
RISK FACTORS 7
UNRESOLVED STAFF COMMENTS 18
PROPERTIES 19
LEGAL PROCEEDINGS 20
MINE SAFETY DISCLOSURES 21
EXECUTIVE OFFICERS OF THE REGISTRANT 22
PART II
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES 23
SELECTED FINANCIAL DATA 26
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 28
FINANCIAL SUMMARY 30
CURRENT TRENDS AND OUTLOOK 31
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK 45
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 46
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME 46
CONSOLIDATED BALANCE SHEETS 47
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY 48
CONSOLIDATED STATEMENTS OF CASH FLOWS 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 50
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 79
CONTROLS AND PROCEDURES 80
OTHER INFORMATION 81
PART III
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 82
EXECUTIVE COMPENSATION 83
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS 84
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE 85
PRINCIPAL ACCOUNTANT FEES AND SERVICES 86
PART IV
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 87
3
PART I
ITEM 1. BUSINESS.
GENERAL.
Abercrombie & Fitch Co. (“A&F”), a company incorporated in Delaware in 1996, through its subsidiaries (collectively,
A&F and its subsidiaries, are referred to as “Abercrombie & Fitch” or the “Company”), is a specialty retailer that operates
stores and direct-to-consumer operations. Through these channels, the Company sells a broad array of products, including:
casual sportswear apparel, including knit and woven shirts, graphic t-shirts, fleece, jeans and woven pants, shorts, sweaters, and
outerwear; personal care products; and accessories for men, women and kids under the Abercrombie & Fitch, abercrombie kids,
and Hollister brands. The Company also operates stores and direct-to-consumer operations offering bras, underwear, personal
care products, sleepwear and at-home products for girls under the Gilly Hicks brand. As of February 2, 2013, the Company
operated 912 stores in the United States (“U.S.”) and 139 stores outside of the U.S.
The Company’s fiscal year ends on the Saturday closest to January 31, typically resulting in a fifty-two week year, but
occasionally giving rise to an additional week, resulting in a fifty-three week year as was the case for Fiscal 2012. Fiscal years
are designated in the consolidated financial statements and notes by the calendar year in which the fiscal year commences. All
references herein to “Fiscal 2012” represent the 53-week fiscal year ended February 2, 2013; to “Fiscal 2011” represent the 52-
week fiscal year ended January 28, 2012; and to “Fiscal 2010” represent the 52-week fiscal year ended January 29, 2011. In
addition, all references herein to “Fiscal 2013” represent the 52-week fiscal year that will end on February 1, 2014.
A&F makes available free of charge on its Internet website, www.abercrombie.com, under “Investors, SEC Filings,” its
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
as well as A&F’s definitive proxy materials filed pursuant to Section 14 of the Exchange Act, as soon as reasonably practicable
after A&F electronically files such material with, or furnishes it to, the Securities and Exchange Commission (“SEC”). The
SEC maintains a website that contains electronic filings by A&F and other issuers at www.sec.gov. In addition, the public may
read and copy any materials A&F files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington,
D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-
SEC-0330.
The Company has included its Internet website addresses throughout this filing as textual references only. The
information contained within these Internet websites is not incorporated into this Annual Report on Form 10-K.
DESCRIPTION OF OPERATIONS.
Brands.
Abercrombie & Fitch. Rooted in East Coast traditions and Ivy League heritage, Abercrombie & Fitch is the essence of
privilege and casual luxury. The Adirondacks supply a clean inspiration to this preppy, youthful All-American lifestyle. A
combination of classic and sexy creates a charged atmosphere that is confident and just a bit provocative. Idolized and
respected, Abercrombie & Fitch is timeless and always cool.
abercrombie kids. The essence of privilege and prestigious East Coast prep schools, abercrombie kids directly follows
in the footsteps of Abercrombie & Fitch. With an energetic attitude, abercrombie kids are popular, wholesome and athletic.
Casual, with classic, preppy style, abercrombie kids aspire to be like their older sibling, Abercrombie & Fitch. The perfect
combination of maturity and mischief, abercrombie kids are the signature of All-American cool.
Hollister. Hollister is the fantasy of Southern California. It’s all about hot lifeguards and beautiful beaches. Young and
fun, with a sense of humor, Hollister never takes itself too seriously. Hollister’s laidback lifestyle and All-American image is
timeless and effortlessly cool. Hollister brings Southern California to the world.
Gilly Hicks. Gilly Hicks is the cheeky cousin of Abercrombie & Fitch. Inspired by the free spirit of Sydney, Australia,
Gilly Hicks makes the hottest Push ‘Em Up bras and the cutest Down Undies for young, naturally beautiful, confident girls.
Carefree and undeniably pretty, Gilly Hicks is the All-American brand with a Sydney sensibility.
Though each of the Company’s brands embodies its own heritage and handwriting, the brands share common elements
and characteristics. The brands are classic, casual, confident, intelligent, privileged and possess a sense of humor.
Refer to the “FINANCIAL SUMMARY” in “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of this Annual Report on Form 10-K for information
regarding net sales and other financial and operational data by segment and by brand.
Table of Contents
4
FINANCIAL INFORMATION ABOUT SEGMENTS.
The Company determines its segments on the same basis that it uses to evaluate performance. All of the Company’s
segments sell a similar group of products — casual sportswear apparel, personal care products and accessories for men, women
and kids and bras, underwear and sleepwear for girls. The Company has three reportable segments: U.S. Stores, International
Stores and Direct-to-Consumer. Refer to Note 2, “SEGMENT REPORTING,” of the Notes to Consolidated Financial
Statements included in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this Annual Report on
Form 10-K for further discussion of the Company’s reportable segments.
IN-STORE EXPERIENCE AND STORE OPERATIONS.
The Company views the customer’s in-store experience as the primary means of communicating the spirit of each brand.
The Company emphasizes the senses of sight, sound, smell, touch and energy by utilizing the visual presentation of
merchandise, in-store marketing, music, fragrances, rich fabrics and its sales associates to reinforce the aspirational lifestyles
represented by the brands.
The Company’s in-store marketing is designed to convey the principal elements and personality of each brand. The store
design, furniture, fixtures and music are all carefully planned and coordinated to create a shopping experience that reflects the
Abercrombie & Fitch, abercrombie kids, Hollister or Gilly Hicks lifestyle.
The Company’s sales associates and managers are a central element in creating the atmosphere of the stores. In addition
to serving customers, sales associates and managers reflect the casual, energetic and aspirational attitude of the brands.
Merchandise is similarly displayed, regardless of location, to ensure a consistent in-store experience. Store managers
receive detailed plans designating fixture and merchandise placement to ensure coordinated execution of the Company-wide
merchandising strategy. In addition, standardization of each brand’s store design and merchandise presentation enables the
Company to open new stores efficiently.
At the end of Fiscal 2012, the Company operated 1,051 stores. The following table details the number of retail stores
operated by the Company at February 2, 2013:
Fiscal 2012
Abercrombie &
Fitch
abercrombie
kids
Hollister Gilly Hicks Total
U.S. 266 144 482 20 912
International 19 6 107 7 139
Total 285 150 589 27 1,051
DIRECT-TO-CONSUMER BUSINESS.
The Company operates websites for each brand, both domestically and internationally. The websites reinforce each
particular brand’s lifestyle, and are designed to complement the in-store experience. Total net sales through direct-to-consumer
operations, including shipping and handling revenue, were $700.7 million for Fiscal 2012, representing 16% of total net sales.
The Company believes its direct-to-consumer operations have broadened its market and brand recognition worldwide.
MARKETING AND ADVERTISING.
The Company considers the in-store experience to be its primary marketing vehicle. The Company’s marketing strategy
emphasizes the senses to reinforce the aspirational lifestyle represented by each brand. The Company’s flagship stores represent
the pinnacle of the Company’s in-store branding efforts. The Company also engages its customers through the internet, social
media and mobile commerce in ways that reinforce the aspirational lifestyle of the brands. Flagship stores, e-commerce and
digital marketing, inclusive of social media, attract a substantial number of international consumers and have significantly
contributed to the worldwide status of the Company’s iconic brands. In addition, the Company launched A&F and Hollister
club programs during the third quarter of Fiscal 2012 to further engage customers. Including email addresses and mobile phone
numbers, the Company's total customer relationship management database has over ten million contacts.
MERCHANDISE SUPPLIERS.
During Fiscal 2012, the Company sourced merchandise through approximately 155 vendors located throughout the
world; primarily in Asia and Central and South America. The Company did not source more than 10% of its merchandise from
any single factory or supplier during Fiscal 2012. The Company pursues a global sourcing strategy that includes relationships
with vendors in 20 countries, as well as the United States. The Company’s foreign sourcing of merchandise is negotiated and
settled in U.S. Dollars.
Table of Contents
5
All product sources, including independent manufacturers and suppliers, must achieve and maintain the Company’s high
quality standards, which are an integral part of the Company’s identity. The Company has established supplier product quality
standards to ensure the high quality of fabrics and other materials used in the Company’s products. The Company utilizes both
home office and field employees to help monitor compliance with the Company’s product quality standards.
Before the Company begins production with any factory, the factory must first go through a quality assurance inspection
to ensure it meets Company standards. This includes factories that are subcontractors to the factories and vendors with whom
the Company works. All business partners are contractually required to adhere to our vendor Code of Conduct, and all new
factories go through an initial social audit, which includes a factory walk-through to appraise the physical working conditions
and health and safety practices, as well as payroll and age document review. Social audits on the factories are also performed
once a year after the initial audit. The Company strives to partner with suppliers who respect local laws and share our
dedication to utilize best practices in human rights, labor rights, environmental practices and workplace safety.
DISTRIBUTION AND MERCHANDISE INVENTORY.
The Company’s merchandise is shipped to the Company’s distribution centers (“DCs”) where it is received and inspected
before being shipped to stores or direct-to-consumer customers. The Company uses its two DCs in New Albany, Ohio to
support its North American stores, and direct-to-consumer customers outside of Europe. The Company uses a third-party DC in
the Netherlands for the distribution of merchandise to stores and direct-to-consumer customers located in Europe, and a third-
party DC in Hong Kong for the distribution of merchandise to stores located in Asia. The Company utilizes primarily one
contract carrier to ship merchandise and related materials to its North American stores and direct-to-consumer customers, and a
separate contract carrier for its European and Asian stores and direct-to-consumer customers.
The Company strives to maintain sufficient quantities of inventory in its retail stores and DCs to offer customers a full
selection of current merchandise. The Company attempts to balance in-stock levels and inventory turnover, and to take
markdowns when required to keep merchandise fresh and current with fashion trends.
INFORMATION SYSTEMS.
The Company’s management information systems consist of a full range of retail, merchandising and financial systems.
The systems include applications related to point-of-sale, direct-to-consumer, inventory management, supply chain, planning,
sourcing, merchandising and financial reporting. The Company continues to invest in technology to upgrade core systems to
make the Company scalable, efficient, and more accurate, including support of its international expansion.
SEASONAL BUSINESS.
The retail apparel market has two principal selling seasons: the Spring season which includes the first and second fiscal
quarters (“Spring”); and the Fall season which includes the third and fourth fiscal quarters (“Fall”). As is typical in the apparel
industry, the Company experiences its greatest sales activity during the Fall season due to the Back-to-School (August) and
Holiday (November and December) selling periods, particularly in the U.S.
TRADEMARKS.
The Abercrombie & Fitch
®
, abercrombie
®
, Hollister
®
, Gilly Hicks
®
, “Moose” and “Seagull” trademarks are registered
with the U.S. Patent and Trademark Office and the registries of countries where stores are located or likely to be located in the
future. In addition, these trademarks are either registered, or the Company has applications for registration pending, with the
registries of many of the foreign countries in which the manufacturers of the Company’s products are located. The Company
has also registered, or has applied to register, certain other trademarks in the U.S. and around the world. The Company believes
its products are identified by its trademarks and, therefore, its trademarks are of significant value. Each registered trademark
has a duration of ten to 20 years, depending on the date it was registered, and the country in which it is registered, and is
subject to an indefinite number of renewals for a like period upon continued use and appropriate application. The Company
intends to continue using its core trademarks and to renew each of its registered trademarks that remain in use.
OTHER INFORMATION.
Additional information about the Company’s business, including its revenues and profits for the last three fiscal years and
gross square footage of stores, is set forth under “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of this Annual Report on Form 10-K.
COMPETITION.
The sale of apparel, accessories and personal care products through stores and direct-to-consumer channels is a highly
competitive business with numerous participants, including individual and chain fashion specialty stores, as well as regional
and national department stores. As the Company continues expanding internationally, it also faces competition in local markets
from established chains, as well as local specialty stores. Brand recognition, fashion, price, service, store location, selection and
quality are the principal competitive factors in retail store and direct-to-consumer sales.
Table of Contents
6
The competitive challenges facing the Company include: anticipating and quickly responding to changing fashion trends
and maintaining the aspirational positioning of its brands. Furthermore, the Company faces additional competitive challenges
as many retailers continue promotional activities, particularly in the U.S. In response to these conditions, the Company has
engaged in promotional activity while continuing to focus on preserving the value of its brands.
ASSOCIATE RELATIONS.
As of March 22, 2013, the Company employed approximately 98,000 associates. Approximately 88,000 of the
Company’s associates were part-time associates.
On average, the Company employed approximately 26,000 full-time equivalents during Fiscal 2012 which included
approximately 15,000 full-time equivalents comprised of part-time associates, including temporary associates hired during peak
periods, such as the Back-to-School and Holiday seasons.
The Company believes it maintains a good relationship with its associates. However, in the normal course of business,
the Company is party to lawsuits involving former and current associates.
ENVIRONMENTAL MATTERS.
Compliance with domestic and international regulations related to environmental matters has not had, nor is it expected
to have, any material effect on capital expenditures, earnings, or the Company’s competitive position based on information and
circumstances known to us at this time.
Table of Contents
7
ITEM 1A. RISK FACTORS
FORWARD-LOOKING STATEMENTS AND RISK FACTORS.
We caution that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act
of 1995) contained in this Annual Report on Form 10-K or made by us, our management or our spokespeople involve risks and
uncertainties and are subject to change based on various factors, many of which may be beyond our control. Words such as
“estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend” and similar expressions may identify forward-looking
statements. Except as may be required by applicable law, we assume no obligation to publicly update or revise our forward-
looking statements.
The following factors could affect our financial performance and could cause actual results to differ materially from those
expressed or implied in any of the forward-looking statements:
• changes in economic and financial conditions, and the resulting impact on consumer confidence and consumer
spending, could have a material adverse effect on our business, results of operations and liquidity;
• changing fashion trends and consumer preferences, and the ability to manage our inventory commensurate with
customer demand, could adversely impact our sales levels and profitability;
• fluctuations in the cost, availability and quality of raw materials, labor and transportation, could cause manufacturing
delays and increase our costs;
• our growth strategy relies significantly on international expansion, which requires significant capital investment, adds
complexity to our operations and may strain our resources and adversely impact current store performance;
• our international expansion plan is dependent on a number of factors, any of which could delay or prevent successful
penetration into new markets or could adversely affect the profitability of our international operations;
• our direct-to-consumer operations are subject to numerous risks that could adversely impact sales;
• equity-based compensation awarded under the employment agreement with our Chief Executive Officer could
adversely impact our cash flows, financial position or results of operations and could have a dilutive effect on our
outstanding Common Stock;
• our development of a new brand concept such as Gilly Hicks could have a material adverse effect on our financial
condition or results of operations;
• fluctuations in foreign currency exchange rates could adversely impact our financial condition and results of operations;
• our business could suffer if our information technology systems are disrupted or cease to operate effectively;
• comparable sales, including direct-to-consumer, may continue to fluctuate on a regular basis and impact the volatility of
the price of our Common Stock;
• our market share may be negatively impacted by increasing competition and pricing pressures from companies with
brands or merchandise competitive with ours;
• our ability to attract customers to our stores depends, in part, on the success of the shopping malls or area attractions in
which most of our stores are located;
• our net sales fluctuate on a seasonal basis, causing our results of operations to be susceptible to changes in Back-to-
School and Holiday shopping patterns;
• our failure to protect our reputation could have a material adverse effect on our brands;
• we rely on the experience and skills of our senior executive officers, the loss of whom could have a material adverse
effect on our business;
• interruption in the flow of merchandise from our key vendors and international manufacturers could disrupt our supply
chain, which could result in lost sales and could increase our costs;
• In a number of our European stores, associates are represented by workers’ councils and unions, whose demands could
adversely affect our profitability or operating standards for our brands;
• we depend upon independent third parties for the manufacture and delivery of all our merchandise;
• our reliance on two distribution centers domestically and two third-party distribution centers internationally makes us
susceptible to disruptions or adverse conditions affecting our distribution centers;
• we may be exposed to risks and costs associated with credit card fraud and identity theft that would cause us to incur
unexpected expenses and loss of revenues;
• our facilities, systems and stores, as well as the facilities and systems of our vendors and manufacturers, are vulnerable
to natural disasters, pandemic disease and other unexpected events, any of which could result in an interruption to our
business and adversely affect our operating results;
• our litigation exposure could have a material adverse effect on our financial condition and results of operations;
• our inability or failure to adequately protect our trademarks could have a negative impact on our brand image and limit
our ability to penetrate new markets;
Table of Contents
8
• fluctuations in our tax obligations and effective tax rate may result in volatility in our operating results;
• the effects of war or acts of terrorism could have a material adverse effect on our operating results and financial
condition;
• our inability to obtain commercial insurance at acceptable prices or our failure to adequately reserve for self-insured
exposures might increase our expenses and adversely impact our financial results;
• operating results and cash flows at the store level may cause us to incur impairment charges;
• we are subject to customs, advertising, consumer protection, privacy, zoning and occupancy and labor and employment
laws that could require us to modify our current business practices, incur increased costs or harm our reputation if we
do not comply;
• changes in the regulatory or compliance landscape could adversely affect our business and results of operations;
• our unsecured Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) and our Term
Loan Agreement include financial and other covenants that impose restrictions on our financial and business operations;
and
• compliance with changing regulations and standards for accounting, corporate governance and public disclosure could
adversely affect our business, results of operations and reported financial results.
The following sets forth a description of the preceding risk factors that we believe may be relevant to an understanding of
our business. These risk factors could cause actual results to differ materially from those expressed or implied in any of our
forward-looking statements.
Changes in economic and financial conditions, and the resulting impact on consumer confidence and consumer
spending, could have a material adverse effect on our business, results of operations and liquidity.
Our business depends on consumer demand for our merchandise. Consumer purchases of discretionary items, including
our merchandise, generally decline during recessionary periods and other periods where disposable income is adversely
affected. Our performance is subject to factors that affect worldwide economic conditions including unemployment, consumer
credit availability, consumer debt levels, reductions in net worth based on declines in the financial, residential real estate and
mortgage markets, sales tax rates and tax rate increases, fuel and energy prices, interest rates, consumer confidence in future
economic and political conditions, consumer perceptions of personal well-being and security, the value of the U.S. Dollar
versus foreign currencies and other macroeconomic factors.
During Fiscal 2008 and Fiscal 2009, the combination of these factors caused consumer spending in the U.S. to deteriorate
significantly. While consumer spending began to improve in Fiscal 2010 and continued to improve in Fiscal 2011 and Fiscal
2012, these factors may cause levels of spending to remain depressed relative to historical levels for the foreseeable future.
These factors also may cause consumers to purchase products from lower-priced competitors or to defer purchases of apparel
and personal care products.
In addition, we have significantly expanded our presence in the European market with stores in the United Kingdom,
France, Germany, Netherlands, Austria, Belgium, Spain, Italy, Ireland, Sweden, Poland and Denmark. The ongoing European
debt crisis may impact consumer demand for our merchandise. The economic conditions and factors described above could
adversely affect the productivity of our stores, as well as adversely affect the pace of opening new international stores, or their
productivity once opened.
Economic uncertainty could have a material adverse effect on our results of operations, liquidity, and capital resources if
reduced consumer demand for our merchandise should occur. It could also impact our ability to fund growth and/or result in
our becoming reliant on external financing, the availability of which may be uncertain.
In addition, the economic environment may exacerbate some of the risks noted below, including consumer demand, strain
on available resources, international growth strategy and the availability of real estate, interruption of the flow of merchandise
from key vendors and manufacturers, and foreign currency exchange rate fluctuations. The risks could be exacerbated
individually, or collectively.
Changing fashion trends and consumer preferences, and the ability to manage our inventory commensurate with
customer demand, could adversely impact our sales levels and profitability.
Our success largely depends on our ability to anticipate and gauge the fashion preferences of our customers and provide
merchandise that satisfies constantly shifting demands in a timely manner. Our merchandise and our brands must appeal to our
consumers, whose preferences cannot be predicted with certainty and are also subject to rapid change. We must translate
market trends into appropriate, saleable merchandise far in advance of its sale in our stores or through our websites. Because
we enter into agreements for the manufacture and purchase of merchandise well in advance of the applicable selling season, we
are vulnerable to changes in consumer preferences and demand, pricing shifts, and the sub-optimal selection and timing of
merchandise purchases. Moreover, there can be no assurance that we will continue to anticipate consumer demands and
accurately plan inventory successfully in the future. Changing consumer preferences and fashion trends, whether we are able to
Table of Contents
9
anticipate, identify and respond to them or not, could adversely impact our sales. Inventory levels for certain merchandise
styles no longer considered to be “on trend” may increase, leading to higher markdowns to sell through excess inventory. A
distressed economic and retail environment, in which many of our competitors continue to engage in aggressive promotional
activities, particularly in the U.S., increases the importance of reacting appropriately to changing consumer preferences and
fashion trends. Conversely, if we underestimate consumer demand for our merchandise, or if our manufacturers fail to supply
quality products in a timely manner, we may experience inventory shortages, which may negatively impact customer
relationships, diminish brand loyalty and result in lost sales. Any of these events could significantly harm our operating results
and financial condition.
Fluctuations in the cost, availability and quality of raw materials, labor and transportation, could cause manufacturing
delays and increase our costs.
Fluctuations in the cost, availability and quality of the fabrics or other raw materials used to manufacture our
merchandise could have a material adverse effect on our cost of goods, or our ability to meet customer demand. The prices for
such fabrics depend largely on the market prices for the raw materials used to produce them, particularly cotton. The price and
availability of such raw materials may fluctuate significantly, depending on many factors, including crop yields and weather
patterns. Such factors may be exacerbated by legislation and regulations associated with global climate change.
In addition, the cost of labor at many of our third-party manufacturers has been increasing significantly, and as the middle
class in developing countries continues to grow, it is unlikely such cost pressure will abate. The cost of transportation has been
increasing as well and, if the price of oil continues to increase, and there continues to be significant unrest in the Middle East, it
is unlikely that such cost pressure will abate.
We may not be able to pass all or a portion of higher raw materials prices or labor or transportation costs on to our
customers, which could adversely affect our gross margin and results of our operations.
Our growth strategy relies significantly on international expansion, which requires significant capital investment, adds
complexity to our operations and may strain our resources and adversely impact current store performance.
Our growth strategy largely depends on the opening of new international stores. This international expansion has placed,
and will continue to place, increased demands on our operational, managerial and administrative resources at all levels of the
Company. These increased demands may cause us to operate our business less efficiently, which in turn could cause
deterioration in the performance of our existing stores or could adversely affect our inventory levels. Furthermore, our ability to
conduct business in international markets may be adversely affected by legal, regulatory, political and economic risks. Our
international expansion strategy and success could also be adversely impacted by the global economy. Failure to properly
implement our growth strategy could have a material adverse effect on our financial condition and results of operations or
could otherwise adversely affect our ability to achieve our objectives.
In addition, as we continue to expand our overseas operations, we are subject to certain U.S. laws, including the Foreign
Corrupt Practices Act, in addition to the laws of the foreign countries in which we operate. We must use all commercially
reasonable efforts to ensure our associates comply with these laws. If any of our overseas operations, or our associates or
agents, violate such laws, we could become subject to sanctions or other penalties that could negatively affect our reputation,
business and operating results.
Our international expansion plan is dependent on a number of factors, any of which could delay or prevent successful
penetration into new markets or could adversely affect the profitability of our international operations.
As we expand internationally, we may incur significant costs related to starting up and maintaining foreign operations.
Costs may include, but are not limited to, obtaining prime locations for stores, setting up foreign offices and distribution
centers, hiring experienced management and maintaining good relations with individual associates and groups of associates. We
may be unable to open and operate new stores successfully, or we may face operational issues that delay our intended pace of
international store openings, and, in any such case, our growth may be limited, unless we can:
• identify suitable markets and sites for store locations;
• address the different operational characteristics present in each country to which we expand, including employment and
labor, transportation, logistics, real estate, lease provisions and local reporting or legal requirements;
• negotiate acceptable lease terms, in some cases in locations in which the relative rights and obligations of landlords and
tenants differ significantly from the customs and practices in the U.S.;
• hire, train and retain competent store personnel;
• gain and retain acceptance from foreign customers;
• manage inventory effectively to meet the needs of new and existing stores on a timely basis;
• expand infrastructure to accommodate growth;
Table of Contents
10
• foster current relationships and develop new relationships with vendors that are capable of supplying a greater volume
of merchandise;
• generate sufficient operating cash flows or secure adequate capital on commercially reasonable terms to fund our
expansion plan;
• manage foreign currency exchange risks effectively; and
• achieve acceptable operating margins from new stores.
Failure to implement our international expansion plan consistent with our internal expectations, whether as a result of one
or more of the factors listed above or other factors, could adversely affect our ability to achieve the objectives that we have
established.
Our direct-to-consumer operations are subject to numerous risks that could adversely impact sales.
We sell merchandise for each brand over the Internet, both domestically and internationally. Our direct-to-consumer
operations are subject to numerous risks, including:
• reliance on third-party computer hardware/software providers;
• rapid technological change and the implementation of new systems and platforms;
• diversions of sales from our stores;
• liability for online content;
• violations of state, federal or international laws, including those relating to online privacy;
• credit card fraud;
• the failure of the computer systems that operate our websites and their related support systems, including computer
viruses;
• telecommunication failures and electronic break-ins and similar disruptions; and
• disruption of Internet service, whether for technical reasons or as a result of state-sponsored censorship.
Our failure to successfully respond to these risks might adversely affect sales in our direct-to-consumer business, as well
as damage our reputation and brands.
Equity-based compensation awarded under the employment agreement with our Chief Executive Officer could adversely
impact our cash flows, financial position or results of operations and could have a dilutive effect on our outstanding
Common Stock.
Under the Employment Agreement entered into as of December 19, 2008, which expires February 1, 2014, between A&F
and Michael S. Jeffries, our Chairman and Chief Executive Officer (the “Employment Agreement”), Mr. Jeffries received
grants (the “Retention Grants”) of stock appreciation rights. In addition to the Retention Grants, Mr. Jeffries is eligible to
receive two equity-based grants during each fiscal year of the term of the Employment Agreement starting with Fiscal 2009
(each, a “Semi-Annual Grant”). The value of a Semi-Annual Grant is uncertain and dependent on the future market price of our
Common Stock and our financial performance. To date, Mr. Jeffries has received Semi-Annual Grants, in the aggregate, of
3,752,259 stock appreciation rights.
In connection with the Semi-Annual Grants contemplated by the Employment Agreement, the related compensation
expense could significantly impact our results of operations. In addition, the significant number of shares of Common Stock
which could be issued to settle the Retention Grants and the Semi-Annual Grants is uncertain and dependent on the future
market price of our Common Stock and our financial performance and would, if issued, have a dilutive effect with respect to
our outstanding shares of Common Stock, which may adversely affect the market price of our Common Stock.
Our development of a new brand concept such as Gilly Hicks could have a material adverse effect on our financial
condition or results of operations.
Historically, we have developed and launched new brands internally that have contributed to our sales growth. Our most
recent brand, Gilly Hicks, offers bras, underwear, personal care products, sleepwear and at-home products for girls. The
development and growth of new brand concepts, such as Gilly Hicks, requires management’s focus and attention, as well as
significant capital investments. Furthermore, a new brand concept is susceptible to risks, including lack of customer
acceptance, competition from existing or new retailers, product differentiation, production and distribution inefficiencies and
unanticipated operating issues. There is no assurance that a new brand concept, including Gilly Hicks, will achieve successful
results. The failure of Gilly Hicks to be launched and expanded successfully, and to achieve profitability, could have a material
adverse effect on our financial condition and results of operations. The costs of exiting a brand are significant. In addition, the
ongoing development of new concepts may place a strain on available resources.
Fluctuations in foreign currency exchange rates could adversely impact our financial condition and results of
operations.
Table of Contents
11
The functional currency of our international subsidiaries is generally the local currency in which each operates, which
includes British Pounds, Canadian Dollars, Chinese Yuan, Danish Kroner, Euros, Hong Kong Dollars, Japanese Yen, Polish
Zloty, Singapore Dollars, South Korean Won, Swedish Kronor and Swiss Francs. Our consolidated financial statements are
presented in U.S. Dollars. Therefore, we must translate revenues, expenses, assets and liabilities from functional currencies into
U.S. Dollars at exchange rates in effect during, or at the end of the reporting period. In addition, our international subsidiaries
transact in currencies other than their functional currency, including intercompany transactions, which could result in foreign
currency transaction gains or losses. The fluctuation in the value of the U.S. Dollar against other currencies could impact our
financial results.
Furthermore, we purchase substantially our entire inventory in U.S. Dollars. As a result, our gross margin rate from
international operations is subject to volatility from movements in exchange rates over time, which could have an adverse
effect on our financial condition and results of operations and profitability from the growth desired from international
operations.
Our business could suffer if our information technology systems are disrupted or cease to operate effectively.
We rely heavily on our information technology systems: to operate our websites; record and process transactions; respond
to customer inquiries; manage inventory; purchase, sell and ship merchandise on a timely basis; and maintain cost-efficient
operations. Given the significant number of transactions that are completed annually, it is vital to maintain constant operation of
our computer hardware and software systems and maintain cyber security. Despite efforts to prevent such an occurrence, our
information technology systems are vulnerable from time-to-time to damage or interruption from computer viruses, power
outages, third-party intrusions and other technical malfunctions. If our systems are damaged, or fail to function properly, we
may have to make monetary investments to repair or replace the systems, and we could endure delays in our operations.
In addition, we regularly evaluate our information technology systems and requirements and are currently implementing
modifications and/or upgrades to the information technology systems that support our business. Modifications include
replacing existing systems with successor systems, making changes to existing systems, or acquiring new systems with new
functionality. We are aware of the inherent risks associated with replacing and modifying these systems, including inaccurate
system information, system disruptions and user acceptance and understanding. We believe we are taking appropriate action to
mitigate the risks through disciplined adherence to methodology, program management, testing and user involvement, as well
as securing appropriate commercial contracts with third-party vendors supplying the replacement technologies.
Any material disruption or slowdown of our systems, including a disruption or slowdown caused by our failure to
successfully upgrade our systems, could cause information, including data related to customer orders, to be lost or delayed.
Such a loss or delay could - especially if the disruption or slowdown occurred during our peak selling seasons - result in delays
of merchandise delivery to our stores and customers, which could reduce demand for our merchandise and cause our sales and
profitability to decline.
Comparable sales, including direct-to-consumer, may continue to fluctuate on a regular basis and impact the volatility of
the price of our Common Stock.
Our comparable sales, defined as year-over-year sales for a store that has been open as the same brand at least one year
and the square footage of which has not been expanded or reduced by more than 20% and our direct to consumer sales, have
fluctuated significantly in the past on an annual and quarterly basis and are expected to continue to fluctuate in the future. We
believe that a variety of factors affect comparable sales results including, but not limited to, fashion trends, actions by
competitors or mall anchor tenants, changes in economic conditions and consumer spending patterns, weather conditions,
opening and/or closing of our stores in proximity to each other, the timing of the release of new merchandise and promotional
events, changes in our merchandise mix and the calendar shifts of tax free and holiday periods.
Comparable sales fluctuations may impact our ability to leverage fixed direct expenses, including store rent and store
asset depreciation, which may adversely affect our financial condition or results of operations.
In addition, comparable sales fluctuations may have been an important factor in the volatility of the price of our Common
Stock in the past, and it is likely that future comparable sales fluctuations will contribute to stock price volatility in the future.
Our market share may be negatively impacted by increasing competition and pricing pressures from companies with
brands or merchandise competitive with ours.
The sale of apparel and personal care products through stores and direct-to-consumer channels is a highly competitive
business with numerous participants, including individual and chain fashion specialty stores, as well as regional, national and
international department stores. The substantial sales growth in the direct-to-consumer channel within the last few years has
encouraged the entry of many new competitors and an increase in competition from established companies. We face a variety
of competitive challenges, including:
Table of Contents
12
• anticipating and quickly responding to changing consumer demands or preferences better than our competitors;
• maintaining favorable brand recognition and effectively marketing our products to consumers in several diverse
demographic markets;
• sourcing merchandise efficiently;
• developing innovative, high-quality merchandise in styles that appeal to our consumers and in ways that favorably
distinguish us from our competitors; and
• countering the aggressive promotional activities of many of our competitors without diminishing the aspirational nature
of our brands and brand equity.
In light of the competitive challenges we face, we may not be able to compete successfully in the future. Further,
increases in competition could reduce our sales and harm our operating results and business.
Our ability to attract customers to our stores depends, in part, on the success of the shopping malls or area attractions in
which most of our stores are located.
In order to generate customer traffic, we locate many of our stores in prominent locations within successful shopping
malls or street locations. Our stores benefit from the ability of the malls’ “anchor” tenants, generally large department stores
and other area attractions, to generate consumer traffic in the vicinity of our stores and the continuing popularity of malls in the
U.S. and, increasingly, in many international locations as shopping destinations. We cannot control the development of new
shopping malls in the U.S. or around the world; the availability or cost of appropriate locations; competition with other retailers
for prominent locations; or the success of individual shopping malls. All of these factors may impact our ability to meet our
productivity targets for our domestic stores and our growth objectives for our international stores and could have a material
adverse effect on our financial condition or results of operations. In addition, some malls that were in prominent locations
when we opened stores may cease to be viewed as prominent. If this trend continues or if the popularity of mall shopping
continues to decline generally among our customers, our sales may decline, which would impact our gross profits and net
income.
Part of our future growth is dependent on our ability to operate stores in desirable locations with capital investment and
lease costs providing the opportunity to earn a reasonable return. We cannot be sure as to when or whether such desirable
locations will become available at reasonable costs.
Our net sales fluctuate on a seasonal basis, causing our results of operations to be susceptible to changes in Back-to-
School and Holiday shopping patterns.
Historically, our operations have been seasonal, with a significant amount of net sales and net income occurring in the
fourth fiscal quarter, due to the increased sales during the Holiday selling season and, to a lesser extent, the third fiscal quarter,
reflecting increased sales during the Back-to-School selling season in the U.S. Our net sales and net income during the first and
second fiscal quarters are typically lower due, in part, to the traditional slowdown in retail sales immediately following the
Holiday selling season. As a result of this seasonality, net sales and net income during any fiscal quarter cannot be used as an
accurate indicator of our annual results. Any factors negatively affecting us during the third and fourth fiscal quarters of any
year, including inclement weather or unfavorable economic conditions, could have a material adverse effect on our financial
condition and results of operations for the entire year.
Our failure to protect our reputation could have a material adverse effect on our brands.
Our ability to maintain our reputation is critical to our brands. Our reputation could be jeopardized if we fail to maintain
high standards for merchandise quality and integrity. In addition, our reputation could be jeopardized if our third-party vendors
fail to comply with our vendor code of conduct. Any negative publicity about these types of concerns may reduce demand for
our merchandise. Failure to comply with ethical, social, product, labor, health and safety or environmental standards, or related
political considerations, could also jeopardize our reputation and potentially lead to various adverse consumer actions,
including boycotts. Public perception about our products or our stores, whether justified or not, could impair our reputation,
involve us in litigation, damage our brands and have a material adverse effect on our business. Failure to comply with local
laws and regulations, to maintain an effective system of internal controls or to provide accurate and timely financial statement
information could also hurt our reputation. Damage to our reputation or loss of consumer confidence for any of these or other
reasons could have a material adverse effect on our results of operations and financial condition, as well as require additional
resources to rebuild our reputation.
We rely on the experience and skills of our senior executive officers, the loss of whom could have a material adverse
effect on our business.
Our senior executive officers closely supervise all aspects of our business — in particular, the design of our merchandise
and the operation of our stores. Our senior executive officers have substantial experience and expertise in the retail business
and have made significant contributions to the growth and success of our brands. If we were to lose the benefit of their
involvement — in particular the services of any one or more of Michael S. Jeffries, Chairman and Chief Executive Officer;
Table of Contents
13
Diane Chang, Executive Vice President — Sourcing; Leslee K. Herro, Executive Vice President — Planning and Allocation;
Jonathan E. Ramsden, Executive Vice President and Chief Financial Officer; Ronald A. Robins, Jr., Senior Vice President,
General Counsel and Secretary; and Amy Zehrer, Executive Vice President — Stores — without adequate succession plans, our
business could be adversely affected. Competition for such senior executive officers is intense, and we cannot be sure we will
be able to attract, retain and develop a sufficient number of qualified senior executive officers in future periods.
Interruption in the flow of merchandise from our key vendors and international manufacturers could disrupt our
supply chain, which could result in lost sales and could increase our costs.
We source the majority of our merchandise outside of the U.S. through arrangements with approximately 155 vendors
which includes foreign manufacturers located throughout the world, primarily in Asia and Central and South America. In
addition, many of our domestic manufacturers maintain production facilities overseas. Political, social or economic instability
in Asia, Central or South America, or in other regions in which our manufacturers are located, could cause disruptions in trade,
including exports to the U.S. Other events that could also cause disruptions to exports to the U.S. include:
• the imposition of additional trade law provisions or regulations;
• reliance on a limited number of shipping and air carriers who may experience capacity issues that adversely affect our
ability to ship inventory in a timely manner or for an acceptable cost;
• the imposition of additional duties, tariffs and other charges on imports and exports;
• quotas imposed by bilateral textile agreements;
• economic uncertainties and adverse economic conditions (including inflation and recession);
• fluctuations in the value of the U.S. Dollar against foreign currencies;
• restrictions on the transfer of funds;
• the potential of manufacturer financial instability, inability to access needed liquidity or bankruptcy;
• significant labor disputes, such as dock strikes;
• significant delays in the delivery of cargo due to port security considerations;
• financial or political instability in any of the countries in which our merchandise is manufactured;
• natural disasters; and
• regulations to address climate change.
In addition, we cannot predict whether the countries in which our merchandise is manufactured, or may be manufactured
in the future, will be subject to new or additional trade restrictions imposed by the U.S. or foreign governments, including the
likelihood, type or effect of any such restrictions. Trade restrictions, including new or increased tariffs or quotas, embargoes,
safeguards and customs restrictions against apparel items, as well as U.S. or foreign labor strikes and work stoppages or
boycotts, could increase the cost or reduce the supply of apparel available to us and adversely affect our business, financial
condition or results of operations.
In a number of our European stores, associates are represented by workers’ councils and unions, whose demands could
adversely affect our profitability or operating standards for our brands.
As of March 22, 2013, we employed approximately 98,000 associates, of whom approximately 88,000 were part-time
associates and 12,000 were located in our European stores. In a number of our European stores, particularly in France and
Germany, associates are represented by workers' councils and unions. These workers’ councils and unions, as well as
government officials who support their positions, have, in a number of instances, made demands that could adversely affect our
profitability or have a negative effect on the operating standards we believe are critical to our brands. We are committed to
working with all of our associates, whether they are represented by a workers’ council or union or not, and we believe we
maintain good relations with our associates; however, there can be no assurance that we will not experience work stoppages or
other labor-related issues that could have an adverse effect on our profitability or on our operating standards.
We depend upon independent third parties for the manufacture and delivery of all our merchandise.
We do not own or operate any manufacturing facilities. As a result, the continued success of our operations is tied to our
timely receipt of quality merchandise from third-party manufacturers. Our products are manufactured to our specifications
primarily by foreign manufacturers. We cannot control all of the various factors, which include inclement weather, natural
disasters, political and financial instability, strikes, health concerns regarding infectious diseases in countries in which our
merchandise is produced, and acts of terrorism, that might affect a manufacturer’s ability to ship orders of our merchandise in a
timely manner or to meet our quality standards. A manufacturer’s inability to ship orders in a timely manner or meet our quality
standards could cause delays in responding to consumer demands and negatively affect consumer confidence in the quality and
value of our brands or negatively impact our competitive position, any of which could have a material adverse effect on our
financial condition and results of operations. We are also susceptible to increases in sourcing costs from our manufacturers
which we may not be able to pass on to our customers and could adversely affect our financial condition or results of
operations.
Table of Contents
14
Additionally, while we utilize third-party compliance auditors to visit and monitor the operations of our manufacturers,
we do not have control of the independent manufacturers or their labor practices. As a result, the risk remains that one or more
of our manufacturers will not adhere to our global compliance standards and violate labor laws or other laws, including
consumer and product safety laws. Non-governmental organizations might attempt to create an unfavorable impression of our
sourcing practices or the practices of some of our vendors or manufacturers that could harm our image. If either of these events
occur, we could lose customer goodwill and favorable brand recognition.
The efficient operation of our stores and direct-to-consumer business depends on the timely receipt of merchandise from
our distribution centers. We deliver our merchandise to our stores and direct-to-consumer customers using independent third
parties. We utilize primarily one contract carrier to ship merchandise and related materials to our North American stores and
direct-to-consumer customers, and a separate contract carrier for our European and Asian stores and direct-to-consumer
customers. The independent third parties employ personnel that may be represented by labor unions. Disruptions in the delivery
of merchandise or work stoppages by associates or contractors of any of these third parties could delay the timely receipt of
merchandise. There can be no assurance that such stoppages or disruptions will not occur in the future. Any failure by a third
party to respond adequately to our distribution needs would disrupt our operations and could have a material adverse effect on
our financial condition or results of operations. Furthermore, we are susceptible to increases in fuel costs which may increase
the cost of distribution. If we are not able to pass this cost on to our customers, our financial condition and results of operations
could be adversely affected.
Our reliance on two distribution centers domestically and two third-party distribution centers internationally makes us
susceptible to disruptions or adverse conditions affecting our distribution centers.
Our two distribution centers located in New Albany, Ohio, manage the receipt, storage, sorting, packing and distribution
of merchandise to our North American stores and to our North American and Asian direct-to-consumer customers. We also use
a third-party distribution center in the Netherlands to manage the receipt, storage, sorting, packing and distribution of
merchandise delivered to our stores and direct-to-consumer customers in Europe and a third-party distribution center in Hong
Kong to manage receipt, storage, sorting, packing and distribution of merchandise delivered to our stores in Asia. As a result,
our operations are susceptible to local and regional factors, such as system failures, accidents, economic and weather
conditions, natural disasters, demographic and population changes, as well as other unforeseen events and circumstances. If our
distribution operations were disrupted, our ability to replace inventory in our stores and process direct-to-consumer orders
could be interrupted and sales could be negatively impacted.
We may be exposed to risks and costs associated with credit card fraud and identity theft that would cause us to incur
unexpected expenses and loss of revenues.
A significant portion of our customer orders are placed through our websites. In addition, a significant portion of sales
made through our retail stores requires the collection of certain customer data, such as credit card information. In order for our
sales channels to function and develop successfully, we and other parties involved in processing customer transactions must be
able to transmit confidential information, including credit card information, securely over public networks. Third parties may
have the technology or knowledge to breach the security of customer transaction data. Although we have security measures
related to our systems and the privacy of our customers, we cannot guarantee these measures will effectively prevent others
from obtaining unauthorized access to our information and our customers’ information. Any person who circumvents our
security measures could destroy or steal valuable information or disrupt our operations. While one has not occurred, a security
breach could cause customers to lose confidence in the security of our websites or stores and choose not to purchase from us.
Any security breach could also expose us to risks of data loss, litigation and liability, and could seriously disrupt operations and
harm our reputation, any of which could adversely affect our financial condition and results of operations.
In addition, state, federal and foreign governments are increasingly enacting laws and regulations to protect consumers
against identity theft. These laws and regulations will likely increase the costs of doing business and if we fail to implement
appropriate security measures, or to detect and provide prompt notice of unauthorized access as required by some of these laws
and regulations, we could be subject to potential claims for damages and other remedies, which could adversely affect our
business and results of operations.
Our facilities, systems and stores, as well as the facilities and systems of our vendors and manufacturers, are vulnerable
to natural disasters, pandemic disease and other unexpected events, any of which could result in an interruption to our
business and adversely affect our operating results.
Our retail stores, corporate offices, distribution centers, infrastructure projects and direct-to-consumer operations, as well
as the operations of our vendors and manufacturers, are vulnerable to damage from natural disasters, pandemic disease and
other unexpected events. If any of these events result in damage to our facilities, systems or stores, or the facilities or systems
of our vendors or manufacturers, we may experience interruptions in our business until the damage is repaired, resulting in the
potential loss of customers and revenues. In addition, we may incur costs in repairing any damage which exceeds our
applicable insurance coverage.
Table of Contents
15
Our business is also vulnerable to any interruption related to an outbreak of a pandemic disease in countries where we
have retail locations or source our merchandise.
Our litigation exposure could have a material adverse effect on our financial condition and results of operations.
We are involved, from time-to-time, in litigation incidental to our business, such as litigation regarding overtime
compensation and other employment or wage and hour related matters. Our current exposure could change in the event of the
discovery of damaging facts with respect to legal matters pending against us or determinations by judges, juries or other finders
of fact that are not in accordance with management’s evaluation of the claims. Should management’s evaluation prove
incorrect, our exposure could greatly exceed expectations and have a material adverse effect on our financial condition, results
of operations or cash flows.
Our inability or failure to adequately protect our trademarks could have a negative impact on our brand image and limit
our ability to penetrate new markets.
We believe our core trademarks, Abercrombie & Fitch
®
, abercrombie
®
, Hollister
®
, Gilly Hicks
®
and the “Moose” and
“Seagull” logos, are an essential element of our strategy. We have obtained or applied for federal registration of these
trademarks with the U.S. Patent and Trademark Office and the registries of countries where stores are located or likely to be
located in the future. In addition, we own registrations and have pending applications for other trademarks in the U.S. and have
applied for or obtained registrations from the registries in many foreign countries in which our stores or our manufacturers are
located. There can be no assurance that we will obtain registrations that have been applied for or that the registrations we obtain
will prevent the imitation of our products or infringement of our intellectual property rights by others. If a third party copies our
products in a manner that projects lesser quality or carries a negative connotation, our brand image could be materially
adversely affected.
Because we have not yet registered all of our trademarks in all categories, or in all foreign countries in which we source
or offer our merchandise now, or may in the future, our international expansion and our merchandising of products using these
marks could be limited. For example, we cannot ensure that others will not try to block the manufacture, export or sale of our
products as a violation of their trademarks or other proprietary rights. The pending applications for international registration of
various trademarks could be challenged or rejected in those countries because third parties of whom we are not currently aware
have already registered similar marks in those countries. Accordingly, it may be possible, in those foreign countries where the
status of various applications is pending or unclear, for a third-party owner of the national trademark registration for a similar
mark to prohibit the manufacture, sale or exportation of branded goods in or from that country. If we are unable to reach an
arrangement with any such party, our manufacturers may be unable to manufacture our products, and we may be unable to sell
certain products in those countries. Our inability to register our trademarks or purchase or license the right to use our
trademarks or logos in these jurisdictions could limit our ability to obtain supplies from, or manufacture in, less costly markets
or penetrate new markets should our business plan include selling our merchandise in those non-U.S. jurisdictions.
We have an anti-counterfeiting program, under the auspices of the Abercrombie & Fitch Brand Protection Team, whose
goal is to eliminate the supply of illegal pieces of our products. The Brand Protection Team interacts with investigators,
customs officials and law enforcement entities throughout the world to combat the illegal use of our trademarks. Although
brand security initiatives are in place, we cannot guarantee that our efforts against the counterfeiting of our brands will be
successful.
Fluctuations in our tax obligations and effective tax rate may result in volatility in our operating results.
We are subject to income taxes in many U.S. and certain foreign jurisdictions. In addition, our products are subject to
import and excise duties and/or sales, consumption or value-added taxes (or “VAT”) in many jurisdictions. We record tax
expense based on our estimates of future payments, which include reserves for estimates of probable settlements of foreign and
domestic tax audits. At any one time, many tax years are subject to audit by various taxing jurisdictions. The results of these
audits and negotiations with taxing authorities may affect the ultimate settlement of these issues. As a result, we expect that
throughout the year there could be ongoing variability in our quarterly tax rates as taxable events occur and exposures are
evaluated. In addition, our effective tax rate in any given financial statement period may be materially impacted by changes in
the mix and level of earnings or by changes to existing accounting rules or regulations. Fluctuations in duties could also have a
material impact on our financial condition, results of operations or cash flows. In some international markets, we are required
to hold and submit VAT to the appropriate local tax authorities. Failure to correctly calculate or submit the appropriate amounts
could subject us to substantial fines and penalties that could have an adverse effect on our financial condition, results of
operations or cash flows. In addition, tax legislation may be enacted in the future, domestically or abroad, that impacts our
current or future tax structure and effective tax rate.
The effects of war or acts of terrorism could have a material adverse effect on our operating results and financial
condition.
Table of Contents
16
The continued threat of terrorism and the associated heightened security measures and military actions in response to acts
of terrorism have disrupted commerce. Any further acts of terrorism or a future war may disrupt commerce and undermine
consumer confidence, which could negatively impact our sales revenue by causing consumer spending and/or mall traffic to
decline. Furthermore, an act of terrorism or war, or the threat thereof, or any other unforeseen interruption of commerce, could
negatively impact our business by interfering with our ability to obtain merchandise from foreign manufacturers. Our inability
to obtain merchandise from our foreign manufacturers or substitute other manufacturers, at similar costs and in a timely
manner, could adversely affect our operating results and financial condition.
Our inability to obtain commercial insurance at acceptable prices or our failure to adequately reserve for self-insured
exposures might increase our expenses and adversely impact our financial results.
We believe that commercial insurance coverage is prudent for risk management in certain areas of our business.
Insurance costs may increase substantially in the future and may be affected by natural catastrophes, fear of terrorism, financial
irregularities and other fraud at publicly-held companies, intervention by the government or a decrease in the number of
insurance carriers. In addition, the carriers with which we hold our policies may go out of business, or may be otherwise unable
to fulfill their contractual obligations. Furthermore, for certain types or levels of risk, such as risks associated with earthquakes,
hurricanes or terrorist attacks, we may determine that we cannot obtain commercial insurance at acceptable prices, if at all.
Therefore, we may choose to forego or limit our purchase of relevant commercial insurance, choosing instead to self-insure one
or more types or levels of risk. We are primarily self-insured for workers’ compensation and associate health benefits. If we
suffer a substantial loss that is not covered by commercial insurance or our self-insurance reserves, the loss and attendant
expenses could harm our business and operating results. In addition, exposures could exist for which no insurance may be
available and for which we have not reserved.
Operating results and cash flows at the store level may cause us to incur impairment charges.
Long-lived assets, primarily property and equipment, are reviewed at the store level at least annually for impairment, or
whenever changes in circumstances indicate that a full recovery of net asset values through future cash flows is in question.
The review could result in significant charges related to underperforming stores which could impact our results of operations.
Furthermore, our impairment review requires us to make estimates and projections regarding, but not limited to, future
cash flows. We make certain estimates and projections in connection with impairment analyses for our store locations and other
property and equipment. If these estimates or projections change or prove incorrect, we may be, and have been, required to
record impairment charges on certain store locations and other property and equipment. We have recognized significant
impairment charges in the past and may do so in the future.
We are subject to customs, advertising, consumer protection, privacy, zoning and occupancy and labor and employment
laws that could require us to modify our current business practices, incur increased costs or harm our reputation if we do
not comply.
We are subject to numerous laws and regulations, including customs, truth-in-advertising, consumer protection, general
privacy, health information privacy, identity theft, online privacy, unsolicited commercial communication and zoning and
occupancy laws and ordinances that regulate retailers generally and/or govern the importation, promotion and sale of
merchandise and the operation of retail stores, direct-to-consumer operations and distribution centers. As our business becomes
more international in scope and we enter more countries internationally, the number of laws and regulations that we are subject
to, as well as their scope and reach, increase significantly and heighten our risks. If these laws and regulations were to change,
or were violated by our management, associates, suppliers, vendors or other parties with whom we do business, the costs of
certain merchandise could increase, or we could experience delays in shipments of our merchandise, be subject to fines or
penalties, or suffer reputational harm, which could reduce demand for our merchandise and adversely affect our business and
results of operations. Failure to protect personally identifiable information of our customers or associates could subject us to
considerable reputational harm, as well as significant fines, penalties and sanctions both domestically and abroad. In addition,
changes in federal, state and international minimum wage laws and other laws relating to associate benefits could cause us to
incur additional wage and benefits costs, which could hurt our profitability. We are also subject to U.S. securities laws and
regulations, as well as stock exchange rules which could subject us to enforcement actions, de-listing and adverse legal
sanctions for non-compliance.
Changes in the regulatory or compliance landscape could adversely affect our business and results of operations.
Laws and regulations at the state, federal and international levels frequently change, and the ultimate cost of compliance
cannot be precisely estimated. In addition, we cannot predict the impact that may result from changes in the regulatory
landscape. Any changes in regulations, the imposition of additional regulations, or the enactment of any new or more stringent
legislation including those related to health care, taxes, transportation and logistics, privacy, environmental issues, trade,
product safety or employment and labor, could adversely affect our business and results of operations.
Table of Contents
17
Our unsecured Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) and our Term
Loan Agreement include financial and other covenants that impose restrictions on our financial and business operations.
Our Amended and Restated Credit Agreement expires on July 27, 2016 and our Term Loan Agreement has a maturity
date of February 23, 2017. Market conditions could potentially impact the size and terms of a replacement facility or facilities.
Both our Amended and Restated Credit Agreement and our Term Loan Agreement contain financial covenants that
require us to maintain a minimum coverage ratio and a maximum leverage ratio. If we fail to comply with the covenants and
are unable to obtain a waiver or amendment, an event of default would result, and the lenders could declare outstanding
borrowings immediately due and payable. If that should occur, we cannot guarantee that we would have sufficient liquidity at
that time to repay or refinance borrowings under the Amended and Restated Credit Agreement and/or the Term Loan
Agreement.
The inability to obtain credit on commercially reasonable terms, or a default under the current Amended and Restated
Credit Agreement and/or the Amended Term Loan Agreement, could adversely impact our liquidity and results of operations.
Compliance with changing regulations and standards for accounting, corporate governance and public disclosure could
adversely affect our business, results of operations and reported financial results.
Changing regulatory requirements for corporate governance and public disclosure, including SEC regulations and the
Financial Accounting Standards Board’s accounting standards requirements are creating additional complexities for public
companies. For example, the Dodd-Frank Act contains provisions governing “conflict minerals,” certain minerals originating
from the Democratic Republic of Congo and adjoining countries. As a result, the SEC adopted annual disclosure and reporting
requirements for those companies who use conflict minerals mined in the named countries. There will be costs associated with
complying with the disclosure requirements, including diligence to determine the sources of minerals used in our products and
possible changes to sources of our inputs.
Stockholder activism, the current political environment, financial reform legislation and the current high level of
government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations. In addition,
the expected future requirement to transition to, or converge with, international financial reporting standards is creating
uncertainty and additional complexities. These changing regulatory requirements may lead to additional compliance costs, as
well as the diversion of our management’s time and attention from strategic business activities and could have a significant
effect on our reported results for the affected periods.
Table of Contents
19
ITEM 2. PROPERTIES.
The Company’s headquarters and support functions occupy 491 acres, consisting of the home office, distribution and
shipping facilities centralized on a campus-like setting in New Albany, Ohio and an additional small distribution and shipping
facility located in the Columbus, Ohio area, all of which are owned by the Company. Additionally, the Company leases small
facilities to house its design and sourcing support centers in Hong Kong, New York City and Los Angeles, California, as well as
offices in the United Kingdom, Japan, Switzerland, Italy, Hong Kong and China.
All of the retail stores operated by the Company, as of March 22, 2013, are located in leased facilities, primarily in
shopping centers. The leases expire at various dates, between 2013 and 2031.
The Company’s home office, distribution and shipping facilities, design support centers and stores are currently suitable
and adequate.
As of March 22, 2013, the Company’s 1,053 stores were located as follows:
U.S. & U.S. Territories:
Alabama 5 Kentucky 9 North Dakota 1
Alaska 1 Louisiana 8 Ohio 31
Arizona 16 Maine 4 Oklahoma 7
Arkansas 6 Maryland 19 Oregon 10
California 130 Massachusetts 33 Pennsylvania 44
Colorado 8 Michigan 25 Rhode Island 3
Connecticut 20 Minnesota 15 South Carolina 10
Delaware 5 Mississippi 2 South Dakota 1
District Of Columbia 1 Missouri 11 Tennessee 20
Florida 74 Montana 2 Texas 84
Georgia 21 Nebraska 3 Utah 7
Hawaii 5 Nevada 11 Vermont 2
Idaho 3 New Hampshire 10 Virginia 23
Illinois 41 New Jersey 39 Washington 19
Indiana 18 New Mexico 3 West Virginia 4
Iowa 7 New York 50 Wisconsin 11
Kansas 5 North Carolina 24 Puerto Rico 1
International Stores:
Austria 6 Germany 23 Poland 1
Belgium 3 Hong Kong 3 Republic of Korea 2
Canada 19 Ireland 2 Singapore 1
China 4 Italy 10 Spain 13
Denmark 1 Japan 2 Sweden 3
France 9 Netherlands 2 United Kingdom 37
Table of Contents
20
ITEM 3. LEGAL PROCEEDINGS.
A&F is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business. Legal costs
incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, and the Company
establishes reserves for the outcome of litigation where it deems appropriate to do so under applicable accounting rules. The
Company’s assessment of the current exposure could change in the event of the discovery of additional facts with respect to
legal matters pending against the Company or determinations by judges, juries, administrative agencies or other finders of fact
that are not in accordance with the Company’s evaluation of claims. Actual liabilities may exceed the amounts reserved, and
there can be no assurance that final resolution of these matters will not have a material adverse effect on the Company’s
financial condition, results of operations or cash flows. The Company has established accruals for certain matters where losses
are deemed probable and reasonably estimable. There are other claims and legal proceedings pending against the Company for
which accruals have not been established.
Table of Contents
22
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT.
Set forth below is certain information regarding the executive officers of A&F as of March 22, 2013:
Michael S. Jeffries, 68, has been Chairman of A&F since May 1998. Mr. Jeffries has been Chief Executive Officer of
A&F since February 1992. From February 1992 to May 1998, Mr. Jeffries held the title of President of A&F. Under the terms
of the Employment Agreement, entered into as of December 19, 2008, between A&F and Mr. Jeffries, A&F is obligated to
cause Mr. Jeffries to be nominated as a director of A&F during his employment term.
Diane Chang, 57, has been Executive Vice President — Sourcing of A&F since May 2004. Prior thereto, Ms. Chang held
the position of Senior Vice President — Sourcing of A&F from February 2000 to May 2004 and the position of Vice President
— Sourcing of A&F from May 1998 to February 2000.
Leslee K. Herro, 52, has been Executive Vice President — Planning and Allocation of A&F since May 2004. Prior
thereto, Ms. Herro held the position of Senior Vice President — Planning and Allocation of A&F from February 2000 to May
2004 and the position of Vice President — Planning & Allocation of A&F from February 1994 to February 2000.
Jonathan E. Ramsden, 48, has been Executive Vice President and Chief Financial Officer of A&F since December 2008.
From December 1998 to December 2008, Mr. Ramsden served as Chief Financial Officer and a member of the Executive
Committee of TBWA Worldwide, a large advertising agency network and a division of Omnicom Group Inc. Prior to becoming
Chief Financial Officer of TWBA Worldwide, he served as Controller and Principal Accounting Officer of Omnicom Group
Inc. from June 1996 to December 1998.
Ronald A. Robins, Jr., 49, has been Senior Vice President, General Counsel and Secretary of A&F since August 2010.
Mr. Robins joined A&F in November 2009 as Deputy General Counsel after spending 16 years at Vorys, Sater, Seymour and
Pease LLP, 13 years as a partner in the firm’s corporate and finance practice group. Mr. Robins clerked for The Honorable
Milton Pollack of the United States District Court for the Southern District of New York from 1989 to 1990. Before joining
Vorys, Mr. Robins practiced for several years as an associate at Davis Polk & Wardwell in New York City.
Amy Zehrer, 43, has been Executive Vice President — Stores of A&F since February 2013. Prior thereto, Ms. Zehrer
held the position of Senior Vice President — Stores of A&F from November 2007 to February 2013 and the position of Vice
President — Stores of A&F from August 2006 to November 2007. Ms. Zehrer has been with A&F since 1992 playing an
integral part in evolving the brands and the success of the Company's international expansion.
The executive officers serve at the pleasure of the Board of Directors of A&F and, in the case of Mr. Jeffries, pursuant to
an employment agreement.
Table of Contents
23
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
A&F’s Class A Common Stock (the “Common Stock”) is traded on the New York Stock Exchange under the symbol
“ANF.” The table below sets forth the high and low sales prices of A&F’s Common Stock on the New York Stock Exchange for
Fiscal 2012 and Fiscal 2011:
Sales Price
High Low
Fiscal 2012
4th Quarter
$ 51.07 $ 30.58
3rd Quarter
$ 39.36 $ 29.06
2nd Quarter
$ 53.29 $ 29.78
1st Quarter
$ 53.53 $ 40.40
Fiscal 2011
4th Quarter
$ 76.33 $ 43.56
3rd Quarter
$ 77.49 $ 55.70
2nd Quarter
$ 78.25 $ 62.46
1st Quarter
$ 72.61 $ 48.40
A quarterly dividend, of $0.175 per share, was paid in each of March, June, September and December in Fiscal 2012 and
Fiscal 2011. A&F increased the quarterly dividend to $0.20 per share beginning with the first quarter of Fiscal 2013. A&F
expects to continue to pay a quarterly dividend, subject to the Board of Directors’ review of the Company’s cash position and
results of operations.
As of March 22, 2013, there were approximately 4,230 stockholders of record. However, when including investors
holding shares in broker accounts under street name, active associates of the Company who participate in A&F’s stock purchase
plan, and associates of the Company who own shares through A&F-sponsored retirement plans, A&F estimates that there are
approximately 38,700 stockholders.
The following table provides information regarding the purchase of shares of the Common Stock of A&F made by or on
behalf of A&F or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as
amended, during each fiscal month of the quarterly period ended February 2, 2013:
Period (Fiscal Month)
Total Number
of Shares
Purchased
(1)
Average
Price Paid
per Share
(2)
Total Number of
Shares
Purchased as
Part of Publicly
Announced Plans
or
Programs
(3)
Maximum Number of
Shares that May Yet
be Purchased under
the Plans or
Programs
(4)
October 28, 2012 through November 24, 2012
3,355 $ 36.89 — 19,893,742
November 25, 2012 through December 29, 2012
1,181,438 $ 45.89 1,175,023 18,718,719
December 30, 2012 through February 2, 2013
48,710 $ 45.01 47,671 18,671,048
Total
1,233,503 $ 45.83 1,222,694 18,671,048
(1)
An aggregate of 10,809 of the shares of A&F’s Common Stock purchased during the fourteen-week period ended February 2, 2013, represented shares
which were withheld for tax payments due upon the vesting of employee restricted stock unit and restricted share awards and upon the exercise of
employee stock appreciation rights.
(2)
The average price paid per share includes broker commissions, as applicable.
(3)
The reported shares were repurchased pursuant to A&F’s publicly announced stock repurchase authorizations. On May 15, 2012, A&F’s Board of
Directors authorized the repurchase of an aggregate of 10.0 million shares of A&F’s Common Stock. On August 14, 2012, A&F's Board of Directors
authorized the repurchase of an additional 10.0 million shares of A&F’s Common Stock.
(4)
The number shown represents, as of the end of each period, the maximum number of shares of Common Stock that may yet be purchased under A&F’s
publicly announced stock repurchase authorization described in footnote 3 above. The shares may be purchased, from time-to-time, depending on
market conditions.
During Fiscal 2012, A&F repurchased approximately 7.5 million shares of A&F’s Common Stock in the open market
with a cost of approximately $321.7 million. During Fiscal 2011, A&F repurchased approximately 3.5 million shares of A&F’s
Table of Contents
25
The following graph shows the changes, over the five-year period ended February 2, 2013 (the last day of A&F’s Fiscal
2012) in the value of $100 invested in (i) shares of A&F’s Common Stock; (ii) the Standard & Poor’s 500 Stock Index (the
“S&P 500 Index”) and (iii) the Standard & Poor’s Apparel Retail Composite Index (the “S&P Apparel Retail Index”), including
reinvestment of dividends. The plotted points represent the closing price on the last trading day of the fiscal year indicated.
PERFORMANCE GRAPH
(1)
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Abercrombie & Fitch Co., the S&P 500 Index
and the S&P Apparel Retail Index
* $100 invested on 2/2/08 in stock or 1/31/08 in index, including reinvestment of dividends.
Indexes calculated on month-end basis.
Copyright
©
2013 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
(1)
This graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to SEC Regulation
14A or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the
extent that A&F specifically requests that the graph be treated as soliciting material or specifically incorporates it by reference
into a filing under the Securities Act of 1933, as amended, or the Exchange Act.
Table of Contents
26
ITEM 6. SELECTED FINANCIAL DATA.
ABERCROMBIE & FITCH CO.
FINANCIAL SUMMARY
(Thousands, except per share and per square foot amounts, ratios and store and associate data)
(Information below excludes amounts related to discontinued operations, except where otherwise noted)
2012
(1)
Restated 2011
(2)
Restated 2010
(2)
2009 2008
Net Sales $ 4,510,805
$ 4,158,058 $ 3,468,777 $ 2,928,626 $ 3,484,058
Gross Profit $ 2,816,709
$ 2,550,224 $ 2,217,429 $ 1,883,598 $ 2,331,095
Operating Income $ 374,233
$ 221,384 $ 237,180 $ 117,912 $ 498,262
Net Income from Continuing Operations $ 237,011
$ 143,138 $ 155,709 $ 78,953 $ 308,169
Income (Loss) from Discontinued Operations, Net of
Tax
(3)
—
$ 796 $ — $ (78,699) $ (35,914)
Net Income
(3)
$ 237,011 $ 143,934 $ 155,709 $ 254 $ 272,255
Dividends Declared Per Share
$ 0.70 $ 0.70 $ 0.70 $ 0.70 $ 0.70
Net Income Per Share from Continuing Operations
Basic $ 2.89
$ 1.65 $ 1.77 $ 0.90 $ 3.55
Diluted $ 2.85
$ 1.60 $ 1.73 $ 0.89 $ 3.45
Net Income (Loss) Per Share from Discontinued
Operations
(3)
Basic $ —
$ 0.01 $ — $ (0.90) $ (0.41)
Diluted $ —
$ 0.01 $ — $ (0.89) $ (0.40)
Net Income Per Share
(3)
Basic $ 2.89
$ 1.66 $ 1.77 $ 0.00 $ 3.14
Diluted $ 2.85
$ 1.61 $ 1.73 $ 0.00 $ 3.05
Basic Weighted-Average Shares Outstanding 81,940
86,848 88,061 87,874 86,816
Diluted Weighted-Average Shares Outstanding 83,175
89,537 89,851 88,609 89,291
Other Financial Information
Total Assets (including discontinued operations) $ 2,987,401
$ 3,117,032 $ 2,994,022 $ 2,821,866 $ 2,848,181
Working Capital
(4)
$ 617,023 $ 858,248 $ 927,024 $ 776,311 $ 622,213
Current Ratio
(5)
1.89 2.23 2.68 2.73 2.38
Net Cash Provided by Operating Activities
(3)
$ 684,171 $ 365,219 $ 391,789 $ 395,487 $ 491,031
Capital Expenditures
$ 339,862 $ 318,598 $ 160,935 $ 175,472 $ 367,602
Free Cash Flow
(6)
$ 344,309
$ 46,621 $ 230,854 $ 220,015 $ 123,429
Borrowings —
— $ 43,805 $ 50,927 $ 100,000
Leasehold Financing Obligations $ 63,942
$ 57,851 $ 24,761 $ 20,286 $ 5,881
Stockholders’ Equity (including discontinued
operations)
$ 1,818,268 $ 1,931,335 $ 1,943,391 $ 1,827,917 $ 1,845,578
Return on Average Stockholders’ Equity
(7)
13 % 7% 8% 0 % 16 %
Comparable Sales
(8)
(1)% 5% 7% (23)% (13)%
Net Store Sales Per Average Gross Square Foot
$ 485 $ 463 $ 390 $ 339 $ 432
Stores at End of Year and Average Associates
Total Number of Stores Open 1,051
1,045 1,069 1,096 1,097
Gross Square Feet 7,958
7,778 7,756 7,848 7,760
Average Number of Associates
(9)
95,800 91,000 83,000 83,000 96,200
(1)
Fiscal 2012 was a fifty-three week year.
(2)
Reported results for Fiscal 2011 and Fiscal 2010 have been restated to reflect the change in method of accounting for inventory
effective in the fourth quarter of Fiscal 2012. Refer to Note 4, “CHANGE IN ACCOUNTING PRINCIPLE,” of the Notes to
Consolidated Financial Statements included in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this
Annual Report on Form 10-K for further discussion. Reported results for periods prior to Fiscal 2010 have not been restated to reflect
the change in accounting principle as the information is not available.
(3)
Includes results of operations from RUEHL branded stores and related direct-to-consumer operations. Results from discontinued
operations were immaterial in Fiscal 2010.
(4)
Working Capital is computed by subtracting current liabilities (including discontinued operations) from current assets (including
discontinued operations).
Table of Contents
27
(5)
Current Ratio is computed by dividing current assets (including discontinued operations) by current liabilities (including discontinued
operations).
(6)
Free Cash Flow is computed by subtracting capital expenditures from net cash provided by operating activities.
(7)
Return on Average Stockholders’ Equity is computed by dividing net income (including discontinued operations) by the average
stockholders’ equity balance (including discontinued operations).
(8)
A store is included in comparable sales when it has been open as the same brand at least one year and its square footage has not been
expanded or reduced by more than 20% within the past year. Beginning with Fiscal 2012, comparable sales include comparable direct-
to-consumer sales. Prior year figures have not been restated and only include comparable store sales.
(9)
Includes employees from RUEHL operations.
Table of Contents
28
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
OVERVIEW
The Company’s fiscal year ends on the Saturday closest to January 31, typically resulting in a fifty-two week year, but
occasionally giving rise to an additional week, resulting in a fifty-three week year as was the case for Fiscal 2012. A store is
included in comparable sales when it has been open as the same brand at least one year and its square footage has not been
expanded or reduced by more than 20% within the past year. Additionally, beginning with Fiscal 2012, comparable direct-to-
consumer sales were included in comparable sales.
For purposes of this “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS,” the fifty-three week period ended February 2, 2013 is compared to the fifty-two week
period ended January 28, 2012 and the fifty-two week period ended January 28, 2012 is compared to the fifty-two week period
ended January 29, 2011.
The Company has changed its method of accounting for inventory from the lower of cost or market utilizing the retail
method to the weighted average cost method ("cost method") effective in the fourth quarter of Fiscal 2012. Results discussed in
this "ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," reflect the cost method of accounting for inventory. Refer to Note 4, "CHANGE IN ACCOUNTING
PRINCIPLE," of the Notes to Consolidated Financial Statements included in "ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA." All references to historical amounts reflect the effects of the change to the cost method.
The Company had net sales of $4.511 billion for Fiscal 2012, an increase of 8% from $4.158 billion for Fiscal 2011.
Operating income for Fiscal 2012 was $374.2 million, which increased 69% from the Fiscal 2011 operating income of $221.4
million.
Net income from continuing operations was $237.0 million and net income from continuing operations per diluted share
was $2.85 in Fiscal 2012, compared to net income from continuing operations of $143.1 million and net income from
continuing operations per diluted share of $1.60 in Fiscal 2011.
Excluding charges for impairments, the Company reported adjusted, non-GAAP net income per diluted share of $2.90 for
the Fiscal 2012. Excluding charges for impairments and write-downs of store-related long-lived assets, charges related to store
closures and lease exits, and other charges associated with legal settlements and a change in intent regarding the Company’s
auction rate securities ("ARS"), the Company reported non-GAAP net income per diluted share of $2.49 for Fiscal 2011.
The Company believes that the non-GAAP financial measures are useful to investors as they provide the ability to
measure the Company’s operating performance and compare it against that of prior periods without reference to the
Consolidated Statements of Operations and Comprehensive Income impact of non-cash, store-related asset impairment charges,
charges related to store closures and lease exits, and other charges associated with legal settlements and a change in intent
regarding the Company's ARS. These non-GAAP financial measures should not be used as alternatives to net income per
diluted share or as indicators of the ongoing operating performance of the Company and are also not intended to supersede or
replace the Company’s GAAP financial measures. The table below reconciles the GAAP financial measures to the non-GAAP
financial measures discussed above.
Fiscal 2012 Fiscal 2011
February 2, 2013 January 28, 2012
Net income per diluted share on a GAAP basis
$ 2.85 $ 1.61
Add back: Asset impairment charges
(1)
0.06 0.49
Add back: Asset write-downs
(2)
— 0.10
Add back: Store closure and lease exit charges
(3)
— 0.13
Add back: Legal charges
(4)
— 0.07
Add back: ARS charges
(5)
— 0.09
Net income per diluted share on a non-GAAP basis
$ 2.90 $ 2.49
(1)
The store-related asset impairment charges relate to stores whose asset carrying value exceeded their fair value. For Fiscal 2012, the
charge was primarily associated with one Abercrombie & Fitch, three abercrombie kids, 12 Hollister and one Gilly Hicks store. For
Fiscal 2011, the charge was associated with 14 Abercrombie & Fitch, 21 abercrombie kids, 42 Hollister and two Gilly Hicks stores.
(2)
For Fiscal 2011, the charge associated with the asset write-downs was related to the reconfiguration of three flagship stores and a small
write-off related to a cancelled flagship project.
Table of Contents
29
(3)
For Fiscal 2011, the charges for store closures and lease exits were associated with lease buyouts and other lease obligations related to
stores closing prior to natural lease expirations, other lease terminations, and other incidental costs associated with store closures.
(4)
For Fiscal 2011, the charge was related to legal settlements during the fourth quarter.
(5)
For Fiscal 2011, the charge associated with the ARS was related to a change in intent with regard to the Company’s auction rate
securities portfolio, which resulted in recognition of an other-than-temporary impairment.
Net cash provided by operating activities, the Company’s primary source of liquidity, was $684.2 million for Fiscal 2012.
This source of cash was primarily driven by a change in inventories partially offset by a change in accounts payable. The
Company used $339.9 million of cash for capital expenditures partially offset by cash proceeds of $102.0 million from the sale
of marketable securities. The Company also repurchased $321.7 million of Common Stock and paid dividends totaling $57.6
million. As of February 2, 2013, the Company had $643.5 million in cash and equivalents, no outstanding debt aside from that
related to landlord financing obligations, and immaterial stand-by letters of credit.
The following data represents the amounts shown in the Company’s Consolidated Statements of Operations and
Comprehensive Income for the last three fiscal years, expressed as a percentage of net sales:
2012 2011 2010
NET SALES
100.0% 100.0% 100.0%
Cost of Goods Sold
37.6 38.7 36.1
GROSS PROFIT
62.4 61.3 63.9
Stores and Distribution Expense
44.1 45.4 45.8
Marketing, General and Administrative Expense
10.5 10.5 11.6
Other Operating Expense (Income), Net
(0.4) 0.1 (0.3)
OPERATING INCOME
8.3 5.3 6.8
Interest Expense, Net
0.2 0.1 0.1
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES
8.1 5.2 6.7
Tax Expense from Continuing Operations
2.9 1.8 2.3
NET INCOME FROM CONTINUING OPERATIONS
5.3 3.4 4.5
INCOME FROM DISCONTINUED OPERATIONS, Net of Taxes
— 0.0 —
NET INCOME
5.3% 3.5% 4.5%
Table of Contents
30
FINANCIAL SUMMARY
The following summarized financial and statistical data compares Fiscal 2012, Fiscal 2011 and Fiscal 2010:
2012 2011 2010
Net sales by segment (in thousands)
$ 4,510,805 $ 4,158,058 $ 3,468,777
U.S. Stores
$ 2,615,138 $ 2,710,842 $ 2,546,798
International Stores
$ 1,195,016 $ 894,616 $ 517,005
Direct-to-consumer
$ 700,651 $ 552,600 $ 404,974
Net sales as a % of total sales
U.S. Stores 58 %
65 % 73 %
International Stores 26 %
22 % 15 %
Direct-to-consumer 16 %
13 % 12 %
Net sales by brand (in thousands)
$ 4,510,805 $ 4,158,058 $ 3,468,777
Abercrombie & Fitch
$ 1,704,190 $ 1,665,135 $ 1,493,101
abercrombie
$ 382,509 $ 397,904 $ 382,579
Hollister
$ 2,314,462 $ 2,022,002 $ 1,552,814
Gilly Hicks**
$ 109,644 $ 73,017 $ 40,283
Increase (decrease) in comparable sales*
(1
)%
5% 7%
Abercrombie & Fitch
(3
)%
3 % 9%
abercrombie 0 %
4 % 5%
Hollister
(1
)%
8 % 6%
U.S. 1 %
International
(8
)%
Stores
(5
)%
5 % 7%
Direct-to-Consumer 24 %
36 % 40 %
* Beginning with 2012, comparable sales were reported including comparable direct-to-consumer sales. Prior year figures were not
restated. A store is included in comparable sales when it has been open as the same brand 12 months or more and its square footage
has not been expanded or reduced by more than 20% within the past year. The Fiscal 2012 retail year included a fifty-third week and,
therefore, Fiscal 2012 comparable sales are compared to the fifty-three week period ended February 4, 2012.
** Net sales for the year-to-date periods ended February 2, 2013, January 28, 2012 and January 29, 2011 reflect the activity of 27, 21 and
19 stores, respectively.
Table of Contents
31
CURRENT TRENDS AND OUTLOOK
Our results for Fiscal 2012 included an 8% increase in net sales and a 78% increase in diluted earnings per share
compared to last year.
We have made progress in our operating income the past couple of years, including improvement in gross margin in
Fiscal 2012 driven by a reduction in average unit cost. However, our operating margins remain well below historical levels,
despite our highly profitable international business, which presents opportunities in two specific areas.
First, we will be revisiting our operating model and identifying processes and investments we make in our business
that may have had a return in the past but no longer do today. We have established a cross-functional team to simplify
processes, eliminate low value added components of our model, increase efficiencies and lower expenses.
Second, we will be seeking to identify ways to increase our average unit retail, particularly in the U.S. stores and U.S.
direct-to-consumer operations. Growth in our average unit retail will help our gross margins and contribute to expense
leverage.
Beyond the two initiatives above, our focus remains on key strategic initiatives with regard to merchandising, inventory
productivity, expense and average unit cost, insight and intelligence, customer engagement and targeted closure of under-
performing U.S. stores. We are confident that our focus on these initiatives, allied with our iconic brands and continued
judicious use of shareholder capital, will drive significant long-term value.
With regard to real estate plans for Fiscal 2013, we expect to open Abercrombie & Fitch flagship locations in Seoul and
Shanghai and approximately 20 international Hollister stores. The Hollister openings will include our first stores in Australia,
our first store in the Middle East in Dubai through a joint venture and entry into the Japanese market for Hollister. Additionally,
we are contemplating opening international mall-based Abercrombie & Fitch stores within the next 12 months. We expect
capital expenditures to be approximately $200 million for the year, with estimated store pre-opening costs of around $30
million.
We are confident that we are on track in regard to our long-term strategy of leveraging the international appeal of our
brands to build a highly profitable, sustainable, global business.
We continue to target annual EPS growth of approximately 15%. As in the past, our earnings are sensitive to changes in
comparable sales trends.
Our capital allocation philosophy continues to be highly disciplined in allocating capital to where it will derive the
greatest return on a risk-adjusted basis. After allocating capital to new stores and other internal projects that provide superior
returns, we continue to expect to return excess cash to shareholders.
Table of Contents
32
The following measurements are among the key business indicators reviewed by various members of management to gauge the
Company’s results:
• Comparable sales, defined as year-over-year sales for a store that has been open as the same brand at least one year and
its square footage has not been expanded or reduced by more than 20% within the past year combined with direct to
consumer sales;
• Direct-to-consumer sales growth;
• U.S. and International store performance;
• Store productivity;
• Selling margin, defined as sales price less original cost, by brand and by product category;
• Stores and distribution expense as a percentage of net sales;
• Marketing, general and administrative expense as a percentage of net sales;
• Operating income and operating income as a percentage of net sales;
• Net income;
• Inventory per gross square foot;
• Cash flow and liquidity determined by the Company’s current ratio and free cash flow; and
• Store metrics such as sales per gross square foot, sales per selling square foot, average unit retail, average number of
transactions per store, average transaction values, store contribution (defined as store sales less direct costs of operating
the store), and average units per transaction.
While not all of these metrics are disclosed publicly by the Company due to the proprietary nature of the information, the
Company publicly discloses and discusses many of these metrics as part of its “Financial Summary” and in several sections
within this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FISCAL 2012 COMPARED TO FISCAL 2011
Net Sales
Net sales for Fiscal 2012 were $4.511 billion, an increase of 8% from Fiscal 2011 net sales of $4.158 billion. The net
sales increase was attributable to new stores, primarily international and a 27% increase in the direct-to-consumer business,
including shipping and handling revenue offset by a decrease of 5% from comparable store sales. The impact of foreign
currency on sales (based on converting prior year sales at current year exchange rates) adversely affected Fiscal 2012 by $26.3
million and benefited Fiscal 2011 by $21.6 million.
The Fiscal 2012 retail year includes a fifty-third week and, therefore, Fiscal 2012 comparable sales are compared to the
fifty-three week period ended February 4, 2012. The fifty-third week added approximately $62.8 million of sales to the
comparable base, being sales for the week ended February 4, 2012.
Total U.S. sales, including direct-to-consumer, for Fiscal 2012 were $3.087 billion, a decrease of 1% from Fiscal 2011
sales of $3.108 billion. Total international sales, including direct-to-consumer, for Fiscal 2012 were $1.424 billion, an increase
of 36% from Fiscal 2011 sales of $1.050 billion.
Direct-to-consumer sales in Fiscal 2012, including shipping and handling revenue, were $700.7 million, an increase of
27% from Fiscal 2011 direct-to-consumer sales of $552.6 million. The direct-to-consumer business, including shipping and
handling revenue, accounted for 16% of total net sales in Fiscal 2012 compared to 13% in Fiscal 2011.
Total comparable sales for the year, including direct-to-consumer sales, decreased 1% with comparable store sales
decreasing 5% and comparable direct-to-consumer sales increasing by 24%. Comparable sales for Fiscal 2012 increased 1% for
the U.S., with comparable store sales decreasing by 1% and comparable direct-to-consumer sales up 15%. Comparable sales for
the full year decreased 8% for international, with comparable store sales decreasing by 19% and comparable direct-to-
consumer sales up 46%.
For Fiscal 2012, comparable sales by brand, including direct-to-consumer sales, decreased 3% for Abercrombie & Fitch,
were flat for abercrombie kids, and decreased 1% for Hollister Co. Across the brands, male performed better than female.
From a merchandise classification standpoint, outerwear and jeans were stronger performing categories for the male
business while polos and sport shirts were weaker performing categories. In the female business, woven shirts, sweaters, and
knit tops were stronger performing categories, while fleece, sweatpants and graphics were weaker performing categories.
Gross Profit
Table of Contents
33
Gross profit during Fiscal 2012 was $2.817 billion compared to gross profit of $2.550 billion during Fiscal 2011. The
gross profit rate (gross profit divided by net sales) for Fiscal 2012 was 62.4%, up 110 basis points from the Fiscal 2011 rate of
61.3%.
The increase in the gross profit rate for Fiscal 2012 was primarily driven by a decrease in average unit cost.
Stores and Distribution Expense
Stores and distribution expense for Fiscal 2012 was $1.988 billion compared to $1.888 billion in Fiscal 2011. The stores
and distribution expense rate (stores and distribution expense divided by net sales) for Fiscal 2012 was 44.1% compared to
45.4% in Fiscal 2011.
Stores and distribution expense for Fiscal 2012 included store-related asset impairment charges of $7.4 million primarily
associated with 17 stores. For Fiscal 2011, stores and distribution expense included store-related asset impairment charges of
$68.0 million associated with 79 stores, asset write-down charges of $14.6 million related to the reconfiguration of three
flagship stores and a small write-off related to a cancelled flagship project, and store exit charges of $19.0 million, associated
with lease buyouts and other lease obligations related to stores closing prior to natural lease expirations, other lease
terminations, and other incidental costs associated with store closures. Excluding the effect of these charges, the stores and
distribution expense rate was 43.9% for Fiscal 2012 compared to 43.0% last year. The increase in stores and distribution
expense rate for Fiscal 2012 was primarily the result of deleveraging on negative comparable store sales and higher direct-to-
consumer expense.
Shipping and handling costs, including costs incurred to store, move and prepare merchandise for shipment and costs
incurred to physically move the product to the customer, associated with direct-to-consumer operations were $78.6 million and
$53.6 million for Fiscal 2012 and Fiscal 2011, respectively. The increase in shipping and handling costs in Fiscal 2012 was
primarily driven by increased sales volume and a higher international mix component. These amounts are recorded in Stores
and Distribution Expense in our Consolidated Statements of Operations and Comprehensive Income.
Handling costs, including costs incurred to store, move and prepare merchandise for shipment to the stores were $59.4
million and $62.8 million for Fiscal 2012 and Fiscal 2011, respectively. These amounts are recorded in Stores and Distribution
Expense in our Consolidated Statements of Operations and Comprehensive Income.
Marketing, General and Administrative Expense
Marketing, general and administrative expense during Fiscal 2012 was $473.9 million compared to $437.1 million in
Fiscal 2011. The marketing, general and administrative expense rate (marketing, general and administrative expense divided by
net sales) was 10.5% in Fiscal 2012 and Fiscal 2011. Marketing, general and administrative expense for Fiscal 2011 included
$10.0 million in connection with legal settlements.
The increase in marketing, general, and administrative expenses was due to increases in incentive and other
compensation related expenses, IT, marketing and other expenses.
Other Operating Expense (Income), Net
Other operating income, net was $19.3 million for Fiscal 2012 compared to other operating expense, net of $3.5 million
for Fiscal 2011. Other operating income, net for Fiscal 2012, included income of $4.8 million related to business interruption
insurance recoveries associated with Superstorm Sandy. Other operating expense included a charge of $13.4 million related to
the Company’s change of intent regarding the sale of its ARS portfolio, which resulted in recognition of an other-than-
temporary impairment in Fiscal 2011.
Operating Income
Operating income for Fiscal 2012 was $374.2 million compared to operating income of $221.4 million for Fiscal 2011.
Operating income growth by new international stores, existing U.S. stores and direct-to-consumer operations more than off-set
declines in existing international stores driven by negative comparable store sales and higher non-four wall expenses. Non-four
wall expenses include: marketing, general and administrative expense; store management and support functions such as
regional and district management and other functions not dedicated to an individual store; and distribution center costs.
Interest Expense (Income), Net and Tax Expense
Fiscal 2012 interest expense was $10.5 million, offset by interest income of $3.2 million, compared to interest expense of
$7.9 million, offset by interest income of $4.3 million for Fiscal 2011.
The effective tax rate for Fiscal 2012 was 35.4% compared to 34.3% for Fiscal 2011.
As of February 2, 2013, there were approximately $22.2 million of net deferred tax assets in Japan. The realization of the
net deferred tax assets is dependent upon the future generation of sufficient taxable profits in Japan. While the Company
Table of Contents
34
believes it is more likely than not that the net deferred tax assets will be realized, it is not certain. Should circumstances change,
the net deferred tax assets not currently subject to a valuation allowance may become subject to one in the future. Additional
valuation allowances would result in additional tax expense.
Net Income and Net Income per Diluted Share
Net income for Fiscal 2012 was $237.0 million compared to net income of $143.9 million for Fiscal 2011. Net income
per diluted share for Fiscal 2012 was $2.85 compared to net income per diluted share of $1.61 for Fiscal 2011. Net income per
diluted share for Fiscal 2012 included store-related asset impairment charges of approximately $0.06 per diluted share. Net
income per diluted share for Fiscal 2011 included store-related asset impairment charges of approximately $0.49 per diluted
share, asset write-down charges of approximately $0.10 per diluted share, store closure and exit charges of approximately $0.13
per diluted share, legal charges of approximately $0.07 per diluted share, and other-than-temporary impairment charges of
approximately $0.09 per diluted share related to a change in intent regarding the Company’s ARS portfolio. Refer to the GAAP
reconciliation table in the “OVERVIEW” section of this “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS” for a reconciliation of net income per diluted share on a
GAAP basis to net income per diluted share on a non-GAAP basis, excluding charges for impairment and write-downs of store
related long-lived assets, charges related to store closures and lease exits, and other charges associated with legal settlements
and with a change in intent regarding the Company’s ARS.
FISCAL 2011 COMPARED TO FISCAL 2010
Net Sales
Net sales for Fiscal 2011 were $4.158 billion, an increase of 20% from Fiscal 2010 net sales of $3.469 billion. The net
sales increase was attributable to new stores, primarily international, a 5% increase in comparable store sales, and a 36%
increase in the direct-to-consumer business, including shipping and handling revenue. The impact of foreign currency on sales
(based on converting prior year sales at current year exchange rates) for Fiscal 2011 and Fiscal 2010 was a benefit of $21.6
million and $4.9 million, respectively.
Total Company U.S. store sales for Fiscal 2011 were $2.711 billion, an increase of 6% from Fiscal 2010 sales of $2.547
billion. Total Company international store sales for Fiscal 2011 were $894.6 million, an increase of 73% from Fiscal 2010 sales
of $517.0 million.
Direct-to-consumer sales in Fiscal 2011, including shipping and handling revenue, were $552.6 million, an increase of
36% from Fiscal 2010 direct-to-consumer sales of $405.0 million. The direct-to-consumer business, including shipping and
handling revenue, accounted for 13% of total net sales in Fiscal 2011 compared to 12% in Fiscal 2010.
Comparable store sales by brand for Fiscal 2011 were as follows: Abercrombie & Fitch increased 3%, with men’s and
women’s increasing by a low single digit percent. abercrombie kids increased 4%, with guys increasing by a high single digit
and girls increasing by a low single digit. Hollister increased 8%, with dudes and bettys increasing by a high single digit.
On a comparable store sales basis, the Southern and the Western regions of the U.S. were the strongest performing
regions, while Canada and Japan were the weakest.
From a merchandise classification standpoint, fleece, active wear, and knit tops were stronger performing categories for
the male business while graphics and woven shirts were weaker performing categories. In the female business, woven shirts,
sweaters, and knit tops were stronger performing categories, while graphics and dresses were weaker performing categories.
Gross Profit
Gross profit during Fiscal 2011 was $2.550 billion compared to gross profit of $2.217 billion during Fiscal 2010. The
gross profit rate for Fiscal 2011 was 61.3%, down 260 basis points from the Fiscal 2010 rate of 63.9%.
The decrease in the gross profit rate for Fiscal 2011 was primarily driven by an increase in average unit cost.
Stores and Distribution Expense
Stores and distribution expense for Fiscal 2011 was $1.888 billion compared to $1.590 billion in Fiscal 2010. The stores
and distribution expense rate for Fiscal 2011 was 45.4% compared to 45.8% in Fiscal 2010.
Stores and distribution expense for Fiscal 2011 included store-related asset impairment charges of $68.0 million
associated with 79 stores, asset write-down charges of $14.6 million related to the reconfiguration of three flagship stores and a
small write-off related to a cancelled flagship project, and store exit charges of $19.0 million, associated with lease buyouts and
other lease obligations related to stores closing prior to natural lease expirations, other lease terminations, and other incidental
costs associated with store closures. For Fiscal 2010, stores and distribution expense included store-related asset impairment
Table of Contents
35
charges associated with 26 stores of $50.6 million and store exit charges of $4.4 million associated with the closure of 64
domestic stores during the year.
The decrease in stores and distribution expense rate for Fiscal 2011 was primarily driven by lower store occupancy costs
as a percentage of net sales.
Shipping and handling costs, including costs incurred to store, move and prepare the products for shipment and costs
incurred to physically move the product to the customer, associated with direct-to-consumer operations were $53.6 million and
$38.9 million for Fiscal 2011 and Fiscal 2010, respectively. Handling costs, including costs incurred to store, move and prepare
the products for shipment to the stores were $62.8 million and $42.8 million for Fiscal 2011 and Fiscal 2010, respectively.
These amounts are recorded in Stores and Distribution Expense in our Consolidated Statements of Operations and
Comprehensive Income.
Marketing, General and Administrative Expense
Marketing, general and administrative expense during Fiscal 2011 was $437.1 million compared to $400.8 million in
Fiscal 2010. For Fiscal 2011, the marketing, general and administrative expense rate was 10.5%, compared to 11.6% for Fiscal
2010. Marketing, general and administrative expense for Fiscal 2011 included $10.0 million in connection with legal
settlements.
In addition to legal settlement charges, the increase in marketing, general and administrative expense for Fiscal 2011 was
primarily due to increases in compensation, including equity compensation, outside services, marketing, travel and IT expenses.
Other Operating Expense (Income), Net
Other operating expense, net was $3.5 million for Fiscal 2011 compared to other operating income, net of $10.1 million
for Fiscal 2010. Other operating expense, net for Fiscal 2011, included $13.4 million of expense related to a change in the
Company’s intent regarding the sale of its ARS portfolio, which resulted in recognition of an other-than-temporary impairment
in Fiscal 2011.
Interest Expense (Income), Net and Tax Expense
Fiscal 2011 interest expense was $7.9 million, offset by interest income of $4.3 million, compared to interest expense of
$7.8 million, offset by interest income of $4.4 million for Fiscal 2010.
The effective tax rate for Fiscal 2011 was 34.3% compared to 33.4% for Fiscal 2010.
As of January 28, 2012, there were approximately $25.6 million of net deferred tax assets in Japan with a valuation
allowance of $2.4 million. The valuation allowance in Japan was established as the result of changes to the business
configuration of operations in Japan, as well as tax law changes. The realization of the net deferred tax assets not subject to a
valuation allowance is dependent upon the future generation of sufficient profits in Japan. While the Company believes it is
more likely than not that the net deferred tax assets will be realized, it is not certain. Should circumstances change, some or all
of the net deferred tax assets not currently subject to a valuation allowance may become so in the future. Any increase in the
valuation allowance would result in additional tax expense.
Income from Discontinued Operations, Net of Tax
The Company completed the closure of its RUEHL branded stores and related direct-to-consumer operations in the fourth
quarter of Fiscal 2009. Accordingly, the after-tax operating results appear in Income (Loss) from Discontinued Operations, Net
of Tax on the Consolidated Statements of Operations and Comprehensive Income. Results from discontinued operations, net of
tax, were immaterial for Fiscal 2010.
Refer to Note 19, “DISCONTINUED OPERATIONS,” of the Notes to Consolidated Financial Statements included in
“ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this Annual Report on Form 10-K for further
discussion.
Net Income and Net Income per Diluted Share
Net income for Fiscal 2011 was $143.9 million compared to $155.7 million for Fiscal 2010. Net income per diluted share
for Fiscal 2011 was $1.61 compared to $1.73 for Fiscal 2010. Net income per diluted share for Fiscal 2011 included store-
related asset impairment charges of approximately $0.49 per diluted share, asset write-down charges of approximately $0.10
per diluted share, store closure and exit charges of approximately $0.13 per diluted share, legal charges of approximately $0.07
per diluted share, and other-than-temporary impairment charges of approximately $0.09 per diluted share related to a change in
intent regarding the Company’s ARS portfolio. Net income per diluted share for Fiscal 2010 included store-related asset
impairment charges of approximately $0.34 per diluted share and store exit charges of approximately $0.03 per diluted share.
FINANCIAL CONDITION
Table of Contents
36
Liquidity and Capital Resources
Historical Sources and Uses of Cash
Seasonality of Cash Flows
The retail business has two principal selling seasons: the Spring season which includes the first and second fiscal quarters
(“Spring”) and the Fall season which includes the third and fourth fiscal quarters (“Fall”). As is typical in the apparel industry,
the Company experiences its greatest sales activity during the Fall season due to Back-to-School and Holiday sales periods,
particularly in the U.S. The Company relies on excess operating cash flows, which are largely generated in the Fall season, to
fund operating expenses throughout the year and to reinvest in the business to support future growth. The Company also has a
credit facility and the term loan agreement available as sources of additional funding.
Credit Agreements
On July 28, 2011, the Company entered into an unsecured amended and restated credit agreement (the “Amended and
Restated Credit Agreement”) under which up to $350 million is available. The Amended and Restated Credit Agreement served
to amend and restate, in its entirety, the credit agreement dated April 15, 2008 as previously amended (the “Prior Credit
Agreement”). The primary reasons for entering into the Amended and Restated Credit Agreement were to extend the
termination date from April 12, 2013 to July 27, 2016 and to reduce fees and interest rates.
As of March 22, 2013, the Company had approximately $350 million available under the Amended and Restated Credit
Agreement. The Company had no borrowings outstanding under the Amended and Restated Credit Agreement on February 2,
2013.
On February 24, 2012, the Company entered into a $300 million Term Loan Agreement to increase its flexibility and
liquidity. On January 23, 2013, the Company amended both the Amended and Restated Credit Agreement and Term Loan
Agreement to reduce the amount available for borrowing under the Term Loan Agreement to $150 million and lower the
applicable Coverage Ratio to 1.75 to 1.00. In addition, the Amended and Restated Credit Agreement and the Term Loan
Agreement both have a Leverage Ratio. The Company was in compliance with the applicable ratio requirements and other
covenants at February 2, 2013. Subsequent to year end, the Company drew down the full $150 million available under the Term
Loan Agreement.
The Amended and Restated Credit Agreement and the Term Loan Agreement, including the material covenants which
apply to each, are described in Note 16, “BORROWINGS,” of the Notes to Consolidated Financial Statements included in
"ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA," of this Annual Report on Form 10-K.
Stand-by letters of credit outstanding as of February 2, 2013 and January 28, 2012 were immaterial.
Operating Activities
Net cash provided by operating activities was $684.2 million for Fiscal 2012 compared to $365.2 million for Fiscal 2011.
The increase in cash provided by operating activities was primarily driven by a change in inventories partially offset by a
change in accounts payable.
Investing Activities
Cash outflows for investing activities for Fiscal 2012 and Fiscal 2011 were used primarily for capital expenditures related
to new store construction and information technology investments. Cash outflows for capital expenditures were consistent from
Fiscal 2012 and Fiscal 2011. In Fiscal 2012, cash flows for investing activities included proceeds received from sales of
marketable securities.
Financing Activities
For Fiscal 2012 and Fiscal 2011, cash outflows for financing activities consisted primarily of the repurchase of A&F’s
Common Stock and the payment of dividends. For Fiscal 2011, net cash outflows related to the repurchase of A&F's Common
Stock, payment of dividends and the repayment of borrowings under the then existing credit agreement were partially offset by
the receipt of proceeds associated with the exercise of share-based compensation awards.
During Fiscal 2012, A&F repurchased approximately 7.5 million shares of A&F’s Common Stock in the open market
with a market value of approximately $321.7 million. During Fiscal 2011, A&F repurchased approximately 3.5 million shares
of A&F’s Common Stock in the open market with a market value of $196.6 million. During Fiscal 2010, A&F repurchased
approximately 1.6 million shares of A&F’s Common Stock in the open market with a market value of $76.2 million. Fiscal
2012, Fiscal 2011 and Fiscal 2010 repurchases were pursuant to the authorizations of A&F's Board of Directors.
As of February 2, 2013, A&F had approximately 18.7 million remaining shares available for repurchase as part of the
A&F Board of Directors’ previously approved authorizations.
Table of Contents
37
Future Cash Requirements and Sources of Cash
Over the next twelve months, the Company’s primary cash requirements will be to fund operating activities, including the
acquisition of inventory, and obligations related to compensation, rent, taxes and other operating activities, as well as capital
expenditures and paying of quarterly dividend payments to stockholders subject to the A&F Board of Directors’ approval. The
Company also has availability under the Amended and Restated Credit Agreement as a source of additional funding. In
addition, on February 21, 2013, the Company drew down the full $150 million available under the Term Loan Agreement to
take advantage of the current lending market and to increase its flexibility and liquidity. The Company expects to generate
positive free cash flow defined as operating cash flow less capital expenditures for Fiscal 2013.
Subject to suitable market conditions, A&F expects to continue to repurchase shares of its Common Stock. The Company
anticipates funding these cash requirements with available cash from operations and as deemed appropriate, the Amended and
Restated Credit Agreement and the Term Loan Agreement proceeds.
The Company is not dependent on dividends from its foreign subsidiaries to fund its U.S. operations or make
distributions to A&F's shareholders. Unremitted earnings from foreign subsidiaries, which are considered to be invested
indefinitely, would become subject to income tax if they were remitted as dividends or were lent to A&F or a U.S. affiliate.
Off-Balance Sheet Arrangements
As of February 2, 2013, the Company did not have any off-balance sheet arrangements.
Contractual Obligations
Payments due by period (thousands)
Total Less than 1 year 1-3 years 3-5 years More than 5 years
Operating Lease Obligations
(1)
$ 2,635,519 $ 421,577 $ 758,711 $ 586,752 $ 868,479
Purchase Obligations
161,615 161,615 — — —
Other Obligations
41,584 18,634 9,493 1,110 12,347
Dividends
— — — — —
Totals
$ 2,838,718 $ 601,826 $ 768,204 $ 587,862 $ 880,826
(1)
Includes leasehold financing obligations of $71.7 million and related interest. Refer to Note 17, "LEASEHOLD FINANCING
OBLIGATIONS," of the Notes to Consolidated Financial Statements for additional reference.
Operating lease obligations consist primarily of non-cancelable future minimum lease commitments related to store
operating leases. See Note 12, “LEASED FACILITIES,” of the Notes to Consolidated Financial Statements included in “ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this Annual Report on Form 10-K, for further
discussion. Excluded from the obligations above are amounts related to portions of lease terms that are currently cancelable at
the Company's discretion. While included in the obligations above, in many instances, the Company has options to terminate
certain leases if stated sales volume levels are not met or the Company ceases operations in a given country. Operating lease
obligations do not include common area maintenance (“CAM”), insurance, marketing or tax payments for which the Company
is also obligated. Total expense related to CAM, insurance, marketing and taxes was $168.6 million in Fiscal 2012.
The purchase obligations category represents purchase orders for merchandise to be delivered during Fiscal 2013 and
commitments for fabric expected to be used during upcoming seasons.
Other obligations consist primarily of asset retirement obligations and information technology contracts.
Due to uncertainty as to the amounts and timing of future payments, the contractual obligations table above does not
include tax (including accrued interest and penalties) of $16.0 million related to uncertain tax positions at February 2, 2013.
Deferred taxes are also not included in the preceding table. For further discussion, see Note 15, “INCOME TAXES,” of the
Notes to Consolidated Financial Statements included in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA” of this Annual Report on Form 10-K.
The table above does not include estimated future retirement payments under the Chief Executive Officer Supplemental
Executive Retirement Plan (the “SERP”) for the Company’s Chairman and Chief Executive Officer with a present value of
$18.5 million at February 2, 2013. See Note 20, “RETIREMENT BENEFITS,” of the Notes to Consolidated Financial
Statements included in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this Annual Report on
Form 10-K and the description of the SERP to be included in the text under the caption “EXECUTIVE OFFICER
COMPENSATION” in A&F’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on June 20, 2013,
incorporated by reference in “ITEM 11. EXECUTIVE COMPENSATION” of this Annual Report on Form 10-K.
Table of Contents
39
Year-To-Date Store Count and Gross Square Feet
Store count and gross square footage by brand for Fiscal 2012 and Fiscal 2011, respectively, were as follows:
Store Activity
Abercrombie &
Fitch abercrombie Hollister Gilly Hicks Total
U.S. Stores
January 28, 2012
280 154 494 18 946
New
4 3 3 3 13
Closed
(18)
(13
)
(15
)
(1
)
(47
)
February 2, 2013
266 144 482 20 912
Gross Square Feet at February 2, 2013
2,378 677 3,287 170 6,512
International Stores
January 28, 2012
14 5 77 3 99
New
5 1 30 4 40
Closed
— — — — —
February 2, 2013
19 6 107 7 139
Gross Square Feet at February 2, 2013
401 71 926 48 1,446
Total Stores
285 150 589 27 1,051
Gross Square Feet at February 2, 2013
2,779 748 4,213 218 7,958
Store Activity
Abercrombie &
Fitch abercrombie Hollister Gilly Hicks Total
U.S. Stores
January 29, 2011
316 181 502 18 1,017
New
1 1 1 — 3
Closed
(37) (28) (9) — (74)
January 28, 2012
280 154 494 18 946
Gross Square Feet at January 28, 2012
2,514 727 3,373 176 6,790
International Stores
January 29, 2011
9 4 38 1 52
New
5 1 39 2 47
Closed
— — — — —
January 28, 2012
14 5 77 3 99
Gross Square Feet at January 28, 2012
264 59 642 23 988
Total Stores
294 159 571 21 1,045
Gross Square Feet at January 28, 2012
2,778 786 4,015 199 7,778
Table of Contents
40
CAPITAL EXPENDITURES
Capital expenditures totaled $339.9 million, $318.6 million and $160.9 million for Fiscal 2012, Fiscal 2011 and Fiscal
2010, respectively. A summary of capital expenditures is as follows:
Capital Expenditures (in millions) 2012 2011 2010
New Store Construction, Store Refreshes and Remodels
$ 245.3 $ 258.0 $ 118.0
Home Office, Distribution Centers and Information Technology
94.6 60.6 42.9
Total Capital Expenditures
$ 339.9 $ 318.6 $ 160.9
During Fiscal 2013, based on new store opening plans and other capital expenditure plans, the Company expects total
capital expenditures to be approximately $200 million.
Recent Accounting Pronouncements
In May 2011, Accounting Standards Codification 820-10, “Fair Value Measurements and Disclosures,” (“ASC 820-10”)
was amended to clarify certain disclosure requirements and improve consistency with international reporting standards. This
amendment is to be applied prospectively and became effective for the Company beginning January 29, 2012. The adoption did
not have a material effect on our consolidated financial statements.
Accounting Standards Codification Topic 220, “Comprehensive Income,” was amended in June 2011 to require entities to
present the total of comprehensive income, the components of net income, and the components of other comprehensive income
either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The
amendment does not change the items that must be reported in other comprehensive income or when an item of other
comprehensive income must be reclassified to net income under current GAAP. This guidance became effective for the
Company’s fiscal year and interim periods beginning January 29, 2012. The adoption did not have a material effect on our
consolidated financial statements.
In February 2013, the FASB issued ASU 2013-02, which further amends Accounting Standards Codification Topic 220,
"Comprehensive Income." The ASU contains new requirements related to the presentation and disclosure of items that are
reclassified out of other comprehensive income. The new requirements will give financial statement users a more
comprehensive view of items that are reclassified out of other comprehensive income. ASU 2013-02 is effective for the
Company's fiscal year and interim periods beginning after December 15, 2012, and is to be applied prospectively. Since the
guidance relates only to presentation and disclosure of information, adoption is not expected to have a material effect on our
consolidated financial condition or results of operations.
Critical Accounting Estimates
The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s
consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these consolidated financial statements requires the Company to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Since actual results may differ
from those estimates, the Company revises its estimates and assumptions as new information becomes available.
The Company believes the following policies are the most critical to the portrayal of the Company’s financial condition
and results of operations.
Table of Contents
41
Policy
Effect if Actual Results Differ from Assumptions
Revenue Recognition
The Company recognizes retail sales at the time the customer
takes possession of the merchandise. The Company reserves
for sales returns through estimates based on historical
experience and various other assumptions that management
believes to be reasonable. The value of point of sale coupons
that result in a reduction of the price paid by the customer is
recorded as a reduction of sales.
The Company sells gift cards in its stores and through direct-
to-consumer operations. The Company accounts for gift cards
sold to customers by recognizing a liability at the time of
sale. The liability remains on the Company’s books until the
earlier of redemption (recognized as revenue) or when the
Company determines the likelihood of redemption is remote,
known as breakage (recognized as other operating income),
based on historical redemption patterns.
The Company has not made any material changes in the
accounting methodology used to determine the sales return
reserve and revenue recognition for gift cards over the past
three fiscal years.
The Company does not expect material changes in the near
term to the underlying assumptions used to measure the sales
return reserve or to measure the timing and amount of future
gift card redemptions as of February 2, 2013. However,
changes in these assumptions do occur, and, should those
changes be significant, the Company may be exposed to
gains or losses that could be material.
A 10% change in the sales return reserve as of February 2,
2013 would have affected pre-tax income by an immaterial
amount for Fiscal 2012.
A 10% change in the assumption of the breakage for gift
cards as of February 2, 2013 would have affected pre-tax
income by an immaterial amount for Fiscal 2012.
Inventory Valuation
Inventories are principally valued at the lower of average cost
or market utilizing the weighted average cost method (the
"cost method").
The Company reduces the inventory valuation only when the
cost of specific inventory items on hand exceeds the amount
expected to be realized from the ultimate sale or disposal of
the goods through a lower of cost or market ("LCM") reserve.
Additionally, as part of inventory valuation, an inventory
shrink estimate is made each period that reduces the value of
inventory for lost or stolen items.
Effective February 2, 2013, the Company changed its method
of accounting for inventories from the retail method to the
cost method. This accounting change resulted in a
fundamental change in the inventory valuation reserve from a
markdown reserve under the retail method to an LCM reserve
under the cost method. The Company has not made any
material changes to the way it accounts for shrink during the
past three fiscal years.
The Company does not expect material changes in the near
term to the underlying assumptions used to determine the
shrink reserve or LCM reserve as of February 2, 2013.
However, changes in these assumptions do occur, and, should
those changes be significant, they could significantly impact
the ending inventory valuation at cost, as well as the resulting
gross margin(s).
An increase or decrease in the LCM reserve of 10% would
have affected pre-tax income by approximately $1.0 million
for Fiscal 2012.
An increase or decrease in the inventory shrink accrual of
10% would have affected pre-tax income by approximately
$1.2 million for Fiscal 2012.
Table of Contents
42
Policy
Effect if Actual Results Differ from Assumptions
Property and Equipment
Long-lived assets, primarily comprised of property and
equipment, are reviewed whenever events or changes in
circumstances indicate that full recoverability of net asset
group balances through future cash flows is in question. In
addition, the Company conducts an annual impairment
analysis in the fourth quarter of each year. For the purposes
of the annual review, the Company reviews long-lived assets
associated with stores that have an operating loss in the
current year and have been open for at least two full years.
The Company’s impairment calculation requires management
to make assumptions and judgments related to factors used in
the evaluation for impairment, including, but not limited to,
management’s expectations for future operations and
projected cash flows. The key assumptions used in our
undiscounted future cash flow model include sales, gross
margin and, to a lesser extent, operating expenses.
The Company has not made any material changes in the
accounting methodology used to determine impairment loss
over the past three fiscal years.
During Fiscal 2012, 44 stores, which excludes stores with a
de minimis book value, were tested for impairment during the
fourth quarter as part of our annual review of all stores. Of
the 44 stores tested for impairment, 17 failed step one and
were impaired. Of the 27 stores not impaired, 18 stores, with
an aggregate net asset group value of $17.0 million, had
undiscounted cash flows which were 150% or more of this
net asset group value. Nine stores, with an aggregate net asset
group value of $2.6 million, had undiscounted cash flows
which were in the range of 100% to 150% of this net asset
group value.
The Company does not expect material changes in the near
term to the assumptions underlying its impairment
calculations as of February 2, 2013. However, if changes in
these assumptions do occur, and, should those changes be
significant, they could have a material impact on the
Company’s determination of whether or not there has been an
impairment.
A 10% decrease in the sales assumption used to project future
cash flows in Fiscal 2012 impairment test would have
increased the impairment charge by approximately $17.0
million for Fiscal 2012.
Table of Contents
43
Policy
Effect if Actual Results Differ from Assumptions
Income Taxes
The provision for income taxes is determined using the asset
and liability approach. Tax laws often require items to be
included in tax filings at different times than the items are
being reflected in the financial statements. A current liability
is recognized for the estimated taxes payable for the current
year. Deferred taxes represent the future tax consequences
expected to occur when the reported amounts of assets and
liabilities are recovered or paid. Deferred taxes are adjusted
for enacted changes in tax rates and tax laws. Valuation
allowances are recorded to reduce deferred tax assets when it
is more likely than not that a tax benefit will not be realized.
A provision for U.S. income tax has not been recorded on
undistributed profits of non-U.S. subsidiaries that the
Company has determined to be indefinitely reinvested outside
the U.S. Determination of the amount of unrecognized
deferred U.S. income tax liability on these unremitted
earnings is not practicable because of the complexities
associated with this hypothetical calculation.
The Company recognizes accrued interest and penalties
related to uncertain tax positions as a component of tax
expense upon settlement, law changes or expiration of statute
of limitations.
The Company does not expect material changes in the
judgments, assumptions or interpretations used to calculate
the tax provision for Fiscal 2012. However, changes in these
assumptions may occur and should those changes be
significant, they could have a material impact on the
Company’s income tax provision.
If the Company’s intention or U.S. and/or international tax
law changes in the future, there may be a significant negative
impact on the provision for income taxes to record an
incremental tax liability in the period the change occurs.
Of the total uncertain tax positions, it is reasonably possible
that $7 million to $12 million could change in the next twelve
months due to audit settlements, expiration of statutes of
limitations or other resolution of uncertainties. Due to the
uncertain and complex application of tax regulations, it is
possible that the ultimate resolution of audits may result in
amounts which could be different from this estimate. In such
case, the Company will record an adjustment in the period in
which such matters are effectively settled.
Equity Compensation Expense
The Company’s equity compensation expense related to stock
options and stock appreciation rights granted is estimated
using the Black-Scholes option-pricing model to determine
the fair value of the stock option and stock appreciation right
grants, which requires the Company to estimate the expected
term of the stock option and stock appreciation right grants
and expected future stock price volatility over the expected
term.
During Fiscal 2012, the Company granted stock appreciation
rights covering an aggregate of 363,800 shares. A 10%
increase in the assumed expected term would have yielded a
3% increase in the Black-Scholes valuation for stock
appreciation rights granted during the year, while a 10%
increase in assumed stock price volatility would have yielded
a 6% increase in the Black-Scholes valuation for stock
appreciation rights granted during the year.
Table of Contents
44
Policy
Effect if Actual Results Differ from Assumptions
Supplemental Executive Retirement Plan
Effective February 2, 2003, the Company established a Chief
Executive Officer Supplemental Executive Retirement Plan
to provide additional retirement income to its Chairman and
Chief Executive Officer. Subject to service requirements, the
CEO will receive a monthly benefit equal to 50% of his final
average compensation (as defined in the SERP) for life. The
final average compensation used for the calculation is based
on actual compensation (base salary and actual annual cash
incentive compensation) averaged over the last 36
consecutive full calendar months ending before the CEO’s
retirement.
The Company’s accrual for the SERP requires management
to make assumptions and judgments related to the CEO’s
final average compensation, life expectancy and discount
rate.
The Company does not expect material changes in the near
term to the underlying assumptions used to determine the
accrual for the SERP as of February 2, 2013. However,
changes in these assumptions do occur, and, should those
changes be significant, the Company may be exposed to
gains or losses that could be material.
A 10% increase in final average compensation as of February
2, 2013 would increase the SERP accrual by approximately
$1.8 million. A 50 basis point increase in the discount rate as
of February 2, 2013 would decrease the SERP accrual by an
immaterial amount.
Legal Contingencies
The Company is a defendant in lawsuits and other adversarial
proceedings arising in the ordinary course of business. Legal
costs incurred in connection with the resolution of claims and
lawsuits are expensed as incurred, and the Company
establishes reserves for the outcome of litigation where it
deems appropriate to do so under applicable accounting rules.
Actual liabilities may exceed or be less than the amounts
reserved, and there can be no assurance that the final
resolution of these matters will not have a material adverse
effect on the Company’s financial condition, results of
operations or cash flows.
Table of Contents
45
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Investment Securities
The Company maintains its cash equivalents in financial instruments, primarily money market funds and United States
treasury bills, with original maturities of three months or less.
The irrevocable rabbi trust (the “Rabbi Trust”) is intended to be used as a source of funds to match respective funding
obligations to participants in the Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan I, the
Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan II and the Chief Executive Officer
Supplemental Executive Retirement Plan. As of February 2, 2013, total assets held in the Rabbi Trust were $87.6 million and
related to trust-owned life insurance policies with a cash surrender value of $87.6 million and an immaterial amount of assets
held in money market funds. The trust-owned life insurance policies are recorded at cash surrender value, in Other Assets on
the Consolidated Balance Sheets and are restricted as to their use as noted above. The change in cash surrender value of the
trust-owned life insurance policies held in the Rabbi Trust resulted in realized gains of $2.4 million and $2.5 million for Fiscal
2012 and Fiscal 2011, respectively.
Interest Rate Risks
As of February 2, 2013, the Company had no borrowings outstanding under the Amended and Restated Credit Agreement
or the Term Loan Agreement.
Foreign Exchange Rate Risk
A&F’s international subsidiaries generally operate with functional currencies other than the U.S. Dollar. The Company’s
Consolidated Financial Statements are presented in U.S. Dollars. Therefore, the Company must translate revenues, expenses,
assets and liabilities from functional currencies into U.S. Dollars at exchange rates in effect during or at the end of the reporting
period. The fluctuation in the value of the U.S. Dollar against other currencies affects the reported amounts of revenues,
expenses, assets and liabilities. The potential impact of currency fluctuation increases as international expansion increases.
A&F and its subsidiaries have exposure to changes in currency exchange rates associated with foreign currency
transactions and forecasted foreign currency transactions, including the sale of inventory between subsidiaries and foreign
denominated assets and liabilities. Such transactions are denominated primarily in U.S. Dollars, British Pounds, Canadian
Dollars, Chinese Yuan, Danish Kroner, Euros, Hong Kong Dollars, Japanese Yen, Polish Zloty, South Korean Won, Singapore
Dollars, Swedish Kroner and Swiss Francs. The Company has established a program that primarily utilizes foreign currency
forward contracts to partially offset the risks associated with the effects of certain foreign currency transactions and forecasted
transactions. Under this program, increases or decreases in foreign currency exposures are partially offset by gains or losses on
forward contracts, to mitigate the impact of foreign currency gains or losses. The Company does not use forward contracts to
engage in currency speculation. All outstanding foreign currency forward contracts are recorded at fair value at the end of each
fiscal period.
Table of Contents
46
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ABERCROMBIE & FITCH CO.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Thousands, except share and per share amounts)
2012 2011 2010
(Restated see Note 4)
NET SALES
$ 4,510,805 $ 4,158,058 $ 3,468,777
Cost of Goods Sold
1,694,096 1,607,834 1,251,348
GROSS PROFIT
2,816,709 2,550,224 2,217,429
Stores and Distribution Expense
1,987,926 1,888,248 1,589,501
Marketing, General and Administrative Expense
473,883 437,120 400,804
Other Operating Expense (Income), Net
(19,333
) 3,472
(10,056
)
OPERATING INCOME
374,233 221,384 237,180
Interest Expense, Net
7,288 3,577 3,362
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES
366,945 217,807 233,818
Tax Expense from Continuing Operations
129,934 74,669 78,109
NET INCOME FROM CONTINUING OPERATIONS
$ 237,011 $ 143,138 $ 155,709
INCOME FROM DISCONTINUED OPERATIONS, Net of Tax
$ — $ 796 $ —
NET INCOME
$ 237,011 $ 143,934 $ 155,709
NET INCOME PER SHARE FROM CONTINUING OPERATIONS:
BASIC
$ 2.89 $ 1.65 $ 1.77
DILUTED
$ 2.85 $ 1.60 $ 1.73
NET INCOME PER SHARE FROM DISCONTINUED OPERATIONS:
BASIC
$ — $ 0.01 $ —
DILUTED
$ — $ 0.01 $ —
NET INCOME PER SHARE:
BASIC
$ 2.89 $ 1.66 $ 1.77
DILUTED
$ 2.85 $ 1.61 $ 1.73
WEIGHTED-AVERAGE SHARES OUTSTANDING:
BASIC
81,940 86,848 88,061
DILUTED
83,175 89,537 89,851
DIVIDENDS DECLARED PER SHARE
$ 0.70 $ 0.70 $ 0.70
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign Currency Translation Adjustments
$
(427
) $
(8,658
) $ 3,238
Gains (Losses) on Marketable Securities, net of taxes of $(5,526) and
$366 for Fiscal 2011 and Fiscal 2010, respectively.
— 9,409
(622
)
Unrealized Gain (Loss) on Derivative Financial Instruments, net of
taxes of $2,361, $(1,216) and $188 for Fiscal 2012, Fiscal 2011 and
Fiscal 2010, respectively.
(19,152
) 12,217
(320
)
Other Comprehensive (Loss) Income
$
(19,579
) $ 12,968 $ 2,296
COMPREHENSIVE INCOME
$ 217,432 $ 156,902 $ 158,005
The accompanying Notes are an integral part of these Consolidated Financial Statements.
Table of Contents
47
ABERCROMBIE & FITCH CO.
CONSOLIDATED BALANCE SHEETS
(Thousands, except par value amounts)
February 2,
2013
January 28,
2012
ASSETS
(Restated see Note 4)
CURRENT ASSETS:
Cash and Equivalents
$ 643,505 $ 583,495
Marketable Securities
— 84,650
Receivables
99,622 89,350
Inventories
426,962 679,935
Deferred Income Taxes
32,558 35,882
Other Current Assets
105,177 84,342
TOTAL CURRENT ASSETS
1,307,824 1,557,654
PROPERTY AND EQUIPMENT, NET
1,308,232 1,197,271
NON-CURRENT MARKETABLE SECURITIES
— 14,858
OTHER ASSETS
371,345 347,249
TOTAL ASSETS
$ 2,987,401 $ 3,117,032
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts Payable
$ 140,396 $ 211,368
Accrued Expenses
395,734 369,073
Deferred Lease Credits
39,054 41,047
Income Taxes Payable
115,617 77,918
TOTAL CURRENT LIABILITIES
690,801 699,406
LONG-TERM LIABILITIES:
Deferred Lease Credits
168,397 183,022
Leasehold Financing Obligations
63,942 57,851
Other Liabilities
245,993 245,418
TOTAL LONG-TERM LIABILITIES
478,332 486,291
STOCKHOLDERS’ EQUITY:
Class A Common Stock — $0.01 par value: 150,000 shares authorized and
103,300 shares issued at each of February 2, 2013 and January 28, 2012
1,033 1,033
Paid-In Capital
403,271 369,171
Retained Earnings
2,567,261 2,389,614
Accumulated Other Comprehensive (Loss) Income, net of tax
(13,288
) 6,291
Treasury Stock, at Average Cost — 24,855 and 17,662 shares at February 2, 2013
and January 28, 2012, respectively
(1,140,009
)
(834,774
)
TOTAL STOCKHOLDERS’ EQUITY
1,818,268 1,931,335
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$ 2,987,401 $ 3,117,032
The accompanying Notes are an integral part of these Consolidated Financial Statements.
Table of Contents
48
ABERCROMBIE & FITCH CO.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Thousands, except per share amounts)
Common Stock
Paid-In
Capital
Retained
Earnings
Other
Comprehensive
(Loss) Income
Treasury Stock
Total
Stockholders’
Equity
Shares
Outstanding
Par
Value Shares
At Average
Cost
Balance, January 30, 2010
87,986 $ 1,033 $ 339,453 $ 2,183,690 $ (8,973) 15,314 $ (687,286) $ 1,827,917
Cumulative restatement for change
in inventory accounting (See Note 4)
47,341 47,341
Restated Net Income
— — — 155,709 — — — 155,709
Purchase of Common Stock
(1,582) — — — — 1,582 (76,158) (76,158)
Dividends ($0.70 per share)
— — — (61,656) — — — (61,656)
Share-based Compensation Issuances
and Exercises
842 — (29,741) — — (842) 38,136 8,395
Tax Deficiency from Share-based
Compensation Issuances and
Exercises
— — (1,053) — — — — (1,053)
Share-based Compensation Expense
— — 40,599 — — — — 40,599
Unrealized Gains on Marketable
Securities
— — — — (622) — (622)
Net Change in Unrealized Gains or
Losses on Derivative Financial
Instruments
— — — — (320) — (320)
Foreign Currency Translation
Adjustments
— — — — 3,238 — 3,238
Balance, January 29, 2011
87,246 $ 1,033 $ 349,258 $ 2,325,084 $ (6,677) 16,054 $ (725,308) $ 1,943,390
Restated Net Income
— — — 143,934 — — — 143,934
Purchase of Common Stock
(3,546) — — — — 3,546 (196,605) (196,605)
Dividends ($0.70 per share)
— — — (60,956) — — — (60,956)
Share-based Compensation Issuances
and Exercises
1,938 — (34,153) (18,448) — (1,938) 87,139 34,538
Tax Deficiency from Share-based
Compensation Issuances and
Exercises
— — 2,973 — — — — 2,973
Share-based Compensation Expense
— — 51,093 — — — — 51,093
Losses on Marketable Securities
reclassed to the Income Statement
— — — — 9,409 — 9,409
Net Change in Unrealized Gains or
Losses on Derivative Financial
Instruments
— — — — 12,217 — 12,217
Foreign Currency Translation
Adjustments
— — — — (8,658) — (8,658)
Balance, January 28, 2012
85,638 $ 1,033 $ 369,171 $ 2,389,614 $ 6,291 17,662 $ (834,774) $ 1,931,335
Net Income
— — — 237,011 — — — 237,011
Purchase of Common Stock
(7,548) — — — — 7,548 (321,665) (321,665)
Dividends ($0.70 per share)
— — — (57,634) — — — (57,634)
Share-based Compensation Issuances
and Exercises
355 — (18,356) (1,730) — (355) 16,430 (3,656)
Tax Benefit from Share-based
Compensation Issuances and
Exercises
— — (466) — — — — (466)
Share-based Compensation Expense
— — 52,922 — — — — 52,922
Net Change in Unrealized Gains or
Losses on Derivative Financial
Instruments
— — — — (19,152) — (19,152)
Foreign Currency Translation
Adjustments
— — — — (427) — (427)
Balance, February 2, 2013
78,445 $ 1,033 $ 403,271 $ 2,567,261 $ (13,288) 24,855 $ (1,140,009) $ 1,818,268
The accompanying Notes are an integral part of these Consolidated Financial Statements.
Table of Contents
49
ABERCROMBIE & FITCH CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
2012 2011 2010
(Restated see Note 4)
OPERATING ACTIVITIES:
Net Income $ 237,011 $ 143,934 $ 155,709
Impact of Other Operating Activities on Cash Flows:
Depreciation and Amortization 224,245 232,956 229,153
Non-Cash Charge for Asset Impairment 7,407 68,022 50,631
Loss on Disposal / Write-off of Assets 11,866 22,460 7,064
Lessor Construction Allowances 22,522 41,509 35,281
Amortization of Deferred Lease Credits
(45,942
)
(48,258
)
(48,373
)
Deferred Taxes
(21,543
)
(31,252
)
(28,001
)
Share-Based Compensation 52,922 51,093 40,599
Tax Benefit (Deficiency) from Share-Based Compensation
(466
) 2,973
(1,053
)
Excess Tax Benefit from Share-Based Compensation
(1,198
)
(4,821
) —
Auction Rate Securities (Gain) Loss
(2,454
) 13,442 —
Changes in Assets and Liabilities:
Inventories 253,650
(216,133
)
(79,869
)
Accounts Payable and Accrued Expenses
(34,692
) 130,180 27,108
Income Taxes 37,628 4,754 63,807
Other Assets and Liabilities
(56,785
)
(45,640
)
(60,267
)
NET CASH PROVIDED BY OPERATING ACTIVITIES 684,171 365,219 391,789
INVESTING ACTIVITIES:
Capital Expenditures
(339,862
)
(318,598
)
(160,935
)
Purchase of Trust-Owned Life Insurance Policies — —
(16,583
)
Proceeds from Sales of Marketable Securities 101,963 2,650 84,542
Other Investing
(9,339
)
(24,741
) —
NET CASH USED FOR INVESTING ACTIVITIES
(247,238
)
(340,689
)
(92,976
)
FINANCING ACTIVITIES:
Proceeds from Share-Based Compensation 2,676 46,530 13,941
Excess Tax Benefit from Share Based Compensation 1,198 4,821 —
Proceeds from Borrowings under Credit Agreement 135,000 — —
Repayment of Borrowings under Credit Agreement
(135,000
)
(45,002
)
(12,093
)
Purchase of Common Stock
(321,665
)
(196,605
)
(76,158
)
Dividends Paid
(57,634
)
(60,956
)
(61,656
)
Change in Outstanding Checks and Other
(4,646
)
(14,117
)
(9,367
)
NET CASH USED FOR FINANCING ACTIVITIES
(380,071
)
(265,329
)
(145,333
)
EFFECT OF EXCHANGE RATES ON CASH 3,148
(2,059
) 2,923
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS: 60,010
(242,858
) 156,403
Cash and Equivalents, Beginning of Period 583,495 826,353 669,950
CASH AND EQUIVALENTS, END OF PERIOD $ 643,505 $ 583,495 $ 826,353
SIGNIFICANT NON-CASH INVESTING ACTIVITIES:
Change in Accrual for Construction in Progress $
(12,919
) $ 23,040 $ 18,741
The accompanying Notes are an integral part of these Consolidated Financial Statements.
Table of Contents
50
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Abercrombie & Fitch Co. (“A&F”), through its wholly-owned subsidiaries (collectively, A&F and its wholly-owned
subsidiaries are referred to as “Abercrombie & Fitch” or the “Company”), is a specialty retailer of high-quality, casual apparel
for men, women and kids with an active, youthful lifestyle.
The accompanying consolidated financial statements include the historical financial statements of, and transactions
applicable to, the Company and reflect its assets, liabilities, results of operations and cash flows.
FISCAL YEAR
The Company’s fiscal year ends on the Saturday closest to January 31, typically resulting in a fifty-two week year, but
occasionally giving rise to an additional week, resulting in a fifty-three week year as was the case for Fiscal 2012. Fiscal years
are designated in the consolidated financial statements and notes by the calendar year in which the fiscal year commences. All
references herein to “Fiscal 2012” represent the 53-week fiscal year ended February 2, 2013; to “Fiscal 2011” represent the 52-
week fiscal year ended January 28, 2012; and to “Fiscal 2010” represent the 52-week fiscal year ended January 29, 2011. In
addition, all references herein to “Fiscal 2013” represent the 52-week fiscal year that will end on February 1, 2014.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified or adjusted to conform to the current year presentation.
2. SEGMENT REPORTING
The Company determines its segments on the same basis that it uses to allocate resources and assess performance. All of
the Company’s segments sell a similar group of products—casual sportswear apparel, personal care products and accessories
for men, women and kids and bras, underwear and sleepwear for girls. The Company has three reportable segments: U.S.
Stores, International Stores, and Direct-to-Consumer. Corporate functions, interest income and expense, and other income and
expense are evaluated on a consolidated basis and are not allocated to the Company’s segments, and therefore are included in
Other.
The U.S. Stores reportable segment includes the results of store operations in the United States and Puerto Rico,
including outlet stores. The International Stores reportable segment includes the results of store operations in Canada, Europe
and Asia and sell-off of merchandise to authorized third-party resellers. The Direct-to-Consumer reportable segment includes
the results of operations directly associated with on-line operations, both domestic and international.
Operating income is the primary measure of profit the Company uses to make decisions regarding the allocation of
resources to its operating segments. For the U.S. Stores and International Stores reportable segments, operating income is
defined as aggregate income directly attributable to individual stores on a four-wall basis. Four-wall expense includes all
expenses contained “within the four walls of the stores.” The four-wall expense includes: cost of merchandise, selling payroll
and related costs, rent, utilities, depreciation, repairs and maintenance, supplies and packaging and other store sales-related
expenses including credit card and bank fees and taxes. Operating income also reflects pre-opening charges related to stores not
yet in operation. For the Direct-to-Consumer reportable segment, operating income is defined as aggregate income attributable
to the direct-to-consumer business, less call center, fulfillment and shipping expense, charge card fees and direct-to-consumer
operations management and support expenses. The U.S. Stores, International Stores and Direct-to-Consumer segments exclude
marketing, general and administrative expense; store management and support functions such as regional and district
management and other functions not dedicated to an individual store; and distribution center costs. All costs excluded from the
three reportable segments are included in Other.
Reportable segment assets include those used directly in or resulting from the operations of each reportable segment.
Total assets for the U.S. Stores and International Stores reportable segments primarily consist of store cash, credit card
receivables, prepaid rent, store packaging and supplies, lease deposits, merchandise inventory, leasehold acquisition costs,
restricted cash and the net book value of store long-lived assets. Total assets for International Stores also include VAT
receivables. Total assets for the Direct-to-Consumer reportable segment primarily consist of credit card receivables,
merchandise inventory, and the net book value of long-lived assets. Total assets for Other include cash, investments,
distribution center inventory, the net book value of home office and distribution center long-lived assets, foreign currency hedge
assets and tax-related assets. Reportable segment capital expenditures are direct purchases of property and equipment for that
segment.
Table of Contents
51
The following table provides the Company’s segment information as of, and for the fiscal years ended February 2,
2013, January 28, 2012 and January 29, 2011. All results reported below have been adjusted based on the change in accounting
principle as noted in Note 4.
U.S. Stores
International
Stores
Direct-to-
Consumer
Operations
Segment
Total Other
(1)
Total
(in thousands):
February 2, 2013
Net Sales
$ 2,615,138 $ 1,195,016 $ 700,651 $ 4,510,805 — $ 4,510,805
Depreciation and Amortization
94,367 67,972 5,198 167,537 56,708 224,245
Operating Income
(2)
432,040 350,871 269,479 1,052,390
(678,157
) 374,233
Total Assets
587,334 840,317 63,063 1,490,714 1,496,687 2,987,401
Capital Expenditures 3,016 218,933 22,567 244,516 95,346 339,862
January 28, 2012
Net Sales
2,710,842 894,616 552,600 4,158,058 — 4,158,058
Depreciation and Amortization
125,827 35,844 2,876 164,547 68,409 232,956
Operating Income
(3)
362,760 282,462 224,759 869,981
(648,597
) 221,384
Total Assets
755,330 661,680 90,922 1,507,932 1,609,100 3,117,032
Capital Expenditures 1,105 229,959 8,367 239,431 79,167 318,598
January 29, 2011
Net Sales
2,546,798 517,005 404,974 3,468,777 — 3,468,777
Depreciation and Amortization
149,533 17,680 3,154 170,367 58,786 229,153
Operating Income
(4)
392,626 192,583 197,809 783,018
(545,838
) 237,180
Total Assets
898,157 370,209 46,331 1,314,697 1,679,325 2,994,022
Capital Expenditures 24,706 85,435 816 110,957 49,978 160,935
(1)
Includes corporate functions such as Design, Merchandising, Sourcing, Planning, Allocation, Store Management and Support,
Marketing, Distribution Center Operations, Information Technology, Real Estate, Finance, Legal, Human Resources and other
corporate overhead. Operating Income includes: marketing, general and administrative expense; store management and support
functions such as regional and district management and other functions not dedicated to an individual store; and distribution center
costs.
(2)
Includes charges for asset impairments of $7.4 million for U.S. Stores.
(3)
Includes charges for asset impairments and write-down of store-related long-lived assets of $52.1 million and $15.9 million for U.S.
Stores and International Stores, respectively.
(4)
Includes charges for asset impairments of $50.6 million for U.S. Stores.
Geographic Information
Financial information relating to the Company’s operations by geographic area is as follows:
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
52
Net Sales:
Net sales includes net merchandise sales through stores and direct-to-consumer operations, including shipping and
handling revenue. Net sales are reported by geographic area based on the location of the customer.
Fiscal 2012 Fiscal 2011 Fiscal 2010
(in thousands):
United States
$ 3,087,205 $ 3,108,380 $ 2,821,993
Europe
1,137,664 822,473 443,836
Other International
285,936 227,205 202,948
Total
$ 4,510,805 $ 4,158,058 $ 3,468,777
Long-Lived Assets:
February 2, 2013 January 28, 2012
(in thousands):
United States
$ 742,926 $ 794,723
Europe
496,960 366,647
Other International
177,780 156,361
Total
$ 1,417,666 $ 1,317,731
Long-lived assets included in the table above include primarily property and equipment (net), store supplies and lease
deposits.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of A&F and its subsidiaries. All intercompany balances and
transactions have been eliminated in consolidation.
CASH AND EQUIVALENTS
See Note 6, “CASH AND EQUIVALENTS.”
INVESTMENTS
See Note 7, “INVESTMENTS.”
RECEIVABLES
Receivables primarily include credit card receivables, construction allowances, value added tax (“VAT”) receivables and
other tax credits or refunds.
As part of the normal course of business, the Company has approximately three to four days of sales transactions
outstanding with its third-party credit card vendors at any point. The Company classifies these outstanding balances as credit
card receivables. Construction allowances are recorded for certain store lease agreements for improvements completed by the
Company. VAT receivables are payments the Company has made on purchases of goods and services that will be recovered as
sales are made to customers.
INVENTORIES
During the fourth quarter of Fiscal 2012, the Company elected to change its inventory valuation method from the
lower of cost or market utilizing the retail method to the lower of cost or market under the weighted average cost method. The
Company believes the new method is preferable as it is consistent with the practices of other specialty retailers and better aligns
with the way the Company manages its business with a focus on the actual margin realized. See Note 4, “CHANGE IN
ACCOUNTING PRINCIPLE,” for further details on the accounting change.
Inventories are principally valued at the lower of cost or market on a weighted-average cost basis. The Company
writes down inventory through a lower of cost or market adjustment, the impact of which is reflected in cost of goods sold in
the Consolidated Statements of Operations and Comprehensive Income. This adjustment is based on management's judgment
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
53
regarding future demand and market conditions and analysis of historical experience. The lower of cost or market adjustment to
inventory as of February 2, 2013, January 28, 2012 and January 29, 2011 was $9.9 million, $13.0 million and $10.2 million,
respectively.
Additionally, as part of inventory valuation, inventory shrinkage estimates based on historical trends from actual physical
inventories are made each period that reduce the inventory value for lost or stolen items. The Company performs physical
inventories on a periodic basis and adjusts the shrink reserve accordingly. The shrink reserve was $11.8 million, $10.3 million
and $9.1 million at February 2, 2013, January 28, 2012 and January 29, 2011, respectively.
Ending inventory balances were $427.0 million, $679.9 million and $464.6 million at February 2, 2013, January 28,
2012 and January 29, 2011, respectively. These balances included inventory in transit balances of $34.8 million, $103.1 million
and $55.0 million at February 2, 2013, January 28, 2012 and January 29, 2011, respectively. Inventory in transit is considered to
be all merchandise owned by Abercrombie & Fitch that has not yet been received at an Abercrombie & Fitch distribution center.
OTHER CURRENT ASSETS
Other current assets include prepaid rent, current store supplies, derivative contracts and other prepaids.
PROPERTY AND EQUIPMENT
Depreciation and amortization of property and equipment are computed for financial reporting purposes on a straight-line
basis, using service lives which are principally: 30 years for buildings; from three to 15 years for leasehold improvements and
furniture and fixtures; from three to seven years for information technology; and from three to 20 years for other property and
equipment; or lease term, whichever is shorter. The cost of assets sold or retired and the related accumulated depreciation or
amortization are removed from the accounts with any resulting gain or loss included in net income. Maintenance and repairs are
charged to expense as incurred. Major remodels and improvements that extend service lives of the related assets are capitalized.
Long-lived assets, primarily comprised of property and equipment, are reviewed whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable. The primary triggering events are (1) when the
Company believes that it is more likely than not that long-lived assets will be disposed of before the end of their previously
estimated useful life (e.g., store closures before the end of a lease) and (2) if the Company’s performance in any quarter
indicates that there has been a long-term and significant change in the economics of the business. The Company reviews long-
lived assets for impairments in the quarter in which a triggering event occurs.
In addition, the Company conducts an annual impairment analysis in the fourth quarter of each year. For the purposes of
the annual review, the Company reviews long-lived assets associated with stores that have an operating loss in the current year
and have been open for at least two full years.
The reviews are conducted at the individual store level, which is the lowest level for which identifiable cash flows are
largely independent of the cash flows of other groups of assets and liabilities.
The impairment evaluation is performed as a two-step test. First, the Company utilizes an undiscounted future cash flow
model to test the individual asset groups for recoverability. If the net carrying value of the asset group exceeds the undiscounted
cash flows, the Company proceeds to step two. Under step two, an impairment loss is recognized for the excess of net book
value over the fair value of the assets. Factors used in the evaluation include, but are not limited to, management’s plans for
future operations, recent operating results and projected cash flows. See Note 9, “PROPERTY AND EQUIPMENT, NET,” for
further discussion.
The Company expenses all internal-use software costs incurred in the preliminary project stage and capitalizes certain
direct costs associated with the development and purchase of internal-use software within property and equipment. Capitalized
costs are amortized on a straight-line basis over the estimated useful lives of the software, generally not exceeding seven years.
INCOME TAXES
Income taxes are calculated using the asset and liability method. Deferred tax assets and liabilities are recognized based
on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using current enacted tax rates in effect for the years in which those
temporary differences are expected to reverse. Inherent in the measurement of deferred balances are certain judgments and
interpretations of enacted tax law and published guidance with respect to applicability to the Company’s operations. A valuation
allowance is established against deferred tax assets when it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Currently, there is an immaterial valuation allowance provided for foreign net operating losses.
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
54
The Company records tax expense or benefit that does not relate to ordinary income in the current fiscal year discretely in
the period in which it occurs. Examples of such types of discrete items include, but are not limited to: changes in estimates of
the outcome of tax matters related to prior years; provision-to-return adjustments; tax-exempt income; and the settlement of tax
audits.
See Note 15, “INCOME TAXES,” for a discussion regarding the Company’s policies for uncertain tax positions.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
The majority of the Company’s international operations use local currencies as the functional currency. Assets and
liabilities denominated in foreign currencies are translated into U.S. Dollars (the reporting currency) at the exchange rate
prevailing at the balance sheet date. Equity accounts denominated in foreign currencies are translated into U.S. Dollars at
historical exchange rates. Revenues and expenses denominated in foreign currencies are translated into U.S. Dollars at the
monthly average exchange rate for the period. Gains and losses resulting from foreign currency transactions are included in the
results of operations; whereas, translation adjustments and inter-company loans of a long-term investment nature are reported as
an element of Other Comprehensive Income (Loss). Foreign currency transactions resulted in a gain of $3.3 million for Fiscal
2012, a gain of $1.3 million for Fiscal 2011 and an immaterial gain for Fiscal 2010.
DERIVATIVES
See Note 18, “DERIVATIVES.”
CONTINGENCIES
In the normal course of business, the Company must make estimates of potential future legal obligations and liabilities,
which requires the use of management’s judgment on the outcome of various issues. Management may also use outside legal
advice to assist in the estimating process. However, the ultimate outcome of various legal issues could be different than
management estimates, and adjustments may be required. See Note 21, “CONTINGENCIES,” for further discussion.
STOCKHOLDERS’ EQUITY
At February 2, 2013 and January 28, 2012, there were 150.0 million shares of A&F’s Class A Common Stock, $0.01 par
value, authorized, of which 78.4 million and 85.6 million shares were outstanding at February 2, 2013 and January 28, 2012,
respectively, and 106.4 million shares of Class B Common Stock, $0.01 par value, authorized, none of which were outstanding
at February 2, 2013 and January 28, 2012. In addition, 15.0 million shares of A&F’s Preferred Stock, $0.01 par value, were
authorized, none of which have been issued. See Note 23, “PREFERRED STOCK PURCHASE RIGHTS” for information about
Preferred Stock Purchase Rights.
Holders of Class A Common Stock generally have identical rights to holders of Class B Common Stock, except holders of
Class A Common Stock are entitled to one vote per share while holders of Class B Common Stock are entitled to three votes per
share on all matters submitted to a vote of stockholders.
REVENUE RECOGNITION
The Company recognizes store sales at the time the customer takes possession of the merchandise. Direct-to-consumer
sales are recorded based on an estimated date for customer receipt of merchandise, which is based on shipping terms and
historical delivery terms. Amounts relating to shipping and handling billed to customers in a sale transaction are classified as
revenue and the related direct shipping and handling costs are classified as Stores and Distribution Expense. Associate
discounts are classified as a reduction of net sales. The Company reserves for sales returns through estimates based on historical
experience. The sales return reserve was $9.3 million, $7.0 million and $10.3 million at February 2, 2013, January 28, 2012 and
January 29, 2011, respectively.
The Company sells gift cards in its stores and through direct-to-consumer operations. The Company accounts for gift
cards sold to customers by recognizing a liability at the time of sale. Gift cards sold to customers do not expire or lose value
over periods of inactivity. The liability remains on the Company’s books until the Company recognizes income from gift cards.
Income from gift cards is recognized at the earlier of redemption by the customer (recognized as revenue) or when the
Company determines that the likelihood of redemption is remote, referred to as “gift card breakage” (recognized as other
operating income). The Company determines the probability of the gift card being redeemed to be remote based on historical
redemption patterns. At February 2, 2013 and January 28, 2012, the gift card liabilities on the Company’s Consolidated Balance
Sheets were $47.7 million.
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
55
The Company is not required by law to escheat the value of unredeemed gift cards to the states in which it operates.
During Fiscal 2012, Fiscal 2011 and Fiscal 2010, the Company recognized other operating income for gift card breakage of
$6.9 million, $7.2 million and $7.8 million, respectively.
The Company does not include tax amounts collected as part of the sales transaction in its net sales results.
COST OF GOODS SOLD
Cost of goods sold is primarily comprised of: cost incurred to ready inventory for sale, including product costs, freight,
and import cost, as well as changes in reserves for shrink and lower of cost or market reserves. Gains and losses associated with
foreign currency exchange contracts related to hedging of inventory purchases are also recognized in cost of goods sold when
the inventory being hedged is sold.
STORES AND DISTRIBUTION EXPENSE
Stores and distribution expense includes store payroll, store management, rent, utilities and other landlord expenses,
depreciation and amortization, repairs and maintenance and other store support functions, as well as Direct-to-Consumer
expense and Distribution Center (“DC”) expense.
Shipping and handling costs, including costs incurred to store, move and prepare products for shipment, and costs
incurred to physically move the product to the customer, associated with direct-to-consumer operations were $78.6 million,
$53.6 million and $38.9 million for Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively. Handling costs, including costs
incurred to store, move and prepare the products for shipment to the stores were $59.4 million, $62.8 million and $42.8 million
for Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively. These amounts are recorded in Stores and Distribution Expense in
our Consolidated Statements of Operations and Comprehensive Income. Costs incurred to physically move the product to the
stores is recorded in Cost of Goods Sold in our Consolidated Statements of Operations and Comprehensive Income.
MARKETING, GENERAL & ADMINISTRATIVE EXPENSE
Marketing, general and administrative expense includes: photography and media ads; store marketing; home office
compensation, except for those departments included in stores and distribution expense; information technology; outside
services such as legal and consulting; relocation; recruiting; samples and travel expenses.
OTHER OPERATING EXPENSE (INCOME), NET
Other operating expense (income) consists primarily of the following: income related to gift card balances whose
likelihood of redemption has been determined to be remote; gains and losses on foreign currency transactions; business
interruption insurance recoveries; and the net impact of the change in valuation related to other-than-temporary impairments
associated with auction rate securities ("ARS"). See Note 7, “INVESTMENTS.”
WEBSITE AND ADVERTISING COSTS
Website and advertising costs related to direct-to-consumer operations are expensed as incurred as a component of Stores
and Distribution Expense on the Consolidated Statements of Operations and Comprehensive Income.
LEASES
The Company leases property for its stores under operating leases. Lease agreements may contain construction
allowances, rent escalation clauses and/or contingent rent provisions.
For construction allowances, the Company records a deferred lease credit on the Consolidated Balance Sheets and
amortizes the deferred lease credit as a reduction of rent expense on the Consolidated Statements of Operations and
Comprehensive Income over the terms of the leases.
For scheduled rent escalation clauses during the lease terms, the Company records minimum rental expense on a straight-
line basis over the terms of the leases on the Consolidated Statements of Operations and Comprehensive Income. The
difference between the rent expense and the amount payable under the lease is included in Accrued Expenses and Other
Liabilities on the Consolidated Balance Sheets. The term of the lease over which the Company amortizes construction
allowances and minimum rental expenses on a straight-line basis begins on the date of initial possession, which is generally
when the Company enters the space and begins construction.
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
56
Certain leases provide for contingent rents, which are determined as a percentage of gross sales. The Company records a
contingent rent liability in Accrued Expenses on the Consolidated Balance Sheets, and the corresponding rent expense on the
Consolidated Statements of Operations and Comprehensive Income when management determines that achieving the specified
levels during the fiscal year is probable. In addition, most of the leases require payment of real estate taxes, insurance and
certain common area maintenance costs in addition to the future minimum lease payments.
In certain lease arrangements, the Company is involved with the construction of the building. If the Company determines
that it has substantially all of the risks of ownership during construction of the leased property and therefore is deemed to be the
owner of the construction project, the Company records an asset for the amount of the total project costs and an amount related
to the value attributed to the pre-existing leased building in Property and Equipment, Net and the related financing obligation in
Leasehold Financing Obligations on the Consolidated Balance Sheets. Once construction is complete, the Company determines
if the asset qualifies for sale-leaseback accounting treatment. If the arrangement does not qualify for sale-lease back treatment,
the Company continues to amortize the obligation over the lease term and depreciates the asset over its useful life. The
Company does not report rent expense for the portion of the rent payment determined to be related to the assets which are
owned for accounting purposes. Rather, this portion of the rent payment under the lease is recognized as a reduction of the
financing obligation and interest expense.
The Company recorded a cumulative correction during the fourth quarter of Fiscal 2011 relating to four specific leasing
transactions to recognize approximately $33.0 million of long-lived assets and a corresponding financing obligation. In
connection with the cumulative correction during the fourth quarter of Fiscal 2011, the Company reversed $1.2 million of
previously recognized expense, primarily rent expense, of which $1.1 million related to reversal of expense recognized during
the first three quarters of Fiscal 2011. The Company does not believe the correction was material to any current or prior interim
or annual periods that were affected.
STORE PRE-OPENING EXPENSES
Pre-opening expenses related to new store openings are charged to operations as incurred.
DESIGN AND DEVELOPMENT COSTS
Costs to design and develop the Company’s merchandise are expensed as incurred and are reflected as a component of
“Marketing, General and Administrative Expense.”
NET INCOME PER SHARE
Net income per basic share is computed based on the weighted-average number of outstanding shares of Class A
Common Stock (“Common Stock”). Net income per diluted share includes the weighted-average effect of dilutive stock
options, stock appreciation rights and restricted stock units.
Weighted-Average Shares Outstanding and Anti-Dilutive Shares (in thousands):
2012 2011 2010
Shares of Common Stock issued
103,300 103,300 103,300
Treasury shares
(21,360
)
(16,452
)
(15,239
)
Weighted-Average — basic shares
81,940 86,848 88,061
Dilutive effect of stock options, stock appreciation rights and restricted
stock units
1,235 2,689 1,790
Weighted-Average — diluted shares
83,175 89,537 89,851
Anti-Dilutive shares
(1)
5,228 2,452 6,019
(1)
Reflects the number of shares subject to outstanding stock options, stock appreciation rights and restricted stock units, but excluded
from the computation of net income per diluted share because the impact would be anti-dilutive.
SHARE-BASED COMPENSATION
See Note 5, “SHARE-BASED COMPENSATION.”
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
57
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in accordance with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Since actual results may differ from those estimates, the
Company revises its estimates and assumptions as new information becomes available.
4. CHANGE IN ACCOUNTING PRINCIPLE
The Company elected to change its method of accounting for inventory from the lower of cost or market utilizing the
retail method to the weighted average cost method effective February 2, 2013. In accordance with generally accepted
accounting principles, all periods have been retroactively adjusted to reflect the period-specific effects of the change to the
weighted average cost method. The Company believes that accounting under the weighted average cost method is preferable as
it better aligns with the Company's focus on realized selling margin and improves the comparability of the Company's financial
results with those of its competitors. Additionally, it will improve the matching of cost of goods sold with the related net sales
and reflect the acquisition cost of inventory outstanding at each balance sheet date. The cumulative adjustment as of January 30,
2010, was an increase in its inventory of $73.6 million and an increase in retained earnings of $47.3 million.
As a result of the retroactive application of the change in accounting for inventory, the following items in the Company's
Consolidated Statements of Operations and Comprehensive Income and Consolidated Statements of Cash Flows have been
restated:
Fiscal Year Ended January 28, 2012 (in thousands, except per share data)
As Reported Effect of Change As Restated
Net Sales $ 4,158,058 $ — $ 4,158,058
Cost of Goods Sold 1,639,188
(31,354
) 1,607,834
Gross Profit 2,518,870 31,354 2,550,224
Operating Income 190,030 31,354 221,384
Income from Continuing Operations Before Taxes 186,453 31,354 217,807
Tax Expense for Continuing Operations 59,591 15,078 74,669
Net Income from Continuing Operations 126,862 16,276 143,138
Net Income 127,658 16,276 143,934
Net Income Per Share from Continuing Operations:
Basic $ 1.46 $ 0.19 $ 1.65
Diluted $ 1.42 $ 0.18 $ 1.60
Net Income Per Share:
Basic $ 1.47 $ 0.19 $ 1.66
Diluted $ 1.43 $ 0.18 $ 1.61
Foreign Currency Translation Adjustments
(8,655
)
(3
)
(8,658
)
Other Comprehensive Income (Loss) 12,971
(3
) 12,968
Comprehensive Income 140,629 16,273 156,902
As Reported Effect of Change As Restated
Cash flow from operating activities:
Net Income $ 127,658 $ 16,276 $ 143,934
Deferred Taxes
(46,330
) 15,078
(31,252
)
Inventories
(184,784
)
(31,349
)
(216,133
)
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
58
Fiscal Year Ended January 29, 2011 (in thousands, except per share data)
As Reported Effect of Change As Restated
Net Sales $ 3,468,777 $ — $ 3,468,777
Cost of Goods Sold 1,256,596
(5,248
) 1,251,348
Gross Profit 2,212,181 5,248 2,217,429
Operating Income 231,932 5,248 237,180
Income from Continuing Operations Before Taxes 228,570 5,248 233,818
Tax Expense for Continuing Operations 78,287
(178
) 78,109
Net Income from Continuing Operations 150,283 5,426 155,709
Net Income 150,283 5,426 155,709
Net Income Per Share from Continuing Operations:
Basic $ 1.71 $ 0.06 $ 1.77
Diluted $ 1.67 $ 0.06 $ 1.73
Net Income Per Share:
Basic $ 1.71 $ 0.06 $ 1.77
Diluted $ 1.67 $ 0.06 $ 1.73
Foreign Currency Translation Adjustments 3,399 $
(161
) $ 3,238
Other Comprehensive Income (Loss) 2,457 $
(161
) $ 2,296
Comprehensive Income 152,740 $ 5,265 $ 158,005
As Reported Effect of Change As Restated
Cash flow from operating activities:
Net Income $ 150,283 $ 5,426 $ 155,709
Deferred Taxes
(27,823
)
(178
)
(28,001
)
Inventories
(74,689
)
(5,180
)
(79,869
)
As a result of the retroactive application of the change in accounting for inventories, the following items in the Company's
Consolidated Balance Sheets have been restated:
January 28, 2012 (in thousands):
As Reported Effect of Change As Restated
Inventories $ 569,818 $ 110,117 $ 679,935
Deferred Income Taxes 77,120
(41,238
) 35,882
Total Current Assets 1,488,775 68,879 1,557,654
Total Assets 3,048,153 68,879 3,117,032
Retained Earnings 2,320,571 69,043 2,389,614
Total Stockholders' Equity 1,862,456 68,879 1,931,335
Total Liabilities and Stockholders' Equity 3,048,153 68,879 3,117,032
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
59
5. SHARE-BASED COMPENSATION
Financial Statement Impact
The Company recognized share-based compensation expense of $52.9 million, $51.1 million and $40.6 million for Fiscal
2012, Fiscal 2011 and Fiscal 2010, respectively. The Company also recognized $20.1 million, $19.2 million and $14.7 million
in tax benefits related to share-based compensation for Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively.
The fair value of share-based compensation awards is recognized as compensation expense on a straight-line basis over
the awards’ requisite service period, net of forfeitures. For awards that are expected to result in a tax deduction, a deferred tax
asset is recorded in the period in which share-based compensation expense is recognized. A current tax deduction arises upon
the vesting of restricted stock units or the exercise of stock options and stock appreciation rights and is principally measured at
the award’s intrinsic value. If the tax deduction is greater than the recorded deferred tax asset, the tax benefit associated with
any excess deduction is considered a “windfall tax benefit” and is recognized as additional paid-in capital. If the tax deduction
is less than the recorded deferred tax asset, the resulting difference, or shortfall, is first charged to additional paid-in capital, to
the extent of the pool of “windfall tax benefits,” with any remainder recognized as tax expense. The Company’s pool of
“windfall tax benefits” as of February 2, 2013, is sufficient to fully absorb any shortfall which may develop associated with
awards currently outstanding.
Share-based compensation expense is recognized, net of estimated forfeitures, over the requisite service period on a
straight-line basis. The Company adjusts share-based compensation expense on a quarterly basis for actual forfeitures and for
changes to the estimate of expected award forfeitures based on actual forfeiture experience. The effect of adjusting the
forfeiture rate is recognized in the period the forfeiture estimate is changed. The effect of adjustments for forfeitures was $1.3
million, $1.6 million and $4.5 million for Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively.
A&F issues shares of Common Stock for stock option and stock appreciation right exercises and restricted stock unit
vestings from treasury stock. As of February 2, 2013, A&F had sufficient treasury stock available to settle stock options, stock
appreciation rights and restricted stock units outstanding without having to repurchase additional shares of Common Stock.
Settlement of stock awards in Common Stock also requires that the Company has sufficient shares available in stockholder-
approved plans at the applicable time.
In the event, at each reporting date during which share-based compensation awards remain outstanding, there are not
sufficient shares of Common Stock available to be issued under the Amended and Restated Abercrombie & Fitch Co. 2007
Long-Term Incentive Plan (the “2007 LTIP”) and the Abercrombie & Fitch Co. 2005 Long-Term Incentive Plan (the “2005
LTIP”), or under a successor or replacement plan, the Company may be required to designate some portion of the outstanding
awards to be settled in cash, which would result in liability classification of such awards. The fair value of liability-classified
awards is re-measured each reporting date until such awards no longer remain outstanding or until sufficient shares of Common
Stock become available to be issued under the 2007 LTIP, or under a successor or replacement plan. As long as the awards are
required to be classified as a liability, the change in fair value would be recognized in current period expense based on the
requisite service period rendered.
Plans
As of February 2, 2013, A&F had two primary share-based compensation plans: the 2005 LTIP, under which A&F grants
stock options, stock appreciation rights and restricted stock units to associates of the Company and non-associate members of
the A&F Board of Directors, and the 2007 LTIP, under which A&F grants stock options, stock appreciation rights and restricted
stock units to associates of the Company. A&F also has four other share-based compensation plans under which it granted stock
options and restricted stock units to associates of the Company and non-associate members of the A&F Board of Directors in
prior years.
The 2007 LTIP, a stockholder-approved plan, permits A&F to annually grant awards covering up to 2.0 million of
underlying shares of A&F’s Common Stock for each type of award, per eligible participant, plus any unused annual limit from
prior years. The 2005 LTIP, a stockholder-approved plan, permits A&F to annually grant awards covering up to 250,000 of
underlying shares of A&F’s Common Stock for each award type to any associate of the Company (other than the Chairman and
Chief Executive Officer (the "CEO") ) who is subject to Section 16 of the Securities Exchange Act of 1934, as amended, at the
time of the grant, plus any unused annual limit from prior years. In addition, any non-associate director of A&F is eligible to
receive awards under the 2005 LTIP. Under both plans, stock options, stock appreciation rights and restricted stock units vest
primarily over four years for associates. Under the 2005 LTIP, restricted stock units typically vest after approximately one year
for non-associate directors of A&F. Awards granted to the CEO under the 2007 LTIP have a vesting period defined as the
shorter of four years or the period from the award date through the end of the CEO's employment agreement subject to the
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
60
satisfaction of performance-based criteria for awards granted subsequent to May 7, 2012. Under both plans, stock options have
a ten-year term and stock appreciation rights have up to a ten-year term, subject to forfeiture under the terms of the plans. The
plans provide for accelerated vesting if there is a change of control as defined in the plans.
Fair Value Estimates
The Company estimates the fair value of stock options and stock appreciation rights granted using the Black-Scholes
option-pricing model, which requires the Company to estimate the expected term of the stock options and stock appreciation
rights and expected future stock price volatility over the expected term. Estimates of expected terms, which represent the
expected periods of time the Company believes stock options and stock appreciation rights will be outstanding, are based on
historical experience. Estimates of expected future stock price volatility are based on the volatility of A&F’s Common Stock
price for the most recent historical period equal to the expected term of the stock option or stock appreciation right, as
appropriate. The Company calculates the volatility as the annualized standard deviation of the differences in the natural
logarithms of the weekly stock closing price, adjusted for stock splits and dividends.
In the case of restricted stock units, the Company calculates the fair value of the restricted stock units granted using the
market price of the underlying Common Stock on the date of grant adjusted for anticipated dividend payments during the
vesting period.
Stock Options
The Company did not grant any stock options during Fiscal 2012, Fiscal 2011 and Fiscal 2010.
Below is a summary of stock option activity for Fiscal 2012:
Stock Options
Number of
Underlying
Shares
Weighted-
Average
Exercise Price
Aggregate
Intrinsic Value
Weighted-
Average
Remaining
Contractual Life
Outstanding at January 28, 2012
714,997 $ 60.72
Granted
— —
Exercised
(99,122) 27.02
Forfeited or expired
(46,475) 75.27
Outstanding at February 2, 2013
569,400 $ 65.40 $ 2,282,298 4.3
Stock options exercisable at February 2, 2013
568,400 $ 65.47 $ 2,254,098 4.3
Stock options expected to become exercisable in the future as of
February 2, 2013
996 $ 22.87 $ 28,078 6.0
The total intrinsic value of stock options which were exercised during Fiscal 2012, Fiscal 2011 and Fiscal 2010 was $2.0
million, $48.5 million and $10.7 million, respectively.
The grant date fair value of stock options that vested during Fiscal 2012, Fiscal 2011 and Fiscal 2010 was $1.3 million,
$2.4 million and $4.0 million, respectively.
As of February 2, 2013, there was no unrecognized compensation cost related to stock options.
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
61
Stock Appreciation Rights
The weighted-average estimated fair value of stock appreciation rights granted during Fiscal 2012, Fiscal 2011 and Fiscal
2010, and the weighted-average assumptions used in calculating such fair value, on the date of grant, were as follows:
Fiscal Year
Chairman and Chief Executive
Officer Other Executive Officers All Other Associates
2012 2011 2010 2012 2011 2010 2012 2011 2010
Grant date market price
— $ 56.86 $ 44.86 $ 52.89 $ 54.87 $ 44.86 $ 51.31 $ 55.12 $ 44.32
Exercise price
— $ 56.86 $ 44.86 $ 52.89 $ 54.87 $ 44.86 $ 51.31 $ 55.12 $ 44.32
Fair value
— $ 22.99 $ 16.96 $ 23.53 $ 22.29 $ 16.99 $ 21.90 $ 21.98 $ 16.51
Assumptions:
Price volatility
— 53% 50% 56% 53% 51% 61% 55% 53%
Expected term (years)
— 4.6 4.7 5.0 4.7 4.5 4.1 4.1 4.1
Risk-free interest rate
— 1.8% 2.3% 1.3% 2.0% 2.3% 0.9% 1.7% 2.0%
Dividend yield
— 1.5% 2.1% 1.1% 1.6% 2.1% 1.2% 1.6% 2.1%
Below is a summary of stock appreciation rights activity for Fiscal 2012:
Stock Appreciation Rights
Number of
Underlying
Shares
Weighted-
Average
Exercise Price
Aggregate
Intrinsic Value
Weighted-
Average
Remaining
Contractual Life
Outstanding at January 28, 2012
9,039,334 $ 39.66
Granted:
Chairman and Chief Executive Officer
— —
Other Executive Officers
212,500 52.89
All Other Associates
151,300 51.31
Exercised
(63,150) 30.27
Forfeited or expired
(93,125) 44.61
Outstanding at February 2, 2013
9,246,859 $ 40.17 $ 114,456,670 4.3
Stock appreciation rights exercisable at February 2, 2013
2,134,871 $ 42.55 $ 21,259,648 4.8
Stock appreciation rights expected to become exercisable in the future as
of February 2, 2013
7,057,622 $ 39.38 $ 93,026,530 4.1
The total intrinsic value of stock appreciation rights exercised during Fiscal 2012, Fiscal 2011 and Fiscal 2010 was $0.9
million, $11.0 million and $1.8 million, respectively.
The grant date fair value of stock appreciation rights that vested during Fiscal 2012, Fiscal 2011 and Fiscal 2010 was
$24.1 million, $11.3 million and $5.0 million, respectively.
As of February 2, 2013, there was $41.6 million of total unrecognized compensation cost, net of estimated forfeitures,
related to stock appreciation rights. The unrecognized compensation cost is expected to be recognized over a weighted-average
period of six months.
Restricted Stock Units
Below is a summary of restricted stock unit activity for Fiscal 2012:
Restricted Stock Units
Number of
Underlying
Shares
Weighted-
Average Grant
Date Fair Value
Non-vested at January 28, 2012
1,189,292 $ 49.11
Granted
625,615 48.07
Vested
(374,352) 52.18
Forfeited
(241,875) 52.82
Non-vested at February 2, 2013
1,198,680 $ 46.88
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
62
The total fair value of restricted stock units granted during Fiscal 2012, Fiscal 2011 and Fiscal 2010 was $30.1 million,
$31.2 million and $17.9 million, respectively.
The total grant date fair value of restricted stock units and restricted shares which vested during Fiscal 2012, Fiscal 2011
and Fiscal 2010 was $19.5 million, $24.3 million and $24.3 million, respectively.
As of February 2, 2013, there was $38.9 million of total unrecognized compensation cost, net of estimated forfeitures,
related to non-vested restricted stock units. The unrecognized compensation cost is expected to be recognized over a weighted-
average period of six months.
6. CASH AND EQUIVALENTS
Cash and equivalents consisted of (in thousands):
February 2, 2013 January 28, 2012
Cash and equivalents:
Cash
$ 398,508 $ 374,479
Cash equivalents
244,997 209,016
Total cash and equivalents
$ 643,505 $ 583,495
Cash and equivalents include amounts on deposit with financial institutions, United States treasury bills, and other
investments, primarily held in money market accounts, with original maturities of less than three months. Any cash that is
legally restricted from use is recorded in Other Assets on the Consolidated Balance Sheets. The restricted cash balance was
$31.1 million on February 2, 2013 and $30.0 million on January 28, 2012. Restricted cash includes various cash deposits with
international banks that are used as collateral for customary non-debt banking commitments and deposits into trust accounts to
conform with standard insurance security requirements.
7. INVESTMENTS
Investments consisted of (in thousands):
February 2, 2013 January 28, 2012
Marketable securities:
Available-for-sale securities:
Auction rate securities — student loan backed $ — $ 84,650
Auction rate securities — municipal authority bonds — 14,858
Total available-for-sale securities — 99,508
Rabbi Trust assets:
(1)
Money market funds 22 23
Trust-owned life insurance policies (at cash surrender value) 87,575 85,126
Total Rabbi Trust assets 87,597 85,149
Total Investments $ 87,597 $ 184,657
(1)
Rabbi Trust assets are included in Other Assets on the Consolidated Balance Sheets and are restricted as to their use.
During Fiscal 2012, the Company sold its remaining ARS. As of January 28, 2012, the Company held $113 million in par
value of auction rate securities at a recorded fair value of $99.5 million. Based on the sale of the remaining ARS, the Company
recorded a gain of $2.5 million for Fiscal 2012.
The irrevocable rabbi trust (the “Rabbi Trust”) is intended to be used as a source of funds to match respective funding
obligations to participants in the Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan I, the
Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan II and the Chief Executive Officer
Supplemental Executive Retirement Plan. The Rabbi Trust assets are consolidated and recorded at fair value, with the exception
of the trust-owned life insurance policies which are recorded at cash surrender value. The Rabbi Trust assets are included in
Other Assets on the Consolidated Balance Sheets and are restricted as to their use as noted above. The change in cash surrender
value of the trust-owned life insurance policies held in the Rabbi Trust resulted in realized gains of $2.4 million and $2.5
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
63
million for Fiscal 2012 and Fiscal 2011, respectively, recorded as part of Interest Expense, Net on the Consolidated Statements
of Operations and Comprehensive Income.
8. FAIR VALUE
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The inputs used to measure fair value are prioritized based on a three-
level hierarchy. The three levels of inputs to measure fair value are as follows:
• Level 1 — inputs are unadjusted quoted prices for identical assets or liabilities that are available in active markets.
• Level 2 — inputs are other than quoted market prices included within Level 1 that are observable for assets or liabilities,
directly or indirectly.
• Level 3 — inputs to the valuation methodology are unobservable.
The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. The
three levels of the hierarchy and the distribution of the Company’s assets and liabilities, measured at fair value, within it were as
follows:
Assets and Liabilities at Fair Value as of February 2, 2013
Level 1 Level 2 Level 3 Total
(in thousands)
ASSETS:
Money market funds
(1)
$ 245,019 $ — $ — $ 245,019
Derivative financial instruments
— 2,493 — 2,493
Total assets measured at fair value
$ 245,019 $ 2,493 $ — $ 247,512
LIABILITIES:
Derivative financial instruments
— 9,987 — 9,987
Total liabilities measured at fair value
$ — $ 9,987 $ — $ 9,987
(1)
Includes $245.0 million of money market funds included in Cash and Equivalents. Amounts held in the Rabbi Trust were immaterial.
Assets and Liabilities at Fair Value as of January 28, 2012
Level 1 Level 2 Level 3 Total
(in thousands)
ASSETS:
Money market funds
(1)
$ 209,039 $ — $ — $ 209,039
ARS — available-for-sale — student loan backed
— — 84,650 84,650
ARS — available-for-sale — municipal authority bonds
— — 14,858 14,858
Derivative financial instruments
— 10,770 — 10,770
Total assets measured at fair value
$ 209,039 $ 10,770 $ 99,508 $ 319,317
LIABILITIES:
Derivative financial instruments
— 1,458 — 1,458
Total liabilities measured at fair value
$ — $ 1,458 $ — $ 1,458
(1)
Includes $209.0 million of money market funds included in Cash and Equivalents. Amounts held in the Rabbi Trust were immaterial.
The level 2 assets and liabilities consist of derivative financial instruments, primarily forward foreign exchange contracts.
The fair value of forward foreign exchange contracts is determined by using quoted market prices of the same or similar
instruments, adjusted for counterparty risk.
The level 3 assets included available-for-sale investments in insured student loan backed ARS and insured municipal
authority bond ARS.
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
64
The table below includes a roll-forward of the Company’s level 3 assets and liabilities from January 28, 2012 to
February 2, 2013. When a determination is made to classify an asset or liability within level 3, the determination is based upon
the lack of significance of the observable parameters to the overall fair value measurement. However, the fair value
determination for level 3 financial assets and liabilities may include observable components.
Available-for-sale
ARS -
Student Loans
Available-for-sale
ARS - Muni Bonds Total
(in thousands)
Fair value, January 28, 2012
$ 84,650 $ 14,858 $ 99,508
Dispositions
(85,524
)
(16,439
)
(101,963
)
Gains and (losses), net:
Reported in Net Income
874 1,581 2,455
Fair value, February 2, 2013
$ — $ — $ —
9. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of (in thousands):
February 2, 2013 January 28, 2012
Land
$ 36,890 $ 36,890
Buildings
297,243 267,566
Furniture, fixtures and equipment
707,061 614,641
Information technology
289,656 237,245
Leasehold improvements
1,449,568 1,340,487
Construction in progress
90,573 113,663
Other
44,081 44,727
Total
$ 2,915,072 $ 2,655,219
Less: Accumulated depreciation and amortization
(1,606,840
)
(1,457,948
)
Property and equipment, net
$ 1,308,232 $ 1,197,271
Long-lived assets, primarily comprised of property and equipment, are reviewed periodically for impairment or whenever
events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Factors used in the
evaluation include, but are not limited to, management’s plans for future operations, recent operating results, and projected cash
flows.
In the fourth quarter of Fiscal 2012, as a result of the fiscal year-end review of long-lived store-related assets, the
Company incurred store-related asset impairment charges of $7.4 million included in Stores and Distribution Expense on the
Consolidated Statement of Operations and Comprehensive Income for Fiscal 2012. The asset impairment charge was primarily
related to one Abercrombie & Fitch, three abercrombie kids, 12 Hollister, and one Gilly Hicks store.
In the fourth quarter of Fiscal 2011, as a result of the fiscal year-end review of long-lived store-related assets, the
Company incurred store-related asset impairment charges of $68.0 million, included in Stores and Distribution Expense on the
Consolidated Statement of Operations and Comprehensive Income for Fiscal 2011. The asset impairment charge was related to
14 Abercrombie & Fitch, 21 abercrombie kids, 42 Hollister, and two Gilly Hicks stores.
In Fiscal 2010, as a result of the review of long-lived store-related assets, the Company incurred store-related asset
impairment charges of $50.6 million, included in Stores and Distribution Expense on the Consolidated Statement of Operations
and Comprehensive Income for Fiscal 2010. The asset impairment charge was primarily related to 13 Gilly Hicks stores. The
charge also included two Abercrombie & Fitch, two abercrombie kids and nine Hollister stores.
Store-related assets are considered level 3 assets in the fair value hierarchy and the fair values were determined at the
individual store level, primarily using a discounted cash flow model. The estimation of future cash flows from operating
activities requires significant estimates of factors that include future sales, gross margin performance and operating expenses. In
instances where the discounted cash flow analysis indicated a negative value at the store level, the market exit price based on
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
65
historical experience was used to determine the fair value by asset type. Included in property and equipment, net, are store-
related assets previously impaired and measured at a fair value of $10.2 million and $13.1 million, net of accumulated
depreciation, as of February 2, 2013 and January 28, 2012, respectively.
The following table presents quantitative information related to the unobservable inputs used in the Company's level 3
fair value measurements for the impairment loss incurred in Fiscal 2012.
UNOBSERVABLE INPUT VALUE
Weighted average cost of capital
(1)
12%
Annual revenue growth rates
(2)
2%
(1)
The Company utilized the year-end weighted average cost of capital in the discounted cash flow model.
(2)
The Company utilized an annual revenue growth rate in the discounted cash flow model.
In certain lease arrangements, the Company is involved with the construction of the building. If the Company determines
that it has substantially all of the risks of ownership during construction of the leased property and therefore is deemed to be the
owner of the construction project, the Company records an asset for the amount of the total project costs and an amount related
to the value attributed to the pre-existing leased building in Property and Equipment, Net and the related financing obligation in
Leasehold Financing Obligations on the Consolidated Balance Sheets. Once construction is complete, the Company determines
if the asset qualifies for sale-leaseback accounting treatment. If the arrangement does not qualify for sale-lease back treatment,
the Company continues to depreciate the asset over its useful life. The Company had $55.2 million and $47.5 million of
construction project assets in Property and Equipment, Net at February 2, 2013 and January 28, 2012, respectively.
10. OTHER ASSETS
Other assets consisted of (in thousands):
2012 2011
Rabbi Trust $ 87,597 $ 85,149
Long-term deposits 71,486 78,617
Non-current deferred tax assets 50,387 29,165
Long-term supplies 42,404 36,739
Restricted cash 31,137 30,043
Intellectual property 30,811 31,760
Prepaid income tax on intercompany items 19,217 16,049
Other 38,306 39,727
Other assets $ 371,345 $ 347,249
Restricted cash includes various cash deposits with international banks that are used as collateral for customary non-debt
banking commitments and deposits into trust accounts to conform to standard insurance security requirements. Long-term
supplies include, but are not limited to, hangers, frames, sign holders, security tags, back-room supplies, and construction
materials. Other includes prepaid leases and various other assets.
11. DEFERRED LEASE CREDITS
Deferred lease credits are derived from payments received from landlords to wholly or partially offset store construction
costs and are classified between current and long-term liabilities. The amounts, which are amortized as a reduction of rent
expense over the respective lives of the related leases, consisted of the following (in thousands):
February 2,
2013
January 28,
2012
Deferred lease credits
$ 550,527 $ 551,468
Amortized deferred lease credits
(343,076
)
(327,399
)
Total deferred lease credits, net
$ 207,451 $ 224,069
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
66
12. LEASED FACILITIES
Annual store rent is comprised of a fixed minimum amount and/or contingent rent based on a percentage of sales. For
scheduled rent escalation clauses during the lease terms, the Company records minimum rental expenses on a straight-line basis
over the terms of the leases on the Consolidated Statements of Operations and Comprehensive Income. The term of the lease
over which the Company amortizes construction allowances and minimum rental expenses on a straight-line basis begins on the
date of initial possession.
Certain leases provide for contingent rents, which are primarily determined as a percentage of sales in excess of a
predetermined level. The Company records a contingent rent liability in Accrued Expenses on the Consolidated Balance Sheets,
and the corresponding rent expense on the Consolidated Statements of Operations and Comprehensive Income when the
Company determines that it is probable that the expense has been incurred and the amount can be reasonably estimated.
Store lease terms may also require additional payments covering taxes, common area costs and certain other expenses.
A summary of rent expense follows (in thousands):
2012 2011 2010
Store rent:
Fixed minimum $ 414,061 $ 388,004 $ 333,419
Contingent 16,828 16,942 9,306
Deferred lease credits amortization
(45,926
)
(48,219
)
(48,373
)
Total store rent expense 384,963 356,727 294,352
Buildings, equipment and other 6,259 4,719 4,988
Total rent expense $ 391,222 $ 361,446 $ 299,340
At February 2, 2013, the Company was committed to non-cancelable leases with remaining terms of one to 18 years.
Excluded from the obligations below are amounts related to portions of lease terms that are currently cancelable at the
Company's discretion. While included in the obligations below, in many instances, the Company has options to terminate
certain leases if stated sales volume levels are not met or the Company ceases operations in a given country. A summary of
operating lease commitments, including $71.7 million of leasehold financing obligations and related interest as discussed in
Note 17, under non-cancelable leases follows (in thousands):
Fiscal 2013 $ 418,478
Fiscal 2014 $ 391,925
Fiscal 2015 $ 361,257
Fiscal 2016 $ 343,337
Fiscal 2017 $ 242,735
Thereafter $ 868,479
13. ACCRUED EXPENSES
Accrued expenses consisted of (in thousands):
2012 2011
Accrued payroll and related costs
$ 74,747 $ 57,633
Accrued taxes
56,219 68,138
Gift card liability
47,683 47,669
Accrued rent
36,861 33,966
Construction in progress
34,732 47,526
Other
145,492 114,141
Accrued expenses
$ 395,734 $ 369,073
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
67
Accrued payroll and related costs include salaries, incentive compensation, benefits, withholdings and other payroll
related costs. Other accrued expenses include expenses incurred but not yet paid related to outside services associated with
store and home office operations.
14. OTHER LIABILITIES
Other liabilities consisted of (in thousands):
2012 2011
Accrued straight-line rent $ 119,057 $ 114,136
Deferred compensation 93,211 84,573
Uncertain tax positions, including interest and penalties 16,047 19,496
Other 17,678 27,213
Other liabilities $ 245,993 $ 245,418
Deferred compensation includes the Chief Executive Officer Supplemental Executive Retirement Plan (the “SERP”), the
Abercrombie & Fitch Co. Savings and Retirement Plan and the Abercrombie & Fitch Nonqualified Savings and Supplemental
Retirement Plan, all further discussed in Note 20, “RETIREMENT BENEFITS,” as well as deferred Board of Directors
compensation and other accrued retirement benefits.
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
68
15. INCOME TAXES
Income from continuing operations before taxes was comprised of (in thousands) (amounts restated due to change in
accounting principle referenced in Note 4):
2012 2011 2010
Domestic
$ 302,589 $ 192,312 $ 188,444
Foreign
64,356 25,495 45,374
Total
$ 366,945 $ 217,807 $ 233,818
Domestic income from continuing operations above includes intercompany charges to foreign affiliates for management
fees, cost-sharing, royalties, including those related to international direct-to-consumer operations, and interest. The provision
for tax expense from continuing operations consisted of (in thousands):
2012 2011 2010
Current:
Federal
$ 111,761 $ 100,495 $ 94,922
State
15,323 11,085 16,126
Foreign
17,984 13,262 11,395
$ 145,068 $ 124,842 $ 122,443
Deferred:
Federal
$
(10,456
) $
(32,776
) $
(33,441
)
State
458
(8,662
)
(7,299
)
Foreign
(5,136
)
(8,735
)
(3,594
)
$
(15,134
) $
(50,173
) $
(44,334
)
Total provision
$ 129,934 $ 74,669 $ 78,109
Reconciliation between the statutory federal income tax rate and the effective tax rate for continuing operations is as
follows:
2012 2011 2010
Federal income tax rate
35.0% 35.0% 35.0%
State income tax, net of federal income tax effect
2.7 3.9 2.5
Tax effect of foreign earnings
(1.8
)
(3.0
)
(3.7
)
Other items, net
(0.5
)
(1.6
)
(0.4
)
Total
35.4% 34.3% 33.4%
Amounts paid directly to taxing authorities were $122.7 million, $118.2 million, and $85.1 million in Fiscal 2012, Fiscal
2011, and Fiscal 2010, respectively.
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
69
The effect of temporary differences which gives rise to deferred income tax assets (liabilities) were as follows (in
thousands):
2012 2011
Deferred tax assets:
Deferred compensation
$ 83,529 $ 69,296
Accrued expenses
18,971 20,356
Rent
39,061 41,424
Foreign net operating losses (NOLs)
12,107 11,687
Reserves
6,698 7,669
Realized and unrealized investment losses
592 5,565
Valuation allowance
(158
)
(2,531
)
Total deferred tax assets
$ 160,800 $ 153,466
Deferred tax liabilities:
Property and equipment
(57,875
)
(70,961
)
Inventory
(13,156
)
(8,164
)
Store supplies
(9,990
)
(10,591
)
Other
(2,140
)
(1,245
)
Total deferred tax liabilities
$
(83,161
) $
(90,961
)
Net deferred income tax assets
$ 77,639 $ 62,505
Accumulated other comprehensive income is shown net of deferred tax assets and deferred tax liabilities, resulting in a
deferred tax liability of $0.8 million and a deferred tax asset of $1.6 million for Fiscal 2012 and Fiscal 2011, respectively. These
deferred taxes are not reflected in the table above.
As of February 2, 2013 and January 28, 2012, the Company had deferred tax assets related to foreign net operating loss
carryovers that could be utilized to reduce future years’ tax liabilities, totaling $12.1 million and $11.7 million, respectively. A
portion of these net operating loss carryovers begin expiring in the year 2016 and some have an indefinite carryforward period.
Management believes it is more likely than not that these net operating loss carryovers will reduce future years’ tax liabilities in
certain foreign jurisdictions less the associated valuation allowance. As of February 2, 2013 and January 28, 2012, the foreign
subsidiaries’ net operating valuation allowances were immaterial and $2.5 million, respectively.
No other valuation allowances have been provided for deferred tax assets because management believes that it is more
likely than not that the full amount of the net deferred tax assets will be realized in the future.
A reconciliation of the beginning and ending amounts of uncertain tax positions is as follows:
2012 2011 2010
(in thousands)
Uncertain tax positions, beginning of the year
$ 13,404 $ 14,827 $ 29,437
Gross addition for tax positions of the current year
1,084 1,183 562
Gross addition for tax positions of prior years
227 1,602 1,734
Reductions of tax positions of prior years for:
Lapses of applicable statutes of limitations
(2,053
)
(2,448
)
(2,328
)
Settlements during the period
(1,480
)
(1,631
)
(14,166
)
Changes in judgment
(66
)
(129
)
(412
)
Uncertain tax positions, end of year
$ 11,116 $ 13,404 $ 14,827
The amount of the above uncertain tax positions at February 2, 2013, January 28, 2012 and January 29, 2011 which
would impact the Company’s effective tax rate, if recognized, was $11.1 million, $13.4 million and $14.8 million, respectively.
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
70
The Company recognizes accrued interest and penalties related to uncertain tax positions as a component of income tax
expense. Interest and penalties of $4.9 million had been accrued, at the end of Fiscal 2012, compared to $6.1 million accrued at
the end of Fiscal 2011.
The Internal Revenue Service (“IRS”) is currently conducting an examination of the Company’s U.S. federal income tax
return for Fiscal 2012 as part of the IRS’s Compliance Assurance Process program. IRS examinations for Fiscal 2011 and prior
years have been completed and settled. State and foreign returns are generally subject to examination for a period of three to
five years after the filing of the respective return. The Company has various state income tax returns in the process of
examination or administrative appeals. The outcome of the examinations is not expected to have a material impact on the
Company's financial statements. The Company believes that some of these audits and negotiations will conclude within the next
12 months and that it is reasonably possible the amount of uncertain income tax positions, including interest, may decrease in
the range of $7 million to $12 million within the next 12 months due to settlement of audits and expiration of statutes of
limitations, and a range of $2.5 million to $10 million of which would reduce income tax expense.
The Company does not expect material adjustments to the total amount of uncertain tax positions within the next 12
months, but the outcome of tax matters is uncertain and unforeseen results can occur.
As of February 2, 2013, U.S. taxes have not been provided on approximately $99.6 million of unremitted earnings of
subsidiaries operating outside of the United States. These earnings, which are considered to be invested indefinitely, would
become subject to income tax if they were remitted as dividends or were lent to Abercrombie & Fitch or a U.S. affiliate, or if
Abercrombie & Fitch were to sell its stock in the subsidiaries. Determination of the amount of unrecognized deferred U.S.
income tax liability on these unremitted earnings is not practicable because of the complexities associated with this hypothetical
calculation.
16. BORROWINGS
On July 28, 2011, the Company entered into an unsecured Amended and Restated Credit Agreement, as amended by
Amendment No. 1, made as of February 24, 2012, and Amendment No. 2, made as of January 23, 2013, (the “Amended and
Restated Credit Agreement”) under which up to $350 million is available. As stated in the Amended and Restated Credit
Agreement, the primary purposes of the agreement are for trade and stand-by letters of credit in the ordinary course of business,
as well as to fund working capital, capital expenditures, acquisitions and investments, and other general corporate purposes,
including repurchases of A&F's Common Stock.
The Amended and Restated Credit Agreement has several borrowing options, including interest rates that are based on:
(i) a defined Base Rate, plus a margin based on the Leverage Ratio, payable quarterly; (ii) an Adjusted Eurodollar Rate (as
defined in the Amended and Restated Credit Agreement) plus a margin based on the Leverage Ratio, payable at the end of the
applicable interest period for the borrowing and, for interest periods in excess of three months, on the date that is three months
after the commencement of the interest period; or (iii) an Adjusted Foreign Currency Rate (as defined in the Amended and
Restated Credit Agreement) plus a margin based on the Leverage Ratio, payable at the end of the applicable interest period for
the borrowing and, for interest periods in excess of three months, on the date that is three months after the commencement of
the interest period. The Base Rate represents a rate per annum equal to the highest of (a) PNC Bank, National Association’s
then publicly announced prime rate, (b) the Federal Funds Open Rate (as defined in the Amended and Restated Credit
Agreement) as then in effect plus
1
/2 of 1.0% or (c) the Daily Adjusted Eurodollar Rate (as defined in the Amended and
Restated Credit Agreement) as then in effect plus 1.0%.
The facility fees payable under the Amended and Restated Credit Agreement are based on the Company’s Leverage Ratio
(i.e., the ratio, on a consolidated basis, of (a) the sum of total debt (excluding specified permitted foreign bank guarantees and
trade letters of credit) plus 600% of forward minimum rent commitments to (b) consolidated earnings, as adjusted, before
interest, taxes, depreciation, amortization and rent (“Consolidated EBITDAR”) for the trailing four-consecutive-fiscal-quarter
periods. The facility fees accrue at a rate of 0.125% to 0.30% per annum based on the Leverage Ratio for the most recent
determination date. The Amended and Restated Credit Agreement requires that the Leverage Ratio not be greater than 3.75 to
1.00 at the end of each testing period. The Amended and Restated Credit Agreement also requires that the “Coverage Ratio” for
A&F and its subsidiaries on a consolidated basis of (i) Consolidated EBITDAR for the trailing four-consecutive-fiscal-quarter
period to (ii) the sum of, without duplication, (x) net interest expense for such period, (y) scheduled payments of long-term debt
due within twelve months of the date of determination and (z) the sum of minimum rent and contingent store rent, not be less
than 1.75 to 1.00 at the end of each testing period. The Company was in compliance with the applicable ratio requirements and
other covenants at February 2, 2013.
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
71
The terms of the Amended and Restated Credit Agreement include customary events of default such as payment defaults,
cross-defaults to other material indebtedness, undischarged material judgments, bankruptcy and insolvency, the occurrence of a
defined change in control, or the failure to observe the negative covenants and other covenants related to the operation and
conduct of the business of A&F and its subsidiaries. Upon an event of default, the lenders will not be obligated to make loans or
other extensions of credit and may, among other things, terminate their commitments to the Company, and declare any then
outstanding loans due and payable immediately.
The Amended and Restated Credit Agreement will mature on July 27, 2016. The Company had no trade letters of credit
outstanding at February 2, 2013 and January 28, 2012. Stand-by letters of credit outstanding, under the Amended and Restated
Credit Agreement, on February 2, 2013 and January 28, 2012 were immaterial.
As of February 2, 2013 and January 28, 2012, the Company did not have any borrowings under the Amended and
Restated Credit Agreement.
On February 24, 2012, the Company entered into a $300 million Term Loan Agreement to increase its flexibility and
available liquidity. On January 23, 2013, the Company entered into Amendment No.1 to the Term Loan Agreement (the "Term
Loan Agreement") lowering its availability to $150 million. In conjunction with the Term Loan Agreement Amendment, the
Company amended the Amended and Restated Credit Agreement (via Amendment No. 2 thereto) on January 23, 2013,
principally to lower the required Coverage Ratio to 1.75 to 1.00. Proceeds from the Term Loan Agreement may be used for any
general corporate purpose. The Term Loan will mature on February 23, 2017, with quarterly amortization payments of principal
beginning in May 2013. Interest on borrowings may be determined under several alternative methods including LIBOR plus a
margin based upon the Company’s Leverage Ratio, which represents the ratio of (a) the sum of total debt (excluding specified
permitted foreign bank guarantees) plus 600% of forward minimum rent commitments to (b) Consolidated EBITDAR (as
defined in the Term Loan Agreement) for the trailing four-consecutive-fiscal-quarter period. Covenants are generally consistent
with those in the Company’s Amended and Restated Credit Agreement.
As of February 2, 2013, the Company did not have any borrowings outstanding under the Term Loan Agreement.
Total interest expense on borrowings was $3.8 million, $2.5 million and $4.5 million for Fiscal 2012, Fiscal 2011 and
Fiscal 2010, respectively.
17. LEASEHOLD FINANCING OBLIGATIONS
As of February 2, 2013 and January 28, 2012, the Company had $63.9 million and $57.9 million, respectively, of long-
term liabilities related to leasehold financing obligations. In certain lease arrangements, the Company is involved with the
construction of the building. If the Company determines that the Company has substantially all of the risks of ownership during
construction of the leased property and therefore is deemed to be the owner of the construction project, the Company records an
asset for the amount of the total project costs and an amount related to the value attributed to the pre-existing leased building in
Property and Equipment, Net and the related financing obligation in Leasehold Financing Obligations on the Consolidated
Balance Sheets. Once construction is complete, the Company determines if the asset qualifies for sale-leaseback accounting
treatment. If the arrangement does not qualify for sale-leaseback treatment, the Company continues to amortize the obligation
over the lease term and depreciates the asset over its useful life. The Company does not report rent expense for the portion of
the rent payment determined to be related to the assets which are determined to be owned for accounting purposes. Rather, this
portion of the rent payment under the lease is recognized as a reduction of the financing obligation and interest expense.
Total interest expense related to landlord financing obligations was $6.8 million, $5.3 million and $3.3 million for Fiscal
2012, Fiscal 2011 and Fiscal 2010, respectively.
18. DERIVATIVES
The Company is exposed to risks associated with changes in foreign currency exchange rates and uses derivatives,
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 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 achieving offsetting changes in fair value or cash flows is assessed and documented at least
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
72
quarterly. Any hedge ineffectiveness is reported in current period earnings and hedge accounting is discontinued if it is
determined that the derivative is not highly effective.
For derivatives that either do not qualify for hedge accounting or are not designated as hedges, all changes in the fair
value of the derivative are recognized in earnings. For qualifying cash flow hedges, the effective portion of the change in the
fair value of the derivative is recorded as a component of Other Comprehensive Income (“OCI”) and recognized in earnings
when the hedged cash flows affect earnings. The ineffective portion of the derivative gain or loss, as well as changes in the fair
value of the derivative’s time value are recognized in current period earnings. The effectiveness of the hedge is assessed based
on changes in the fair value attributable to changes in spot prices. The changes in the fair value of the derivative contract
related to the changes in the difference between the spot price and the forward price are excluded from the assessment of hedge
effectiveness and are also recognized in current period earnings. If the cash flow hedge relationship is terminated, the derivative
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 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 exposure associated with forecasted foreign-currency-denominated intercompany inventory sales to foreign
subsidiaries and the related settlement of the foreign-currency-denominated inter-company accounts receivable. Fluctuations in
exchange rates will either increase or decrease the Company’s U.S. dollar equivalent cash flows and affect the Company’s U.S.
dollar earnings. Gains or losses on the foreign exchange forward contracts that are used to hedge these exposures are expected
to partially offset this variability. Foreign exchange forward contracts represent agreements to exchange the currency of one
country for the currency of another country at an agreed-upon settlement date. As of February 2, 2013, the maximum length of
time over which forecasted foreign-currency-denominated inter-company inventory sales were hedged was ten months. The
sale of the inventory to the Company’s customers will result in the reclassification of related derivative gains and losses that are
reported in Accumulated Other Comprehensive Income (Loss). Substantially all of the remaining unrealized gains or losses
related to foreign-currency-denominated inter-company inventory sales that have occurred as of February 2, 2013 will be
recognized in costs of goods sold over the following two months at the values at the date the inventory was sold to the
respective subsidiary.
The Company nets derivative assets and liabilities on the Consolidated Balance Sheets to the extent that master netting
arrangements meet the specific accounting requirements set forth by U.S. GAAP.
As of February 2, 2013, the Company had the following outstanding foreign exchange forward contracts that were
entered to hedge either a portion, or all, of forecasted foreign-currency-denominated inter-company inventory sales, the
resulting settlement of the foreign-currency-denominated inter-company accounts receivable, or both:
Notional Amount
(1)
Euro
$ 151,138
British Pound
$ 98,600
Canadian Dollar
$ 8,816
(1)
Amounts are reported in thousands and in U.S. Dollars equivalent as of February 2, 2013.
The Company also uses foreign exchange forward contracts to hedge certain foreign currency denominated net monetary
assets/liabilities. Examples of monetary assets/liabilities include cash balances, receivables and payables. Fluctuations in
exchange rates result in transaction gains/(losses) being recorded in earnings as U.S. GAAP requires that monetary assets/
liabilities be remeasured at the spot exchange rate at quarter-end or upon settlement. The Company has chosen not to apply
hedge accounting to these instruments because there are no differences in the timing of gain or loss recognition on the hedging
instrument and the hedged item.
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
73
As of February 2, 2013, the Company had the following outstanding foreign exchange forward contracts that were
entered into to hedge foreign currency denominated net monetary assets/liabilities:
Notional Amount
(1)
Euro $ 23,195
Swiss Franc $ 10,935
British Pound $ 8,079
Japanese Yen $ 4,080
Canadian Dollar $ 2,031
(1)
Amounts are reported in thousands and in U.S. Dollars equivalent as of February 2, 2013.
The location and amounts of derivative fair values on the Consolidated Balance Sheets as of February 2, 2013 and
January 28, 2012 were as follows:
Asset Derivatives
Liability Derivatives
Balance
Sheet
Location
February 2,
2013
January 28,
2012
Balance
Sheet
Location
February 2,
2013
January 28,
2012
(in thousands)
Derivatives Designated as Hedging
Instruments:
Foreign Exchange Forward Contracts
Other
Current Assets $ 1,967 $ 10,766
Other
Liabilities $ 9,270 $ 874
Derivatives Not Designated as
Hedging Instruments:
Foreign Exchange Forward Contracts
Other
Current Assets $ 526 $ 4
Other
Liabilities $ 717 $ 584
Total
Other
Current Assets $ 2,493 $ 10,770
Other
Liabilities $ 9,987 $ 1,458
Refer to Note 8, “FAIR VALUE,” for further discussion of the determination of the fair value of derivatives.
The location and amounts of derivative gains and losses for Fiscal 2012 and Fiscal 2011, respectively, on the
Consolidated Statements of Operations and Comprehensive Income were as follows:
Fiscal 2012 Fiscal 2011
February 2, 2013 January 28, 2012
Location Gain/(Loss) Gain/(Loss)
(in thousands)
Derivatives not designated as Hedging
Instruments:
Foreign Exchange Forward Contracts
Other Operating
Income (Expense), Net $ 1,946 $ 1,503
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
74
Amount of
Gain (Loss)
Recognized
in OCI on
Derivative
Contracts
(Effective
Portion)
(a)
Location of
Gain (Loss)
Reclassified
from
Accumulated
OCI into
Earnings
(Effective
Portion)
Amount of
Gain (Loss)
Reclassified from
Accumulated
OCI into
Earnings
(Effective
Portion)
(b)
Location of
Gain (Loss)
Recognized
in
Earnings on
Derivative
Contracts
(Ineffective
Portion and
Amount
Excluded
from
Effectiveness
Testing)
Amount of
Gain (Loss)
Recognized
in Earnings
on Derivative
Contracts
(Ineffective
Portion and
Amount
Excluded
from
Effectiveness
Testing)
(c)
February 2,
2013
January 28,
2012
February 2,
2013
January 28,
2012
February 2,
2013
January 28,
2012
(in thousands)
Derivatives in
Cash Flow
Hedging
Relationships
Foreign Exchange
Forward Contracts
$ (4,003) $ 14,415
Cost of
Goods Sold $ 17,510 $ 982
Other
Operating
Expense
(Income),
Net $ 226 $
(1,190
)
(a) The amount represents the change in fair value of derivative contracts due to changes in spot rates.
(b) The amount represents reclassification from OCI into earnings that occurs when the hedged item affects earnings, which is when
merchandise is sold to the Company’s customers.
(c) The amount represents the change in fair value of derivative contracts due to changes in the difference between the spot price and
forward price that is excluded from the assessment of hedge effectiveness and, therefore, recognized in earnings.
19. DISCONTINUED OPERATIONS
On June 16, 2009, A&F’s Board of Directors approved the closure of the Company’s 29 RUEHL branded stores and
related direct-to-consumer operations. The Company completed the closure of the RUEHL branded stores and related direct-to-
consumer operations during the fourth quarter of Fiscal 2009.
Accordingly, the results of operations of RUEHL are reflected in Income from Discontinued Operations, Net of Tax on
the Consolidated Statement of Operations and Comprehensive Income for Fiscal 2010.
20. RETIREMENT BENEFITS
The Company maintains the Abercrombie & Fitch Co. Savings & Retirement Plan, a qualified plan. All U.S. associates
are eligible to participate in this plan if they are at least 21 years of age and have completed a year of employment with 1,000 or
more hours of service. In addition, the Company maintains the Abercrombie & Fitch Co. Nonqualified Savings and
Supplemental Retirement, composed of two sub-plans (Plan I and Plan II). Plan I contains contributions made through
December 31, 2004, while Plan II contains contributions made on and after January 1, 2005. Participation in these plans is
based on service and compensation. The Company’s contributions are based on a percentage of associates’ eligible annual
compensation. The cost of the Company’s contributions to these plans was $21.1 million in Fiscal 2012, $16.4 million in Fiscal
2011 and $19.4 million in Fiscal 2010.
Effective February 2, 2003, the Company established a Chief Executive Officer Supplemental Executive Retirement Plan
(the “SERP”) to provide additional retirement income to its CEO. Subject to service requirements, the CEO will receive a
monthly benefit equal to 50% of his final average compensation (as defined in the SERP) for life. The final average
compensation used for the calculation is based on actual compensation, base salary and cash incentive compensation, averaged
over the last 36 consecutive full calendar months ending before the CEO’s retirement. The Company recorded net expense of
$3.9 million, $1.3 million and $2.7 million for Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively, associated with the SERP.
The expense for Fiscal 2010, included an expense of $2.1 million to correct a cumulative under accrual of the SERP
relating to prior periods, primarily Fiscal 2008. The Company does not believe this correction was material to the periods
affected.
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
75
21. CONTINGENCIES
A&F is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business. Legal costs
incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, and the Company
establishes reserves for the outcome of litigation where it deems appropriate to do so under applicable accounting rules. The
Company’s assessment of the current exposure could change in the event of the discovery of additional facts with respect to
legal matters pending against the Company or determinations by judges, juries, administrative agencies or other finders of fact
that are not in accordance with the Company’s evaluation of claims. Actual liabilities may exceed the amounts reserved, and
there can be no assurance that final resolution of these matters will not have a material adverse effect on the Company’s
financial condition, results of operations or cash flows. The Company has established accruals for certain matters where losses
are deemed probable and reasonably estimable. There are other claims and legal proceedings pending against the Company for
which accruals have not been established.
22. RECENT ACCOUNTING PRONOUNCEMENTS
In May 2011, Accounting Standards Codification 820-10, “Fair Value Measurements and Disclosures,” (“ASC 820-10”)
was amended to clarify certain disclosure requirements and improve consistency with international reporting standards. This
amendment is to be applied prospectively and became effective for the Company beginning January 29, 2012. The adoption did
not have a material effect on our consolidated financial statements.
Accounting Standards Codification Topic 220, “Comprehensive Income,” was amended in June 2011 to require entities to
present the total of comprehensive income, the components of net income, and the components of other comprehensive income
either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendment
does not change the items that must be reported in other comprehensive income or when an item of other comprehensive
income must be reclassified to net income under current GAAP. This guidance became effective for the Company’s fiscal year
and interim periods beginning January 29, 2012. The adoption did not have a material effect on our consolidated financial
statements.
In February 2013, the FASB issued ASU 2013-02, which further amends Accounting Standards Codification Topic 220,
"Comprehensive Income." The ASU contains new requirements related to the presentation and disclosure of items that are
reclassified out of other comprehensive income. The new requirements will give financial statement users a more
comprehensive view of items that are reclassified out of other comprehensive income. ASU 2013-02 is effective for the
Company's fiscal year and interim periods beginning after December 15, 2012, and is to be applied prospectively. Since the
guidance relates only to presentation and disclosure of information, adoption is not expected to have a material effect on our
consolidated financial condition or results of operations.
23. PREFERRED STOCK PURCHASE RIGHTS
On July 16, 1998, A&F’s Board of Directors declared a dividend of one Series A Participating Cumulative Preferred
Stock Purchase Right (the “Rights”) for each outstanding share of Class A Common Stock, par value $0.01 per share (the
"Common Stock"), of A&F. The dividend was paid on July 28, 1998 to stockholders of record on that date. Shares of Common
Stock issued after July 28, 1998 and prior to May 25, 1999 were issued with one Right attached. A&F’s Board of Directors
declared a two-for-one stock split (the “Stock Split”) on the Common Stock, payable on June 15, 1999 to the holders of record
at the close of business on May 25, 1999. In connection with the Stock Split, the number of Rights associated with each share
of Common Stock outstanding as of the close of business on May 25, 1999, or issued or delivered after May 25, 1999 and prior
to the “Distribution Date” (as defined below), was proportionately adjusted from one Right to 0.50 Right. Each share of
Common Stock issued after May 25, 1999 and prior to the Distribution Date has been, and will be issued, with 0.50 Right
attached so that all shares of Common Stock outstanding prior to the Distribution Date will have 0.50 Right attached.
The Rights are initially attached to the shares of Common Stock. The Rights will separate from the Common Stock after
a Distribution Date occurs. The “Distribution Date” generally means the earlier of (i) the close of business on the 10th day after
the date (the “Share Acquisition Date”) of the first public announcement that a person or group (other than A&F or any of
A&F’s subsidiaries or any employee benefit plan of A&F or of any of A&F’s subsidiaries) has acquired beneficial ownership of
20% or more of A&F’s outstanding shares of Common Stock (an “Acquiring Person”), or (ii) the close of business on the 10th
business day (or such later date as A&F’s Board of Directors may designate before any person has become an Acquiring
Person) after the date of the commencement of a tender or exchange offer by any person which would, if consummated, result
in such person becoming an Acquiring Person. The Rights are not exercisable until the Distribution Date. After the Distribution
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
76
Date, each whole Right may be exercised to purchase, at an initial exercise price of $250, one one-thousandth of a share of
Series A Participating Cumulative Preferred Stock.
At any time after any person becomes an Acquiring Person, but before the occurrence of any of the events described in
the immediately following paragraph, each holder of a Right, other than the Acquiring Person and certain affiliated persons,
will be entitled to purchase, upon exercise of the Right, shares of Common Stock having a market value of twice the exercise
price of the Right. At any time after any person becomes an Acquiring Person, but before any person becomes the beneficial
owner of 50% or more of the outstanding shares of Common Stock or the occurrence of any of the events described in the
immediately following paragraph, A&F’s Board of Directors may exchange all or part of the Rights, other than Rights
beneficially owned by an Acquiring Person and certain affiliated persons, for shares of Common Stock at an exchange ratio of
one share of Common Stock per 0.50 Right.
If, after any person has become an Acquiring Person, (i) A&F is involved in a merger or other business combination
transaction in which A&F is not the surviving corporation or A&F’s Common Stock is exchanged for other securities or assets,
or (ii) A&F and/or one or more of A&F’s subsidiaries sell or otherwise transfer 50% or more of the assets or earning power of
A&F and its subsidiaries, taken as a whole, each holder of a Right, other than the Acquiring Person and certain affiliated
persons, will be entitled to buy, for the exercise price of the Rights, the number of shares of common stock of the other party to
the business combination or sale, or in certain circumstances, an affiliate, which at the time of such transaction will have a
market value of twice the exercise price of the Right.
The Rights will expire on July 16, 2018, unless earlier exchanged or redeemed. A&F may redeem all of the Rights at a
price of $0.01 per whole Right at any time before any person becomes an Acquiring Person.
Rights holders have no rights as a stockholder of A&F, including no right to vote or to receive dividends.
24. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized unaudited quarterly financial results for Fiscal 2012 and Fiscal 2011 follows (in thousands, except per share
amounts):
Fiscal Quarter 2012
(1)
First
(2)
Second
(3)
Third
(4)
Fourth
(5)
Net sales
$ 921,218 $ 951,407 $ 1,169,649 $ 1,468,531
Gross profit
$ 541,092 $ 592,451 $ 752,514 $ 930,652
Net income (loss)
(10)
$
(21,305
) $ 17,051 $ 84,036 $ 157,229
Net income (loss) per diluted share $
(0.25
) $ 0.20 $ 1.02 $ 1.95
Fiscal Quarter 2011
(1)
First
(6)
Second
(7)
Third
(8)
Fourth
(9)
Net sales $ 836,674 $ 916,763 $ 1,075,856 $ 1,328,766
Gross profit $ 525,536 $ 578,465 $ 656,254 $ 789,970
Net income $ 12,998 $ 28,119 $ 56,992 $ 45,825
Net income per diluted share $ 0.14 $ 0.31 $ 0.64 $ 0.52
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
77
(1)
Results reported above have been restated to reflect the change in method of accounting for inventory effective in the fourth quarter of
Fiscal 2012. Refer to Note 4, “CHANGE IN ACCOUNTING PRINCIPLE,” for further discussion.
(2)
For the first quarter of Fiscal 2012, the change in accounting principle decreased gross profit by $35.3 million, decreased net income
by $24.3 million and decreased net income per diluted share by $0.28.
(3)
For the second quarter of Fiscal 2012, the change in accounting principle decreased gross profit by $2.0 million, increased net income
by $1.5 million and increased net income per diluted share by $0.01.
(4)
For the third quarter of Fiscal 2012, the change in accounting principle increased gross profit by $20.9 million, increased net income
by $12.5 million and increased net income per diluted share by $0.15.
(5)
The fourth quarter of Fiscal 2012 includes impairment charges of $0.06 per diluted share.
(6)
For the first quarter of Fiscal 2011, the change in accounting principle decreased gross profit by $18.1 million, decreased net income
by $12.1 million and decreased net income per diluted share by $0.14.
(7)
For the second quarter of Fiscal 2011, the change in accounting principle decreased gross profit by $4.6 million, decreased net income
by $3.9 million and decreased net income per diluted share by $0.04.
(8)
For the third quarter of Fiscal 2011, the change in accounting principle increased gross profit by $9.7 million, increased net income by
$6.1 million and increased net income per diluted share by $0.07.
(9)
For the fourth quarter of Fiscal 2011, the change in accounting principle increased gross profit by $44.3 million, increased net income
by $26.2 million and increased net income per diluted share by $0.30. Additionally, the fourth quarter of Fiscal 2011 includes
impairment charges of $0.50 per diluted share, asset write down charges of $0.10 per diluted share, store closure and lease exit charges
of $0.13 per diluted share, legal charges of $0.07 per diluted share, and charges related to a change in intent with regarding the
Company’s ARS portfolio of $0.10 per diluted share.
(10)
Tax expense for the fourteen weeks ended February 2, 2013 included $1.1 million to correct for understated tax expense relating to the
fourth quarter of 2011. Additionally, the fourth quarter included certain other corrections related to the first three quarters of 2012 that
have an immaterial effect on the fourth quarter. The Company does not believe these corrections were material to any current or prior
interim or annual periods that were affected.
25. SUBSEQUENT EVENT
On February 21, 2013, the Company drew down the full $150 million available under the Term Loan Agreement at an
effective interest rate of 1.96%.
Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
78
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Abercrombie & Fitch Co.
In our opinion, the consolidated financial statements listed in the accompanying index appearing under Item 15(a)(1)
present fairly, in all material respects, the financial position of Abercrombie & Fitch Co. and its subsidiaries (the Company) at
February 2, 2013 and January 28, 2012, and the results of their operations and their cash flows for each of the three years in the
period ended February 2, 2013 in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
February 2, 2013, based on criteria established in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these
financial statements, for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on
Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the
Company’s internal control over financial reporting based on our integrated audit. We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
As discussed in Note 4 to the consolidated financial statements, the Company changed the manner in which it accounts for
inventory in fiscal 2012.
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
April 2, 2013
Table of Contents
80
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
A&F maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information
required to be disclosed in the reports that A&F files or submits under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and
communicated to A&F’s management, including the Chairman and Chief Executive Officer of A&F and the Executive Vice
President and Chief Financial Officer of A&F, as appropriate to allow timely decisions regarding required disclosures. Because
of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only
reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.
A&F’s management, including the Chairman and Chief Executive Officer of A&F and the Executive Vice President and
Chief Financial Officer of A&F, evaluated the effectiveness of A&F’s design and operation of its disclosure controls and
procedures as of the end of the fiscal year ended February 2, 2013. The Chairman and Chief Executive Officer of A&F and the
Executive Vice President and Chief Financial Officer of A&F concluded that A&F’s disclosure controls and procedures were
effective at a reasonable level of assurance as of February 2, 2013, the end of the period covered by this Annual Report on
Form 10-K.
Management’s Annual Report on Internal Control Over Financial Reporting
The management of A&F is responsible for establishing and maintaining adequate internal control over financial
reporting. A&F’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting principles generally accepted in the United States of
America.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Accordingly, even an effective system of internal control over financial reporting will provide only reasonable assurance with
respect to financial statement preparation.
With the participation of the Chairman and Chief Executive Officer of A&F and the Executive Vice President and Chief
Financial Officer of A&F, management evaluated the effectiveness of A&F’s internal control over financial reporting as of
February 2, 2013 using criteria established in the Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”). Based on the assessment of A&F’s internal control over
financial reporting, under the criteria described in the preceding sentence, management has concluded that, as of February 2,
2013, A&F’s internal control over financial reporting was effective.
A&F’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has issued an audit report on the
effectiveness of A&F’s internal control over financial reporting as of February 2, 2013 as stated in their report, which is
included in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes in A&F’s internal control over financial reporting during the fourth quarter ended February 2,
2013 that materially affected, or are reasonably likely to materially affect, A&F’s internal control over financial reporting
except for the change in accounting principle to the weighted average cost method from the retail method of accounting for
inventory.
Table of Contents
82
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information concerning directors, executive officers and persons nominated or chosen to become directors or executive
officers is incorporated by reference from the text to be included under the caption “PROPOSAL 1 — ELECTION OF
DIRECTORS” in A&F’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on June 20, 2013 and
from the text under the caption “SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT” in PART I of
this Annual Report on Form 10-K.
Compliance with Section 16(a) of the Exchange Act
Information concerning beneficial ownership reporting compliance under Section 16(a) of the Securities Exchange Act of
1934, as amended, is incorporated by reference from the text to be included under the caption “SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT — Section 16(a) Beneficial Ownership Reporting Compliance” in
A&F’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on June 20, 2013.
Code of Business Conduct and Ethics
Information concerning the Abercrombie & Fitch Code of Business Conduct and Ethics is incorporated by reference from
the text to be included under the caption “PROPOSAL 1 — ELECTION OF DIRECTORS — Code of Business Conduct and
Ethics” in A&F’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on June 20, 2013.
Audit Committee
Information concerning A&F’s Audit Committee, including the determination that the Audit Committee has at least one
audit committee financial expert (as defined under applicable SEC rules) serving on the Audit Committee, is incorporated by
reference from the text to be included under the caption “PROPOSAL 1 — ELECTION OF DIRECTORS — Committees of
the Board — Audit Committee” in A&F’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
June 20, 2013.
Procedures by which Stockholders May Recommend Nominees to A&F’s Board of Directors
Information concerning the procedures by which stockholders of A&F may recommend nominees to A&F’s Board of
Directors is incorporated by reference from the text to be included under the captions “PROPOSAL 1 — ELECTION OF
DIRECTORS — Director Qualifications and Consideration of Director Candidates” and “PROPOSAL 1 — ELECTION OF
DIRECTORS — Director Nominations” in A&F’s definitive Proxy Statement for the Annual Meeting of Stockholders to be
held on June 20, 2013. These procedures have not materially changed from those described in A&F's definitive Proxy
Statement for the Annual Meeting of Stockholders held on June 14, 2012.
Table of Contents
83
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding executive compensation is incorporated by reference from the text to be included under the
captions “PROPOSAL 1 — ELECTION OF DIRECTORS — Compensation of Directors,” “PROPOSAL 1 — ELECTION OF
DIRECTORS — Board Role in Risk Oversight,” “PROPOSAL 1 — ELECTION OF DIRECTORS — Compensation
Committee Interlocks and Insider Participation,” “COMPENSATION DISCUSSION AND ANALYSIS,” “REPORT OF THE
COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION” and “EXECUTIVE OFFICER COMPENSATION”
in A&F’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on June 20, 2013.
Table of Contents
84
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
Information concerning the security ownership of certain beneficial owners and management is incorporated by reference
from the text to be included under the caption “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT” in A&F’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on June 20, 2013.
Information regarding the number of securities to be issued and remaining available under equity compensation plans as
of February 2, 2013 is incorporated by reference from the text to be included under the caption “EQUITY COMPENSATION
PLANS” in A&F’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on June 20, 2013.
Table of Contents
85
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Information concerning certain relationships and transactions involving the Company and certain related persons within
the meaning of Item 404(a) of SEC Regulation S-K as well as information concerning A&F’s policies and procedures for the
review, approval or ratification of transactions with related persons is incorporated by reference from the text to be included
under the captions “PROPOSAL 1 — ELECTION OF DIRECTORS — Compensation of Directors” and “PROPOSAL 1 —
ELECTION OF DIRECTORS — Certain Relationships and Related Transactions” in A&F’s definitive Proxy Statement for the
Annual Meeting of Stockholders to be held on June 20, 2013.
Information concerning the independence of the directors of A&F is incorporated by reference from the text to be
included under the caption “PROPOSAL 1 — ELECTION OF DIRECTORS — Director Independence” in A&F’s definitive
Proxy Statement for the Annual Meeting of Stockholders to be held on June 20, 2013.
Table of Contents
86
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Information concerning the pre-approval policies and procedures of A&F’s Audit Committee and the fees for services
rendered by the Company’s principal independent registered public accounting firm is incorporated by reference from the text
to be included under captions “AUDIT COMMITTEE MATTERS — Pre-Approval Policy” and “AUDIT COMMITTEE
MATTERS — Fees of Independent Registered Public Accounting Firm” in A&F’s definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on June 20, 2013.
Table of Contents
87
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as a part of this Annual Report on Form 10-K:
(1) Consolidated Financial Statements:
Consolidated Statements of Operations and Comprehensive Income for the fiscal years ended February 2,
2013, January 28, 2012 and January 29, 2011.
Consolidated Balance Sheets as of February 2, 2013 and January 28, 2012.
Consolidated Statements of Stockholders’ Equity for the fiscal years ended February 2, 2013, January 28,
2012 and January 29, 2011.
Consolidated Statements of Cash Flows for the fiscal years ended February 2, 2013, January 28, 2012 and
January 29, 2011.
Notes to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP.
(2) Consolidated Financial Statement Schedules:
All financial statement schedules for which provision is made in the applicable accounting regulations of the SEC are
omitted because the required information is either presented in the consolidated financial statements or notes thereto,
or is not applicable, required or material.
(3) Exhibits:
The documents listed below are filed or furnished with this Annual Report on Form 10-K as exhibits or incorporated
into this Annual Report on Form 10-K by reference as noted:
Table of Contents
88
3.1
Amended and Restated Certificate of Incorporation of A&F as filed with the Delaware Secretary of State on
August 27, 1996, incorporated herein by reference to Exhibit 3.1 to A&F’s Quarterly Report on Form 10-Q for the
quarterly period ended November 2, 1996 (File No. 001-12107).
3.2
Certificate of Designation of Series A Participating Cumulative Preferred Stock of A&F as filed with the Delaware
Secretary of State on July 21, 1998, incorporated herein by reference to Exhibit 3.2 to A&F’s Annual Report on
Form 10-K for the fiscal year ended January 30, 1999 (File No. 001-12107).
3.3
Certificate of Decrease of Shares Designated as Class B Common Stock as filed with the Delaware Secretary of
State on July 30, 1999, incorporated herein by reference to Exhibit 3.3 to A&F’s Quarterly Report on Form 10-Q for
the quarterly period ended July 31, 1999 (File No. 001-12107).
3.4
Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Abercrombie & Fitch Co., as
filed with the Delaware Secretary of State on June 16, 2011, incorporated herein by reference to Exhibit 3.1 to
A&F’s Current Report on Form 8-K dated and filed June 17, 2011 (File No. 001-12107).
3.5
Amended and Restated Certificate of Incorporation of Abercrombie & Fitch Co. reflecting amendments through
June 16, 2011, incorporated herein by reference to Exhibit 3.2 to A&F’s Quarterly Report on Form 10-Q for the
quarterly period ended July 30, 2011 (File No. 001-12107). [This document represents the Amended and Restated
Certificate of Incorporation of Abercrombie & Fitch Co. in compiled form incorporating all amendments. This
compiled document has not been filed with the Delaware Secretary of State.]
3.6
Certificate regarding Approval of Amendment to Section 2.03 of Amended and Restated Bylaws of Abercrombie &
Fitch Co. by Stockholders of Abercrombie & Fitch Co. at Annual Meeting of Stockholders held on June 10, 2009,
incorporated herein by reference to Exhibit 3.1 to A&F’s Current Report on Form 8-K dated and filed June 16, 2009
(File No. 001-12107).
3.7
Certificate regarding Approval of Addition of New Article IX of Amended and Restated Bylaws by Board of
Directors of Abercrombie & Fitch Co. on June 10, 2009, incorporated herein by reference to Exhibit 3.2 to A&F’s
Current Report on Form 8-K dated and filed June 16, 2009 (File No. 001-12107).
3.8
Certificate regarding Approval of Amendments to Sections 1.09 and 2.04 of Amended and Restated Bylaws of
Abercrombie & Fitch Co. by Board of Directors of Abercrombie & Fitch Co. on November 15, 2011, incorporated
herein by reference to Exhibit 3.1 to A&F’s Current Report on Form 8-K dated and filed November 21, 2011 (File
No. 001-12107).
3.9
Amended and Restated Bylaws of Abercrombie & Fitch Co. reflecting amendments through November 15, 2011,
incorporated herein by reference to Exhibit 3.2 to A&F’s Quarterly Report on Form 10-Q for the quarterly period
ended October 29, 2011 (File No. 001-12107). [This document represents the Amended and Restated Bylaws of
Abercrombie & Fitch Co. in compiled form incorporating all amendments.]
4.1
Rights Agreement, dated as of July 16, 1998, between A&F and First Chicago Trust Company of New York,
incorporated herein by reference to Exhibit 1 to A&F’s Registration Statement on Form 8-A dated and filed July 21,
1998 (File No. 001-12107).
4.2
Amendment No. 1 to Rights Agreement, dated as of April 21, 1999, between A&F and First Chicago Trust Company
of New York, incorporated herein by reference to Exhibit 2 to A&F’s Form 8-A (Amendment No. 1), dated April 23,
1999 and filed April 26, 1999 (File No. 001-12107).
4.3
Certificate of adjustment of number of Rights associated with each share of Class A Common Stock, dated May 27,
1999, incorporated herein by reference to Exhibit 4.6 to A&F’s Quarterly Report on Form 10-Q for the quarterly
period ended July 31, 1999 (File No. 001-12107).
4.4
Appointment and Acceptance of Successor Rights Agent, effective as of the opening of business on October 8, 2001,
between A&F and National City Bank, incorporated herein by reference to Exhibit 4.6 to A&F’s Quarterly Report on
Form 10-Q for the quarterly period ended August 4, 2001 (File No. 001-12107).
4.5
Amendment No. 2, dated as of June 11, 2008, to the Rights Agreement, dated as of July 16, 1998, between A&F and
National City Bank (as successor to First Chicago Trust Company of New York), as Rights Agent, incorporated
herein by reference to Exhibit 4.01 to A&F’s Form 8-A/A (Amendment No. 2), dated and filed June 12, 2008 (File
No. 001-12107).
4.6
Appointment and Acceptance of Successor Rights Agent, effective as of the opening of business on November 2,
2009, between A&F and American Stock Transfer & Trust Company, LLC (as successor to National City Bank), as
Rights Agent, incorporated herein by reference to Exhibit 4.6 to A&F’s Form 8-A/A (Amendment No. 5), dated and
filed November 3, 2009 (File No. 001-12107).
Table of Contents
89
4.7
Amended and Restated Credit Agreement, entered into as of July 28, 2011, among Abercrombie & Fitch
Management Co.; the Foreign Subsidiary Borrowers (as defined in the Amended and Restated Credit Agreement);
Abercrombie & Fitch Co.; the Lenders (as defined in the Amended and Restated Credit Agreement); PNC Bank,
National Association, as global agent, the Swing Line Lender and an LC Issuer; PNC Capital Markets LLC, as a co-
lead arranger and a co-bookrunner; J.P. Morgan Securities, LLC, as a co-lead arranger and a co-bookrunner;
JPMorgan Chase Bank, N.A., as syndication agent and an LC Issuer; Fifth Third Bank, as a co-documentation agent;
and The Huntington National Bank, as a co-documentation agent and an LC Issuer, incorporated herein by reference
to Exhibit 4.1 to A&F’s Current Report on Form 8-K dated and filed August 3, 2011 (File No. 001-12107).
4.8
Amended and Restated Guaranty of Payment (Domestic Credit Parties), dated as of July 28, 2011, among
Abercrombie & Fitch Co.; the material Domestic Subsidiaries (as defined in the Amended and Restated Guaranty of
Payment (Domestic Credit Parties)); and PNC Bank, National Association, as global agent, incorporated herein by
reference to Exhibit 4.2 to A&F’s Current Report on Form 8-K dated and filed August 3, 2011 (File No. 001-12107).
4.9
Supplement No. 1 to Amended and Restated Guaranty of Payment (Domestic Credit Parties), dated as of August 31,
2011, between NSOP, LLC, as a New Guarantor, and PNC Bank, National Association, as global agent, incorporated
herein by reference to Exhibit 4.3 to A&F’s Quarterly Report on Form 10-Q for the quarterly period ended July 30,
2011 (File No. 001-12107).
4.10
Amendment No. 1 to Credit Agreement, made as of February 24, 2012, among Abercrombie & Fitch Management
Co. and the Foreign Subsidiary Borrowers (as defined in the Amended and Restated Credit Agreement, dated as of
July 28, 2011), as borrowers; Abercrombie & Fitch Co., as a guarantor; PNC Bank, National Association, as Global
Agent, Swing Line Lender, an LC Issuer and a Lender; JPMorgan Chase Bank, N.A., as an LC Issuer and a Lender;
Fifth Third Bank, as a Lender; The Huntington National Bank, as an LC Issuer and a Lender; PNC Bank, National
Association, Canada Branch, as a Canadian Lender; JPMorgan Chase Bank, N.A., Toronto Branch, as a Canadian
Lender; Bank of America, N.A., as a Lender; U.S. Bank National Association, as a Lender; Citizens Bank of
Pennsylvania, as a Lender; and Sumitomo Mitsui Banking Corporation, as a Lender, incorporated herein by
reference to Exhibit 4.3 to A&F’s Current Report on Form 8-K dated and filed February 29, 2012 (File No.
001-12107).
4.11 Amendment No. 2 to Amended and Restated Credit Agreement, made as of January 23, 2012, among Abercrombie
& Fitch Management Co., as borrower; Abercrombie & Fitch Co., as guarantor; Abercrombie & Fitch Europe S.A.,
Abercrombie & Fitch (UK) Limited, AFH Stores UK Limited, AFH Canada Stores Co. and AFH Japan, G.K., as
foreign subsidiary borrowers; PNC Bank, National Association, as Global Agent, the Swing Line Lender, an LC
Issuer and a Lender; JPMorgan Chase Bank, N.A., as a Lender; Fifth Third Bank, as a Lender; The Huntington
National Bank, as a Lender; PNC Bank Canadian Branch, as a Canadian Lender; JPMorgan Chase Bank, N.A.,
Toronto Branch, as a Canadian Lender; Bank of America N.A., as a Lender; U.S. Bank National Association, as a
Lender; and Sumitomo Mitsui Banking Corporation, as a Lender, incorporated herein by reference to Exhibit 4.1 to
A&F's Current Report on Form 8-K dated and filed January 25, 2013 (File No. 001-12107).
4.12
Term Loan Agreement, entered into as of February 24, 2012, among Abercrombie & Fitch Management Co.;
Abercrombie & Fitch Co.; the Lenders (as defined in the Term Loan Agreement); PNC Bank, National Association,
as administrative agent and a Lender; PNC Capital Markets LLC, as a co-lead arranger and a co-bookrunner; J.P.
Morgan Securities LLC, as a co-lead arranger and a co-bookrunner; JPMorgan Chase Bank, N.A., as syndication
agent and a Lender; Fifth Third Bank, as a co-documentation agent and a Lender; Citizens Bank of Pennsylvania, as
a co-documentation agent and a Lender; The Huntington National Bank, as a Lender; U.S. Bank National
Association, as a Lender; HSBC Bank USA, N.A., as a Lender; and Sumitomo Mitsui Banking Corporation, as a
Lender, incorporated herein by reference to Exhibit 4.1 to A&F’s Current Report on Form 8-K dated and filed
February 29, 2012 (File No. 001-12107).
4.13
Guaranty of Payment (Credit Parties), dated as of February 24, 2012, among Abercrombie & Fitch Co.; the material
Domestic Subsidiaries (as identified in the Guaranty of Payment (Credit Parties)); and PNC Bank, National
Association, as administrative agent, incorporated herein by reference to Exhibit 4.2 to A&F’s Current Report on
Form 8-K dated and filed February 29, 2012 (File No. 001-12107).
4.14 Amendment No. 1 to Term Loan Agreement, made as of January 23, 2013, among Abercrombie & Fitch
Management Co., as borrower; Abercrombie & Fitch Co., as a guarantor; PNC Bank, National Association, as Agent
and a Lender; JPMorgan Chase Bank, N.A., as a Lender; Fifth Third Bank, as a Lender; The Huntington National
Bank, as a Lender; HSBC Bank USA, N.A., as a Lender; U.S. Bank National Association, as a Lender; Citizens
Bank of Pennsylvania, as a Lender; and Sumitomo Mitsui Banking Corporation, as a Lender, incorporated herein by
reference to Exhibit 4.2 to A&F's Current Report on Form 8-K dated and filed January 25, 2013 (File No.
001-12107).
*10.1
Abercrombie & Fitch Co. Incentive Compensation Performance Plan, incorporated herein by reference to Exhibit
10.1 to A&F’s Current Report on Form 8-K dated and filed June 18, 2012 (File No. 001-12107).
*10.2
Abercrombie & Fitch Co. 2002 Stock Plan for Associates (as amended and restated May 22, 2003), incorporated
herein by reference to Exhibit 10.4 to A&F’s Quarterly Report on Form 10-Q for the quarterly period ended May 3,
2003 (File No. 001-12107).
*10.3
Amended and Restated Employment Agreement, entered into as of August 15, 2005, by and between A&F and
Michael S. Jeffries, including as Exhibit A thereto the Abercrombie & Fitch Co. Supplemental Executive Retirement
Plan (Michael S. Jeffries) effective February 2, 2003, incorporated herein by reference to Exhibit 10.1 to A&F’s
Current Report on Form 8-K dated and filed August 26, 2005 (File No. 001-12107).
Table of Contents
90
*10.4
Employment Agreement, entered into as of December 19, 2008, by and between A&F and Michael S. Jeffries,
incorporated herein by reference to Exhibit 10.1 to A&F’s Current Report on Form 8-K dated and filed December
22, 2008 (File No. 001-12107).
*10.5
Amendment No. 1 to Michael S. Jeffries Employment Agreement, entered into on April 12, 2010, by and between
A&F and Michael S. Jeffries, incorporated herein by reference to Exhibit 10.1 to A&F’s Current Report on Form 8-
K dated and filed April 13, 2010 (File No. 001-12107).
*10.6
Amendment No. 2 to Michael S. Jeffries Employment Agreement, made and entered into on January 28, 2011, by
and between A&F and Michael S. Jeffries, incorporated herein by reference to Exhibit 10.1 to A&F’s Current Report
on Form 8-K dated and filed January 31, 2011 (File No. 001-12107).
*10.7 Amendment No. 3 to Michael S. Jeffries Employment Agreement, made and entered into on May 7, 2012, by and
between A&F and Michael S. Jeffries, incorporated herein by reference to Exhibit 10.1 to A&F's Current Report on
Form 8-K dated and filed May 9, 2012 (File No. 001-12107).
10.8
Aircraft Time Sharing Agreement, made and entered into to be effective as of June 1, 2010, by and between
Abercrombie & Fitch Management Co., as Lessor, and Michael S. Jeffries, as Lessee, and consented to by DFZ,
LLC, as Owner (the “Gulfstream Agreement”), incorporated herein by reference to Exhibit 10.2 to A&F’s Quarterly
Report on Form 10-Q for the quarterly period ended May 1, 2010 (File No. 001-12107).
10.9
Aircraft Time Sharing Agreement, made and entered into to be effective as of November 12, 2010, by and between
Abercrombie & Fitch Management Co., as Lessor, and Michael S. Jeffries, as Lessee, and consented to by NetJets
Sales, Inc., NetJets Aviation, Inc. and NetJets Services, Inc. (the “NetJets Agreement”), incorporated herein by
reference to Exhibit 10.10 to A&F’s Annual Report on Form 10-K for the fiscal year ended January 29, 2011 (File
No. 001-12107).
10.10
Letter of Understanding, dated November 12, 2010, between Michael S. Jeffries and Abercrombie & Fitch
Management Co. in respect of the Gulfstream Agreement and the NetJets Agreement, incorporated herein by
reference to Exhibit 10.11 to A&F’s Annual Report on Form 10-K for the fiscal year ended January 29, 2011 (File
No. 001-12107).
*10.11
Abercrombie & Fitch Co. Directors’ Deferred Compensation Plan (as amended and restated May 22, 2003) — as
authorized by the Board of Directors of A&F on December 17, 2007, to become one of two plans following the
division of said Abercrombie & Fitch Co. Directors’ Deferred Compensation Plan (as amended and restated May 22,
2003) into two separate plans effective January 1, 2005 and to be named the Abercrombie & Fitch Co. Directors’
Deferred Compensation Plan (Plan I) [terms to govern “amounts deferred” (within the meaning of Section 409A of
the Internal Revenue Code of 1986, as amended) in taxable years beginning before January 1, 2005 and any earnings
thereon], incorporated herein by reference to Exhibit 10.7 to A&F’s Quarterly Report on Form 10-Q for the quarterly
period ended May 3, 2003 (File No. 001-12107).
*10.12
Abercrombie & Fitch Nonqualified Savings and Supplemental Retirement Plan (January 1, 2001 Restatement) — as
authorized by the Compensation Committee of the A&F Board of Directors on August 14, 2008, to become one of
two sub-plans following the division of said Abercrombie & Fitch Nonqualified Savings and Supplemental
Retirement Plan (January 1, 2001 Restatement) into two sub-plans effective immediately before January 1, 2009 and
to be named the Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan I [terms to
govern amounts “deferred” (within the meaning of Section 409A of the Internal Revenue Code of 1986, as
amended) before January 1, 2005, and any earnings thereon], incorporated herein by reference to Exhibit 10.9 to
A&F’s Annual Report on Form 10-K for the fiscal year ended February 1, 2003 (File No. 001-12107).
*10.13
First Amendment to the Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan I (Plan
I) (January 1, 2001 Restatement), as authorized by the Compensation Committee of the A&F Board of Directors on
August 14, 2008 and executed on behalf of A&F on September 3, 2008, incorporated herein by reference to Exhibit
10.13 to A&F’s Quarterly Report on Form 10-Q for the quarterly period ended August 2, 2008 (File No. 001-12107).
*10.14
Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan (II) — as authorized by the
Compensation Committee of the A&F Board of Directors on August 14, 2008, to become one of two sub-plans
following the division of the Abercrombie & Fitch Nonqualified Savings and Supplemental Retirement Plan
(January 1, 2001 Restatement) into two sub-plans effective immediately before January 1, 2009 and to be named the
Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan II [terms to govern amounts
“deferred” (within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended) in taxable years
beginning on or after January 1, 2005, and any earnings thereon], incorporated herein by reference to Exhibit 10.12
to A&F’s Quarterly Report on Form 10-Q for the quarterly period ended August 2, 2008 (File No. 001-12107).
*10.15
Abercrombie & Fitch Co. 2003 Stock Plan for Non-Associate Directors, incorporated herein by reference to Exhibit
10.9 to A&F’s Quarterly Report on Form 10-Q for the quarterly period ended May 3, 2003 (File No. 001-12107).
*10.16
Form of Stock Option Agreement (Nonstatutory Stock Options) used for grants under the Abercrombie & Fitch Co.
2002 Stock Plan for Associates prior to November 28, 2004, incorporated herein by reference to Exhibit 10.19 to
A&F’s Quarterly Report on Form 10-Q for the quarterly period ended October 30, 2004 (File No. 001-12107).
*10.17
Form of Stock Option Agreement (Nonstatutory Stock Options) used for grants under the Abercrombie & Fitch Co.
2002 Stock Plan for Associates after November 28, 2004 and before March 6, 2006, incorporated herein by
reference to Exhibit 10.20 to A&F’s Quarterly Report on Form 10-Q for the quarterly period ended October 30,
2004 (File No. 001-12107).
Table of Contents
91
*10.18
Form of Stock Option Agreement used for grants under the Abercrombie & Fitch Co. 2003 Stock Plan for Non-
Associate Directors prior to November 28, 2004, incorporated herein by reference to Exhibit 10.21 to A&F’s
Quarterly Report on Form 10-Q for the quarterly period ended October 30, 2004 (File No. 001-12107).
*10.19
Form of Stock Option Agreement used for grants under the Abercrombie & Fitch Co. 2003 Stock Plan for Non-
Associate Directors after November 28, 2004 and before June 13, 2007, incorporated herein by reference to
Exhibit 10.22 to A&F’s Quarterly Report on Form 10-Q for the quarterly period ended October 30, 2004 (File No.
001-12107).
*10.20
Form of Stock Option Agreement (Nonstatutory Stock Options) used for grants under the Abercrombie & Fitch Co.
2002 Stock Plan for Associates on or after March 6, 2006 and before June 13, 2007, incorporated herein by
reference to Exhibit 10.36 to A&F’s Annual Report on Form 10-K for the fiscal year ended January 28, 2006 (File
No. 001-12107).
*10.21
Abercrombie & Fitch Co. 2005 Long-Term Incentive Plan, incorporated herein by reference to Exhibit 10.1 to
A&F’s Current Report on Form 8-K dated and filed June 17, 2005 (File No. 001-12107).
*10.22
Form of Stock Option Agreement (Nonstatutory Stock Option) used for grants under the Abercrombie & Fitch Co.
2005 Long-Term Incentive Plan prior to March 6, 2006, incorporated herein by reference to Exhibit 99.4 to A&F’s
Current Report on Form 8-K dated and filed August 19, 2005 (File No. 001-12107).
*10.23
Summary of Terms of the Annual Restricted Stock Unit Grants to Non-Associate Directors of Abercrombie & Fitch
Co., to summarize the terms of the grants to the Board of Directors of A&F under the 2005 Long-Term Incentive
Plan.
*10.24
Summary of Compensation Structure for Non-Associate Members of Board of Directors of A&F.
*10.25
Form of Stock Option Agreement (Nonstatutory Stock Option) for Associates used for grants under the Abercrombie
& Fitch Co. 2005 Long-Term Incentive Plan on or after March 6, 2006, incorporated herein by reference to Exhibit
10.33 to A&F’s Annual Report on Form 10-K for the fiscal year ended January 28, 2006 (File No. 001-12107).
*10.26
Form of Restricted Stock Unit Award Agreement for Associates used for grants under the Abercrombie & Fitch Co.
2005 Long-Term Incentive Plan on or after March 6, 2006, incorporated herein by reference to Exhibit 10.34 to
A&F’s Annual Report on Form 10-K for the fiscal year ended January 28, 2006 (File No. 001-12107).
*10.27
Trust Agreement, made as of October 16, 2006, between A&F and Wilmington Trust Company, incorporated herein
by reference to Exhibit 10.1 to A&F’s Current Report on Form 8-K dated and filed October 17, 2006 (File No.
001-12107).
*10.28
Amended and Restated Abercrombie & Fitch Co. 2007 Long-Term Incentive Plan, incorporated herein by reference
to Exhibit 10.1 to A&F’s Current Report on Form 8-K dated and filed June 17, 2011 (File No. 001-12107).
*10.29
Form of Stock Option Agreement to be used to evidence the grant of non-statutory stock options to associates of
A&F and its subsidiaries under the Amended and Restated Abercrombie & Fitch Co. 2007 Long-Term Incentive
Plan (formerly known as the Abercrombie & Fitch Co. 2007 Long-Term Incentive Plan) after August 21, 2007,
incorporated herein by reference to Exhibit 10.1 to A&F’s Current Report on Form 8-K dated and filed August 27,
2007 (File No. 001-12107).
*10.30
Form of Restricted Stock Unit Award Agreement to be used to evidence the grant of restricted stock units to
associates of A&F and its subsidiaries under the Amended and Restated Abercrombie & Fitch Co. 2007 Long-Term
Incentive Plan (formerly known as the Abercrombie & Fitch Co. 2007 Long-Term Incentive Plan) after August 21,
2007, incorporated herein by reference to Exhibit 10.2 to A&F’s Current Report on Form 8-K dated and filed August
27, 2007 (File No. 001-12107).
*10.31
Form of Restricted Stock Unit Award Agreement to be used to evidence the grant of restricted stock units to
Executive Vice Presidents of A&F and its subsidiaries under the Abercrombie & Fitch Co. 2005 Long-Term
Incentive Plan on and after March 4, 2008, incorporated herein by reference to Exhibit 10.1 to A&F’s Current
Report on Form 8-K dated and filed March 6, 2008 (File No. 001-12107).
*10.32
Abercrombie & Fitch Co. Associate Stock Purchase Plan (Effective July 1, 1998), incorporated herein by reference
to Exhibit 1 to the Schedule 13D filed by Michael S. Jeffries on May 2, 2006.
*10.33
Form of Stock Appreciation Right Agreement to be used to evidence the grant of stock appreciation rights to
associates (employees) of A&F and its subsidiaries under the Amended and Restated Abercrombie & Fitch Co. 2007
Long-Term Incentive Plan (formerly known as the Abercrombie & Fitch Co. 2007 Long-Term Incentive Plan) on
and after February 12, 2009, incorporated herein by reference to Exhibit 10.1 to A&F’s Current Report on Form 8-K
dated and filed February 17, 2009 (File No. 001-12107).
*10.34
Form of Stock Appreciation Right Agreement to be used to evidence the Semi-Annual Grants of stock appreciation
rights to Michael S. Jeffries under the Abercrombie & Fitch Co. 2007 Long-Term Incentive Plan (now known as the
Amended and Restated Abercrombie & Fitch Co. 2007 Long-Term Incentive Plan) as contemplated by the
Employment Agreement, entered into as of December 19, 2008, by and between A&F and Michael S. Jeffries,
incorporated herein by reference to Exhibit 10.2 to A&F’s Current Report on Form 8-K dated and filed February 17,
2009 (File No. 001-12107).
Table of Contents
92
*10.35
Stock Appreciation Right Agreement [Retention Grant Tranche 1], made to be effective as of December 19, 2008, by
and between A&F and Michael S. Jeffries entered into to evidence first tranche of Retention Grant covering
1,600,000 stock appreciation rights granted under the Abercrombie & Fitch Co. 2007 Long-Term Incentive Plan
(now known as the Amended and Restated Abercrombie & Fitch Co. 2007 Long-Term Incentive Plan) as
contemplated by the Employment Agreement, entered into as of December 19, 2008, by and between A&F and
Michael S. Jeffries, incorporated herein by reference to Exhibit 10.3 to A&F’s Current Report on Form 8-K dated
and filed February 17, 2009 (File No. 001-12107).
*10.36
Stock Appreciation Right Agreement [Retention Grant Tranche 2] by and between A&F and Michael S. Jeffries
entered into effective as of March 2, 2009 to evidence second tranche of Retention Grant covering 1,200,000 stock
appreciation rights granted under the Abercrombie & Fitch Co. 2007 Long-Term Incentive Plan (now known as the
Amended and Restated Abercrombie & Fitch Co. 2007 Long-Term Incentive Plan) as contemplated by the
Employment Agreement, entered into as of December 19, 2008, by and between A&F and Michael S. Jeffries,
incorporated herein by reference to Exhibit 10.4 to A&F’s Current Report on Form 8-K dated and filed February 17,
2009 (File No. 001-12107).
*10.37
Stock Appreciation Right Agreement [Retention Grant Tranche 3] by and between A&F and Michael S. Jeffries
entered into effective as of September 1, 2009 to evidence third tranche of Retention Grant covering 1,200,000 stock
appreciation rights granted under the Abercrombie & Fitch Co. 2007 Long-Term Incentive Plan (now known as the
Amended and Restated Abercrombie & Fitch Co. 2007 Long-Term Incentive Plan) as contemplated by the
Employment Agreement, entered into as of December 19, 2008, by and between A&F and Michael S. Jeffries,
incorporated herein by reference to Exhibit 10.5 to A&F’s Current Report on Form 8-K dated and filed February 17,
2009 (File No. 001-12107).
*10.38
Form of Stock Appreciation Right Agreement to be used to evidence the grant of stock appreciation rights to
associates (employees) of Abercrombie & Fitch Co. and its subsidiaries under the Abercrombie & Fitch Co. 2005
Long-Term Incentive Plan after February 12, 2009, incorporated herein by reference to Exhibit 10.6 to A&F’s
Current Report on Form 8-K dated and filed February 17, 2009 (File No. 001-12107).
*10.39
Abercrombie & Fitch Co. Directors’ Deferred Compensation Plan (Plan II) — as authorized by the Board of
Directors of A&F on December 17, 2007, to become one of two plans following the division of the Abercrombie &
Fitch Co. Directors’ Deferred Compensation Plan (as amended and restated May 22, 2003) into two separate plans
effective January 1, 2005 and to be named Abercrombie & Fitch Co. Directors’ Deferred Compensation Plan (Plan
II) [terms to govern “amounts deferred” (within the meaning of Section 409A of the Internal Revenue Code of 1986,
as amended) in taxable years beginning on or after January 1, 2005 and any earnings thereon], incorporated herein
by reference to Exhibit 10.50 to A&F’s Annual Report on Form 10-K for the fiscal year ended January 31, 2009
(File No. 001-12107).
12.1
Computation of Leverage Ratio and Coverage Ratio for the fiscal year ended February 2, 2013.
14.1
Abercrombie & Fitch Code of Business Conduct and Ethics, as amended by the Board of Directors of A&F on
August 21, 2007, incorporated herein by reference to Exhibit 14 to A&F’s Current Report on Form 8-K dated and
filed August 27, 2007 (File No. 001-12107).
18.1
Letter of Change in Accounting Principle
21.1
List of Subsidiaries of the Registrant
23.1
Consent of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP
24.1
Powers of Attorney
31.1
Certifications by Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certifications by Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certifications by Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101
The following materials from Abercrombie & Fitch Co.’s Annual Report on Form 10-K for the fiscal year ended
February 2, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of
Operations and Comprehensive Income for the fiscal years ended February 2, 2013, January 28, 2012 and January
29, 2011; (ii) Consolidated Balance Sheets at February 2, 2013 and January 28, 2012; (iii) Consolidated Statements
of Stockholders’ Equity for the fiscal years ended February 2, 2013, January 28, 2012 and January 29, 2011;
(iv) Consolidated Statements of Cash Flows for the fiscal years ended February 2, 2013, January 28, 2012 and
January 29, 2011; and (v) Notes to Consolidated Financial Statements***
* Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K
pursuant to Item 15(a)(3) of this Annual Report on Form 10-K.
** These certifications are furnished.
*** Electronically submitted herewith
Table of Contents
94
SIGNATURES
Pursuant to the requirements of Section 13 or l5(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ABERCROMBIE & FITCH CO.
Date: April 2, 2013
By /s/ JONATHAN E. RAMSDEN
Jonathan E. Ramsden,
Executive Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated on April 2, 2013.
Signature
Title
/s/ Michael S. Jeffries
Michael S. Jeffries
Chairman, Chief Executive Officer and Director
*
James B. Bachmann
Director
*
Lauren J. Brisky
Director
*
Michael E. Greenlees
Director
*
Archie M. Griffin
Director
*
Kevin S. Huvane
Director
*
John W. Kessler
Director
*
Elizabeth M. Lee
Director
/s/ Jonathan E. Ramsden
Jonathan E. Ramsden
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting
Officer)
*
Craig R. Stapleton
Director
* The undersigned, by signing his name hereto, does hereby sign this Annual Report on Form 10-K on behalf of each of the above-
named directors of the Registrant pursuant to powers of attorney executed by such directors, which powers of attorney are filed
with this Annual Report on Form 10-K as exhibits, in the capacities as indicated and on April 2, 2013.
By
/s/ Jonathan E. Ramsden
Jonathan E. Ramsden
Attorney-in-fact
Table of Contents
95
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 2, 2013
ABERCROMBIE & FITCH CO.
(Exact name of registrant as specified in its charter)
EXHIBITS
Table of Contents
96
EXHIBIT INDEX
Exhibit
No.
Document
10.23 Summary of Terms of the Annual Restricted Stock Unit Grants to Non-Associate Directors of Abercrombie &
Fitch Co., to summarize the terms of the grants to the Board of Directors of A&F under the 2005 Long-Term
Incentive Plan.
10.24 Summary of Compensation Structure for Non-Associate Members of Board of Directors of A&F.
12.1
Computation of Leverage Ratio and Coverage Ratio for the fiscal year ended February 2, 2013.
18.1
Letter of Change in Accounting Principle
21.1
List of Subsidiaries of the Registrant
23.1
Consent of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP
24.1
Powers of Attorney
31.1
Certifications by Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certifications by Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certifications by Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101
The following materials from Abercrombie & Fitch Co.’s Annual Report on Form 10-K for the fiscal year ended
February 2, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of
Operations and Comprehensive Income for the fiscal years ended February 2, 2013, January 28, 2012 and January
29, 2011; (ii) Consolidated Balance Sheets at February 2, 2013 and January 28, 2012; (iii) Consolidated
Statements of Stockholders’ Equity for the fiscal years ended February 2, 2013, January 28, 2012 and January 29,
2011; (iv) Consolidated Statements of Cash Flows for the fiscal years ended February 2, 2013, January 28, 2012
and January 29, 2011; and (v) Notes to Consolidated Financial Statements
Table of Contents
Summary of Terms of the Annual Restricted Stock Unit Grants
to Non-Associate Directors of Abercrombie & Fitch Co.
(Approved by Board of Directors on August 15, 2005 and effective August 1, 2005)
Directors of Abercrombie & Fitch Co. who are not associates of Abercrombie & Fitch Co. or its
subsidiaries (“non-associate directors”) receive an annual grant of 3,000 restricted stock units as part of
their compensation. Each restricted stock unit represents the right to receive one share of Class A
Common Stock, $0.01 par value, of Abercrombie & Fitch Co. (the “Common Stock”), upon vesting.
The annual restricted stock unit grant is subject to the following provisions:
• restricted stock units are to be granted annually on the date of the annual meeting of
stockholders of Abercrombie & Fitch Co. pursuant to the Abercrombie & Fitch Co. 2005
Long-Term Incentive Plan;
• the maximum market value of the underlying shares of Common Stock on the date of grant is
to be $300,000 (i.e., should the price of the Company's Common Stock on the grant date
exceed $100 per share, the number of restricted stock units granted will be automatically
reduced to provide a maximum grant date market value of $300,000);
• the minimum market value of the underlying shares of Common Stock on the date of grant is
to be $120,000 (i.e., should the price of the Company's Common Stock on the grant date be
lower than $40 per share, the number of restricted stock units granted will be automatically
increased to provide a minimum grant date market value of $120,000); and
• restricted stock units will vest on the later of (i) the first anniversary of the grant date or (ii) the
first “open window” trading date following the first anniversary of the grant date, subject to
earlier vesting in the event of the director's death or total disability or upon a change of control
of Abercrombie & Fitch Co.
Summary of Compensation Structure for
Non-Associate Members of Board of Directors of Abercrombie & Fitch Co.
Any officer of Abercrombie & Fitch Co. (the “Company”) who is also a director of the Company
receives no additional compensation for services rendered as a director. Directors of the Company who
are not employees, or as referred to by the Company, “associates”, of the Company or its subsidiaries
(“non-associate directors”) receive:
• an annual retainer of $55,000 (paid quarterly in arrears);
• an annual retainer for each standing committee Chair and member of $25,000 and $12,500,
respectively, other than (i) the Chair and members of the Audit Committee who receive
$40,000 and $25,000, respectively, and (ii) the Lead Independent Director of the Company
who receives $30,000 for serving in that capacity. In each case, the retainers are paid quarterly
in arrears; and
• an annual grant of 3,000 restricted stock units (each of which represents the right to receive
one share of Class A Common Stock, $0.01 par value, of the Company (the “Common Stock”),
upon vesting).
The annual restricted stock unit grant is subject to the following provisions:
• restricted stock units are to be granted annually on the date of the annual meeting of
stockholders of the Company;
• the maximum market value of the underlying shares of Common Stock on the date of grant is
to be $300,000 (i.e., should the price of the Company's Common Stock on the grant date
exceed $100 per share, the number of restricted stock units granted will be automatically
reduced to provide a maximum grant date market value of $300,000);
• the minimum market value of the underlying shares of Common Stock on the date of grant is
to be $120,000 (i.e., should the price of the Company's Common Stock on the grant date be
lower than $40 per share, the number of restricted stock units granted will be automatically
increased to provide a minimum grant date market value of $120,000); and
• restricted stock units will vest on the later of (i) the first anniversary of the grant date or (ii) the
first “open window” trading date following the first anniversary of the grant date, subject to
earlier vesting in the event of the director's death or total disability or upon a change of control
of the Company.
Non-associate directors are also reimbursed for their expenses for attending meetings of the
Company's Board of Directors and Board committee meetings and receive the discount on purchases of
the Company's merchandise extended to all Company associates.
ABERCROMBIE & FITCH CO.
Computation of Leverage Ratio and Coverage Ratio
Fiscal 2012
Leverage Ratio Calculation:
Adjusted Total Debt
(1)
$ 2,512,448
Consolidated EBITDAR
(2)
$ 1,054,867
Leverage Ratio
2.38
Coverage Ratio Calculation:
Consolidated EBITDAR
(2)
$ 1,054,867
Net Interest Expense + Long-Term Debt due in One Year + Minimum Rent + Contingent Store Rent $ 425,942
Coverage Ratio
2.48
(1)
Adjusted Total Debt means the sum of total debt (excluding specified permitted foreign bank guarantees and trade letters of
credit) plus 600% of forward minimum rent commitments.
(2)
Consolidated EBITDAR means, for the fiscal year ended February 2, 2013 ("Fiscal 2012"), Consolidated Net Income for
Fiscal 2012; plus without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of
(i) Interest Expense, (ii) income and franchise (or similar) tax expense, (iii) depreciation and amortization expense (including
impairment of long-term store fixed assets), (iv) Minimum Rent (plus contingent store rent plus non-cash rent expense),
(v) Non-Cash Compensation Charges, (vi) losses on any Specified Auction Rate Securities, in each case not to exceed the
applicable Temporary Impairment for such Specified Auction Rate Securities, (vii) non-cash charges related to the Ruehl Exit
in an aggregate amount not to exceed $50,000,000, (viii) non-recurring cash charges in an aggregate amount not to exceed
$61,000,000 related to the Ruehl Exit, (ix) additional non-recurring non-cash charges in an amount not to exceed $20,000,000
in the aggregate during Fiscal 2012, and (x) other non-recurring cash charges in an amount not to exceed $10,000,000 in the
aggregate during Fiscal 2012 minus without duplication (A) Interest Income, (B) any benefit received from income, franchise
(or similar) tax expense to the extent included in the determination of Consolidated Net Income, (C) gains arising from any
Specified Auction Rate Securities, in each case resulting from the excess of the Fair Value thereof and (D) any cash payments
made during such period that were deducted in determining Consolidated Net Income and added back in determining
Consolidated EBITDAR in a previous Testing Period under clauses (v) or (ix); all as determined in accordance with GAAP on a
consolidated basis for Abercrombie & Fitch Co. and the Subsidiaries) as defined in the Amended and Restated Credit
Agreement, dated as of July 28, 2011, to which Abercrombie & Fitch Management Co. and Abercrombie & Fitch Co. are
parties.)
April 2, 2013
Board of Directors of
Abercrombie & Fitch Co.
6301 Fitch Path
New Albany, Ohio 43054
Dear Directors:
We are providing this letter to you for inclusion as an exhibit to your Form 10-K filing pursuant to Item 601 of Regulation S-K.
We have audited the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year
ended February 2, 2013 and issued our report thereon dated April 2, 2013. Note 4 to the financial statements describes a
change in accounting principle from the retail inventory method to weighted average cost in accounting for inventory. It should
be understood that the preferability of one acceptable method of accounting over another for inventory accounting methods has
not been addressed in any authoritative accounting literature, and in expressing our concurrence below we have relied on
management's determination that this change in accounting principle is preferable. Based on our reading of management's
stated reasons and justification for this change in accounting principle in the Form 10-K, and our discussions with management
as to their judgment about the relevant business planning factors relating to the change, we concur with management that such
change represents, in the Company's circumstances, the adoption of a preferable accounting principle in conformity with
Accounting Standards Codification 250, Accounting Changes and Error Corrections.
Very truly yours,
/s/ PricewaterhouseCoopers LLP
Subsidiaries of Abercrombie & Fitch Co.: Jurisdiction:
1. Abercrombie & Fitch Holding Corporation (a) Delaware
2. Abercrombie & Fitch Fulfillment Company (b) Ohio
3. Abercrombie & Fitch Distribution Company (b) Ohio
4. Abercrombie & Fitch Management Co. (b) Delaware
5. A & F Trademark, Inc. (c) Delaware
6. Abercrombie & Fitch Stores, Inc. (c) Ohio
7. Hollister Co. (c) Delaware
8. Abercrombie & Fitch International, Inc. (c) Delaware
9. Fan Company, LLC (c) Ohio
10. Canoe, LLC (c) Ohio
11. Crombie, LLC (c) Ohio
12. DFZ, LLC (c) Ohio
13. NSOP, LLC (c) Ohio
14. J.M.H. Trademark, Inc. (d) Delaware
15. J.M. Hollister, LLC (e) Ohio
16. Ruehl No. 925, LLC (e) Ohio
17. Gilly Hicks, LLC (e) Ohio
18. Abercrombie & Fitch Europe SA (f) Switzerland
19. Abercrombie & Fitch Hong Kong Limited (f) Hong Kong
20. AFH Puerto Rico LLC (f) Ohio (Qualified in PR)
21. AFH Brasil Participacoes Ltda (f)* Brazil
22. A&F Canada Holding Co. (f) Delaware
23. Abercrombie & Fitch Trading Co. (g) Ohio
24. AFH Canada Stores Co. (h) Nova Scotia
25. AFH Japan GK (i) Japan
26. Abercrombie & Fitch Italia SRL (i) Italy
27. Abercrombie & Fitch (UK) Limited (i) United Kingdom
28. AFH Stores UK Limited (i) United Kingdom
29. Abercrombie & Fitch (France) SAS (i) France
30. Abercrombie & Fitch (Denmark) ApS (i) Denmark
31. Abercrombie & Fitch (Spain) S.L. (i) Spain
32. Abfico Netherlands Distribution B.V. (i) The Netherlands
33. European Regional Inventory Control NL B.V. (i) The Netherlands
34. AFH Hong Kong Limited (i) Hong Kong
35. A&F Hollister Ireland Limited (i) Ireland
36. AFH Hong Kong Stores Limited (i) Hong Kong
37. AFH Singapore Pte. Ltd. (i) Singapore
38. A&F HCo Stores AT GmbH (i) Austria
39. AFH Belgium SPRL (i)** Belgium
40. AFH Korea Yuhan Hoesa (i) South Korea
41. AFH Poland Sp. Z o.o (i) Poland
42. AFHCo Stores NL BV (i) The Netherlands
43. AFH Switzerland SA (i) Switzerland
44. AFH Fulfillment NL BV (i) The Netherlands
45. AFH TR Perakende Satis Limited Sirketi (i)*** Turkey
46. AFH Australia Pty. Ltd. (i) Australia
47. AFH Finland Oy (i) Finland
48. AFH Taiwan Co., Ltd. (i) Taiwan
49. Abercrombie & Fitch Procurement Services, LLC (j) Ohio
50. Abercrombie & Fitch Design Limited (j) United Kingdom
51. Hollister Co. California, LLC (j) California
52. AFH Germany GmbH (k) Germany
53. AFH Sweden AB (k) Sweden
54. AFH Trading (Shanghai) Co., Ltd. (l) China
55. AFH International Trading Shanghai Co., Ltd. (l) China
(a) Wholly-owned subsidiary of Abercrombie & Fitch Co., the registrant
(b) Wholly-owned subsidiary of Abercrombie & Fitch Holding Corporation
(c) Wholly-owned subsidiary of Abercrombie & Fitch Management Co.
(d) Wholly-owned subsidiary of A&F Trademark, Inc.
(e) Wholly-owned subsidiary of Abercrombie & Fitch Stores, Inc.
(f) Wholly-owned subsidiary of Abercrombie & Fitch International, Inc.
(g) Wholly-owned subsidiary of J.M.H. Trademark, Inc.
(h) Wholly-owned subsidiary of A&F Canada Holding Co.
(i) Wholly-owned subsidiary of Abercrombie & Fitch Europe SA
(j) Wholly-owned subsidiary of Abercrombie & Fitch Trading Co.
(k) Wholly-owned subsidiary of Abfico Netherlands Distribution B.V.
(l) Wholly-owned subsidiary of AFH Hong Kong Limited
* Abercrombie & Fitch Management Co. owns 1% (8,600 shares @ R$1.00/share) of AFH Brasil Participacoes Ltda .
Abercrombie & Fitch International, Inc. owns the remaining 99% (841,400 shares @ R$1.00/share).
** Abfico Netherlands Distribution B.V. owns three shares (EUR 300.00) of AFH Belgium SPRL. Abercrombie & Fitch
Europe SA owns the remaining 169,997 shares.
*** Abfico Netherlands Distribution B.V. owns 101 shares (TL 5,050) of AFH TR Perkande Satis Limited Sirketi.
Abercrombie & Fitch Europe SA owns the remaining 9,999 shares TL 499,950).
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-15941, 333-15945,
333-60189, 333-81373, 333-100079, 333-107646, 333-107648, 333-128000, 333-145166 and 333-176135) of Abercrombie &
Fitch Co. of our report dated April 2, 2013 relating to the consolidated financial statements and the effectiveness of internal
control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
April 2, 2013
POWER OF ATTORNEY
The undersigned officer and director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an
Annual Report on Form 10-K for the fiscal year ended February 2, 2013 under the provisions of the Securities Exchange Act of
1934, as amended, with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Jonathan
E. Ramsden, with full power of substitution and resubstitution, as attorney in-fact and agent to sign for the undersigned, in any
and all capacities, such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K, with full
power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the
premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
EXECUTED as of the 2nd day of April, 2013
/s/ MICHAEL S. JEFFRIES
Michael S. Jeffries
POWER OF ATTORNEY
The undersigned officer of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual
Report on Form 10-K for the fiscal year ended February 2, 2013 under the provisions of the Securities Exchange Act of 1934,
as amended, with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S.
Jeffries, with full power of substitution and resubstitution, as attorney in-fact and agent to sign for the undersigned, in any and
all capacities, such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K, with full
power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the
premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies
and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
EXECUTED as of the 2nd day of April, 2013
/s/ JONATHAN E. RAMSDEN
Jonathan E. Ramsden
POWER OF ATTORNEY
The undersigned director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual
Report on Form 10-K for the fiscal year ended February 2, 2013 under the provisions of the Securities Exchange Act of 1934,
as amended, with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S.
Jeffries and Jonathan E. Ramsden, and each of them, with full power of substitution and resubstitution, as attorney in-fact and
agent to sign for the undersigned, in any and all capacities, such Annual Report on Form 10-K and any and all amendments
thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report on Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally
present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 2nd day of April, 2013
/s/ JAMES B. BACHMANN
James B. Bachmann
POWER OF ATTORNEY
The undersigned director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual
Report on Form 10-K for the fiscal year ended February 2, 2013 under the provisions of the Securities Exchange Act of 1934,
as amended, with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S.
Jeffries and Jonathan E. Ramsden, and each of them, with full power of substitution and resubstitution, as attorney in-fact and
agent to sign for the undersigned, in any and all capacities, such Annual Report on Form 10-K and any and all amendments
thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report on Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally
present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 2nd day of April, 2013
/s/ LAUREN J. BRISKY
Lauren J. Brisky
POWER OF ATTORNEY
The undersigned director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual
Report on Form 10-K for the fiscal year ended February 2, 2013 under the provisions of the Securities Exchange Act of 1934,
as amended, with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S.
Jeffries and Jonathan E. Ramsden, and each of them, with full power of substitution and resubstitution, as attorney in-fact and
agent to sign for the undersigned, in any and all capacities, such Annual Report on Form 10-K and any and all amendments
thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report on Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally
present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 2nd day of April, 2013
/s/ MICHAEL E. GREENLEES
Michael E. Greenlees
POWER OF ATTORNEY
The undersigned director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual
Report on Form 10-K for the fiscal year ended February 2, 2013 under the provisions of the Securities Exchange Act of 1934,
as amended, with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S.
Jeffries and Jonathan E. Ramsden, and each of them, with full power of substitution and resubstitution, as attorney in-fact and
agent to sign for the undersigned, in any and all capacities, such Annual Report on Form 10-K and any and all amendments
thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report on Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally
present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 2nd day of April, 2013
/s/ ARCHIE M. GRIFFIN
Archie M. Griffin
POWER OF ATTORNEY
The undersigned director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual
Report on Form 10-K for the fiscal year ended February 2, 2013 under the provisions of the Securities Exchange Act of 1934,
as amended, with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S.
Jeffries and Jonathan E. Ramsden, and each of them, with full power of substitution and resubstitution, as attorney in-fact and
agent to sign for the undersigned, in any and all capacities, such Annual Report on Form 10-K and any and all amendments
thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report on Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally
present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 2nd day of April, 2013
/s/ KEVIN S. HUVANE
Kevin S. Huvane
POWER OF ATTORNEY
The undersigned director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual
Report on Form 10-K for the fiscal year ended February 2, 2013 under the provisions of the Securities Exchange Act of 1934,
as amended, with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S.
Jeffries and Jonathan E. Ramsden, and each of them, with full power of substitution and resubstitution, as attorney in-fact and
agent to sign for the undersigned, in any and all capacities, such Annual Report on Form 10-K and any and all amendments
thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report on Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally
present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 2nd day of April, 2013
/s/ JOHN W. KESSLER
John W. Kessler
POWER OF ATTORNEY
The undersigned director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual
Report on Form 10-K for the fiscal year ended February 2, 2013 under the provisions of the Securities Exchange Act of 1934,
as amended, with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S.
Jeffries and Jonathan E. Ramsden, and each of them, with full power of substitution and resubstitution, as attorney in-fact and
agent to sign for the undersigned, in any and all capacities, such Annual Report on Form 10-K and any and all amendments
thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report on Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally
present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 2nd day of April, 2013
/s/ ELIZABETH M. LEE
Elizabeth M. Lee
POWER OF ATTORNEY
The undersigned director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual
Report on Form 10-K for the fiscal year ended February 2, 2013 under the provisions of the Securities Exchange Act of 1934,
as amended, with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S.
Jeffries and Jonathan E. Ramsden, and each of them, with full power of substitution and resubstitution, as attorney in-fact and
agent to sign for the undersigned, in any and all capacities, such Annual Report on Form 10-K and any and all amendments
thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report on Form 10-K, with full power and authority to do and perform any and all acts and things whatsoever
required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally
present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 2nd day of April, 2013
/s/ CRAIG R. STAPLETON
Craig R. Stapleton
EXHIBIT 31.1
CERTIFICATIONS
I, Michael S. Jeffries, certify that:
1. I have reviewed this Annual Report on Form 10-K of Abercrombie & Fitch Co. for the fiscal year ended February 2, 2013;
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.
Date: April 2, 2013 By: /s/ MICHAEL S. JEFFRIES
Michael S. Jeffries
Chairman and Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
CERTIFICATIONS
I, Jonathan E. Ramsden, certify that:
1. I have reviewed this Annual Report on Form 10-K of Abercrombie & Fitch Co. for the fiscal year ended February 2, 2013;
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.
Date: April 2, 2013 By: /s/ JONATHAN E. RAMSDEN
Jonathan E. Ramsden
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 32.1
Certifications by Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
In connection with the Annual Report of Abercrombie & Fitch Co. (the “Corporation”) on Form 10-K for the fiscal year ended
February 2, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Michael S.
Jeffries, Chairman and Chief Executive Officer of the Corporation, and Jonathan E. Ramsden, Executive Vice President and Chief Financial
Officer of the Corporation, certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of
operations of the Corporation and its subsidiaries.
By /s/ MICHAEL S. JEFFRIES By /s/ JONATHAN E. RAMSDEN
Michael S. Jeffries
Chairman and Chief Executive Officer
Jonathan E. Ramsden
Executive Vice President and Chief Financial Officer
Dated: April 2, 2013 Dated: April 2, 2013
* 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.
