Flagship Store Exit Charges (Notes)

6 Months Ended

Aug. 03, 2019

Flagship Store Exit Charges [Abstract]

Restructuring and Related Activities Disclosure [Text Block]

FLAGSHIP STORE EXIT CHARGES

Global Store Network Optimization

Reflecting a continued focus on one of the Company’s key transformation initiatives ‘Global Store Network Optimization’, the Company continues to pivot away from its large format flagship stores and strives to open smaller, more productive omnichannel focused brand experiences.

As a result, the Company has closed certain of its flagship stores and may have additional closures as it executes against this strategy. For context, at the end of Fiscal 2018, the Company had 19 flagship stores, and at the end of the second quarter of Fiscal 2019, the Company had 17 flagship stores. Details related to previously announced flagship store closures are as follows:



Location	Brand	Actual or expected closure date
Pedder Street, Hong Kong	Abercrombie	Closed in the first quarter of Fiscal 2017
Copenhagen, Denmark	Abercrombie	Closed in the first quarter of Fiscal 2019
SoHo in New York City	Hollister	Closed in the second quarter of Fiscal 2019
Milan, Italy	Abercrombie	Expected to close by the end of Fiscal 2019
Fukuoka, Japan	Abercrombie	Expected to close in the second half of Fiscal 2020

The Company has recognized charges related to the aforementioned store closures in flagship store exit charges on the Consolidated Statements of Operations and Comprehensive Loss. The following table provides additional details related to these charges incurred during the thirteen and twenty-six weeks ended August 3, 2019 and August 4, 2018.



	Thirteen Weeks Ended					Twenty-six Weeks Ended
(in thousands)	August 3, 2019			August 4, 2018		August 3, 2019			August 4, 2018
Single lease cost ⁽¹⁾	$	23,269		$	—	$	23,269		$	—
Variable lease cost ⁽²⁾	20,218			—		20,218			—
Operating lease right-of-use asset impairment	3,229			—		3,229			—
Operating lease cost	46,716			—		46,716			—
Lease termination fees ⁽³⁾	—			—		—			3,688
Asset disposals and other store-closure costs ⁽⁴⁾	(1,675		)	—		(1,687		)	—
Employee severance and other employee transition costs	(47		)	—		1,709			120
Total flagship store exit charges	$	44,994		$	—	$	46,738		$	3,808


⁽¹⁾	Amounts represent accelerated amortization associated with the operating lease right-of-use assets and liabilities and the impact from remeasurement of operating lease liabilities.


⁽²⁾	Amounts represent the remeasurement of the lease liability to reflect variable lease costs that became fixed upon decision to close aforementioned flagship stores.


⁽³⁾	Under the new lease accounting standard, which the Company adopted on February 3, 2019, similar charges would be incorporated into the above table as a component of operating lease cost.


⁽⁴⁾	Amounts represent costs incurred in returning the store to its original condition, including updates to previous accruals for asset retirement obligations and costs to remove inventory and store assets.

The Company’s future lease payments associated with these stores are reflected within short-term and long-term operating lease liabilities on the Condensed Consolidated Balance Sheet and will be paid through the fiscal year ending January 30, 2029 (“Fiscal 2028”).These future lease payments are not expected to exceed $15 million in any fiscal year. Refer to Note 7, “LEASES,” for a maturity analysis of the Company’s operating lease liabilities, based on undiscounted cash flows.

As the Company continues its ‘Global Store Network Optimization’ efforts, it may incur incremental charges or future cash expenditures not currently contemplated due to events that may occur as a result of, or that are associated with, additional flagship store closures. At this time, the Company is not able to quantify the amount of charges or future cash expenditures that may take place in future periods resulting from any potential flagship store closures given the unpredictable nature of lease exit negotiations and ultimate lease renewal decisions.