Flagship Store Exit (Benefits) Charges (Notes)

9 Months Ended

Oct. 30, 2021

Flagship Store Exit Charges [Abstract]

Restructuring and Related Activities Disclosure [Text Block]

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.

The Company recognizes impacts related to the exit of its flagship stores in flagship store exit charges (benefits) on the Consolidated Statements of Operations and Comprehensive Income (Loss). Details of the charges (benefits) recognized during the thirteen and thirty-nine weeks ended October 30, 2021 and October 31, 2020 related to this initiative follow:

	Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Operating lease cost	—		(1,729)		(841)		(6,959)
Gain on lease assignment	—		(5,237)		—		(5,237)
Asset disposals and other store-closure benefits (1)	—		(405)		(514)		(3,610)
Employee severance and other employee transition costs (benefits)	11		(692)		178		3,316
Total flagship store exit charges (benefits)	$	11	$	(8,063)	$	(1,177)	$	(12,490)

(1)    Amounts represent costs incurred or benefits realized associated with returning the store to its original condition, including updated estimates to previously established accruals for asset retirement obligations and costs to remove inventory and store assets.

During the thirteen weeks ended May 1, 2021, the Company finalized an agreement with and paid its landlord partner to settle all remaining obligations related to the SoHo Hollister flagship store in New York City, which closed during the second quarter of Fiscal 2019. Prior to this new agreement, the Company was required to make payments in aggregate of $80.1 million pursuant to the lease agreements through the fiscal year ending January 30, 2029 (“Fiscal 2028”). The new agreement resulted in an acceleration of payments and provided for a discount resulting in a reduction of operating lease liabilities of $65.0 million and a cash outflow of $63.8 million to settle all remaining obligations related to this location. This cash outflow was classified within operating lease right-of-use assets and liabilities within operating activities on the Condensed Consolidated Statement of Cash Flows during the thirty-nine weeks ended October 30, 2021. The Company recognized a gain of $0.9 million in flagship store exit benefits on the Consolidated Statement of Operations and Comprehensive Income (Loss) related to this transaction.

In addition, during Fiscal 2020, the Company announced the early exit of four European Abercrombie & Fitch flagship locations, Three of the leases were transferred through assignment while the fourth lease has been subleased to a new tenant. The Company no longer has lease obligations for the three transfers and is scheduled to receive payments to fully offset its lease obligations on the sublease. Refer to Note 8, “ LEASES,” for additional information on the sublease arrangement.

As the Company continues its ‘Global Store Network Optimization’ efforts, it may incur future cash expenditures or incremental charges or realize benefits not currently contemplated due to events that may occur as a result of, or that are associated with, previously announced flagship store closures and flagship store closures that have not yet been finalized. At this time, the Company is not able to quantify the amount of future impacts, including any 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.