Table of Contents. Chairman s Letter 6. Financial Summary 11. Management s Discussion and Analysis 12

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3 Table of Cotets Chairma s Letter 6 Fiacial Summary 11 Maagemet s Discussio ad Aalysis 12 Quatitative ad Qualitative Disclosures About Market Risk 22 Cosolidated Statemets of Net Icome ad Comprehesive Icome 24 Cosolidated Balace Sheets 25 Cosolidated Statemets of Shareholders Equity 26 Cosolidated Statemets of Cash Flows 27 Notes to Cosolidated Fiacial Statemets 28 Report of Idepedet Registered Public Accoutig Firm 40 Corporate Iformatio 43 Seior Maagemet ad Board of Directors 44 3

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5 CHAIRMAN S LETTER Oce agai, I am proud to report that our compay achieved record sales ad earigs, markig 16 cosecutive years of sales ad earigs improvemet. Our success is a reflectio of effective brad positioig ad our commitmet to maitai ad ehace that positioig over the log-term. I 1992, we bega to build a ew Abercrombie & Fitch rooted i East Coast traditios with a Ivy League heritage. We positioed the brad to target a youg ad hip customer by offerig high quality, tred right casual sportswear ad creatig a uique ad exceptioal i-store eviromet, which established a emotioal coectio with our customer. We developed stadards for every aspect of the customer experiece to esure that the brad s image was reiforced through product desig ad presetatio, marketig imagery, music ad lightig, fragrace ad ethusiastic ad eergetic brad represetatives. We also recogized the importace of protectig the log-term positio of the brad by reivestig i store refreshes ad remodels, maitaiig full priced sellig ad avoidig market saturatio. These stadards cotiue to be the foudatio of the brad ad today, I believe Abercrombie & Fitch is better positioed tha ever before. Leveragig the bradig success of Abercrombie & Fitch, which has achieved icoic status with worldwide recogitio, we applied our strategy to our other iterally developed brads which iclude: abercrombie, Hollister, Ruehl ad Gilly Hicks. While each brad possesses its ow uique heritage ad hadwritig, they all share commo elemets ad characteristics icludig casual, classic, cofidece, itelligece, privilege ad a sese of humor. Our objective is to be the domiate, aspiratioal lifestyle brad for each brad s targeted age group. The success of our brad is demostrated by our log-stadig fiacial performace. I 1992, we operated 40 Abercrombie & Fitch stores i the Uited States that geerated $85.3 millio i sales. Today, across all brads, we operate over 1,000 stores i the Uited States, Caada ad the Uited Kigdom. I 2007, we geerated $3.750 billio i sales ad $475.7 millio i et icome, with earigs per diluted share of $5.20, represetig a 13% icrease over Sice becomig a publicly held compay i 1996, sales ad earigs Our recet performace highlights the opportuity for iteratioal expasio. I 2007, the Abercrombie & Fitch ad Hollister stores located i Caada cotiued to geerate more tha three times the sales productivity of the average U.S. couterpart ad our Abercrombie & Fitch Lodo flagship geerated similar sales per sellig square foot to our amazigly productive Fifth Aveue flagship. Tourist stores, such as Fifth Aveue i New York ad Avetura Mall i Miami, are amog the top performig stores i the chai. Additioally, iteratioal direct-to-cosumer sales icreased 72.4% i I 2008, we will cotiue our expasio ito Caada with the opeig of Abercrombie & Fitch, abercrombie ad Hollister stores. Hollister will make its debut i the U.K. market i 2008 with the opeig of our first store at Bret Cross Shoppig Cetre, outside of Lodo. Costructio is also uderway for a Abercrombie & Fitch flagship i Tokyo s Giza district, with a plaed opeig i late Additioal opportuities are also beig pursued for the Abercrombie & Fitch ad Hollister brads i cotietal Europe ad other sites i Japa. Domestically, we are o schedule to ope our first Hollister flagship i New York s SoHo area i early 2009 ad we pla to ope a abercrombie flagship i New York as well. We aticipate that the Hollister ad abercrombie flagships will further fortify the icoic status of these brads. I Jauary 2008, we lauched our fifth cocept, Gilly Hicks. Gilly Hicks gives us the opportuity to expad the existig emotioal coectio we share with our female customers by offerig them bras, uderwear, persoal care products, sleepwear ad at-home products. We recogize the learig curve associated with the specializatios required to operate this type of busiess ad are committed to establishig the brad as the best i the itimates busiess as we have doe with our sportswear collectios. We are very excited about the prospect of this compellig ew brad. The future of our compay is very bright. Our brads are strog ad relevat ad our busiess is well positioed for cosistet ad sustaiable growth. I am cofidet that we will cotiue to be the premier brad for each of our target age groups ad I look forward to may more years of cotiued success. per diluted share have icreased by a compouded aual growth rate of 25% ad 31%, respectively, far exceedig idustry averages. We believe we ca cotiue to produce cosistet ad sustaiable growth with our existig domestic ad iteratioal expasio opportuities. Domestically, growth will come from prove brads like Hollister ad developig cocepts like Gilly Hicks. Iteratioally, growth will come from the Abercrombie & Fitch, abercrombie ad Hollister brads. Michael S. Jeffries Chairma ad Chief Executive Officer 6 7

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7 FiNANCIAL SUMMARY (Thousads, except per share, per square foot amouts, ratios ad store ad associate data) Fiscal Year * Summary of Operatios Net Sales $3,749,847 $ 3,318,158 $2,784,711 $ 2,021,253 $1,707,810 Gross Profit $2,511,367 $ 2,209,006 $1,851,416 $1,341,224 $1,083,170 Operatig Icome $ 740,497 $ 658,090 $ 542,738 $ 347,635 $ 331,180 Operatig Icome as a Percetage of Net Sales 19.7% 19.8% 19.5% 17.2% 19.4% Net Icome $ 475,697 $ 422,186 $ 333,986 $ 216,376 $ 204,830 Net Icome as a Percetage of Net Sales 12.7% 12.7% 12.0% 10.7% 12.0% Divideds Declared Per Share $ 0.70 $ 0.70 $ 0.60 $ 0.50 Net Icome Per Weighted-Average Share Results Basic $ 5.45 $ 4.79 $ 3.83 $ 2.33 $ 2.12 Diluted $ 5.20 $ 4.59 $ 3.66 $ 2.28 $ 2.06 Diluted Weighted-Average Shares Outstadig 91,523 92,010 91,221 95,110 99,580 Other Fiacial Iformatio Total Assets $2,567,598 $ 2,248,067 $1,789,718 $ 1,386,791 $ 1,401,369 Retur o Average Assets 20% 21% 21% 16% 16% Net Cash Provided from Operatios $ 817,825 $ 582,171 $ 453,590 $ 423,784 $ 340,814 Capital Expeditures $ 403,345 $ 403,476 $ 256,422 $ 185,065 $ 159,777 Log-Term Debt Shareholders Equity $1,618,313 $ 1,405,297 $ 995,117 $ 669,326 $ 857,764 Retur o Average Shareholders Equity 31% 35% 40% 28% 26% Comparable Store Sales** (1)% 2% 26% 2% (9)% Net Retail Sales Per Average Gross Square Foot $ 489 $ 500 $ 464 $ 360 $ 345 Stores at Ed of Year ad Average Associates Total Number of Stores Ope 1, Gross Square Feet 7, 337,000 6, 693,000 6, 025,000 5,590,000 5,016,000 Average Number of Associates 94,600 80,100 69,100 48,500 30,200 * Fiscal 2006 was a fifty-three week year. ** A store is icluded i comparable store sales whe it has bee ope as the same brad at least oe year ad its square footage has ot bee expaded or reduced by more tha 20% withi the past year. Note that Fiscal 2007 comparable store sales are compared to store sales for the comparable fifty-two weeks eded February 3, Note that fiscal 2006 comparable store sales are compared to store sales for the comparable fifty-three weeks eded February 4,

8 MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The Compay s fiscal year eds o the Saturday closest to Jauary 31, typically resultig i a fifty-two week year, but occasioally givig rise to a additioal week, resultig i a fifty-three week year. A store is icluded i comparable store sales whe it has bee ope as the same brad at least oe year ad its square footage has ot bee expaded or reduced by more tha 20% withi the past year. Fiscal 2007 icludes fifty-two weeks ad Fiscal 2006 icludes fiftythree weeks. For purposes of MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, the thirtee ad fifty-two week periods eded February 2, 2008 are compared to the fourtee ad fifty-three week periods eded February 3, For Fiscal 2007, comparable store sales compare the thirtee ad fifty-two week periods eded February 2, 2008 to the thirtee ad fifty-two week periods eded February 3, For Fiscal 2006, comparable store sales compare the fourtee ad fifty-three week periods eded February 3, 2007 to the fourtee ad fifty-three week periods eded February 4, The Compay had et sales of $3.750 billio for the fifty-two weeks eded February 2, 2008, up 13.0% from $3.318 billio for the fifty-three weeks eded February 3, Operatig icome for Fiscal 2007 icreased 12.5% to $740.5 millio from $658.1 millio for Fiscal Net icome was $475.7 millio i Fiscal 2007, up 12.7% from $422.2 millio i Fiscal Net icome per diluted weightedaverage share was $5.20 for Fiscal 2007 compared to $4.59 i Fiscal 2006, a icrease of 13.3%. The Compay geerated cash from operatios of $817.8 millio i Fiscal 2007 versus $582.2 millio i Fiscal 2006, resultig primarily from a reductio i ivetory ad sales ad earigs growth. Durig Fiscal 2007, the Compay used cash from operatios to fiace its growth strategy, icludig the opeig of 58 ew Hollister stores, 25 ew abercrombie stores, seve ew RUEHL stores, six ew Abercrombie & Fitch stores ad three ew Gilly Hicks stores, as well as the remodelig, covertig or refreshig of existig Abercrombie & Fitch, abercrombie, Hollister ad RUEHL stores. The Compay also used excess cash i Fiscal 2007 to pay divideds of $0.70 per share, for a total of $61.3 millio ad to repurchase approximately 3.6 millio shares of A&F Commo Stock with a value of approximately $287.9 millio. The Compay believes that share repurchases ad divideds are a importat way for the Compay to deliver shareholder value, but the Compay s priority will be to ivest i the busiess to support its domestic ad iteratioal growth plas. The Compay cotiues to be committed to maitaiig sufficiet cash o the balace sheet to support daily operatios, fud growth iitiatives ad provide a degree of protectio agaist uaticipated busiess volatility. I additio, the Compay has $250 millio available, less outstadig letters of credit, uder its usecured credit agreemet to support operatios. Fiacial Summary The followig summarized fiacial ad operatioal data compares Fiscal 2007 to Fiscal 2006 ad Fiscal 2006 to Fiscal 2005: % Chage * Net sales (thousads) $3,749,847 $ 3,318,158 $ 2,784,711 13% 19% Net sales by brad (thousads) Abercrombie & Fitch $ 1,638,929 $ 1,515,123 $1,424,013 8% 6% abercrombie $ 471,045 $ 405,820 $ 344,938 16% 18% Hollister $1,589,452 $ 1,363,233 $ 999,212 17% 36% RUEHL $ 50,191 $ 33,982 $ 16,548 48% 105% Gilly Hicks*** $ 230 / a / a / a / a Icrease (decrease) i comparable store sales** (1)% 2 % 26% Abercrombie & Fitch 0 % (4)% 18% abercrombie 0 % 10 % 54% Hollister (2)% 5 % 29% RUEHL (9)% 14 % / a Net retail sales icrease attributable to ew ad remodeled stores, websites ad catalogue 14 % 17% 12% Net retail sales per average store (thousads) $ 3,470 $ 3,533 $ 3,284 (2)% 8 % Abercrombie & Fitch $ 4,073 $ 3,945 $ 3,784 3 % 4 % abercrombie $ 2,230 $ 2,251 $ 1,957 (1)% 15 % Hollister $ 3,550 $ 3,732 $ 3,442 (5)% 8 % RUEHL $ 2,602 $ 3,248 $ 2,903 (20)% 12 % Net retail sales per average gross square foot $ 489 $ 500 $ 464 (2)% 8 % Abercrombie & Fitch $ 463 $ 450 $ % 4 % abercrombie $ 493 $ 513 $ 446 (4)% 15 % Hollister $ 531 $ 568 $ 528 (7)% 7 % RUEHL $ 282 $ 363 $ 315 (22)% 15 % Trasactios per average retail store 53,152 55,142 50,863 (4)% 8 % Abercrombie & Fitch 49,915 51,704 49,685 (3)% 4 % abercrombie 33,907 34,786 30,356 (3)% 15 % Hollister 65,564 68,740 64,913 (5)% 6 % RUEHL 31,880 38,554 26,215 (17)% 47 % Average retail trasactio value $ $ $ % (1)% Abercrombie & Fitch $ $ $ % 0 % abercrombie $ $ $ % 0 % Hollister $ $ $ % 2 % RUEHL $ $ $ (3)% (24)% Average uits per retail trasactio % 4 % Abercrombie & Fitch % 4 % abercrombie % 5 % Hollister % 5 % RUEHL (4)% 13 % Average uit retail sold $ $ $ (1)% (5)% Abercrombie & Fitch $ $ $ % (3)% abercrombie $ $ $ % (4)% Hollister $ $ $ (2)% (2)% RUEHL $ $ $ % (33)% *Fiscal 2006 was a fifty-three week year. **A store is icluded i comparable store sales whe it has bee ope as the same brad at least oe year ad its square footage has ot bee expaded or reduced by more tha 20% withi the past year. Note Fiscal 2007 comparable store sales are compared to store sales for the comparable fifty-two weeks eded February 3, Note that Fiscal 2006 comparable store sales are compared to store sales for the comparable fifty-three weeks eded February 4, *** Net sales for Gilly Hicks durig Fiscal 2007 reflect the activity of 3 stores opeed i Jauary The followig data represets the Compay s Cosolidated Statemets of Net Icome for the last three fiscal years, expressed as a percetage of et sales: * 2005 Net Sales 100.0% 100.0% 100.0% Cost of Goods Sold Gross Profit Stores ad Distributio Expese Marketig, Geeral ad Admiistrative Expese Other Operatig Icome, Net (0.3) (0.3) (0.2) Operatig Icome Iterest Icome, Net (0.5) (0.4) (0.2) Icome Before Icome Taxes Provisio for Icome Taxes Net Icome 12.7% 12.7% 12.0% *Fiscal 2006 was a fifty-three week year. CURRENT TRENDS AND OUTLOOK I Fiscal 2007, the Compay oce agai produced record sales ad earigs, drive by a icreased gross profit rate ad a lower marketig, geeral ad admiistrative expese rate. The Compay maitaied high store sales productivity ad a high operatig margi, eve as the Compay cotiued to ivest i the log-term positioig of its brads. The Compay believes its ability to maitai the sale of full-priced merchadise ad cosistet high store sales productivity is a result of its commitmet to offer tred-right merchadise, with the highest level of quality, ad to create a exceptioal i-store experiece, which establishes a emotioal coectio with its customers. The Compay s commitmet to its brads is demostrated by strategic ivestmets made i the areas of stores, merchadise developmet ad home office ifrastructure, which the Compay believes will ehace quality, improve productivity ad support future growth. Specifically, major implemetatios i plaig, merchadisig ad allocatio iformatio systems over the ext year should geerate supply chai improvemets ad serve as a platform for future growth ad expasio, both domestically ad iteratioally. The Compay believes it has sigificat growth potetial both domestically ad iteratioally. Domestically, the Compay believes its growth potetial will come from prove brads like Hollister ad developig cocepts like Gilly Hicks. Iteratioally, the Compay believes its growth will come from its Abercrombie & Fitch, abercrombie ad Hollister brads. Recet iteratioal performace highlights the opportuity for expasio. I Fiscal 2007, the three Abercrombie & Fitch ad three Hollister stores located i Caada cotiued to geerate more tha three times the sales productivity of the average U.S. couterpart ad the Abercrombie & Fitch Lodo flagship geerated substatial sales per sellig square foot similar to the strog performace of the Fifth Aveue flagship. Tourist stores, such as Fifth Aveue i New York, Ala Moaa i Hawaii ad Avetura Mall i Miami, are amog the top performig stores i the chai. Additioally, iteratioal direct-tocosumer sales icreased 72.4% from Fiscal I 2008, the Compay plas to ope oe Abercrombie & Fitch store, three abercrombie stores ad three Hollister stores i Caada. The Compay also plas to eter the U.K. market with Hollister with the opeig of four shoppig ceter-based stores i The first store is scheduled to ope i October at Bret Cross Shoppig Cetre, outside of Lodo. Costructio is curretly uderway for the first Hollister flagship i the SoHo area of New York City. The multi-level flagship is scheduled to ope i Sprig The Compay aticipates the Hollister flagship to fortify the icoic status of the brad i order to support its iteratioal growth. Costructio is also curretly uderway for the Abercrombie & Fitch flagship i Tokyo s Giza district, with a plaed opeig i late Opportuities are also beig assessed for the Abercrombie & Fitch ad Hollister brads i cotietal Europe ad other sites i Japa. I additio to a focus o the domestic ad iteratioal expasio of existig icoic brads, the Compay also views ew cocepts as a itegral part of its log-term strategy. I Jauary 2008, the Compay lauched its fifth cocept, Gilly Hicks. This cocept provides the opportuity to expad the existig emotioal coectio with the Compay s female customers by offerig bras, uderwear, persoal care products, sleepwear ad at-home products. The Compay operated three Gilly Hicks stores at the ed of Fiscal 2007 ad plas to ope 15 stores i Fiscal Although profitability was ot achieved as origially expected, RUEHL made sigificat progress i Fiscal 2007 with improvemets to gross margi ad reductios i store operatig ad store costructio costs. I Fiscal 2008, the Compay will cotiue to focus o improvig the quality level of the merchadise i order to be cosistet with the brad s positioig ad pricig strategy. The Compay expects brad awareess to grow from the RUEHL website which has offered a full product assortmet sice Jauary However, the Compay will moderate the pace of ew store opeigs util RUEHL ca be established as a prove cocept. The Compay also views product lie expasio through its existig brads as aother promisig growth opportuity. I October 2007, the Compay lauched a body care lie i 93 Hollister stores for both Dudes ad Bettys. Holiday purchases of body care products were primarily icremetal trasactio uits idicatig the product lie is a way to help fuel orgaic sales growth. As a result, the Compay has decided to expad the body care products to all Hollister stores i Fiscal The Compay is i the midst of a ivestmet ad expasio phase targeted at drivig cosistet ad sustaiable log-term value growth. The Compay believes strogly i its brads ad i the potetial for its iteratioal expasio pla, ad will cotiue to ivest durig ecoomic cycles. If the curret geeral macro-ecoomic dowtur persists ad egatively impacts sales, the Compay s cost structure will be aliged accordigly, but resource cuts that could jeopardize the ability to implemet the Compay s log-term growth iitiatives will be avoided

9 The followig measuremets are amog the key busiess idicators reviewed by various members of maagemet to gauge the Compay s results: Comparable store sales by brad, by product ad by store, defied as year-over-year sales for a store that has bee ope as the same brad at least oe year ad its square footage has ot bee expaded or reduced by more tha 20% withi the past year; Direct-to-cosumer sales growth; Iteratioal ad flagship store performace; New store productivity; IMU; Sellig margi, defied as sales price less origial cost, by brad ad by product category; Stores ad distributio expese as a percetage of et sales; Marketig, geeral ad admiistrative expese as a percetage of et sales; Store metrics such as sales per gross square foot, sales per sellig square foot, average uit retail, average umber of trasactios per store, average trasactio values, store cotributio (defied as store sales less direct costs of ruig the store), ad average uits per trasactio; Markdow rate; Gross profit rate; Operatig icome ad operatig icome as a percetage of et sales; Net icome; Ivetory per gross square foot; ad Cash flow ad liquidity determied by the Compay s curret ratio ad cash provided by operatios. While ot all of these metrics are disclosed publicly by the Compay due to the proprietary ature of the iformatio, the Compay publicly discloses ad discusses several of these metrics as part of its fiacial summary ad i several sectios withi the Maagemet s Discussio ad Aalysis. FISCAL 2007 COMPARED TO FISCAL 2006: FOURTH QUARTER RESULTS: NET SALES Fourth quarter et sales for the thirtee week period eded February 2, 2008 were $1.229 billio, up 7.9% versus et sales of $1.139 billio for the fourtee week period eded February 3, The et sales icrease was attributed primarily to the et additio of 91 stores ad a 46.8% icrease i directto-cosumer busiess (icludig shippig ad hadlig reveue), partially offset by a extra sellig week i the fourth quarter of Fiscal 2006 ad the resultig impact of the caledar shift i Fiscal 2007 due to Fiscal 2006 beig a 53-week fiscal year, as well as a 1% decrease i comparable store sales. Comparable store sales by brad for the fourth quarter of Fiscal 2007 were as follows: Abercrombie & Fitch icreased 1% with me s comparable store sales icreasig by a low double-digit ad wome s decreasig by a mid sigle-digit; abercrombie decreased 3% with boys icreasig by a mid sigle-digit ad girls decreasig by a mid sigle-digit; Hollister decreased 2% with dudes icreasig by a high sigle-digit ad bettys decreasig by a mid sigle-digit; ad RUEHL decreased 19% with me s decreasig by a high sigle-digit ad wome s decreasig by the high tweties. Comparable regioal store sales raged from icreases i the high tees to decreases i the mid sigle-digits. Stores located i Caada ad the Southwest ad North Atlatic regios had the strogest comparable store sales performace, while stores located i the South, Midwest ad West regios had the weakest comparable store sales performace o a cosolidated basis. From a merchadise classificatio stadpoit across all brads, stroger performig masculie categories icluded graphic tees, fragrace ad fleece, while pats, jeas ad kits posted egative comparable sales. I the femiie busiesses, across all brads, stroger performig categories icluded graphics tees, jeas ad sweaters, while kits ad fleece posted egative comparable sales. Direct-to-cosumer et merchadise sales, which are sold through the Compay s websites ad catalogue i the fourth quarter of Fiscal 2007, were $108.6 millio, a icrease of 45.2% versus last year s fourth quarter et merchadise sales of $74.8 millio. Shippig ad hadlig reveue for the correspodig periods was $15.6 millio i Fiscal 2007 ad $9.8 millio i Fiscal The direct-to-cosumer busiess, icludig shippig ad hadlig reveue, accouted for 10.1% of total et sales i the fourth quarter of Fiscal 2007 compared to 7.4% i the fourth quarter of Fiscal The icrease was drive by store expasio, both domestically ad iteratioally, improved i-stock ivetory availability, a improved targeted marketig strategy ad improved website fuctioality. GROSS PROFIT Gross profit durig the fourth quarter of Fiscal 2007 was $825.6 millio compared to $755.6 millio for the comparable period i Fiscal The gross profit rate (gross profit divided by et sales) for the fourth quarter of Fiscal 2007 was 67.2%, up 80 basis poits from last year s fourth quarter rate of 66.4%. The icrease i gross profit rate ca be attributed to both a higher IMU rate ad a lower shrik rate compared to the fourth quarter of Fiscal 2006, partially offset by a higher markdow rate. STORES AND DISTRIBUTION Expese Stores ad distributio expese for the fourth quarter of Fiscal 2007 was $388.4 millio compared to $349.8 millio for the comparable period i Fiscal The stores ad distributio expese rate (stores ad distributio expese divided by et sales) for the fourth quarter of Fiscal 2007 was 31.6%, up 90 basis poits from 30.7% i the fourth quarter of Fiscal The icrease i rate is primarily related to the impact of miimum wage ad maagemet salary icreases ad higher store fixed cost rates. The DC productivity level, measured i uits processed per labor hour ( UPH ), was 16.1% higher i the fourth quarter of Fiscal 2007 versus the fourth quarter of Fiscal 2006, reflectig the realizatio of icreased efficiecies due to the secod DC beig operatioal durig Fiscal MArKETING, GENERAL AND ADMINISTRATIVE EXPENSE Marketig, geeral ad admiistrative expese durig the fourth quarter of Fiscal 2007 was $103.2 millio compared to $101.6 millio durig the same period i Fiscal For the fourth quarter of Fiscal 2007, the marketig, geeral ad admiistrative expese rate (marketig, geeral ad admiistrative expese divided by et sales) was 8.4% compared to 8.9% i the fourth quarter of Fiscal The decrease i the marketig, geeral ad admiistrative expese rate was a result of lower travel, samples ad outside service expese rates, partially offset by a icrease i the home office payroll expese rate. OTHER OPERATING INCOME, NET Fourth quarter et other operatig icome for Fiscal 2007 was $3.0 millio compared to $4.6 millio for the fourth quarter of Fiscal The decrease was drive primarily by losses o foreig currecy trasactios i the fourth quarter of Fiscal 2007 as compared to gais o foreig currecy trasactios i the fourth quarter of Fiscal OPERATING INCOME Operatig icome durig the fourth quarter of Fiscal 2007 icreased to $337.1 millio from $308.8 millio for the comparable period i Fiscal 2006, a icrease of 9.2%. The operatig icome rate (operatig icome divided by et sales) for the fourth quarter of Fiscal 2007 was 27.4% compared to 27.1% for the fourth quarter of Fiscal INTEREST INCOME, NET AND INCOME TAXES Fourth quarter et iterest icome was $6.4 millio i Fiscal 2007 compared to $4.7 millio durig the comparable period i Fiscal The icrease i et iterest icome was due to higher iterest rates ad higher available ivestmet balaces durig the fourth quarter of Fiscal 2007 whe compared to the fourth quarter of Fiscal The effective tax rate for the fourth quarter of 2007 was 36.9% as compared to 36.8% for the Fiscal 2006 comparable period. NET INCOME AND NET INCOME PER SHARE Net icome for the fourth quarter of Fiscal 2007 was $216.8 millio versus $198.2 millio for the fourth quarter of Fiscal 2006, a icrease of 9.4%. Net icome per diluted weighted-average share outstadig for the fourth quarter of Fiscal 2007 was $2.40, versus $2.14 for the Fiscal 2006 comparable period, a icrease of 12.2%. FISCAL 2007 RESULTS: NET SALES Net sales for Fiscal 2007 were $3.750 billio, a icrease of 13.0% versus Fiscal 2006 et sales of $3.318 billio. The et sales icrease was attributed to the combiatio of the et additio of 91 stores ad a 50% icrease i direct-to-cosumer busiess (icludig shippig ad hadlig reveue), partially offset by a 1% comparable store sales decrease ad a fifty-three week year i Fiscal 2006 versus a fifty-two week year i Fiscal For Fiscal 2007, comparable store sales by brad were as follows: Abercrombie & Fitch ad abercrombie comparable sales were flat; Hollister decreased 2%; ad RUEHL decreased 9%. I additio, the wome s, girls ad bettys busiesses cotiued to be more sigificat tha the me s, boys ad dudes. Durig Fiscal 2007, wome s, girls ad bettys represeted at least 60% of the et sales for each of their correspodig brads. Direct-to-cosumer merchadise et sales i Fiscal 2007 were $258.9 millio, a icrease of 49% versus Fiscal 2006 et merchadise sales of $174.1 millio. Shippig ad hadlig reveue was $39.1 millio i Fiscal 2007 ad $24.9 millio i Fiscal The direct-to-cosumer busiess, icludig shippig ad hadlig reveue, accouted for 8.0% of total et sales i Fiscal 2007 compared to 6.0% of total et sales i Fiscal The icrease was drive by store expasio, both domestically ad iteratioally, improved i-stock ivetory availability, a improved targeted marketig strategy ad improved website fuctioality. GROSS PROFIT For Fiscal 2007, gross profit icreased to $2.511 billio from $2.209 billio i Fiscal The gross profit rate for Fiscal 2007 was 67.0% versus 66.6% the previous year, a icrease of 40 basis poits. The icrease i the gross profit rate was drive primarily by a higher IMU rate ad a lower shrik rate i the fourth quarter of Fiscal 2007, partially offset by a higher markdow rate. STORES AND DISTRIBUTION EXPENSE Stores ad distributio expese for Fiscal 2007 was $1.387 billio compared to $1.187 billio for Fiscal For Fiscal 2007, the stores ad distributio expese rate was 37.0% compared to 35.8% i the previous year. The icrease i rate resulted primarily from store payroll, icludig miimum wage ad store maager salary icreases, higher store fixed cost rates ad store packagig ad supply expeses. The DCs UPH rate for Fiscal 2007 icreased 9.1% as compared to Fiscal 2006, reflectig the realizatio of efficiecies obtaied durig Fiscal 2007 due to the secod DC beig operatioal. The Compay expects the overall UPH level to cotiue to improve durig Fiscal 2008, however at a lower rate tha Fiscal MARKETING, GENERAL AND ADMINISTRATIVE EXPENSE Marketig, geeral ad admiistrative expese durig Fiscal 2007 was $395.8 millio compared to $373.8 millio i Fiscal For the curret year, the marketig, geeral ad admiistrative expese rate was 10.6%, a decrease of 70 basis poits compared to last year s rate of 11.3%. The decrease i rate resulted from reductios i travel, samples ad outside services expese rates, partially offset by the icrease i payroll expese rate. OTHER OPERATING INCOME, NET Other operatig icome for Fiscal 2007 was $11.7 millio compared to $10.0 millio for Fiscal The icrease was primarily related to gift cards for which the Compay has determied the likelihood of redemptio to be remote, partially offset by decreases i gais related to foreig currecy trasactios. The comparable year-to-date period i Fiscal 2006 icluded other operatig icome related to isurace reimbursemets for a fire-damaged store ad a store damaged by Hurricae Katria. OPERATING INCOME Fiscal 2007 operatig icome was $740.5 millio compared to $658.1 millio for Fiscal 2006, a icrease of 12.5%. The operatig icome rate for Fiscal 2007 was 19.7% versus 19.8% i the previous year. Iterest icome, NET ad icome taxes Net iterest icome for Fiscal 2007 was $18.8 millio compared to $13.9 millio for Fiscal The icrease i et iterest icome was due to higher iterest rates ad higher available ivestmet balaces durig Fiscal 2007 compared to Fiscal The effective tax rate for Fiscal 2007 was 37.4% compared to 37.2% for Fiscal NET INCOME AND NET INCOME PER SHARE Net icome for Fiscal 2007 was $475.7 millio versus $422.2 millio i Fiscal 2006, a icrease of 12.7%. Net icome per diluted weighted-average share was $5.20 i Fiscal 2007 versus $4.59 i Fiscal 2006, a icrease of 13.3%. FISCAL 2006 COMPARED TO FISCAL 2005: FOURTH QUARTER results: NET SALES Net sales for the fourth quarter of Fiscal 2006 were $1.139 billio, up 18.5% versus et sales of $961.4 millio i the fourth quarter of Fiscal The et sales icrease was attributed primarily to the et additio of 93 stores, icludig the full quarter impact of the Abercrombie & Fitch Fifth Aveue flagship ad six stores i Caada; a 58% icrease i direct-to-cosumer busiess (icludig shippig ad hadlig reveue); ad a fourtee week quarter i Fiscal 2006 versus a thirtee week quarter i Fiscal 2005, partially 14 15

10 offset by a 3% decrease i comparable store sales. Comparable store sales by brad for the fourth quarter of Fiscal 2006 versus the fourth quarter of Fiscal 2005 were as follows: Abercrombie & Fitch decreased 6% with wome s comparable store sales decreasig by a high sigle-digit ad me s decreasig by a mid sigle-digit; abercrombie icreased 2% with boys achievig a mid sigle-digit icrease ad girls flat; Hollister was flat with bettys flat ad dudes postig a decrease i the low sigle-digits; ad RUEHL icreased 6% with wome s realizig a mid sigle-digit icrease ad me s postig a low sigle-digit icrease. O a regioal basis, comparable store sales for the Compay raged from decreases i the high sigle-digits to icreases i the low sigle-digits. Stores located i the North Atlatic regio had the strogest comparable store sales performace ad stores located i the West regio had the weakest comparable store sales performace o a cosolidated basis. From a merchadise classificatio stadpoit across all brads, stroger performig masculie categories icluded fleece, kit tops ad uderwear, while jeas, pats ad sweaters posted egative comparable store sales. I the femiie busiesses, across all brads, stroger performig categories icluded kit tops, fleece ad shorts, while jeas, skirts ad pats posted egative comparable store sales. Direct-to-cosumer et merchadise sales, sold through the Compay s websites ad catalogue, i the fourth quarter of Fiscal 2006 were $74.8 millio, a icrease of 57.5% versus et merchadise sales of $47.5 millio i the fourth quarter of Fiscal Shippig ad hadlig reveue for the correspodig periods was $9.8 millio i Fiscal 2006 ad $6.2 millio i Fiscal The direct-to-cosumer busiess, icludig shippig ad hadlig reveue, accouted for 7.4% of total et sales i the fourth quarter of Fiscal 2006 compared to 5.6% i the fourth quarter of Fiscal gross profit Gross profit durig the fourth quarter of Fiscal 2006 was $755.6 millio compared to $639.4 millio for the comparable period i Fiscal The gross profit rate for the fourth quarter of Fiscal 2006 was 66.4%, dow 10 basis poits from the Fiscal 2005 fourth quarter rate of 66.5%. The decrease i gross profit rate largely resulted from a higher shrik rate ad a slightly higher markdow rate compared to the fourth quarter of Fiscal Abercrombie & Fitch, abercrombie ad Hollister all operated at similar IMU levels. STORES AND DISTRIBUTION EXPENSE Stores ad distributio expese for the fourth quarter of Fiscal 2006 was $349.8 millio compared to $293.5 millio for the comparable period i Fiscal The stores ad distributio expese rate for the fourth quarter of Fiscal 2006 was 30.7%, up 20 basis poits from 30.5% i the fourth quarter of Fiscal The icrease i rate is primarily related to additioal DC expeses associated with the secod DC, which became fully operatioal i the fourth quarter, ad direct-to-cosumer expeses, which icreased due to higher iteret sales as a percetage of total sales. These icreases were partially offset by decreased store expeses as a percetage of sales. Sellig payroll, drive by maagemet salary icreases, state miimum wage icreases ad additioal floor coverage to address shrik cocers icreased as a percetage of sales. However, the icrease i sellig payroll was more tha offset by leveragig other store related cotrollable expeses. The DC productivity level, measured i UPH, was 9% higher i the fourth quarter of Fiscal 2006 versus the fourth quarter of Fiscal The UPH rate icrease was due to the secod DC becomig fully operatioal durig the fourth quarter. MARKETING, GENERAL AND ADMINISTRATIVE EXPENSE Marketig, geeral ad admiistrative expese durig the fourth quarter of Fiscal 2006 was $101.6 millio compared to $80.8 millio durig the fourth quarter of Fiscal For the fourth quarter of Fiscal 2006, the marketig, geeral ad admiistrative expese rate was 8.9% compared to 8.4% i the fourth quarter of Fiscal The icrease i the marketig, geeral ad admiistrative expese rate was due to higher home office payroll ad cosultig expeses. OTHER OPERATING INCOME, NET Fourth quarter et other operatig icome for Fiscal 2006 was $4.6 millio compared to $2.3 millio for the fourth quarter of Fiscal Other operatig icome related primarily to gift cards for which the Compay has determied the likelihood of redemptio to be remote. operatig icome Operatig icome durig the fourth quarter of Fiscal 2006 icreased to $308.8 millio from $267.5 millio i the fourth quarter of Fiscal 2005, a icrease of 15.4%. The operatig icome rate for the fourth quarter of Fiscal 2006 was 27.1% compared to 27.8% for the fourth quarter of Fiscal INTEREST INCOME, NET AND INCOME TAXES Fourth quarter et iterest icome was $4.7 millio i Fiscal 2006 compared to $2.4 millio durig the comparable period i Fiscal The icrease i et iterest icome was due to higher iterest rates ad higher available ivestmet balaces durig the fourth quarter of Fiscal 2006 whe compared to the fourth quarter of Fiscal The effective tax rate for the fourth quarter of Fiscal 2006 was 36.8% as compared to 39.0% for the Fiscal 2005 comparable period. The decrease i the effective tax rate was related primarily to favorable settlemets of tax audits durig the fourth quarter ad the chage i estimates of potetial outcomes of certai state tax matters. NET INCOME AND NET INCOME PER SHARE Net icome for the fourth quarter of Fiscal 2006 was $198.2 millio versus $164.6 millio for the fourth quarter of Fiscal 2005, a icrease of 20.4%. Net icome per diluted weighted-average share outstadig for the fourth quarter of Fiscal 2006 was $2.14, icludig $0.01 related to Statemet of Fiacial Accoutig Stadards ( SFAS ) No. 123 (Revised 2004), Share-Based Paymet ( SFAS 123(R) ), versus $1.80 for the comparable period i Fiscal 2005, a icrease of 18.9%. FISCAL 2006 Results: NET SALES Net sales for Fiscal 2006 were $3.318 billio, a icrease of 19.1% versus Fiscal 2005 et sales of $2.785 billio. The et sales icrease was attributed to the combiatio of the et additio of 93 stores, icludig the full year impact of the Abercrombie & Fitch Fifth Aveue flagship ad six stores i Caada; a 2% comparable store sales icrease; a 42% icrease i direct-to-cosumer busiess (icludig shippig ad hadlig reveue); ad a fifty-three week year i Fiscal 2006 versus a fifty-two week year i Fiscal For Fiscal 2006, comparable store sales by brad were as follows: Abercrombie & Fitch decreased 4%; abercrombie icreased 10%; Hollister icreased 5%; ad RUEHL icreased 14%. I additio, the wome s, girls ad bettys busiesses cotiued to be more sigificat tha the me s, boys ad dudes. Direct-to-cosumer merchadise et sales i Fiscal 2006 were $174.1 millio, a icrease of 42.1% versus Fiscal 2005 et merchadise sales of $122.5 millio. Shippig ad hadlig reveue was $24.9 millio i Fiscal 2006 ad $17.6 millio i Fiscal The directto-cosumer busiess, icludig shippig ad hadlig reveue, accouted for 6.0% of total et sales i Fiscal 2006 compared to 5.0% of et total sales i Fiscal GROSS PROFIT For Fiscal 2006, gross profit icreased to $2.209 billio from $1.851 billio i Fiscal The gross profit rate for Fiscal 2006 was 66.6% versus 66.5% for Fiscal 2005, a icrease of 10 basis poits. STORES AND DISTRIBUTION EXPENSE Stores ad distributio expese for Fiscal 2006 was $1.187 billio compared to $1.001 billio for Fiscal For Fiscal 2006, the stores ad distributio expese rate was 35.8% compared to 35.9% i Fiscal The decrease i the rate resulted primarily from the Compay s ability to leverage store-related costs o a 2% icrease i comparable store sales. The DC s UPH rate for the year was flat i Fiscal 2006 versus Fiscal Durig Fiscal 2006, while the secod DC was beig built, the overall DC s UPH was impacted by the Compay s first DC reachig ear capacity, a result of the Compay s focus o strategically flowig ivetory to stores durig Fiscal MARKETING, GENERAL AND ADMINISTRATIVE EXPENSE Marketig, geeral ad admiistrative expese durig Fiscal 2006 was $373.8 millio compared to $313.5 millio i Fiscal For Fiscal 2006, the marketig, geeral ad admiistrative expese rate was 11.3%, which was flat compared to Fiscal Fiscal 2006 icluded a charge of $13.6 millio related to the adoptio of SFAS 123(R). Fiscal 2005 icluded a o-recurrig charge of $13.5 millio related to a severace agreemet with a executive officer. OTHER OPERATING INCOME, NET Other operatig icome for Fiscal 2006 was $10.0 millio compared to $5.5 millio for Fiscal The icrease was related to gift cards for which the Compay has determied the likelihood of redemptio to be remote ad isurace reimbursemets received durig the first ad secod quarters of Fiscal 2006 related to stores damaged by fire ad Hurricae Katria, respectively. operatig icome Fiscal 2006 operatig icome was $658.1 millio compared to $542.7 millio for Fiscal 2005, a icrease of 21.3%. The operatig icome rate for Fiscal 2006 was 19.8% versus 19.5% i Fiscal INTEREST INCOME, NET AND INCOME TAXES Net iterest icome for Fiscal 2006 was $13.9 millio compared to $6.7 millio for Fiscal The icrease i et iterest icome was due to higher iterest rates ad higher available ivestmet balaces durig Fiscal 2006 compared to Fiscal The effective tax rate for Fiscal 2006 was 37.2% compared to 39.2% for Fiscal The decrease i the effective tax rate primarily related to favorable settlemets of tax audits, favorable chages i estimates of potetial outcomes of certai state tax matters ad a icrease i tax exempt icome durig Fiscal Fiscal 2005 tax expese reflected a charge related to the Compay s chage i estimate of the potetial outcome of certai state tax matters. NET INCOME AND NET INCOME PER SHARE Net icome for Fiscal 2006 was $422.2 millio versus $334.0 millio i Fiscal 2005, a icrease of 26.4%. Net icome icluded after-tax charges of $9.9 millio i Fiscal 2006 related to the adoptio of SFAS 123(R), ad o-recurrig charges of $8.2 millio i Fiscal 2005 related to a severace agreemet with a executive officer. Net icome per diluted weighted-average share was $4.59 i Fiscal 2006 versus $3.66 i Fiscal 2005, a icrease of 25.4%. fiacial coditio Cotiued growth i et icome ad decreases i ivetory resulted i icreased cash provided by operatig activities. A more detailed discussio of liquidity, capital resources ad capital requiremets follows. LIQUIDITY AND CAPITAL RESOURCES The Compay expects that substatially all future operatios, icludig projected growth, seasoal requiremets ad capital expeditures will be fuded with cash from operatios. I additio, the Compay has $250 millio available, less outstadig letters of credit, uder its usecured credit agreemet to support operatios. Furthermore, the Compay expects that cash from operatig activities will fud divideds curretly beig paid at a rate of $0.175 per share per quarter. The Board of Directors of A&F will review the Compay s cash positio ad results of operatios ad address the appropriateess of future divided amouts. A summary of the Compay s workig capital (curret assets less curret liabilities) positio ad capitalizatio at the ed of the last three fiscal years follows (thousads): Workig capital $ 597,142 $ 581,451 $455,530 Capitalizatio: Shareholders equity $1,618,313 $1,405,297 $995,117 The icrease i workig capital durig Fiscal 2007 versus Fiscal 2006 was the result of higher cash ad marketable securities, resultig primarily from the Compay s icreases i earigs, partially offset by capital expeditures for expasio, share repurchases ad divideds paid. The icrease i workig capital i Fiscal 2006 versus Fiscal 2005 was the result of higher cash ad marketable securities, resultig primarily from the icrease i the Compay s et icome ad decreases i icome taxes payable, partially offset by a icrease i accrued expeses. Additioally, the Compay did ot make ay share repurchases i Fiscal 2006 compared to $103.3 millio of repurchases made i Fiscal The Compay cosiders the followig to be measures of its liquidity ad capital resources for the last three fiscal years: Curret ratio (curret assets divided by curret liabilities) Net cash provided by operatig activities (i thousads) $817,825 $582,171* $453,590 *Fiscal 2006 was a fifty-three week year. OPERATING ACTIVITIES Net cash provided by operatig activities, the Compay s primary source of liquidity, icreased to $817.8 millio for Fiscal 2007 from $582.2 millio i Fiscal I Fiscal 2007, cash was provided primarily by curret year et icome, adjusted for o-cash items icludig depreciatio ad amortizatio, share-based compesatio charges 16 17

11 ad amortizatio of deferred lease credits, collectio of lessor costructio allowaces ad decreases i ivetory. Uses of cash i Fiscal 2007 cosisted primarily of a decrease i icome taxes payable. Cash i Fiscal 2006 was provided primarily by curret year et icome, adjusted for o-cash items icludig, depreciatio ad amortizatio ad share-based compesatio charges, ad lessor costructio allowaces collected. Uses of cash i Fiscal 2006 cosisted primarily of icreases i ivetory ad a decrease i icome taxes payable. Net cash provided by operatig activities icreased to $582.2 millio for Fiscal 2006 from $453.6 millio i Fiscal Cash i Fiscal 2005 was provided primarily by et icome adjusted for o-cash items icludig depreciatio ad amortizatio ad share-based compesatio charges, collectio of lessor costructio allowaces ad a icrease i icome taxes payable. Uses of cash i Fiscal 2005 cosisted primarily of icreases i ivetory. The Compay s operatios are seasoal ad typically peak durig the Back-to-School ad Holiday sellig periods. Accordigly, cash requiremets for ivetory expeditures are highest i the secod ad third fiscal quarters as the Compay builds ivetory i aticipatio of these sellig periods. INVESTING ACTIVITIES Cash outflows for Fiscal 2007 were primarily for purchases of marketable securities ad trust-owed life isurace policies ad capital expeditures related primarily to ew store costructio, store remodels ad refreshes, the purchase of a airplae ad other various store, home office ad DC projects, partially offset by proceeds from the sale of marketable securities. Cash outflows for Fiscal 2006 were primarily for purchases of marketable securities, the purchase of trust-owed life isurace policies ad capital expeditures. Cash outflows for Fiscal 2005 were primarily for purchases of marketable securities ad capital expeditures. FINANCING ACTIVITIES Cash outflows related to fiacig activities cosisted primarily of the repurchase of the Compay s Commo Stock ad the paymet of divideds i Fiscal 2007 ad Fiscal I Fiscal 2006, cash outflows for fiacig activities related primarily to the paymet of divideds ad a chage i outstadig checks. Cash iflows i Fiscal 2007, Fiscal 2006 ad Fiscal 2005 cosisted primarily of stock optio exercises ad excess tax beefits related to stock optio exercises ad restricted stock issuaces. A&F repurchased approximately 3.6 millio ad 1.8 millio shares of A&F s Commo Stock durig Fiscal 2007 ad Fiscal 2005, respectively. A&F did ot repurchase ay shares of A&F s Commo Stock durig Fiscal Both the Fiscal 2007 ad the Fiscal 2005 repurchases were pursuat to A&F Board of Directors authorizatios. I August 2005, the A&F Board of Directors authorized A&F to repurchase 6.0 millio shares of A&F s Commo Stock. I November 2007, the A&F Board of Directors authorized the repurchase of 10.0 millio shares of A&F s Commo Stock, i additio to the approximately 2.0 millio shares of A&F s Commo Stock which the remaied available uder the August 2005 repurchase authorizatio. As of February 2, 2008, A&F had approximately 12.0 millio shares remaiig available to repurchase uder the 6.0 millio share authorizatio by the A&F Board of Directors i August 2005 ad the 10.0 millio share authorizatio by the Board of Directors i November Subsequet to February 2, 2008, A&F repurchased approximately 0.7 millio shares of A&F s Commo Stock with a value of approximately $50.0 millio from the approximately 12.0 millio shares of Commo Stock remaiig authorized for repurchase at February 2, O December 15, 2004, the Compay etered ito a ameded ad restated $250 millio sydicated usecured credit agreemet (the Ameded Credit Agreemet ) with Abercrombie & Fitch Maagemet Co., as borrower, ad with A&F ad its other domestic subsidiaries, as guarators. The primary purposes of the Ameded Credit Agreemet are for fiacial support of trade ad stad-by letters of credit ad workig capital. The Ameded Credit Agreemet has several borrowig optios, icludig a optio where iterest rates are based o the aget bak s Alterate Base Rate, ad aother usig the Lodo Iterbak Offered Rate. The facility fees payable uder the Ameded Credit Agreemet are based o the ratio of the Compay s leveraged total debt plus 600% of forward miimum ret commitmets to cosolidated earigs before iterest, taxes, depreciatio, amortizatio ad ret for the trailig four fiscal quarter periods. The facility fees are projected to accrue at either 0.15% or 0.175% o the committed amouts per aum. The Ameded Credit Agreemet cotais limitatios o idebtedess, lies, sale-leaseback trasactios, sigificat corporate chages icludig mergers ad acquisitios with third parties, ivestmets, restricted paymets (icludig divideds ad stock repurchases) ad trasactios with affiliates. The Ameded Credit Agreemet will mature o December 15, Trade letters of credit totalig approximately $61.6 millio ad $48.8 millio were outstadig uder the Ameded Credit Agreemet o February 2, 2008 ad February 3, 2007, respectively. No borrowigs were outstadig uder the Ameded Credit Agreemet o February 2, 2008 or o February 3, Stadby letters of credit totalig approximately $14.5 millio ad $4.9 millio were outstadig o February 2, 2008 ad February 3, 2007, respectively. The stadby letters of credit are set to expire durig the fourth quarter of Fiscal The beeficiary, a merchadise supplier, has the right to draw upo the stadby letters of credit if the Compay authorizes or files a volutary petitio i bakruptcy. To date, the beeficiary has ot draw upo the stadby letters of credit. OFF-BALANCE SHEET ARRANGEMENTS The Compay does ot have ay off-balace sheet arragemets or debt obligatios. CONTRACTUAL OBLIGATIONS As of February 2, 2008, the Compay s cotractual obligatios were as follows: Paymets due by period (thousads) Cotractual less tha more tha Obligatios Total 1 year 1-3 years 3-5 years 5 years Operatig Lease $2,173,795 $254,456 $515,928 $449,994 $953,417 Obligatios Purchase Obligatios $ 245,599 $245,599 Other Obligatios $ 115,044 $ 90,943 $ 24,075 $ 26 Totals $2,534,438 $590,998 $540,003 $450,020 $953,417 Operatig lease obligatios cosist primarily of future miimum lease commitmets related to store operatig leases. See Note 7, Leased Facilities ad Commitmets, of the Notes to Cosolidated Fiacial Statemets, for further discussio. Operatig lease obligatios do ot iclude commo area maiteace ( CAM ), isurace, marketig or tax paymets for which the Compay is also obligated. Total expese related to CAM, isurace, marketig ad taxes was $129.6 millio i Fiscal The obligatios i the table above do ot iclude urecogized tax beefits at February 2, 2008 of $38.9 millio. Additioally, the obligatios i the table above do ot iclude retiremet beefits for the Compay s Chief Executive Officer at February 2, 2008 of $14.0 millio due uder the Chief Executive Officer Supplemetal Executive Retiremet Pla (the SERP ). See Note 12, Retiremet Beefits, of the Notes to Cosolidated Fiacial Statemets, ad the descriptio of the SERP i the text uder the captio EXECUTIVE OFFICER COMPENSATION i A&F s defiitive Proxy Statemet for the Aual Meetig of Stockholders to be held o Jue 11, The purchase obligatios category represets purchase orders for merchadise to be delivered durig Sprig 2008 ad commitmets for fabric to be used durig upcomig seasos. Other obligatios primarily represet letters of credit outstadig as of February 2, 2008, lease deposits ad prevetive maiteace ad iformatio techology cotracts for Fiscal See Note 11, Log- Term Debt, of the Notes to Cosolidated Fiacial Statemets. The Compay expects to fud all of these obligatios with cash provided from operatios. STORES AND GROSS SQUARE FEET Store cout ad gross square footage by brad were as follows for the thirtee weeks eded February 2, 2008 ad the fourtee weeks eded February 3, 2007 respectively: Abercrombie Store Activity & Fitch abercrombie Hollister RUEHL Gilly Hicks Total November 3, ,014 New Remodels/Coversios (et activity) (3) (1) (4) Closed (2) (1) (3) February 2, ,035 Gross Square Feet Abercrombie (thousads) & Fitch abercrombie Hollister RUEHL Gilly Hicks Total November 3, , , ,188 New Remodels/Coversios (et activity) (29) (4) (33) Closed (18) (7) (25) February 2, , , ,337 Average Store Size 8,822 4,562 6,700 9,273 11,333 7,089 Abercrombie Store Activity & Fitch abercrombie Hollister RUEHL Gilly Hicks Total October 28, New Remodels/Coversios (et activity) 1 (1) (1) Closed (2) (2) (4) February 3, Gross Square Feet Abercrombie (thousads) & Fitch abercrombie Hollister RUEHL Gilly Hicks Total October 28, , , ,441 New Remodels/Coversios (et activity) 19 2 (9) (1) 12 Closed (15) (6) (21) February 3, , , ,693 Average Store Size 8,808 4,452 6,626 9,286 7,090 (1) Icludes oe RUEHL store temporarily closed due to fire damage. Store cout ad gross square footage by brad were as follows for the fifty-two weeks eded February 2, 2008 ad the fifty-three weeks eded February 3, 2007, respectively: Abercrombie Store Activity & Fitch abercrombie Hollister RUEHL Gilly Hicks Total February 3, New Remodels/Coversios (et activity) (2) (1) 1 (2) (2) Closed (5) (1) (6) February 2, ,035 Gross Square Feet Abercrombie (thousads) & Fitch abercrombie Hollister RUEHL Gilly Hicks Total February 3, , , ,693 New Remodels/Coversios (et activity) (23) 3 9 (11) Closed (45) (7) (52) February 2, , , ,337 Average Store Size 8,822 4,562 6,700 9,273 11,333 7,089 Abercrombie Store Activity & Fitch abercrombie Hollister RUEHL Gilly Hicks Total Jauary 29, New Remodels/Coversios (et activity) (2) (1) 5 (1) (1) (2) 2 Closed (7) (6) (13) February 3, Gross Square Feet Abercrombie (thousads) & Fitch abercrombie Hollister RUEHL Gilly Hicks Total Jauary 29, , , ,025 New Remodels/Coversios (et activity) 3 (1) 39 (1) (9) (2) 33 Closed (55) (22) (77) February 3, , , ,693 Average Store Size 8,808 4,452 6,626 9,286 7,090 (1) (2) Icludes oe Abercrombie & Fitch store ad oe Hollister store reopeed after repair from hurricae damage. Icludes oe RUEHL store temporarily closed due to fire damage. Capital Expeditures AND LESSOR CONSTRUCTION ALLOWANCES Capital expeditures totaled $403.3 millio, $403.5 millio ad $256.4 millio for Fiscal 2007, Fiscal 2006 ad Fiscal 2005, respectively. I Fiscal 2007, total capital expeditures were $403.3 millio, of which $252.8 millio was used for store related projects related to ew costructio ad remodels, coversios ad refreshes of existig Abercrombie & Fitch, abercrombie ad Hollister stores. The remaiig $150.5 millio was used for projects at the home office ad the distributio ceters, icludig home office expasio, iformatio techology ivestmets, the purchase of a airplae ad other projects. I Fiscal 2006, total capital expeditures were $403.5 millio, of which $253.7 millio was used for store related projects related to ew store costructio ad remodels, coversios, ad refreshes of existig Abercrombie & Fitch, abercrombie ad Hollister stores. The remaiig $149.8 millio was used for projects at the home office, icludig the completio of the secod DC, home office expasio, iformatio techology ivestmets ad other projects. I Fiscal 2005, total capital expeditures were $256.4 millio, of which $204.7 millio was used for store related projects, icludig ew store costructio ad remodels, coversios ad other projects

12 The remaiig $51.7 millio was used for projects at the home office, icludig home office improvemets, iformatio techology ivestmets, DC improvemets ad other projects. Lessor costructio allowaces are a itegral part of the decisio makig process for assessig the viability of ew store locatios. I makig the decisio whether to ivest i a store locatio, the Compay calculates the estimated future retur o its ivestmet based o the cost of costructio, less ay costructio allowaces to be received from the ladlord. The Compay received $43.4 millio, $49.4 millio ad $42.3 millio i costructio allowaces durig Fiscal 2007, Fiscal 2006 ad Fiscal 2005, respectively. Durig Fiscal 2008, the Compay aticipates capital expeditures betwee approximately $420 millio ad $425 millio. Approximately $300 millio of this amout is allocated to ew store costructio ad full store remodels, icludig $55 millio allocated for the Hollister flagship i the SoHo area of New York City, the Abercrombie & Fitch flagships i Europe ad Japa ad the four ew Hollister mall-based U.K. stores. Approximately $50 millio is expected to be allocated to refresh existig stores. The store refreshes will iclude ew floors, soud systems ad fixture replacemets at Abercrombie & Fitch ad abercrombie stores. I additio, Hollister store refreshes will iclude the additio of video walls ad the refittig of lightig ad shelvig to accommodate the rollout of the persoal care product lie. The Compay is plaig approximately $73 millio i capital expeditures at the home office related to iformatio techology ivestmets, ew direct-to-cosumer distributio ad logistics systems ad other home office projects. The Compay iteds to add approximately 760,000 gross square feet of stores durig Fiscal 2008, which will represet a icrease of approximately 10% over Fiscal The Compay aticipates the icrease durig Fiscal 2008 will be primarily due to the additio of approximately 70 ew Hollister stores, 16 ew abercrombie stores, three ew Abercrombie & Fitch stores, six ew RUEHL stores ad 15 ew Gilly Hicks stores. Durig Fiscal 2008, the Compay expects the average costructio cost per square foot, et of costructio allowaces, for o-flagship Abercrombie & Fitch stores to remai flat compared to Fiscal 2007 s cost of approximately $140; for ew abercrombie stores to decrease from Fiscal 2007 s cost of approximately $171 to approximately $148; for ew Hollister stores to decrease from Fiscal 2007 s cost of approximately $131 to approximately $126; ad for RUEHL to decrease from Fiscal 2007 s cost of $267 to $257. The chages from Fiscal 2007 s estimates for Hollister, abercrombie ad RUEHL stores were drive by a umber of factors, icludig ladlord allowace levels ad lower costructio costs. The Compay expects the average costructio cost per square foot, et of costructio allowaces, for ew Gilly Hicks stores to be approximately $392 i Fiscal The Compay expects iitial ivetory purchases for the stores to average approximately $0.4 millio, $0.2 millio, $0.4 millio, $0.5 millio ad $0.6 millio per store for Abercrombie & Fitch, abercrombie, Hollister, RUEHL ad Gilly Hicks, respectively. The Compay expects that substatially all future capital expeditures will be fuded with cash from operatios. I additio, the Compay has $250 millio available, less outstadig letters of credit, uder its Ameded Credit Agreemet to support operatios. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The Compay s discussio ad aalysis of its fiacial coditio ad results of operatios are based upo the Compay s cosolidated fiacial statemets, which have bee prepared i accordace with accoutig priciples geerally accepted i the U.S. ( GAAP ). The preparatio of these cosolidated fiacial statemets requires the Compay to make estimates ad assumptios that affect the reported amouts of assets, liabilities, reveues ad expeses. Sice actual results may differ from those estimates, the Compay revises its estimates ad assumptios as ew iformatio becomes available. The Compay s sigificat accoutig policies ca be foud i Note 2, Summary of Sigificat Accoutig Policies, of the Notes to Cosolidated Fiacial Statemets. The Compay believes that the followig policies are most critical to the portrayal of the Compay s fiacial coditio ad results of operatios. REVENUE RECOGNITION The Compay recogizes retail sales at the time the customer takes possessio of the merchadise. Directto-cosumer sales are recorded upo customer receipt of merchadise. Amouts relatig to shippig ad hadlig billed to customers i a sale trasactio are classified as reveue ad the related direct shippig ad hadlig costs are classified as stores ad distributio expese. Associate discouts are classified as a reductio of reveue. The Compay reserves for sales returs through estimates based o historical experiece ad various other assumptios that maagemet believes to be reasoable. The sales retur reserve was $10.7 millio, $8.9 millio ad $8.2 millio at February 2, 2008, February 3, 2007 ad Jauary 28, 2006, respectively. The Compay s gift cards do ot expire or lose value over periods of iactivity. The Compay accouts for gift cards by recogizig a liability at the time a gift card is sold. The liability remais o the Compay s books util the earlier of redemptio (recogized as reveue) or whe the Compay determies the likelihood of redemptio is remote (recogized as other operatig icome). The Compay determies the probability of the gift card beig redeemed to be remote based o historical redemptio patters ad recogizes the remaiig balace as other operatig icome. At February 2, 2008 ad February 3, 2007, the gift card liabilities o the Compay s Cosolidated Balace Sheets were $68.8 millio ad $65.0 millio, respectively. The Compay is ot required by law to escheat the value of uredeemed gift cards to the states i which it operates. Durig Fiscal 2007, Fiscal 2006 ad Fiscal 2005, the Compay recogized other operatig icome for adjustmets to the gift card liability of $10.9 millio, $5.2 millio ad $2.4 millio, respectively. INVENTORY VALUATION Ivetories are pricipally valued at the lower of average cost or market utilizig the retail method. The Compay determies market value as the aticipated future sellig price of the merchadise less a ormal margi. A iitial markup is applied to ivetory at cost i order to establish a cost-to-retail ratio. Permaet markdows, whe take, reduce both the retail ad cost compoets of ivetory o had so as to maitai the already established cost-to-retail relatioship. At first ad third fiscal quarter ed, the Compay reduces ivetory value by recordig a markdow reserve that represets the estimated future aticipated sellig price decreases ecessary to sell-through the curret seaso ivetory. At secod ad fourth fiscal quarter ed, the Compay reduces ivetory value by recordig a markdow reserve that represets the estimated future sellig price decreases ecessary to sell-through ay remaiig carryover ivetory from the seaso just passed. The markdow reserve was $5.4 millio, $6.8 millio ad $10.0 millio at February 2, 2008, February 3, 2007 ad Jauary 28, 2006, respectively. Additioally, as part of ivetory valuatio, a ivetory shrik estimate is made each period that reduces the value of ivetory for lost or stole items. The Compay performs physical ivetories throughout the year ad adjusts the shrik reserve accordigly. The shrik reserve was $11.5 millio, $7.7 millio ad $3.8 millio at February 2, 2008, February 3, 2007 ad Jauary 28, 2006, respectively. Iheret i the retail method calculatio are certai sigificat judgmets ad estimates icludig, amog others, markdows ad shrikage, which could sigificatly impact the edig ivetory valuatio at cost as well as the resultig gross margis. A icrease or decrease i the ivetory shrik estimate of 10% would ot have a material impact o the Compay s results of operatios. Maagemet believes this ivetory valuatio method is appropriate sice it preserves the cost-to-retail relatioship i edig ivetory. PROPERTY AND EQUIPMENT Depreciatio ad amortizatio of property ad equipmet are computed for fiacial reportig purposes o a straight-lie basis, usig service lives ragig pricipally from 30 years for buildigs; the lesser of the useful life of the asset, which rages from three to 15 years, or the term of the lease for leasehold improvemets; the lesser of the useful life of the asset, which rages from three to seve years, or the term of the lease whe applicable for iformatio techology; ad three to 20 years for other property ad equipmet. The cost of assets sold or retired ad the related accumulated depreciatio or amortizatio are removed from the accouts with ay resultig gai or loss icluded i et icome. Maiteace ad repairs are charged to expese as icurred. Major remodels ad improvemets that exted service lives of the assets are capitalized. Log-lived assets are reviewed at the store level periodically for impairmet or wheever evets or chages i circumstaces idicate that full recoverability of et assets through future cash flows is i questio. Factors used i the evaluatio iclude, but are ot limited to, maagemet s plas for future operatios, recet operatig results ad projected cash flows. INCOME TAXES Icome taxes are calculated i accordace with SFAS No. 109, Accoutig for Icome Taxes, which requires the use of the asset ad liability method. Deferred tax assets ad liabilities are recogized based o the differece betwee the fiacial statemet carryig amouts of existig assets ad liabilities ad their respective tax bases. Deferred tax assets ad liabilities are measured usig curret eacted tax rates i effect for the years i which those temporary differeces are expected to reverse. Iheret i the measuremet of deferred balaces are certai judgmets ad iterpretatios of eacted tax law ad published guidace with respect to applicability to the Compay s operatios. A valuatio allowace is established agaist deferred tax assets whe it is more likely tha ot that some portio or all of the deferred tax assets will ot be realized. The Compay has recorded a valuatio allowace agaist the deferred tax asset arisig from the et operatig loss of a foreig subsidiary. No other valuatio allowaces have bee provided for deferred tax assets. The effective tax rate utilized by the Compay reflects maagemet s judgmet of expected tax liabilities withi the various tax jurisdictios. I Jue 2006, the FASB issued Fiacial Accoutig Stadards Board Iterpretatio ( FIN ) No. 48, Accoutig for Ucertaity i Icome Tax a iterpretatio of FASB Statemet No FIN 48 clarifies the accoutig for ucertaity i icome taxes recogized i a compay s fiacial statemets i accordace with SFAS No. 109, Accoutig for Icome Taxes. This iterpretatio prescribes a recogitio threshold ad measuremet attribute for the fiacial statemet recogitio ad measuremet of a tax positio take or expected to be take i a tax retur. This iterpretatio also provides guidace o derecogitio, classificatio, iterest ad pealties, accoutig i iterim periods, disclosure ad trasitio. The Compay recogizes accrued iterest ad pealties related to urecogized tax beefits as a compoet of tax expese. The provisio for icome taxes is based o the curret estimate of the aual effective tax rate adjusted to reflect the tax impact of items discrete to the quarter. The Compay records tax expese or beefit that does ot relate to ordiary icome i the curret fiscal year discretely i the period i which it occurs pursuat to the requiremets of APB Opiio No. 28, Iterim Fiacial Reportig ad FIN 18, Accoutig for Icome Taxes i Iterim Periods a Iterpretatio of APB Opiio No. 28. Examples of such types of discrete items iclude, but are ot limited to, chages i estimates of the outcome of tax matters related to prior years, provisio-to-retur adjustmets, tax-exempt icome ad the settlemet of tax audits. FOREIGN CURRENCY TRANSLATION The majority of the Compay s iteratioal operatios use local currecies as the fuctioal currecy. I accordace with SFAS No. 52, Foreig Currecy Traslatio, assets ad liabilities deomiated i foreig currecies were traslated ito U.S. dollars (the reportig currecy) at the exchage rate prevailig at the balace sheet date. Equity accouts deomiated i foreig currecies were traslated ito U.S. dollars at historical exchage rates. Reveues ad expeses deomiated i foreig currecies were traslated ito U.S. dollars at the mothly average exchage rate for the period. Gais ad losses resultig from foreig currecy trasactios are icluded i the results of operatios; whereas, traslatio adjustmets are reported as a elemet of other comprehesive icome i accordace with SFAS No. 130, Reportig Comprehesive Icome. CONTINGENCIES I the ormal course of busiess, the Compay must make cotiuig estimates of potetial future legal obligatios ad liabilities, which requires the use of maagemet s judgmet o the outcome of various issues. Maagemet may also use outside legal advice to assist i the estimatig process. However, the ultimate outcome of various legal issues could be differet tha maagemet estimates, ad adjustmets may be required. Equity Compesatio Expese Prior to Jauary 29, 2006, the Compay reported share-based compesatio through the disclosure-oly requiremets of SFAS No. 123, Accoutig for Stock-Based Compesatio ( SFAS No.123 ), as ameded by SFAS No. 148, Accoutig for Stock-Based Compesatio Trasitio ad Disclosure a Amedmet of FASB Statemet No. 123, but elected to measure compesatio expese usig the itrisic value method i accordace with Accoutig Priciples Board ( APB ) Opiio No. 25, Accoutig for Stock Issued to Employees, for which o expese was recogized for stock optios if the exercise price was equal to the market value of the uderlyig Commo Stock o the date of grat, ad provided the required pro forma disclosures i accordace with SFAS No. 123, as ameded

13 Effective Jauary 29, 2006, the Compay adopted the provisios of SFAS No. 123(R) which requires stock optios to be accouted for uder the fair value method ad requires the use of a optio-pricig model for estimatig fair value. Accordigly, share-based compesatio is measured at the grat date, based o the fair value of the award. The Compay s equity compesatio expese related to stock optios is estimated usig the Black-Scholes optio-pricig model to determie the fair value of the stock optio grats, which requires the Compay to estimate the expected term of the stock optio grats ad expected future stock price volatility over the expected term. Estimates of the expected term, which represets the expected period of time the Compay believes the stock optios will be outstadig, are based o historical iformatio. Estimates of the expected future stock price volatility are based o the volatility of A&F s Commo Stock for the most recet historical period equal to the expected term of the stock optio. The Compay calculates the historic volatility as the aualized stadard deviatio of the differeces i the atural logarithms of the weekly stock closig price, adjusted for stock splits. The fair value calculatio uder the Black-Scholes valuatio model is particularly sesitive to chages i the expected term ad volatility assumptios. Icreases i expected term or volatility will result i a higher fair valuatio of stock optio grats. Assumig all other assumptios disclosed i Note 4, Share-Based Compesatio of the Notes to Cosolidated Fiacial Statemets, beig equal, a 10% icrease i term will yield a 5% icrease i the Black-Scholes valuatio, while a 10% icrease i volatility will yield a 7% icrease i the Black-Scholes valuatio. The Compay believes that chages i expected term ad volatility would ot have a material effect o the Compay s results sice the umber of stock optios grated durig the periods preseted was ot material. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS I September 2006, the FASB released SFAS No. 157, Fair Value Measuremets ( SFAS 157 ). SFAS 157 establishes a commo defiitio for fair value uder GAAP ad also establishes a framework for measurig fair value ad expads disclosure requiremets about such fair value measuremets. I February 2008, the FASB issued FASB Staff Positio ( FSP ) that elimiates SFAS No. 13, Accoutig for Leases, from the scope of SFAS 157. I February 2008, the FASB issued FSP that partially defers the effective date of SFAS No. 157 for oe year for o-fiacial assets ad liabilities that are recogized or disclosed at fair value i the fiacial statemets o a o-recurrig basis. Cosequetly, SFAS No. 157 was effective for the Compay o February 3, 2008, for fiacial assets ad liabilities carried at fair value ad o-fiacial assets ad liabilities that are recogized or disclosed at fair value o a recurrig basis ad will be effective o February 1, 2009, for o-recurrig o-fiacial assets ad liabilities that are recogized or disclosed at fair value. The Compay is curretly evaluatig the potetial impact of adoptig SFAS No. 157 ad the related FSPs o the cosolidated results of operatios ad cosolidated fiacial coditio. I February 2007, the FASB released SFAS No. 159, The Fair Value Optio for Fiacial Assets ad Fiacial Liabilities Icludig a amedmet of FASB Statemet No. 115 ( SFAS 159 ). SFAS 159 permits compaies to measure may fiacial istrumets ad certai other assets ad liabilities at fair value o a istrumet by istrumet basis. SFAS 159 also establishes presetatio ad disclosure requiremets to facilitate comparisos betwee compaies that select differet measuremet attributes for similar types of assets ad liabilities. SFAS 159 was effective for the Compay o February 3, The Compay is curretly evaluatig the potetial impact o the cosolidated fiacial statemets of adoptig SFAS 159. FORWARD-LOOKING STATEMENTS AND RISK FACTORS The Compay cautios that ay forward-lookig statemets (as such term is defied i the Private Securities Litigatio Reform Act of 1995) cotaied i this Aual Report or made by the Compay, its maagemet or spokespeople ivolve risks ad ucertaities ad are subject to chage based o various factors, may of which may be beyod the Compay s cotrol. Words such as estimate, project, pla, believe, expect, aticipate, ited, ad similar expressios may idetify forward-lookig statemets. Except as may be required by applicable law, the Compay assumes o obligatio to publicly update or revise its forward-lookig statemets. The followig factors could affect the Compay s fiacial performace ad could cause actual results to differ materially from those expressed or implied i ay of the forward-lookig statemets: loss of services of skilled seior executive officers; ability to hire, trai ad retai qualified associates; chages i cosumer spedig patters ad cosumer prefereces; ability to develop iovative, high-quality ew merchadise i respose to chagig fashio treds; effects o cosumer purchases due to a geeral ecoomic dowtur; the impact of competitio ad pricig pressures; availability ad market prices of key raw materials; ability of maufacturers to comply with applicable laws, regulatios ad ethical busiess practices; availability of suitable store locatios uder appropriate terms; currecy ad exchage risks ad chages i existig or potetial duties, tariffs or quotas; effects of political ad ecoomic evets ad coditios domestically ad i foreig jurisdictios i which the Compay operates, icludig, but ot limited to, acts of terrorism or war; useasoable weather coditios affectig cosumer prefereces; disruptive weather coditios affectig cosumers ability to shop; ad effects of capital market coditios. Refer to Item 1A. Risk Factors of the Compay s Report o Form 10-K filed March 28, 2008 for a descriptio of certai risk factors that the Compay believes may be relevat to a uderstadig of the Compay ad its busiess. These risk factors, i additio to the factors set forth above, could cause actual results to differ materially from those expressed or implied i ay of the Compay s forward-lookig statemets. QUANTITatIVE AND QUALITatIVE DISCLOSURES ABOUT MARKET RISK The Compay maitais its cash equivalets i fiacial istrumets, primarily moey market accouts, with origial maturities of 90 days or less. The Compay also holds ivestmets i ivestmet grade auctio rate securities ( ARS ), all classified as available-for-sale that have maturities ragig from eight to 34 years. As of February 2, 2008, the Compay held approximately $530.5 millio i ARS classified as marketable securities. Approximately $272.1 millio of these securities were ivested i closed ed muicipal bod fuds ad approximately $258.4 millio were ivested i securities issued by state agecies which issue studet loas. Despite the uderlyig log-term maturity of ARS, such securities were priced ad subsequetly traded as short-term ivestmets because of the iterest rate reset feature. Iterest rates reset through a Dutch auctio process at predetermied periods ragig from seve to 35 days. If there are isufficiet buyers, the auctio is said to fail ad the holders are uable to liquidate the ivestmets through auctio. A failed auctio does ot result i a default of the debt istrumet. The securities will cotiue to accrue iterest ad be auctioed util the auctio succeeds, the issuer calls the securities or the securities mature. O February 13, 2008, the Compay bega to experiece failed auctios o some of its ARS. As of March 27, 2008, the Compay held approximately $365.9 millio i ARS, of which $326.9 millio were also held as of February 2, As of February 2, 2008, approximately 99% of the Compay s ARS were AAA rated by oe or more major credit ratig agecies. The ratigs take ito accout isurace policies guarateeig both the pricipal ad accrued iterest. Each ivestmet i studet loas is substatially guarateed by the U.S. govermet uder the Federal Family Educatio Loa Program. The Compay does ot believe that failures i the auctio market will have a material impact o the Compay s liquidity. The Compay believes that it curretly has adequate workig capital to fud operatios based o access to cash ad cash equivalets ad expected operatig cash flows. I additio, the Compay has $250 millio available, less outstadig letters of credit, uder its usecured credit agreemet to support operatios. The curret market for the ARS is ucertai ad the Compay will cotiue to moitor ad evaluate the market. If auctios cotiue to fail, it may be ecessary to reflect the securities as log-term ivestmets o its cosolidated balace sheet for the period edig May 3, 2008 or thereafter. If the Compay sells ay of the ARS, prior to maturity, at a amout below origial purchase value, or if it becomes probable that the Compay will ot receive 100% of the pricipal ad iterest from the issuer as to ay of the ARS, the Compay will be required to recogize a other-tha-temporary impairmet charge agaist et icome. The Compay established a irrevocable rabbi trust (the Rabbi Trust ) durig the third quarter of Fiscal 2006, the purpose of which is to be a source of fuds to match respective fudig obligatios to participats i the Abercrombie & Fitch Noqualified Savigs ad Supplemetal Retiremet Pla ad the Chief Executive Officer Supplemetal Executive Retiremet Pla. As of February 2, 2008, total assets held i the Rabbi Trust were $51.3 millio, which icluded $18.6 millio of available-for-sale muicipal otes ad bods, trust-owed life isurace policies with a cash surreder value of $31.3 millio ad $1.4 millio held i moey market accouts. As of February 3, 2007, total assets held i the Rabbi Trust were $33.5 millio, which icluded $18.3 millio of available-for-sale muicipal otes ad bods ad trust-owed life isurace policies with a cash surreder value of $15.3 millio. The Rabbi Trust assets are cosolidated i accordace with Emergig Issues Task Force ( EITF ) 97-14, Accoutig for Deferred Compesatio Agreemets Where Amouts Eared Are Held i a Rabbi Trust ad Ivested ( EITF ) ad recorded at fair value i other assets o the Cosolidated Balace Sheets ad are restricted as to their use as oted above. There were $0.4 millio i realized losses for the fifty-two weeks eded February 2, 2008 ad o realized gais or losses for the fifty-three weeks eded February 3, 2007, all related to available-for-sale securities. Net urealized gais were approximately $.01 millio as of February 2, 2008 ad et urealized losses were approximately $0.7 millio as of February 3, 2007, all related to available-for-sale securities. The Compay does ot eter ito fiacial istrumets for tradig purposes. As of February 2, 2008, the Compay had o log-term debt outstadig. Future borrowigs would bear iterest at egotiated rates ad would be subject to iterest rate risk. The Compay has exposure to chages i currecy exchage rates associated with foreig currecy trasactios, icludig iter-compay trasactios. Such foreig currecy trasactios are deomiated i Euros, Caadia Dollars, Japaese Ye, Daish Kroes, Swiss Fracs ad British Pouds. The Compay has established a program that primarily utilizes foreig currecy forward cotracts to partially offset the risks associated with the effects of certai foreig currecy exposures. Uder this program, icreases or decreases i foreig currecy exposures are partially offset by gais or losses o forward cotracts, to mitigate the impact of foreig currecy trasactio gais or losses. The Compay does ot use forward cotracts to egage i currecy speculatio. All outstadig foreig currecy forward cotracts are marked to market at the ed of each fiscal period. The Compay s ultimate realized gai or loss with respect to foreig currecy fluctuatios will deped o the foreig currecy exchage rate chages ad other factors i effect as the cotracts mature

14 Cosolidated Statemets of et Icome ad comprehesive icome Cosolidated Balace Sheets (Thousads, except per share amouts) Net Sales Cost of Goods Sold Gross Profit Stores ad Distributio Expese Marketig, Geeral & Admiistrative Expese Other Operatig Icome, Net Operatig Icome Iterest Icome, Net Icome Before Icome Taxes Provisio for Icome Taxes Net Icome Net Icome Per Share: Basic Diluted Weighted-Average Shares Outstadig: Basic Diluted Divideds Declared Per Share Other Comprehesive Icome Cumulative Foreig Currecy Traslatio Adjustmets Urealized Gais (Losses) o Marketable Securities, et of taxes of ($502), $20 ad $0 for Fiscal 2007, Fiscal 2006, ad Fiscal 2005, respectively Other Comprehesive Icome (Loss) Comprehesive Icome 2007 $3,749,847 1,238,480 2,511,367 1,386, ,758 (11,734) 740,497 (18,828) 759, ,628 $ 475,697 $5.45 $ ,248 91,523 $0.70 $ 7, $ 8,112 $ 483,809 The accompayig Notes are a itegral part of these Cosolidated Fiacial Statemets. Net Sales ($ i Millios) $3,800 $3,600 $3,400 $3,200 $3,000 $2,800 $2,600 $2400 $2,200 $2,000 $1,800 $1,600 $1,400 $1,200 $1,708 * Fiscal 2006 was a fifty-three week year. $2,021 $2,785 $3,318 $3, * 2007 Net Icome ($ i Millios) $490 $470 $450 $430 $410 $390 $370 $350 $330 $310 $290 $270 $250 $230 $210 $190 $170 $150 $130 $110 $ * $3,318,158 1,109,152 2,209,006 1,187, ,828 (9,983) 658,090 (13,896) 671, ,800 $ 422,186 $4.79 $ ,052 92,010 $0.70 ($239) 41 ($198) $ 421,988 $216 $334 $ $2,784, ,295 1,851,416 1,000, ,457 (5,534) 542,738 (6,674) 549, ,426 $ 333,986 $3.83 $ ,161 91,221 $0.60 ($78) (718) ($796) $ 333,190 $ * 2007 (Thousads, except share amouts) February 2, 2008 February 3, 2007 Assets Curret Assets Cash ad Equivalets $ 118,044 $ 81,959 Marketable Securities 530, ,793 Receivables 53,801 43,240 Ivetories 333, ,447 Deferred Icome Taxes 36,128 33,170 Other Curret Assets 68,643 58,469 Total Curret Assets 1,140,255 1,092,078 Property ad Equipmet, Net 1,318,291 1,092,282 Other Assets 109,052 63,707 Total Assets $ 2,567,598 $ 2,248,067 Liabilities ad Shareholders Equity Curret Liabilities Accouts Payable $ 0 108,437 $ 100,919 Outstadig Checks 43,361 27,391 Accrued Expeses 280, ,219 Deferred Lease Credits 37,925 35,423 Icome Taxes Payable 72,480 86,675 Total Curret Liabilities 543, ,627 Log-Term Liabilities Deferred Icome Taxes 0 22,491 30,394 Deferred Lease Credits 213, ,943 Commitmets Other Liabilities 169,942 97,806 Total Log-Term Liabilities 406, ,143 Shareholders Equity Class A Commo Stock $0.01 par value: 150,000,000 shares authorized ad 103,300,000 shares issued at February 2, 2008 ad February 3, 2007, respectively 0 1,033 1,033 Paid-I Capital 319, ,732 Retaied Earigs 2,051,463 1,646,290 Accumulated Other Comprehesive Icome (Loss), et of tax 7,118 (994) Treasury Stock, at Average Cost 17,141,116 ad 14,999,945 shares at February 2, 2008 ad February 3, 2007, respectively (760,752) (530,764) Total Shareholders Equity 1,618,313 1,405,297 Total Liabilities ad Shareholders Equity $ 2,567,598 $2,248,067 The accompayig Notes are a itegral part of these Cosolidated Fiacial Statemets

15 Cosolidated statemets of shareholders equity Cosolidated Statemets of Cash Flows Commo Stock Treasury Stock (Thousads) * 2005 Other Compre- D deferred hesive total Shares Par Paid-I Retaied Compe- Icome at Average Shareholders (Thousads) outstadig Value Capital Earigs satio (Loss) Shares cost Equity Balace, Jauary 29, ,036 $1,033 $176,552 $1,039,722 $ 15,048 17,263 $(563,029) $ 669,326 Net Icome 333, ,986 Purchase of Treasury Stock (1,765) 1,765 (103,296) (103,296) Divideds ($0.60 per share) (52,218) (52,218) Stock Optio Exercises 3,289 (26,985) (3,289) 109,880 82,895 Restricted Stock Uit Issuace 166 (4,297) (12,966) (166) 5,650 (11,613) Tax Beefit from Excercise of Stock Optios ad Issuace of Restricted Stock Uits 52,709 52,709 Restricted Stock Uit Expese 24,124 24,124 Urealized Losses o Marketable Securtities (718) (718) Cumulative Foreig Currecy Traslatio Adjustmets (78) (78) Balace, Jauary 28, ,726 $1,033 $229,261 $1,290,208 $ 26,206 $ (796) 15,574 $(550,795) $ 995,117 Deferred Compesatio Reclassificatio 26,206 (26,206) Net Icome 422, ,186 Divideds ($0.70 per share) (61,623) (61,623) Share-based Compesatio Issuaces ad Excersises 574 (6,326) (4,481) (574) 20,031 9,224 Tax Beefit from Share-based Compesatio Issuaces ad Exercises 5,472 5,472 Share-based Compesatio Expese 35,119 35,119 Urealized Gais o Marketable Securities Cumulative Foreig Currecy Traslatio Adjustmets (239) (239) Balace, February 3, ,300 $1,033 $289,732 $1,646,290 $ (994) 15,000 $(530,764) $1,405,297 FIN 48 Impact (2,786) (2,786) Net Icome 475, ,697 Purchase of Treasury Stock (3,654) 3,654 (287,916) (287,916) Divideds ($0.70 per share) (61,330) (61,330) Share-based Compesatio Issuaces ad Excersises 1,513 (19,052) (6,408) (1,513) 57,928 32,468 Tax Beefit from Share-based Compesatio Issuaces ad Exercises 17,600 17,600 Share-based Compesatio Expese 31,170 31,170 Urealized Gais o Marketable Securities Cumulative Foreig Currecy Traslatio Adjustmets 7,328 7,328 Balace, February 2, ,159 $1,033 $319,451 $2,051,463 $ 7,118 (1) 17,141 $(760,752) $ 1,618,313 (1) Accumulated Other Comprehesive Icome icludes cummulative foreig currecy traslatio adjustmets of $7.0 millio ad of urealized gais o marketable securities, et of taxes of $0.1 millio. The accompayig Notes are a itegral part of these Cosolidated Fiacial Statemets. 26 Operatig Activities: Net Icome $475,697 $422,186 $333,986 Impact of Other Operatig Activities o Cash Flows: Depreciatio ad Amortizatio 183, , ,206 Amortizatio of Deferred Lease Credits (37,418) (34,485) (32,527) Share-Based Compesatio 31,170 35,119 24,124 Tax Beefit from Share-Based Compesatio 17,600 5,472 52,709 Excess Tax Beefit from Share-Based Compesatio (14,205) (3,382) Deferred Taxes 1,342 (11,638) (2,099) Loss o Disposal of Assets ad Charge for Impairmet 9,517 6,559 7,658 Lessor Costructio Allowaces 43,391 49,387 42,336 Foreig Currecy Gais 301 Chages i Assets ad Liabilities: Ivetories 87,657 (61,940) (146,314) Accouts Payable ad Accrued Expeses 22,375 24,579 (2,912) Icome Taxes (13,922) (12,805) 43,893 Other Assets ad Liabilities 10,604 16,963 8,530 Net Cash Provided by Operatig Activities 817, , ,590 Ivestig Activities: Capital Expeditures (403,345) (403,476) (256,422) Purchases of Trust Owed Life Isurace Policies (15,000) (15,258) Purchases of Marketable Securities (1,444,736) (1,459,835) (1,016,986) Proceeds of Sales of Marketable Securities 1,362,911 1,404, ,101 Net Cash Used for Ivestig Activities (500,170) (473,764) (668,307) Fiacig Activities: Divideds Paid (61,330) (61,623) (52,218) Chage i Outstadig Checks ad Other 13,536 (31,770) 8,467 Proceeds from Share-Based Compesatio 38,750 12,876 73,716 Excess Tax Beefit from Share-Based Compesatio 14,205 3,382 Purchase of Treasury Stock (287,916) (103,296) Net Cash Used For Fiacig Activities (282,755) (77,135) (73,331) effect of exchage rates o cash 1,185 Net Icrease (Decrease) i Cash ad Equivalets 36,085 31,272 (288,048) Cash ad Equivalets, Begiig of Year 81,959 50, ,735 Cash ad Equivalets, Ed of Year $118,044 $ 81,959 $ 50,687 Sigificat No-Cash Ivestig Activities: Chage i Accrual for Costructio i Progress $ 8,791 $ 28,455 $ 3,754 * Fiscal 2006 was a fifty-three week year. The accompayig Notes are a itegral part of these Cosolidated Fiacial Statemets. 27

16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION Abercrombie & Fitch Co. ( A&F ), through its wholly-owed subsidiaries (collectively, A&F ad its wholly-owed subsidiaries are referred to as Abercrombie & Fitch or the Compay ), is a specialty retailer of high-quality, casual apparel for me, wome ad kids with a active, youthful lifestyle. The accompayig cosolidated fiacial statemets iclude the historical fiacial statemets of, ad trasactios applicable to, the Compay ad reflect the assets, liabilities, results of operatios ad cash flows. FISCAL YEAR The Compay s fiscal year eds o the Saturday closest to Jauary 31, typically resultig i a fifty-two week year, but occasioally givig rise to a additioal week, resultig i a fifty-three week year. Fiscal years are desigated i the cosolidated fiacial statemets ad otes by the caledar year i which the fiscal year commeces. All refereces herei to Fiscal 2007 represet the results of the 52-week fiscal year eded February 2, 2008; to Fiscal 2006 represet the 53-week fiscal year eded February 3, 2007; ad to Fiscal 2005 represet the 52-week fiscal year eded Jauary 28, I additio, all refereces herei to Fiscal 2008 represet the 52-week fiscal year that will ed o Jauary 31, reclassificatios Certai amouts have bee reclassified to coform to the curret year presetatio. A&F periodically acquires shares of its Class A Commo Stock, par value $0.01 per share ( Commo Stock ) uder various Board of Directorsauthorized share buy-back plas. The shares acquired are held as treasury stock ad are ot retired. A&F utilizes the treasury stock whe issuig shares for stock optio exercises ad restricted stock uit vestigs. I accordace with Accoutig Priciples Board ( APB ) Opiio No. 6, Status of Accoutig Research Bulletis, gais o sales of treasury stock ot previously accouted for as costructively retired should be credited to paid-i capital; losses may be charged to paid-i capital to the extet of previous et gais from sales or retiremets of the same class of stock, otherwise to retaied earigs. O the Cosolidated Statemets of Shareholders Equity for the year eded Jauary 28, 2006, the Compay reclassified treasury stock losses of $31.3 millio to retaied earigs that were previously etted agaist paid-i capital. Amouts reclassified did ot have a effect o the Compay s results of operatios or Cosolidated Statemet of Cash Flows. I coectio with the Compay s adoptio of Fiacial Accoutig Stadards Board ( FASB ) Iterpretatio No. 48, Accoutig for Ucertaity i Icome Taxes A Iterpretatio of FASB Statemet No. 109 ( FIN 48 ) o February 4, 2007, a $2.8 millio cumulative effect adjustmet was recorded as a reductio to begiig of the year retaied earigs. The Compay s urecogized tax beefits as of February 4, 2007 were reclassified from curret taxes payables to other log-term liabilities. See Note 10, Icome Taxes for iformatio about the adoptio of FIN 48. segmet reportig I accordace with Statemet of Fiacial Accoutig Stadards ( SFAS ) No. 131, Disclosures about Segmets of a Eterprise ad Related Iformatio, ( SFAS No. 131 ), the Compay determies its operatig segmets o the same basis that it uses iterally to evaluate performace. The operatig segmets idetified by the Compay iclude Abercrombie & Fitch, abercrombie, Hollister, RUEHL ad Gilly Hicks. The operatig segmets have bee aggregated ad are reported as oe reportable fiacial segmet. RUEHL ad Gilly Hicks were determied to be immaterial for segmet reportig purposes, ad are therefore icluded i the oe reportable segmet as they have similar ecoomic characteristics ad meet the majority of the aggregatio criteria i paragraph 17 of SFAS No The Compay aggregates its operatig segmets because they meet the aggregatio criteria set forth i paragraph 17 of SFAS No The Compay believes its operatig segmets may be aggregated for fiacial reportig purposes because they are similar i each of the followig areas: class of cosumer, ecoomic characteristics, ature of products, ature of productio processes ad distributio methods. Reveues ad log-lived assets relatig to the Compay s iteratioal operatios i each of Fiscal 2007, Fiscal 2006 ad Fiscal 2005 were ot material ad were ot reported separately from domestic reveues ad log-lived assets. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The cosolidated fiacial statemets iclude the accouts of A&F ad its subsidiaries. All itercompay balaces ad trasactios have bee elimiated i cosolidatio. CASH AND EQUIVALENTS Cash ad equivalets iclude amouts o deposit with fiacial istitutios ad ivestmets, primarily held i moey market accouts, with origial maturities of less tha 90 days. Outstadig checks at year-ed are reclassified from cash to liabilities i the Codesed Cosolidated Balace Sheet. INVESTMENTS Ivestmets with origial maturities greater tha 90 days are accouted for i accordace with SFAS No. 115, Accoutig for Certai Ivestmets i Debt ad Equity Securities, ad are classified accordigly by the Compay at the time of purchase. At February 2, 2008, the Compay s ivestmets i marketable securities cosisted of ivestmet grade auctio rate securities ( ARS ), all classified as available-for-sale ad reported at fair value based o the Dutch auctio market as of February 2, 2008, with maturities that rage from eight to 34 years. As of February 2, 2008, the Compay held approximately $530.5 millio i ARS as marketable securities. Approximately $272.1 millio of the securities were ivested i closed ed muicipal bod fuds ad approximately $258.4 millio were ivested i securities issued by state agecies which issue studet loas. At February 3, 2007, the Compay s ivestmets i marketable securities cosisted primarily of ivestmet grade muicipal otes ad bods ad ivestmet grade ARS, all classified as available-for-sale ad reported at fair value based o the market, with maturities that could rage from oe moth to forty years. As of February 3, 2007, the marketable securities cosisted of approximately $346.1 millio of ARS, approximately $97.1 millio of muicipal otes ad bods ad approximately $4.6 millio of divided received deductio. The iterest rates of ARS reset through a auctio process at predetermied periods ragig from seve to 35 days. The Compay established a irrevocable rabbi trust (the Rabbi Trust ) durig the third quarter of Fiscal 2006, the purpose of which is to be a source of fuds to match respective fudig obligatios to participats i the Abercrombie & Fitch Noqualified Savigs ad Supplemetal Retiremet Pla ad the Chief Executive Officer Supplemetal Executive Retiremet Pla. As of February 2, 2008, total assets held i the Rabbi Trust were $51.3 millio, which icluded $18.6 millio of available-for-sale muicipal otes ad bods with maturities that raged from four to six years, trust-owed life isurace policies with a cash surreder value of $31.3 millio ad $1.4 millio held i moey market accouts. As of February 3, 2007, total assets held i the Rabbi Trust were $33.5 millio, which icluded $18.3 millio of available-for-sale muicipal otes ad bods ad trust-owed life isurace policies with a cash surreder value of $15.3 millio. The Rabbi Trust assets are cosolidated i accordace with Emergig Issues Task Force 97-14, Accoutig for Deferred Compesatio Agreemets Where Amouts Eared Are Held i a Rabbi Trust ad Ivested ( EITF ) ad recorded at fair value i other assets o the Cosolidated Balace Sheets ad are restricted as to their use as oted above. There were $0.4 millio i realized losses for the fifty-two weeks eded February 2, 2008 ad o realized gais or losses for the fifty-three weeks eded February 3, 2007, all related to availablefor-sale securities. Net urealized gais were approximately $.01 millio as of February 2, 2008 ad et urealized losses were approximately $0.7 millio as of February 3, 2007, all related to available-for-sale securities. credit card receivables As part of the ormal course of busiess, the Compay has approximately three to four days of sales trasactios outstadig with its third-party credit card vedors at ay poit. The Compay classifies these outstadig balaces as receivables. INVENTORIES Ivetories are pricipally valued at the lower of average cost or market utilizig the retail method. The Compay determies market value as the aticipated future sellig price of the merchadise less a ormal margi. Therefore, a iitial markup is applied to ivetory at cost i order to establish a cost-to-retail ratio. Permaet markdows, whe take, reduce both the retail ad cost compoets of ivetory o had so as to maitai the already established cost-to-retail relatioship. The ivetory balace was $333.2 millio ad $427.4 millio at February 2, 2008 ad February 3, 2007, respectively. The markdow reserve was $5.4 millio, $6.8 millio ad $10.0 millio at February 2, 2008, February 3, 2007 ad Jauary 28, 2006, respectively. The fiscal year is comprised of two pricipal sellig seasos: Sprig (the first ad secod fiscal quarters) ad Fall (the third ad fourth fiscal quarters). The Compay classifies its ivetory ito three categories: sprig fashio, fall fashio ad basic. The Compay reduces ivetory valuatio at the ed of the first ad third fiscal quarters to reserve for projected ivetory markdows required to sell through the curret seaso ivetory prior to the begiig of the followig seaso. Additioally, the Compay reduces ivetory at seaso ed by recordig a markdow reserve at the ed of the secod ad fourth fiscal quarters that represets the estimated future aticipated sellig price decreases ecessary to sell through the remaiig carryover ivetory for the seaso just passed. Further, as part of ivetory valuatio, ivetory shrikage estimates, based o historical treds from actual physical ivetories, are made that reduce the ivetory value for lost or stole items. The Compay performs physical ivetories throughout the year ad adjusts the shrik reserve accordigly. The shrik reserve was $11.5 millio, $7.7 millio ad $3.8 millio at February 2, 2008, February 3, 2007 ad Jauary 28, 2006, respectively. STORE SUPPLIES The iitial ivetory of supplies for ew stores icludig, but ot limited to, hagers, sigage, security tags ad poit-of-sale supplies are capitalized at the store opeig date. I lieu of amortizig the iitial balaces over their estimated useful lives, the Compay expeses all subsequet replacemets ad adjusts the iitial balace, as appropriate, for chages i store quatities or replacemet cost. This policy approximates the expese that would have bee recogized uder accoutig priciples geerally accepted i the Uited States of America ( GAAP ). Store supply categories are classified as curret or o-curret based o their estimated useful lives. Packagig is expesed as used. Curret store supplies were $22.5 millio ad $20.0 millio at February 2, 2008 ad February 3, 2007, respectively. No-curret store supplies were $21.7 millio ad $20.6 millio at February 2, 2008 ad February 3, 2007, respectively. PROPERTY AND EQUIPMENT Depreciatio ad amortizatio of property ad equipmet are computed for fiacial reportig purposes o a straight-lie basis, usig service lives ragig pricipally from 30 years for buildigs; the lesser of the useful life of the asset, which rages from three to 15 years, or the term of the lease for leasehold improvemets; the lesser of the useful life of the asset, which rages from three to seve years, or the term of the lease whe applicable for iformatio techology; ad three to 20 years for other property ad equipmet. The cost of assets sold or retired ad the related accumulated depreciatio or amortizatio are removed from the accouts with ay resultig gai or loss icluded i et icome. Maiteace ad repairs are charged to expese as icurred. Major reewals ad bettermets that exted service lives are capitalized. Log-lived assets are reviewed at the store level periodically for impairmet or wheever evets or chages i circumstaces idicate that full recoverability of et assets through future cash flows is i questio. Factors used i the evaluatio iclude, but are ot limited to, maagemet s plas for future operatios, recet operatig results ad projected cash flows. The Compay icurred impairmet charges of approximately $2.3 millio for Fiscal 2007, icludig $1.6 millio of o-store impairmet charges compared to $0.3 millio for Fiscal INCOME TAXES Icome taxes are calculated i accordace with SFAS No. 109, Accoutig for Icome Taxes, which requires the use of the asset ad liability method. Deferred tax assets ad liabilities are recogized based o the differece betwee the fiacial statemet carryig amouts of existig assets ad liabilities ad their respective tax bases. Deferred tax assets ad liabilities are measured usig curret eacted tax rates i effect for the years i which those temporary differeces are expected to reverse. Iheret i the measuremet of deferred balaces are certai judgmets ad iterpretatios of eacted tax law ad published guidace with respect to applicability to the Compay s operatios. A valuatio allowace is established agaist deferred tax assets whe it is more likely tha ot that some portio or all of the deferred tax assets will ot be realized. The Compay has recorded a valuatio allowace agaist the deferred tax asset arisig from the et operatig loss of a foreig subsidiary

17 No other valuatio allowaces have bee provided for deferred tax assets. The effective tax rate utilized by the Compay reflects maagemet s judgmet of expected tax liabilities withi the various tax jurisdictios. The provisio for icome taxes is based o the curret estimate of the aual effective tax rate adjusted to reflect the tax impact of items discrete to the quarter. The Compay records tax expese or beefit that does ot relate to ordiary icome i the curret fiscal year discretely i the period i which it occurs pursuat to the requiremets of APB Opiio No. 28, Iterim Fiacial Reportig ad FIN 18, Accoutig for Icome Taxes i Iterim Periods a Iterpretatio of APB Opiio No. 28. Examples of such types of discrete items iclude, but are ot limited to, chages i estimates of the outcome of tax matters related to prior years, provisio-to-retur adjustmets, tax-exempt icome ad the settlemet of tax audits. See Note 10, Icome Taxes for discussio regardig the Compay s policies for FIN 48. FOREIGN CURRENCY TRANSLATION The majority of the Compay s iteratioal operatios use local currecies as the fuctioal currecy. I accordace with SFAS No. 52, Foreig Currecy Traslatio, assets ad liabilities deomiated i foreig currecies were traslated ito U.S. dollars (the reportig currecy) at the exchage rate prevailig at the balace sheet date. Equity accouts deomiated i foreig currecies were traslated ito U.S. dollars at historical exchage rates. Reveues ad expeses deomiated i foreig currecies were traslated ito U.S. dollars at the mothly average exchage rate for the period. Gais ad losses resultig from foreig currecy trasactios are icluded i the results of operatios; whereas, related traslatio adjustmets are reported as a elemet of other comprehesive icome i accordace with SFAS No. 130, Reportig Comprehesive Icome. CONTINGENCIES I the ormal course of busiess, the Compay must make cotiuig estimates of potetial future legal obligatios ad liabilities, which require maagemet s judgmet o the outcome of various issues. Maagemet may also use outside legal advice to assist i the estimatig process. However, the ultimate outcome of various legal issues could be differet tha maagemet estimates, ad adjustmets may be required. SHAREHOLDERS EQUITY At February 2, 2008 ad February 3, 2007, there were 150 millio shares of A&F s $.01 par value Class A Commo Stock authorized, of which 86.2 millio ad 88.3 millio shares were outstadig at February 2, 2008 ad February 3, 2007, respectively, ad millio shares of $.01 par value Class B Commo Stock authorized, oe of which were outstadig at February 2, 2008 or February 3, I additio, 15 millio shares of A&F s $.01 par value Preferred Stock were authorized, oe of which have bee issued. See Note 14, Preferred Stock Purchase Rights for iformatio about Preferred Stock Purchase Rights. Holders of Class A Commo Stock geerally have idetical rights to holders of Class B Commo Stock, except that holders of Class A Commo Stock are etitled to oe vote per share while holders of Class B Commo Stock are etitled to three votes per share o all matters submitted to a vote of shareholders. REVENUE RECOGNITION The Compay recogizes retail sales at the time the customer takes possessio of the merchadise. Direct-to-cosumer sales are recorded upo customer receipt of merchadise. Amouts relatig to shippig ad hadlig billed to customers i a sale trasactio are classified as reveue ad the related direct shippig ad hadlig costs are classified as stores ad distributio expese. Associate discouts are classified as a reductio of reveue. The Compay reserves for sales returs through estimates based o historical experiece ad various other assumptios that maagemet believes to be reasoable. The sales retur reserve was $10.7 millio, $8.9 millio ad $8.2 millio at February 2, 2008, February 3, 2007 ad Jauary 28, 2006, respectively. The Compay s gift cards do ot expire or lose value over periods of iactivity. The Compay accouts for gift cards by recogizig a liability at the time a gift card is sold. The liability remais o the Compay s books util the earlier of redemptio (recogized as reveue) or whe the Compay determies the likelihood of redemptio is remote (recogized as other operatig icome). The Compay determies the probability of the gift card beig redeemed to be remote based o historical redemptio patters, ad recogizes the remaiig balace as other operatig icome. At February 2, 2008 ad February 3, 2007, the gift card liability o the Compay s Cosolidated Balace Sheets was $68.8 millio ad $65.0 millio, respectively. The Compay is ot required by law to escheat the value of uredeemed gift cards to the states i which it operates. Durig Fiscal 2007, Fiscal 2006 ad Fiscal 2005, the Compay recogized other operatig icome for adjustmets to the gift card liability of $10.9 millio, $5.2 millio ad $2.4 millio, respectively. The Compay does ot iclude tax amouts collected as part of the sales trasactio i its et sales results. COST OF GOODS SOLD Cost of goods sold primarily icludes the followig: cost of merchadise, markdows, ivetory shrik, valuatio reserves ad freight expeses. Stores ad distributio expese Stores ad distributio expese icludes store payroll, store maagemet, ret, utilities ad other ladlord expeses, depreciatio ad amortizatio, repairs ad maiteace ad other store support fuctios, as well as directto-cosumer ad Distributio Ceter ( DC ) expeses. Marketig, geeral & admiistrative expese Marketig, geeral ad admiistrative expese icludes photography ad media ads, store marketig, home office payroll, except for those departmets icluded i stores ad distributio expese, iformatio techology, outside services such as legal ad cosultig, relocatio expeses, as well as recruitig, samples ad travel expeses. other operatig icome, et Other operatig icome primarily cosists of gift card balaces whose likelihood of redemptio has bee determied to be remote ad are therefore recogized as icome ad gais ad losses o foreig currecy trasactios ad foreig currecy gais ad losses resultig from remeasuremet of foreig iter-compay loas ad foreig held cash accouts for the Compay s Swiss ad Uited Kigdom operatios i compliace with SFAS No. 52, Foreig Currecy Traslatio. Other operatig icome i Fiscal 2006 also icluded o-recurrig beefits from isurace reimbursemets received for fire ad Hurricae Katria damage. CATALOGUE AND ADVERTISING COSTS Catalogue costs cosist primarily of catalogue productio ad mailig costs ad are expesed as icurred as a compoet of Stores ad Distributio Expese. Advertisig costs cosist of i-store photographs ad advertisig i selected atioal publicatios ad billboards ad are expesed as part of Marketig, Geeral ad Admiistrative Expese whe the photographs or publicatios first appear. Catalogue ad advertisig costs, icludig photo shoot costs, amouted to $32.8 millio i Fiscal 2007, $39.3 millio i Fiscal 2006 ad $36.8 millio i Fiscal LEASES The Compay leases property for its stores uder operatig leases. Most lease agreemets cotai costructio allowaces, ret escalatio clauses ad/or cotiget ret provisios. For costructio allowaces, the Compay records a deferred lease credit o the Cosolidated Balace Sheets ad amortizes the deferred lease credit as a reductio of ret expese o the Cosolidated Statemets of Net Icome ad Comprehesive Icome over the terms of the leases. For scheduled ret escalatio clauses durig the lease terms, the Compay records miimum retal expeses o a straight-lie basis over the terms of the leases o the Cosolidated Statemets of Net Icome ad Comprehesive Icome. The term of the lease over which the Compay amortizes costructio allowaces ad miimum retal expeses o a straight-lie basis begis o the date of iitial possessio, which is geerally whe the Compay eters the space ad begis to make improvemets i preparatio for iteded use. Certai leases provide for cotiget rets, which are determied as a percetage of gross sales i excess of specified levels. The Compay records a cotiget ret liability i accrued expeses o the Cosolidated Balace Sheets ad the correspodig ret expese o the Cosolidated Statemets of Net Icome ad Comprehesive Icome whe maagemet determies that achievig the specified levels durig the fiscal year is probable. STORE PRE-OPENING EXPENSES Pre-opeig expeses related to ew store opeigs are charged to operatios as icurred. DESIGN AND DEVELOPMENT COSTS Costs to desig ad develop the Compay s merchadise are expesed as icurred ad are reflected as a compoet of Marketig, Geeral ad Admiistrative Expese. FAIR VALUE OF ASSETS AND LIABILITIES The recorded values of curret assets ad curret liabilities, icludig receivables, marketable securities, other assets ad accouts payable, approximate fair value due to the short maturity ad because the average iterest rate approximates curret market origiatio rates. NET INCOME PER SHARE Net icome per share is computed i accordace with SFAS No. 128, Earigs Per Share. Net icome per basic share is computed based o the weighted-average umber of outstadig shares of Commo Stock. Net icome per diluted share icludes the weighted-average effect of dilutive stock optios ad restricted stock uits. Weighted Average Shares Outstadig (i thousads): Shares of Class A Commo Stock issued 103, , ,300 Treasury shares oustadig (16,052) (15,248) (16,139) Basic shares outstadig 87,248 88,052 87,161 Dilutive effect of stock optios ad restricted stock uits 4,275 3,958 4,060 Diluted shares outstadig 91,523 92,010 91,221 Stock optios to purchase approximately 0.4 millio, 0.1 millio ad 0.2 millio shares of Commo Stock were outstadig for Fiscal 2007, Fiscal 2006 ad Fiscal 2005, respectively, but were ot icluded i the computatio of et icome per diluted share because the impact of such stock optios would be ati-dilutive. SHARE-BASED COMPENSATION See Note 4, Share-Based Compesatio. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparatio of fiacial statemets i accordace with GAAP requires maagemet to make estimates ad assumptios that affect the reported amouts of assets ad liabilities as of the date of the fiacial statemets ad the reported amouts of reveues ad expeses durig the reportig period. Sice actual results may differ from those estimates, the Compay revises its estimates ad assumptios as ew iformatio becomes available. 3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS I September 2006, the FASB released SFAS No. 157, Fair Value Measuremets ( SFAS 157 ). SFAS 157 establishes a commo defiitio for fair value uder GAAP ad also establishes a framework for measurig fair value ad expads disclosure requiremets about such fair value measuremets. I February 2008, the FASB issued FASB Staff Positio ( FSP ) that elimiates SFAS No. 13, Accoutig for Leases, from the scope of SFAS 157. I February 2008, the FASB issued FSP that partially defers the effective date of SFAS No. 157 for oe year for o-fiacial assets ad liabilities that are recogized or disclosed at fair value i the fiacial statemets o a o-recurrig basis. Cosequetly, SFAS No. 157 was effective for the Compay o February 3, 2008, for fiacial assets ad liabilities carried at fair value ad ofiacial assets ad liabilities that are recogized or disclosed at fair value o a recurrig basis ad will be effective o February 1, 2009, for o-recurrig o-fiacial assets ad liabilities that are recogized or disclosed at fair value. The Compay is curretly evaluatig the potetial impact of adoptig SFAS No. 157 ad the related FSPs o the cosolidated results of operatios ad cosolidated fiacial coditio. I February 2007, the FASB released SFAS No. 159, The Fair Value Optio for Fiacial Assets ad Fiacial Liabilities Icludig a amedmet of FASB Statemet No. 115 ( SFAS 159 ). SFAS 159 permits compaies to measure may fiacial istrumets ad 30 31

18 certai other assets ad liabilities at fair value o a istrumet by istrumet basis. SFAS 159 also establishes presetatio ad disclosure requiremets to facilitate comparisos betwee compaies that select differet measuremet attributes for similar types of assets ad liabilities. SFAS 159 was effective for the Compay o February 3, The Compay is curretly evaluatig the potetial impact o the cosolidated fiacial statemets of adoptig SFAS SHARE-BASED COMPENSATION BACKGROUND O Jauary 29, 2006, the Compay adopted SFAS No. 123 (Revised 2004), Share-Based Paymet ( SFAS No. 123(R) ), which requires share-based compesatio to be measured based o estimated fair values at the date of grat usig a optiopricig model. Previously, the Compay accouted for share-based compesatio usig the itrisic value method i accordace with APB Opiio No. 25, Accoutig for Stock Issued to Employees, ad related iterpretatios, for which o expese was recogized for stock optios if the exercise price was equal to the market value of the uderlyig commo stock o the date of grat, ad if the Compay provided the required pro forma disclosures i accordace with SFAS No. 123, Accoutig for Stock-Based Compesatio ( SFAS No. 123 ), as ameded. The Compay adopted SFAS No. 123(R) usig the modified prospective trasitio method, which requires share-based compesatio to be recogized for all uvested share-based awards begiig i the first quarter of adoptio. Accordigly, prior period iformatio preseted i these fiacial statemets has ot bee restated to reflect the fair value method of expesig stock optios. Uder the modified prospective method, compesatio expese icludes a) all share-based awards grated prior to, but ot yet vested as of, Jauary 29, 2006, based o the grat-date fair value estimated i accordace with the origial provisios of SFAS No. 123 ad b) all share-based awards grated subsequet to Jauary 29, 2006, based o the grat-date fair value estimated i accordace with the provisios of SFAS No. 123(R). FINANCIAL STATEMENT IMPACT The followig table summarizes share-based compesatio expese (i thousads): Fifty-Two Fifty-Three Weeks Eded Weeks Eded February 2, 2008 February 3, 2007 Stores ad distributio expese $ 1,628 $ 2,419 Marketig, geeral ad admiistrative expese 29,542 32,700 Operatig icome $31,170 $35,119 The Compay also recogized $11.5 millio ad $12.2 millio i tax beefits related to share-based compesatio for the fifty-two week period eded February 2, 2008 ad the fifty-three week period eded February 3, 2007, respectively. Prior to the adoptio of SFAS No. 123(R), the Compay recogized $1.4 millio i tax beefits related to restricted stock uits for the fifty-two week period eded Jauary 28, The followig table is preseted for comparative purposes ad illustrates the pro forma effect o et icome ad et icome per share for the fifty-two weeks eded Jauary 28, 2006, as if the Compay had applied the fair value recogitio provisios of SFAS No. 123 to stock optios grated uder the Compay s share-based compesatio plas prior to Jauary 29, 2006: (Thousads, except per share amouts) Fifty-Two Weeks Eded Jauary 28, 2006 Net icome: As reported $333,986 Share-based compesatio expese icluded i reported et icome, et of tax (1) 14,716 Share-based compesatio expese determied uder fair value based method, et of tax (36,689) Pro forma $312,013 Net icome per basic share: As reported $3.83 Pro forma $3.58 Net icome per diluted share: As reported $3.66 Pro forma $3.38 (1) Icludes share-based compesatio expese related to restricted stock uit awards actually recogized i et icome i each period preseted usig the itrisic value method. Share-based compesatio expese is recogized, et of estimated forfeitures, over the requisite service period o a straight lie basis. The Compay adjusts share-based compesatio expese o a quarterly basis for actual forfeitures ad for chages to the estimate of expected award forfeitures based o actual forfeiture experiece. The effect of adjustig the forfeiture rate is recogized i the period the forfeiture estimate is chaged. The effect of adjustmets for forfeitures durig the thirtee ad fifty-two week periods eded February 2, 2008 ad the fourtee ad fifty-three week periods eded February 3, 2007 was immaterial. A&F issues shares of Commo Stock for stock optio exercises ad restricted stock uit vestigs from treasury stock. As of February 2, 2008, A&F had eough treasury stock available to cover stock optios ad restricted stock uits outstadig without havig to repurchase additioal shares. PLANS As of February 2, 2008, A&F had two primary share-based compesatio plas icludig the followig: the 2005 Log-Term Icetive Pla (the 2005 LTIP ), uder which A&F grats stock optios ad restricted stock uits to associates of the Compay ad o-associate members of the A&F Board of Directors, ad the 2007 Log-Term Icetive Pla (the 2007 LTIP ), uder which A&F grats stock optios ad restricted stock uits to associates of the Compay. A&F also has four other share-based compesatio plas uder which it grated stock optios ad restricted stock uits to associates of the Compay ad oassociate members of the A&F Board of Directors i prior years. The 2007 LTIP, a shareholder approved pla, permits A&F to grat up to 5.0 millio shares of A&F s Commo Stock to ay associate of the Compay eligible to receive awards uder the 2007 LTIP. The 2005 LTIP, a shareholder approved pla, permits A&F to grat up to approximately 2.0 millio shares of A&F s Commo Stock to ay associate of the Compay (other tha Michael S. Jeffries) who is subject to Sectio 16 of the Securities Exchage Act of 1934, as ameded, at the time of the grat ad ay o-associate director of A&F is eligible to receive awards uder the 2005 LTIP. Uder both plas, stock optios ad restricted stock uits vest primarily over four years for associates. Uder the 2005 LTIP, stock optios ad restricted stock uits vest over oe year for o-associate directors of A&F. Stock optios have a te-year term, subject to forfeiture uder the terms of the plas, ad the plas provide for accelerated vestig if there is a chage of cotrol as defied i the plas. FAIR VALUE ESTIMATES The Compay estimates the fair value of stock optios grated usig the Black-Scholes optio-pricig model, which requires the Compay to estimate the expected term of the stock optio grats ad expected future stock price volatility over the expected term. Estimates of the expected term, which represets the expected period of time the Compay believes the stock optios will be outstadig, are based o historical experiece. Estimates of expected future stock price volatility are based o the volatility of A&F s Commo Stock price for the most recet historical period equal to the expected term of the stock optio. The Compay calculates the volatility as the aualized stadard deviatio of the differeces i the atural logarithms of the weekly stock closig price, adjusted for stock splits ad divideds. The weighted-average estimated fair values of stock optios grated durig the fifty-two week period eded February 2, 2008, the fifty-three week period eded February 3, 2007 ad the fifty-two week period eded Jauary 28, 2006, as well as the weighted-average assumptios used i calculatig such values, o the date of grat, were as follows: Fifty-Two Fifty-Three Fifty-Two Weeks Eded Weeks Eded Weeks Eded February 2, 2008 February 3, 2007 Jauary 28, 2006 Executive Executive Officers ad Executive Other Officers ad Other Associates Officers Associates Other Associates Exercise price $74.05 $58.22 $58.12 $60.10 Fair Value $22.56 $24.92 $20.69 $23.01 Assumptios: Price volatility 34% 47% 42% 47% Expected term (Years) Risk-free iterest rate 4.5% 4.9% 4.9% 4.0% Divided yield 1.0% 1.2% 1.2% 1.1% I the case of restricted stock uits, the Compay calculates the fair value of the restricted stock uits grated as the market price of the uderlyig Commo Stock o the date of grat, adjusted for expected divided paymets durig the vestig period. Stock Optio Activity Below is the summary of stock optio activity for Fiscal 2007: Fifty-Two Weeks Eded February 2, 2008 Number Weighted- Aggregate Weighted-Average Stock of Average Itristic Remaiig Optios Shares Exercise Price Value Cotractual Life Outstadig at February 3, ,804,724 $38.07 Grated 341, Exercised (1,323,937) Forfeited or expired (84,425) Outstadig at February 2, ,738,112 $41.03 $284,082, Stock optios expected to vest at February 2, ,670 $66.11 $ 6,814, Stock optios exercisable at February 2, ,018,762 $38.61 $274,659, The total itrisic value of stock optios exercised durig the fifty-two weeks eded February 2, 2008, the fifty-three weeks eded February 3, 2007, ad the fifty-two weeks eded Jauary 28, 2006 was $64.2 millio, $15.2 millio ad $139.9 millio, respectively. The total fair value of stock optios vested durig the fifty-two weeks eded February 2, 2008, the fifty-three weeks eded February 3, 2007 ad the fifty-two weeks eded Jauary 28, 2006 was $5.1 millio, $29.5 millio ad $31.4 millio, respectively. As of February 2, 2008, there was $11.9 millio of total urecogized compesatio cost, et of estimated forfeitures, related to stock optios. The urecogized cost is expected to be recogized over a weighted-average period of 1.3 years. Restricted Stock Uit Activity A summary of the status of the Compay s restricted stock uits as of February 2, 2008 ad chages durig the fifty-two week period eded February 2, 2008 were as follows: Weighted-Average Restricted Number of Grat Date Stock Uits Shares Fair Value No-vested at February 3, ,043,456 $40.65 Grated 741,000 $72.69 Vested (284,200) $49.99 Forfeited (145,385) $60.44 No-vested at February 2, ,354,871 $48.02 The total fair value of restricted stock uits grated durig the fifty-two weeks eded February 2, 2008, the fifty-three weeks eded February 3, 2007 ad the fifty-two weeks eded Jauary 28, 2006 was $53.9 millio, $35.5 millio ad $36.3 millio, respectively. The total fair value of restricted stock uits vested durig the fifty-two weeks eded February 2, 2008, the fifty-three weeks eded February 3, 2007 ad the fifty-two weeks eded Jauary 28, 2006 was $14.2 millio, $8.6 millio ad $5.0 millio, respectively. As of February 2, 2008, there was $65.1 millio of total urecogized compesatio cost, et of estimated forfeitures, related to o-vested restricted stock uits. The urecogized cost is expected to be recogized over a weighted-average period of 1.4 years. 5. PROPERTY AND EQUIPMENT Property ad equipmet, at cost, cosisted of (thousads): Lad $ 32,302 $ 32,291 Buildig 193, ,111 Furiture, fixtures ad equipmet 540, ,391 Iformatio techology 81,110 48,173 Leasehold improvemets 977, ,224 Costructio i progress 177, ,695 Other 51,571 10,168 Total $2,054,275 $ 1,669,053 Less: Accumulated depreciatio ad amortizatio (735,984) (576,771) Property ad equipmet, et $1,318,291 $ 1,092, DeferRed lease credits, et Deferred lease credits are derived from paymets received from ladlords to partially offset 32 33

19 store costructio costs ad are reclassified betwee curret ad logterm liabilities. The amouts, which are amortized over the life of the related leases, cosisted of the followig (thousads): Deferred lease credits $471,498 $423,390 Amortized deferred lease credits (219,834) (184,024) Total deferred lease credits, et $251,664 $239, LEASED FACILITIES AND COMMITMENTS Aual store ret is comprised of a fixed miimum amout, plus cotiget ret based o a percetage of sales exceedig a stipulated amout. Store lease terms geerally require additioal paymets coverig taxes, commo area costs ad certai other expeses. A summary of ret expese follows (thousads): * 2005 Store ret: Fixed miimum $231,653 $196,690 $170,009 Cotiget 21,489 20,192 16,178 Total store ret $253,142 $216,882 $186,187 Buildigs, equipmet ad other 6,096 5,646 3,241 Total ret expese $259,238 $222,528 $189,428 *Fiscal 2006 was a fifty-three week year. At February 2, 2008, the Compay was committed to o-cacelable leases with remaiig terms of oe to 20 years. A summary of operatig lease commitmets uder o-cacelable leases follows (thousads): Fiscal 2008 $254,456 Fiscal 2011 $235,080 Fiscal 2009 $263,179 Fiscal 2012 $214,914 Fiscal 2010 $$252,749 Thereafter $953, ACCRUED EXPENSES Accrued expeses icluded gift card liabilities of $68.8 millio ad costructio i progress of $55.2 millio at February 2, Accrued expeses icluded gift card liabilities of $65.0 millio ad costructio i progress of $48.0 millio at February 3, OTHER LIABILITIES Other liabilities cosist primarily of straight-lie ret of $56.1 millio ad $45.8 millio at February 2, 2008 ad February 3, 2007, respectively ad a FIN 48 liability of $49.4 millio, icludig iterest ad pealties, as of February 2, INCOME TAXES The provisio for icome taxes cosisted of (thousads): * 2005 Curretly payable: Federal $245,845 $236,553 $184,884 State 36,441 24,885 32,641 $282,286 $261,438 $ 217,525 Deferred: Federal $ 1,039 $ (10,271) $ (5,980) State 303 (1,367) 3,881 $ 1,342 $ (11,638) $ (2,099) Total provisio $283,628 $ 249,800 $215,426 *Fiscal 2006 was a fifty-three week year. Recociliatio betwee the statutory federal icome tax rate ad the effective icome tax rate is as follows: Federal icome tax rate 35.0% 35.0% 35.0% State icome tax, et of federal icome tax effect Other items, et (0.7) (0.1) (0.1) Total 37.4% 37.2% 39.2% Amouts paid directly to taxig authorities were $259.0 millio, $272.0 millio ad $122.0 millio i Fiscal 2007, Fiscal 2006, ad Fiscal 2005, respectively. The effect of temporary differeces which give rise to deferred icome tax assets (liabilities) were as follows (thousads): * Deferred tax assets: Deferred compesatio $ 45,984 $ 37,725 Ret 67,024 76,890 Accrued expeses 14,571 15,003 Ivetory 6,691 5,642 FIN 48 Liabilities 12,416 Foreig et operatio losses 2,595 2,709 Valuatio allowace o foreig et operatio losses (905) (2,709) Total deferred tax assets $ 148,376 $ 135,260 Deferred tax liabilities: Store supplies $ (12,266) $ (11,578) Property ad equipmet (122,473) (120,906) Total deferred tax liabilities $(134,739) $ (132,484) Net deferred icome tax liabilities $ 13,637 $ 2,776 *Fiscal 2006 was a fifty-three week year At February 2, 2008, the Compay had $2.6 millio i foreig et operatig loss carryovers that could be utilized to reduce future years tax liabilities. A portio of these et operatig loss carryovers begi expirig i the year 2012 ad some have a idefiite carryforward period. Durig Fiscal 2007, $2.2 millio of the valuatio allowace established i prior years was reversed because the Compay believed that it was more likely tha ot that these et operatig loss carryovers would reduce future years tax liabilities i certai foreig jurisdictios. I Jue 2006, the FASB issued FIN 48, Accoutig for Ucertaity i Icome Tax A Iterpretatio of FASB Statemet No FIN 48 clarifies the accoutig for ucertaity i icome taxes recogized i a compay s fiacial statemets i accordace with SFAS No. 109, Accoutig for Icome Taxes. This iterpretatio prescribes a recogitio threshold ad measuremet attribute for the fiacial statemet recogitio ad measuremet of a tax positio take or expected to be take i a tax retur. This iterpretatio also provides guidace o derecogitio, classificatio, iterest ad pealties, accoutig i iterim periods, disclosure ad trasitio. The Compay recogizes accrued iterest ad pealties related to urecogized tax beefits as a compoet of tax expese. I coectio with the Compay s adoptio of FIN 48 o February 4, 2007, a $2.8 millio cumulative effect adjustmet was recorded as a reductio to begiig of the year retaied earigs. The Compay s urecogized tax beefits as of February 4, 2007 were reclassed from curret taxes payable to other log-term liabilities. A recociliatio of the begiig ad edig amouts of urecogized tax beefits was as follows: 2007 Urecogized tax beefits, February 3, 2007 $ 29,613 Gross additio for tax positios of the curret year 5,146 Gross additio for tax positios of prior years 12,789 Reductios for tax positios for prior years for: Chages i judgemet/excess reserve (4,726) Settlemets durig the period (3,291) Lapses of applicable statute of limitatios (637) Urecogized tax beefits, February 2, 2008 $ 38,894 Gross additios for tax positios of prior years iclude a $11.9 millio liability, offset by other balace sheet chages, related to a trasfer pricig matter that is subject to a ogoig Advaced Pricig Agreemet egotiatio with the Iteral Reveue Service. These amouts, if recogized, would affect the Compay s effective tax rate. Pursuat to the accoutig rules, the urecogized tax beefit for the trasfer pricig matter will ot have a sigificat effect o the effective tax rate because it would be recogized i the provisio for icome taxes over a log-term period. The Compay recogizes accrued iterest ad pealties related to urecogized tax beefits as a compoet of icome tax expese. The Compay s policy did ot chage as a result of adoptig FIN 48. Tax expese for Fiscal 2007 icludes $2.7 millio of iterest. Iterest ad pealties of $10.5 millio have bee accrued as of the ed of Fiscal The statute of limitatios for icome tax examiatios by the Iteral Reveue Service has expired for the fiscal years prior to the fiscal year eded Jauary 29, The Compay files icome tax returs i various state, local ad foreig jurisdictios with varyig statutes of limitatios. The Compay does ot expect material adjustmets to the total amout of urecogized tax beefits withi the ext 12 moths, but the outcome of tax matters is ucertai ad uforesee results ca occur. 11. LONG-TERM DEBT O December 15, 2004, the Compay etered ito a ameded ad restated $250 millio sydicated usecured credit agreemet (the Ameded Credit Agreemet ), with Abercrombie & Fitch Maagemet Co., as borrower, ad with A&F ad its subsidiaries, as guarators. The primary purposes of the Ameded Credit Agreemet are for fiacial support of trade ad stad-by letters of credit ad workig capital. The Ameded Credit Agreemet has several borrowig optios, icludig a optio where iterest rates are based o the aget bak s Alterate Base Rate, ad aother usig the Lodo Iterbak Offered Rate. The facility fees payable uder the Ameded Credit Agreemet are based o the ratio of the Compay s leveraged total debt plus 600% of forward miimum ret commitmets to cosolidated earigs before iterest, taxes, depreciatio, amortizatio ad ret for the trailig four fiscal quarter periods. The facility fees are projected to accrue at either 0.15% or 0.175% o the committed amouts per aum. The Ameded Credit Agreemet cotais limitatios o idebtedess, lies, sale-leaseback trasactios, sigificat corporate chages icludig mergers ad acquisitios with third parties, ivestmets, restricted paymets (icludig divideds ad stock repurchases) ad trasactios with affiliates. The Ameded Credit Agreemet will mature o December 15, Letters of credit totalig approximately $76.1 millio ad $53.7 millio were outstadig uder the Ameded Credit Agreemet o February 2, 2008 ad February 3, 2007, respectively. No borrowigs were outstadig uder the Ameded Credit Agreemet o February 2, 2008 or o February 3, RETIREMENT BENEFITS The Compay maitais the Abercombie & Fitch Co. Savigs & Retiremet Pla, a qualified pla. All U.S. associates are eligible to participate i this pla if they are at least 21 years of age ad have completed a year of employmet with 1,000 or more hours of service. I additio, the Compay maitais the Abercrombie & Fitch Noqualified Savigs ad Supplemetal Retiremet Pla. Participatio i this pla is based o service ad compesatio. The Compay s cotributios are based o a percetage of associates eligible aual compesatio. The cost of these plas was $21.0 millio i Fiscal 2007, $15.0 millio i Fiscal 2006 ad $10.5 millio i Fiscal Effective February 2, 2003, the Compay established a Chief Executive Officer Supplemetal Executive Retiremet Pla (the SERP ) to provide additioal retiremet icome to its Chairma ad Chief Executive Officer ( CEO ). Subject to service requiremets, the CEO will receive a mothly beefit equal to 50% of his fial average compesatio (as defied i the SERP) for life. The SERP has bee actuarially valued by a idepedet third party ad the expese associated with the SERP is beig accrued over the stated term of the Ameded ad Restated Employmet Agreemet, dated as of August 15, 2005, betwee the Compay ad its CEO. The expese associated with the SERP was $1.4 millio i Fiscal 2007, $6.6 millio i Fiscal 2006 ad $2.5 millio i Fiscal The icrease i Fiscal 2006 was primarily related to a chage i the discout rate. The Compay established the Rabbi Trust durig the third quarter of Fiscal 2006, the purpose of which is to be a source of fuds to match respective fudig obligatios to participats i the Abercrombie & Fitch Noqualified Savigs ad Supplemetal Retiremet Pla ad the SERP. Refer to further discussio regardig the Rabbi Trust i Note 2, Summary of Sigificat Accoutig Policies. 13. CONTINGENCIES A&F is a defedat i lawsuits arisig i the ordiary course of busiess. O Jue 23, 2006, Lisa Hashimoto, et al. v. Abercrombie & Fitch Co. ad Abercrombie & Fitch Stores, Ic., was filed i the Superior Court of the State of Califoria for the Couty of Los Ageles. I that actio, three plaitiffs allege, o behalf of a putative class of Califoria store maagers employed i Hollister ad abercrombie stores, that they were etitled to receive overtime pay as oexempt employees uder Califoria wage ad hour laws. The complait seeks ijuctive relief, equitable relief, upaid overtime compesatio, upaid beefits, pealties, iterest ad attoreys fees ad costs. The defedats filed a aswer to the complait o August 21, The parties are egagig i discovery. O December 10, 2007, the defedats reached a agreemet i priciple with plaitiffs cousel to settle certai claims i the actio. The agreemet resulted i a writte Stipulatio ad Settlemet Agreemet, effective as of February 7, 2008, settlig all claims of 34 35

20 Hollister ad abercrombie store maagers who served i stores from Jue 23, 2002 util April 30, Neither the agreemet i priciple or the Stipulatio affects claims which are alleged to have arise i the period commecig o April 30, O February 27, 2008, the Court etered a order otig its prelimiary approval of the Stipulatio ad Settlemet Agreemet ad settig a oticed hearig for Jue 9, 2008, to determie whether the proposed settlemet should be fially approved. The cost of the settlemet, if approved, is ot expected to be material. O September 2, 2005, a purported class actio, styled Robert Ross v. Abercrombie & Fitch Compay, et al., was filed agaist A&F ad certai of its officers i the Uited States District Court for the Souther District of Ohio o behalf of a purported class of all persos who purchased or acquired shares of A&F s Commo Stock betwee Jue 2, 2005 ad August 16, I September ad October of 2005, five other purported class actios were subsequetly filed agaist A&F ad other defedats i the same Court. All six securities cases allege claims uder the federal securities laws, ad seek uspecified moetary damages, as a result of a declie i the price of A&F s Commo Stock durig the summer of O November 1, 2005, a motio to cosolidate all of these purported class actios ito the first-filed case was filed by some of the plaitiffs. A&F joied i that motio. O March 22, 2006, the motios to cosolidate were grated, ad these actios (together with the federal court derivative cases described i the followig paragraph) were cosolidated for purposes of motio practice, discovery ad pretrial proceedigs. A cosolidated ameded securities class actio complait (the Complait ) was filed o August 14, O October 13, 2006, all defedats moved to dismiss that Complait. O August 9, 2007, the Court deied the motios to dismiss. O September 14, 2007, defedats filed aswers deyig the material allegatios of the Complait ad assertig affirmative defeses. O October 26, 2007, plaitiffs moved to certify their purported class. The motio has ot bee fully briefed or submitted. O September 16, 2005, a derivative actio, styled The Booth Family Trust v. Michael S. Jeffries, et al., was filed i the Uited States District Court for the Souther District of Ohio, amig A&F as a omial defedat ad seekig to assert claims for uspecified damages agaist ie of A&F s preset ad former directors, allegig various breaches of the directors fiduciary duty ad seekig equitable ad moetary relief. I the followig three moths (October, November ad December of 2005), four similar derivative actios were filed (three i the Uited States District Court for the Souther District of Ohio ad oe i the Court of Commo Pleas for Frakli Couty, Ohio) agaist preset ad former directors of A&F allegig various breaches of the directors fiduciary duty ad seekig equitable ad moetary relief. A&F is also a omial defedat i each of the four later derivative actios. O November 4, 2005, a motio to cosolidate all of the federal court derivative actios with the purported securities law class actios described i the precedig paragraph was filed. O March 22, 2006, the motio to cosolidate was grated, ad the federal court derivative actios have bee cosolidated with the aforesaid purported securities law class actios for purposes of motio practice, discovery ad pretrial proceedigs. A cosolidated ameded derivative complait was filed i the federal proceedig o July 10, A&F filed a motio to stay the cosolidated federal derivative case ad that motio was grated. The state court actio was also stayed. O February 16, 2007, A&F aouced its Board of Directors received a report of the Special Litigatio Committee established by the Board to ivestigate ad act with respect to claims asserted i certai previously disclosed derivative lawsuits brought agaist curret ad former directors ad maagemet, icludig Chairma ad Chief Executive Officer Michael S. Jeffries. The Special Litigatio Committee has cocluded that there is o evidece to support the asserted claims ad directed the Compay to seek dismissal of the derivative actios. O September 10, 2007, the Compay moved to dismiss the federal derivative cases o the authority of the Special Litigatio Committee report ad o October 18, 2007, the state court stayed further proceedigs util resolutio of the cosolidated federal derivative cases. I December 2005, the Compay received a formal order of ivestigatio from the SEC cocerig tradig i shares of A&F s Commo Stock. The SEC has requested iformatio from A&F ad certai of its curret ad former officers ad directors. The Compay ad its persoel have cooperated fully with the SEC. Maagemet iteds to defed the aforesaid matters vigorously, as appropriate. Maagemet is uable to quatify the potetial exposure of the aforesaid matters. However, maagemet s assessmet of the Compay s curret exposure could chage i the evet of the discovery of additioal facts with respect to legal matters pedig agaist the Compay or determiatios by judges, juries or other fiders of fact that are ot i accord with maagemet s evaluatio of the claims. 14. PREFERRED STOCK PURCHASE RIGHTS O July 16, 1998, A&F s Board of Directors declared a divided of oe Series A Participatig Cumulative Preferred Stock Purchase Right (the Rights ) for each outstadig share of Class A Commo Stock (the Commo Stock ), par value $.01 per share, of A&F. The divided was paid o July 28, 1998 to shareholders of record o that date. Shares of Commo Stock issued afteer July 28, 1998 ad prior to May 25, 1999 were issued with oe Right attached. A&F s Board of Directors declared a two-for-oe stock split (the Stock Split ) o the Commo Stock, payable o Jue 15, 1999 to the holders of record at the close of busiess o May 25, I coectio with the Stock Split, the umber of Rights associated with each share of Commo Stock outstadig as of the close of busiess o May 25, 1999, or issued or delivered after May 25, 1999 ad prior to the Distributio Date (as defied below), was proportioately adjusted from oe Right to 0.50 Right. Each share of Commo Stock issued after May 25, 1999 ad prior to the Distributio Date has bee ad will be issued with 0.50 Right attached so that all shares of Commo Stock outstadig prior to the Distributio Date will have 0.50 Right attached. The Rights iitially will be attached to the shares of Commo Stock. The Rights will separate from the Commo Stock after a Distributio Date occurs. The Distributio Date geerally meas the earlier of (i) the close of busiess o the 10th day after the date (the Share Acquisitio Date ) of the first public aoucemet that a perso or group (other tha A&F or ay of A&F s subsidiaries or ay employee beefit pla of A&F or of ay of A&F s subsidiaries) has acquired beeficial owership of 20% or more of A&F s outstadig shares of Commo Stock (a Acquirig Perso ) or (ii) the close of busiess o the 10th busiess day (or such later date as A&F s Board of Directors may desigate before ay perso has become a Acquirig Perso) after the date of the commecemet of a teder or exchage offer by ay perso which would, if cosummated, result i such perso becomig a Acquirig Perso. The Rights are ot exercisable util the Distributio Date. After the Distributio Date, each whole Right may be exercised to purchase, at a iitial exercise price of $250, oe oe-thousadth of a share of Series A Participatig Cumulative Preferred Stock. At ay time after ay perso becomes a Acquirig Perso, but before the occurrece of ay of the evets described i the immediately followig paragraph, each holder of a Right, other tha the Acquirig Perso ad certai affiliated persos, will be etitled to purchase, upo exercise of the Right, shares of Commo Stock havig a market value of twice the exercise price of the Right. At ay time after ay perso becomes a Acquirig Perso, but before ay perso becomes the beeficial ower of 50% or more of the outstadig shares of Commo Stock or the occurrece of ay of the evets described i the immediately followig paragraph, A&F s Board of Directors may exchage all or part of the Rights, other tha Rights beeficially owed by a Acquirig Perso ad certai affiliated persos, for shares of Commo Stock at a exchage ratio of oe share of Commo Stock per 0.50 Right. If, after ay perso has become a Acquirig Perso, (i) A&F is ivolved i a merger or other busiess combiatio trasactio i which A&F is ot the survivig corporatio or A&F s Commo Stock is exchaged for other securities or assets or (ii) A&F ad/or oe or more of A&F s subsidiaries sell or otherwise trasfer 50% or more of the assets or earig power of A&F ad its subsidiaries, take as a whole, each holder of a Right, other tha the Acquirig Perso ad certai affiliated persos, will be etitled to buy, for the exercise price of the Rights, the umber of shares of commo stock of the other party to the busiess combiatio or sale, or i certai circumstaces, a affiliate, which at the time of such trasactio will have a market value of twice the exercise price of the Right. The Rights will expire o July 16, 2008, uless earlier exchaged or redeemed. A&F may redeem all of the Rights at a price of $.01 per whole Right at ay time before ay perso becomes a Acquirig Perso. Rights holders have o rights as a shareholder of A&F, icludig the right to vote ad to receive divideds. 15. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized uaudited quarterly fiacial results for Fiscal 2007 ad Fiscal 2006 follows (thousads, except per share amouts): Fiscal 2007 Quarter First Secod Third Fourth Net sales $742,410 $804,538 $973,930 $1,228,969 Gross profit $487,269 $553,438 $645,043 $ 825,617 Operatig icome $ 92,710 $124,132 $186,587 $ 337,068 Net icome $ 60,081 $ 81,275 $117,585 $ 216,756 Net icome per basic share $ 0.68 $ 0.92 $ 1.35 $ 2.52 Net icome per diluted share $ 0.65 $ 0.88 $ 1.29 $ 2.40 Fiscal 2006 Quarter First Secod Third Fourth* Net sales $657,271 $658,696 $863,448 $1,138,743 Gross profit $429,915 $455,258 $568,198 $ 755,635 Operatig icome $ 83,985 $102,429 $162,841 $ 308,834 Net icome $ 56,240 $ 65,722 $102,031 $ 198,192 Net icome per basic share $ 0.64 $ 0.75 $ 1.16 $ 2.25 Net icome per diluted share $ 0.62 $ 0.72 $ 1.11 $ 2.14 *Fourth Quarter Fiscal 2006 was a fourtee week quarter