Our proven playbook worked and we achieved our best second quarter operating income and operating margin since 2008.
Second quarter total sales rose 24% to last year and we were up 3% compared to Q2 2019.
Our largest market, the US, led with sales up 31% on a one-year and 11% on a two-year basis.
By channel, total global store sales rose 55% from last year and we're down 20% from 2019.
As a reminder, during fiscal 2020, we proactively closed 137 locations, removing 1.1 million under productive gross square feet from our store base.
Digital sales held steady to 2020 levels and grew 52% from 2019.
For the quarter, we achieved our best Q2 gross margin rate since 2009.
Our total Company gross margin rate increased 450 basis points on a one-year and 590 basis points on a two-year basis.
Reflecting our strong top line and gross margin performance, combined with ongoing tight expense controls, our operating margin rate was over 1,100 basis points compared to last year and 1,800 basis points compared to Q2 2019.
We are viewed as a premier denim destination with newer styles representing over 40% of our jeans volume, up from 25% last year, and our customer is not waiting for sales to get what they want.
This included 20 refreshes to existing side-by-side formats in three new locations, all of which incorporate elements from the stand-alone store.
In the second quarter, sales rose approximately 30% year-over-year, with growth across digital and store channels.
It's hard to believe it's only been three months since we've taken Hollister's successful partnership with TikTok superstars Dixie and Charli D'Amelio, who combined have over 270 million followers across social platforms to the next level with the launch of our fifth brand.
Since the launch, the brand has had over 700 million impressions and views, and we continue to build awareness.
Starting with our largest brand, Hollister, which includes Gilly Hicks and Social Tourist, sales rose 20% in the quarter and we achieved our highest Q2 sales in Company history, congrats to the entire Hollister team.
In July, we sponsored the Lago Vista Snapchat series, featuring 21 non-skippable Hollister commercials.
In the second quarter, we grew associated sales by over 70% year-over-year and increased our already sizable network of digital brand advocates.
On a year-over-year basis, we doubled our new-to-file visits, grew new-to-file orders and sales by over 80%, and continued to break TikTok's benchmarks for paid media.
In total, Abercrombie, which includes kids, grew sales 30% in the quarter.
The Ultimate Summer Outfit campaign contributed to sales growth in shorts and swim, which are two important seasonal categories, while the release of the Cool Stuff collection and the launch of our active assortment both had over 70% new-to-file shop rates and average order values that were over 70% above our goal.
With our solid foundation and strong balance sheet, as well as our long-standing relationships with our global vendor and supply chain partners, we are well positioned to be winners in the back half and expect to surpass our previously stated 5.8% operating margin goal this year.
Turning to our results, in the second quarter, we delivered total net sales of $865 million, up 24% to last year.
On a two-year basis, sales were up 3%.
We ended the quarter with all of our 733 stores open.
This compares to 92% of our base open at the end of the first quarter.
Store sales rose 55% on a one-year basis and were down 20% on a two-year basis.
At the same time, total digital sales dollars remained steady compared to last year and grew 52% to Q2 2019, representing 44% of total sales this quarter.
By brand, net sales increased 20% for Hollister, which includes Gilly Hicks and Social Tourist, and 30% for Abercrombie, which includes kids.
As compared to Q2 2019, net sales increased 2% for Hollister and 4% for Abercrombie.
By region, net sales in the US were up 31% and 11% on a one- and two-year basis, respectively, despite having roughly 129 fewer stores and over 22% less square footage in our US store base as compared to Q2 2019.
In EMEA, sales rose 11% on a one-year basis, but were down 5% on a two-year basis.
Since Q2 2019, we have closed 17 stores, including eight flagships, as we continue to reposition to a smaller and wider store network focused on local customers.
In APAC, sales were down 1% to last year and down 39% to Q2 2019.
Our rate of 65.2% was up 450 basis points to last year and 590 basis points to Q2 2019, driven by higher AUR across brands on reduced promotions and markdowns, partially offset by higher AUC, reflecting increased transportation costs.
Inventories control and current ending the quarter down 8% to last year.
Excluded from our non-GAAP results are approximately $800,000 and $8 million of pre-tax asset impairment charges for this year and last year, respectively.
Operating expense excluding other operating income was up 11% compared to last year, while operating expense as a percentage of sales decreased to 52% from 57.8%.
In Q2, we saw an increase in stores distribution expense of 5% compared to 2020, and a reduction of 13% compared to 2019.
Compared to 2019, store occupancy was down approximately $50 million related to square footage reductions and renegotiated leases and included approximately $9 million of benefits associated with rent abatements and a flagship lease-related item.
Marketing, general and administrative expense rose 27% from last year and 7% compared to 2019, primarily driven by increased marketing spend and higher performance-based compensation expense.
We delivered operating income of $116 million compared to operating income of $22 million last year.
As Fran noted, this was our best second quarter operating income and operating margin since 2008.
The effective tax rate was approximately negative 6%.
In the quarter, we released approximately $30 million of previously established valuation allowances on certain deferred tax assets, primarily in the United States, Germany and the Netherlands.
Additionally, the quarter reflected a discrete benefit of approximately $4 million for UK rate change enacted in the quarter, which increased the value of deferred taxes in the UK.
Net income per diluted share on adjusted non-GAAP basis was $1.70 compared to $0.23 last year.
The current quarter includes the benefit of approximately $0.53 related to the tax items mentioned.
We ended the quarter with cash and cash equivalents of $922 million and total liquidity of approximately $1.2 billion.
During the quarter, we repurchased approximately $2.4 million shares for $100 million, bringing the year-to-date total share repurchases to about 3.5 million shares and $135 million.
At the end of Q2, we had approximately 6.5 million shares remaining under our previously authorized share repurchase program.
In addition, we spent $47 million to purchase $42 million at par value of our senior secured notes on the open market, as a way to deleverage the balance sheet and deploy excess cash.
Looking ahead, we continue to expect fiscal 2021 capex to be approximately $100 million, with about half of that related to digital and technology and the other half related to real estate and maintenance items.
During the quarter, we opened 14 new stores, bringing the total to 18 for the year-to-date period and closed 12 for a total of 20 year-to-date.
In the back half, we expect to open roughly 20 stores, bringing the total for the year to approximately 40.
This year, we have about 240 leases up for renewal.
Recently, we have been encouraged by back-to-school results in the US, where we expect to see an extended back-to-school season.
Net sales to be up 2% to 4% from 2019 level of approximately $863 million.
Gross profit rate to be up at least 300 basis points to 2019 level of 60.1%, including an expected negative impact of approximately 300 basis points to 400 basis points of freight cost pressure.
Operating expense excluding other operating income to be up low-single digits to 2019 adjusted non-GAAP level of $494 million.
And the tax rate to be in the low-20%.
Net sales to be up low to mid single digits to 2019 level of $3.6 billion.
Gross profit rate to be up around 300 basis points to 2019 level of 59.4%.
Operating expense excluding other operating income to be down 3% to 4% to 2019 adjusted non-GAAP level of $2.07 billion.
Assuming we deliver against these expectations, we would expect operating margin at or above 9% for the full year, which is well above our 2018 Investor Day target of 5.8%.

Summary:
Turning to our results, in the second quarter, we delivered total net sales of $865 million, up 24% to last year.
Net income per diluted share on adjusted non-GAAP basis was $1.70 compared to $0.23 last year.
Recently, we have been encouraged by back-to-school results in the US, where we expect to see an extended back-to-school season.
Operating expense excluding other operating income to be down 3% to 4% to 2019 adjusted non-GAAP level of $2.07 billion.