U.S. Markets open in 7 hrs 26 mins

URBN Reports Record Q3 Sales

PHILADELPHIA, Nov. 19, 2019 (GLOBE NEWSWIRE) -- Urban Outfitters, Inc. (URBN), a leading lifestyle products and services company which operates a portfolio of global consumer brands comprised of Anthropologie, BHLDN, Free People, Terrain, Urban Outfitters and Nuuly brands and the Food and Beverage division, today announced net income of $56 million and $149 million for the three and nine months ended October 31, 2019, respectively. Earnings per diluted share were $0.56 and $1.47 for the three and nine months ended October 31, 2019, respectively.

Total Company net sales for the three months ended October 31, 2019, increased 1.4% over the same period last year to $987 million. Comparable Retail segment net sales increased 3%, driven by growth in the digital channel, partially offset by negative retail store sales. By brand, comparable Retail segment net sales increased 9% at Free People, 4% at the Anthropologie Group and were flat at Urban Outfitters. Wholesale segment net sales decreased 7%.

“I’m pleased to report record third quarter sales, driven by better reaction to our apparel assortments and strength in the digital channel,” said Richard A. Hayne, Chief Executive Officer. “Looking ahead to Q4, we’re encouraged by positive sales-to-date but realize our highest volume days have yet to be written,” finished Mr. Hayne.

Net sales by brand and segment for the three and nine-month periods were as follows:

           
  Three Months Ended     Nine Months Ended  
  October 31,     October 31,  
  2019     2018     2019     2018  
Net sales by brand                              
Anthropologie Group $ 398,709     $ 385,031     $ 1,147,977     $ 1,133,391  
Urban Outfitters   374,459       379,187       1,046,310       1,081,192  
Free People   205,475       202,170       597,606       589,890  
Food and Beverage   6,794       7,145       20,286       17,202  
Nuuly   2,032             2,032        
Total Company $ 987,469     $ 973,533     $ 2,814,211     $ 2,821,675  
                               
Net sales by segment                              
Retail Segment $ 897,130     $ 878,869     $ 2,558,386     $ 2,556,460  
Wholesale Segment   88,307       94,664       253,793       265,215  
Subscription Segment   2,032             2,032        
Total Company $ 987,469     $ 973,533     $ 2,814,211     $ 2,821,675  
                               

 

For the three months ended October 31, 2019, the gross profit rate decreased by 217 basis points versus the prior year’s comparable period. The decrease in gross profit rate was driven by higher markdowns, deleverage in delivery and logistics expenses and lower Wholesale segment margins. The higher markdowns were largely driven by underperforming women’s apparel at the Urban Outfitters brand. The deleverage in delivery and logistics expenses is due in part to the increased penetration of the digital channel as well as increased labor expenses due to the competitive market for employment in the United States. The lower Wholesale segment margins were due to increased markdowns from department stores. For the nine months ended October 31, 2019, the gross profit rate decreased by 234 basis points versus the prior year’s comparable period. The decrease in gross profit rate was driven by higher markdowns and deleverage in delivery and logistics expenses. The higher markdowns were largely driven by underperforming women’s apparel at the Anthropologie and Urban Outfitters brands. The deleverage in delivery and logistics expenses is primarily due to the increase in penetration of the digital channel.

As of October 31, 2019, total inventory increased by $79.9 million, or 17.7%, on a year-over-year basis. Comparable Retail segment inventory increased 9% at cost. The increase in comparable Retail segment inventory in each of our brands was due in part to early receipts related to the ongoing tariff uncertainty as well as positive comparable Retail segment net sales plans for the fourth quarter. The remainder of the increase was primarily related to an increase in Wholesale segment inventory.

For the three months ended October 31, 2019, selling, general and administrative expenses increased by $4.5 million, or 1.9%, compared to the prior year’s comparable period and expressed as a percentage of net sales, deleveraged by 11 basis points. For the nine months ended October 31, 2019, selling, general and administrative expenses increased by $5.6 million, or 0.8%, compared to the prior year’s comparable period and expressed as a percentage of net sales, deleveraged by 26 basis points. The dollar growth in selling, general and administrative expenses in both periods was primarily driven by increased marketing expenses to support our digital sales growth as well as the launch of our new monthly women’s apparel subscription rental service, Nuuly.

The Company’s effective tax rate for the three months ended October 31, 2019, was 26.6% compared to 20.6% in the prior year period. The Company’s effective tax rate for the nine months ended October 31, 2019, was 25.8% compared to 21.7% in the prior year period. The increase in the effective tax rate for the three and nine month periods was primarily due to the ratio of foreign taxable profits to global taxable profits and the prior year favorable impact of equity activity.

Net income for the three and nine months ended October 31, 2019, was $56 million and $149 million, respectively, and earnings per diluted share was $0.56 and $1.47, respectively.

On February 1, 2019, the Company adopted an accounting standards update that amended the previous accounting standards for lease accounting. The adoption resulted in the recognition of approximately $1.3 billion of lease liabilities and corresponding right-of-use assets of approximately $1.1 billion, with the offsetting balance representing a reduction in the previously recognized deferred rent balance. The adoption did not result in a material impact on the Company’s Condensed Consolidated Statements of Income.

On August 22, 2017, the Company’s Board of Directors authorized the repurchase of 20 million common shares under a share repurchase program. During the nine months ended October 31, 2019, the Company repurchased and subsequently retired 8.1 million common shares for approximately $217 million under this program. During the year ended January 31, 2019, the Company repurchased and subsequently retired 3.5 million common shares for approximately $121 million under this program. On June 4, 2019, the Company’s Board of Directors authorized the repurchase of 20 million common shares under a new share repurchase program. As of October 31, 2019, 26.3 million common shares were remaining under the programs.

During the nine months ended October 31, 2019, the Company opened a total of 19 new retail locations including: 9 Free People stores, 6 Anthropologie Group stores and 4 Urban Outfitters stores; and closed 5 retail locations including: 2 Anthropologie Group stores, 1 Free People store and 2 Food and Beverage restaurants. During the nine months ended October 31, 2019, two franchisee-owned stores were opened including: one Anthropologie Group store and one Urban Outfitters store.

Urban Outfitters, Inc., offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands comprised of 249 Urban Outfitters stores in the United States, Canada and Europe and websites; 231 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 143 Free People stores in the United States, Canada and Europe, catalogs and websites, 11 Food and Beverage restaurants, 5 Urban Outfitters franchisee-owned stores, 1 Anthropologie Group franchisee-owned store and 1 Free People franchisee-owned store, as of October 31, 2019. Free People, Anthropologie Group and Urban Outfitters wholesale sell their products through approximately 2,200 department and specialty stores worldwide, digital businesses and the Company’s Retail segment.

A conference call will be held today to discuss third quarter results and will be webcast at 5:15 pm. ET at: https://edge.media-server.com/mmc/p/5k77vs2q

This news release is being made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Certain matters contained in this release may constitute forward-looking statements. When used in this release, the words “project,” “believe,” “plan,” “will,” “anticipate,” “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Any one, or all, of the following factors could cause actual financial results to differ materially from those financial results mentioned in the forward-looking statements: the difficulty in predicting and responding to shifts in fashion trends, changes in the level of competitive pricing and promotional activity and other industry factors, overall economic and market conditions and worldwide political events and the resultant impact on consumer spending patterns, the effects of the implementation of the United Kingdom's referendum to withdraw membership from the European Union (commonly referred to as “Brexit”), including currency fluctuations, economic conditions, and legal or regulatory changes, any effects of war, terrorism and civil unrest, natural disasters or severe or unseasonable weather conditions, increases in labor costs, increases in raw material costs, availability of suitable retail space for expansion, timing of store openings, risks associated with international expansion, seasonal fluctuations in gross sales, the departure of one or more key senior executives, import risks, changes to U.S. and foreign trade policies, including the enactment of tariffs, border adjustment taxes or increases in duties or quotas, the closing or disruption of, or any damage to, any of our distribution centers, our ability to protect our intellectual property rights, risks associated with digital sales, our ability to maintain and expand our digital sales channels, response to new store concepts, our ability to integrate acquisitions, failure of our manufacturers and third-party vendors to comply with our social compliance program, changes in our effective income tax rate, the impact of the U.S. Tax Cuts and Jobs Act, changes in accounting standards and subjective assumptions, regulatory changes and legal matters and other risks identified in the Company’s filings with the Securities and Exchange Commission. The Company disclaims any intent or obligation to update forward-looking statements even if experience or future changes make it clear that actual results may differ materially from any projected results expressed or implied therein.

(Tables follow)


URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Income
(amounts in thousands, except share and per share data)
(unaudited)

  Three Months Ended     Nine Months Ended
  October 31,     October 31,
  2019       2018       2019       2018  
                             
Net sales $ 987,469       $ 973,533       $ 2,814,211       $ 2,821,675  
Cost of sales   666,367         635,835         1,908,178         1,847,473  
Gross profit   321,102         337,698         906,033         974,202  
Selling, general and administrative expenses   245,833         241,341         712,683         707,097  
Income from operations   75,269         96,357         193,350         267,105  
Other income, net   576         1,235         6,754         3,061  
Income before income taxes   75,845         97,592         200,104         270,166  
Income tax expense   20,193         20,072         51,547         58,577  
Net income $ 55,652       $ 77,520       $ 148,557       $ 211,589  
                             
Net income per common share:                            
Basic $ 0.57       $ 0.71       $ 1.48       $ 1.95  
Diluted $ 0.56       $ 0.70       $ 1.47       $ 1.92  
                             
Weighted-average common shares outstanding:                            
Basic   97,972,864         108,778,483         100,458,726         108,702,575  
Diluted   98,628,169         110,262,879         101,147,025         110,149,105  
                             
                             
AS A PERCENTAGE OF NET SALES                            
Net sales 100.0 %     100.0 %     100.0 %     100.0 %
Cost of sales 67.5 %     65.3 %     67.8 %     65.5 %
Gross profit 32.5 %     34.7 %     32.2 %     34.5 %
Selling, general and administrative expenses 24.9 %     24.8 %     25.3 %     25.0 %
Income from operations 7.6 %     9.9 %     6.9 %     9.5 %
Other income, net 0.1 %     0.1 %     0.2 %     0.1 %
Income before income taxes 7.7 %     10.0 %     7.1 %     9.6 %
Income tax expense 2.1 %     2.0 %     1.8 %     2.1 %
Net income 5.6 %     8.0 %     5.3 %     7.5 %
                             


URBAN OUTFITTERS, INC.

Condensed Consolidated Balance Sheets
(amounts in thousands, except share data)
(unaudited)

  October 31,     January 31,     October 31,  
  2019     2019     2018  
ASSETS                      
Current assets:                      
Cash and cash equivalents $ 167,070     $ 358,260     $ 329,021  
Marketable securities   170,697       279,232       237,391  
Accounts receivable, net of allowance for doubtful accounts of $1,084, $1,499 and $1,572, respectively   99,971       80,461       90,954  
Inventory   531,565       370,507       451,659  
Prepaid expenses and other current assets   143,710       114,296       139,774  
Total current assets   1,113,013       1,202,756       1,248,799  
                       
Property and equipment, net   890,538       796,029       808,883  
Operating lease right-of-use assets   1,119,280              
Marketable securities   83,121       57,292       36,033  
Deferred income taxes and other assets   114,641       104,438       103,327  
Total Assets $ 3,320,593     $ 2,160,515     $ 2,197,042  
                       
LIABILITIES AND SHAREHOLDERS EQUITY                      
Current liabilities:                      
Accounts payable $ 232,901     $ 144,414     $ 191,684  
Current portion of operating lease liabilities   213,911              
Accrued expenses, accrued compensation and other current liabilities   264,240       242,230       263,289  
Total current liabilities   711,052       386,644       454,973  
Non-current portion of operating lease liabilities   1,119,340              
Deferred rent and other liabilities   60,348       284,773       281,460  
Total Liabilities   1,890,740       671,417       736,433  
                       
Shareholders’ equity:                      
Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued                
Common shares; $.0001 par value, 200,000,000 shares authorized, 10     11     11  
97,975,343, 105,642,283 and 107,638,846 issued and outstanding, respectively
Additional paid-in-capital   5,201              
Retained earnings   1,454,333       1,516,190       1,492,691  
Accumulated other comprehensive loss   (29,691 )     (27,103 )     (32,093 )
Total Shareholders’ Equity   1,429,853       1,489,098       1,460,609  
Total Liabilities and Shareholders’ Equity $ 3,320,593     $ 2,160,515     $ 2,197,042  
                       



Contact:   Oona McCullough
    Director of Investor Relations
    (215) 454-4806