Urban Outfitters, Inc. (NASDAQ: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 |
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