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 and
Urban Outfitters brands and the Food and Beverage division, today
announced net income of $50 million and $62 million for the three
and six months ended July 31, 2017, respectively. Earnings per
diluted share were $0.44 and $0.54 for the three and six months
ended July 31, 2017, respectively.
Total Company net sales for the second quarter
of fiscal 2018 were $873 million, a 2% decrease as compared to the
same quarter last year. Comparable Retail segment net sales, which
include the comparable direct-to-consumer channel, decreased 4.9%.
By brand, comparable Retail segment net sales increased 2.9% at
Free People, but decreased 4.0% at the Anthropologie Group and 7.9%
at Urban Outfitters. The decline in comparable Retail segment net
sales was due to negative retail store sales, which was partially
offset by continued sales growth in our direct-to-consumer channel.
Wholesale segment net sales increased
10%.
"While we are disappointed in our second quarter
performance, we have a number of initiatives underway
including: speed to customer, international growth, wholesale
expansion and digital investments,” said Richard A. Hayne, Chief
Executive Officer. “We believe these initiatives combined with
encouraging fashion apparel trends could lead to improved topline
performance in future quarters,” finished Mr. Hayne.
Net sales by brand and segment for the three and six month
periods were as follows:
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
July 31, |
|
July 31, |
Net sales by
brand |
2017 |
|
2016 |
|
2017 |
|
2016 |
Urban Outfitters |
$ |
323,828 |
|
$ |
353,837 |
|
$ |
608,615 |
|
$ |
652,726 |
Anthropologie
Group |
|
362,449 |
|
|
366,610 |
|
|
673,505 |
|
|
680,683 |
Free People |
|
180,228 |
|
|
164,421 |
|
|
339,735 |
|
|
308,935 |
Food and Beverage |
|
6,426 |
|
|
5,700 |
|
|
12,266 |
|
|
10,801 |
Total Company |
$ |
872,931 |
|
$ |
890,568 |
|
$ |
1,634,121 |
|
$ |
1,653,145 |
|
|
|
|
|
|
|
|
Net sales by
segment |
|
|
|
|
|
|
|
Retail Segment |
$ |
790,628 |
|
$ |
815,762 |
|
$ |
1,480,980 |
|
$ |
1,515,955 |
Wholesale Segment |
|
82,303 |
|
|
74,806 |
|
|
153,141 |
|
|
137,190 |
Total Company |
$ |
872,931 |
|
$ |
890,568 |
|
$ |
1,634,121 |
|
$ |
1,653,145 |
|
|
|
|
|
|
|
|
For the three and six months ended July 31,
2017, the gross profit rate decreased 440 basis points and 369
basis points versus the prior year’s comparable periods,
respectively. The decline in gross profit rate for both
periods was driven by higher markdowns due to underperforming
women’s apparel and accessories product at Anthropologie and Urban
Outfitters, deleverage in delivery and logistics expenses primarily
due to the penetration of the direct-to-consumer channel and
deleverage in initial merchandise mark-ups at the Anthropologie and
Urban Outfitters brands due to a change in product mix.
As of July 31, 2017, total inventory decreased
by $2 million, or 0.6%, on a year-over-year basis. Comparable
Retail segment inventory decreased 4.6% at cost, which was
partially offset by inventory to stock non-comparable stores.
Selling, general and administrative expenses
decreased by $2.1 million, or 1.0%, during the three months ended
July 31, 2017, compared to the prior year’s comparable period
primarily due to the net benefit of our store organization project.
For the three months ended July 31, 2017, selling, general and
administrative expenses, expressed as a percentage of net sales,
deleveraged by 26 basis points when compared to the prior year’s
comparable period primarily due to the negative comparative Retail
segment net sales and increased spending in digital marketing.
Selling, general and administrative expenses increased by $5.2
million, or 1.2%, during the six months ended July 31, 2017,
compared to the prior year’s comparable period primarily due to
approximately $8.1 million, or 50 basis points, of nonrecurring
expenses related to severance and fees associated with our store
organization project. For the six months ended July 31, 2017,
selling, general and administrative expenses, expressed as a
percentage of net sales, deleveraged by 62 basis points when
compared to the prior year’s comparable period primarily due to the
nonrecurring expenses related to our store organization project and
the negative comparable Retail segment net sales.
The Company’s effective tax rate for the second
quarter of fiscal 2018 was 35.1% compared to 35.5% in the prior
year period. The effective tax rate for the first half of fiscal
2018 is 37.1% compared to 36.7% in the prior year period. The
increase in the first half effective tax rate was due to the ratio
of foreign taxable losses to global taxable profits in the first
half and the prospective adoption of the new accounting standard
related to share-based compensation.
Net income for the three and six months ended
July 31, 2017, was $50 million and $62 million, respectively, and
earnings per diluted share was $0.44 and $0.54, respectively.
On February 23, 2015, the Company’s Board
of Directors authorized the repurchase of 20 million common shares
under a share repurchase program. Under this authorization, the
Company repurchased and subsequently retired 5.0 million common
shares for approximately $91 million during the six months ended
July 31, 2017. The Company repurchased and subsequently retired 1.3
million common shares for approximately $46 million under this
authorization during the year ended January 31, 2017. As of July
31, 2017, 1.0 million common shares are remaining under this
authorization.
During the six months ended July 31, 2017, the
Company opened a total of 12 new locations including: 6 Free People
stores, 4 Urban Outfitters stores, 1 Anthropologie Group store and
1 Food and Beverage restaurant; and closed 6 locations including: 3
Free People stores, 1 Urban Outfitters store, 1 Anthropologie Group
store and 1 Food and Beverage restaurant.
Urban Outfitters, Inc., offers
lifestyle-oriented general merchandise and consumer products and
services through a portfolio of global consumer brands comprised of
245 Urban Outfitters stores in the United States, Canada, and
Europe and websites; 225 Anthropologie Group stores in the United
States, Canada and Europe, catalogs and websites; 130 Free People
stores in the United States and Canada, catalogs and websites and
12 Food and Beverage restaurants, as of July 31, 2017. Free People
wholesale sells its product through approximately 1,900 department
and specialty stores worldwide, third-party websites and the
Company’s own retail stores.
A conference call will be held today to discuss
second quarter results and will be webcast at 5:00 pm. ET at:
http://edge.media-server.com/m/p/m3hzew4w
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, any effects of war, terrorism, and
civil unrest, natural disasters or severe weather conditions,
increases in labor 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 internet sales, 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, 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 |
|
Six Months Ended |
|
July 31, |
|
July 31, |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
872,931 |
|
|
$ |
890,568 |
|
|
$ |
1,634,121 |
|
|
$ |
1,653,145 |
|
Cost of
sales |
|
575,588 |
|
|
|
548,057 |
|
|
|
1,096,998 |
|
|
|
1,048,743 |
|
Gross
profit |
|
297,343 |
|
|
|
342,511 |
|
|
|
537,123 |
|
|
|
604,402 |
|
Selling, general and
administrative expenses |
|
222,163 |
|
|
|
224,299 |
|
|
|
440,907 |
|
|
|
435,707 |
|
Income from
operations |
|
75,180 |
|
|
|
118,212 |
|
|
|
96,216 |
|
|
|
168,695 |
|
Other income (expense),
net |
|
1,736 |
|
|
|
1,071 |
|
|
|
2,055 |
|
|
|
(506 |
) |
Income before
income taxes |
|
76,916 |
|
|
|
119,283 |
|
|
|
98,271 |
|
|
|
168,189 |
|
Income tax expense |
|
27,001 |
|
|
|
42,368 |
|
|
|
36,418 |
|
|
|
61,712 |
|
Net income |
$ |
49,915 |
|
|
$ |
76,915 |
|
|
$ |
61,853 |
|
|
$ |
106,477 |
|
|
|
|
|
|
|
|
|
Net income per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.44 |
|
|
$ |
0.66 |
|
|
$ |
0.54 |
|
|
$ |
0.91 |
|
Diluted |
$ |
0.44 |
|
|
$ |
0.66 |
|
|
$ |
0.54 |
|
|
$ |
0.91 |
|
|
|
|
|
|
|
|
|
Weighted-average common
shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
113,500,381 |
|
|
|
117,133,169 |
|
|
|
114,865,336 |
|
|
|
117,218,013 |
|
Diluted |
|
113,760,647 |
|
|
|
117,383,132 |
|
|
|
115,126,977 |
|
|
|
117,484,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AS A PERCENTAGE OF NET
SALES |
|
|
|
|
|
|
|
Net sales |
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of
sales |
|
65.9 |
% |
|
|
61.5 |
% |
|
|
67.1 |
% |
|
|
63.4 |
% |
Gross
profit |
|
34.1 |
% |
|
|
38.5 |
% |
|
|
32.9 |
% |
|
|
36.6 |
% |
Selling, general and
administrative expenses |
|
25.5 |
% |
|
|
25.2 |
% |
|
|
27.0 |
% |
|
|
26.4 |
% |
Income from
operations |
|
8.6 |
% |
|
|
13.3 |
% |
|
|
5.9 |
% |
|
|
10.2 |
% |
Other income (expense),
net |
|
0.2 |
% |
|
|
0.1 |
% |
|
|
0.1 |
% |
|
|
0.0 |
% |
Income before
income taxes |
|
8.8 |
% |
|
|
13.4 |
% |
|
|
6.0 |
% |
|
|
10.2 |
% |
Income tax expense |
|
3.1 |
% |
|
|
4.8 |
% |
|
|
2.2 |
% |
|
|
3.8 |
% |
Net income |
|
5.7 |
% |
|
|
8.6 |
% |
|
|
3.8 |
% |
|
|
6.4 |
% |
|
|
|
|
|
|
|
|
URBAN OUTFITTERS, INC. |
Condensed Consolidated Balance
Sheets |
(amounts in thousands, except share data) |
(unaudited) |
|
|
|
|
|
|
|
July 31, |
|
January 31, |
|
July 31, |
|
|
2017 |
|
|
|
2017 |
|
|
|
2016 |
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash
equivalents |
$ |
276,759 |
|
|
$ |
248,140 |
|
|
$ |
243,116 |
|
Marketable
securities |
|
110,195 |
|
|
|
111,067 |
|
|
|
59,231 |
|
Accounts
receivable, net of allowance for doubtful accounts |
|
|
|
|
|
of
$592, $588 and $876, respectively |
|
75,530 |
|
|
|
54,505 |
|
|
|
95,003 |
|
Inventory |
|
365,176 |
|
|
|
338,590 |
|
|
|
367,197 |
|
Prepaid expenses
and other current assets |
|
110,017 |
|
|
|
129,095 |
|
|
|
94,663 |
|
Total current assets |
|
937,677 |
|
|
|
881,397 |
|
|
|
859,210 |
|
|
|
|
|
|
|
Property and equipment,
net |
|
843,058 |
|
|
|
867,786 |
|
|
|
878,607 |
|
Marketable
securities |
|
25,960 |
|
|
|
44,288 |
|
|
|
26,000 |
|
Deferred income taxes
and other assets |
|
115,906 |
|
|
|
109,166 |
|
|
|
110,279 |
|
Total Assets |
$ |
1,922,601 |
|
|
$ |
1,902,637 |
|
|
$ |
1,874,096 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts
payable |
$ |
159,756 |
|
|
$ |
119,537 |
|
|
$ |
134,825 |
|
Accrued
expenses, accrued compensation and other current
liabilities |
|
210,399 |
|
|
|
233,391 |
|
|
|
222,352 |
|
Total current liabilities |
|
370,155 |
|
|
|
352,928 |
|
|
|
357,177 |
|
Long-term
debt |
|
– |
|
|
|
– |
|
|
|
50,000 |
|
Deferred rent and other
liabilities |
|
243,633 |
|
|
|
236,625 |
|
|
|
221,901 |
|
Total Liabilities |
|
613,788 |
|
|
|
589,553 |
|
|
|
629,078 |
|
|
|
|
|
|
|
Shareholders’
equity: |
|
|
|
|
|
Preferred
shares; $.0001 par value, 10,000,000 shares authorized, |
|
|
|
|
|
|
|
|
|
|
|
none issued |
|
– |
|
|
|
– |
|
|
|
– |
|
Common shares;
$.0001 par value, 200,000,000 shares authorized, |
|
|
|
|
|
111,280,653, 116,233,781 and 117,136,520 issued and
outstanding, |
|
|
|
|
|
respectively |
|
11 |
|
|
|
12 |
|
|
|
12 |
|
Additional
paid-in-capital |
|
– |
|
|
|
– |
|
|
|
7,112 |
|
Retained
earnings |
|
1,332,145 |
|
|
1,347,141 |
|
|
|
1,264,821 |
|
Accumulated
other comprehensive loss |
|
(23,343 |
) |
|
|
(34,069 |
) |
|
|
(26,927 |
) |
Total Shareholders’ Equity |
|
1,308,813 |
|
|
|
1,313,084 |
|
|
|
1,245,018 |
|
Total Liabilities and Shareholders’ Equity |
$ |
1,922,601 |
|
|
$ |
1,902,637 |
|
|
$ |
1,874,096 |
|
|
|
|
|
|
|
Contact:
Oona McCullough
Director of Investor Relations
(215) 454-4806
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