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 $60 million and $93 million
for the three and six months ended July 31, 2019, respectively.
Earnings per diluted share were $0.61 and $0.91 for the three and
six months ended July 31, 2019, respectively.
Total Company net sales for the three months
ended July 31, 2019, decreased 3.0% over the same period last year
to $962 million. Comparable Retail segment net sales decreased 3%,
driven by negative retail store sales, partially offset by growth
in the digital channel. By brand, comparable Retail segment net
sales increased 6% at Free People and decreased 3% at the
Anthropologie Group and 5% at Urban Outfitters. Wholesale segment
net sales decreased 8%.
“I am pleased to report that customer reaction
to our early fall apparel assortments have improved significantly
from our second quarter results,” said Richard A. Hayne, Chief
Executive Officer. “Third quarter-to-date ‘comp’ sales are positive
at all three brands,” 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, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Net
sales by brand |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthropologie Group |
$ |
394,280 |
|
|
$ |
401,275 |
|
|
$ |
749,268 |
|
|
$ |
748,360 |
|
Urban Outfitters |
|
355,045 |
|
|
|
379,327 |
|
|
|
671,851 |
|
|
|
702,005 |
|
Free People |
|
205,940 |
|
|
|
206,413 |
|
|
|
392,131 |
|
|
|
387,720 |
|
Food and Beverage |
|
7,064 |
|
|
|
5,439 |
|
|
|
13,492 |
|
|
|
10,057 |
|
Total Company |
$ |
962,329 |
|
|
$ |
992,454 |
|
|
$ |
1,826,742 |
|
|
$ |
1,848,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales by segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Segment |
$ |
878,693 |
|
|
$ |
902,027 |
|
|
$ |
1,661,256 |
|
|
$ |
1,677,591 |
|
Wholesale Segment |
|
83,636 |
|
|
|
90,427 |
|
|
|
165,486 |
|
|
|
170,551 |
|
Total Company |
$ |
962,329 |
|
|
$ |
992,454 |
|
|
$ |
1,826,742 |
|
|
$ |
1,848,142 |
|
For the three and six months ended July 31,
2019, the gross profit rate decreased by 304 basis points and 242
basis points versus the prior year’s comparable periods,
respectively. The decrease in gross profit rate for both periods
was driven by higher markdowns, deleverage in delivery and
logistics expenses and store occupancy deleverage. 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. The deleverage in store
occupancy was due to negative store and Retail segment comparable
net sales.
As of July 31, 2019, total inventory increased
by $64.4 million, or 17.2%, on a year-over-year basis. Comparable
Retail segment inventory increased 5% at cost. The remainder of the
increase was primarily related to an increase in inventory in
transit.
Selling, general and administrative expenses
decreased by $1.2 million, or 0.5%, during the three months ended
July 31, 2019, compared to the prior year’s comparable period.
Selling, general and administrative expenses increased by $1.1
million, or 0.2%, during the six months ended July 31, 2019,
compared to the prior year’s comparable period. As a percentage of
net sales, selling, general and administrative expenses deleveraged
by 62 basis points and 36 basis points during the three and six
months ended July 31, 2019, when compared to the prior year’s
comparable periods, respectively. The deleverage 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 July 31, 2019, was 26.0% compared to 21.7% in the
prior year period. The Company’s effective tax rate for the six
months ended July 31, 2019, was 25.2% compared to 22.3% in the
prior year period. The increase in the effective tax rate for the
three and six-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 six months ended
July 31, 2019, was $60 million and $93 million, respectively, and
earnings per diluted share was $0.61 and $0.91, 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 six months ended July
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
July 31, 2019, 26.3 million common shares were remaining under the
programs.
During the six months ended July 31, 2019, the
Company opened a total of seven new retail locations including:
three Anthropologie Group stores, three Free People stores and one
Urban Outfitters store; and closed five retail locations including:
two Anthropologie Group stores, one Free People store and two Food
and Beverage restaurants. During the six months ended July 31,
2019, one Anthropologie Group franchisee-owned store was
opened.
Urban Outfitters, Inc., offers
lifestyle-oriented general merchandise and consumer products and
services through a portfolio of global consumer brands comprised of
246 Urban Outfitters stores in the United States, Canada and Europe
and websites; 228 Anthropologie Group stores in the United States,
Canada and Europe, catalogs and websites; 137 Free People stores in
the United States, Canada and Europe, catalogs and websites, 11
Food and Beverage restaurants, 4 Urban Outfitters franchisee-owned
stores, 1 Anthropologie Group franchisee-owned store and 1 Free
People franchisee-owned store, as of July 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
second quarter results and will be webcast at 5:15 pm. ET at:
https://edge.media-server.com/mmc/p/2bvghd8c
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 |
|
|
Six Months
Ended |
|
|
July 31, |
|
|
July 31, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
962,329 |
|
|
|
$ |
992,454 |
|
|
|
$ |
1,826,742 |
|
|
|
$ |
1,848,142 |
|
|
Cost of sales |
|
646,454 |
|
|
|
|
636,610 |
|
|
|
|
1,241,811 |
|
|
|
|
1,211,638 |
|
|
Gross profit |
|
315,875 |
|
|
|
|
355,844 |
|
|
|
|
584,931 |
|
|
|
|
636,504 |
|
|
Selling, general and administrative expenses |
|
237,814 |
|
|
|
|
238,992 |
|
|
|
|
466,850 |
|
|
|
|
465,756 |
|
|
Income from operations |
|
78,061 |
|
|
|
|
116,852 |
|
|
|
|
118,081 |
|
|
|
|
170,748 |
|
|
Other income, net |
|
3,498 |
|
|
|
|
1,746 |
|
|
|
|
6,178 |
|
|
|
|
1,826 |
|
|
Income before income taxes |
|
81,559 |
|
|
|
|
118,598 |
|
|
|
|
124,259 |
|
|
|
|
172,574 |
|
|
Income tax expense |
|
21,239 |
|
|
|
|
25,789 |
|
|
|
|
31,354 |
|
|
|
|
38,505 |
|
|
Net income |
$ |
60,320 |
|
|
|
$ |
92,809 |
|
|
|
$ |
92,905 |
|
|
|
$ |
134,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.61 |
|
|
|
$ |
0.85 |
|
|
|
$ |
0.91 |
|
|
|
$ |
1.23 |
|
|
Diluted |
$ |
0.61 |
|
|
|
$ |
0.84 |
|
|
|
$ |
0.91 |
|
|
|
$ |
1.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
99,095,562 |
|
|
|
|
108,831,399 |
|
|
|
|
101,722,244 |
|
|
|
|
108,663,990 |
|
|
Diluted |
|
99,602,465 |
|
|
|
|
110,433,840 |
|
|
|
|
102,427,040 |
|
|
|
|
110,091,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AS A PERCENTAGE OF NET SALES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
Cost of sales |
67.2 |
% |
|
|
64.1 |
% |
|
|
68.0 |
% |
|
|
65.6 |
% |
|
Gross profit |
32.8 |
% |
|
|
35.9 |
% |
|
|
32.0 |
% |
|
|
34.4 |
% |
|
Selling, general and administrative expenses |
24.7 |
% |
|
|
24.1 |
% |
|
|
25.5 |
% |
|
|
25.2 |
% |
|
Income from operations |
8.1 |
% |
|
|
11.8 |
% |
|
|
6.5 |
% |
|
|
9.2 |
% |
|
Other income, net |
0.4 |
% |
|
|
0.1 |
% |
|
|
0.3 |
% |
|
|
0.1 |
% |
|
Income before income taxes |
8.5 |
% |
|
|
11.9 |
% |
|
|
6.8 |
% |
|
|
9.3 |
% |
|
Income tax expense |
2.2 |
% |
|
|
2.5 |
% |
|
|
1.7 |
% |
|
|
2.0 |
% |
|
Net income |
6.3 |
% |
|
|
9.4 |
% |
|
|
5.1 |
% |
|
|
7.3 |
% |
|
|
|
URBAN OUTFITTERS,
INC.Condensed Consolidated Balance
Sheets(amounts in thousands, except share
data)(unaudited)
|
July
31, |
|
|
January
31, |
|
|
July
31, |
|
|
2019 |
|
|
2019 |
|
|
2018 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
162,018 |
|
|
$ |
358,260 |
|
|
$ |
405,727 |
|
Marketable securities |
|
171,398 |
|
|
|
279,232 |
|
|
|
198,166 |
|
Accounts receivable, net of allowance for doubtful accounts
of $939, $1,499 and $1,613, respectively |
|
95,131 |
|
|
|
80,461 |
|
|
|
90,646 |
|
Inventory |
|
440,087 |
|
|
|
370,507 |
|
|
|
375,657 |
|
Prepaid expenses and other current assets |
|
131,763 |
|
|
|
114,296 |
|
|
|
131,572 |
|
Total current assets |
|
1,000,397 |
|
|
|
1,202,756 |
|
|
|
1,201,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
867,434 |
|
|
|
796,029 |
|
|
|
807,084 |
|
Operating lease right-of-use assets |
|
1,085,543 |
|
|
|
— |
|
|
|
— |
|
Marketable securities |
|
78,857 |
|
|
|
57,292 |
|
|
|
45,514 |
|
Deferred income taxes and other assets |
|
105,814 |
|
|
|
104,438 |
|
|
|
104,169 |
|
Total Assets |
$ |
3,138,045 |
|
|
$ |
2,160,515 |
|
|
$ |
2,158,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
$ |
181,955 |
|
|
$ |
144,414 |
|
|
$ |
149,947 |
|
Current portion of operating lease liabilities |
|
209,072 |
|
|
|
— |
|
|
|
— |
|
Accrued expenses, accrued compensation and other current
liabilities |
|
235,106 |
|
|
|
242,230 |
|
|
|
279,991 |
|
Total current liabilities |
|
626,133 |
|
|
|
386,644 |
|
|
|
429,938 |
|
Non-current portion of operating lease liabilities |
|
1,090,623 |
|
|
|
— |
|
|
|
— |
|
Deferred rent and other liabilities |
|
59,885 |
|
|
|
284,773 |
|
|
|
284,925 |
|
Total Liabilities |
|
1,776,641 |
|
|
|
671,417 |
|
|
|
714,863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
Preferred shares; $.0001 par value, 10,000,000 shares
authorized, none issued |
|
— |
|
|
|
— |
|
|
|
— |
|
Common shares; $.0001 par value, 200,000,000 shares
authorized, 97,965,012, 105,642,283 and 108,951,308 issued
and outstanding, respectively |
10 |
|
|
11 |
|
|
11 |
|
Additional paid-in-capital |
|
— |
|
|
|
— |
|
|
|
18,770 |
|
Retained earnings |
|
1,398,681 |
|
|
|
1,516,190 |
|
|
|
1,451,492 |
|
Accumulated other comprehensive loss |
|
(37,287 |
) |
|
|
(27,103 |
) |
|
|
(26,601 |
) |
Total Shareholders’ Equity |
|
1,361,404 |
|
|
|
1,489,098 |
|
|
|
1,443,672 |
|
Total Liabilities and Shareholders’ Equity |
$ |
3,138,045 |
|
|
$ |
2,160,515 |
|
|
$ |
2,158,535 |
|
Contact: |
|
Oona McCullough |
|
|
Director of Investor Relations |
|
|
(215) 454-4806 |
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