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 $93 million and $134 million for the three
and six months ended July 31, 2018, respectively. Earnings per
diluted share were $0.84 and $1.22 for the three and six months
ended July 31, 2018, respectively.
Total Company net sales for the three months
ended July 31, 2018, increased 13.7% over the same period last year
to a record $992 million. Comparable Retail segment net sales
increased 13%, driven by strong, double-digit growth in the digital
channel and positive retail store sales. By brand, comparable
Retail segment net sales increased 17% at Free People, 15% at Urban
Outfitters and 11% at the Anthropologie Group. Wholesale segment
net sales increased 10%.
“I’m pleased to announce our teams produced
record Q2 sales and earnings per share,” said Richard A. Hayne,
Chief Executive Officer. “All three brands delivered double-digit
Retail segment ‘comp’ sales and lower markdown rates to drive these
results,” 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, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Net sales by
brand |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Urban Outfitters |
$ |
379,327 |
|
|
$ |
323,828 |
|
|
$ |
702,005 |
|
|
$ |
608,615 |
|
Anthropologie
Group |
|
401,275 |
|
|
|
362,449 |
|
|
|
748,360 |
|
|
|
673,505 |
|
Free People |
|
206,413 |
|
|
|
180,228 |
|
|
|
387,720 |
|
|
|
339,735 |
|
Food and Beverage |
|
5,439 |
|
|
|
6,426 |
|
|
|
10,057 |
|
|
|
12,266 |
|
Total Company |
$ |
992,454 |
|
|
$ |
872,931 |
|
|
$ |
1,848,142 |
|
|
$ |
1,634,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales by
segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Segment |
$ |
902,027 |
|
|
$ |
790,628 |
|
|
$ |
1,677,591 |
|
|
$ |
1,480,980 |
|
Wholesale Segment |
|
90,427 |
|
|
|
82,303 |
|
|
|
170,551 |
|
|
|
153,141 |
|
Total Company |
$ |
992,454 |
|
|
$ |
872,931 |
|
|
$ |
1,848,142 |
|
|
$ |
1,634,121 |
|
|
For the three and six months ended July 31,
2018, the gross profit rate improved by 180 basis points and 157
basis points versus the prior year’s comparable periods,
respectively. The improvement in gross profit rate for both periods
was driven by lower markdowns at all three brands and leverage in
store occupancy cost due to strong Retail segment comparable net
sales. These gains were partially offset by deleverage in delivery
expense due in part to the increased penetration of the digital
channel.
As of July 31, 2018, total inventory increased
by $10.5 million, or 2.9%, on a year-over-year basis. Comparable
Retail segment inventory increased 3% at cost.
Selling, general and administrative expenses
increased by $16.8 million, or 7.6%, and $24.8 million, or 5.6%,
during the three and six months ended July 31, 2018, compared to
the prior year’s comparable periods, respectively. As a percentage
of net sales, selling, general and administrative expenses
leveraged 136 basis points and 178 basis points during the three
and six months ended July 31, 2018, when compared to the prior
year’s comparable periods, respectively. The dollar growth in
selling, general and administrative expenses in both periods was
primarily due to increased direct selling and marketing expenses to
support and drive the increase in Retail segment net sales and
higher bonus expense due to the strong Company performance. The
leverage in both periods was primarily driven by the net sales
growth, continued savings associated with the fiscal 2018 store
reorganization project and the current year benefit associated with
the nonrecurring store reorganization expenses incurred in the
prior year.
The Company’s effective tax rate for the three
months ended July 31, 2018, was 21.7% compared to 35.1% in the
prior year period. The effective tax rate for the six months ended
July 31, 2018 was 22.3% compared to 37.1% in the prior year period.
The decrease in the effective tax rate for the three and six month
periods was primarily due to the lower federal statutory rate
resulting from the U.S. Tax Cuts and Jobs Act.
Net income for the three and six months ended
July 31, 2018, was $93 million and $134 million, respectively, and
earnings per diluted share was $0.84 and $1.22, respectively.
On August 22, 2017, the Company’s Board of
Directors authorized the repurchase of 20 million common shares
under a share repurchase program, of which 17.9 million common
shares were remaining as of July 31, 2018. No shares were
repurchased during the six months ended July 31, 2018. During the
year ended January 31, 2018, the Company repurchased and
subsequently retired 2.1 million common shares for approximately
$46 million under this program.
During the six months ended July 31, 2018, the
Company opened a total of seven new locations including: three Free
People stores, two Urban Outfitters stores and two Anthropologie
Group stores; and closed two locations including: one Urban
Outfitters store and one Anthropologie Group store.
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; 227 Anthropologie Group stores in the United
States, Canada and Europe, catalogs and websites; 135 Free People
stores in the United States and Canada, catalogs and websites and
10 Food and Beverage restaurants, as of July 31, 2018. Free People
and Anthropologie Group wholesale sell their products through
approximately 2,100 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 5:00 pm. ET at:
https://edge.media-server.com/m6/p/8f7kd45c
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 contain 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 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
internet 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, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
992,454 |
|
|
|
$ |
872,931 |
|
|
|
$ |
1,848,142 |
|
|
|
$ |
1,634,121 |
|
|
Cost of sales |
|
636,610 |
|
|
|
|
575,588 |
|
|
|
|
1,211,638 |
|
|
|
|
1,096,998 |
|
|
Gross
profit |
|
355,844 |
|
|
|
|
297,343 |
|
|
|
|
636,504 |
|
|
|
|
537,123 |
|
|
Selling, general and
administrative expenses |
|
238,992 |
|
|
|
|
222,163 |
|
|
|
|
465,756 |
|
|
|
|
440,907 |
|
|
Income from
operations |
|
116,852 |
|
|
|
|
75,180 |
|
|
|
|
170,748 |
|
|
|
|
96,216 |
|
|
Other income, net |
|
1,746 |
|
|
|
|
1,736 |
|
|
|
|
1,826 |
|
|
|
|
2,055 |
|
|
Income before
income taxes |
|
118,598 |
|
|
|
|
76,916 |
|
|
|
|
172,574 |
|
|
|
|
98,271 |
|
|
Income tax expense |
|
25,789 |
|
|
|
|
27,001 |
|
|
|
|
38,505 |
|
|
|
|
36,418 |
|
|
Net income |
$ |
92,809 |
|
|
|
$ |
49,915 |
|
|
|
$ |
134,069 |
|
|
|
$ |
61,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.85 |
|
|
|
$ |
0.44 |
|
|
|
$ |
1.23 |
|
|
|
$ |
0.54 |
|
|
Diluted |
$ |
0.84 |
|
|
|
$ |
0.44 |
|
|
|
$ |
1.22 |
|
|
|
$ |
0.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common
shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
108,831,399 |
|
|
|
|
113,500,381 |
|
|
|
|
108,663,990 |
|
|
|
|
114,865,336 |
|
|
Diluted |
|
110,433,840 |
|
|
|
|
113,760,647 |
|
|
|
|
110,091,586 |
|
|
|
|
115,126,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AS A PERCENTAGE OF NET
SALES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
Cost of sales |
64.1 |
% |
|
|
65.9 |
% |
|
|
65.6 |
% |
|
|
67.1 |
% |
|
Gross
profit |
35.9 |
% |
|
|
34.1 |
% |
|
|
34.4 |
% |
|
|
32.9 |
% |
|
Selling, general and
administrative expenses |
24.1 |
% |
|
|
25.5 |
% |
|
|
25.2 |
% |
|
|
27.0 |
% |
|
Income from
operations |
11.8 |
% |
|
|
8.6 |
% |
|
|
9.2 |
% |
|
|
5.9 |
% |
|
Other income, net |
0.1 |
% |
|
|
0.2 |
% |
|
|
0.1 |
% |
|
|
0.1 |
% |
|
Income before
income taxes |
11.9 |
% |
|
|
8.8 |
% |
|
|
9.3 |
% |
|
|
6.0 |
% |
|
Income tax expense |
2.5 |
% |
|
|
3.1 |
% |
|
|
2.0 |
% |
|
|
2.2 |
% |
|
Net income |
9.4 |
% |
|
|
5.7 |
% |
|
|
7.3 |
% |
|
|
3.8 |
% |
|
|
URBAN OUTFITTERS, INC. |
Condensed Consolidated Balance
Sheets |
(amounts in thousands, except share data) |
(unaudited) |
|
|
July 31, |
|
|
January 31, |
|
|
July 31, |
|
|
2018 |
|
|
2018 |
|
|
2017 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
405,727 |
|
|
$ |
282,220 |
|
|
$ |
276,759 |
|
Marketable
securities |
|
198,166 |
|
|
|
165,125 |
|
|
|
110,195 |
|
Accounts
receivable, net of allowance for doubtful accounts of $1,613,
$1,326 and $592, respectively |
|
90,646 |
|
|
|
76,962 |
|
|
|
75,530 |
|
Inventory |
|
375,657 |
|
|
|
351,395 |
|
|
|
365,176 |
|
Prepaid expenses
and other current assets |
|
131,572 |
|
|
|
103,055 |
|
|
|
110,017 |
|
Total
current assets |
|
1,201,768 |
|
|
|
978,757 |
|
|
|
937,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment,
net |
|
807,084 |
|
|
|
813,768 |
|
|
|
843,058 |
|
Marketable
securities |
|
45,514 |
|
|
|
58,688 |
|
|
|
25,960 |
|
Deferred income taxes
and other assets |
|
104,169 |
|
|
|
101,567 |
|
|
|
115,906 |
|
Total
Assets |
$ |
2,158,535 |
|
|
$ |
1,952,780 |
|
|
$ |
1,922,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable |
$ |
149,947 |
|
|
$ |
128,246 |
|
|
$ |
159,756 |
|
Accrued
expenses, accrued compensation and other current liabilities |
|
279,991 |
|
|
|
231,968 |
|
|
|
210,399 |
|
Total
current liabilities |
|
429,938 |
|
|
|
360,214 |
|
|
|
370,155 |
|
Long-term debt |
|
— |
|
|
|
— |
|
|
|
— |
|
Deferred rent and other
liabilities |
|
284,925 |
|
|
|
291,663 |
|
|
|
243,633 |
|
Total
Liabilities |
|
714,863 |
|
|
|
651,877 |
|
|
|
613,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity: |
|
|
|
|
|
|
|
|
|
|
|
Preferred
shares; $.0001 par value, 10,000,000 shares authorized,
none issued |
|
— |
|
|
|
— |
|
|
|
— |
|
Common shares;
$.0001 par value, 200,000,000 shares authorized,
108,951,308, 108,248,568 and 111,280,653 issued and
outstanding, respectively |
11 |
|
|
11 |
|
|
11 |
|
Additional
paid-in-capital |
|
18,770 |
|
|
684 |
|
|
|
— |
|
Retained
earnings |
|
1,451,492 |
|
|
|
1,310,859 |
|
|
|
1,332,145 |
|
Accumulated
other comprehensive loss |
|
(26,601 |
) |
|
|
(10,651 |
) |
|
|
(23,343 |
) |
Total
Shareholders’ Equity |
|
1,443,672 |
|
|
|
1,300,903 |
|
|
|
1,308,813 |
|
Total
Liabilities and Shareholders’ Equity |
$ |
2,158,535 |
|
|
$ |
1,952,780 |
|
|
$ |
1,922,601 |
|
Contact: |
|
Oona McCullough |
|
|
Director of Investor
Relations |
|
|
(215) 454-4806 |
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