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Urban Outfitters Reports Record Q3 Sales

 

          PHILADELPHIA, PA, November 17, 2014 - Urban Outfitters, Inc. (NASDAQ:URBN), a leading lifestyle specialty retail company operating under the Anthropologie, Bhldn, Free People, Terrain and Urban Outfitters brands, today announced third quarter net income of $47 million and $152 million for the three and nine months ended October 31, 2014, respectively.  Earnings per diluted share were $0.35 and $1.09 for the three and nine months ended October 31, 2014, respectively.

Total Company net sales for the third quarter of fiscal 2015 increased to a record $814 million or 5% over the same quarter last year. Comparable Retail segment net sales, which include our comparable direct-to-consumer channel, decreased 1%.  Comparable Retail segment net sales increased 15% at Free People and 2% at the Anthropologie Group and decreased 7% at Urban Outfitters. Wholesale segment net sales rose 26%.

"While we are pleased with delivering record third quarter sales fueled by strong performances at our Anthropologie and Free People brands, I am disappointed by the results at the Urban Outfitters brand," said Richard A. Hayne, Chief Executive Officer.  "There is much work to be done to improve the merchandise margins and store performance at the Urban brand, but I see positive signs as shown by strong results at the brand's direct-to-consumer channel," he concluded. 

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,
Net sales by brand   2014     2013     2014     2013
Urban Outfitters $  340,413   $  341,916   $  946,701   $  971,281
Anthropologie Group1 327,694   314,617   971,265   902,086
Free People 141,185   112,968   378,161   293,508
Other 5,178   4,548   15,906   13,875
Total Company $814,470    $  774,049   $  2,312,033   $  2,180,750
        
Net sales by segment        
Retail Segment $  751,451   $  724,066   $  2,143,997   $  2,051,028
Wholesale Segment 63,019   49,983   168,036   129,722
Total Company $  814,470   $  774,049   $  2,312,033   $  2,180,750

1Anthropologie Group consists of the Anthropologie and Bhldn brands.

For the three and nine months ended October 31, 2014, the gross profit rate declined by 295 basis points and 233 basis points versus the prior year's comparable periods, respectively.  The deleverage in both periods occurred primarily due to lower initial merchandise markup followed by higher markdowns at the stores and store occupancy expense deleverage due to negative store comparable net sales, which were all primarily driven by the poor performance at the Urban Outfitters brand.

As of October 31, 2014, total inventories increased by $60 million, or 15%, on a year-over-year basis. The growth in total inventories is primarily related to the acquisition of inventory to stock new and non-comparable stores as well as an increase in comparable Retail segment inventories. Comparable Retail segment inventories increased 8% at cost while decreasing 7% in units.

            For the three and nine months ended October 31, 2014, selling, general and administrative expenses, expressed as a percentage of net sales, increased by 128 basis points and 88 basis points compared to the prior year's comparable periods, respectively. The increase in both periods was primarily due to increased marketing and technology expenses which drove higher direct-to-consumer traffic.

The Company's effective tax rate for the third quarter of fiscal 2015 was 37.8% compared to 33.3% in the prior year's comparable period. The increase in rate is primarily due to state tax adjustments in both periods.

            During the third quarter of fiscal 2014, the Board of Directors authorized the repurchase of 10.0 million common shares under a share repurchase program. During the first quarter of fiscal 2015, the Company repurchased and retired 9.7 million common shares for approximately $353 million completing the share repurchase authorization.  During the second quarter of fiscal 2015, the Board of Directors authorized the repurchase of an additional 10.0 million common shares under a share repurchase program.  As of October 31, 2014, the Company repurchased and retired 3.9 million common shares for approximately $132 million, leaving 6.1 million shares available for repurchase under the current authorization.

            During the nine months ended October 31, 2014, the Company opened a total of 29 new stores including: 12 Free People stores, 10 Anthropologie Group stores and 7 Urban Outfitters stores; and closed 1 Urban Outfitters store.

Urban Outfitters, Inc. is an innovative specialty retail company which offers a variety of lifestyle merchandise to highly defined customer niches through 236 Urban Outfitters stores in the United States, Canada, and Europe, catalogs and websites; 199 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 102 Free People stores in the United States and Canada, catalogs and websites; Free People wholesale, which sells its product to approximately 1,400 specialty stores and select department stores worldwide; and 2 Terrain garden centers and a website, as of October 31, 2014.

Management's third quarter commentary is located on our website at www.urbanoutfittersinc.com.   A conference call will be held today to discuss third quarter results and will be webcast at 5:00PM ET at:  http://edge.media-server.com/m/p/ixvv2cmi/lan/en

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 the resultant impact on consumer spending patterns, lowered levels of consumer confidence and higher levels of unemployment, continuation of lowered levels of consumer spending resulting from a worldwide political and economic crisis, any effects of terrorist acts or war, natural disasters or severe weather conditions, 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, including potential disruptions and changes in duties, tariffs and quotas, the closing of any of our distribution centers, our ability to protect our intellectual property rights, risks associated with internet sales, response to new store concepts, failure of our manufacturers to comply with our social compliance program, 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.

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(Tables follow)


URBAN OUTFITTERS, INC.

Condensed Consolidated Statements of Income

(in thousands, except share and per share data)
(unaudited)

  Three Months Ended   Nine Months Ended  
  October 31,   October 31,  
    2014     2013     2014     2013  
               
Net sales $  814,470   $  774,049   $  2,312,033   $  2,180,750
Cost of sales  530,946   481,764   1,486,740   1,351,413
  Gross profit 283,524   292,285   825,293   829,337
Selling, general and administrative expenses 207,059   186,826   583,890   531,595
  Income from operations 76,465   105,459   241,403   297,742
Other expense, net (693)   (186)   (1,560)   (108)
  Income before income taxes 75,772   105,273   239,843   297,634
Income tax expense 28,629   35,016   87,713   103,956
  Net income $  47,143    $  70,257   $  152,130    $  193,678
               
Net income per common share:              
  Basic $  0.35    $  0.48    $  1.10    $  1.32 
  Diluted $  0.35    $  0.47    $  1.09    $  1.30 
               
Weighted average common shares and common              
  share equivalents outstanding:              
  Basic 134,267,259   147,405,769   138,201,670   146,918,029
  Diluted 135,948,454   149,517,146   139,946,843   149,232,609
               
               
AS A PERCENT OF NET SALES              
Net sales 100.0%   100.0%   100.0%   100.0%
Cost of sales    65.2%     62.3%     64.3%     62.0%
  Gross profit 34.8%   37.7%   35.7%   38.0%
Selling, general and administrative expenses  25.4%     24.1%     25.3%     24.3%
  Income from operations 9.4%   13.6%   10.4%   13.7%
Other expense, net   (0.1%)     0.0%     0.0%     0.0%
  Income before income taxes 9.3%   13.6%    10.4%    13.7%
Income tax expense   3.5%     4.5%     3.8%     4.8%
  Net income   5.8%     9.1%   6.6%     8.9%

URBAN OUTFITTERS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
           (unaudited)

           October 31,
 2014
  January 31,
2014
  October 31,
2013

ASSETS          
Current assets:          
  Cash and cash equivalents $  128,191   $  242,058   $  194,929
  Marketable securities 115,005   281,813   227,547
  Accounts receivable, net of allowance for doubtful accounts          
  of $1,004, $1,711 and $1,371, respectively 70,803   55,161   54,717
  Inventories 467,097   311,207   406,712
  Prepaid expenses, deferred taxes and other current assets 116,969      104,741     92,876
  Total current assets 898,065   994,980   976,781
           
Property and equipment, net 886,810   806,909   783,662
Marketable securities 114,600   366,422   303,200
Deferred income taxes and other assets 89,290  

 
  52,903     54,669
  Total Assets $1,988,765   $ 2,221,214   $ 2,118,312
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
Current liabilities:          
  Accounts payable $  218,251   $  137,036   $  160,787
  Accrued expenses, accrued compensation and other current liabilities   190,819     194,794     165,129
  Total current liabilities 409,070   331,830   325,916
           
Deferred rent and other liabilities 201,712      195,214      196,114 
  Total Liabilities 610,782     527,044     522,030
           
Shareholders' equity:          
  Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued -   -   -
  Common shares; $.0001 par value, 200,000,000 shares authorized, 134,268,445          
  147,309,575 and 147,277,047 issued and outstanding respectively 13   15   15
  Additional paid-in-capital 3,870   97,684   93,245
  Retained earnings 1,380,801 1,597,439   1,508,757
  Accumulated other comprehensive loss (6,701)     (968)     (5,735)
  Total Shareholders' Equity 1,377,983     1,694,170     1,596,282
  Total Liabilities and Shareholders' Equity  $ 1,988,765   $ 2,221,214   $ 2,118,312

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


HUG#1872238