URBN - URBN Q2: Record Sales Record Profits

PHILADELPHIA, Aug. 24, 2021 (GLOBE NEWSWIRE) -- Urban Outfitters, Inc. (NASDAQ:URBN), a leading lifestyle products and services company which operates a portfolio of global consumer brands comprised of the Anthropologie, BHLDN, Free People, FP Movement, Terrain, Urban Outfitters, Nuuly and Menus & Venues brands, today announced net income of $127 million and earnings per diluted share of $1.28 for the three months ended July 31, 2021. For the six months ended July 31, 2021, net income was $181 million and earnings per diluted share were $1.82.

Due to the material impact of COVID-19 on our business operations in fiscal 2021, including mandated store closures, this release includes a comparison of fiscal 2022 results to fiscal 2020. Management views the comparison of fiscal 2022 results to fiscal 2020 as the more meaningful measurement of the Company’s business performance.

Total Company net sales for the three months ended July 31, 2021, were a record $1.16 billion. Net sales increased 20.3% compared to the three months ended July 31, 2019. Comparable Retail segment net sales increased 22%, driven by strong double-digit growth in digital channel sales, partially offset by low single-digit negative retail store sales due to reduced store traffic. By brand, comparable Retail segment net sales increased 53% at the Free People Group, 20% at Urban Outfitters and 14% at the Anthropologie Group. Total Retail segment net sales increased 24%. Wholesale segment net sales decreased 30% primarily from reducing the Free People Group’s sales to promotional wholesale customers.

For the six months ended July 31, 2021, total Company net sales increased 14.1% compared to the six months ended July 31, 2019. Comparable Retail segment net sales increased 17%, driven by strong double-digit growth in digital channel sales, partially offset by double-digit negative retail store sales due to reduced store traffic resulting from temporary store closures and occupancy restrictions in Europe and Canada. Wholesale segment net sales decreased 27% primarily from reducing the Free People Group’s sales to promotional wholesale customers.

“We’re pleased to report record second quarter sales and earnings driven by extraordinary performance at all three brands,” said Richard A. Hayne, Chief Executive Officer. “Congratulations to all Brand, Creative and Shared teams for the exceptional execution that led to a 110% increase in earnings per share over fiscal 2020,” finished Mr. Hayne.

Net sales by brand and segment for the three and six-month periods were as follows:

(1)   The Subscription segment (which is comprised of the Nuuly brand) began operations on July 30, 2019.

For the three months ended July 31, 2021, the gross profit rate increased by 478 basis points compared to the three months ended July 31, 2019. Gross profit dollars increased by $119.4 million to $435.3 million from $315.9 million in the three months ended July 31, 2019. The increase in gross profit rate was primarily due to record low second quarter merchandise markdown rates in the Retail segment and a leverage in store occupancy expense primarily due to the increased penetration of the digital channel in Retail segment net sales. All three brands recorded lower merchandise markdown rates with the Urban Outfitters and Anthropologie brands achieving record low second quarter merchandise markdown rates. This was partially offset by a deleverage in delivery and logistics expenses. Delivery and logistics expense deleverage was primarily driven by the increased penetration of the digital channel. Logistics expense also deleveraged due to increased wages at our distribution and fulfillment centers in order to attract and retain appropriate levels of employees.

For the six months ended July 31, 2021, the gross profit rate increased by 327 basis points compared to the six months ended July 31, 2019. Gross profit dollars increased by $151.0 million to $735.9 million from $584.9 million in the six months ended July 31, 2019. The increase in gross profit rate was primarily due to record low first half merchandise markdown rates in the Retail segment and a leverage in store occupancy expense due to the increased penetration of the digital channel in Retail segment net sales. All three brands recorded record low first half merchandise markdown rates. This was partially offset by a deleverage in delivery and logistics expenses. Delivery and logistics expense deleverage was primarily driven by the increased penetration of the digital channel. Logistics expense also deleveraged due to increased wages at our distribution and fulfillment centers in order to attract and retain appropriate levels of employees.

As of July 31, 2021, total inventory increased by $43.1 million, or 9.8%, compared to total inventory as of July 31, 2019. The increase in inventory was due to the increase in net sales.

For the three months ended July 31, 2021, selling, general and administrative expenses increased by $31.6 million, or 13.3%, compared to the three months ended July 31, 2019, and expressed as a percentage of net sales, decreased to 23.3% from 24.7% in the three months ended July 31, 2019. The leverage in selling, general and administrative expenses as a rate to sales was primarily related to disciplined store payroll management and overall expense control that was partially offset by a deleverage in digital marketing and creative expenses during the quarter to support the strong digital sales and customer growth. The increase in dollars was primarily driven by the increase in digital marketing and creative expenses partially offset by the reduction in direct selling expenses due to the lower retail store net sales.

For the six months ended July 31, 2021, selling, general, and administrative expense increased by $29.7 million, or 6.4%, compared to the prior year’s comparable period and expressed as a percentage of net sales, decreased to 23.8% from 25.5% in the six months ended July 31, 2019. The leverage in selling, general and administrative expenses as a rate to sales was primarily related to disciplined store payroll management and overall expense control that was partially offset by a deleverage in digital marketing and creative expenses during the period to support the strong digital sales and customer growth. The increase in dollars was primarily driven by the increase in digital marketing and creative expenses to support the overall growth of the Company partially offset by the reduction in direct selling expenses due to the lower retail store net sales.

The Company’s effective tax rate for the three months ended July 31, 2021, was 22.4% compared to 26.0% in the three months ended July 31, 2019. The Company’s effective tax rate for the six months ended July 31, 2021, was 23.8% compared to 25.2% in the six months ended July 31, 2019. The decrease in the effective tax rate for the three and six months ended July 31, 2021, was primarily due to the ratio of foreign taxable profits to global taxable profits.

Net income for the three months ended July 31, 2021, was $127 million and record second quarter earnings per diluted share were $1.28. Net income for the six months ended July 31, 2021, was $181 million and record first half earnings per diluted share were $1.82.

On August 22, 2017, the Company’s Board of Directors authorized the repurchase of 20 million common shares under a share repurchase 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. During the six months ended July 31, 2021, the Company did not repurchase any shares. During the year ended January 31, 2021, the Company repurchased and subsequently retired 0.5 million common shares for approximately $7 million. These shares were repurchased prior to the known spread of the COVID-19 pandemic in the United States that forced the Company to close its stores for an extended period of time. As of July 31, 2021, 25.9 million common shares were remaining under the programs.

During the six months ended July 31, 2021, the Company opened a total of 28 new retail locations including: 15 Free People Group stores (including 7 FP Movement stores), 9 Urban Outfitters stores and 4 Anthropologie Group stores; and closed 6 retail locations including: 2 Free People Group stores, 2 Anthropologie Group stores, 1 Urban Outfitters store and 1 Menus & Venues restaurant. During the six months ended July 31, 2021, 1 Urban Outfitters franchisee-owned store and 1 Anthropologie Group franchisee-owned store were opened.

Urban Outfitters, Inc., offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands comprised of 255 Urban Outfitters stores in the United States, Canada and Europe and websites; 239 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 162 Free People Group stores in the United States, Canada and Europe, catalogs and websites, 10 Menus & Venues restaurants, 2 Urban Outfitters franchisee-owned stores and 1 Anthropologie Group franchisee-owned store, as of July 31, 2021. Free People, FP Movement and Urban Outfitters wholesale sell their products through 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 5:30 pm. ET at: https://edge.media-server.com/mmc/p/di4txumm

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 impacts of public health crises such as the coronavirus (COVID-19) pandemic, overall economic and market conditions and worldwide political events and the resultant impact on consumer spending patterns, 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, the effects of the implementation of the United Kingdom's withdrawal from membership in 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, severe or unseasonable weather conditions (including as a result of climate change) or public health crises, 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, response to new concepts, our ability to integrate acquisitions, risks associated with digital sales, our ability to maintain and expand our digital sales channels, any material disruptions or security breaches with respect to our technology systems, the departure of one or more key senior executives, import risks (including any shortage of transportation capacities or delays at ports), 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, failure of our manufacturers and third-party vendors to comply with our social compliance program, risks related to environmental, social and governance activities, changes in our effective income tax rate, changes in accounting standards and subjective assumptions, regulatory changes and legal matters and other risks identified in our 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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