URBN - URBN Reports Record Q2 Sales

PHILADELPHIA, Aug. 22, 2023 (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 Group (Anthropologie and Terrain), Free People Group (Free People and FP Movement), Urban Outfitters, Nuuly and Menus & Venues brands, today announced net income of $104.1 million and earnings per diluted share of $1.10 for the three months ended July 31, 2023. For the six months ended July 31, 2023, net income was $156.9 million and earnings per diluted share were $1.67.

Total Company net sales for the three months ended July 31, 2023, increased 7.5% to a record $1.27 billion. Total Retail segment net sales increased 5.9%, with comparable Retail segment net sales increasing 4.9%. The increase in Retail segment comparable net sales was driven by mid-single-digit positive growth in both retail store sales and digital channel sales. By brand, comparable Retail segment net sales increased 26.9% at the Free People Group and 10.6% at the Anthropologie Group and decreased 14.1% at Urban Outfitters. Wholesale segment net sales decreased 5.2% driven by a 6.5% decrease in Free People Group wholesale sales due to a decrease in sales to department stores, while Urban Outfitters wholesale sales increased by $0.5 million. Nuuly segment net sales increased by $27.0 million driven by an 85% increase in our subscribers versus the end of the prior year’s comparable quarter.

For the six months ended July 31, 2023, total Company net sales increased 6.7% to a record $2.39 billion. Total Retail segment net sales increased 5.1%, with comparable Retail segment net sales increasing 4.7%. The increase in Retail segment comparable net sales was driven by mid-single-digit positive growth in both digital channel sales and retail store sales. By brand, comparable Retail segment net sales increased 22.5% at the Free People Group and 11.9% at the Anthropologie Group and decreased 13.7% at Urban Outfitters. Wholesale segment net sales decreased 8.5% driven by a 10.7% decrease in Free People Group wholesale sales due to a decrease in sales to department stores and specialty customers, while Urban Outfitters wholesale sales increased by $1.8 million. Nuuly segment net sales increased by $55.6 million due to an 85% increase in our subscribers versus the end of the prior year’s comparable period.

“We are proud to report record second quarter sales that helped drive a 72% increase in EPS,” said Richard A. Hayne, Chief Executive Officer. “Also gratifying is that Q2’s sales strength has continued to date in Q3,” finished Mr. Hayne.

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

For the three months ended July 31, 2023, the gross profit rate increased by 416 basis points compared to the three months ended July 31, 2022. Gross profit dollars increased 21.6% to $455.6 million from $374.6 million in the three months ended July 31, 2022. The increase in gross profit rate was primarily due to higher initial merchandise markups and lower merchandise markdowns at all three Retail segment brands. The improvement in initial merchandise markups was primarily driven by lower inbound transportation costs. The increase in gross profit dollars was due to the improved gross profit rate and higher net sales.

For the six months ended July 31, 2023, the gross profit rate increased by 343 basis points compared to the six months ended July 31, 2022. Gross profit dollars increased 18.5% to $826.8 million from $697.9 million in the six months ended July 31, 2022. The increase in gross profit rate was primarily due to higher initial merchandise markups at all three Retail segment brands primarily driven by lower inbound transportation costs. Additionally, the gross profit rate benefited from lower merchandise markdowns at the Anthropologie Group and Free People Group brands. The increase in gross profit dollars was due to the improved gross profit rate and higher net sales.

As of July 31, 2023, total inventory decreased by $111.0 million, or 15.9%, compared to total inventory as of July 31, 2022. Total Retail segment inventory decreased by 14.1% primarily due to improved inventory control supported by a more reliable supply chain. Wholesale segment inventory decreased by 31.6% due to improved inventory control and a reduction in wholesale sales.

For the three months ended July 31, 2023, selling, general and administrative expenses increased by $34.7 million, or 12.0%, compared to the three months ended July 31, 2022, and expressed as a percentage of net sales, deleveraged 103 basis points. For the six months ended July 31, 2023, selling, general and administrative expenses increased by $57.5 million, or 10.2%, compared to the six months ended July 31, 2022, and expressed as a percentage of net sales, deleveraged 81 basis points. The deleverage in selling, general and administrative expenses as a rate to sales for both periods was primarily related to higher incentive-based compensation costs due to improved Company performance and increased marketing and creative expenses to support increased sales and customer growth. The dollar growth in selling, general and administrative expenses for both periods was primarily related to higher compensation costs, including higher incentive-based compensation costs due to improved Company performance, as well as increased marketing and creative expenses to support increased sales and customer growth.

The Company’s effective tax rate for the three months ended July 31, 2023 was 23.2%, compared to 28.8% in the prior year period. The Company’s effective tax rate for the six months ended July 31, 2023 was 24.5%, compared to 28.8% in the prior year period. The decrease in the effective tax rate for the three and six months ended July 31, 2023 was attributable to the ratio of foreign taxable earnings to global taxable earnings and the favorable impact of general business credits in the current year.

Net income for the three months ended July 31, 2023 was $104.1 million and earnings per diluted share were $1.10. Net income for the six months ended July 31, 2023 was $156.9 million and earnings per diluted share were $1.67.

On August 22, 2017, the Company’s Board of Directors authorized the repurchase of 20 million common shares under a share repurchase program; all shares were repurchased and the authorization was completed by the end of June 2022. 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 year ended January 31, 2023, the Company repurchased and subsequently retired 4.7 million common shares for approximately $112 million. During the six months ended July 31, 2023, the Company did not repurchase any common shares. As of July 31, 2023, 19.2 million common shares were remaining under the program.

During the six months ended July 31, 2023, the Company opened a total of 16 new retail locations including: 9 Free People Group stores (including 5 FP Movement stores), 4 Urban Outfitters stores, 2 Anthropologie Group stores and 1 Menus & Venues restaurant; and closed 8 retail locations including: 3 Urban Outfitters stores, 3 Anthropologie Group stores, 1 Free People Group store and 1 Menus & Venues restaurant. During the six months ended July 31, 2023, 1 Urban Outfitters 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 264 Urban Outfitters stores in the United States, Canada and Europe and websites; 237 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 196 Free People Group stores (including 36 FP Movement stores) in the United States, Canada and Europe, catalogs and websites, 11 Menus & Venues restaurants, 7 Urban Outfitters franchisee-owned stores and 2 Anthropologie Group franchisee-owned stores as of July 31, 2023. 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 5:15 pm. ET at: https://edge.media-server.com/mmc/p/d5vy9nre.

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: overall economic and market conditions (including current levels of inflation) and worldwide political events and the resultant impact on consumer spending patterns and our pricing power, 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, including geopolitical instability and impacts of the war between Russia and Ukraine and from related sanctions imposed by the United States, the European Union, United Kingdom and others, terrorism and civil unrest, natural disasters, severe or unseasonable weather conditions (including as a result of climate change) or public health crises (such as the coronavirus (COVID-19)), labor shortages and increases in labor costs, raw material costs and transportation 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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