Urban Outfitters Post Solid First-quarter Results

Urban Outfitters Inc. posted a solid first-quarter report card, citing top- and bottom-line gains and momentum at the Free People and Anthropologie groups.

Net income for the quarter ended April 30 jumped to $52.82 million from $31.53 million in the year-ago period. Earnings per diluted share rose to $0.56 from $0.33 a year ago.

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Total company net sales increased 5.9 percent to $1.11 billion, from $1.05 billion in the year-ago period.

The financial report, released after the stock market closed, apparently pleased investors who pushed the share price up 8 percent, or $2.16, to $28.82.

“The hostile operating environment of the last three years has finally abated,” Richard A. Hayne, chief executive officer, said during a conference call Tuesday after the results were released. “Freight rates have normalized and supply chain speed and reliability have returned, Our IMU (initial markup) improvement initiatives have become to bear fruit. And total inventories are down from last year and once again growing at a slower rate than sales.”

Hayne said that his Anthropologie and Free Peoplethe merchants have done an “outstanding job with fashion and customers are obviously responding,” adding that the brands are “hitting more fashion silhouette sensibilities. All categories are working and we’re seeing that comp success. The product mix is a little bit different this year, in some cases creating higher AUR (average unit retail prices) and lower markdowns. We have better marketing across both brands.”

While Free People and Anthropologie, as well as the Nuuly rental business all performed, Urban Outfitters continued to dissapoint, though Hayne said, “We’re planning for better women’s apparel comps for back-to-school beginning in July.”

Citing three reasons for the weak Urban Outfitter performance, Hayne said, “The macro climate is working against the Urban Outfitter customer, as people’s take home pay continues to erode from inflationary pressures. The product is not where it should be but we have made strides particularly in the women’s area. And in the quarter, we planned inventory too lean and didn’t allow women’s apparel sales to bloom as well as they may have.”

Executives said they see the biggest store growth opportunities with Free People, and Florida is the state where there is the biggest opportunity for more doors. Regionally, the Southeast, Southwest and Midwest are performing best in terms of the company’s store fleet.

“We are pleased to report record first-quarter sales and earnings per share driven by a 5 percent increase in comparable retail segment sales, strong growth in Nuuly Rent and a significant improvement in gross margins,” Hayne said in a prepared statement. “We are equally pleased that Q1’s sales strength has continued quarter-to-date.”

Retail sales increased 4 percent, with comparable sales increasing 5 percent, partially offset by a 1 percent negative impact of foreign currency translation. The increase in retail comparable net sales was driven by high single-digit positive growth in digital channel sales and low single-digit positive growth in retail store sales.

By brand, comparable retail sales increased 17 percent at the Free People Group and 13 percent at the Anthropologie Group, but decreased 13 percent at Urban Outfitters.

Wholesale segment net sales decreased 11 percent driven by a 14 percent fall 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 million.

Nuuly segment net sales increased by $28.6 million driven by a 118 percent increase in subscribers.

Urban Outfitters’ portfolio is composed of 260 Urban Outfitters stores in the U.S., Canada and Europe; 237 Anthropologie Group stores in the U.S., Canada and Europe; 193 Free People stores (including 33 FP Movement stores) in the U.S., Canada and Europe; 10 Menus & Venues restaurants; seven Urban Outfitters franchisee-owned stores, and two Anthropologie Group franchisee-owned stores. The company also operates websites and catalogues for its various brands.

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