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:
|
Three Months
Ended |
|
|
Six Months
Ended |
|
|
July 31, |
|
|
July 31, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Net
sales by brand |
|
|
|
|
|
|
|
|
|
|
|
Anthropologie Group |
$ |
530,087 |
|
|
$ |
479,228 |
|
|
$ |
1,003,727 |
|
|
$ |
898,905 |
|
Urban
Outfitters |
|
346,424 |
|
|
|
396,449 |
|
|
|
655,132 |
|
|
|
754,151 |
|
Free People
Group |
|
331,201 |
|
|
|
271,403 |
|
|
|
604,936 |
|
|
|
517,161 |
|
Nuuly |
|
55,793 |
|
|
|
28,776 |
|
|
|
107,263 |
|
|
|
51,625 |
|
Menus &
Venues |
|
8,690 |
|
|
|
7,532 |
|
|
|
14,811 |
|
|
|
13,480 |
|
Total
Company |
$ |
1,272,195 |
|
|
$ |
1,183,388 |
|
|
$ |
2,385,869 |
|
|
$ |
2,235,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales by segment |
|
|
|
|
|
|
|
|
|
|
|
Retail
Segment |
$ |
1,160,089 |
|
|
$ |
1,095,191 |
|
|
$ |
2,164,190 |
|
|
$ |
2,058,626 |
|
Wholesale
Segment |
|
56,313 |
|
|
|
59,421 |
|
|
|
114,416 |
|
|
|
125,071 |
|
Nuuly
Segment |
|
55,793 |
|
|
|
28,776 |
|
|
|
107,263 |
|
|
|
51,625 |
|
Total
Company |
$ |
1,272,195 |
|
|
$ |
1,183,388 |
|
|
$ |
2,385,869 |
|
|
$ |
2,235,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
(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, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Net sales |
$ |
1,272,195 |
|
|
$ |
1,183,388 |
|
|
$ |
2,385,869 |
|
|
$ |
2,235,322 |
|
Cost of
sales |
|
816,614 |
|
|
|
808,836 |
|
|
|
1,559,057 |
|
|
|
1,537,469 |
|
Gross profit |
|
455,581 |
|
|
|
374,552 |
|
|
|
826,812 |
|
|
|
697,853 |
|
Selling,
general and administrative expenses |
|
323,483 |
|
|
|
288,734 |
|
|
|
623,331 |
|
|
|
565,798 |
|
Income from operations |
|
132,098 |
|
|
|
85,818 |
|
|
|
203,481 |
|
|
|
132,055 |
|
Other income
(loss), net |
|
3,399 |
|
|
|
(2,262 |
) |
|
|
4,418 |
|
|
|
(4,251 |
) |
Income before income taxes |
|
135,497 |
|
|
|
83,556 |
|
|
|
207,899 |
|
|
|
127,804 |
|
Income tax
expense |
|
31,405 |
|
|
|
24,083 |
|
|
|
50,990 |
|
|
|
36,798 |
|
Net income |
$ |
104,092 |
|
|
$ |
59,473 |
|
|
$ |
156,909 |
|
|
$ |
91,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
per common share: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
1.12 |
|
|
$ |
0.64 |
|
|
$ |
1.69 |
|
|
$ |
0.97 |
|
Diluted |
$ |
1.10 |
|
|
$ |
0.64 |
|
|
$ |
1.67 |
|
|
$ |
0.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
92,741,888 |
|
|
|
93,041,310 |
|
|
|
92,610,499 |
|
|
|
94,240,412 |
|
Diluted |
|
94,228,185 |
|
|
|
93,648,214 |
|
|
|
94,026,950 |
|
|
|
94,977,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AS A
PERCENTAGE OF NET SALES |
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of
sales |
|
64.2 |
% |
|
|
68.3 |
% |
|
|
65.3 |
% |
|
|
68.8 |
% |
Gross profit |
|
35.8 |
% |
|
|
31.7 |
% |
|
|
34.7 |
% |
|
|
31.2 |
% |
Selling,
general and administrative expenses |
|
25.4 |
% |
|
|
24.4 |
% |
|
|
26.2 |
% |
|
|
25.3 |
% |
Income from operations |
|
10.4 |
% |
|
|
7.3 |
% |
|
|
8.5 |
% |
|
|
5.9 |
% |
Other income
(loss), net |
|
0.3 |
% |
|
|
(0.2 |
%) |
|
|
0.2 |
% |
|
|
(0.2 |
%) |
Income before income taxes |
|
10.7 |
% |
|
|
7.1 |
% |
|
|
8.7 |
% |
|
|
5.7 |
% |
Income tax
expense |
|
2.5 |
% |
|
|
2.1 |
% |
|
|
2.1 |
% |
|
|
1.6 |
% |
Net income |
|
8.2 |
% |
|
|
5.0 |
% |
|
|
6.6 |
% |
|
|
4.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
URBAN OUTFITTERS, INC.
Condensed Consolidated Balance Sheets (amounts in
thousands, except share data) (unaudited)
|
July
31, |
|
|
January
31, |
|
|
July
31, |
|
|
2023 |
|
|
2023 |
|
|
2022 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
224,744 |
|
|
$ |
201,260 |
|
|
$ |
91,665 |
|
Marketable securities |
|
250,832 |
|
|
|
181,378 |
|
|
|
160,020 |
|
Accounts receivable, net of allowance for doubtful accounts of
$1,481, $1,496 and $1,201, respectively |
|
79,118 |
|
|
|
70,339 |
|
|
|
97,374 |
|
Inventory |
|
586,514 |
|
|
|
587,510 |
|
|
|
697,474 |
|
Prepaid expenses and other current assets |
|
224,254 |
|
|
|
197,232 |
|
|
|
220,901 |
|
Total
current assets |
|
1,365,462 |
|
|
|
1,237,719 |
|
|
|
1,267,434 |
|
Property and
equipment, net |
|
1,222,343 |
|
|
|
1,187,735 |
|
|
|
1,150,247 |
|
Operating
lease right-of-use assets |
|
961,458 |
|
|
|
959,436 |
|
|
|
927,685 |
|
Marketable
securities |
|
122,356 |
|
|
|
102,844 |
|
|
|
152,528 |
|
Deferred
income taxes and other assets |
|
298,317 |
|
|
|
195,178 |
|
|
|
155,538 |
|
Total Assets |
$ |
3,969,936 |
|
|
$ |
3,682,912 |
|
|
$ |
3,653,432 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
$ |
270,464 |
|
|
$ |
257,620 |
|
|
$ |
347,805 |
|
Current portion of operating lease liabilities |
|
227,669 |
|
|
|
232,672 |
|
|
|
222,430 |
|
Accrued expenses, accrued compensation and other current
liabilities |
|
459,343 |
|
|
|
400,082 |
|
|
|
396,650 |
|
Total current liabilities |
|
957,476 |
|
|
|
890,374 |
|
|
|
966,885 |
|
Non-current
portion of operating lease liabilities |
|
882,841 |
|
|
|
884,696 |
|
|
|
868,686 |
|
Deferred
rent and other liabilities |
|
162,228 |
|
|
|
115,159 |
|
|
|
110,669 |
|
Total Liabilities |
|
2,002,545 |
|
|
|
1,890,229 |
|
|
|
1,946,240 |
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
Preferred shares; $.0001 par value, 10,000,000
shares authorized, none issued |
|
— |
|
|
|
— |
|
|
|
— |
|
Common shares; $.0001 par value, 200,000,000
shares authorized, 92,773,249, 92,180,709 and 92,173,342
shares issued and outstanding, respectively |
9 |
|
|
9 |
|
|
9 |
|
Additional paid-in-capital |
|
23,214 |
|
|
|
15,248 |
|
|
|
— |
|
Retained earnings |
|
1,982,970 |
|
|
|
1,826,061 |
|
|
|
1,757,368 |
|
Accumulated other comprehensive loss |
|
(38,802 |
) |
|
|
(48,635 |
) |
|
|
(50,185 |
) |
Total Shareholders’ Equity |
|
1,967,391 |
|
|
|
1,792,683 |
|
|
|
1,707,192 |
|
Total Liabilities and Shareholders’ Equity |
$ |
3,969,936 |
|
|
$ |
3,682,912 |
|
|
$ |
3,653,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Cash Flows
(amounts in thousands) (unaudited)
|
|
Six Months
Ended |
|
|
|
July 31, |
|
|
|
2023 |
|
|
2022 |
|
Cash flows
from operating activities: |
|
|
|
|
|
|
Net income |
|
$ |
156,909 |
|
|
$ |
91,006 |
|
Adjustments to reconcile net income to net cash provided by (used
in) operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
47,471 |
|
|
|
52,383 |
|
Non-cash lease expense |
|
|
101,277 |
|
|
|
94,821 |
|
Provision for deferred income taxes |
|
|
526 |
|
|
|
6,136 |
|
Share-based compensation expense |
|
|
15,556 |
|
|
|
14,109 |
|
Amortization of tax credit investment |
|
|
7,953 |
|
|
|
— |
|
Loss on disposition of property and equipment, net |
|
|
146 |
|
|
|
284 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
Receivables |
|
|
(8,160 |
) |
|
|
(34,607 |
) |
Inventory |
|
|
3,299 |
|
|
|
(134,092 |
) |
Prepaid expenses and other assets |
|
|
(48,256 |
) |
|
|
(36,593 |
) |
Payables, accrued expenses and other liabilities |
|
|
54,573 |
|
|
|
37,088 |
|
Operating lease liabilities |
|
|
(120,047 |
) |
|
|
(122,198 |
) |
Net cash provided by (used in) operating activities |
|
|
211,247 |
|
|
|
(31,663 |
) |
Cash flows
from investing activities: |
|
|
|
|
|
|
Cash paid for property and equipment |
|
|
(78,517 |
) |
|
|
(105,652 |
) |
Cash paid for marketable securities |
|
|
(229,446 |
) |
|
|
(22,973 |
) |
Sales and maturities of marketable securities |
|
|
149,921 |
|
|
|
164,314 |
|
Initial cash payment for tax credit investment |
|
|
(20,000 |
) |
|
|
— |
|
Net cash (used in) provided by investing activities |
|
|
(178,042 |
) |
|
|
35,689 |
|
Cash flows
from financing activities: |
|
|
|
|
|
|
Proceeds from the exercise of stock options |
|
|
594 |
|
|
|
376 |
|
Share repurchases related to share repurchase program |
|
|
— |
|
|
|
(112,016 |
) |
Share repurchases related to taxes for share-based awards |
|
|
(8,184 |
) |
|
|
(6,668 |
) |
Tax credit investment liability payments |
|
|
(1,724 |
) |
|
|
— |
|
Net cash used in financing activities |
|
|
(9,314 |
) |
|
|
(118,308 |
) |
Effect of
exchange rate changes on cash and cash equivalents |
|
|
(407 |
) |
|
|
(628 |
) |
Increase
(decrease) in cash and cash equivalents |
|
|
23,484 |
|
|
|
(114,910 |
) |
Cash and
cash equivalents at beginning of period |
|
|
201,260 |
|
|
|
206,575 |
|
Cash and
cash equivalents at end of period |
|
$ |
224,744 |
|
|
$ |
91,665 |
|
|
|
|
|
|
|
|
|
|
Contact: |
|
Oona McCulloughExecutive Director of Investor Relations(215)
454-4806 |
|
|
|
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