URBN
$26.75
Urban Outfitters
$.70
2.69%
Earnings Details
3rd Quarter October 2019
Tuesday, November 19, 2019 4:05:00 PM
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Summary

Urban Outfitters Misses

Urban Outfitters (URBN) reported 3rd Quarter October 2019 earnings of $0.56 per share on revenue of $987.5 million. The consensus earnings estimate was $0.57 per share on revenue of $1.0 billion. The Earnings Whisper number was $0.58 per share. Revenue grew 1.4% on a year-over-year basis.

Urban Outfitters Inc is a lifestyle specialty retail company that operates under the Urban Outfitters, Anthropologie, Free People, Terrain and Bhldn brands. It also operates a Wholesale segment under the Free People brand.

Results
Reported Earnings
$0.56
Earnings Whisper
$0.58
Consensus Estimate
$0.57
Reported Revenue
$987.5 Mil
Revenue Estimate
$1.00 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

URBN Reports Record Q3 Sales

PHILADELPHIA, Nov. 19, 2019 (GLOBE NEWSWIRE) -- Urban Outfitters, Inc. (NASDAQ:URBN), a leading lifestyle products and services company which operates a portfolio of global consumer brands comprised of Anthropologie, BHLDN, Free People, Terrain, Urban Outfitters and Nuuly brands and the Food and Beverage division, today announced net income of $56 million and $149 million for the three and nine months ended October 31, 2019, respectively. Earnings per diluted share were $0.56 and $1.47 for the three and nine months ended October 31, 2019, respectively.

Total Company net sales for the three months ended October 31, 2019, increased 1.4% over the same period last year to $987 million. Comparable Retail segment net sales increased 3%, driven by growth in the digital channel, partially offset by negative retail store sales. By brand, comparable Retail segment net sales increased 9% at Free People, 4% at the Anthropologie Group and were flat at Urban Outfitters. Wholesale segment net sales decreased 7%.

“I’m pleased to report record third quarter sales, driven by better reaction to our apparel assortments and strength in the digital channel,” said Richard A. Hayne, Chief Executive Officer. “Looking ahead to Q4, we’re encouraged by positive sales-to-date but realize our highest volume days have yet to be written,” finished Mr. Hayne.

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, 
 2019  2018  2019  2018 
Net sales by brand               
Anthropologie Group$398,709  $385,031  $1,147,977  $1,133,391 
Urban Outfitters 374,459   379,187   1,046,310   1,081,192 
Free People 205,475   202,170   597,606   589,890 
Food and Beverage 6,794   7,145   20,286   17,202 
Nuuly 2,032      2,032    
Total Company$987,469  $973,533  $2,814,211  $2,821,675 
                
Net sales by segment               
Retail Segment$897,130  $878,869  $2,558,386  $2,556,460 
Wholesale Segment 88,307   94,664   253,793   265,215 
Subscription Segment 2,032      2,032    
Total Company$987,469  $973,533  $2,814,211  $2,821,675 
                

 

For the three months ended October 31, 2019, the gross profit rate decreased by 217 basis points versus the prior year’s comparable period. The decrease in gross profit rate was driven by higher markdowns, deleverage in delivery and logistics expenses and lower Wholesale segment margins. The higher markdowns were largely driven by underperforming women’s apparel at the Urban Outfitters brand. The deleverage in delivery and logistics expenses is due in part to the increased penetration of the digital channel as well as increased labor expenses due to the competitive market for employment in the United States. The lower Wholesale segment margins were due to increased markdowns from department stores. For the nine months ended October 31, 2019, the gross profit rate decreased by 234 basis points versus the prior year’s comparable period. The decrease in gross profit rate was driven by higher markdowns and deleverage in delivery and logistics expenses. The higher markdowns were largely driven by underperforming women’s apparel at the Anthropologie and Urban Outfitters brands. The deleverage in delivery and logistics expenses is primarily due to the increase in penetration of the digital channel.

As of October 31, 2019, total inventory increased by $79.9 million, or 17.7%, on a year-over-year basis. Comparable Retail segment inventory increased 9% at cost. The increase in comparable Retail segment inventory in each of our brands was due in part to early receipts related to the ongoing tariff uncertainty as well as positive comparable Retail segment net sales plans for the fourth quarter. The remainder of the increase was primarily related to an increase in Wholesale segment inventory.

For the three months ended October 31, 2019, selling, general and administrative expenses increased by $4.5 million, or 1.9%, compared to the prior year’s comparable period and expressed as a percentage of net sales, deleveraged by 11 basis points. For the nine months ended October 31, 2019, selling, general and administrative expenses increased by $5.6 million, or 0.8%, compared to the prior year’s comparable period and expressed as a percentage of net sales, deleveraged by 26 basis points. The dollar growth in selling, general and administrative expenses in both periods was primarily driven by increased marketing expenses to support our digital sales growth as well as the launch of our new monthly women’s apparel subscription rental service, Nuuly.

The Company’s effective tax rate for the three months ended October 31, 2019, was 26.6% compared to 20.6% in the prior year period. The Company’s effective tax rate for the nine months ended October 31, 2019, was 25.8% compared to 21.7% in the prior year period. The increase in the effective tax rate for the three and nine month periods was primarily due to the ratio of foreign taxable profits to global taxable profits and the prior year favorable impact of equity activity.

Net income for the three and nine months ended October 31, 2019, was $56 million and $149 million, respectively, and earnings per diluted share was $0.56 and $1.47, respectively.

On February 1, 2019, the Company adopted an accounting standards update that amended the previous accounting standards for lease accounting. The adoption resulted in the recognition of approximately $1.3 billion of lease liabilities and corresponding right-of-use assets of approximately $1.1 billion, with the offsetting balance representing a reduction in the previously recognized deferred rent balance. The adoption did not result in a material impact on the Company’s Condensed Consolidated Statements of Income.

On August 22, 2017, the Company’s Board of Directors authorized the repurchase of 20 million common shares under a share repurchase program. During the nine months ended October 31, 2019, the Company repurchased and subsequently retired 8.1 million common shares for approximately $217 million under this program. During the year ended January 31, 2019, the Company repurchased and subsequently retired 3.5 million common shares for approximately $121 million under this 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. As of October 31, 2019, 26.3 million common shares were remaining under the programs.

During the nine months ended October 31, 2019, the Company opened a total of 19 new retail locations including: 9 Free People stores, 6 Anthropologie Group stores and 4 Urban Outfitters stores; and closed 5 retail locations including: 2 Anthropologie Group stores, 1 Free People store and 2 Food and Beverage restaurants. During the nine months ended October 31, 2019, two franchisee-owned stores were opened including: one Anthropologie Group store and one Urban Outfitters store.

Urban Outfitters, Inc., offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands comprised of 249 Urban Outfitters stores in the United States, Canada and Europe and websites; 231 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 143 Free People stores in the United States, Canada and Europe, catalogs and websites, 11 Food and Beverage restaurants, 5 Urban Outfitters franchisee-owned stores, 1 Anthropologie Group franchisee-owned store and 1 Free People franchisee-owned store, as of October 31, 2019. Free People, Anthropologie Group and Urban Outfitters wholesale sell their products through approximately 2,200 department and specialty stores worldwide, digital businesses and the Company’s Retail segment.

A conference call will be held today to discuss third quarter results and will be webcast at 5:15 pm. ET at: https://edge.media-server.com/mmc/p/5k77vs2q

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 worldwide political events and the resultant impact on consumer spending patterns, the effects of the implementation of the United Kingdom's referendum to withdraw membership from 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 or severe or unseasonable weather conditions, 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, the departure of one or more key senior executives, import risks, 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, risks associated with digital sales, our ability to maintain and expand our digital sales channels, response to new store concepts, our ability to integrate acquisitions, failure of our manufacturers and third-party vendors to comply with our social compliance program, changes in our effective income tax rate, the impact of the U.S. Tax Cuts and Jobs Act, 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.

(Tables follow)


URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Income
(amounts in thousands, except share and per share data)
(unaudited)

 Three Months Ended  Nine Months Ended
 October 31,  October 31,
 2019   2018   2019   2018 
               
Net sales$987,469   $973,533   $2,814,211   $2,821,675 
Cost of sales 666,367    635,835    1,908,178    1,847,473 
Gross profit 321,102    337,698    906,033    974,202 
Selling, general and administrative expenses 245,833    241,341    712,683    707,097 
Income from operations 75,269    96,357    193,350    267,105 
Other income, net 576    1,235    6,754    3,061 
Income before income taxes 75,845    97,592    200,104    270,166 
Income tax expense 20,193    20,072    51,547    58,577 
Net income$55,652   $77,520   $148,557   $211,589 
               
Net income per common share:              
Basic$0.57   $0.71   $1.48   $1.95 
Diluted$0.56   $0.70   $1.47   $1.92 
               
Weighted-average common shares outstanding:              
Basic 97,972,864    108,778,483    100,458,726    108,702,575 
Diluted 98,628,169    110,262,879    101,147,025    110,149,105 
               
               
AS A PERCENTAGE OF NET SALES              
Net sales100.0%  100.0%  100.0%  100.0%
Cost of sales67.5%  65.3%  67.8%  65.5%
Gross profit32.5%  34.7%  32.2%  34.5%
Selling, general and administrative expenses24.9%  24.8%  25.3%  25.0%
Income from operations7.6%  9.9%  6.9%  9.5%
Other income, net0.1%  0.1%  0.2%  0.1%
Income before income taxes7.7%  10.0%  7.1%  9.6%
Income tax expense2.1%  2.0%  1.8%  2.1%
Net income5.6%  8.0%  5.3%  7.5%
               


URBAN OUTFITTERS, INC.

Condensed Consolidated Balance Sheets
(amounts in thousands, except share data)
(unaudited)

 October 31,  January 31,  October 31, 
 2019  2019  2018 
ASSETS           
Current assets:           
Cash and cash equivalents$167,070  $358,260  $329,021 
Marketable securities 170,697   279,232   237,391 
Accounts receivable, net of allowance for doubtful accounts of $1,084, $1,499 and $1,572, respectively 99,971   80,461   90,954 
Inventory 531,565   370,507   451,659 
Prepaid expenses and other current assets 143,710   114,296   139,774 
Total current assets 1,113,013   1,202,756   1,248,799 
            
Property and equipment, net 890,538   796,029   808,883 
Operating lease right-of-use assets 1,119,280       
Marketable securities 83,121   57,292   36,033 
Deferred income taxes and other assets 114,641   104,438   103,327 
Total Assets$3,320,593  $2,160,515  $2,197,042 
            
LIABILITIES AND SHAREHOLDERS EQUITY           
Current liabilities:           
Accounts payable$232,901  $144,414  $191,684 
Current portion of operating lease liabilities 213,911       
Accrued expenses, accrued compensation and other current liabilities 264,240   242,230   263,289 
Total current liabilities 711,052   386,644   454,973 
Non-current portion of operating lease liabilities 1,119,340       
Deferred rent and other liabilities 60,348   284,773   281,460 
Total Liabilities 1,890,740   671,417   736,433 
            
Shareholders’ equity:           
Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued        
Common shares; $.0001 par value, 200,000,000 shares authorized,10  11  11 
97,975,343, 105,642,283 and 107,638,846 issued and outstanding, respectively
Additional paid-in-capital 5,201       
Retained earnings 1,454,333   1,516,190   1,492,691 
Accumulated other comprehensive loss (29,691)  (27,103)  (32,093)
Total Shareholders’ Equity 1,429,853   1,489,098   1,460,609 
Total Liabilities and Shareholders’ Equity$3,320,593  $2,160,515  $2,197,042 
            



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

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Source: Urban Outfitters, Inc.