URBN
$22.74
Urban Outfitters
($.63)
(2.70%)
Earnings Details
2nd Quarter July 2017
Tuesday, August 15, 2017 4:05:11 PM
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Summary

Urban Outfitters Beats

Urban Outfitters (URBN) reported 2nd Quarter July 2017 earnings of $0.44 per share on revenue of $872.9 million. The consensus earnings estimate was $0.37 per share on revenue of $869.3 million. The Earnings Whisper number was $0.39 per share. Revenue fell 2.0% compared to the same quarter a year ago.

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
$0.44
Earnings Whisper
$0.39
Consensus Estimate
$0.37
Reported Revenue
$872.9 Mil
Revenue Estimate
$869.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

URBN Reports Q2 Results

Urban Outfitters, Inc. (URBN), a leading lifestyle products and services company which operates a portfolio of global consumer brands comprised of Anthropologie, BHLDN, Free People, Terrain and Urban Outfitters brands and the Food and Beverage division, today announced net income of $50 million and $62 million for the three and six months ended July 31, 2017, respectively. Earnings per diluted share were $0.44 and $0.54 for the three and six months ended July 31, 2017, respectively.

Total Company net sales for the second quarter of fiscal 2018 were $873 million, a 2% decrease as compared to the same quarter last year. Comparable Retail segment net sales, which include the comparable direct-to-consumer channel, decreased 4.9%. By brand, comparable Retail segment net sales increased 2.9% at Free People, but decreased 4.0% at the Anthropologie Group and 7.9% at Urban Outfitters. The decline in comparable Retail segment net sales was due to negative retail store sales, which was partially offset by continued sales growth in our direct-to-consumer channel. Wholesale segment net sales increased 10%.

"While we are disappointed in our second quarter performance, we have a number of initiatives underway including: speed to customer, international growth, wholesale expansion and digital investments," said Richard A. Hayne, Chief Executive Officer. "We believe these initiatives combined with encouraging fashion apparel trends could lead to improved topline performance in future quarters," 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,
Net sales by brand
2017
2016
2017
2016
Urban Outfitters
$
323,828
$
353,837
$
608,615
$
652,726
Anthropologie Group
362,449
366,610
673,505
680,683
Free People
180,228
164,421
339,735
308,935
Food and Beverage
6,426
5,700
12,266
10,801
Total Company
$
872,931
$
890,568
$
1,634,121
$
1,653,145
Net sales by segment
Retail Segment
$
790,628
$
815,762
$
1,480,980
$
1,515,955
Wholesale Segment
82,303
74,806
153,141
137,190
Total Company
$
872,931
$
890,568
$
1,634,121
$
1,653,145

For the three and six months ended July 31, 2017, the gross profit rate decreased 440 basis points and 369 basis points versus the prior year’s comparable periods, respectively. The decline in gross profit rate for both periods was driven by higher markdowns due to underperforming women’s apparel and accessories product at Anthropologie and Urban Outfitters, deleverage in delivery and logistics expenses primarily due to the penetration of the direct-to-consumer channel and deleverage in initial merchandise mark-ups at the Anthropologie and Urban Outfitters brands due to a change in product mix.

As of July 31, 2017, total inventory decreased by $2 million, or 0.6%, on a year-over-year basis. Comparable Retail segment inventory decreased 4.6% at cost, which was partially offset by inventory to stock non-comparable stores.

Selling, general and administrative expenses decreased by $2.1 million, or 1.0%, during the three months ended July 31, 2017, compared to the prior year’s comparable period primarily due to the net benefit of our store organization project. For the three months ended July 31, 2017, selling, general and administrative expenses, expressed as a percentage of net sales, deleveraged by 26 basis points when compared to the prior year’s comparable period primarily due to the negative comparative Retail segment net sales and increased spending in digital marketing. Selling, general and administrative expenses increased by $5.2 million, or 1.2%, during the six months ended July 31, 2017, compared to the prior year’s comparable period primarily due to approximately $8.1 million, or 50 basis points, of nonrecurring expenses related to severance and fees associated with our store organization project. For the six months ended July 31, 2017, selling, general and administrative expenses, expressed as a percentage of net sales, deleveraged by 62 basis points when compared to the prior year’s comparable period primarily due to the nonrecurring expenses related to our store organization project and the negative comparable Retail segment net sales.

The Company’s effective tax rate for the second quarter of fiscal 2018 was 35.1% compared to 35.5% in the prior year period. The effective tax rate for the first half of fiscal 2018 is 37.1% compared to 36.7% in the prior year period. The increase in the first half effective tax rate was due to the ratio of foreign taxable losses to global taxable profits in the first half and the prospective adoption of the new accounting standard related to share-based compensation.

Net income for the three and six months ended July 31, 2017, was $50 million and $62 million, respectively, and earnings per diluted share was $0.44 and $0.54, respectively.

On February 23, 2015, the Company’s Board of Directors authorized the repurchase of 20 million common shares under a share repurchase program. Under this authorization, the Company repurchased and subsequently retired 5.0 million common shares for approximately $91 million during the six months ended July 31, 2017. The Company repurchased and subsequently retired 1.3 million common shares for approximately $46 million under this authorization during the year ended January 31, 2017. As of July 31, 2017, 1.0 million common shares are remaining under this authorization.

During the six months ended July 31, 2017, the Company opened a total of 12 new locations including: 6 Free People stores, 4 Urban Outfitters stores, 1 Anthropologie Group store and 1 Food and Beverage restaurant; and closed 6 locations including: 3 Free People stores, 1 Urban Outfitters store, 1 Anthropologie Group store and 1 Food and Beverage restaurant.

Urban Outfitters, Inc., offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands comprised of 245 Urban Outfitters stores in the United States, Canada, and Europe and websites; 225 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 130 Free People stores in the United States and Canada, catalogs and websites and 12 Food and Beverage restaurants, as of July 31, 2017. Free People wholesale sells its product through approximately 1,900 department and specialty stores worldwide, third-party websites and the Company’s own retail stores.

A conference call will be held today to discuss second quarter results and will be webcast at 5:00 pm. ET at: http://edge.media-server.com/m/p/m3hzew4w

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, any effects of war, terrorism, and civil unrest, natural disasters or severe weather conditions, increases in labor 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 internet sales, 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, 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
Six Months Ended
July 31,
July 31,
2017
2016
2017
2016
Net sales
$
872,931
$
890,568
$
1,634,121
$
1,653,145
Cost of sales
575,588
548,057
1,096,998
1,048,743
Gross profit
297,343
342,511
537,123
604,402
Selling, general and administrative expenses
222,163
224,299
440,907
435,707
Income from operations
75,180
118,212
96,216
168,695
Other income (expense), net
1,736
1,071
2,055
(506
)
Income before income taxes
76,916
119,283
98,271
168,189
Income tax expense
27,001
42,368
36,418
61,712
Net income
$
49,915
$
76,915
$
61,853
$
106,477
Net income per common share:
Basic
$
0.44
$
0.66
$
0.54
$
0.91
Diluted
$
0.44
$
0.66
$
0.54
$
0.91
Weighted-average common shares outstanding:
Basic
113,500,381
117,133,169
114,865,336
117,218,013
Diluted
113,760,647
117,383,132
115,126,977
117,484,131
AS A PERCENTAGE OF NET SALES
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
65.9
%
61.5
%
67.1
%
63.4
%
Gross profit
34.1
%
38.5
%
32.9
%
36.6
%
Selling, general and administrative expenses
25.5
%
25.2
%
27.0
%
26.4
%
Income from operations
8.6
%
13.3
%
5.9
%
10.2
%
Other income (expense), net
0.2
%
0.1
%
0.1
%
0.0
%
Income before income taxes
8.8
%
13.4
%
6.0
%
10.2
%
Income tax expense
3.1
%
4.8
%
2.2
%
3.8
%
Net income
5.7
%
8.6
%
3.8
%
6.4
%
URBAN OUTFITTERS, INC.
Condensed Consolidated Balance Sheets
(amounts in thousands, except share data)
(unaudited)
July 31,
January 31,
July 31,
2017
2017
2016
ASSETS
Current assets:
Cash and cash equivalents
$
276,759
$
248,140
$
243,116
Marketable securities
110,195
111,067
59,231
Accounts receivable, net of allowance for doubtful accounts
of $592, $588 and $876, respectively
75,530
54,505
95,003
Inventory
365,176
338,590
367,197
Prepaid expenses and other current assets
110,017
129,095
94,663
Total current assets
937,677
881,397
859,210
Property and equipment, net
843,058
867,786
878,607
Marketable securities
25,960
44,288
26,000
Deferred income taxes and other assets
115,906
109,166
110,279
Total Assets
$
1,922,601
$
1,902,637
$
1,874,096
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
159,756
$
119,537
$
134,825
Accrued expenses, accrued compensation and other current liabilities
210,399
233,391
222,352
Total current liabilities
370,155
352,928
357,177
Long-term debt
-
-
50,000
Deferred rent and other liabilities
243,633
236,625
221,901
Total Liabilities
613,788
589,553
629,078
Shareholders’ equity:
Preferred shares; $.0001 par value, 10,000,000 shares authorized,
none issued
-
-
-
Common shares; $.0001 par value, 200,000,000 shares authorized,
111,280,653, 116,233,781 and 117,136,520 issued and outstanding,
respectively
11
12
12
Additional paid-in-capital
-
-
7,112
Retained earnings
1,332,145
1,347,141
1,264,821
Accumulated other comprehensive loss
(23,343
)
(34,069
)
(26,927
)
Total Shareholders’ Equity
1,308,813
1,313,084
1,245,018
Total Liabilities and Shareholders’ Equity
$
1,922,601
$
1,902,637
$
1,874,096
Contact:
Oona McCullough
Director of Investor Relations
(215) 454-4806

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