URBN
$25.74
Urban Outfitters
($1.01)
(3.78%)
Earnings Details
2nd Quarter July 2019
Tuesday, August 20, 2019 4:05:00 PM
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Summary

Urban Outfitters Beats

Urban Outfitters (URBN) reported 2nd Quarter July 2019 earnings of $0.61 per share on revenue of $962.3 million. The consensus earnings estimate was $0.58 per share on revenue of $986.6 million. The Earnings Whisper number was $0.58 per share. Revenue fell 3.0% 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
$0.61
Earnings Whisper
$0.58
Consensus Estimate
$0.58
Reported Revenue
$962.3 Mil
Revenue Estimate
$986.6 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

URBN Reports Q2 Results

PHILADELPHIA, Aug. 20, 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 $60 million and $93 million for the three and six months ended July 31, 2019, respectively. Earnings per diluted share were $0.61 and $0.91 for the three and six months ended July 31, 2019, respectively.

Total Company net sales for the three months ended July 31, 2019, decreased 3.0% over the same period last year to $962 million. Comparable Retail segment net sales decreased 3%, driven by negative retail store sales, partially offset by growth in the digital channel. By brand, comparable Retail segment net sales increased 6% at Free People and decreased 3% at the Anthropologie Group and 5% at Urban Outfitters. Wholesale segment net sales decreased 8%.

“I am pleased to report that customer reaction to our early fall apparel assortments have improved significantly from our second quarter results,” said Richard A. Hayne, Chief Executive Officer. “Third quarter-to-date ‘comp’ sales are positive at all three brands,” 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, 
 2019  2018  2019  2018 
Net sales by brand               
Anthropologie Group$394,280  $401,275  $749,268  $748,360 
Urban Outfitters 355,045   379,327   671,851   702,005 
Free People 205,940   206,413   392,131   387,720 
Food and Beverage 7,064   5,439   13,492   10,057 
Total Company$962,329  $992,454  $1,826,742  $1,848,142 
                
Net sales by segment               
Retail Segment$878,693  $902,027  $1,661,256  $1,677,591 
Wholesale Segment 83,636   90,427   165,486   170,551 
Total Company$962,329  $992,454  $1,826,742  $1,848,142 


For the three and six months ended July 31, 2019, the gross profit rate decreased by 304 basis points and 242 basis points versus the prior year’s comparable periods, respectively. The decrease in gross profit rate for both periods was driven by higher markdowns, deleverage in delivery and logistics expenses and store occupancy deleverage. 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. The deleverage in store occupancy was due to negative store and Retail segment comparable net sales.

As of July 31, 2019, total inventory increased by $64.4 million, or 17.2%, on a year-over-year basis. Comparable Retail segment inventory increased 5% at cost. The remainder of the increase was primarily related to an increase in inventory in transit.

Selling, general and administrative expenses decreased by $1.2 million, or 0.5%, during the three months ended July 31, 2019, compared to the prior year’s comparable period. Selling, general and administrative expenses increased by $1.1 million, or 0.2%, during the six months ended July 31, 2019, compared to the prior year’s comparable period. As a percentage of net sales, selling, general and administrative expenses deleveraged by 62 basis points and 36 basis points during the three and six months ended July 31, 2019, when compared to the prior year’s comparable periods, respectively. The deleverage 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 July 31, 2019, was 26.0% compared to 21.7% in the prior year period. The Company’s effective tax rate for the six months ended July 31, 2019, was 25.2% compared to 22.3% in the prior year period. The increase in the effective tax rate for the three and six-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 six months ended July 31, 2019, was $60 million and $93 million, respectively, and earnings per diluted share was $0.61 and $0.91, 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 six months ended July 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 July 31, 2019, 26.3 million common shares were remaining under the programs.

During the six months ended July 31, 2019, the Company opened a total of seven new retail locations including: three Anthropologie Group stores, three Free People stores and one Urban Outfitters store; and closed five retail locations including: two Anthropologie Group stores, one Free People store and two Food and Beverage restaurants. During the six months ended July 31, 2019, one Anthropologie Group 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 246 Urban Outfitters stores in the United States, Canada and Europe and websites; 228 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 137 Free People stores in the United States, Canada and Europe, catalogs and websites, 11 Food and Beverage restaurants, 4 Urban Outfitters franchisee-owned stores, 1 Anthropologie Group franchisee-owned store and 1 Free People franchisee-owned store, as of July 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 second quarter results and will be webcast at 5:15 pm. ET at: https://edge.media-server.com/mmc/p/2bvghd8c

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  Six Months Ended 
 July 31,  July 31, 
 2019  2018  2019  2018 
                
Net sales$962,329   $992,454   $1,826,742   $1,848,142  
Cost of sales 646,454    636,610    1,241,811    1,211,638  
Gross profit 315,875    355,844    584,931    636,504  
Selling, general and administrative expenses 237,814    238,992    466,850    465,756  
Income from operations 78,061    116,852    118,081    170,748  
Other income, net 3,498    1,746    6,178    1,826  
Income before income taxes 81,559    118,598    124,259    172,574  
Income tax expense 21,239    25,789    31,354    38,505  
Net income$60,320   $92,809   $92,905   $134,069  
                
Net income per common share:               
Basic$0.61   $0.85   $0.91   $1.23  
Diluted$0.61   $0.84   $0.91   $1.22  
                
Weighted-average common shares outstanding:               
Basic 99,095,562    108,831,399    101,722,244    108,663,990  
Diluted 99,602,465    110,433,840    102,427,040    110,091,586  
                
                
AS A PERCENTAGE OF NET SALES               
Net sales100.0%  100.0%  100.0%  100.0% 
Cost of sales67.2%  64.1%  68.0%  65.6% 
Gross profit32.8%  35.9%  32.0%  34.4% 
Selling, general and administrative expenses24.7%  24.1%  25.5%  25.2% 
Income from operations8.1%  11.8%  6.5%  9.2% 
Other income, net0.4%  0.1%  0.3%  0.1% 
Income before income taxes8.5%  11.9%  6.8%  9.3% 
Income tax expense2.2%  2.5%  1.7%  2.0% 
Net income6.3%  9.4%  5.1%  7.3% 
  


URBAN OUTFITTERS, INC.
Condensed Consolidated Balance Sheets
(amounts in thousands, except share data)
(unaudited)

 July 31,  January 31,  July 31, 
 2019  2019  2018 
ASSETS           
Current assets:           
Cash and cash equivalents$162,018  $358,260  $405,727 
Marketable securities 171,398   279,232   198,166 
Accounts receivable, net of allowance for doubtful accounts
  of $939, $1,499 and $1,613, respectively
 95,131   80,461   90,646 
Inventory 440,087   370,507   375,657 
Prepaid expenses and other current assets 131,763   114,296   131,572 
Total current assets 1,000,397   1,202,756   1,201,768 
            
Property and equipment, net 867,434   796,029   807,084 
Operating lease right-of-use assets 1,085,543       
Marketable securities 78,857   57,292   45,514 
Deferred income taxes and other assets 105,814   104,438   104,169 
Total Assets$3,138,045  $2,160,515  $2,158,535 
            
LIABILITIES AND SHAREHOLDERS EQUITY           
Current liabilities:           
Accounts payable$181,955  $144,414  $149,947 
Current portion of operating lease liabilities 209,072       
Accrued expenses, accrued compensation and other current liabilities 235,106   242,230   279,991 
Total current liabilities 626,133   386,644   429,938 
Non-current portion of operating lease liabilities 1,090,623       
Deferred rent and other liabilities 59,885   284,773   284,925 
Total Liabilities 1,776,641   671,417   714,863 
            
Shareholders’ equity:           
Preferred shares; $.0001 par value, 10,000,000 shares authorized,
  none issued
        
Common shares; $.0001 par value, 200,000,000 shares authorized,
  97,965,012, 105,642,283 and 108,951,308 issued and outstanding,
  respectively
10  11  11 
Additional paid-in-capital       18,770 
Retained earnings 1,398,681   1,516,190   1,451,492 
Accumulated other comprehensive loss (37,287)  (27,103)  (26,601)
Total Shareholders’ Equity 1,361,404   1,489,098   1,443,672 
Total Liabilities and Shareholders’ Equity$3,138,045  $2,160,515  $2,158,535 


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

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Source: Urban Outfitters, Inc.