Urban Outfitters Inc.

11/27/2024 | Press release | Distributed by Public on 11/27/2024 10:19

URBN Reports Record Q3 Sales and Earnings Form 8 K

URBN Reports Record Q3 Sales and Earnings

PHILADELPHIA, PA, November 26, 2024 - Urban Outfitters, Inc. (NASDAQ:URBN), a leading lifestyle products and services company which operates a portfolio of global consumer brands including the Anthropologie, Free People, FP Movement, Urban Outfitters and Nuuly brands, today announced record third quarter net income of $102.9 million and earnings per diluted share of $1.10 for the three months ended October 31, 2024. For the nine months ended October 31, 2024, net income was $282.2 million and earnings per diluted share were $2.99.

Total Company net sales for the three months ended October 31, 2024, increased 6.3% to a record $1.36 billion. Total Retail segment net sales increased 3.2%, with comparable Retail segment net sales increasing 1.5%. The increase in Retail segment comparable net sales was driven by low single-digit positive growth in both digital channel sales and retail store sales. Comparable Retail segment net sales increased 5.8% at Anthropologie and 5.3% at Free People and decreased 8.9% at Urban Outfitters. Nuuly segment net sales increased by 48.4% primarily driven by a 51% increase in average active subscribers in the current quarter versus the prior year quarter. Wholesale segment net sales increased 17.4% driven by a 20.3% increase in Free People wholesale sales due to an increase in sales to specialty customers and department stores, partially offset by a decrease in Urban Outfitters wholesale sales.

For the nine months ended October 31, 2024, total Company net sales increased 6.7% to a record $3.91 billion. Total Retail segment net sales increased 4.0%, with comparable Retail segment net sales increasing 2.6%. The increase in Retail segment comparable net sales was driven by mid single-digit positive growth in digital channel sales and low single-digit positive growth in retail store sales. Comparable Retail segment net sales increased 9.3% at Free People and 7.5% at Anthropologie and decreased 10.6% at Urban Outfitters. Nuuly segment net sales increased by 53.9% primarily driven by a 50% increase in average active subscribers in the current period versus the prior year period. Wholesale segment net sales increased 12.3% driven by a 15.1% increase in Free People wholesale sales due to an increase in sales to specialty customers and department stores, partially offset by a decrease in Urban Outfitters wholesale sales.

"We are pleased to announce record third quarter sales and earnings, both of which exceeded our expectations. These results were driven by outperformance across all three business segments - Retail, Subscription and Wholesale," said Richard A. Hayne, Chief Executive Officer. "Additionally, we're optimistic about the outlook for Holiday demand and believe total comparable sales could be similar to our third quarter results," 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,

2024

2023

2024

2023

Net sales by brand

Anthropologie(1)

$

587,923

$

549,819

$

1,683,408

$

1,553,546

Free People(2)

365,857

331,772

1,049,677

936,708

Urban Outfitters

300,577

324,375

887,550

979,507

Nuuly

97,232

65,516

265,870

172,779

Menus & Venues

10,266

9,692

28,041

24,503

Total Company

$

1,361,855

$

1,281,174

$

3,914,546

$

3,667,043

Net sales by segment

Retail Segment

$

1,182,557

$

1,145,766

$

3,441,698

$

3,309,956

Nuuly Segment

97,232

65,516

265,870

172,779

Wholesale Segment

82,066

69,892

206,978

184,308

Total Company

$

1,361,855

$

1,281,174

$

3,914,546

$

3,667,043

(1)
Anthropologie includes the Anthropologie and Terrain brands.
(2)
Free People includes the Free People and FP Movement brands.

For the three months ended October 31, 2024, the gross profit rate increased by 105 basis points compared to the three months ended October 31, 2023. Gross profit dollars increased 9.4% to $497.3 million from $454.4 million in the three months ended October 31, 2023. The increase in gross profit rate for the three months ended October 31, 2024 was primarily due to higher initial merchandise markups for all segments primarily driven by Company cross-functional initiatives. Additionally, Retail segment merchandise markdowns improved driven by lower merchandise markdowns at Urban Outfitters, which were partially offset by an increase at Free People. For the nine months ended October 31, 2024, the gross profit rate increased by 80 basis points compared to the nine months ended October 31, 2023. Gross profit dollars increased 9.2% to $1.40 billion from $1.28 billion in the nine months ended October 31, 2023. The increase in gross profit rate for the nine months ended October 31, 2024 was primarily due to higher initial merchandise markups for all segments primarily driven by Company cross-functional initiatives. The increase in gross profit dollars for both periods was due to higher net sales and the improved gross profit rate.

As of October 31, 2024, total inventory increased by $72.3 million, or 10.0%, compared to total inventory as of October 31, 2023. Total Retail segment inventory increased 8.1% due to a Retail segment comparable inventory increase of 3.7% and planned early receipts of holiday merchandise. Wholesale segment inventory increased by 41.6% due to the timing of receipts and to support increased sales.

For the three months ended October 31, 2024, selling, general and administrative expenses increased by $23.2 million, or 6.7%, compared to the three months ended October 31, 2023, and expressed as a percentage of net sales, deleveraged 11 basis points. For the nine months ended October 31, 2024, selling, general and administrative expenses increased by $81.8 million, or 8.4%, compared to the nine months ended October 31, 2023, and expressed as a percentage of net sales, deleveraged 42 basis points. The deleverage in selling, general and administrative expenses as a rate to net sales for both periods was primarily related to increased marketing expenses to support customer growth and increased sales in the Retail and Nuuly segments. The dollar growth in selling, general and administrative expenses for both periods was primarily related to increased marketing expenses to support customer growth and increased sales in the Retail and Nuuly segments, as well as increased store payroll expenses to support the Retail segment stores comparable net sales growth.

The Company's effective tax rate for the three months ended October 31, 2024 was 24.2%, compared to 24.3% in the three months ended October 31, 2023. The Company's effective tax rate for the nine months ended October 31, 2024 was 23.6%, compared to 24.5% in the nine months ended October 31, 2023. The decrease in the effective tax rate for the three and nine months ended October 31, 2024 was primarily due to the favorable impact of equity vestings in the current year.

Net income for the three months ended October 31, 2024 was a record $102.9 million or $1.10 per diluted share. Net income for the nine months ended October 31, 2024 was $282.2 million or $2.99 per diluted share.

On June 4, 2019, 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, 2024, the Company repurchased and subsequently retired 1.2 million shares for approximately $52 million. As of October 31, 2024, 18.0 million common shares were remaining under the program.

During the nine months ended October 31, 2024, the Company opened a total of 36 new retail locations including: 20 Free People stores (including 12 FP Movement stores), 9 Anthropologie stores and 7 Urban Outfitters stores; and closed 11 retail locations including: 5 Urban Outfitters stores, 4 Anthropologie stores and 2 Free People stores.

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; 242 Anthropologie stores in the United States, Canada and Europe, catalogs and websites; 216 Free People stores (including 50 FP Movement stores) in the United States, Canada and Europe, catalogs and websites, 9 Menus & Venues restaurants, 7 Urban Outfitters franchisee-owned stores and 2 Anthropologie franchisee-owned stores as of October 31, 2024. 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. Nuuly is a women's apparel subscription rental service which offers a wide selection of rental product from the Company's own brands, third-party brands and one-of-a-kind vintage pieces.

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/9zt6ekqe/.

As used in this document, unless otherwise defined, "Anthropologie" refers to the Company's Anthropologie and Terrain brands and "Free People" refers to the Company's Free People and FP Movement brands.

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, impacts of the conflict in the Middle East and impacts of the war between Russia and Ukraine and from related sanctions imposed by the United States, 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 unexpected 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

Nine Months Ended

October 31,

October 31,

2024

2023

2024

2023

Net sales

$

1,361,855

$

1,281,174

$

3,914,546

$

3,667,043

Cost of sales (excluding store impairment and lease abandonment charges)

864,536

825,375

2,510,956

2,384,432

Store impairment and lease abandonment charges

-

1,392

4,601

1,392

Gross profit

497,319

454,407

1,398,989

1,281,219

Selling, general and administrative expenses

368,628

345,429

1,050,539

968,760

Income from operations

128,691

108,978

348,450

312,459

Other income, net

7,141

705

20,816

5,123

Income before income taxes

135,832

109,683

369,266

317,582

Income tax expense

32,921

26,669

87,105

77,659

Net income

$

102,911

$

83,014

$

282,161

$

239,923

Net income per common share:

Basic

$

1.12

$

0.89

$

3.04

$

2.59

Diluted

$

1.10

$

0.88

$

2.99

$

2.55

Weighted-average common shares outstanding:

Basic

92,270,583

92,780,736

92,819,987

92,667,878

Diluted

93,857,850

94,448,376

94,511,989

94,168,058

AS A PERCENTAGE OF NET SALES

Net sales

100.0

%

100.0

%

100.0

%

100.0

%

Cost of sales (excluding store impairment and lease abandonment charges)

63.5

%

64.4

%

64.2

%

65.1

%

Store impairment and lease abandonment charges

-

0.1

%

0.1

%

0.0

%

Gross profit

36.5

%

35.5

%

35.7

%

34.9

%

Selling, general and administrative expenses

27.1

%

27.0

%

26.8

%

26.4

%

Income from operations

9.4

%

8.5

%

8.9

%

8.5

%

Other income, net

0.6

%

0.1

%

0.5

%

0.2

%

Income before income taxes

10.0

%

8.6

%

9.4

%

8.7

%

Income tax expense

2.4

%

2.1

%

2.2

%

2.2

%

Net income

7.6

%

6.5

%

7.2

%

6.5

%

URBAN OUTFITTERS, INC.

Condensed Consolidated Balance Sheets

(amounts in thousands, except share data)

(unaudited)

October 31,

January 31,

October 31,

2024

2024

2023

ASSETS

Current assets:

Cash and cash equivalents

$

182,516

$

178,321

$

206,237

Marketable securities

340,445

286,744

249,176

Accounts receivable, net of allowance for doubtful accounts
of $1,423, $1,465 and $1,271, respectively

96,977

67,008

77,399

Inventory

793,324

550,242

721,011

Prepaid expenses and other current assets

224,070

200,188

235,227

Total current assets

1,637,332

1,282,503

1,489,050

Property and equipment, net

1,324,545

1,286,541

1,272,652

Operating lease right-of-use assets

947,150

920,396

933,864

Marketable securities

240,237

314,152

132,939

Other assets

336,519

307,617

281,151

Total Assets

$

4,485,783

$

4,111,209

$

4,109,656

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

363,187

$

253,342

$

319,115

Current portion of operating lease liabilities

228,443

226,645

223,781

Accrued expenses, accrued compensation and other
current liabilities

533,915

514,218

506,028

Total current liabilities

1,125,545

994,205

1,048,924

Non-current portion of operating lease liabilities

879,362

851,853

857,791

Other non-current liabilities

127,953

152,611

156,383

Total Liabilities

2,132,860

1,998,669

2,063,098

Shareholders' equity:

Preferred shares; $.0001 par value, 10,000,000 shares
authorized, none issued

-

-

-

Common shares; $.0001 par value, 200,000,000 shares
authorized, 92,275,849, 92,787,522, and 92,784,344 shares
issued and outstanding, respectively

9

9

9

Additional paid-in-capital

7,529

37,943

30,734

Retained earnings

2,382,767

2,113,735

2,065,984

Accumulated other comprehensive loss

(37,382

)

(39,147

)

(50,169

)

Total Shareholders' Equity

2,352,923

2,112,540

2,046,558

Total Liabilities and Shareholders' Equity

$

4,485,783

$

4,111,209

$

4,109,656

URBAN OUTFITTERS, INC.

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)

Nine Months Ended

October 31,

2024

2023

Cash flows from operating activities:

Net income

$

282,161

$

239,923

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

86,031

75,286

Non-cash lease expense

162,466

151,413

Provision for deferred income taxes

3,335

33,660

Share-based compensation expense

23,366

23,245

Amortization of tax credit investment

12,872

11,929

Store impairment and lease abandonment charges

4,601

1,392

Loss on disposition of property and equipment, net

1,553

146

Changes in assets and liabilities:

Receivables

(29,682

)

(7,233

)

Inventory

(242,190

)

(135,216

)

Prepaid expenses and other assets

(52,548

)

(74,957

)

Payables, accrued expenses and other liabilities

113,773

138,735

Operating lease liabilities

(183,376

)

(178,084

)

Net cash provided by operating activities

182,362

280,239

Cash flows from investing activities:

Cash paid for property and equipment

(144,052

)

(151,037

)

Cash paid for marketable securities

(267,276

)

(335,508

)

Sales and maturities of marketable securities

309,178

242,847

Initial cash payment for tax credit investment

-

(20,000

)

Net cash used in investing activities

(102,150

)

(263,698

)

Cash flows from financing activities:

Proceeds from the exercise of stock options

851

594

Share repurchases related to share repurchase program

(52,262

)

-

Share repurchases related to taxes for share-based awards

(15,264

)

(8,353

)

Tax credit investment liability payments

(6,220

)

(3,007

)

Net cash used in financing activities

(72,895

)

(10,766

)

Effect of exchange rate changes on cash and cash equivalents

(3,122

)

(798

)

Increase in cash and cash equivalents

4,195

4,977

Cash and cash equivalents at beginning of period

178,321

201,260

Cash and cash equivalents at end of period

$

182,516

$

206,237