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Profits, Shares Soar At Urban Outfitters

NEW YORK — With tiered skirts, T-shirt and cargo pants must-have items for today’s younger women, Urban Outfitters Inc. delivered double-digit profits and sales increases in both its fiscal fourth quarter and year and watched its stock...

NEW YORK — With tiered skirts, T-shirt and cargo pants must-have items for today’s younger women, Urban Outfitters Inc. delivered double-digit profits and sales increases in both its fiscal fourth quarter and year and watched its stock skyrocket at a similar pace.

Furthermore, the Philadelphia-based specialty retailer indicated spring sales are expected to blossom with the weather.

With one analyst on a morning conference call describing the results as “simply fantastic,” investors drove up shares of UO $3.82, or 20.8 percent, to close at $22.22 in Nasdaq trading Thursday. UO benefitted not only from its own strong showing but from the overall markets’ best performance since the start of the year. The Dow Jones Industrial Average rose 269.68 points, or 3.6 percent, to 7,821.75, and the Standard & Poor’s Retail Index picked up 11.76 points, or 4.7 percent, to end the day at 260.74 as diplomatic maneuvering assuaged fears of the possibility of war in Iraq.

UO — which operates 93 stores under the Urban Retail, Anthropologie and Free People nameplates — said for the three months ended Jan. 31, income soared 45.2 percent to $8.4 million, or 42 cents, surging past Wall Street’s estimates of 38 cents. In the corresponding year-ago period, UO reported income of $5.8 million, or 33 cents.

Sales for the quarter climbed 13.2 percent to $117.6 million over $103.9 million. Total company comparable-store sales rose 1 percent, including a 4 percent increase at Urban Retail, offset by a 3 percent decline at Anthropologie. Direct-to-consumer sales increased 18.3 percent to $9.4 million, while sales at its wholesale division Free People fell 11.9 percent to $2.6 million.

“All three brands, including direct, showed considerable improvement in margins due to better initial markups as a result of better sourcing and greater buying leverage,” Richard Hayne, chairman and president of UO, said on the call. Also contributing to the bottom line were fewer markdowns during the year due to improved inventory management.

As has been their habit, company executives were mute about financial goals and merchandise plans for the current year, but said they expect to achieve a modest single-digit increase in comps this year as well as potential upside on gross profit margins. “Results this quarter are encouraging and warm-weather stores are producing sales that are exceeding plan,” Hayne said, adding that the goal this year is to open 20 to 24 new stores, including Free People units.

“We are pleased, but not complacent,” Hayne said in a statement. “We have a lot of room to post even better results this year.”

Glen Senk, president of Anthropologie, said on the call that women’s apparel and accessories were solid in the quarter, but the home business was tough. “I am doing all I can to look at each classification of product to make sure we are addressing all opportunities,” he said. “I don’t see a lot of strong trends in the home business, unlike women’s and accessories.”

The company also plans to increase its marketing efforts to include a small catalog drop this month for Urban Retail and has slated another drop in mid-year.

For the year, income surged 82.7 percent to $27.4 million, or $1.41 a diluted share, versus income in 2001 of $15 million, or 86 cents. Sales for the 12 months fattened 21.1 percent to $422.8 million from $349 million. Comps gained 9 percent, consisting of a 7 percent rise at Urban and a 12 percent increase at Anthropologie. Direct-to-consumer sales grew 27.9 percent to $31.7 million, while Free People sales were flat at $18.3 million.

AEROPOSTALE

Aeropostale closed out its first full year as a public company with solid results.

For the three months ended Feb. 1, income climbed 27.1 percent to $17.7 million, or 46 cents a diluted share, compared with income in the year-ago quarter of $13.9 million, or 38 cents, including a noncash charge related to equity-based compensation. Excluding the charge, prior-year income was $16.3 million, or 44 cents.

Sales sprouted 30.6 percent to $206.4 million over $158 million and inched up 0.3 percent on a comparable-store basis. By merchandise category, accessories were up in the high-single-digit range, followed by women’s comps, which were up slightly, offset by a low-single-digit decrease in its men’s business. Gross margin dropped to 30.7 percent of sales from 34.8 percent due to increased promotions and a resulting 470 basis point decline in merchandise margins.

“The short-term objectives for sales, profits and inventory control also demonstrates the high flexibility of our store model,” Julian R. Geiger, chairman and chief executive, said on a conference call. “We are benefiting from a strong brand destination status, being trend right and offering a highly competitive value proposition for our consumers.”

Asked about the effects of the recent resurgence of Old Navy, Geiger said Aeropostale does not feel pressure from any single retailer: “We are confident about the niche we occupy and feel we can sustain growth against any competitive threats.”

In fiscal 2002, the company reported income increased 18 percent to $31.3 million, or 82 cents a diluted share, compared with income in 2001 of $26.5 million, or 71 cents. Sales for the 12 months climbed to $550.9 million, a 36.2 percent increase over $404.4 million. Comps were up 6.6 percent.

The company, based here, also reiterated its earnings guidance for the year. For the 12 months, it said it believes it is likely to report earnings per share in the range of $1.06 to $1.10 on sales of $670 million to $674 million. By quarter, it said expects the first and second quarters to result in an EPS loss of 2 cents to break even, rising to between 46 and 48 cents in the third quarter, and finally 61 to 63 cents in the fourth.