Urban Outfitters’ growing popularity with hipster shoppers led to earnings and sales growth for the fourth quarter of 72.2 and 42.9 percent, respectively. Higher merchandise margins, increases in customer transactions and strength in catalogue and Internet-based sales bolstered results as the company had double-digit profitability increases in each of its three brands in the quarter. Year-end results also were impressive with profits that doubled, year-over-year.
“Fiscal 2005 was far and away the finest year in the company’s history,” said Urban chairman and president Richard Hayne on a post-earnings conference call with investors and analysts.
But that doesn’t mean Urban is resting on its laurels. The 25-year-old specialty retailer is ramping up sales by better serving its core demographic as well as reaching new consumers via stores in shopping malls, historically nontraditional locales for the company.
Urban, which operates the Urban Outfitters, Anthropologie and Free People brands, plans to add 30 to 32 stores in 2005 — on top of the 28 opened in 2004 — as well as open a new distribution center in South Carolina, which is planned to be four times larger than its existing one. Furthermore, above-average sales productivity at its roughly 20 mall-based stores is contributing to the firm’s belief that a mix of mall-based and on-street locations is the right combination for continued momentum.
Meanwhile, the company also is focused on making accessories a bigger part of its overall business, beefing up Web site-specific merchandise offerings and expanding its profitable Free People wholesale business, which experienced a sales increase of 100 percent in the quarter. The retailer is looking to open three more stand-alone Free People shops, which is in addition to store-within-store formats already in place at several Bloomingdale’s and Nordstrom stores.
Urban’s robust spike in fourth-quarter earnings was on top of same-store sales in the period that advanced 13 percent, including a 58 percent surge in comps at Free People. Hayne said women’s apparel and accessories had the biggest comp-store sales increases in the quarter.
For the three months ended Jan. 31, the Philadelphia-based company posted a profit of $31.7 million, or 38 cents a diluted share, compared with $18.4 million, or 22 cents, a year ago. Analysts had been calling for a profit of 37 cents. The company is reviewing the way it previously has accounted for store leases, but said it does not expect any possible adjustments to have a significant impact on prior earnings.
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