By and  on March 7, 2011

Faced with consumers’ shifting spending from apparel to other categories, inclement weather in January and a new value-added tax in the U.K. that put a damper on shopping, Urban Outfitters Inc.’s fourth-quarter profits fell shy of analysts’ estimates, and year-ago levels, as same-store sales and gross margin trended downward.

For the three months ended Jan. 31, the Philadelphia-based owner of Anthropologie, Free People and its namesake brand saw net income erode 3.1 percent to $75.2 million, or 45 cents a diluted share, from $77.7 million, also 45 cents, in the year-ago period. The consensus estimate among analysts polled by Yahoo Finance was for earnings per share of 52 cents.

Net sales rose 13.6 percent to $668.4 million from $588.5 million. Same-store sales, not including direct-to-consumer channels, fell 2 percent. Including direct channels, comparable-store sales were up 2 percent. Gross margin fell to 39.7 percent of sales from 41.7 percent in the 2009 quarter.

By brand, net sales at Urban Outfitters rose 13.3 percent to $321.8 million while Anthropologie’s ascended 10 percent to $283.4 million. Free People was up 35.2 percent to $58.9 million while other brands picked up 38.4 percent to $4.3 million.

Full-year comparisons were more favorable. Net income grew 24.1 percent to $273 million, or $1.60 a diluted share, from $219.9 million, or $1.28, in 2009. Net sales were up 17.4 percent, to $2.27 billion from $1.94 billion, as gross margin increased to 41.2 percent of sales from 40.6 percent in 2009. Results were reported after the markets closed Monday.

Glen Senk, chief executive officer of Urban, cited the 17 percent sales growth and 22 percent operating income growth in the quarter and said the company also reached its goal of growing profits faster than sales. Areas where the company fell short included more aggressive leveraging of Urban’s flexible assortments in home, beauty and footwear. “We’ll continue to distort our investment in nonapparel categories,” he said.

“Free People clearly hit the bull’s-eye in the fourth quarter,” Senk said. “Urban and Anthropologie will take learnings from Free People.” Senk said it could take three months, six months or even longer for fashion to gain momentum.

Urban and Anthropologie each surpassed the $1 billion mark in revenue for the year. Notwithstanding macroeconomic forces and looming fiber price increases, Senk was bullish about the company’s prospects. “We’ll double our North American store count with our existing brands,” he said. “We’re growing our portfolio of new concepts to fuel future expansion. The direct-to-consumer channel is on track to double its size in three years.”

Capital expenditure for fiscal 2012 will be $175 million to $195 million. The company in 2012 plans to open 50 to 55 stores, driven by Free People and aggressive investment in the international growth of Urban Outfitters and Anthropologie. The firm is preparing for its first brick-and-mortar launch in the Asia-Pacific region in 2013.

The Valentine’s Day launch of Bhldn, a wedding concept, was Urban’s most successful launch ever, Senk said, adding: “It’s exceeded our most optimistic expectations.” The first Bhldn store will open in Houston in early fall, followed by a Chicago flagship after the holiday season.

Urban Outfitters shares fell 1.3 percent to $37.99 prior to the closing bell, but were off more than 10 percent, to $34.15, in the hour after the announcement.

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