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Urban Outfitters Profits Leap

Urban Outfitters, which operates the Anthropologie, Free People, Leifsdottir, Terrain and Urban Outfitters brands, reported record first-quarter earnings.

Glen Senk

Urban Outfitters, which operates the Anthropologie, Free People, Leifsdottir, Terrain and Urban Outfitters brands, on Thursday reported record first-quarter earnings of $53 million. Net income was 31 cents a diluted share, a 72 percent increase over last year’s 18 cents, when earnings totaled $31 million.

Sales for the three months ended April 30 rose to $480 million, a 25 percent increase from $385 million in the same period last year. Comparable retail segment sales, including the direct-to-consumer channel, rose 16 percent and comp-store sales increased 11 percent for the first quarter. Comparable retail segment sales increased 22 percent at Anthropologie, 25 percent at Free People, 22 percent at Terrain and 9 percent at Urban Outfitters. Direct-to-consumer sales soared 42 percent and wholesale sales rose 4 percent for the quarter.

“We achieved record sales and earnings, but to do so within the greater context of our longer-term goals of investing in store productivity, e-commerce penetration, international expansion and new brands, is even more satisfying,” Glen Senk, chief executive officer of Urban Outfitters Inc., said during a conference call with retail analysts. “Our 11 percent positive comp-store sales isn’t just about fashion. It’s about strategy and execution. It’s the way we manage the supply chain. We’re different — a more controlled, more nimble company.”

Stores unveiled in 2009 are among the best-performing new units with higher sales-per-square-foot averages, Senk said. A cross-channel database that’s in the works will unlock myriad opportunities. “Just imagine the potential, once we know who’s shopping and what motivates them to shop,” Senk said. “We expect to mine this information to better serve customers.”

Gross profit margins in the first quarter improved by 459 basis points compared with the same period last year due to better initial margins, lower markdown rates and leveraging of store occupancy expenses driven by positive comps during the quarter.

“We’re unwilling to set a limit to [online] penetration,” Senk said. The 42 percent increase in direct to consumer “highlights a continuing secular shift in the way our customer is shopping. The results were driven by more than 24 million Web visits.”

Senk was bullish about international expansion. “I used to think international sales could be 25 percent of our business,” he said. “We could find out over time that it’s 50 percent. We no longer view ourselves as a North American retailer. The European business is becoming increasingly important to the company.”

Anthropologie opened a second London store and launched anthropologie.eu. The company is shipping Free People overseas and opened El Corte Inglés, Spain’s largest department store, and other accounts. “We’re doing due diligence in the Far East,” Senk said.

Leifsdottir’s first store bows next year along with shoes and handbags. The previously announced wedding concept is due next year. Urban will test or acquire one, two or even three brands in the next several years, Senk said. There’s also room for growth at Anthropologie. “Freestanding stores are possible in the shoe and accessory area,” said Senk, “but there are no firm plans.”

To maintain Urban’s culture, Senk said he treats the company as “a bunch of little businesses” and tries to eliminate or minimize bureaucracy.