Urban Profits Climb, Eyes Overseas Markets

Urban Outfitters Inc. on Monday reported that net income for the third quarter rose 17.2 percent to $73.1 million.

Urban Outfitters Inc. on Monday reported that net income for the third quarter rose 17.2 percent to $73.1 million, or 43 cents a diluted share, from $62.4 million, or 36 cents, in the comparable period in 2009. EPS exceeded analysts’ estimates by 1 cent.

This story first appeared in the November 16, 2010 issue of WWD.  Subscribe Today.

In the three months ended Oct. 31, net sales grew 13.4 percent to $573.6 million from $505.9 million, with direct-to-consumer volume climbing 32.5 percent to $105.7 million and sales in stores rising 9.6 percent to $433.4 million. Same-store sales grew 1 percent, while comparable revenues, including direct-to-consumer channels, were up 6 percent. Comps at Urban Outfitters and Anthropologie both grew 5 percent, while Free People’s same-store sales jumped 29 percent. Gross margin descended 39 basis points to 41.4 percent of sales from 41.5 percent.

Glen Senk, chief executive officer of Urban Outfitters, was bullish on a number of fronts. “We have an opportunity to more than double our North American store count with our existing brands,” he said. From 13 new stores this year and 16 in 2011, the company plans to open 50 to 55 units in 2012.

“We’re laying the groundwork for more accelerated expansion in Europe,” Senk said. “We opened our first distribution center in Europe. We are in a due diligence phase” of looking at Japan, he said. “We’re looking at Japan as the entry point and our gateway to other Asian markets. All three major brands [Urban, Anthropologie and Free People] have an opportunity there. It’s likely we’ll go first with Anthropologie, but the others will go too.”

Senk revealed that there’s a direct-to-consumer business in Latin America. “We haven’t invested in bricks and mortar yet, but we are very encouraged that we’ve been accepted by the consumer.”

The retailer is rushing to complete its new two-level, 32,000-square-foot Urban Outfitters store on Fifth Avenue and 43rd Street in time for the holidays. Urban’s wedding concept — Beholden — will launch in the third quarter of 2011 in an as yet undisclosed location. The store will sell a wide array of products. “It will be a community for brides,” Senk said.

One challenge for Urban has been what Senk called “a major fashion shift.” Ultimately, “fashion cycles are good for our business,” he said. “We’re an early-adopter merchant selling to early-adopter customers. The customer may pull back on spending during a period of fashion transition, but we have tools and a more rigorous approach to managing cycles.”