Urban Outfitters Inc. is on the rise — especially online.
The teen retailer, which includes the Anthropologie Group, Free People and a food-and-beverage business, reported fourth-quarter earnings that topped analysts’ expectations Tuesday afternoon.
“The fourth quarter closed what was an incredibly successful year for [Urban] and all of our brands,” Richard Haynes, chief executive officer of Urban Outfitters, said in a press release.
Net income for the three months ending Jan. 31 increased to $86.4 million from only $1.3 million a year earlier. Total company sales also rose 3.7 percent to $1.13 billion from $1.08 billion.
The biggest growth driver was the company’s digital business, which had double-digit growth and pushed the comparable retail segment sales up 3 percent. In fact, Urban had 8.3 million followers on Instagram at the end of the quarter, now up to 8.4 million.
“The customer is evolving and becoming more digitally innovative,” Haynes said on the conference call Tuesday evening. “The customer is finding most of their brands online and through social media and they want quick access and they want to be rewarded for their loyalty.”
However, the gains were offset by negative same-store sales in brick-and-mortar locations. Meanwhile, sales in the wholesale channel rose 3 percent during the quarter.
Urban Outfitters’ stock, which closed up 0.5 percent to $30.35 in regular trading, advanced an additional 2 percent after hours, and then turned negative by more than 5 percent.
Some investors continue to worry about the company after sales at all three brands slowed in January, compared with November and December, especially at Anthropologie.
In addition, Haynes said same-store sales for the year are expected to be flat or slightly negative.
“Slight being the key word there,” he said.
He credited the decline in store traffic to a combination of weather issues in North America and political issues like Brexit in Europe. Still, he said the declines will likely subside this year.
“But we don’t have any better crystal ball than anyone else out there,” he added.
Further arousing investor fears is the fact that all three brands, Haynes said, will remain “brutally promotional” in the next six to nine months, especially around 2019’s holiday season.
“That will only subside when a lot more stores go out of business and the competition lessens,” he said.
The women’s apparel and accessories categories, meanwhile, had growth during the quarter, but some critics expressed concern about the overall assortment across all three brands.
“We know all brands make mistakes in their spring transition assortments,” Haynes said, but added that there are “plenty of winners.”
“Probably we offered some of the spring assortment a little too early,” Haynes said, referring to all three brands. “We own it. The weather across the country has been particularly negative in inducing people to be interested in buying spring products.”
Even so, he said he’s “100 percent convinced” that comps will turn positive later this year.
“What I’m excited about right now in women’s apparel, just about every iteration of bottoms has tremendous potential right now,” Haynes said. “I’m also excited about dresses and I think it’s going to do well for the spring season.
“Double-digit gains in jackets and outerwear products is a really clear sign that [the customer is] still responding to our fall lines, because literally it’s freezing outside,” Haynes added.
The company also said it will stop reporting monthly sales reports, instead focusing on its quarterly results, and plans to open 24 retail locations this year, up from just 18 last year. That includes at least six internationally, such as a recent Urban Outfitters store in Barcelona and an upcoming store in Tel Aviv, Israel.
The company will also close 13 stores in the coming year, out of the more than 600 in the company’s portfolio.
Janine Stichter, equity analyst at Jefferies, was more optimistic than some other analysts headed into the quarterly update.
She said the company “is capable of maintaining [midsingle-digit] percentage comps over the medium term, supported by a robust fashion cycle, which was likely somewhat less meaningful during the holiday gift-giving season in the fourth [quarter], but should become a bigger driver for spring.”
Still, the retailer has not been able to regain its highs from last summer. The company’s stock is down 15.4 percent in the last year.