Fashion is back.
At least according to Urban Outfitters Inc.’s chief executive officer Richard Hayne, who reported the company had a 15.1 percent gain in second-quarter profits late Tuesday.
The ceo recalled that he saw more fashion excitement in spring than he’d seen in years but wasn’t ready then to call the resurgence.
That’s changed and he told Wall Street analysts on a conference call: “I repeat those comments again as we move into fall, except I believe the change is now upon us. Our customers are adapting to new looks and silhouettes as we speak. As in all such cycles, some customers and brands adopt newness faster than others, but the fact is, there’s currently an abundance of exciting fashion happening and this is very good for our brands, for [our company] and for our industry as a whole.”
Questioned by analysts, Hayne doubled down and said, “This is a fashion change that’s happening. And my experience is once it starts to happen, there’s not much that stops it.” The ceo also reaffirmed his belief in brick-and-mortar and said the retail market was due for a downsizing.
“There’s no question, there are too many stores in North America and we start to see some of those stores going away; some of our competitors are closing stores at a reasonable rate, and there was just Macy’s announcement of closing stores,” he said. “So, I think that you will continue to see a lot of stores close and go away, I think that’s a positive thing for the industry and positive thing for all the, all the people including the ones that are closing the stores.”
He said the concept of a store was still valid, but that there would ultimately be fewer, larger stores that deliver more of an experience.
Urban Outfitters might already be seeing some lift, from the fashion changes in the market and the experiences it offers.
The company’s net income increased 15.1 percent to $76.9 million, or 66 cents a share, from $66.8 million, or 52 cents, a year earlier.
Earnings per share came in 10 cents ahead of the 56 cents analysts had the company pegged for, helping drive Urban’s stock up 10.1 percent to $34.40 in after-hours trading.
Revenues for the three months ended July 31 advanced 2.7 percent to $890.6 million from $867.5 million. Comparable sales rose 1 percent with a 5 percent gain at Urban Outfitters, a flat performance at Free People and a 3 percent fall at the company’s Anthropologie Group.
The results were driven by positive comp sales and what Hayne described as “substantial improvement in merchandise margins.”
The company said its gross profit margin improved 178 basis points, to 38.45 percent of sales, and improvement that was “primarily driven by improvement in the Urban Outfitters and Anthropologie Group brands maintained margins, with both brands delivering higher initial margins and lower merchandise markdowns compared to the prior year.”