Urban Outfitters

Urban Outfitters Inc. is slowly starting to recover from earlier losses this year.  

The company, which counts Urban Outfitters, Anthropologie, Free People, Terrain and Bhldn among its brands, in addition to rental subscription service Nuuly and a food and beverage business — reported a $34 million quarterly profit Tuesday afternoon (up from a loss of $138 million three months prior), causing company shares to surge more than 15 percent in after-hours trading.  

I’m pleased to announce Urban [Outfitters] produced solid revenues and profits for the second quarter driven by strength in the digital channel,” Urban Outfitters ceo Richard A. Hayne said in prepared remarks. “Notably, all brands were profitable and [will] enter the fall selling season with lean inventories and positive momentum.” 

For the three-month period ended July 31, total company revenues were down nearly 17 percent to $803 million, from $962 million a year earlier. Urban Outfitters, Anthropologie and Free People all suffered from the coronavirus shutdown earlier this year, but Anthropologie, known for some of its occasion wear, was hit hardest, with revenues for the quarter down from $394 million in the prior-year period to $295 million. Top-line sales at the nameplate brand were nearly $324 million, down from $355 million the same time last year, while Free People’s revenues were $178 million, compared with nearly $206 million in the same quarter of 2019. 

Comparable retail sales across the entire portfolio decreased 13 percent during the period, driven by store closures during part of the quarter and slower traffic when locations started to reopen. But the company’s e-commerce grew by double digits during the same time frame, helping offset losses and resulting in a $34 million profit, though that was down more than 43 percent compared to profits of more than $60 million the same time last year. 

Urban Outfitters credits disciplined inventory control and better-than-expected top-line performance for the gains. The company ended the quarter with a $21.7 million reduction in inventory reserves year-over-year for its retail and wholesale segments. Inventory decreased more than 20 percent during the quarter, or by $88.3 million year-over-year. 

“We want to stay lean [in inventory] because of all the uncertainty around COVID-19,” Hayne said on Tuesday afternoon’s conference call with analysts.

Other bright spots during the quarter included Urban’s women’s apparel, home and intimates categories, as well as FP Movement, Free People’s activewear line, which grew triple digits online during the quarter. The retailer plans to open its first stand-alone FP Movement store this fall in Los Angeles. New digital customers across all three brands also jumped more than 70 percent during the quarter.

Meanwhile, digital marketing expenses grew during the quarter, along with an increase in delivery and logistics expenses because of the company’s increased penetration online. The company ended the quarter with $663 million in cash and equivalents and $120 million in long-term debt. 

Earlier this month, Urban Outfitters announced plans to build an 880,000-square-foot omnichannel distribution center in Kansas for roughly $350 million. The site will support digital growth across all brands. Construction is slated to begin in October and is expected to take roughly four years to complete. 

The company ended the quarter with 624 stores in North America and Europe, or 248 Urban Outfitters locations, 233 Anthropologie stores and 143 Free People locations, along with the related web sites and catalogue businesses. 

“Clearly some shoppers still prefer shopping in stores,” Hayne said on the call. “We’re committed to maintaining or even enlarging our fleet where necessarily.”

Shares of Urban Outfitters, which closed up 2.39 percent to $20.80 apiece Tuesday, are down more than 7 percent year-over-year.

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