Urban Outfitters Inc. is beginning to see some positive signs in its namesake business.
But the retailer still has work to do. Fourth-quarter net income declined 9 percent to $80 million from $88 million in the 2014 quarter, and 18 percent to $232 million for the year ending Jan. 15, compared with $282 million in 2014.
Earnings per diluted share were 60 cents in the fourth quarter, beating analysts estimates of 58 cents a diluted share. EPS for the year came in at $1.68.
Fourth-quarter sales rose to $1.01 billion, a 12 percent increase over the prior-year period. For the year, total company net sales increased 8 percent to a record $3.3 billion from $3.08 billion in 2014. Comparable retail segment net sales advanced 2 percent and wholesale segment net sales increased 27 percent in the fourth quarter.
By business, comparable retail segment net sales increased 18 percent at Free People, 6 percent at Anthropologie Group and 4 percent at Urban Outfitters, while wholesale segment net sales rose 21 percent.
Richard Hayne, chairman and chief executive officer of Urban Outfitters Inc., said double-digit sales gains in Web and mobile full-priced selling contributed to a strong start to fiscal 2016. But consumer demand has shifted from higher to lower-margin categories, so to continue operating at profitable levels, the business must avoid excessive markdowns.
The Urban Outfitters brand reported a 10 percent gain in net sales to $438.4 million in the fourth quarter from $398 million in last year’s fourth quarter. For the year, the division logged a 1.47 percent increase in sales to $1.38 billion, from $1.36 billion in 2014.
“The Urban brand is in a much better position than this time last year,” said Tedford Marlow, ceo of Urban Outfitters Group. “We’re still a work in progress. We’re beginning to see the fruits of our labor. We realized quarter-to-quarter improvement, culminating in positive comp performance in the fourth quarter. While it’s true that our comparisons were easier in the back half of the year than the front half, we have seen improving rhythm. I have cautious optimism for 2016, versus a high level of concern at this time last year.”
The poor performance of the Urban brand in the third quarter was the primary reason for the company’s gross profit rate decline of 295 basis points in the three months ending Oct. 31 and 233 basis points in the nine months ending Oct. 31, driven by Urban’s lower initial merchandise markup followed by higher markdowns.
Elsewhere, “Free People delivered another excellent quarter,” Hayne said, adding that the division posted record fourth-quarter results, double-digit sales gains and record operating profits with wholesale revenue growth 21 percent ahead. Free People’s newest category introduction, footwear, gained significant traction, with Nordstrom, Bloomingdale’s, Galeries Lafayette, Isetan and the Bay among the retailers selling the product.
Anthropologie also posted record sales and profits, according to Hayne, with 14 “highly profitable” new stores generating strong consumer demand. BHLDN, an Anthropologie Group brand, “had a breakout quarter and year in each of its distribution channels with double-digit sales gains,” Hayne said. A BHLDN shop-in-shop is slated to open in Atlanta and a pop-up shop will be unveiled in London on Kings Road. “The power of the Anthropologie brand is a testament to the multicategory strategy,” Hayne said, adding that the division is focused on expanding its home business. Anthropologie dropped a home-only catalogue last year and has several planned for 2015.