Weak apparel sales and a decline in gross profit margins contributed to a less-than-stellar fourth quarter and year for Urban Outfitters Inc.

This story first appeared in the March 8, 2016 issue of WWD. Subscribe Today.

Philadelphia-based Urban Outfitters on Monday said net income declined 7.2 percent to $73 million from $80.2 million in the 2014 fourth quarter ended Jan. 31, and fell 8 percent to $224 million from $323.4 million for the full year. Earnings per diluted share were 61 cents in the fourth quarter and $1.78 for the year ended Jan. 31.

Total net sales for the fourth quarter were flat at $1.01 billion compared with the same quarter last year. Comparable retail segment net sales, which include comparable direct-to-consumer channel, decreased 2 percent. Comparable retail segment net sales increased 2 percent at Free People. The Anthropologie Group and Urban Outfitters both saw net sales declines, the former by 2 percent and the latter, 3 percent.

Wholesale segment net sales increased 29 percent, partially due to delayed shipments from the third quarter carrying over into the fourth quarter.

For the year ended Jan. 31, total net sales increased 4 percent to $3.4 billion from $2.04 billion in the prior year. Comparable retail segment net sales increased 2 percent, while wholesale segment net sales rose 15 percent.

While apparel sales underperformed during the fourth quarter, Richard A. Hayne, chief executive officer, said he was nonetheless pleased with the merchandise margin improvement delivered by the brands. “In addition, our expansion categories performed above our expectations and continue to give us confidence in our future growth opportunities,” Hayne said.

For the three months ended Jan. 31, the gross profit rate fell by 12 basis points compared with last year’s fourth quarter. The decline in gross profit rate was driven by about 100 basis points of deleverage in delivery and fulfillment center expense. Gross margin rate was also impacted by deleverage related to higher store occupancy costs, store impairment charges and the negative impact of foreign currency. These decreases were almost entirely offset by approximately 200 basis points of improvement in maintained margins, mostly driven by significant improvement in the Urban Outfitters brand markdown rate.

The gross profit rate for the year declined by 47 basis points compared to the prior year’s same period.

In summary, for the year ended Jan. 31, 2016, the Company repurchased and subsequently retired a total of 15 million shares at a total cost of $465.3 million under both authorizations.

Urban Outfitters in July entered into a five-year $400 million asset-based revolving credit facility with a group of lenders, with J.P. Morgan Chase Bank as administrative agent. The new credit facility replaced the existing $175 million line of credit facility with Wells Fargo Bank, National Association, which was set to expire in March 2019. As of Jan. 31, borrowings under the new revolving credit facility totaled $150 million.

During the year ended Jan. 31, the retailer opened 31 new stores including, 14 Anthropologie Group stores, 13 Free People units and four Urban Outfitters stores. The retailer closed five stores, including two Urban Outfitters stores, two Anthropologie Group stores and one Free People unit.