Urban Outfitters Inc. on Wednesday reported a 9.8 percent drop in net income for the first quarter ended April 30 to $29.6 million from $34.8 million in the year-earlier period.
The retailer said earnings per share were flat at 25 cents. Net sales for the first quarter rose 3 percent to a record $763 million, from $739 million in the same quarter last year.
The retailer beat analyst estimates of a 0.5 percent comparable retail segment net sales decline, as the metric, which includes the direct-to-consumer channel, rose 1 percent. Comparable retail segment net sales increased 2 percent at Urban Outfitters, were flat at the Anthropologie Group and fell 2 percent at Free People, while wholesale segment net sales increased 16 percent.
The retailer said it plans to open 24 new stores for the year. In the second quarter, six new Free People stores and two Anthropologie units are planned for North America and one Urban Outfitters is slated to open in Europe.
David McCreight, president and chief executive officer of the Anthropologie Group, cited strong double-digit growth in home, beauty, intimates, Terrain and BHLDN. New expanded retail concepts with 20,000 to 30,000 square feet bowed in Portland, Ore., and Newport Beach, Calif., featuring the fullest expression of the brand to-date, he said.
The locations offer an expansive home selection with full-scale rooms of decor, dedicated shops for beauty, intimates and shoes and enlarged assortments of apparel and accessories, including jewelry. Additional features may include BHLDN and Terrain, a dedicated petites shop and a dining experience.
“With broad weakness in the apparel category, we believe we have an opportunity to improve the appeal of our assortment,” McCreight said, “by shortening the design calendar and improving product accuracy.” He also stressed key looks, better fabric variety, better decoration and an improved edit.
McCreight noted the quarter saw the most complete example of the concept-to-customer approach as applied to dresses. “We created dress shops in 75 locations, created digital stores and a dress catalogue.” The efforts were rewarded with double-digit regular-price comps, he said. McCreight said the expanded categories represent “tremendous opportunity for Anthropologie to capture spend from existing customers.”
”To reach our goal of doubling Anthropologie Group revenue, we need to bring more products to her,” he said. “We need the momentum of all of the categories and brand expressions. BHLDN and Terrain are delivering a remarkably engaging experience.”
McCreight said beauty shops will expand to more than 100 stores this summer.
“Units per order and average order continue to climb,” he said. “We have plans to open four or more of these locations over the next 12 months.”
Richard Hayne, chairman, said the response to the core Free People apparel assortment was disappointing. “We played Q1 too safe,” he said. “Inventories grew and additional markdowns had to be taken.”
In terms of Urban Outfitters, the rebuilding effort started two-and-a-half years ago and is starting to bear fruit, driving better merchandise margins. Direct-to-consumer sales for the brand were up by double digits.
Hayne said home and dining out are capturing share of wallet of the Urban consumer. “Because of price deflation, the spend on apparel is down on a year over year basis. It’s important for expanded stores to house non-apparel products.
“I think our customer is in relatively good shape,” Hayne said. “It’s more of a supply issue in apparel. We [the U.S.] is over-stored and overstocked. We have more retail space per capita than our European counterparts. Many retailers try to offer ever-larger price promotions, and when that’s not enough, they start closing stores.”
Hayne said Urban has invested heavily to make its shopping experience compelling. “The larger format stores is how we’ll win through creativity,” he said. “Most of our offerings consist of unique products and our concepts have always been about an eclectic mix of multiple categories.”