Urban Outfitters Inc. is going bigger, deeper and into new areas to jump-start its in-store experiences.
After a third quarter that was described by chief executive officer Richard Hayne as “subpar” — and an equally bruising fourth quarter — the group that owns the Urban Outfitters, Anthropologie and Free People chains is scurrying to inject more excitement into its stores by offering deeper assortments in areas such as accessories and beauty and more services.
Chief financial officer Frank Conforti told Wall Street analysts at Wednesday’s Bank of America consumer and retail conference about the “ultimate experience” Anthropologie stores with 20,000 square feet to 30,000 square feet that the company is testing.
The size of an existing unit in Portland, Ore. was recently doubled to create a large footprint store. Apparel is augmented by limited-edition capsules; there are more than 300 shoe styles; upward of 800 beauty products; activewear designed for the mat, the track and the coffee shop, plus sneakers and wearable technology; intimate apparel; jewelry, including items from local artisans; a home area with a full-scale living room, dining room and bedroom displays, and a design center with specialists to offer advice. Beauty experts are also found in the Portland store.
Anthropologie has opened 70 beauty shops in North American stores as a separate test. “We’re launching much bigger beauty assortments,” said Conforti. “If we’re going to have a beauty shop, we need to have beauty expertise in stores. The same goes for a shoe section and the same level of service is expected for home.”
The prominent Without Walls activewear shops at Urban Outfitters stores, with product that includes the private-label Without Walls brand, may be integrated into men’s and women’s general apparel in some stores.
“Anthropologie has its own ath-leisure line,” Conforti said. “I would call it more leisure than ath-. Anthropologie has started to see gains in the last several months. You’ll see shops now for that line and trend.”
“We’ve done a lot of things to make the shopping experience more enjoyable,” Conforti added. “Each brand [Urban Outfitters, Anthropologie and Free People] was built on the idea of the treasure hunt. For example, dresses were scattered throughout the store.” Today’s consumer doesn’t want to sift through lots of merchandise to come across a keeper. “They want to see a dress shop, an area for intimates, etc.,” he said. “We’ve put more of a shop-in-shop approach into our stores.”
Anthropologie is leaning hard into the other businesses. “It’s not just a destination for women’s apparel,” he said. “The early read on the store we just launched in Portland is fantastic. This is new — it’s growth.”
Urban Outfitters has a history of quickly incubating and launching new concepts. BHLDN, bridal attire, bowed with a shop in Houston in 2011, followed by a unit in Chicago. BHLDN is sold at six Anthropologie stores and through events held at the chain. When Urban Outfitters in 2008 acquired J. Franklin Styer Nurseries, which it renamed Terrain, Hayne predicted it would become one of the premier garden centers in the country. There are two Terrain stores in Westport, Conn., and Glen Mills, Pa., with the majority of sales done online. Outsize Urban Outfitters concept stores in Brooklyn and Manhattan contain elements such as hair salons, cafés and record shops.
“We’re excited about our international expansion,” Conforti said. “They are concessions or licensing agreements or our own brand stores or partnerships. David McCreight, [ceo of the Anthropologie Group, who recently also became president of Urban Outfitters Inc.] is working on that fast and furious and we’ll get after that in a meaningful way in the next few years.”
McCreight is focused on expanding all of the brands into geographic areas where the retailer has little or no presence.
Anthropologie’s comps declined 2 percent in the fourth quarter, but there has been some improvement in women’s apparel, particularly dresses. “We increased the penetration of our own branded product,” Conforti said. “They’re working through other categories in women’s apparel. There are still areas that aren’t working as well as we’d like. Tops will be next.”
While women’s apparel is doing well at Urban Outfitters, men’s has racked up more than a year of negative comps. “In the past few weeks we’ve started to see that business turn,” Conforti said. “Men’s isn’t positive yet, but we see improvement.”
Free People, which had a 2 percent comp-store sales increase in the fourth quarter, could fall to a low single-digit negative territory in the first quarter, Conforti said. The size of Free People stores is growing to 3,500 square feet to 4,000 square feet. “When Free People launched, it was a relatively small store because the assortment was narrow,” Conforti said, adding that 12 stores will open this year, the majority in the larger format.
Intimate apparel, which was introduced at Free People, has been a bright spot for Anthropologie.
“Urban Outfitters finished the fourth quarter with a negative 3 percent comp and while it may sound a little weird, we’re OK with that,” Conforti said. “Markdowns drove the negative comps. We were able to have a regular-priced comp in the midsingle digits and we added operating profit.”
Conforti stressed that the performance of Urban Outfitters women’s apparel wasn’t a result of markdowns. Nonetheless, he acknowledged that a certain apparel malaise has been plaguing the industry. “There hasn’t been a new silhouette for some time. It’s skinny jeans and big over little. She’s already got that in her closet and she’s uninspired to buy something new.
“There’s often a direct correlation between fashion and price,” he added. “If there’s no new trend, she’s bored, but when the fashion differentiation is there, the price is less important.”
The retailer has been able to improve initial markup and profitability with company-wide savings on lower cotton and fuel prices. It consolidated a number of factories, with more fabric sourcing being done in South America, Southern California and Turkey for certain products that require a fast turn. “We worked on building speed into our supply chain,” Conforti said. “We were able to take a full week out of our supply chain last year.”