URBN Reports Record Q2 Sales

PHILADELPHIA, Aug. 22, 2023 (GLOBE NEWSWIRE) -- Urban Outfitters, Inc. (NASDAQ:URBN), a leading lifestyle products and services company which operates a portfolio of global consumer brands comprised of the Anthropologie Group (Anthropologie and Terrain), Free People Group (Free People and FP Movement), Urban Outfitters, Nuuly and Menus & Venues brands, today announced net income of $104.1 million and earnings per diluted share of $1.10 for the three months ended July 31, 2023. For the six months ended July 31, 2023, net income was $156.9 million and earnings per diluted share were $1.67.

Total Company net sales for the three months ended July 31, 2023, increased 7.5% to a record $1.27 billion. Total Retail segment net sales increased 5.9%, with comparable Retail segment net sales increasing 4.9%. The increase in Retail segment comparable net sales was driven by mid-single-digit positive growth in both retail store sales and digital channel sales. By brand, comparable Retail segment net sales increased 26.9% at the Free People Group and 10.6% at the Anthropologie Group and decreased 14.1% at Urban Outfitters. Wholesale segment net sales decreased 5.2% driven by a 6.5% decrease in Free People Group wholesale sales due to a decrease in sales to department stores, while Urban Outfitters wholesale sales increased by $0.5 million. Nuuly segment net sales increased by $27.0 million driven by an 85% increase in our subscribers versus the end of the prior year's comparable quarter.

For the six months ended July 31, 2023, total Company net sales increased 6.7% to a record $2.39 billion. Total Retail segment net sales increased 5.1%, with comparable Retail segment net sales increasing 4.7%. The increase in Retail segment comparable net sales was driven by mid-single-digit positive growth in both digital channel sales and retail store sales. By brand, comparable Retail segment net sales increased 22.5% at the Free People Group and 11.9% at the Anthropologie Group and decreased 13.7% at Urban Outfitters. Wholesale segment net sales decreased 8.5% driven by a 10.7% decrease in Free People Group wholesale sales due to a decrease in sales to department stores and specialty customers, while Urban Outfitters wholesale sales increased by $1.8 million. Nuuly segment net sales increased by $55.6 million due to an 85% increase in our subscribers versus the end of the prior year's comparable period.

"We are proud to report record second quarter sales that helped drive a 72% increase in EPS," said Richard A. Hayne, Chief Executive Officer. "Also gratifying is that Q2's sales strength has continued to date in Q3," finished Mr. Hayne.

Net sales by brand and segment for the three and six-month periods were as follows:

	Three Months Ended								Six Months Ended
	July 31,								July 31,
	2023				2022				2023				2022
Net sales by brand
Anthropologie Group	$	530,087			$	479,228			$	1,003,727			$	898,905
Urban Outfitters		346,424				396,449				655,132				754,151
Free People Group		331,201				271,403				604,936				517,161
Nuuly		55,793				28,776				107,263				51,625
Menus & Venues		8,690				7,532				14,811				13,480
Total Company	$	1,272,195			$	1,183,388			$	2,385,869			$	2,235,322
Net sales by segment
Retail Segment	$	1,160,089			$	1,095,191			$	2,164,190			$	2,058,626
Wholesale Segment		56,313				59,421				114,416				125,071
Nuuly Segment		55,793				28,776				107,263				51,625
Total Company	$	1,272,195			$	1,183,388			$	2,385,869			$	2,235,322

For the three months ended July 31, 2023, the gross profit rate increased by 416 basis points compared to the three months ended July 31, 2022. Gross profit dollars increased 21.6% to $455.6 million from $374.6 million in the three months ended July 31, 2022. The increase in gross profit rate was primarily due to higher initial merchandise markups and lower merchandise markdowns at all three Retail segment brands. The improvement in initial merchandise markups was primarily driven by lower inbound transportation costs. The increase in gross profit dollars was due to the improved gross profit rate and higher net sales.

For the six months ended July 31, 2023, the gross profit rate increased by 343 basis points compared to the six months ended July 31, 2022. Gross profit dollars increased 18.5% to $826.8 million from $697.9 million in the six months ended July 31, 2022. The increase in gross profit rate was primarily due to higher initial merchandise markups at all three Retail segment brands primarily driven by lower inbound transportation costs. Additionally, the gross profit rate benefited from lower merchandise markdowns at the Anthropologie Group and Free People Group brands. The increase in gross profit dollars was due to the improved gross profit rate and higher net sales.

As of July 31, 2023, total inventory decreased by $111.0 million, or 15.9%, compared to total inventory as of July 31, 2022. Total Retail segment inventory decreased by 14.1% primarily due to improved inventory control supported by a more reliable supply chain. Wholesale segment inventory decreased by 31.6% due to improved inventory control and a reduction in wholesale sales.

For the three months ended July 31, 2023, selling, general and administrative expenses increased by $34.7 million, or 12.0%, compared to the three months ended July 31, 2022, and expressed as a percentage of net sales, deleveraged 103 basis points. For the six months ended July 31, 2023, selling, general and administrative expenses increased by $57.5 million, or 10.2%, compared to the six months ended July 31, 2022, and expressed as a percentage of net sales, deleveraged 81 basis points. The deleverage in selling, general and administrative expenses as a rate to sales for both periods was primarily related to higher incentive-based compensation costs due to improved Company performance and increased marketing and creative expenses to support increased sales and customer growth. The dollar growth in selling, general and administrative expenses for both periods was primarily related to higher compensation costs, including higher incentive-based compensation costs due to improved Company performance, as well as increased marketing and creative expenses to support increased sales and customer growth.

The Company's effective tax rate for the three months ended July 31, 2023 was 23.2%, compared to 28.8% in the prior year period. The Company's effective tax rate for the six months ended July 31, 2023 was 24.5%, compared to 28.8% in the prior year period. The decrease in the effective tax rate for the three and six months ended July 31, 2023 was attributable to the ratio of foreign taxable earnings to global taxable earnings and the favorable impact of general business credits in the current year.

Net income for the three months ended July 31, 2023 was $104.1 million and earnings per diluted share were $1.10. Net income for the six months ended July 31, 2023 was $156.9 million and earnings per diluted share were $1.67.

On August 22, 2017, the Company's Board of Directors authorized the repurchase of 20 million common shares under a share repurchase program; all shares were repurchased and the authorization was completed by the end of June 2022. On June 4, 2019, the Company's Board of Directors authorized the repurchase of 20 million common shares under a new share repurchase program. During the year ended January 31, 2023, the Company repurchased and subsequently retired 4.7 million common shares for approximately $112 million. During the six months ended July 31, 2023, the Company did not repurchase any common shares. As of July 31, 2023, 19.2 million common shares were remaining under the program.

During the six months ended July 31, 2023, the Company opened a total of 16 new retail locations including: 9 Free People Group stores (including 5 FP Movement stores), 4 Urban Outfitters stores, 2 Anthropologie Group stores and 1 Menus & Venues restaurant; and closed 8 retail locations including: 3 Urban Outfitters stores, 3 Anthropologie Group stores, 1 Free People Group store and 1 Menus & Venues restaurant. During the six months ended July 31, 2023, 1 Urban Outfitters franchisee-owned store was opened.

Urban Outfitters, Inc. offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands comprised of 264 Urban Outfitters stores in the United States, Canada and Europe and websites; 237 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 196 Free People Group stores (including 36 FP Movement stores) in the United States, Canada and Europe, catalogs and websites, 11 Menus & Venues restaurants, 7 Urban Outfitters franchisee-owned stores and 2 Anthropologie Group franchisee-owned stores as of July 31, 2023. Free People, FP Movement and Urban Outfitters wholesale sell their products through department and specialty stores worldwide, digital businesses and the Company's Retail segment.

A conference call will be held today to discuss second quarter results and will be webcast at 5:15 pm. ET at: https://edge.media-server.com/mmc/p/d5vy9nre.

This news release is being made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Certain matters contained in this release may contain forward-looking statements. When used in this release, the words "project," "believe," "plan," "will," "anticipate," "expect" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Any one, or all, of the following factors could cause actual financial results to differ materially from those financial results mentioned in the forward-looking statements: overall economic and market conditions (including current levels of inflation) and worldwide political events and the resultant impact on consumer spending patterns and our pricing power, the difficulty in predicting and responding to shifts in fashion trends, changes in the level of competitive pricing and promotional activity and other industry factors, the effects of the implementation of the United Kingdom's withdrawal from membership in the European Union (commonly referred to as "Brexit"), including currency fluctuations, economic conditions and legal or regulatory changes, any effects of war, including geopolitical instability and impacts of the war between Russia and Ukraine and from related sanctions imposed by the United States, the European Union, United Kingdom and others, terrorism and civil unrest, natural disasters, severe or unseasonable weather conditions (including as a result of climate change) or public health crises (such as the coronavirus (COVID-19)), labor shortages and increases in labor costs, raw material costs and transportation costs, availability of suitable retail space for expansion, timing of store openings, risks associated with international expansion, seasonal fluctuations in gross sales, response to new concepts, our ability to integrate acquisitions, risks associated with digital sales, our ability to maintain and expand our digital sales channels, any material disruptions or security breaches with respect to our technology systems, the departure of one or more key senior executives, import risks (including any shortage of transportation capacities or delays at ports), changes to U.S. and foreign trade policies (including the enactment of tariffs, border adjustment taxes or increases in duties or quotas), the closing or disruption of, or any damage to, any of our distribution centers, our ability to protect our intellectual property rights, failure of our manufacturers and third-party vendors to comply with our social compliance program, risks related to environmental, social and governance activities, changes in our effective income tax rate, changes in accounting standards and subjective assumptions, regulatory changes and legal matters and other risks identified in our filings with the Securities and Exchange Commission. The Company disclaims any intent or obligation to update forward-looking statements even if experience or future changes make it clear that actual results may differ materially from any projected results expressed or implied therein.

(Tables follow)

URBAN OUTFITTERS, INC.

Condensed Consolidated Statements of Income

(amounts in thousands, except share and per share data)

(unaudited)

	Three Months Ended								Six Months Ended
	July 31,								July 31,
	2023				2022				2023				2022
Net sales	$	1,272,195			$	1,183,388			$	2,385,869			$	2,235,322
Cost of sales		816,614				808,836				1,559,057				1,537,469
Gross profit		455,581				374,552				826,812				697,853
Selling, general and administrative expenses		323,483				288,734				623,331				565,798
Income from operations		132,098				85,818				203,481				132,055
Other income (loss), net		3,399				(2,262	)			4,418				(4,251	)
Income before income taxes		135,497				83,556				207,899				127,804
Income tax expense		31,405				24,083				50,990				36,798
Net income	$	104,092			$	59,473			$	156,909			$	91,006
Net income per common share:
Basic	$	1.12			$	0.64			$	1.69			$	0.97
Diluted	$	1.10			$	0.64			$	1.67			$	0.96
Weighted-average common shares outstanding:
Basic		92,741,888				93,041,310				92,610,499				94,240,412
Diluted		94,228,185				93,648,214				94,026,950				94,977,505
AS A PERCENTAGE OF NET SALES
Net sales		100.0	%			100.0	%			100.0	%			100.0	%
Cost of sales		64.2	%			68.3	%			65.3	%			68.8	%
Gross profit		35.8	%			31.7	%			34.7	%			31.2	%
Selling, general and administrative expenses		25.4	%			24.4	%			26.2	%			25.3	%
Income from operations		10.4	%			7.3	%			8.5	%			5.9	%
Other income (loss), net		0.3	%			(0.2	%)			0.2	%			(0.2	%)
Income before income taxes		10.7	%			7.1	%			8.7	%			5.7	%
Income tax expense		2.5	%			2.1	%			2.1	%			1.6	%
Net income		8.2	%			5.0	%			6.6	%			4.1	%

URBAN OUTFITTERS, INC.

Condensed Consolidated Balance Sheets

(amounts in thousands, except share data)

(unaudited)

	July 31,				January 31,				July 31,
	2023				2023				2022
ASSETS
Current assets:
Cash and cash equivalents	$	224,744			$	201,260			$	91,665
Marketable securities		250,832				181,378				160,020
Accounts receivable, net of allowance for doubtful accounts of $1,481, $1,496 and $1,201, respectively		79,118				70,339				97,374
Inventory		586,514				587,510				697,474
Prepaid expenses and other current assets		224,254				197,232				220,901
Total current assets		1,365,462				1,237,719				1,267,434
Property and equipment, net		1,222,343				1,187,735				1,150,247
Operating lease right-of-use assets		961,458				959,436				927,685
Marketable securities		122,356				102,844				152,528
Deferred income taxes and other assets		298,317				195,178				155,538
Total Assets	$	3,969,936			$	3,682,912			$	3,653,432
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	270,464			$	257,620			$	347,805
Current portion of operating lease liabilities		227,669				232,672				222,430
Accrued expenses, accrued compensation and other current liabilities		459,343				400,082				396,650
Total current liabilities		957,476				890,374				966,885
Non-current portion of operating lease liabilities		882,841				884,696				868,686
Deferred rent and other liabilities		162,228				115,159				110,669
Total Liabilities		2,002,545				1,890,229				1,946,240
Shareholders' equity:
Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued		—				—				—
Common shares; $.0001 par value, 200,000,000 shares authorized, 92,773,249, 92,180,709 and 92,173,342 shares issued and outstanding, respectively	9				9				9
Additional paid-in-capital		23,214				15,248				—
Retained earnings		1,982,970				1,826,061				1,757,368
Accumulated other comprehensive loss		(38,802	)			(48,635	)			(50,185	)
Total Shareholders' Equity		1,967,391				1,792,683				1,707,192
Total Liabilities and Shareholders' Equity	$	3,969,936			$	3,682,912			$	3,653,432

URBAN OUTFITTERS, INC.

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)

		Six Months Ended
		July 31,
		2023				2022
Cash flows from operating activities:
Net income		$	156,909			$	91,006
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			47,471				52,383
Non-cash lease expense			101,277				94,821
Provision for deferred income taxes			526				6,136
Share-based compensation expense			15,556				14,109
Amortization of tax credit investment			7,953				—
Loss on disposition of property and equipment, net			146				284
Changes in assets and liabilities:
Receivables			(8,160	)			(34,607	)
Inventory			3,299				(134,092	)
Prepaid expenses and other assets			(48,256	)			(36,593	)
Payables, accrued expenses and other liabilities			54,573				37,088
Operating lease liabilities			(120,047	)			(122,198	)
Net cash provided by (used in) operating activities			211,247				(31,663	)
Cash flows from investing activities:
Cash paid for property and equipment			(78,517	)			(105,652	)
Cash paid for marketable securities			(229,446	)			(22,973	)
Sales and maturities of marketable securities			149,921				164,314
Initial cash payment for tax credit investment			(20,000	)			—
Net cash (used in) provided by investing activities			(178,042	)			35,689
Cash flows from financing activities:
Proceeds from the exercise of stock options			594				376
Share repurchases related to share repurchase program			—				(112,016	)
Share repurchases related to taxes for share-based awards			(8,184	)			(6,668	)
Tax credit investment liability payments			(1,724	)			—
Net cash used in financing activities			(9,314	)			(118,308	)
Effect of exchange rate changes on cash and cash equivalents			(407	)			(628	)
Increase (decrease) in cash and cash equivalents			23,484				(114,910	)
Cash and cash equivalents at beginning of period			201,260				206,575
Cash and cash equivalents at end of period		$	224,744			$	91,665

Contact:		Oona McCullough Executive Director of Investor Relations (215) 454-4806