23 Aug Urban Outfitters’ Profits Soar In Q2
Urban Outfitters Inc. reported second-quarter profits rose 85.9 percent to $92.8 million, or 84 cents a share, exceeding Wall Street’s consensus estimate of 77 cents.
Revenues rose 13.7 percent to $992.4 million, also ahead of analyst targets of $981 million.
Total company net sales for the three months ended July 31, 2018, increased 13.7 percent over the same period last year to a record $992 million. Comparable Retail segment net sales increased 13 percent, driven by strong, double-digit growth in the digital channel and positive retail store sales. By brand, comparable Retail segment net sales increased 17 percent at Free People, 15 percent at Urban Outfitters and 11 percent at the Anthropologie Group. Wholesale segment net sales increased 10 percent.
“I’m pleased to announce our teams produced record Q2 sales and earnings per share,” said Richard A. Hayne, chief executive officer. “All three brands delivered double-digit Retail segment ‘comp’ sales and lower markdown rates to drive these results,” finished Hayne.
For the three and six months ended July 31, 2018, the gross profit rate improved by 180 basis points and 157 basis points versus the prior year’s comparable periods, respectively. The improvement in gross profit rate for both periods was driven by lower markdowns at all three brands and leverage in store occupancy cost due to strong Retail segment comparable net sales. These gains were partially offset by deleverage in delivery expense due in part to the increased penetration of the digital channel.
As of July 31, 2018, total inventory increased by $10.5 million, or 2.9 percent, on a year-over-year basis. Comparable Retail segment inventory increased 3 percent at cost.
Selling, general and administrative expenses increased by $16.8 million, or 7.6 percent, and $24.8 million, or 5.6 percent, during the three and six months ended July 31, 2018, compared to the prior year’s comparable periods, respectively. As a percentage of net sales, selling, general and administrative expenses leveraged 136 basis points and 178 basis points during the three and six months ended July 31, 2018, when compared to the prior year’s comparable periods, respectively. The dollar growth in selling, general and administrative expenses in both periods was primarily due to increased direct selling and marketing expenses to support and drive the increase in Retail segment net sales and higher bonus expense due to the strong company performance. The leverage in both periods was primarily driven by the net sales growth, continued savings associated with the fiscal 2018 store reorganization project and the current year benefit associated with the nonrecurring store reorganization expenses incurred in the prior year.
The company’s effective tax rate for the three months ended July 31, 2018, was 21.7 percent compared to 35.1 percent in the prior year period. The effective tax rate for the six months ended July 31, 2018 was 22.3 percent compared to 37.1 percent in the prior year period. The decrease in the effective tax rate for the three and six month periods was primarily due to the lower federal statutory rate resulting from the U.S. Tax Cuts and Jobs Act.
Net income for the three and six months ended July 31, 2018, was $93 million and $134 million, respectively, and earnings per diluted share was $0.84 and $1.22, respectively.
During the six months ended July 31, 2018, the company opened a total of seven new locations including: three Free People stores, two Urban Outfitters stores and two Anthropologie Group stores and closed two locations including: one Urban Outfitters store and one Anthropologie Group store.
Urban Outfitters, Inc., offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands comprised of 246 Urban Outfitters stores in the United States, Canada and Europe and websites; 227 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 135 Free People stores in the United States and Canada, catalogs and websites and 10 Food and Beverage restaurants, as of July 31, 2018. Free People and Anthropologie Group wholesale sell their products through approximately 2,100 department and specialty stores worldwide, digital businesses and the company’s Retail segment.