Urban Outfitters CEO Sees Hope in ‘Going-out’ Fashions
Urban Outfitters Inc. just barely eked out a profit last year, but cofounder, chairman and chief executive officer Richard Hayne is seeing signs of a kind of reawakening.
“We’re particularly excited by the recent uptick in demand for ‘going-out’-type apparel and believe this bodes well for our spring and summer seasons,” Hayne said as the company reported retail results.
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Count that as one more sign of loosening after a tough year.
But while more people are getting vaccinated and the COVID-19 caseload is down from its peak, there are growing warnings from medical experts that it is still too early for a return to normal life, with many people unvaccinated and new variants threatening. Despite those warnings, restrictions are starting to ease in some places, such as Texas, which on Tuesday said it would drop its mask mandate and allow businesses to reopen at full capacity.
Retailers are certainly ready to put 2020 behind them.
Urban Outfitters’ net income for the fourth quarter grew to $28.6 million, or 29 cents a diluted share, from earnings of $19.5 million, or 20 cents, a year ago.
Adjusted earnings per share of 30 cents came in 2 cents ahead of the 28 cents analysts projected.
Sales for the three months ended Jan. 31 slipped to $1.1 billion from $1.2 billion a year earlier.
Digital sales rose at a double-digit clip, but it wasn’t enough to overcome in-store declines. By brand, comparable retail sales increased 6 percent at Free People, but fell 6 percent at the company’s namesake chain and dropped 11 percent at the Anthropologie Group.
Hayne told analysts on a conference call that while consumers had been focusing on “casual at-home comfortable” styles, “we started to see that break a bit.”
In the last week of February, for instance, seven of the top-10-selling items on antropologie.com were dresses, after a year when only one or two dresses would rank in the top 10.
“That’s a very striking change,” Hayne said. “Now some of that definitely could be product-related, and some of that could be imagery related, both of which I think improved, but it is a striking change, and one that we find very positive.
“I think that we’re beginning to see…what I’m calling ‘going-out fashion,’ start to take hold,” Hayne said. “Just about everything you’re hearing in the media today is starting to reinforce that, I want to get out and be with friends again and go out to dinner and do this and that. So I think the apparel business will be in for a change in terms of what categories sell.”
Like most other retailers in a year dominated by the coronavirus, Urban Outfitters logged a sales decline in 2020 — although the company did manage to adjust enough to just barely post a profit.
Net income for the 12 months tallied $1.2 million, or 1 cent a diluted share, down from $168.1 million, or $1.67. Sales slipped 13.4 percent to $3.4 billion from $4 billion in 2019.
The company continues to push e-commerce. And Frank Conforti, copresident at Urban Outfitters, told analysts that the web was a more profitable channel than stores on a stand-alone basis.
But stores are far from going away, and in some ways things are looking up.
The firm has 645 locations, including 11 restaurants, and Conforti said about 55 stores would be added this year, while 21 would close — bigger store opening plans than in prior years.
“The obvious question is, why open stores with the uncertainty around store traffic,” Conforti said. “The answer is the economics of our new stores are significantly favorable to our existing ones.
“Currently, we are successfully negotiating variable rent, also known as percentage rent, on most of our new stores,” he said. “This provides reasonable protection against traffic fluctuation. Additionally, we are receiving significant capital reimbursements on many of our new or renewal locations, making the capital investments in these new stores minimal.
“Lastly, our new stores are located primarily in secondary markets where traffic patterns are currently outperforming major metropolitan areas,” he said. “While our new stores have these benefits, many of our existing locations do not. We will need to negotiate better occupancy costs at these existing locations, when leases expire, or we will be forced to close them.”
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