Urban Outfitters Makes Comeback Across Portfolio

Urban Outfitters Inc. is making a comeback across all of its brands.

The retailer — which counts Urban Outfitters, the Anthropologie Group, Free People, Terrain and Bhldn among its brands, in addition to rental subscription service Nuuly and a food and beverage business under the greater company umbrella — revealed quarterly earnings results Tuesday afternoon, improving on both top and bottom lines, compared with both the pandemic year and 2019’s pre-pandemic first quarter. Company shares shot up nearly 10 percent in after-hours trading as a result.

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“The first quarter was one for the record books: record sales, a record low markdown rate and record earnings per share,” Richard A. Hayne, chief executive officer of Urban Outfitters Inc., said in a statement. “Strong ‘comps’ were driven by powerful demand and superb execution by all teams. In May, sales trends have accelerated further, which we believe bodes well for second-quarter results.”

In fact, total company revenues for the three-month period ending April 30, increased 7.3 percent to $927 million, up from more than $864 million during 2019’s pre-pandemic first quarter, or $588 million a year ago.

Urban Outfitters, Anthropologie and Free People all made gains, compared with 2020’s pandemic year. But revenues increased at Urban Outfitters and Free People, compared with 2019: nearly $350 million at Urban in the most recent quarter, compared with approximately $317 million two years ago, and roughly $213 million at Free People, compared with $186 million during the same time frame. Anthropologie logged $353 million during the most recent quarter, compared with nearly $355 million in 2019, but up from $234 million last year. Sales at Nuuly, which launched in July of 2019, were more than $7.8 million, compared with $6.2 million a year ago.

Comparable retail segment net sales also increased, up 10 percent, compared with 2019, thanks to strong double-digit growth in digital. (E-commerce now accounts for roughly 60 percent of sales across the portfolio, compared with 40 percent in stores.) By brand, comparable retail segment net sales rose 44 percent at Free People, 9 percent at Urban Outfitters and 1 percent at Anthropologie, during the same time period. In addition, total retail segment net sales increased 10 percent.

“The strong headwinds we faced during COVID are quickly shifting and the gale winds now blow from behind,” Hayne told analysts on Tuesday evening’s conference call. “Now that vaccines have been widely administered in North America and the U.K., consumers are returning to a more normal way of life. They’re feeling optimistic, have money to spend and they want a new wardrobe and improvements to their living environment.

“Perhaps the biggest company-wide accomplishment in the first quarter was the strength of full-price selling and the corresponding decrease in markdown sales at each brand,” he continued. “The historically low markdown rate generated outstanding merchandise margins that, when combined with tight expense control, lead to record Q1 earnings per share.”

The gains helped offset sales declines at brick-and-mortar retail during the quarter because of temporary store closures and occupancy restrictions in Europe and Canada. In addition, the wholesale segment decreased 24 percent during the quarter to $62 million, compared with nearly $82 million in 2019.

Frank Conforti, co-president and chief operating officer of Urban Outfitters Inc., added on the call that sourcing and production, logistics, fulfillment and the overall labor market, as well as store traffic in select cities, such as New York, remain headwinds.

Still, Urban Outfitters managed to log a profit of $53.5 million, up from $32.5 million pre-pandemic — or a loss of more than $138 million a year ago.

Growth drivers during the quarter included the Free People brand, home goods and the women’s North American apparel business.

“Over the last 15 months, dresses have not performed particularly well as a class in all three brands and now they’re very hot at all three brands,” Hayne said on the call. “I think that’s a very good indication of the change in the customer mood.”

Tricia Smith, global chief executive officer of the Anthropologie Group, added on the call that there’s opportunity to grow the denim business, which is “a bit underdeveloped” at Anthropologie.

“We’re really looking to expand that and distort that pretty heavily this fall,” she said.

The company ended the quarter with more than $364 million in cash and cash equivalents. The retailer also ended the quarter with 642 stores across North America and Europe, or 251 Urban Outfitters, 238 Anthropologie and 153 Free People locations. Conforti said the company plans on opening 54 new stores across the portfolio this year and closing 18.

“Our new store number is larger than in previous years, because we are adding approximately 16 new Free People stores this year, as well as the availability of stable lease terms, which makes the store economics more attractive to us,” he said.

Company shares, which closed up 0.69 percent Tuesday to $34.96 a piece, are up 95 percent, year-over-year.

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