URBN Reports Q4 Results

PHILADELPHIA, March 01, 2022 (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, BHLDN, Free People, FP Movement, Terrain, Urban Outfitters, Nuuly and Menus & Venues brands, today announced net income of $41 million and earnings per diluted share of $0.41 for the three months ended January 31, 2022. For the year ended January 31, 2022, net income was $311 million and earnings per diluted share were a record $3.13.

Due to the material impact of COVID-19 on our business operations in fiscal 2021, including mandated store closures, this release includes a comparison of fiscal 2022 results to fiscal 2020. Management views the comparison of fiscal 2022 results to fiscal 2020 as a meaningful measurement of the Company’s business performance. In addition, adjusted results for the three months ended January 31, 2020, exclude store and goodwill impairment charges and income tax expense related to valuation allowances attributable to net losses of certain foreign operations. See “Reconciliation of Non-GAAP Financial Measures” included at the end of this release for fiscal 2020 adjustments. There were no adjusted financial measures for fiscal 2022.

Total Company net sales for the three months ended January 31, 2022, were a record $1.33 billion. Net sales increased 13.9% compared to the three months ended January 31, 2020. Comparable Retail segment net sales increased 14%, driven by strong double-digit growth in digital channel sales, partially offset by low double-digit negative retail store sales primarily due to reduced store traffic. By brand, comparable Retail segment net sales increased 49% at the Free People Group, 14% at the Anthropologie Group and 3% at Urban Outfitters. Total Retail segment net sales increased 15%. Wholesale segment net sales decreased 22% primarily from reducing the Free People Group’s sales to promotional wholesale customers. Nuuly segment net sales increased by $11.3 million driven by the continued expansion of the number of subscribers since its launch at the end of the second quarter of fiscal 2020.

For the year ended January 31, 2022, total Company net sales increased 14.2% compared to the year ended January 31, 2020. Comparable Retail segment net sales increased 16%, driven by strong double-digit growth in digital channel sales, partially offset by low double-digit negative retail store sales due to reduced store traffic. Wholesale segment net sales decreased 23% primarily from reducing the Free People Group’s sales to promotional wholesale customers. Nuuly segment net sales increased by $39.7 million driven by the continued expansion of the number of subscribers since its launch at the end of the second quarter of fiscal 2020.

“Record fourth quarter sales were driven by positive ‘comps’ at all brands,” said Richard A. Hayne, Chief Executive Officer. “Strong customer response to our early spring offerings bode well for continued sales growth in the first quarter,” finished Mr. Hayne.

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

(1) The Nuuly segment (formerly known as the Subscription segment) is comprised of the Nuuly Rent and Nuuly Thrift brands. Nuuly Rent began operations on July 30, 2019. Nuuly Thrift began operations on October 12, 2021.

For the three months ended January 31, 2022, the gross profit rate decreased by 97 basis points and the adjusted gross profit rate decreased by 222 basis points compared to the three months ended January 31, 2020. Gross profit dollars increased by $33.5 million to $367.3 million from $333.8 million in the three months ended January 31, 2020. Adjusted gross profit dollars increased by $18.9 million from $348.4 million in the three months ended January 31, 2020. The decrease in adjusted gross profit rate was primarily due to lower initial merchandise markups and an increase in delivery and logistics expenses. Lower initial merchandise markups are primarily due to higher inbound transportation expenses. Delivery expense deleveraged due to the increased penetration of the digital channel and increases in carrier costs per package. Logistics expense deleveraged due to increased wages at our distribution and fulfillment centers in order to attract and retain appropriate levels of employees and the increased penetration of the digital channel. This decrease in adjusted gross profit rate was partially offset by a reduction in merchandise markdown rates in the Retail segment and a leverage in store occupancy expense primarily due to the increased penetration of the digital channel in Retail segment net sales.

For the year ended January 31, 2022, the gross profit rate increased by 172 basis points compared to the year ended January 31, 2020. Gross profit dollars increased by $254.1 million to $1.49 billion from $1.24 billion in the year ended January 31, 2020. The increase in gross profit rate was primarily due to record low merchandise markdown rates for all three brands in the Retail segment for the year and leverage in store occupancy expense due to the increased penetration of the digital channel in Retail segment net sales. This was partially offset by a deleverage in delivery and logistics expenses and lower initial merchandise markups. Delivery expense deleveraged due to the increased penetration of the digital channel and increases in carrier costs per package. Logistics expense deleveraged due to increased wages at our distribution and fulfillment centers in order to attract and retain appropriate levels of employees and the increased penetration of the digital channel. Lower initial merchandise markups are primarily due to higher inbound transportation expenses. Additionally, during the year ended January 31, 2020, the Company recorded a $14.6 million store impairment charge.

As of January 31, 2022, total inventory increased by $160.2 million, or 39.1%, compared to total inventory as of January 31, 2020. Total Retail segment inventory and Retail segment comparable inventory at cost increased by 46% and 26%, respectively. Both increases were primarily due to the Company continuing to bring certain product categories in earlier to protect against ongoing supply chain disruptions and delays and the increase in inbound transportation costs.

For the three months ended January 31, 2022, selling, general and administrative expenses increased by $32.7 million, or 11.6%, compared to the three months ended January 31, 2020, and expressed as a percentage of net sales, leveraged 48 basis points. The leverage in SG&A as a rate to sales was primarily related to the increased penetration of the digital channel in Retail segment net sales and disciplined store payroll management and overall expense control that was partially offset by an increase in digital marketing and creative expenses during the quarter to support the strong digital sales and customer growth. The growth in SG&A dollars was primarily driven by an increase in digital marketing and creative expenses during the quarter to support the strong digital sales and customer growth partially offset by the reduction in direct selling expenses due to the lower retail store net sales. During the three months ended January 31, 2020, the Company recorded a $13.9 million charge related to goodwill impairment of the Menus & Venues division.

For the year ended January 31, 2022, selling, general, and administrative expense increased by $91.4 million, or 9.2%, compared to the year ended January 31, 2020, and expressed as a percentage of net sales, leveraged 109 basis points. The leverage in selling, general and administrative expenses as a rate to sales was primarily related to disciplined store payroll management and overall expense control and the increased penetration of the digital channel in Retail segment net sales, that was partially offset by a deleverage in digital marketing and creative expenses during the period to support the strong digital sales and customer growth. The increase in dollars was primarily driven by the increase in digital marketing and creative expenses to support the overall growth of the Company partially offset by the reduction in direct selling expenses due to the lower retail store net sales. During the year ended January 31, 2020, the Company recorded a charge of approximately $13.9 million related to goodwill impairment of the Menus & Venues division.

The Company’s effective tax rate for the three months ended January 31, 2022, was 21.1% compared to 50.7% in the three months ended January 31, 2020. The adjusted effective tax rate for the three months ended January 31, 2020 was 28.0%. The decrease in the adjusted effective tax rate for the three months ended January 31, 2022, was primarily due to the ratio of foreign taxable profits to global taxable profits. The Company’s effective tax rate for the year ended January 31, 2022, was 23.2% compared to 29.9% in the year ended January 31, 2020. The decrease in the effective tax rate for the year ended January 31, 2022, was primarily due to the ratio of foreign taxable profits to global taxable profits.

Net income for the three months ended January 31, 2022, was $41 million and earnings per diluted share were $0.41. Net income for the year ended January 31, 2022, was $311 million and earnings per diluted share were a record $3.13.

On August 22, 2017, the Company’s Board of Directors authorized the repurchase of 20 million common shares under a share repurchase program. 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, 2022, the Company repurchased and subsequently retired 2.0 million common shares for approximately $56 million. During the year ended January 31, 2021, the Company repurchased and subsequently retired 0.5 million common shares for approximately $7 million. As of January 31, 2022, 23.9 million common shares were remaining under the programs.

During the year ended January 31, 2022, the Company opened a total of 56 new retail locations including: 29 Free People Group stores (including 18 FP Movement stores), 17 Urban Outfitters stores, 9 Anthropologie Group stores and 1 Menus & Venues restaurant; and closed 18 retail locations including: 8 Anthropologie Group stores, 5 Free People Group stores, 3 Urban Outfitters stores and 2 Menus & Venues restaurants. During the year ended January 31, 2022, 1 Urban Outfitters franchisee-owned store and 1 Anthropologie Group franchisee-owned store were opened.

Urban Outfitters, Inc., offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands comprised of 261 Urban Outfitters stores in the United States, Canada and Europe and websites; 238 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 173 Free People stores in the United States, Canada and Europe, catalogs and websites, 10 Menus & Venues restaurants, 2 Urban Outfitters franchisee-owned stores and 1 Anthropologie Group franchisee-owned store, as of January 31, 2022. 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 fourth quarter results and will be webcast at 5:15 pm. ET at: https://edge.media-server.com/mmc/p/8gen97mq

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: the impacts of public health crises such as the coronavirus (COVID-19) pandemic, overall economic and market conditions and worldwide political events and the resultant impact on consumer spending patterns, 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, terrorism and civil unrest, natural disasters, severe or unseasonable weather conditions (including as a result of climate change) or public health crises, increases in labor costs, increases in raw material 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.

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Important Information Regarding Non-GAAP Financial Measures

In addition to evaluating the financial condition and results of our operations in accordance with U.S. generally accepted accounting principles (“GAAP”), from time to time our management evaluates and analyzes results and any impact on the Company of certain events outside of normal, or “core,” business and operations, by considering adjusted financial measures not prepared in accordance with GAAP. Examples of items that we consider non-core include store and goodwill impairment charges and income tax expense related to valuation allowances attributable to net losses of certain foreign operations. In order to improve the transparency of our disclosures, provide a meaningful presentation of results from our core business operations and improve period-over-period comparability, we have included certain adjusted financial measures for fiscal 2020 that exclude the impact of these non-core business items. There were no adjusted financial measures for fiscal 2022.

We believe these adjusted financial measures are important indicators of our recurring results of operations because they exclude items that may not be indicative of, or are unrelated to, our underlying results of operations and provide a useful baseline for analyzing trends in our underlying business. Management uses adjusted financial measures for planning, forecasting and evaluating business and financial performance.

Non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the Company’s financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the Company’s financial position, results of operations or cash flows and should therefore be considered in assessing the Company’s actual and future financial condition and performance. These adjusted financial measures are not consistent with GAAP and may not be calculated the same as similarly titled measures used by other companies.