This summary is based on the first quarter fiscal 2009 earnings call conducted by Urban Outfitters, Inc. (URBN) on May 15, 2008.
President Urban Outfitters Brand:
Key Investors Issues
- EPS were 25 cents a share compared to 17 cents a share last year.
- Net profit rose 45% to $42.6 million from $29.4 million a year earlier.
- Net sales rose 25% to $394.3 million.
First Quarter Highlights
Total company sales increased by 25% to $394.3 million.
- Total company comparable store sales grew by 10% with consistent performance across all three brands: Anthropologie, Free People and Urban Outfitters achieved comparable store sales increases of 10%, 19% and 10% respectively.
- Direct to consumer sales surged by 34% with just 3% additional catalog circulation, with all three brands contributing meaningfully to the result. Free People wholesale revenues increased by 22%.
- Operating income grew by 75% to $62.9 million, or an operating margin of 16%.
- The company earned $42.6 million, a 45% increase from the prior year resulting in earnings per share of 25 cents per share.
New and non-comparable store sales increases accounted for $36 million, or 45% of the total quarterly growth.
The company opened 12 new stores in the period, one Anthropologie store, three Free People stores, seven Urban Outfitters stores and first Terrain garden center. The company’s comparable store performance was stronger in February and April than in March. Considering that URBN operates on a calendar as opposed to 4/5/4 basis, the company faced Easter in April, which makes strong April performance particularly impressive.
- At Anthropologie, 87% of the stores had comparable store positive sales. The Northeast region was strongest, followed closely by the West Coast, then the Midwest and South. Performance by location type was relatively even with the exception of free standing stores which while positive, chased the group. At Free People with just eight stores in the comparable base, it is not yet appropriate to highlight regions or store types.
- At Urban Outfitters, 85% of the stores had comparable store positive sales. Like Anthropologie, the Northeast region fared best while the other regions, the West Coast, Midwest and South performed relatively evenly. Performance by location type was relatively similar as well with the exception of lifestyle centers which were flat on a comparable basis. The company’s comparable store sales gain was driven largely by transactions which increased by 7% in total, with gains of 9%, 10% and 5% at Anthropologie, Free People and Urban Outfitters respectively.
- Driven by a lower weighted mix of sale merchandise, the company’s average unit selling price increased 7% in total, down 1% at Anthropologie, up 10% at Free People and up 11% at Urban Outfitters. Accordingly units per transaction decreased by 4% in total, up 2% at Anthropologie, and down 1% and 7% at Free People and Urban Outfitters respectively.
Consumer business direct sales increased by 34% to $58.2 million, driven by a catalog circulation increase of just 3%.
- The penetration of direct to consumer sales to total company sales increased from 13.8% to 14.8% versus the same period last year.
- Website visits were up 31% to 15.3 million visits, that is a gain of 3.6 million visits over the same quarter last year.
- All three brands continue to innovate in direct to consumer business. For example, Anthropologie began shipping internationally last quarter, Free People introduced product reviews and Urban Outfitters expanded its use of video, generating more than 17,000 YouTube views on its most successful clip.
- Free People wholesale continued its sales momentum increasing quarterly sales by 22%. The increase was driven by an 18% increase in units and a 4% increase in average unit price, with department stores growing faster than specialty stores. Bookings for summer and fall deliveries are nicely ahead of plan, and the company is pleased with the initial reaction to both We the Free and Intimately Free People.
Total company gross margin increased 444 basis points to 40.2%, marking the first time in nine quarters that the gross margin exceeded 40%.
- This performance which was nicely favorable to plan, was driven largely by reductions in markdown rate, improvements in initial margin and the leveraging of store occupancy expense.
- Total company comparable inventory was down 3% at the quarter’s end, with a 2% decrease at Anthropologie and a 5% reduction at Urban Outfitters.
- The company’s operating expense leveraged seven basis points to 24.3%, principally due to the leveraging of direct store controllable expense. Several non-recurring expenses impacted the company’s SG&A, including approximately $2.6 million of charges related to the Terrain opening and the launch of Leifsdottir.
- The company’s income from operations increased 75% to $62.9 million or a 16% operating margin, with earnings per share growing from 17 cents to 25 cents versus the same period last year. The company’s tax rate rose from 22.2% to 35.7%. Excluding one-time federal tax incentives, the company’s estimated quarterly tax rate in fiscal 2008 would have been 36.2% and the earnings per share would have been 14 cents.
Key questions from the first quarter earnings call conducted by Urban Outfitters, Inc. on May 15, 2008.