Finanzas: Urban Outfitters Reports Record Q3 Sales
Urban Outfitters, Inc. (NASDAQ:URBN), a portfolio of global consumer brands comprised of Anthropologie, Bhldn, Free People, Terrain, Urban Outfitters and Vetri Family brands, today announced net income of $47 million and $154 million for the three and nine months ended October 31, 2016, respectively. Earnings per diluted share were $0.40 and $1.31 for the three and nine months ended October 31, 2016, respectively.
Total Company net sales for the third quarter of fiscal 2017 increased 5% over the same quarter last year to a record $862 million. Comparable Retail segment net sales, which include our comparable direct-to-consumer channel, increased 1.0%. Comparable Retail segment net sales increased 5.2% at Urban Outfitters and decreased 1.5% at Free People and 2.7% at the Anthropologie Group. Wholesale segment net sales increased 30%, which benefited from approximately $9 million of shipments moving out of the third quarter of fiscal 2016 into the fourth quarter of fiscal 2016 due to delays at our recently opened east coast fulfillment center.
“I am pleased to announce our teams delivered record third quarter sales,” said Richard A. Hayne, Chief Executive Officer. “These results were driven by the third consecutive quarter of positive Retail segment ‘comps’ and continued strength in our Wholesale segment,” finished Mr. Hayne.
For the three months ended October 31, 2016, the gross profit rate decreased by 15 basis points versus the prior year’s comparable period. The reduction in gross profit rate was primarily driven by the increased penetration of the direct-to-consumer channel resulting in increased customer delivery and overall logistics expense rates. Within gross profit, maintained margins for the quarter were approximately flat compared to the prior year comparable period with initial mark-up lower on a year over year basis and markdowns coming in favorable on a year over year basis. Initial mark-up was lower due to increased penetration of the Wholesale segment sales at Free People which has a lower initial mark-up compared to the Retail segment. Initial mark-up in the Retail segment increased due to improvements at each of the brands. Markdowns were favorable due to lower markdowns at the Urban Outfitters brand which were partially offset by higher markdowns at the Free People and Anthropologie brands. For the nine months ended October 31, 2016, the gross profit rate increased by 88 basis points versus the prior year’s comparable period. The increase in gross profit rate was primarily driven by improvement in the Urban Outfitters brand maintained margins due to lower merchandise markdowns compared to the prior year. This increase was partially offset by a lower gross profit rate at the Free People brand, which was primarily driven by lower maintained margins due to higher merchandise markdowns.
As of October 31, 2016, total inventory increased by $12 million, or 3%, on a year-over-year basis. The increase in inventory is primarily due to an increase in non-comparable inventory to support our new and expanded stores. Comparable Retail segment inventory increased 1% at cost.
For the three and nine months ended October 31, 2016, selling, general and administrative expenses, expressed as a percentage of net sales, increased by 143 basis points and 114 basis points when compared to the prior year’s comparable periods, respectively. The deleverage in the three months ended October 31, 2016 was partially due to the net effect of one-time legal settlements, which accounted for approximately 50 basis points of deleverage. The remaining deleverage related to an increase in direct store controllable expenses largely due to pre-opening expenses and initial staffing levels for several large format Anthropologie stores recently opened or opened in the quarter. The deleverage in the nine months ended October 31, 2016 was primarily due to direct store controllable expenses to support our 5% square footage growth and an increase in direct marketing and technology related expenses to support our direct-to-consumer growth.
The Company’s effective tax rate for the third quarter of fiscal 2017 was 33.5% compared to 35.3% in the prior year period. The decrease in the third quarter tax rate was due to the ratio of foreign taxable losses to global taxable profits for the year. The effective tax rate for the first nine months of fiscal 2017 is 35.7% compared to 35.3% in the first nine months of fiscal 2016.
On February 23, 2015, the Company’s Board of Directors authorized the repurchase of 20 million common shares under a share repurchase program. Under this authorization, the Company repurchased and subsequently retired 1.3 million common shares for approximately $46 million during the nine months ended October 31, 2016. The Company repurchased and subsequently retired a total of 12.7 million common shares for approximately $382 million during fiscal 2016 under this authorization. As of October 31, 2016, 6.0 million common shares are remaining under this authorization.
On May 27, 2014, the Company’s Board of Directors authorized the repurchase of 10 million common shares under a share repurchase program. During fiscal 2016, the Company repurchased and subsequently retired 2.3 million shares at a total cost of $83 million, which completed this authorization.
During the nine months ended October 31, 2016, the Company opened a total of 23 new stores including: 11 Free People stores, 9 Anthropologie Group stores and 3 Urban Outfitters stores; and closed 3 stores including: 1 Free People store, 1 Anthropologie Group store and 1 Urban Outfitters store. During the nine months ended October 31, 2016, the Company opened 2 new restaurants and acquired 6 Vetri Family restaurants which are included in the Food and Beverage division.
Urban Outfitters, Inc. is a portfolio of global consumer brands which offers a variety of lifestyle merchandise and consumer products to highly defined customer niches through 242 Urban Outfitters stores in the United States, Canada, and Europe, catalogs and websites; 226 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 124 Free People stores in the United States and Canada, catalogs and websites; Free People wholesale, which sells its product to approximately 1,800 specialty stores and select department stores worldwide; and 11 Food and Beverage restaurants, as of October 31, 2016.
For more information: URBN
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