Urban Outfitters Inc. on Monday announced net income of $78 million and $212 million for the three and nine months ended October 31, 2018, respectively. Earnings per diluted share were 70 cents—beating estimates by 7 cents—and $1.92 for the three and nine months ended October 31, 2018, respectively.
Total company net sales for the three months ended October 31, 2018, increased 9 percent over the same period last year to a record $974 million, beating Wall Street estimates by $4.9 million.
Comparable retail segment net sales increased 8 percent, driven by strong, double-digit growth in the digital channel and positive retail store sales. By brand, comparable Retail segment net sales increased 12 percent at Free People, 8 percent at the Anthropologie Group and 7 percent at Urban Outfitters. Wholesale segment net sales increased 12 percent.
“I’m pleased to announce our teams produced record Q3 sales and earnings,” said Richard A. Hayne, Chief Executive Officer. “All brands, all channels, all product categories and all geographies delivered positive ‘comp’ sales,” finished Mr. Hayne.
For the three and nine months ended October 31, 2018, the gross profit rate improved by 134 basis points and 149 basis points versus the prior year’s comparable periods, respectively. The improvement in gross profit rate for both periods was driven by lower markdowns at all three brands and leverage in store occupancy cost due to strong Retail segment comparable net sales.
As of October 31, 2018, total inventory increased by $1.7 million, or 0.4 percent, on a year-over-year basis. Comparable Retail segment inventory was flat.
Selling, general and administrative expenses increased by $16.5 million, or 7.3 percent, and $41.3 million, or 6.2 percent, during the three and nine months ended October 31, 2018, compared to the prior year’s comparable periods, respectively. The dollar growth in selling, general and administrative expenses in both periods was primarily due to increased direct selling and marketing expenses to support and drive the increase in Retail segment net sales and higher bonus and share-based compensation expense. As a percentage of net sales, selling, general and administrative expenses leveraged 40 basis points and 129 basis points during the three and nine months ended October 31, 2018, when compared to the prior year’s comparable periods, respectively. The leverage in both periods was primarily driven by the net sales growth. The leverage for the nine months ended October 31, 2018 further benefited from continued savings associated with the fiscal 2018 store reorganization project and the nonrecurring store reorganization expenses incurred in the prior year.
The company’s effective tax rate for the three months ended October 31, 2018, was 20.6 percent compared to 37.4 percent in the prior year period. The effective tax rate for the nine months ended October 31, 2018 was 21.7 percent compared to 37.2 percent in the prior year period. The decrease in the effective tax rate for the three and nine month periods was primarily due to the lower federal statutory rate resulting from the U.S. Tax Cuts and Jobs Act and the favorable impact of certain discrete items.
Net income for the three and nine months ended October 31, 2018, was $78 million and $212 million, respectively, and earnings per diluted share was 70 cents and $1.92, respectively.
On August 22, 2017, the company’s Board of Directors authorized the repurchase of 20 million common shares under a share repurchase program, of which 16.4 million common shares were remaining as of October 31, 2018. During the nine months ended October 31, 2018, the company repurchased and subsequently retired 1.5 million common shares for approximately $58 million under this program. During the year ended January 31, 2018, the company repurchased and subsequently retired 2.1 million common shares for approximately $46 million under this program.
During the nine months ended October 31, 2018, the company opened a total of 14 new locations including: 4 Anthropologie Group stores, 4 Urban Outfitters stores, 3 Free People stores and 3 Food and Beverage restaurants; and closed 4 locations including: 2 Anthropologie Group stores, 1 Urban Outfittersstore and 1 Free People store. During the nine months ended October 31, 2018, 3 franchisee-owned Urban Outfitters stores were opened.
Urban Outfitters, Inc., offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands comprised of 248 Urban Outfitters stores in the United States, Canada, and Europe and websites; 228 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 134 Free People stores in the United States and Canada, catalogs and websites, 13 Food and Beverage restaurants, and 3 Urban Outfitters franchisee-owned stores, as of October 31, 2018. Free People and Anthropologie Group wholesale sell their products through approximately 2,100 department and specialty stores worldwide, digital businesses and the company’s Retail segment.
