Urban Outfitters’ Q4 Sales Jump 14 Percent On Two-Year Basis

Urban Outfitters, Inc. reported total company net sales for the three months ended January 31, 2022, were a record $1.33 billion. Net sales increased 13.9 percent compared to the three months ended January 31, 2020.

Due to the material impact of COVID-19 on its business operations in fiscal 2021, including mandated store closures, this release includes a comparison of fiscal 2022 results to fiscal 2020.

On that two-year basis, comparable Retail segment net sales increased 14 percent, 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 percent at the Free People Group, 14 percent at the Anthropologie Group and 3 percent at Urban Outfitters. Total Retail segment net sales increased 15 percent. Wholesale segment net sales decreased 22 percent 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 percent compared to the year ended January 31, 2020. Comparable Retail segment net sales increased 16 percent, 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 percent 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, CEO. “Strong customer response to our early spring offerings bode well for continued sales growth in the first quarter,” finished Hayne.

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 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 percent, compared to total inventory as of January 31, 2020. Total Retail segment inventory and Retail segment comparable inventory at cost increased by 46 percent and 26 percent, 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 percent, 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 strength in 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 a 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 percent, 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 were primarily related to disciplined store payroll management and overall expense control and the increased penetration of the digital channel in Retail segment net sales, which 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 a goodwill impairment of the Menus & Venues division.

The company’s effective tax rate for the three months ended January 31, 2022, was 21.1 percent compared to 50.7 percent in the three months ended January 31, 2020. The adjusted effective tax rate for the three months ended January 31, 2020 was 28.0 percent. 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 percent compared to 29.9 percent 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.

Photo courtesy URBN