Profits at Urban Outfitters surged 123 percent in the third quarter as sales grew 9 percent. Retail segment comps advanced 5.6 percent as gains of 22.5 percent at Free People and 13.2 percent at Anthropologie offset a 14.2 percent decline at the Urban Outfitters banner.
Net income reached $83.0 million and earnings per diluted share of $0.88 for the three months ended October 31, 2023 compared with $37.2 million, or 40 cents, a year ago.
Total company net sales for the quarter increased 9.0 percent to a record $1.28 billion. Total Retail segment net sales increased 7.3 percent, with comparable Retail segment net sales increasing 5.6 percent. The increase in Retail segment comparable net sales was driven by high single-digit positive growth in digital channel sales and mid-single-digit positive growth in retail store sales. Comparable Retail segment net sales increased 22.5 percent at Free People and 13.2 percent at Anthropologie and decreased 14.2 percent at Urban Outfitters. Wholesale segment net sales decreased 3.6 percent driven by a 3.5 percent decrease in Free People wholesale sales due to a decrease in sales to department stores and close out account partners. Nuuly segment net sales increased by $30.2 million primarily driven by a 68 percent increase in our subscribers versus the end of the prior year’s comparable quarter.
For the nine months, net income was $239.9 million and earnings per diluted share were $2.55. In the year-ago nine months, earnings were $128.2 million, or $1.36 a share.
For the nine months, total company net sales increased 7.5 percent to a record $3.67 billion. Total Retail segment net sales increased 5.9 percent, with comparable Retail segment net sales increasing 5.0 percent. The increase in Retail segment comparable net sales was driven by mid-single-digit positive growth in both digital channel sales and retail store sales. Comparable Retail segment net sales increased 22.5 percent at Free People and 12.4 percent at Anthropologie and decreased 13.9 percent at Urban Outfitters. Wholesale segment net sales decreased 6.7 percent driven by an 8.1 percent decrease in Free People wholesale sales primarily due to a decrease in sales to department stores, while Urban Outfitters wholesale sales increased by $1.5 million. Nuuly segment net sales increased by $86.9 million primarily driven by a 68 percent increase in our subscribers versus the end of the prior year’s comparable period.
“We are proud to report record third-quarter sales that helped drive a 120 percent increase in EPS,” said CEO Richard A. Hayne. “As we enter the holiday season the consumer continues to react positively to our assortments and marketing campaigns at four out of five of our brands which leaves us confident we can continue to drive revenue and earnings growth in the fourth quarter,” finished Hayne.
For the three months, the gross profit rate increased by 509 basis points compared to the three months ended October 31, 2022, and gross profit dollars increased 27.3 percent to $454.4 million from $357.0 million.
For the nine months, the gross profit rate increased by 401 basis points compared to the nine months ended October 31, 2022, and gross profit dollars increased 21.5 percent to $1.28 billion from $1.05 billion. The increase in gross profit rate in both periods was primarily due to higher initial merchandise markups and lower merchandise markdowns in the Retail segment at Anthropologie, Free People and Urban Outfitters. The improvement in initial merchandise markups was primarily driven by lower inbound transportation costs. The increase in gross profit dollars in both periods was due to the improved gross profit rate and higher net sales.
As of October 31, total inventory decreased by $22.6 million, or 3.0 percent, compared to total inventory as of October 31, 2022. Total Retail segment inventory was flat, while Retail segment comparable inventory increased 1.2 percent. Wholesale segment inventory decreased by 33.0 percent due to improved inventory control and a reduction in wholesale sales.
For the three months, selling, general and administrative expenses increased by $45.7 million, or 15.2 percent, compared to the year-ago period. and expressed as a percentage of net sales, deleveraged 146 basis points. For the nine months, selling, general and administrative expenses increased by $103.2 million, or 11.9 percent, compared to the year-ago period, and expressed as a percentage of net sales, deleveraged 104 basis points. The deleverage in selling, general and administrative expenses as a rate to sales for both periods was primarily related to increased marketing and creative expenses to support increased sales and customer growth and higher incentive-based compensation costs due to improved company performance. The dollar growth in selling, general and administrative expenses for both periods was primarily related to increased marketing and creative expenses to support increased sales and customer growth, increased store payroll expenses to support the retail store’s comparable net sales growth and the net growth in retail store count and higher incentive-based compensation costs due to improved company performance.
The company’s effective tax rate for the latest quarter was 24.3 percent, compared to 28.8 percent in the prior year period. The company’s effective tax rate for the nine months ended October 31, 2023 was 24.5 percent, compared to 28.8 percent in the prior year period. The decrease in the effective tax rate for the three and nine months ended October 31, 2023 was attributable to the ratio of foreign taxable earnings to global taxable earnings and the favorable impact of general business credits in the current year.
Photo courtesy Urban Outfitters