Urban Outfitters Inc. reported earnings dipped slightly in the second quarter, to $66.8 million, or 52 cents a share, from $67.5 million, or 49 cents, a year ago. Comparable Retail segment net sales, which include our comparable direct-to-consumer channel, increased 4 percent.
Total company net sales for the second quarter of fiscal 2016 increased 7 percent over the same quarter last year to a record $867 million. Comparable Retail segment net sales increased 14 percent at Free People, 4 percent at Urban Outfitters and 2 percent at the Anthropologie Group. Wholesale segment net sales rose 21 percent.
“We are pleased to announce record sales for the second quarter driven by positive retail segment comp growth at each brand,” said Richard A. Hayne, Chief Executive Officer. “Without question, the brands` strong execution of our long-term strategy helped fuel that sales growth and laid the groundwork for future increases, as well,” finished Mr. Hayne.
For the three and six months ended July 31, 2015, the gross profit rate declined by 71 basis points and 104 basis points versus the prior year`s comparable periods, respectively. The decline in gross profit rate was primarily driven by higher delivery and fulfillment center expenses largely related to the increase in direct-to-consumer sales penetration as well as incremental costs associated with the transition of our South Carolina fulfillment center to Gap, Pennsylvania.
As of July 31, 2015, total inventories increased by $22 million, or 6 percent, on a year-over-year basis. The growth in total inventories is primarily related to the acquisition of inventory to stock new and non-comparable stores. Comparable Retail segment inventories decreased 2 percent at cost while decreasing 7 percent in units.
For the three and six months ended July 31, 2015, selling, general and administrative expenses, expressed as a percentage of net sales, increased by 29 basis points and 22 basis points compared to the prior year`s comparable periods, respectively. The increase in both periods was primarily due to increased marketing and technology expenses which drove higher direct-to-consumer traffic.
The company`s effective tax rate for the second quarter of fiscal 2016 was 35.2 percent compared to 35.5 percent in the prior year`s comparable period.
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 a total of 4.8 million common shares for approximately $170.8 million during the six months ended July 31, 2015.
On May 27, 2014, the company`s Board of Directors authorized the repurchase of 10 million common shares under a share repurchase program. During the six months ended July 31, 2015, the company repurchased and subsequently retired 2.3 million shares at a total cost of $82.8 million which completed this authorization. The company repurchased and subsequently retired 7.7 million common shares at a total cost of $258.2 million during fiscal 2015.
On July 1, 2015, the company entered into a five-year $400 million asset-based revolving credit facility with a group of lenders, with JPMorgan Chase Bank N.A. as administrative agent. The new credit facility replaced the company`s existing $175 million line of credit facility with Wells Fargo Bank, National Association, which was set to expire in March 2019, and is secured by the company`s eligible inventory and accounts receivable. As of July 31, 2015, borrowings under the new revolving credit facility totaled approximately $115 million. All borrowings under the revolving credit facilities were used to fund the repurchase of common shares of the company.
During the six months ended July 31, 2015, the company opened a total of 13 new stores including: 7 Free People stores, 4 Anthropologie Group stores and 2 Urban Outfitters stores. The company closed 3 stores during the six months ended July 31, 2015, 2 Urban Outfitters stores and 1 Free People store.
Urban Outfitters, Inc. operates 238 Urban Outfitters stores in the United States, Canada, and Europe, catalogs and websites; 210 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 108 Free People stores in the United States and Canada, catalogs and websites; and Free People wholesale, which sells its product to approximately 1,600 specialty stores and select department stores worldwide; as of July 31, 2015.
