Urban Outfitters, Inc. saw profits jump 75.0 percent in the second quarter ended July 31 as sales grew 7.5 percent and margins benefited from higher initial markups and lower markdowns.
Net income was $104.1 million, or $1.10 a share, against earnings of $59.5 million, or 64 cents, a year ago. Total sales reached a record $1.27 billion, up from $1.18 billion a year ago.
Total Retail segment net sales increased 5.9 percent, with comparable Retail segment net sales rising 4.9 percent. The increase in Retail segment comparable net sales was driven by mid-single-digit positive growth in retail store sales and digital channel sales.
By brand, comparable Retail segment net sales increased 26.9 percent at the Free People Group, 10.6 percent at the Anthropologie Group and declined 14.1 percent at Urban Outfitters. Wholesale segment net sales decreased 5.2 percent, driven by a 6.5 percent decrease in Free People Group wholesale sales due to decreased sales to department stores, while Urban Outfitters wholesale sales increased by $0.5 million. Nuuly segment net sales increased by $27.0 million, driven by an 85 percent increase in our subscribers versus the end of the prior year’s comparable quarter.
The gross profit rate in the quarter increased by 416 basis points compared to the three months ended July 31, 2022. Gross profit dollars increased 21.6 percent to $455.6 million from $374.6 million in the three months ended July 31, 2022. The increase in gross profit rate was primarily due to higher initial merchandise markups and lower merchandise markdowns at all three Retail segment brands. Lower inbound transportation costs largely drove the improvement in initial merchandise markups. The increased gross profit dollars was due to the improved gross profit rate and higher net sales.
SG&A expenses increased by $34.7 million, or 12.0 percent, compared to the three months ended July 31, 2022, and expressed as a percentage of net sales, deleveraged 103 basis points. The deleverage in SG&A expenses as a rate to sales was primarily related to higher incentive-based compensation costs due to improved company performance and increased marketing and creative expenses to support increased sales and customer growth. The dollar growth in SG&A expenses was primarily related to higher compensation costs, including higher incentive-based compensation costs due to improved company performance and increased marketing and creative expenses to support increased sales and customer growth.
“We are proud to report record second-quarter sales that helped drive a 72 percent increase in EPS,” said Richard A. Hayne, chief executive officer of Urban Outfitters. “Also gratifying is that Q2’s sales strength has continued to date in Q3.”
In the six months, net income was $156.9 million, or $1.67 a share, against $91 million, or 96 cents, a year ago. Sales increased 6.7 percent to a record $2.39 billion. Total Retail segment net sales increased 5.1 percent, with comparable Retail segment net sales increasing 4.7 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.
The gross profit rate increased by 343 basis points. Gross profit dollars increased 18.5 percent to $826.8 million from $697.9 million a year ago. SG&A expenses increased by $57.5 million, or 10.2 percent, and expressed as a percentage of net sales, deleveraged 81 basis points.
As of July 31, total inventory decreased by $111.0 million, or 15.9 percent, compared to total inventory as of July 31, 2022. Total Retail segment inventory decreased by 14.1 percent, primarily due to improved inventory control supported by a more reliable supply chain. Wholesale segment inventory decreased by 31.6 percent due to improved inventory control and reduced wholesale sales.
As of July 31, 2023, Urban Outfitters’ retail business’ includes 264 Urban Outfitters stores and websites in the U.S., Canada and Europe; 237 Anthropologie Group stores, catalogs and websites in the U.S., Canada and Europe; 196 Free People Group stores, including 36 FP Movement stores, catalogs and websites in the U.S., Canada and Europe; 11 Menus & Venues restaurants; 7 Urban Outfitters franchisee-owned stores; and 2 Anthropologie Group franchisee-owned stores.
Photo courtesy Urban Outfitters
