Urban Outfitters, Inc. announced a net income of $32 million, or 33 cents a share, in the first quarter ended April 30, 2022, down 40.2 percent from $53.5 million, or 54 cents, a year ago. Sales increased 13.4 percent over the same period last year to a record $1.05 billion.
Urban Outfitters’ brands include Anthropologie, BHLDN, Free People, FP Movement, Terrain, Urban Outfitters, Nuuly, and Menus & Venues.
Total Retail segment net sales increased 12 percent with comparable Retail segment net sales increasing 11 percent. The relative proportion of Retail segment sales attributable to store and digital channels changed significantly due, in large part, to the temporary store closures and occupancy restrictions in the United States, Europe and Canada in the prior-year quarter due to the pandemic. With those restrictions not present in the current year quarter, Retail segment comparable sales increased due to double-digit growth in retail store sales due to increased store traffic, partially offset by mid-single-digit negative digital channel sales.
By brand, comparable Retail segment net sales increased 18 percent at the Anthropologie Group, 15 percent at the Free People Group and one percent at Urban Outfitters. Wholesale segment net sales increased 6 percent, driven by a 9 percent increase in Free People Group wholesale sales. Newly segment net sales increased by $15.0 million driven by a significant increase in its subscriber base.
“We are pleased to announce record Q1 sales driven by an 11 percent Retail segment ‘comp’,” said Richard A. Hayne, CEO. “Unfortunately, the impact of inflation on our costs of doing business more than offset the benefit of record revenues.”
For the three months ended April 30, 2022, the gross profit rate decreased by 169 basis points compared to the three months ended April 30, 2021. Gross profit dollars increased 7.5 percent to $323.3 million compared to the three months ended April 30, 2021. The decrease in gross profit rate was primarily due to lower initial merchandise markups driven largely by higher inbound transportation expenses and raw materials costs.
As of April 30, 2022, total inventory increased by $152.2 million, or 31.9 percent, compared to total inventory as of April 30, 2021, and the Retail segment comparable inventory at cost increased by 35 percent, which was driven by three factors.
First, inventory costs increased due to higher product costs driven largely by higher inbound transportation expenses and raw materials costs. Second, due to ongoing global supply chain constraints, it extended lead times and held more inventory. Finally, the Urban Outfitters brand sales came in lower than planned resulting in increased inventory levels to date.
For the three months ended April 30, 2022, selling, general and administrative expenses increased by $49.9 million, or 22.0 percent, compared to the three months ended April 30, 2021, and expressed as a percentage of net sales, deleveraged 184 basis points. The deleverage in SG&A, as a rate to sales and growth in SG&A dollars, was primarily related to the increased penetration of retail store sales in the current year quarter as it incurred store payroll expenses to support the retail store sales growth.
The company’s effective tax rate for the three months ended April 30, 2022 was 28.7 percent compared to 27.0 percent in the three months ended April 30, 2021. The increase in the effective tax rate for the three months ended April 30, 2022, was primarily driven by the ratio of foreign taxable earnings to global taxable earnings.
Net income for the three months ended April 30, 2022 was $32 million and earnings per diluted share were $0.33.
On August 22, 2017, the company’s board authorized the repurchase of 20 million common shares under a share repurchase program. On June 4, 2019, the company’s board authorized the repurchase of 20 million common shares under a new share repurchase program. During the three months ended April 30, 2022, the company repurchased and subsequently retired, 2.4 million common shares for approximately $62 million. As of April 30, 2022, 21.5 million common shares were remaining under the programs.
During the three months ended April 30, 2022, the company opened five retail locations including two Free People Group stores (including one FP Movement store), two Urban Outfitters stores and one Menus & Venues restaurant. It closed three retail locations including one Free People Group store, one Urban Outfitters store and one Anthropologie Group store. During the three months ended April 30, 2022, two Urban Outfitters franchisee-owned stores and one Anthropologie Group franchisee-owned store were opened.
Urban Outfitters operates 262 Urban Outfitters stores in the United States, Canada and Europe and websites; 237 Anthropologie Group stores in the United States, Canada and Europe including catalogs and websites; 174 Free People stores in the United States, Canada and Europe, including catalogs and websites, 11 Menus & Venues restaurants, four Urban Outfitters franchisee-owned stores and two Anthropologie Group franchisee-owned stores as of April 30, 2022.
Photo courtesy Urban Outfitters
