Urban Outfitters Inc. announced net income rose 37.7 percent in the third quarter to $76.7 million, or 78 cents a share.
Total company net sales for the three months ended October 31, 2020, decreased 1.8 percent over the same period last year to $970 million. Comparable Retail segment net sales were flat as a result of negative retail store sales driven by lower store productivity due to reduced store traffic, offset by strong double-digit growth in the digital channel. By brand, comparable Retail segment net sales increased 17 percent at Free People and 4 percent at Urban Outfitters and decreased 9 percent at the Anthropologie Group. Wholesale segment net sales decreased 24 percent.
“I am pleased to announce URBN delivered record Q3 earnings per share in spite of an incredibly difficult operating environment,” said Richard A. Hayne, chief executive officer. “Our 38 percent increase in net profits was driven by strong product assortments combined with tight control of inventory and expenses,” finished Hayne.
For the three months ended October 31, 2020, the gross profit rate increased by 79 basis points versus the prior year’s comparable period. Gross profit dollars increased 0.6 percent to $322.9 million from $321.1 million. The increase in gross profit rate was due in part to record low merchandise markdowns in the Retail segment. The record low Retail segment markdown rate was driven by improvement at all three brands with the Urban Outfitters and Free People brands recording significant improvement. The Wholesale segment also delivered a healthy improvement in merchandise margins due to lower discounts and allowances. Additionally, gross profit improved as a result of the benefits associated with negotiated rent concessions with landlords and European government assistance programs. These were partially offset by an increase in delivery and logistics expense primarily due to the penetration of the digital channel.
As of October 31, 2020, total inventory decreased by $42.3 million, or 8.0 percent, on a year-over-year basis. The decrease in total inventory was primarily due to an 11 percent decrease in comparable Retail segment inventory at cost.
For the three months ended October 31, 2020, selling, general and administrative expenses decreased by $21.4 million, or 8.7 percent, compared to the prior year’s comparable period and expressed as a percentage of net sales, leveraged by 175 basis points. The leverage and decrease in selling, general and administrative expenses for the three months ended October 31, 2020, was primarily related to disciplined store payroll management and overall expense control measures. Digital marketing expenses grew during the quarter to support strong digital channel sales and customer growth.
The company’s effective tax rate for the three months ended October 31, 2020, was 21.4 percent compared to 26.6 percent in the prior-year period.
During the three months ended October 31, 2020, the company repaid the remaining $120.0 million outstanding on its Amended Credit Facility. The company had borrowed $220.0 million during the three months ended April 30, 2020, in order to preserve financial flexibility and maintain liquidity and flexibility in response to the coronavirus pandemic and had already repaid $100.0 million during the three months ended July 31, 2020.
Urban Outfitters, Inc., offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands comprised of 250 Urban Outfitters stores in the U.S., Canada and Europe and websites; 234 Anthropologie Group stores in the U.S., Canada and Europe, catalogs and websites; 146 Free People stores in the U.S., Canada and Europe, catalogs and websites, 11 Menus & Venues restaurants, 1 Urban Outfitters franchisee-owned store and 1 Anthropologie Group franchisee-owned store, as of October 31, 2020. Free People and Urban Outfitters wholesale sell their products through approximately 2,300 department and specialty stores worldwide, digital businesses and the company’s retail segment.
Photo courtesy Urban Outfitters