Urban Outfitters Inc. reported earnings on an adjusted basis fell 45.6 percent in the fourth quarter.

Adjusted earnings reached $49.1 million, or 20 cents a share, against $90.2 million, or 83 cents, a year ago. Results were lower than Wall Street’s consensus target of 64 cents. Net income came to $19.5 million, or 20 cents a share, down from $86.4 million, or 80 cents, a year ago.

Adjusted net income and earnings per diluted share for the three months ended January 31, 2020, excludes store and goodwill impairment charges and income tax expense related to valuation allowances attributable to net losses of certain foreign operations

Total company net sales for the three months ended January 31, 2020, increased 3.6 percent over the same period last year to a record $1.17 billion. Comparable Retail segment net sales increased 4 percent, driven by growth in the digital channel, partially offset by negative retail store sales. By brand, comparable Retail segment net sales increased 9 percent at Free People, 6 percent at the Anthropologie Group and were flat at Urban Outfitters. Total Retail segment net sales increased 4 percent. Wholesale segment net sales decreased 10 percent due to a 12 percent decrease at Free People.

“I am pleased to announce record fourth-quarter sales driven by a 4 percent Retail segment ‘comp’,” said Richard A. Hayne, chief executive officer. “Positive customer reaction to our early spring assortments bode well for continued ‘comp’ growth in the first quarter,” finished Hayne.

For the three months ended January 31, 2020, the gross profit rate decreased by 446 basis points and the adjusted gross profit rate decreased by 351 basis points versus the prior year’s comparable period. The decrease in adjusted gross profit rate was driven by higher Retail segment markdowns, deleverage in delivery and logistics expenses and lower Wholesale segment margins.

Selling, general and administrative expenses increased by $23.0 million, or 8.9 percent, compared to the prior year’s comparable period and expressed as a percentage of net sales, deleveraged by 117 basis points.

For the year ended January 31, 2020, total company net sales increased to $4.0 billion, or 0.8 percent, over the prior year. Comparable Retail segment net sales increased 1 percent, driven by growth in the digital channel, partially offset by negative retail store sales. Total Retail segment net sales increased 1 percent. Wholesale segment net sales decreased 6 percent due to an 8 percent decrease at Free People.

For the year ended January 31, 2020, the gross profit rate decreased by 297 basis points versus the prior year’s comparable period. The decrease in gross profit rate was driven by higher Retail segment markdowns and deleverage in delivery and logistics expenses.

Selling, general and administrative expenses increased by $28.6 million, or 3.0 percent, compared to the prior year’s comparable period and expressed as a percentage of net sales, deleveraged by 51 basis points.

As of January 31, 2020, total inventory increased by $39.0 million, or 10.5 percent, on a year-over-year basis. Comparable Retail segment inventory was flat at cost. The total inventory increase was primarily related to an increase in the Wholesale segment inventory.

Income from operations for both periods also includes a charge of approximately $13.9 million related to goodwill impairment of the Food and Beverage division.

The company’s effective tax rate for the three months ended January 31, 2020, was 50.7 percent compared to 25.1 percent in the prior-year period. The adjusted effective tax rate for the three months ended January 31, 2020, was 28.0 percent compared to 24.1 percent in the prior-year period. The increase in the adjusted effective tax rate for the three months ended January 31, 2020, was primarily due to the ratio of foreign taxable losses to global taxable profits.

The company’s effective tax rate for the year ended January 31, 2020, was 29.9 percent compared to 22.7 percent in the prior year comparable period. The increase in the effective tax rate for the year ended January 31, 2020, was primarily due to the ratio of foreign taxable profits to global taxable profits and an increase in valuation allowances attributable to net losses of certain foreign operations.

Net earnings came to $168.1 million, or $1.67 a share, down from $298.0 million, or $2.72, a year ago.

On February 1, 2019, the company adopted an accounting standards update that amended the previous accounting standards for lease accounting. The adoption resulted in the recognition of approximately $1.3 billion of lease liabilities and corresponding right-of-use assets of approximately $1.1 billion, with the offsetting balance representing a reduction in the previously recognized deferred rent balance.

During the year ended January 31, 2020, the company opened a total of 26 new retail locations including 10 Free People stores, 9 Anthropologie Group stores and 7 Urban Outfitters stores; and closed 12 retail locations including 5 Anthropologie Group stores, 1 Free People store, 4 Urban Outfitters store and 2 Food and Beverage restaurants. During the year ended January 31, 2020, two franchisee-owned stores were opened including one Anthropologie Group store and one Urban Outfitters store.

Urban Outfitters, Inc., offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands comprised of 248 Urban Outfitters stores in the United States, Canada and Europe and websites; 231 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 144 Free People stores in the United States, Canada and Europe, catalogs and websites, 11 Food and Beverage restaurants, 5 Urban Outfitters franchisee-owned stores, 1 Anthropologie Group franchisee-owned store and 1 Free People franchisee-owned store, as of January 31, 2020. Free People, Anthropologie Group 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