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Urban Outfitters Reports Q3 Earnings Jump 31 Percent
As stated in the Company's previous sales release on November 6, 2007, net sales jumped during the quarter by 23% to $379.3 million. Total company comparable store sales grew by 8% driven by increases of 17% and 16% at Anthropologie and Free People stores, respectively. Urban Outfitters comparable store sales increased slightly during the quarter. Direct-to-consumer sales increased 30% and Free People Wholesale sales rose 34% for the quarter.
"All of our Brands' positive 'comp' store sales trends were clearly reflected in our earnings performance," stated Glen T. Senk, Chief Executive Officer. "We saw improvements in both merchandise margin and selling, general and administrative expenses during the quarter and these trends validate our optimism heading into the holiday season," concluded Mr. Senk.
Net sales for the periods were as follows:
Three months ended Nine months ended
October 31, October 31,
---------------------- ----------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
(in thousands) (in thousands)
Urban Outfitters
store sales $ 160,864 $ 143,510 $ 431,703 $ 386,232
Anthropologie store
sales 139,980 106,093 396,137 313,761
Direct-to-consumer
sales 46,777 36,070 132,822 101,074
Free People sales 31,699 22,682 81,651 62,854
---------- ---------- ---------- ----------
Total net sales $ 379,320 $ 308,355 $1,042,313 $ 863,921
========== ========== ========== ==========
For the three and nine months ended October 31, 2007, gross profit margins increased by 128 basis points and 68 basis points, respectively, versus the prior year's comparable periods. The increase for both periods was primarily due to the combination of a lower rate of merchandise markdowns and leveraging of store occupancy expenses.
During the quarter, total company comparable store sales grew by 8%, while ending comparable store inventories rose by 6%. Total company inventories grew by $33.1 million or 18% on a year-over-year basis. The acquisition of inventory to stock new retail stores was the primary factor for this increase.
For the three months ended October 31, 2007, selling, general and administrative expenses ("SG&A"), expressed as a percentage of net sales, decreased by 15 basis points, versus the same quarter last year. For the nine months ended October 31, 2007, SG&A increased by 21 basis points as costs related to non-comparable expenses to operate our new home office facility as well as certain non-recurring legal fees more than offset favorable rate reductions from controlling store and store support related expenses.
During the quarter the company finalized its certification of certain tax credits received for work performed in conjunction with its home offices resulting in an additional one-time tax benefit of approximately $2.3 million applied to its tax expense (or $0.01 impact on diluted earnings per share). Excluding the one-time federal tax incentive benefits received thus far this fiscal year, the Company's annual effective tax rate would have been approximately 34%. In the prior year's comparable quarter the company received a $4.4 million one-time tax benefit (or $0.03 impact on diluted earnings per share) for work performed in conjunction with its home office.
Thus far during the fiscal year, the company has opened 23 new stores and expects to open a total of 38 new stores by the end of the fiscal year.
Urban Outfitters, Inc. is an innovative specialty retailer and wholesaler which offers a variety of lifestyle merchandise to highly defined customer niches through 117 Urban Retail stores in the United States, Canada, and Europe, two Urban Outfitters web sites and an Urban catalog; 100 Anthropologie Retail stores; an Anthropologie web site and a catalog, and Free People, the Company's wholesale division, which sells its product to approximately 1,500 specialty stores, department stores and catalogs, as well as through 13 Free People stores, a web site and a catalog.
A conference call will be held today to discuss third quarter results and will be web cast at 11:00 a.m. EST on: http://phx.corporate-ir.net/phoenix.zhtml?c=115825&p=irol-eventDetails&EventId=1669251
This news release is being made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Certain matters contained in this release may constitute forward-looking statements. Any one, or all, of the following factors could cause actual financial results to differ materially from those financial results mentioned in the forward-looking statements: the difficulty in predicting and responding to shifts in fashion trends, changes in the level of competitive pricing and promotional activity and other industry factors, overall economic and market conditions and the resultant impact on consumer spending patterns, including any effects of terrorist acts or war, availability of suitable retail space for expansion, timing of store openings, seasonal fluctuations in gross sales, the departure of one or more key senior managers, import risks, including potential disruptions and changes in duties, tariffs and quotas and other risks identified in filings with the Securities and Exchange Commission. The Company disclaims any intent or obligation to update forward-looking statements even if experience or future changes make it clear that actual results may differ materially from any projected results expressed or implied therein.
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Income
(in thousands, except share and per share data)
(unaudited)
Three Months Ended Nine Months Ended
------------------------ ------------------------
October 31, October 31,
------------------------ ------------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
Net sales $ 379,320 $ 308,355 $ 1,042,313 $ 863,921
Cost of sales,
including certain
buying,
distribution
and occupancy
costs 229,382 190,407 649,733 544,453
----------- ----------- ----------- -----------
Gross profit 149,938 117,948 392,580 319,468
Selling, general
and administrative
expenses 88,611 72,484 247,966 203,744
----------- ----------- ----------- -----------
Income from
operations 61,327 45,464 144,614 115,724
Other income, net 2,151 1,365 5,991 4,527
----------- ----------- ----------- -----------
Income before
income taxes 63,478 46,829 150,605 120,251
Income tax expense 18,096 12,315 43,989 39,776
----------- ----------- ----------- -----------
Net income $ 45,382 $ 34,514 $ 106,616 $ 80,475
=========== =========== =========== ===========
Net income per
common share:
Basic $ 0.27 $ 0.21 $ 0.65 $ 0.49
=========== =========== =========== ===========
Diluted $ 0.27 $ 0.21 $ 0.63 $ 0.48
=========== =========== =========== ===========
Weighted average
common shares
and common share
equivalents
outstanding:
Basic 165,430,768 164,707,980 165,195,871 164,760,387
=========== =========== =========== ===========
Diluted 169,933,513 168,306,967 169,486,304 168,675,078
=========== =========== =========== ===========
AS A PERCENT OF
NET SALES
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales,
including
certain buying,
distribution
and occupancy
costs 60.5% 61.8% 62.3% 63.0%
----------- ----------- ----------- -----------
Gross profit 39.5% 38.2% 37.7% 37.0%
Selling, general
and administrative
expenses 23.3% 23.5% 23.8% 23.6%
----------- ----------- ----------- -----------
Income from
operations 16.2% 14.7% 13.9% 13.4%
Other income, net 0.6% 0.5% 0.6% 0.5%
----------- ----------- ----------- -----------
Income before
income taxes 16.8% 15.2% 14.5% 13.9%
Income tax expense 4.8% 4.0% 4.2% 4.6%
----------- ----------- ----------- -----------
Net income 12.0% 11.2% 10.3% 9.3%
=========== =========== =========== ===========
URBAN OUTFITTERS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
October 31, January 31, October 31,
2007 2007 2006
---------- ---------- ----------
(unaudited) (audited) (unaudited)
Assets
Current assets:
Cash and cash equivalents $ 36,393 $ 27,267 $ 30,544
Marketable securities 154,410 132,011 96,048
Accounts receivable, net
of allowance for doubtful
accounts of $1,699, $849
and $1,238, respectively 24,879 20,871 19,553
Inventories 212,696 154,387 179,592
Prepaid expenses, deferred
taxes and other current
assets 38,259 31,869 33,197
---------- ---------- ----------
Total current assets 466,637 366,405 358,934
Property and equipment, net 489,434 445,698 426,430
Marketable securities 78,510 62,322 58,636
Deferred income taxes and
other assets 31,621 24,826 21,204
---------- ---------- ----------
$1,066,202 $ 899,251 $ 865,204
========== ========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 78,845 $ 57,934 $ 61,988
Accrued expenses, accrued
compensation and other
current liabilities 81,303 77,384 88,015
---------- ---------- ----------
Total current liabilities 160,148 135,318 150,003
Deferred rent and other
liabilities 110,410 88,650 80,626
---------- ---------- ----------
Total liabilities 270,558 223,968 230,629
---------- ---------- ----------
Shareholders' equity:
Preferred shares; $.0001
par value, 10,000,000
shares authorized, none
issued -- -- --
Common shares; $.0001 par
value, 200,000,000 shares
authorized, 165,936,965
164,987,463 and
164,663,037 issued and
outstanding, respectively 17 17 17
Additional paid-in capital 139,637 128,586 124,970
Retained earnings 648,360 542,396 506,665
Accumulated other
comprehensive income 7,630 4,284 2,923
---------- ---------- ----------
Total shareholders' equity 795,644 675,283 634,575
---------- ---------- ----------
$1,066,202 $ 899,251 $ 865,204
========== ========== ==========
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
October 31,
--------------------
2007 2006
-------- --------
Cash flows from operating activities:
Net income $106,616 $ 80,475
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 51,291 39,239
Excess tax benefits from stock-based
compensation (4,512) (4,680)
Stock-based compensation expense 2,541 2,515
Loss on disposition of property and
equipment, net 441 1,236
Changes in assets and liabilities:
Increase in receivables (3,879) (5,178)
Increase in inventories (57,750) (38,694)
(Increase) decrease in prepaid expenses
and other assets (13,011) 4,720
Increase in payables, accrued expenses
and other liabilities 41,881 30,685
-------- --------
Net cash provided by operating activities 123,618 110,318
-------- --------
Cash flows from investing activities:
Cash paid for property and equipment (84,249) (168,243)
Cash paid for marketable securities (144,311) (114,913)
Sales and maturities of marketable
securities 105,074 165,724
-------- --------
Net cash used in investing activities (123,486) (117,432)
-------- --------
Cash flows from financing activities:
Exercise of stock options 3,997 4,431
Excess tax benefits from stock-based
compensation 4,512 4,680
Share repurchases -- (20,801)
-------- --------
Net cash provided by (used in) financing
activities 8,509 (11,690)
-------- --------
Effect of exchange rate changes on cash and
cash equivalents 485 (564)
-------- --------
Increase in cash and cash equivalents 9,126 (19,368)
Cash and cash equivalents at beginning of
period 27,267 49,912
-------- --------
Cash and cash equivalents at end of period $ 36,393 $ 30,544
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SOURCE: Urban Outfitters, Inc.Urban Outfitters, Inc.
John Kyees, Chief Financial Officer
(215) 454-5500
