SEC Filing | Urban Outfitters, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended April 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 000-22754

Urban Outfitters, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Pennsylvania	23-2003332
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

5000 South Broad Street, Philadelphia, PA	19112-1495
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (215) 454-5500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Shares, par value $.0001 per share		URBN		NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common shares, $0.0001 par value—92,664,695 shares outstanding on June 3, 2022.

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets as of April 30, 2022, January 31, 2022 and April 30, 2021	1

	Condensed Consolidated Statements of Income for the three months ended April 30, 2022 and 2021	2

	Condensed Consolidated Statements of Comprehensive Income for the three months ended April 30, 2022 and 2021	3

	Condensed Consolidated Statements of Shareholders’ Equity for the three months ended April 30, 2022 and 2021	4

	Condensed Consolidated Statements of Cash Flows for the three months ended April 30, 2022 and 2021	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26

Item 4.	Controls and Procedures	26

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and the Use of Proceeds	27

Item 6.	Exhibits	28

	Signatures	29

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

(unaudited)

	April 30,			January 31,			April 30,
	2022			2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	71,640		$	206,575		$	364,247
Marketable securities		187,563			239,420			164,430
Accounts receivable, net of allowance for doubtful accounts of $1,153, $1,348 and $2,155, respectively		97,058			63,760			85,307
Inventory		629,953			569,699			477,777
Prepaid expenses and other current assets		221,905			206,293			189,268
Total current assets		1,208,119			1,285,747			1,281,029
Property and equipment, net		1,149,772			1,145,085			988,973
Operating lease right-of-use assets		967,639			1,000,255			1,093,037
Marketable securities		179,458			223,557			100,680
Deferred income taxes and other assets		137,322			136,703			115,888
Total Assets	$	3,642,310		$	3,791,347		$	3,579,607
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	296,673		$	304,246		$	251,944
Current portion of operating lease liabilities		227,533			236,315			246,226
Accrued expenses, accrued compensation and other current liabilities		395,949			440,912			393,430
Total current liabilities		920,155			981,473			891,600
Non-current portion of operating lease liabilities		913,380			951,080			1,060,228
Deferred rent and other liabilities		112,854			113,054			93,270
Total Liabilities		1,946,389			2,045,607			2,045,098
Commitments and contingencies (see Note 12)
Shareholders’ equity:
Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued		—			—			—
Common shares; $.0001 par value, 200,000,000 shares authorized, 94,434,621, 96,431,044 and 98,235,127 shares issued and outstanding, respectively		9			10			10
Additional paid-in-capital		—			—			17,585
Retained earnings		1,740,508			1,770,560			1,528,655
Accumulated other comprehensive loss		(44,596	)		(24,830	)		(11,741	)
Total Shareholders’ Equity		1,695,921			1,745,740			1,534,509
Total Liabilities and Shareholders’ Equity	$	3,642,310		$	3,791,347		$	3,579,607

The accompanying notes are an integral part of these condensed consolidated financial statements.

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except share and per share data)

(unaudited)

	Three Months Ended
	April 30,
	2022			2021
Net sales	$	1,051,934		$	927,415
Cost of sales		728,633			626,764
Gross profit		323,301			300,651
Selling, general and administrative expenses		277,064			227,148
Income from operations		46,237			73,503
Other loss, net		(1,989	)		(155	)
Income before income taxes		44,248			73,348
Income tax expense		12,715			19,801
Net income	$	31,533		$	53,547
Net income per common share:
Basic	$	0.33		$	0.55
Diluted	$	0.33		$	0.54
Weighted-average common shares outstanding:
Basic		95,479,927			98,108,245
Diluted		96,347,211			99,322,220

The accompanying notes are an integral part of these condensed consolidated financial statements.

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in thousands)

(unaudited)

	Three Months Ended
	April 30,
	2022			2021
Net income	$	31,533		$	53,547
Other comprehensive (loss) income:
Foreign currency translation		(14,389	)		5,422
Change in unrealized gains (losses) on marketable securities, net of tax		(5,377	)		(43	)
Total other comprehensive (loss) income		(19,766	)		5,379
Comprehensive income	$	11,767		$	58,926

The accompanying notes are an integral part of these condensed consolidated financial statements.

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(amounts in thousands, except share data)

(unaudited)

													Accumulated
	Common Shares						Additional						Other
	Number of			Par			Paid-in			Retained			Comprehensive
	Shares			Value			Capital			Earnings			Loss			Total
Balances as of January 31, 2022		96,431,044		$	10		$	—		$	1,770,560		$	(24,830	)	$	1,745,740
Comprehensive income		—			—			—			31,533			(19,766	)		11,767
Share-based compensation		—			—			7,102			—			—			7,102
Share-based awards		669,683			—			—			—			—			—
Share repurchases		(2,666,106	)		(1	)		(7,102	)		(61,585	)		—			(68,688	)
Balances as of April 30, 2022		94,434,621		$	9		$	—		$	1,740,508		$	(44,596	)	$	1,695,921

											Accumulated
	Common Shares					Additional					Other
	Number of			Par		Paid-in			Retained		Comprehensive
	Shares			Value		Capital			Earnings		Loss			Total
Balances as of January 31, 2021		97,815,985		$	10	$	19,360		$	1,475,108	$	(17,120	)	$	1,477,358
Comprehensive income		—			—		—			53,547		5,379			58,926
Share-based compensation		—			—		4,570			—		—			4,570
Share-based awards		637,836			—		1,073			—		—			1,073
Share repurchases		(218,694	)		—		(7,418	)		—		—			(7,418	)
Balances as of April 30, 2021		98,235,127		$	10	$	17,585		$	1,528,655	$	(11,741	)	$	1,534,509

The accompanying notes are an integral part of these condensed consolidated financial statements.

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

	Three Months Ended
	April 30,
	2022			2021
Cash flows from operating activities:
Net income	$	31,533		$	53,547
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		26,702			25,633
Non-cash lease expense		47,980			45,422
Provision for deferred income taxes		7,420			37
Share-based compensation expense		7,102			4,570
Loss on disposition of property and equipment, net		85			121
Changes in assets and liabilities:
Receivables		(34,109	)		4,760
Inventory		(64,511	)		(87,427	)
Prepaid expenses and other assets		(22,913	)		(1,355	)
Payables, accrued expenses and other liabilities		(15,184	)		43,442
Operating lease liabilities		(63,662	)		(51,644	)
Net cash (used in) provided by operating activities		(79,557	)		37,106
Cash flows from investing activities:
Cash paid for property and equipment		(73,723	)		(42,589	)
Cash paid for marketable securities		(18,703	)		(94,889	)
Sales and maturities of marketable securities		106,043			73,848
Net cash provided by (used in) investing activities		13,617			(63,630	)
Cash flows from financing activities:
Proceeds from the exercise of stock options		—			1,073
Share repurchases related to share repurchase program		(62,052	)		—
Share repurchases related to taxes for share-based awards		(6,636	)		(7,418	)
Net cash used in financing activities		(68,688	)		(6,345	)
Effect of exchange rate changes on cash and cash equivalents		(307	)		1,481
Decrease in cash and cash equivalents		(134,935	)		(31,388	)
Cash and cash equivalents at beginning of period		206,575			395,635
Cash and cash equivalents at end of period	$	71,640		$	364,247
Supplemental cash flow information:
Cash paid during the year for:
Income taxes	$	1,476		$	1,095
Non-cash investing activities—Accrued capital expenditures	$	23,914		$	40,018

The accompanying notes are an integral part of these condensed consolidated financial statements.

URBAN OUTFITTERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and per share data)

(unaudited)

1. Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed financial statements should be read in conjunction with Urban Outfitters, Inc.’s (the “Company’s”) Annual Report on Form 10-K for the fiscal year ended January 31, 2022, filed with the United States Securities and Exchange Commission on April 1, 2022.

The Company’s business experiences seasonal fluctuations in net sales and net income, with a more significant portion typically realized in the second half of each year predominantly due to the year-end holiday period. Historically, and consistent with the retail industry, this seasonality also impacts our working capital requirements, particularly with regard to inventory. Accordingly, the results of operations for the three months ended April 30, 2022 are not necessarily indicative of the results to be expected for the full year.

The Company’s fiscal year ends on January 31. All references in these notes to the Company’s fiscal years refer to the fiscal years ended on January 31 in those years. For example, the Company’s fiscal year 2023 will end on January 31, 2023.

Recent Accounting Pronouncements

The Company has considered all new accounting standards updates issued by the Financial Accounting Standards Board (“FASB”) and has concluded that there are no recent accounting standard updates that will have a material impact on its consolidated financial statements and related disclosures.

2. Impact of the Coronavirus Pandemic

Impact of the Coronavirus Pandemic on Fiscal 2022

The COVID-19 pandemic continued to negatively impact the Company’s store operations during the beginning of fiscal 2022 with residual impacts on store traffic and store sales resulting from store closures, primarily in Europe and Canada, occupancy restrictions and reduced store hours globally. During the second quarter of fiscal 2022, all remaining COVID-19 government mandated store closures in Europe and Canada expired, although some capacity restrictions continued in certain European and Canadian stores. The COVID-19 pandemic and general unfavorable macro-economic conditions also disrupted the Company’s global supply chain in fiscal 2022, leading to COVID-19 related factory and port closures, continued port congestion and shipping delays, which resulted in inventory receipt delays and an increase in inbound transportation costs. The Company made a strategic decision to start bringing certain product categories in earlier in the third and fourth quarters of fiscal 2022 in an attempt to minimize the impact of such disruptions on the ability to fulfill customer demand.

Impact of the Coronavirus Pandemic and Macroeconomic Uncertainties on Fiscal 2023 and Future Operations

The COVID-19 pandemic and its effects on the global economy continued to impact the Company’s operations during the first quarter of fiscal 2023 and related government and private sector responsive actions could continue to affect its business operations. The Company continues to experience COVID-19 related supply chain disruptions resulting in inventory receipt delays. Furthermore, the Company expects that our operations will continue to be influenced by general economic conditions resulting from COVID-19, such as labor shortages and the impact of inflation, including higher wages, increased merchandise costs and higher inbound transportation costs. In response, the Company is continuing to bring in certain merchandise earlier and diversify our supply chain. The Company cannot reasonably estimate the duration and severity of the COVID-19 pandemic or its effects on the

global economy, which have had and may continue to have a material impact on its business. As a result, current financial information may not be necessarily indicative of future operating results and the Company’s plans to address the impact of the COVID-19 pandemic may change. Additionally, ongoing global issues may affect our business and the global economy, including the geopolitical impact of Russia’s invasion of Ukraine and any related economic or other sanctions.

3. Revenue from Contracts with Customers

Contract receivables occur when the Company satisfies all of its performance obligations under a contract and recognizes revenue prior to billing or receiving consideration from a customer for which it has an unconditional right to payment. Contract receivables arise from credit card, debit card and alternative payment method transactions throughout all segments and sales to the Company’s Wholesale segment customers and franchisees. For the three month period ended April 30, 2022, the opening and closing balances of contract receivables, net of allowance for doubtful accounts, were $63,760 and $97,058, respectively. For the three month period ended April 30, 2021, the opening and closing balances of contract receivables, net of allowance for doubtful accounts, were $89,952 and $85,307, respectively. Contract receivables are included in “Accounts receivable, net of allowance for doubtful accounts” in the Condensed Consolidated Balance Sheets.

Contract liabilities represent unearned revenue and result from the Company receiving consideration in a contract with a customer for which it has not satisfied all of its performance obligations. The Company’s contract liabilities result from customer deposits, customer loyalty programs and the issuance of gift cards. Gift cards are expected to be redeemed within two years of issuance, with the majority of redemptions occurring in the first year. For the three month period ended April 30, 2022, the opening and closing balances of contract liabilities were $78,717 and $71,590, respectively. For the three month period ended April 30, 2021, the opening and closing balances of contract liabilities were $61,986 and $63,970, respectively. Contract liabilities are included in “Accrued expenses, accrued compensation and other current liabilities” in the Condensed Consolidated Balance Sheets. During the three month period ended April 30, 2022, the Company recognized $18,340 of revenue that was included in the contract liability balance at the beginning of the period. During the three month period ended April 30, 2021, the Company recognized $14,157 of revenue that was included in the contract liability balance at the beginning of the period.

4. Marketable Securities

During all periods shown, marketable securities are classified as available-for-sale. The amortized cost, gross unrealized gains (losses) and fair value of available-for-sale securities by major security type and class of security as of April 30, 2022, January 31, 2022 and April 30, 2021 were as follows:

	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
As of April 30, 2022
Short-term Investments:
Corporate bonds	$	85,474	$	—	$	(857	)	$	84,617
Municipal and pre-refunded municipal bonds		86,134		—		(633	)		85,501
US Treasury securities		9,749		—		(93	)		9,656
Commercial paper		7,789		—		—			7,789
		189,146		—		(1,583	)		187,563
Long-term Investments:
Corporate bonds		117,403		—		(4,904	)		112,499
Municipal and pre-refunded municipal bonds		53,928		—		(2,081	)		51,847
US Treasury securities		3,226		—		(138	)		3,088
Mutual funds, held in rabbi trust		12,393		—		(956	)		11,437
Federal government agencies		350		—		(12	)		338
Certificates of deposit		249		—		—			249
		187,549		—		(8,091	)		179,458
	$	376,695	$	—	$	(9,674	)	$	367,021
As of January 31, 2022
Short-term Investments:
Corporate bonds	$	85,062	$	1	$	(200	)	$	84,863
Municipal and pre-refunded municipal bonds		128,984		1		(273	)		128,712
US Treasury securities		14,999		—		(38	)		14,961
Commercial paper		10,884