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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

OR

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: (215454-5500

 

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.

1


 

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.

2


 

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.

3


 

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.

4


 

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.

5


 

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

6


 

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.

 

7


 

 

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

 

 

 

 

 

 

 

 

 

10,884

 

 

 

 

239,929

 

 

 

2

 

 

 

(511

)

 

 

239,420

 

Long-term Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

148,830