10-Q
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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, 2023

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: (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. YesNo

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). YesNo

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—92,697,835 shares outstanding on June 5, 2023.


TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

 

 

 

 

Condensed Consolidated Balance Sheets as of April 30, 2023, January 31, 2023 and April 30, 2022

1

 

 

 

Condensed Consolidated Statements of Income for the three months ended April 30, 2023 and 2022

2

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three months ended April 30, 2023 and 2022

3

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity for the three months ended April 30, 2023 and 2022

4

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended April 30, 2023 and 2022

5

 

 

 

Notes to Condensed Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

24

 

 

 

Item 4.

Controls and Procedures

25

 

 

 

PART II

OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

26

 

 

 

Item 1A.

Risk Factors

26

 

 

 

Item 6.

Exhibits

27

 

 

 

Signatures

28

 


 

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,

 

 

 

2023

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

171,655

 

 

$

201,260

 

 

$

71,640

 

Marketable securities

 

 

209,777

 

 

 

181,378

 

 

 

187,563

 

Accounts receivable, net of allowance for doubtful accounts of
   $
1,453, $1,496 and $1,153, respectively

 

 

105,589

 

 

 

70,339

 

 

 

97,058

 

Inventory

 

 

590,326

 

 

 

587,510

 

 

 

629,953

 

Prepaid expenses and other current assets

 

 

223,894

 

 

 

197,232

 

 

 

221,905

 

Total current assets

 

 

1,301,241

 

 

 

1,237,719

 

 

 

1,208,119

 

Property and equipment, net

 

 

1,201,506

 

 

 

1,187,735

 

 

 

1,149,772

 

Operating lease right-of-use assets

 

 

921,893

 

 

 

959,436

 

 

 

967,639

 

Marketable securities

 

 

86,156

 

 

 

102,844

 

 

 

179,458

 

Deferred income taxes and other assets

 

 

281,874

 

 

 

195,178

 

 

 

137,322

 

Total Assets

 

$

3,792,670

 

 

$

3,682,912

 

 

$

3,642,310

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

263,558

 

 

$

257,620

 

 

$

296,673

 

Current portion of operating lease liabilities

 

 

233,085

 

 

 

232,672

 

 

 

227,533

 

Accrued expenses, accrued compensation and other current liabilities

 

 

431,033

 

 

 

400,082

 

 

 

395,949

 

Total current liabilities

 

 

927,676

 

 

 

890,374

 

 

 

920,155

 

Non-current portion of operating lease liabilities

 

 

845,643

 

 

 

884,696

 

 

 

913,380

 

Deferred rent and other liabilities

 

 

168,669

 

 

 

115,159

 

 

 

112,854

 

Total Liabilities

 

 

1,941,988

 

 

 

1,890,229

 

 

 

1,946,389

 

Commitments and contingencies (see Note 11)

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

 

Preferred shares; $.0001 par value, 10,000,000 shares authorized,
   
none issued

 

 

 

 

 

 

 

 

 

Common shares; $.0001 par value, 200,000,000 shares authorized,
   
92,677,835, 92,180,709 and 94,434,621 shares issued and
   outstanding, respectively

 

 

9

 

 

 

9

 

 

 

9

 

Additional paid-in-capital

 

 

15,133

 

 

 

15,248

 

 

 

 

Retained earnings

 

 

1,878,878

 

 

 

1,826,061

 

 

 

1,740,508

 

Accumulated other comprehensive loss

 

 

(43,338

)

 

 

(48,635

)

 

 

(44,596

)

Total Shareholders’ Equity

 

 

1,850,682

 

 

 

1,792,683

 

 

 

1,695,921

 

Total Liabilities and Shareholders’ Equity

 

$

3,792,670

 

 

$

3,682,912

 

 

$

3,642,310

 

 

 

 

 

 

 

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,

 

 

 

2023

 

 

2022

 

Net sales

 

$

1,113,674

 

 

$

1,051,934

 

Cost of sales

 

 

742,443

 

 

 

728,633

 

Gross profit

 

 

371,231

 

 

 

323,301

 

Selling, general and administrative expenses

 

 

299,848

 

 

 

277,064

 

 Income from operations

 

 

71,383

 

 

 

46,237

 

Other income (loss), net

 

 

1,019

 

 

 

(1,989

)

Income before income taxes

 

 

72,402

 

 

 

44,248

 

Income tax expense

 

 

19,585

 

 

 

12,715

 

Net income

 

$

52,817

 

 

$

31,533

 

Net income per common share:

 

 

 

 

 

 

Basic

 

$

0.57

 

 

$

0.33

 

Diluted

 

$

0.56

 

 

$

0.33

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

Basic

 

 

92,474,688

 

 

 

95,479,927

 

Diluted

 

 

93,821,292

 

 

 

96,347,211

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

2023

 

 

2022

 

Net income

 

$

52,817

 

 

$

31,533

 

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

 

3,177

 

 

 

(14,389

)

Change in unrealized gains (losses) on marketable securities, net of tax

 

 

2,120

 

 

 

(5,377

)

Total other comprehensive income (loss)

 

 

5,297

 

 

 

(19,766

)

Comprehensive income

 

$

58,114

 

 

$

11,767

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2023

 

 

92,180,709

 

 

$

9

 

 

$

15,248

 

 

$

1,826,061

 

 

$

(48,635

)

 

$

1,792,683

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

52,817

 

 

 

5,297

 

 

 

58,114

 

Share-based compensation

 

 

 

 

 

 

 

 

7,735

 

 

 

 

 

 

 

 

 

7,735

 

Share-based awards

 

 

790,388

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share repurchases

 

 

(293,262

)

 

 

 

 

 

(7,850

)

 

 

 

 

 

 

 

 

(7,850

)

Balances as of April 30, 2023

 

 

92,677,835

 

 

$

9

 

 

$

15,133

 

 

$

1,878,878

 

 

$

(43,338

)

 

$

1,850,682

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

52,817

 

 

$

31,533

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

23,879

 

 

 

26,702

 

Non-cash lease expense

 

 

50,859

 

 

 

47,980

 

Provision for deferred income taxes

 

 

2,457

 

 

 

7,420

 

Share-based compensation expense

 

 

7,735

 

 

 

7,102

 

Amortization of tax credit investment

 

 

3,976

 

 

 

 

Loss on disposition of property and equipment, net

 

 

222

 

 

 

85

 

Changes in assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

(35,030

)

 

 

(34,109

)

Inventory

 

 

(1,649

)

 

 

(64,511

)

Prepaid expenses and other assets

 

 

(35,045

)

 

 

(22,913

)

Payables, accrued expenses and other liabilities

 

 

22,257

 

 

 

(15,184

)

Operating lease liabilities

 

 

(56,201

)

 

 

(63,662

)

Net cash provided by (used in) operating activities

 

 

36,277

 

 

 

(79,557

)

Cash flows from investing activities:

 

 

 

 

 

 

Cash paid for property and equipment

 

 

(32,904

)

 

 

(73,723

)

Cash paid for marketable securities

 

 

(74,101

)

 

 

(18,703

)

Sales and maturities of marketable securities

 

 

69,456

 

 

 

106,043

 

Initial cash payment for tax credit investment

 

 

(20,000

)

 

 

 

Net cash (used in) provided by investing activities

 

 

(57,549

)

 

 

13,617

 

Cash flows from financing activities:

 

 

 

 

 

 

Share repurchases related to share repurchase program

 

 

 

 

 

(62,052

)

Share repurchases related to taxes for share-based awards

 

 

(7,850

)

 

 

(6,636

)

Tax credit investment liability payments

 

 

(468

)

 

 

 

Net cash used in financing activities

 

 

(8,318

)

 

 

(68,688

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(15

)

 

 

(307

)

Decrease in cash and cash equivalents

 

 

(29,605

)

 

 

(134,935

)

Cash and cash equivalents at beginning of period

 

 

201,260

 

 

 

206,575

 

Cash and cash equivalents at end of period

 

$

171,655

 

 

$

71,640

 

Supplemental cash flow information:

 

 

 

 

 

 

Cash paid during the year for income taxes

 

$

1,115

 

 

$

1,476

 

Non-cash investing activities—Accrued capital expenditures

 

$

19,529

 

 

$

23,914

 

Right-of-use assets obtained in exchange for operating lease liabilities

 

$

19,698

 

 

$

30,558

 

Non-cash investing activities—Accrued tax credit investment installments

 

$

62,120

 

 

$

 

 

 

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, 2023, filed with the United States Securities and Exchange Commission on April 3, 2023.

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, 2023 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 2024 will end on January 31, 2024.

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. 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, 2023, the opening and closing balances of contract receivables, net of allowance for doubtful accounts, were $70,339 and $105,589, respectively. 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. 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, 2023, the opening and closing balances of contract liabilities were $82,867 and $76,750, respectively. For the three month period ended April 30, 2022, the opening and closing balances of contract liabilities were $78,717 and $71,590, 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, 2023, the Company recognized $17,788 of revenue that was included in the contract liability balance at the beginning of the period. 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.

6


 

3. 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, 2023, January 31, 2023 and April 30, 2022 were as follows:

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gains

 

 

(Losses)

 

 

Value

 

As of April 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Short-term Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

86,052

 

 

$

1

 

 

$

(1,214

)

 

$

84,839

 

Municipal and pre-refunded municipal bonds

 

 

45,467

 

 

 

 

 

 

(547

)

 

 

44,920

 

Commercial paper