UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

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

                   For the fiscal year ended January 31, 1997

                           Commission File No. 0-16999

                             URBAN OUTFITTERS, INC.
             (Exact name of registrant as specified in its charter)


      PENNSYLVANIA                                    23-2003332
- ------------------------                   ------------------------------------
(State of incorporation)                   (I.R.S. Employer Identification No.)


                   1809 Walnut Street, Philadelphia, PA 19103
                   ------------------------------------------
                    (Address of principal executive offices)


       Registrant's telephone number, including area code: (215) 564-2313
                                                           --------------

        Securities registered pursuant to Section 12(b) of the Act: None

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


                         Common Shares, $.0001 par value
                         -------------------------------
                                (Title of class)


     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 [X]    No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

           17,528,698 Common Shares were outstanding at April 4, 1997

     The aggregate market value of voting shares held by non-affiliates at
April 4, 1997 was $96,280,168

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for Registrant's 1997 Annual Meeting of
Shareholders -- Part III.



<PAGE>


                                TABLE OF CONTENTS




                                     PART I



Item 1.    Business........................................................   3


Item 2.    Properties......................................................   7


Item 3.    Legal Proceedings...............................................  10


Item 4.    Submission of Matters to a Vote of Security Holders.............  10



                                     PART II


Item 5.    Market for Registrant's Common Equity and Related
           Shareholder Matters.............................................  11


Item 6.    Selected Financial Data.........................................  12


Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations ......................................  13


Item 8.    Financial Statements and Supplementary Data.....................  18


Item 9.    Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure .......................................  18



                                    PART III


Item 10.   Directors and Executive Officers of the Registrant..............  19


Item 11.   Executive Compensation..........................................  21


Item 12.   Security Ownership of Certain Beneficial Owners and Management..  21


Item 13.   Certain Relationships and Related Transactions..................  21



                                     PART IV


Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K.. 22


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS..................................F-1

FINANCIAL STATEMENT SCHEDULES...............................................S-1

                                   ----------

As used in this Report on Form 10-K, "fiscal 1993," "fiscal 1994," "fiscal
1995," "fiscal 1996" and "fiscal 1997" refer to the Company's fiscal years ended
January 31 in each of those fiscal years.



<PAGE>



                                     PART I



Item 1. Business

General

     Urban Outfitters, Inc. ("Urban Outfitters" or the "Company") is an
innovative specialty retailer and wholesaler which offers a variety of lifestyle
merchandise to highly defined customer niches. The Company's unique concept
forms the basis for its two retail divisions ("Urban Retail" and
"Anthropologie"), each of which sells a broad array of fashion apparel,
accessories and household and gift merchandise in an exciting and dynamic retail
environment. The Company's wholesale subsidiary ("Wholesale") designs and
markets young women's casual wear which it provides to the Company's retail
operations and sells to over 2,000 better specialty stores worldwide.

     Founded and originally operated by a predecessor partnership, the Company
opened its first store in 1970 near the University of Pennsylvania campus in
Philadelphia. The Company was incorporated in Pennsylvania in 1976, and opened
its second store in Harvard Square, Cambridge, Massachusetts in 1980. The
Company has since expanded to 25 Urban Retail stores in 18 metropolitan areas
throughout the United States and Canada. The Company has opened eight
Anthropologie stores in eight metropolitan areas most of which overlap the Urban
Retail areas. The Company is in the process of identifying new retail locations,
negotiating new leases and planning to accelerate its rate of new store openings
in the coming years.

          Urban Retail: Urban Retail has established a strong reputation among
urban, style-conscious young adults aged 18 to 30. Urban Retail stores, which
average approximately 10,000 net selling square feet and carry 50,000 to 60,000
SKUs, are typically located near large universities or other youth enclaves. The
Company's lifestyle merchandise offerings include women's and men's fashion
apparel, footwear and accessories and apartment wares and gifts. Urban Retail
accounted for approximately 69.3% and 76.8% of the Company's net sales in fiscal
1997 and in fiscal 1996, respectively.

          Anthropologie: Anthropologie, the Company's second retail format,
mirrors Urban Retail but tailors its merchandise and shopping environment to
appeal to an older, more established suburban customer, typically women aged 25
to 45. The Company opened its first Anthropologie store in a suburb of
Philadelphia in October 1992. Anthropologie stores average approximately 9,000
net selling square feet and carry 20,000 to 25,000 SKUs with a greater emphasis
on home. The stores are typically located in affluent suburban locations. A few
very special urban locations, such as Soho in New York City, will be part of the
mix. Product offerings include women's casual apparel and accessories, home
furnishings and an eclectic array of gifts and decorative accessories for the
home, garden, bed and bath. Anthropologie accounted for approximately 6.9% and
12.6% of the Company's net sales in fiscal 1996 and in fiscal 1997,
respectively. Anthropologie has a totally separate senior management group,
buying staff, visual merchandising group and operation management. It shares,
with the other companies, distribution, MIS, inventory management, sales audit,
control/accounting and administration.


                                        3


<PAGE>


          Wholesale: Wholesale was established in 1984 to develop, side by side
with Urban Retail, apparel lines of young women's casual wear that could be
effectively sold in the Urban Retail stores at attractive pricing to the retail
customers. In order to provide the "attractive" prices, minimum production lots
are necessary. In order to reach these production minimums Wholesale sells to
other retailers throughout the United States. The Wholesale design and
production staffs have expanded their involvement by designing and producing
private label merchandise categories such as apartment wares, gifts, accessories
and shoes.

     While continuing its role with Urban Retail and Anthropologie, Wholesale
also sells its products to over 2,000 better specialty stores worldwide under
five labels: Free People, Ecote, Anthropologie, Co-Operative and Bulldog.
Wholesale accounted for approximately 16.3% and 18.1% of the Company's net sales
in fiscal 1996 and in fiscal 1997, respectively. Like Anthropologie and Urban
Retail, Wholesale has its own senior and creative management while sharing those
previously identified support services.

     The Company's home offices occupy about 18,000 square feet at 1809 Walnut
Street, Philadelphia, Pennsylvania, adjacent to the Urban Retail store at 1801
Walnut Street.


Retail Strategy

     The Company's overall retailing strategy is to concentrate on its target
customers and offer a wide assortment of distinctive products in a compelling
shopping environment. By executing this strategy, the Company believes that it
has successfully captured and developed unique market niches. Elements of this
strategy include:

     o    Locating Stores in Destination Areas

     o    Creating Highly Differentiated Store Environments

     o    Offering a Broad Merchandise Selection

     o    Emphasizing Dynamic Visual Merchandising


Store Expansion Strategy

     The Company strategy is to open three to four new stores each year for both
retail concepts. In fiscal 1997, Urban Retail opened two new stores while
Anthropologie opened five.


                                        4


<PAGE>


     In selecting new Urban Retail store sites, the Company typically looks for
locations in metropolitan areas with high concentrations of its target
customers. The Company anticipates that the majority of new Urban Retail stores
will continue to be located near large universities or other youth enclaves with
high levels of foot traffic. The majority of new Anthropologie stores are
expected to be located in the affluent suburban areas in which its target
customers live.


Company Operations

     Purchasing: The Company purchases its retail merchandise from numerous
domestic and foreign vendors. During fiscal 1997, the Company's ten largest
retail suppliers, excluding wholesale and in-house private label products,
accounted for approximately 16% of its purchases. The spread of the ten
suppliers is from 0.9% to 3.4% with a mode of 1.1%. The Company may be the
largest customer for many of its smaller, niche vendor sources.

     Distribution: In October 1996, the Company completed construction and
occupied its new 100,000-square-foot distribution center. The majority of
merchandise purchased by Urban Retail, Anthropologie, and Wholesale is shipped
directly to this facility. The facility has an advanced computerized materials
handling system, is expandable within its current "footprint" and can be doubled
in size as future needs arise. The 100,000-square-foot structure is expected to
provide distribution capability through the year 2002. The facility is owned by
the Company and is approximately 60 miles from the home office in Philadelphia.
Due to its proximity to the former distribution center, most of the original
work force retained their positions when the move was executed. After a brief
shakedown period, in which a few minor problems were experienced, productivity
grew significantly and continues to do so.

     As the Company grows on the West Coast, it will likely add a small
distribution facility in the California/Nevada area. The Company currently uses
third-party distribution in Canada and in Europe.

     Management Information Systems: Very early in the Company's growth,
management recognized the need for high-quality information in order to manage
the merchandise planning/buying, inventory management and control functions. The
Company invested in a retail software package that it believes continues to be
one of the best available. The Company is one of the smallest retailers to have
implemented this package. The Company utilizes Point of Sale ("POS") register
and polling systems which provide for register efficiencies, improved customer
checkout and overnight polling.

     To manage its separate needs, Wholesale uses a software system for customer
service, order entry and allocations, production planning and inventory
management.

     Inventory and Shrinkage Control: The Company's inventory management system
enables it to efficiently manage its inventory position. This system provides
management with accurate and timely information about inventory, pricing,
costing, markdowns, markups, transfers, damages, sales and perpetual inventory
levels. The system allows these items to be monitored by SKU, by location and
by day.


                                        5


<PAGE>


     The Company believes its shrinkage levels are below the industry average
despite many store locations in typically higher theft areas. Merchandise
shrinkage control begins at the distribution center with the Company's
information systems, internal employee procedures and self-auditing controls.
The Company educates and incentivizes store employees to actively participate in
loss prevention, and believes that its store employees are the most effective
deterrent to both internal and external theft.


Competition

     The specialty retail and wholesale apparel businesses are highly
competitive. Retail competitive factors include store location; merchandise
breadth, quality, style, and availability; level of customer service; and price.
The Company's retail stores compete against a wide variety of smaller,
independent specialty stores as well as department stores and national specialty
chains. Wholesale competes with numerous companies, many of whose products have
wider distribution than the Company's. Certain of Urban Outfitters' retail and
wholesale competitors have greater name recognition and financial and other
resources than the Company.


Trademarks and Service Marks

     The Company is the registered owner in the United States of the service
marks "Urban Outfitters" and "Anthropologie," and the trademarks
"Anthropologie," "Ecote," "Co-Operative," "Urban Renewal," "Free People,"
"R.V.," "Slant," "Big Smokey," "Fink," "Lisa L.," "Lip Gloss," and "Shag." U.S.
service marks have a term of 20 years, whereas trademarks have a term of
10 years.

     Each mark is renewable indefinitely, contingent upon continued use at the
time of renewal. Accordingly, unless renewed, the marks will expire as follows:

Urban Outfitters(sm)        2005                  R.V.(TM)               2005
Anthropologie(sm)           2013                  Slant(TM)              2005
Anthropologie(TM)           2000                  Big Smokey(TM)         2006
Ecote(TM)                   2000                  Fink(TM)               2006
Co-Operative(TM)            2002                  Lisa L.(TM)            2006
Urban Renewal(TM)           2003                  Lip Gloss(TM)          2007
Free People(TM)             2004                  Shag(TM)               2007



                                        6


<PAGE>



     In addition, the Company currently has pending registration applications
with the Trademark Office covering the trademarks "Bulldog Guaranteed Tough,"
"Cultural Studies," "365 Days," "Gert's," and "Stappleford." The Company is also
the owner of several international service marks and trademarks which have been
registered in Argentina, Australia, Benelux, Brazil, Canada, Chile, the Czech
Republic, France, Germany, Hong Kong, Italy, Japan, Mexico, Spain, Sweden,
Switzerland, Taiwan and the UK. Applications for trademarks have been filed in
several other countries as well.

     In the opinion of management, the Company's service marks and trademarks
are important to its business due to their name recognition with the Company's
customers. Accordingly, the Company intends to maintain and preserve its marks
and the related registrations and to vigorously seek to protect them from
infringement. The Company is not aware of any claims of infringement or other
challenges to the Company's right to use any of its marks in the United States.
There can be no assurance, however, that the Company's trademarks do not or will
not violate the proprietary rights of others, that they would be upheld if
challenged or that the Company would, in such an event, not be prevented from
using its trademarks, any of which could have an adverse effect on the Company.

Employees

     The Company employs approximately 1,281 persons, 741 (58%) of whom are
full-time employees and 540 (42%) of whom are part-time employees. Of the
Company's total employees, 981 (77%) work at Urban Retail, 243 (19%) work at
Anthropologie and 57 (4%) work at Wholesale. The number of part-time employees
fluctuates depending on seasonal needs. None of the Company's employees are
covered by collective bargaining agreements and management believes that the
Company's relations with its employees are excellent.




I
tem 2. Properties

     The Company's home offices are located at 1809 Walnut Street, immediately
adjacent to the retail store at 1801 Walnut Street in Philadelphia.

     All of the Urban Retail and Anthropologie stores are leased. The Company's
retail stores are typically leased for a term of ten years with renewal options
for an additional five to ten years. The following table shows the location,
date opened and net selling square feet of each of the Company's existing retail
stores. Net selling square feet can sometimes change due to floor moves, use of
staircases, cash register configuration, etc.


                                        7


<PAGE>


                                                                  NET SELLING
LOCATION                                DATE OPENED               SQUARE FEET
- --------                                -----------               -----------

Urban Outfitters Stores
- -----------------------

Philadelphia, PA                      November 1970                  7,500
4040 Locust Street

Cambridge, MA                        September 1980                 14,670
11 J.F. Kennedy Street

Philadelphia, PA                         April 1982                 10,320
1801 Walnut Street

New York, NY                              July 1983                 10,020
628 Broadway

Washington, DC                        November 1983                 12,660
3111 M Street, N.W.

New York, NY                              June 1987                  7,530
374 Avenue of Americas

Madison, WI                                May 1989                 10,420
604 State Street

Ann Arbor, MI                           August 1989                  8,940
231 S. State Street

Boston, MA                             October 1989                 11,260
361 Newbury Street

Minneapolis, MN                          April 1990                  7,110
3006 Hennepin Ave., S.

New York, NY                             March 1991                  8,890
127 East 59th Street

Seattle, WA                              April 1991                 13,550
401 Broadway, East

Berkeley, CA                             March 1992                  8,020
2590 Bancroft Way

Santa Monica, CA                      November 1992                 11,060
1440 Third Street Promenade

San Francisco, CA                      October 1993                  7,860
80 Powell Street

Costa Mesa, CA                        December 1993                  9,470
2930 Bristol Street

Chicago, IL                             August 1994                  7,900
2352 N. Clark Street

Pasadena, CA                          November 1994                 12,430
139 W. Colorado Blvd.

Chicago, IL                           November 1994                 11,460
935 N. Rush Street

Portland, OR                             March 1995                 11,140
2320 N.W. Westover Road


                                        8


<PAGE>


                                                                  NET SELLING
LOCATION                                DATE OPENED               SQUARE FEET
- --------                                -----------               -----------

Austin, TX                                June 1995                  7,770
2406 Guadalupe Street

Tempe, AZ                                 July 1995                  8,810
545 South Mill Ave.

Houston, TX                           November 1995                  9,880
2501 University Blvd.

Montreal, PQ                          December 1996                 13,090
1246 Ste. Catherine Street, W.

Toronto, ON                           December 1996                  6,990
235 Yonge Street

Miami, FL *                                     TBA                 10,000
653 Collins Ave.

Boulder, CO *                                   TBA                  8,000
934 Pearl Street


Anthropologie Stores
- --------------------

Wayne, PA                              October 1992                  7,710
201 W. Lancaster Ave.

Rockville, MD                           August 1994                  9,230
11500 Rockville Pike

Westport, CT                          December 1994                  8,340
1365 Post Road, East

Greenvale, NY                            March 1996                  7,490
9 Northern Blvd.

SoHo, NY                                   May 1996                  8,180
375 West Broadway

Newport Beach, CA                          May 1996                  7,010
823 Newport Center Drive

Santa Monica, CA                        August 1996                 11,610
1402 Third Street Promenade

Chicago, IL                           November 1996                  7,580
1120 N. State Street

Highland Park, IL                               TBA                  8,260
696 Central Avenue

*Net Selling Square Feet are only estimates at this time.


                                        9


<PAGE>


     Wholesale's showroom in New York City is leased through July 1999. Retail
and Wholesale distribution center properties are discussed in the Distribution
section on page 5.

     The Company believes that its facilities are well-maintained, in good
operating condition and adequate for its current needs.


Item 3. Legal Proceedings

     None.


Item 4. Submission of Matters to a Vote of Security Holders

     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended January 31, 1997, through the solicitation of
proxies or otherwise.

Executive Officers of the Registrant

     The information concerning the Company's executive officers required by
this Item is incorporated by reference herein to Part III, Item 10 of this Form
10-K.


                                       10


<PAGE>



                                     PART II



Item 5. Market for Registrant's Common Equity and Related Shareholder Matters

     The Company's common shares are traded on the NASDAQ National Market System
under the symbol "URBN."


Market Information
                                                        Market Prices ($)*
                                                     ------------------------
                                                     High Bid         Low Bid
                                                      Price            Price
                                                     --------         -------

         Fiscal 1995

         Quarter ended April 30, 1994                 14               11
         Quarter ended July 31, 1994                  12 3/4           9 5/8
         Quarter ended October 31, 1994               15 3/8           10
         Quarter ended January 31, 1995               15 5/8           12 7/8


         Fiscal 1996

         Quarter ended April 30, 1995                 13 1/8           9 3/4
         Quarter ended July 31, 1995                  11 15/16         9
         Quarter ended October 31, 1995               13 1/2           10 3/8
         Quarter ended January 31, 1996               13 1/8           10 1/16


         Fiscal 1997

         Quarter ended April 30, 1996                 16 15/16         12
         Quarter ended July 31, 1996                  27 3/8           14 3/4
         Quarter ended October 31, 1996               24 3/4           13 5/8
         Quarter ended January 31, 1997               17               10 1/2


                                         *Post June 1, 1996 2-for-1 stock split


                                       11


<PAGE>


Holders

     On April 4, 1997, the Company had approximately 2,200 shareholders.


Dividends

     The Company has not paid any cash dividends since its inception and does
not anticipate paying any cash dividends on its common shares in the foreseeable
future.



Item 6. Selected Financial Data

     The following table sets forth selected consolidated income statement and
balance sheet data for the periods indicated. The selected consolidated income
statement and balance sheet data, at and for each of the five fiscal years
presented below, are derived from the consolidated financial statements of the
Company. The data presented below should be read in conjunction with the
consolidated financial statements of the Company, including the related notes
thereto, included elsewhere in this document.


<TABLE>
<CAPTION>

                                                                    Fiscal Year Ended January 31,
                                                -----------------------------------------------------------------------
                                                    1993           1994           1995           1996           1997
                                                -----------    -----------    -----------    -----------    -----------
                                                          (In thousands, except share and per share data)
<S>                                             <C>            <C>            <C>            <C>            <C>        
Income Statement Data:
Net sales ..................................    $    59,135    $    84,486    $   110,121    $   133,036    $   156,414

Gross profit ...............................         30,165         43,989         57,334         67,583         78,505


Income from operations .....................          7,004         13,302         17,576         19,867         21,356

Net income .................................    $     4,078    $     7,806    $    10,817    $    12,308    $    13,260
                                                ===========    ===========    ===========    ===========    ===========

Net income per common share ................    $       .26    $       .49    $       .61    $       .70    $       .75
                                                ===========    ===========    ===========    ===========    ===========

Weighted average common shares outstanding .     15,719,854     16,064,372     17,575,608     17,619,888     17,782,896


Balance Sheet Data:
Working capital ............................    $     8,744    $    28,285    $    26,872    $    36,487    $    39,239
Total assets ...............................         20,913         43,400         56,766         71,117         89,675
Total liabilities ..........................          7,883          7,902         10,015         11,665         13,983
Long-term debt, excluding current maturities            898             --             --             --             --
Total shareholders' equity .................         13,030         35,498         46,751         59,452         75,692
</TABLE>



                                       12


<PAGE>



Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

     The following discussion of the Company's historical results of operations
and of its liquidity and capital resources should be read in conjunction with
the selected financial data and the consolidated financial statements of the
Company and related notes thereto appearing elsewhere in this Form 10-K.

General

     The Company is composed of two retail subsidiaries, Urban Retail and
Anthropologie, and a Wholesale subsidiary. Urban Retail is the largest of the
three, has the highest gross profit margins and generates most of the Company's
revenues and profits. Urban Retail had 25 stores opened at January 31, 1997 and
23 at January 31, 1996. The Company's first Anthropologie store opened in
October 1992. Two Anthropologie stores were added in fiscal 1995. Due to
protracted lease negotiations, no new stores were opened in fiscal 1996, while
five Anthropologie stores were opened in fiscal 1997. Negotiations for
additional leases continue. The Wholesale company's growth is from both the
domestic and international markets.

     Fiscal 1997 and 1996 continued as very profitable years for Urban
Outfitters with earnings to net sales of 8.5% and 9.3%, respectively, as well as
return on shareholders' equity of 17.5% and 20.7%, respectively. The slight
contraction of earning to net sales in fiscal 1997 and the direction of return
on shareholders' equity in that year resulted primarily from a slowdown in
retail sales growth in both fiscal 1997 and 1996. A combination of lower
comparable store sales growth in the two years and planned new stores either not
opened (fiscal 1996) or opened late (fiscal 1997) caused the slowdown in sales
growth. The Wholesale company has, by contrast, continued to record exceptional
sales growth throughout the two fiscal years.

     The Company's fiscal year ends on January 31. All references in this
discussion to fiscal years of the Company refer to the fiscal years ended on
January 31 in those years. For example, the Company's 1997 fiscal year is its
fiscal year ended January 31, 1997. The comparable store net sales data
presented in this discussion are calculated based on the net sales of all stores
open at least twelve full months at the beginning of the period for which such
data is presented.

Results of Operations

     The following tables set forth, for the periods indicated, the percentage
of the Company's net sales represented by certain income statement data and the
growth of certain of such income statement data from period to period.


                                       13


<PAGE>



<TABLE>
<CAPTION>

                                                            Fiscal Year Ended
                                                               January 31,
                                                     ------------------------------
As a Percentage of Net Sales                         1995         1996         1997
                                                     ----         ----         ----
<S>                                                 <C>          <C>          <C>   
Net sales ..................................        100.0%       100.0%       100.0%
Cost of goods sold .........................         47.9         49.2         49.8
                                                    -----        -----        -----
  Gross profit .............................         52.1         50.8         50.2
Selling, general and administrative expenses         36.1         35.9         36.5
                                                    -----        -----        -----
  Income from operations ...................         16.0         14.9         13.7
Net interest and other expenses (income) ...          (.9)        (1.0)         (.8)
                                                    -----        -----        -----
  Income before income taxes ...............         16.9         15.9         14.5
Income tax expense .........................          7.1          6.6          6.0
                                                    -----        -----        -----
  Net income ...............................          9.8%         9.3%         8.5%
                                                    =====        =====        =====

Period over Period Dollar Growth

Net sales ..................................                      20.8%        17.6%
Gross profit ...............................                      17.9         16.2%
Income from operations .....................                      13.0          7.5%
Net income .................................                      13.8%         7.7%
                                                                  =====       =====
</TABLE>



Fiscal 1997 Compared to Fiscal 1996

     Net sales in fiscal 1997 increased to $156.4 million from $133.0 million in
the prior fiscal year, a 17.6% increase. The $23.4 million increase was
attributable to comparable store net sales increases of $2.2 million, net sales
of $14.5 million from stores opened or enlarged during fiscal 1996 and fiscal
1997 and net sales increases of $6.7 million from the Wholesale company. The
comparable store sales increase of 2.1% or $2.2 million in fiscal 1997 over 1996
results from the inverse relationship of higher average selling prices and fewer
pieces sold. The higher average selling prices representing approximately $12.1
million and the fewer pieces sold approximately $9.9 million leaving the $2.2
million in comparable store sales. New and enlarged stores included four stores
opened in fiscal 1996 and seven opened in fiscal 1997. The Company believes
increased net sales from the Wholesale subsidiary during fiscal 1997 were
attributable to increased orders and order size due to the popularity of its
product lines as well as growth in number of orders and size of orders from
international customers.


                                       14


<PAGE>


     The Company's gross profit margin declined from 50.8% in fiscal 1996 to
50.2% in fiscal 1997. The primary contributors to the decline were higher
markdowns in the retail companies, high growth of a new, lower margin product
line in the Wholesale company, and a mix swing to higher sales in the lower
gross profit margin companies -- Anthropologie and Wholesale. Markdowns were
triggered by lower than plan comparable store sales and by late openings of two
Urban Retail stores. The new Wholesale product line did not have production
economies of scale enjoyed by its larger and more established product lines.

     Selling, general and administrative expenses grew to $57.1 million in
fiscal 1997 from $47.7 million in the prior fiscal year, a 19.8% increase. As a
percentage of net sales, the expenses increased to 36.5% in fiscal 1997 from
35.9% in the prior fiscal year. The increase in percentage was attributable to
Urban Retail due to lower comparable store sales. Conversely, both Anthropologie
and Wholesale experienced selling, general and administrative expense leveraging
on significant sales growth.

     Net income increased to $13.3 million in fiscal 1997 from $12.3 million in
the prior fiscal year, a 7.7% increase. This increase was principally achieved
through increases in net sales.


Fiscal 1996 Compared to Fiscal 1995

     Net sales in fiscal 1996 increased to $133.0 million from $110.1 million in
the prior fiscal year, a 20.8% increase. The $22.9 million increase was
attributable to comparable store net sales increases of $2.3 million, net sales
of $19.0 million from stores opened or enlarged during fiscal 1995 and fiscal
1996 and net sales increases of $1.6 million from Wholesale. The comparable
store sales increase of 3.3% over fiscal 1995 levels was created by an inverse
relationship between a decline in the average selling price and a greater
increase in the pieces sold. The average selling price decline of 3.5% was a
combination of lower initial selling prices from a mix of lower priced
merchandise (not lower markups) and higher markdowns in fiscal 1996 when
compared to fiscal 1995. Pieces sold, on the other hand, increased by 7.1%. The
increases from new and enlarged store sales growth in fiscal 1996 were
attributed to three Urban Retail stores and two Anthropologie stores opened in
the second half of fiscal 1995 and four Urban Retail stores opened in fiscal
1996. The Company believes increased net sales from the Wholesale subsidiary
during fiscal 1996 were attributable to increased orders and order size due to
the popularity of its product lines.

     The Company's gross profit margin declined from 52.1% in fiscal 1995 to
50.8% in fiscal 1996. The primary contributors to the decline were higher
markdowns across all three companies in fiscal 1996. Contrary to the markdown
trend, initial markups were higher in each company than in the prior year.
Anthropologie stores opened prior to the beginning of fiscal 1996 sold well
against their sales plan, but had bought inventory for expected store openings
that did not take place in fiscal 1996. This added to the markdowns.
Anthropologie sales grew at a faster rate than Urban Retail but, at the same
time, had a lower gross profit margin thus contributing to the overall decline.
Freight rates on a growing group of West Coast and Southwest stores contributed
slightly.


                                       15


<PAGE>


     Selling, general and administrative expenses increased to $47.7 million in
fiscal 1996 from $39.8 million in the prior fiscal year, a 20.0% increase. As a
percentage of net sales, the expenses decreased to 35.9% in fiscal 1996 from
36.1% in the prior fiscal year. All three companies contributed to the decrease.
The companies were subject to expense control programs initiated when it became
apparent, early in the year, that sales were not going to meet planned levels
during the first half. The year-to-year aggregate dollar increase in selling,
general and administrative expenses was almost entirely attributable to rent and
other costs of operating new stores.

     Net income increased to $12.3 million in fiscal 1996 from $10.8 million in
the prior fiscal year, a 13.8% increase. This increase was principally achieved
through increases in net sales, a small percentage reduction in selling, general
and administrative expenses, higher net interest income and lower nonoperating
expenses.

Liquidity and Capital Resources

     During the last three years the Company has satisfied its cash requirements
through cash flow from operations. The Company's primary uses of cash have been
to open new stores, build a new distribution center and purchase inventories. In
addition to cash generated from operations, sources of cash have included the
net proceeds from the exercise of certain warrants and employee stock options in
each of fiscal 1995, 1996 and 1997. Over the next few years, the Company expects
to incur capital expenditures in support of its expansion program. Accumulated
cash and future cash from operations are expected to fund such expansion-related
uses of cash.

     Although the Company has not borrowed short-term or long-term funds during
the last five fiscal years, it maintains a line of credit of $10.0 million, of
which all is available for cash borrowings or for the issuance of letters of
credit. The line is unsecured and any cash borrowings under the line would
accrue interest at the LIBOR rate plus 1/2 of one percent. The Company uses
letters of credit primarily to purchase private label and Wholesale merchandise
from offshore suppliers. Outstanding balances of letters of credit at January
31, 1996 and 1997 were $5.3 million and $4.3 million, respectively. There were
no short-term or long-term debts outstanding at January 31, 1996 or at January
31, 1997.

     The Company expects that accumulated cash and cash from operations will be
sufficient to meet the Company's cash needs for at least the next three years.


                                       16


<PAGE>


Seasonality and Quarterly Results

     While Urban Outfitters has been profitable in each of its last 28 operating
quarters, its operating results are subject to seasonal fluctuations. The
Company's highest sales levels have historically occurred during the five-month
period from August 1 to December 31 of each year (the "Back-to-School" and
Holiday periods). Sales generated during these periods have traditionally had a
significant impact on the Company's results of operations. Any decreases in
sales for these periods or in the availability of working capital needed in the
months preceding these periods could have a material, adverse effect on the
Company's results of operations. The Company's results of operations in any one
fiscal quarter are not necessarily indicative of the results of operations that
can be expected for any other fiscal quarter or for the full fiscal year.

     The Company's results of operations may also fluctuate from quarter to
quarter as a result of the amount and timing of expenses incurred in connection
with, and sales contributed by, new stores, store expansions and the integration
of new stores into the operations of the Company, as well as other factors. The
addition of a large number of new stores can therefore significantly affect
results of operations on a quarter-to-quarter basis.

     The following tables, which are unaudited, set forth the Company's net
sales, gross profit, net income and earnings per share for each quarter during
the last two fiscal years and the amount of such net sales and net income,
respectively, as a percentage of annual net sales and annual net income.



<TABLE>
<CAPTION>

                                                        Fiscal 1996 Quarter Ended
                                           --------------------------------------------------
                                           April 30,      July 31,     Oct. 31,      Jan. 31,
                                             1995          1995          1995          1996
                                           -------       -------       -------       -------
                                             (Dollars in thousands, except per share data)
<S>                                        <C>           <C>           <C>           <C>    
Net sales ...........................      $27,919       $29,881       $38,842       $36,394
Gross profit ........................       14,107        15,084        19,603        18,789
Net income ..........................        2,267         2,304         4,148         3,589
Earnings per share ..................      $   .13       $   .13       $   .24       $   .20

As a Percentage of Fiscal Year:
Net sales ...........................           21%           22%           29%           28%
Net income ..........................           18%           19%           34%           29%
</TABLE>



                                       17


<PAGE>



<TABLE>
<CAPTION>

                                                        Fiscal 1997 Quarter Ended
                                           --------------------------------------------------
                                           April 30,      July 31,     Oct. 31,      Jan. 31,
                                             1996          1996          1996          1997
                                           -------       -------       -------       -------
                                             (Dollars in thousands, except per share data)
<S>                                        <C>           <C>           <C>           <C>    
Net sales ...........................      $33,635       $35,898       $44,884       $41,997
Gross profit ........................       17,065        18,402        22,471        20,567
Net income ..........................        2,927         2,849         4,632         2,852
Earnings per share ..................      $   .17       $   .16       $   .26       $   .16

As a Percentage of Fiscal Year:
Net sales ...........................           22%           23%           29%           26%
Net income ..........................           22%           21%           35%           22%
</TABLE>






I
tem 8. Financial Statements and Supplementary Data

     The information required by this Item is incorporated by reference to Pages
F-1 through F-16.



Item 9. Changes in and Disagreements With Accountants on Accounting and
        Financial Disclosure

     Not applicable.


                                       18


<PAGE>



                                    PART III



Item 10. Directors and Executive Officers of the Registrant

     The Company's bylaws provide for the Board of Directors to be comprised of
as many directors as are designated from time to time by the Board of Directors,
which designation is presently five. Each director shall be elected for the term
of one year and shall serve until his successor is elected and qualified. The
officers of the corporation are elected or appointed by the Board of Directors
and each shall serve at the pleasure of the Board.

The directors and executive officers of the Company are as follows:


NAME                         AGE              POSITION
- ----                         ---              --------

Richard A. Hayne             50     Chairman of the Board of Directors and
                                    President

Kenneth K. Cleeland          56     Chief Financial Officer and Treasurer

Jay M. Hammer                41     Secretary and Director of Stores

Michael A. Schultz           43     President, Urban Outfitters Wholesale, Inc.

Glen T. Senk                 40     President, Anthropologie, Inc.

Scott A. Belair(1)(2)        49     Director

Harry S. Cherken, Jr.        47     Director

Joel S. Lawson III(1)(2)     49     Director

Burton M. Sapiro             70     Director

- ----------------------------------

(1)  Member of the Audit Committee.

(2)  Member of the Compensation Committee.


                                       19


<PAGE>



     Mr. Hayne co-founded the Company in 1970 and has been its President and
Chairman of the Board of Directors since the Company's incorporation in 1976.

     Mr. Cleeland has served as Chief Financial Officer and Treasurer since
joining the Company in January 1987.

     Mr. Hammer joined the Company as its Director of Stores for Urban
Outfitters in January, 1997. During the previous six years, he was a Regional
Sales Manager at the Gap and led a team on Strategic Planning for the Gap
division. He also spent eleven years at Macy's in various corporate and store
roles and was a Vice President of that company. Mr. Hammer has an MBA from
Harvard.

     Mr. Schultz has served as President of Urban Outfitters Wholesale, Inc.
since 1986.

     Mr. Senk has served as President of Anthropologie, Inc. since joining the
company in April 1994. Prior to joining Anthropologie, Mr. Senk was Senior Vice
President and General Merchandise Manager of Williams-Sonoma, Inc. and Chief
Executive of the Habitat International Merchandise and Marketing Group in
London, England.

     Mr. Belair co-founded the Company, has been a director since its
incorporation in 1976 and has served as Principal of the ZAC Group, a provider
of financial services, during the last seven years. Previously, he was a
managing director of Drexel Burnham Lambert Incorporated. Mr. Belair is a
director and President of Balfour MacLaine Corporation.

     Mr. Cherken, a director since 1989, has been a partner in the law firm of
Drinker Biddle & Reath LLP in Philadelphia, Pennsylvania since 1984 and has
served as a Managing Partner of that firm since February 1996.

     Mr. Lawson, a director since 1985, has since 1980 been the Managing Partner
and Chief Executive Officer of Howard, Lawson, & Co., an investment banking and
corporate finance firm located in Philadelphia, Pennsylvania.

     Mr. Sapiro, a director since 1989, has been a retail marketing consultant
since his retirement in 1985. Previously, he was Senior Vice President/General
Merchandise Manager and a member of the Executive Committee of both Macy's New
York and Gimbels Philadelphia/Gimbels East. He was also a director of Macy's New
York.


                                       20


<PAGE>



Item 11. Executive Compensation

     Information required by this item is incorporated herein by reference from
the Company's Proxy Statement for the 1997 Annual Meeting of Shareholders.



Item 12. Security Ownership of Certain Beneficial Owners and Management

     Information required by this item is incorporated herein by reference from
the Company's Proxy Statement for the 1997 Annual Meeting of Shareholders.



Item 13. Certain Relationships and Related Transactions

     Information required by this item is incorporated herein by reference from
the Company's Proxy Statement for the 1997 Annual Meeting of Shareholders.


                                       21


<PAGE>



                                     PART IV


Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K


          (a)  The following documents are filed as part of this report:

               (1)  Financial Statements

                    Financial Statements filed herewith are listed in the
                    accompanying index on page F-1.

               (2)  Financial Statement Schedules                          Page

               Schedule II - Valuation and Qualifying Accounts              S-1

All other schedules are omitted because they are not applicable or not required,
or because the required information is included in the consolidated financial
statements or notes thereto.

               (3)  Exhibits

Exhibit Number               Description                                   Page

3.1                 Amended and Restated Articles of Incorporation are
                    incorporated by reference to Exhibit 3.1 of the
                    Company's Registration Statement on Form S-1 (File
                    No. 33-69378) filed on September 24, 1993.

3.2                 Amended and Restated bylaws are incorporated by
                    reference to Exhibit 3.2 of the Company's
                    Registration Statement on Form S-1 (File No.
                    33-69378) filed on September 24, 1993.

10.1                1987 Incentive Stock Option Plan is incorporated
                    by reference to Exhibit 10.1 of the Company's
                    Registration Statement on Form S-1 (File No.
                    33-69378) filed on September 24, 1993.


                                       22


<PAGE>


10.2                1992 Non-Qualified Stock Option Plan is
                    incorporated by reference to Exhibit 10.2 of the
                    Company's Registration Statement on Form S-1 (File
                    No. 33-69378) filed on September 24, 1993.

10.3                Consulting Agreement, dated September 22, 1995 and
                    effective October 1, 1995, between the Company and
                    Burton M. Sapiro, incorporated by reference to
                    Exhibit 10.3 of the Company's Annual Report on
                    Form 10-K for the fiscal year ended January 31,
                    1996.

10.4                Urban Outfitters, Inc. Profit-Sharing Fund is
                    incorporated by reference to Exhibit 10.4 of the
                    Company's Registration Statement on Form S-1 (File
                    No. 33-69378) filed on November 3, 1993.

10.5                1993 Non-Employee Directors' Non-Qualified
                    Stock Option Plan (as amended and restated)
                    incorporated by reference to Exhibit 10.5 of the
                    Company's Annual Report on Form 10-K for the
                    fiscal year ended January 31, 1995.

10.6                1997 Stock Option Plan is filed herewith as
                    Exhibit 10.6

21.1                List of Subsidiaries.

22.0                Income Per Share Calculation



          (b)  Reports on Form 8-K:   No reports on Form 8-K have been filed
               during the period covered by this report.


                                       23


<PAGE>



                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                            URBAN OUTFITTERS, INC.


                                            By: /s/ Richard A. Hayne
                                                -------------------------------
                                                Richard A. Hayne
                                                President


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.



          Signature                        Title                      Date
          ---------                        -----                      ----

/s/ Richard A. Hayne                  Chairman of the            April 21, 1997
- -----------------------------         Board, President and
Richard A. Hayne                      Director            
(Principal Executive Officer)              


/s/ Kenneth K. Cleeland               Chief Financial Officer    April 21, 1997
- -----------------------------         and Treasurer   
Kenneth K. Cleeland                              
(Principal Financial and                       
Accounting Officer)


/s/ Scott A. Belair                   Director                   April 21, 1997
- -----------------------------
Scott A. Belair


/s/ Harry S. Cherken, Jr.             Director                   April 21, 1997
- -----------------------------
Harry S. Cherken, Jr.


/s/ Joel S. Lawson III                Director                   April 21, 1997
- -----------------------------
Joel S. Lawson III


/s/ Burton M. Sapiro                  Director                   April 21, 1997
- -----------------------------
Burton M. Sapiro


                                       24


<PAGE>


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                             URBAN OUTFITTERS, INC.


                                                                           Page
                                                                           ----

         Report of Independent Accountants.............................    F-2

         Consolidated Balance Sheets at January 31, 1996
              and January 31, 1997.....................................    F-3

         Consolidated Statements of Income for the
             years ended January 31, 1995, 1996 and 1997...............    F-4

         Consolidated Statements of Shareholders' Equity for the
             years ended January 31, 1995, 1996 and 1997...............    F-5

         Consolidated Statements of Cash Flows for the
             years ended January 31, 1995, 1996 and 1997...............    F-6

         Notes to Consolidated Financial Statements....................    F-7


                                       F-1


<PAGE>



                        Report of Independent Accountants


To the Board of Directors and Shareholders
Urban Outfitters, Inc.


In our opinion, the consolidated financial statements listed in the index
appearing under Item 14 (a)(1) and (2) on page 22 present fairly, in all
material respects, the financial position of Urban Outfitters, Inc. and its
subsidiaries at January 31, 1996 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended January 31,
1997, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.


PRICE WATERHOUSE LLP

Philadelphia, Pennsylvania
March 18, 1997



                                       F-2


<PAGE>


                                               URBAN OUTFITTERS, INC.
                                             Consolidated Balance Sheets
                                          (In thousands, except share data)


<TABLE>
<CAPTION>

                                                                                  January 31,
                                                                             --------------------
                                Assets                                         1996         1997
                                                                             -------      -------
<S>                                                                          <C>          <C>    
Current assets:
     Cash and cash equivalents ........................................      $20,095      $14,581
     Marketable securities ............................................        9,499        9,255
     Accounts receivable, net of allowance of
       doubtful accounts of $531 and $643 at January 31,
       1996 and 1997, respectively ....................................        1,573        2,827
     Inventory ........................................................       10,477       16,965
     Prepaid expenses and other current assets ........................        3,236        4,776
     Deferred taxes ...................................................        1,679        2,460
                                                                             -------      -------
Total current assets ..................................................       46,559       50,864

Property and equipment, less accumulated depreciation and amortization        16,690       25,209
Marketable securities .................................................        6,247       12,047
Other assets ..........................................................        1,621        1,555
                                                                             -------      -------
                                                                             $71,117      $89,675
                                                                             =======      =======

                      Liabilities and shareholders' equity
Current liabilities:
     Accounts payable .................................................      $ 6,898      $ 8,699
     Income taxes payable .............................................         --            388
     Accrued compensation .............................................        1,362          951
     Accrued expenses and other current liabilities ...................        1,812        1,587
                                                                             -------      -------
Total current liabilities .............................................       10,072       11,625

Accrued rent and other liabilities ....................................        1,593        2,358
                                                                             -------      -------
Total liabilities .....................................................       11,665       13,983
                                                                             -------      -------
Shareholders' equity:
     Preferred shares; $.0001 par, 10,000,000 authorized, none issued .           --           --
     Common shares; $.0001 par, 50,000,000 authorized, 17,080,372
       and 17,528,698 issued at January 31, 1996 and 1997, respectively            1            2
     Additional paid-in capital .......................................       17,417       20,396
     Retained earnings ................................................       42,034       55,294
                                                                             -------      -------
Total shareholders' equity ............................................       59,452       75,692
                                                                             -------      -------
                                                                             $71,117      $89,675
                                                                             =======      =======
</TABLE>


                             See accompanying notes.


                                       F-3


<PAGE>


                             URBAN OUTFITTERS, INC.
                        Consolidated Statements of Income
                 (In thousands, except share and per share data)


<TABLE>
<CAPTION>

                                                            Fiscal Year Ended January 31,
                                                  -------------------------------------------------
                                                       1995              1996              1997
                                                  -----------        -----------        -----------
<S>                                               <C>                <C>                <C>        
Net sales ..................................      $   110,121        $   133,036        $   156,414
Cost of sales ..............................           52,787             65,453             77,909
                                                  -----------        -----------        -----------
       Gross profit ........................           57,334             67,583             78,505

Selling, general and administrative expenses           39,758             47,716             57,149
                                                  -----------        -----------        -----------
     Income from operations ................           17,576             19,867             21,356
Interest (income) ..........................           (1,078)            (1,285)            (1,506)
Other expense, net .........................                4                 22                193
                                                  -----------        -----------        -----------
     Income before income taxes ............           18,650             21,130             22,669
Income tax expense .........................            7,833              8,822              9,409
                                                  -----------        -----------        -----------
     Net income ............................      $    10,817        $    12,308        $    13,260
                                                  ===========        ===========        ===========

Net income per common share ................      $       .62        $       .70        $       .75
                                                  ===========        ===========        ===========

Weighted average common shares outstanding .       17,575,608         17,619,888         17,782,896
                                                  ===========        ===========        ===========
</TABLE>


                             See accompanying notes.

                                       F-4


<PAGE>


                             URBAN OUTFITTERS, INC.
                 Consolidated Statements of Shareholders' Equity
                        (In thousands, except share data)



<TABLE>
<CAPTION>

                                                                      Common Shares
                                                ------------------------------------------------------
                                                  Number of        Par        Additional      Retained
                                                   Shares         Value    Paid-in Capital    Earnings         Total
                                                -----------       -----    ---------------    --------        --------
<S>                                             <C>                 <C>       <C>              <C>            <C>     
Balances at January 31, 1994 ...........         16,723,650         $1        $ 16,588         $18,909        $ 35,498

Exercise of stock options ..............            222,392          -             285              --             285
Tax effect of exercises ................                 --          -             151              --             151
Net income .............................                 --          -              --          10,817          10,817
                                                -----------         --        --------         -------        --------
Balances at January 31, 1995 ...........         16,946,042          1          17,024          29,726          46,751

Exercise of stock options ..............            142,330          -             176              --             176
Tax effect of exercises ................                 --          -             290              --             290
Purchase and retirement of common shares             (8,000)         -             (73)             --             (73)
Net income .............................                 --          -              --          12,308          12,308
                                                -----------         --        --------         -------        --------
Balances at January 31, 1996 ...........         17,080,372          1          17,417          42,034          59,452

Exercise of stock options ..............            448,326          -             806              --             806
Tax effect of exercises ................                 --          -           2,173              --           2,173
Effect of stock split ..................                 --          1              --              --               1
Net income .............................                 --          -              --          13,260          13,260
                                                -----------         --        --------         -------        --------
Balances at January 31, 1997 ...........         17,528,698         $2        $ 20,396         $55,294        $ 75,692
                                                ===========         ==        ========         =======        ========
</TABLE>


                             See accompanying notes.

                                       F-5


<PAGE>

                             URBAN OUTFITTERS, INC.
                      Consolidated Statements of Cash Flows
                                 (In thousands)


<TABLE>
<CAPTION>

                                                                           Fiscal Year Ended January 31,
                                                                      --------------------------------------
                                                                        1995           1996           1997
                                                                      --------       --------       --------
<S>                                                                   <C>            <C>            <C>     
Cash flows from operating activities:
     Net income ................................................      $ 10,817       $ 12,308       $ 13,260
     Adjustments to reconcile net income to net cash
          provided by operating activities:
          Depreciation and amortization ........................         2,061          2,925          3,461
          Provision for deferred income taxes ..................          (153)          (341)          (705)
          Provision for losses (recovery) of accounts receivable           180           (187)           112
          Changes in assets and liabilities:
               Increase in receivables .........................          (633)          (214)        (1,366)
               Increase in inventory ...........................        (3,434)           (96)        (6,488)
               Increase in prepaid expenses and
                    other assets ...............................        (1,972)          (564)        (1,549)
               Increase in payables, accrued expenses and
                    other liabilities ..........................         1,943          1,820          2,318
                                                                      --------       --------       --------
     Net cash provided by operating activities .................         8,809         15,651          9,043
                                                                      --------       --------       --------

Cash flows from investing activities:
     Capital expenditures ......................................        (8,439)        (6,229)       (11,980)
     Purchases of investments held-to-maturity .................       (11,191)        (5,463)       (20,522)
     Purchases of investments available-for-sale ...............            --         (2,911)        (2,425)
     Sales of investments available-for-sale ...................            --             --          5,035
     Maturities of investments held-to-maturity ................         3,985          9,545         12,356
                                                                      --------       --------       --------
     Net cash used in investing activities .....................       (15,645)        (5,058)       (17,536)
                                                                      --------       --------       --------

Cash flows from financing activities:
     Exercise of stock options .................................           436            466          2,979
     Purchase of common shares .................................            --            (73)            --
                                                                      --------       --------       --------
     Net cash provided by financing activities .................           436            393          2,979
                                                                      --------       --------       --------

     Increase (decrease) in cash and cash equivalents ..........        (6,400)        10,986         (5,514)

Cash and cash equivalents at beginning of period ...............        15,509          9,109         20,095
                                                                      --------       --------       --------
Cash and cash equivalents at end of period .....................      $  9,109       $ 20,095       $ 14,581
                                                                      ========       ========       ========
</TABLE>


                             See accompanying notes.

                                       F-6


<PAGE>


                             Urban Outfitters, Inc.

                   Notes to Consolidated Financial Statements
                 (In thousands, except share and per share data)


                            January 31, 1996 and 1997


1. Significant Accounting Policies

  Principles of Consolidation

     The consolidated financial statements include the accounts of Urban
Outfitters, Inc. and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated in consolidation. The principal business
activity of the Company is the operation of general consumer product retail
stores and the wholesale distribution of apparel to over 2,000 better specialty
stores worldwide.

   Cash and Cash Equivalents

     For purposes of the consolidated statements of cash flows, the Company
defines cash and cash equivalents as cash and highly liquid investments with
original maturities of less than three months. They are carried at amortized
cost, which approximates fair value because of the short maturity of these
instruments.

  Investments

     The Company's debt and equity securities are classified as either
held-to-maturity or available-for-sale. Held-to-maturity securities represent
those securities that the Company has both the positive intent and ability to
hold to maturity and are carried at amortized cost. Interest on these securities
as well as amortization is included in interest income. Available-for-sale
securities represent those securities that do not meet the classification of
held-to-maturity, are not actively traded and are carried at fair value.
Unrealized gains and losses on these securities are excluded from earnings and
are reported as a separate component of stockholders' equity, net of applicable
taxes, until realized. Gross unrealized gains and losses net of the related
deferred taxes have not been material.

  Concentration of Credit Risk

     Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash equivalents and
investments. The Company manages the credit risk associated with cash
equivalents and investments by investing with high-quality institutions and, by
policy, limiting the amount of credit exposure to any one institution.


                                       F-7


<PAGE>


Urban Outfitters, Inc.
Notes to Consolidated Financial Statements (continued)


  Inventories

     Inventories, which consist of general consumer merchandise held for sale,
are valued at the lower of cost or market. The cost is determined on the
first-in, first-out method.

  Depreciation and Amortization

     Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over three to five years for
furniture and equipment, or the lease life for leasehold improvements.

  Income Taxes

     The Company utilizes the liability method of accounting for income taxes.
Under this method, deferred tax liabilities and assets are recognized for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities.

  Net Income Per Share

     Net income per share is computed using the weighted number of common shares
and common share equivalents outstanding.

  Accounting Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities and
disclosure of contingencies at the date of the financial statements and the
reported amounts of net sales and expenses during the reporting period.
Differences from those estimates, if any, are recorded in the period they become
known.

  Accounting for Stock-Based Compensation

     In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). SFAS 123 defines a fair value-based method of
accounting for employee stock options or other similar equity instruments.
Companies must either adopt the new method or disclose the pro forma income
statement effects in their financial statements. The Company has chosen to
disclose the pro forma income statement effects of SFAS 123 only.

  Reclassifications

     Certain reclassifications of prior years' data have been made to conform to
1997 classifications.


                                       F-8


<PAGE>


Urban Outfitters, Inc.
Notes to Consolidated Financial Statements (continued)


2. Marketable Securities

     The amortized cost and estimated fair value of the marketable securities
are as follows:


<TABLE>
<CAPTION>

                                                     January 31, 1996          January 31, 1997
                                                  ---------------------     ---------------------
                                                  Amortized      Fair       Amortized      Fair
                                                     Cost        Value         Cost        Value
                                                  ---------     -------     ---------     -------
<S>                                                <C>          <C>          <C>          <C>    
CURRENT PORTION
   Held-to-maturity
     Tax exempt municipal securities ........      $ 4,649      $ 4,654      $ 7,340      $ 7,379
     U.S. government securities .............        1,939        1,957        1,615        1,638
                                                   -------      -------      -------      -------
   Total current held-to-maturity ...........        6,588        6,611        8,955        9,017
                                                   -------      -------      -------      -------

   Available-for-sale
     Tax exempt municipal securities, putable        2,911        2,911          300          300
                                                   -------      -------      -------      -------
   Total current marketable securities ......        9,499        9,522        9,255        9,317
                                                   -------      -------      -------      -------

NONCURRENT PORTION
   Held-to-maturity
     Tax exempt municipal securities ........        6,097        6,127       11,798       11,755
     U.S. government securities .............          150          153          249          251
                                                   -------      -------      -------      -------
   Total noncurrent held-to-maturity ........        6,247        6,280       12,047       12,006
                                                   -------      -------      -------      -------

Total marketable securities .................      $15,746      $15,802      $21,302      $21,323
                                                   =======      =======      =======      =======
</TABLE>



     The noncurrent portion of investments held-to-maturity has contractual
maturities of one to five years. The investments available-for-sale have a
contractual maturity of greater than five years. Actual maturities may differ
from contractual maturities as a result of put and call options that enable
either the Company and/or the issuer to redeem particular securities at an
earlier date.


                                       F-9


<PAGE>


Urban Outfitters, Inc.
Notes to Consolidated Financial Statements (continued)


3. Inventory

     Inventory is summarized as follows:

                                                            January 31,
                                                    ---------------------------
                                                      1996               1997
                                                    -------             -------
     Work-in-progress .....................         $   597             $ 1,151
     Finished goods .......................           9,880              15,814
                                                    -------             -------
             Total ........................         $10,477             $16,965
                                                    =======             =======


4. Property and Equipment

     Property and equipment is summarized as follows:


                                                            January 31,
                                                    ---------------------------
                                                      1996                1997
                                                    -------             -------
     Land .................................         $   543             $   543
     Furniture and fixtures ...............           8,830              12,402
     Leasehold improvements ...............          15,816              23,720
     Other operating equipment ............           1,142               1,646
                                                    -------             -------
                                                     26,331              38,311
     Accumulated depreciation and
       amortization .......................          (9,641)            (13,102)
                                                    -------             -------
             Total ........................         $16,690             $25,209
                                                    =======             =======

     The useful life of furniture and fixtures is five years, leasehold
improvements is "life of lease" and other operating equipment varies from three
to ten years.


5. Accrued Expenses

     Accrued expenses consist of the following:

                                                            January 31,
                                                    ---------------------------
                                                      1996                1997
                                                    -------             -------
     Accrued sales taxes ..................         $   576             $   661
     Other current liabilities.............           1,236                 926
                                                    -------             -------
            Total .........................         $ 1,812             $ 1,587
                                                    =======             =======

The reported amounts approximate fair value because of the short maturity of
these obligations.


                                      F-10


<PAGE>


Urban Outfitters, Inc.
Notes to Consolidated Financial Statements (continued)


6. Line of Credit

     The Company has available a $10,000 revolving line of credit to facilitate
letter of credit transactions and cash advances. Interest on outstanding
balances is payable monthly based on the London Interbank Offered Rate (LIBOR)
plus 1/2%. No principal amounts were outstanding under this line at January 31,
1996 and 1997. Outstanding letters of credit totaled $5,308 and $4,263 as of
January 31, 1996 and 1997, respectively. These letters of credit, which have
terms from one month to one year, collateralize the Company's obligation to
third parties for the purchase of inventory. The fair value of these letters of
credit is estimated to be the same as the contract values.


7. Profit-Sharing Plan

     The Company has a profit-sharing plan that covers all employees who are at
least 18 years of age and have completed at least one thousand hours of service.
Plan contributions are at the discretion of management but may not exceed 15% of
qualified employee earnings.

     The Company contributed $141 in cash to the plan for fiscal year ended
January 31, 1995. No contributions were made by the Company for the years ended
January 31, 1996 or January 31, 1997.


8. Income Taxes

     Income tax expense consists of:

                                                 Fiscal Year Ended January 31,
                                            -----------------------------------
                                              1995          1996          1997
                                            -------       -------       -------
Current:
  Federal ............................      $ 5,957       $ 7,202       $ 8,041
  State and local ....................        2,029         1,961         2,073
Deferred:
  Federal ............................         (203)         (291)         (613)
  State and local ....................           50           (50)          (92)
                                            -------       -------       -------
Total ................................      $ 7,833       $ 8,822       $ 9,409
                                            =======       =======       =======


                                      F-11


<PAGE>


Urban Outfitters, Inc.
Notes to Consolidated Financial Statements (continued)


     The effective tax rate was different than the statutory U.S. federal income
tax rate for the following reasons:

                                                   Fiscal Year Ended January 31,
                                                   -----------------------------
                                                     1995      1996      1997
                                                     ----      ----      ----
Expected provision
   at federal statutory rate .....................     35%       35%       35%
State and local
   income taxes, net of federal tax benefit ......      6         6         6
Other, net .......................................      1         1         1
                                                       --        --        --
Effective rate ...................................     42%       42%       42%
                                                       ==        ==        ==


     The significant components of deferred tax assets and liability at
January 31, 1996 and 1997 are as follows:


                                                         1996             1997
                                                        ------           ------
Deferred tax liability:
  Prepaid expenses ...........................          $ (130)          $ (138)

Deferred tax assets:
  Depreciation and lease transactions ........           1,421            1,667
  Inventory ..................................           1,137            1,484
  Accounts receivable ........................             329              408
  Accrued liabilities ........................              17               --
  Accrued salaries and benefits ..............              53              113
  Other ......................................              21               19
                                                        ------           ------
Net deferred tax assets ......................          $2,848           $3,553
                                                        ======           ======

     At January 31, 1996 and 1997, a deferred tax asset of $1,169 and $1,093,
respectively, is included in Other assets.


                                      F-12


<PAGE>


Urban Outfitters, Inc.
Notes to Consolidated Financial Statements (continued)


9. Commitments and Contingencies

     The Company leases certain of its stores under noncancelable operating
leases. The following is a schedule by year of the future minimum lease payments
for operating leases with terms in excess of one year:


     1998.......................................... $ 9,602
     1999..........................................   9,857
     2000..........................................   9,473
     2001..........................................   9,070
     2002..........................................   8,981
     Thereafter....................................  38,875
                                                    -------
     Total minimum lease payments.................. $85,858
                                                    =======

     Certain store leases provide for predetermined escalations in future
minimum annual rentals. The pro rata portion of future minimum rent escalations,
amounting to $1,527 and $2,302, at January 31, 1996 and 1997, respectively, has
been included in Other liabilities in the accompanying consolidated balance
sheets. Subsequent to year end, the Company entered into a lease for an
additional location in Miami, FL. This amount is included in the above schedule.

     The store leases provide for payment of direct operating costs including
real estate taxes. Certain store leases provide for contingent rentals when
sales exceed specified levels.

     Rent expense consisted of the following:

                                                  Fiscal Year Ended January 31,
                                               ---------------------------------
                                                 1995         1996          1997
                                               ------       ------       -------
Minimum rentals ........................       $6,256       $8,274       $ 9,946
Contingent rentals .....................          883          783           599
                                               ------       ------       -------
       Total ...........................       $7,139       $9,057       $10,545
                                               ======       ======       =======


                                      F-13


<PAGE>


Urban Outfitters, Inc.
Notes to Consolidated Financial Statements (continued)


10. Stock Option Plans

     The Company's three fixed option plans are a) an Incentive Stock Option
plan for which 2,333,332 common shares were reserved for grants to certain key
officers and employees of the Company, b) a Non-qualified Stock Option plan
permitting 1,333,332 common shares to be granted at exercise prices determined
by the Company's Compensation Committee, and c) a Non-qualified Stock Option
plan for Directors with 200,000 shares reserved for directors who are not
employees of the Company. The vesting period for these plans range from one to
five years.

     The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
stock option plans. Had compensation cost for the Company's three stock option
plans been determined based on the fair value provisions of SFAS 123 at the
grant date for awards during fiscal 1996 and 1997, the Company's net earnings
and earnings per share would have been reduced to the pro forma amounts
indicated below:

                                                 For the year ended January 31,
                                                 ------------------------------
                                                     1996            1997
                                                   -------         -------
Net earnings - as reported ...............         $12,308         $13,260
Net earnings - pro forma .................         $11,930         $12,649
Earnings per share - as reported .........         $   .70         $   .75
Earnings per share - pro forma ...........         $   .68         $   .72

     The pro forma results may not be representative of the effects on reported
operations for future years.

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions:

                                                     1996            1997
                                                     ----            ----

Expected life (years) ....................            6.1             5.7
Risk-free interest rate ..................            6.6%            6.1%
Volatility ...............................           49.5%           49.5%
Dividend rate ............................              0%              0%


                                      F-14


<PAGE>


Urban Outfitters, Inc.
Notes to Consolidated Financial Statements (continued)


     Information regarding these option plans for fiscal 1996 and 1997 is as
follows:


<TABLE>
<CAPTION>

                                                                 FY 1996                             FY 1997
                                                     ------------------------------      -------------------------------
                                                                   Weighted Average                     Weighted Average
Fixed Options                                           Shares      Exercise Price         Shares         Exercise Price
- -------------                                        ----------    ----------------       ---------     ----------------
<S>                                                   <C>               <C>               <C>                 <C>   
Options outstanding at beginning of year              1,152,912         $ 4.67            1,274,582           $ 5.99
Options granted                                         564,000          10.23              185,000            15.02
Options exercised                                      (142,330)          1.23             (448,326)            1.80
Options canceled                                       (300,000)         12.38                 (500)           15.19
                                                     ----------                          ----------
Options outstanding at end of year                    1,274,582         $ 5.99            1,010,756           $ 9.50
                                                     ==========         ======           ==========           ======
Options exercisable at end of year                      783,942                             472,920
                                                     ==========                          ==========
Weighted average fair value of grants per share      $     5.75                          $     7.99
                                                     ==========                          ==========
</TABLE>



     The following table summarizes information concerning currently outstanding
and exercisable options:


<TABLE>
<CAPTION>

                                        Options Outstanding                                Options Exercisable
                         -----------------------------------------------               ---------------------------
                           Amount            Wtd. Avg.         Wtd. Avg.                 Amount          Wtd. Avg.
   Range of              Outstanding         Remaining         Exercise                Exercisable       Exercise
Exercise Prices          at 1/31/97       Contractual Life       Price                 at 1/31/97          Price
- ---------------          ----------       ----------------     ---------               -----------       ---------
<C>                       <C>                 <C>               <C>                     <C>                <C>  
$  .39 -  2.33            191,256             .9 years          $ 1.72                  191,256            $1.72
$ 9.00 - 11.81            710,000            7.0                 10.40                  281,664            10.13
$15.19 - 20.88            109,500            6.5                 17.27                       --             n/a
</TABLE>




11.     Supplemental Cash Flow Information

                                              Fiscal year ended January 31,
                                          -------------------------------------
                                           1995            1996            1997
                                          ------          ------          ------
Interest paid                             $    3          $   50          $   28
Income taxes paid                         $7,761          $9,439          $8,260


                                      F-15


<PAGE>


Urban Outfitters, Inc.
Notes to Consolidated Financial Statements (continued)


12. Stock Split

     On May 21, 1996, the Board of Directors of Urban Outfitters, Inc. declared
a two-for-one stock split in the form of a stock dividend for shareholders of
record on June 1, 1996. That stock split is retroactively reflected in the
financial statements for all periods presented.


                                      F-16


<PAGE>


                             URBAN OUTFITTERS, INC.
 
                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)


<TABLE>
<CAPTION>

                                                        Charged
                                       Balance at       to costs                         Balance
                                       beginning          and                            at end
Description                            of period        expenses       Deductions       of period
- -----------                            ---------        --------       ----------       ---------
<S>                                      <C>             <C>             <C>              <C>
Year ended January 31, 1995
  Inventory reserves                     $1,887          $1,072          $  732           $2,227

Year ended January 31, 1996
  Inventory reserves                     $2,227          $1,694          $1,710           $2,211

Year ended January 31, 1997
  Inventory reserves                     $2,211          $2,471          $1,956           $2,726
</TABLE>



                                       S-1



<PAGE>






                             URBAN OUTFITTERS, INC.
                             1997 STOCK OPTION PLAN


                                   DRAFTED BY
                             DRINKER BIDDLE & REATH
                       PHILADELPHIA NATIONAL BANK BUILDING
                              1345 CHESTNUT STREET
                           PHILADELPHIA, PA 19107-3496


                                   MARCH 1997



<PAGE>


                                TABLE OF CONTENTS

                                                                            Page

         SECTION 1 - Purpose and Definitions.................................. 1

         SECTION 2 - Administration........................................... 4

         SECTION 3 - Eligibility.............................................. 4

         SECTION 4 - Stock.................................................... 5

         SECTION 5 - Granting of Options...................................... 5

         SECTION 6 - Annual Limit............................................. 6

         SECTION 7 - Options for Non-Employee Directors....................... 6

         SECTION 8 - Terms and Conditions of Options for Key
                     Employees and Consultants................................10

         SECTION 9 - Option Agreements - Other Provisions.....................15

         SECTION 10 - Capital Adjustments.....................................16

         SECTION 11 - Amendment or Discontinuance of the Plan.................17

         SECTION 12 - Termination of Plan.....................................18

         SECTION 13 - Shareholder Approval....................................19

         SECTION 14 - Miscellaneous...........................................19


                                       -i-



<PAGE>


                             URBAN OUTFITTERS, INC.
                             1997 STOCK OPTION PLAN


                       SECTION 1 - Purpose and Definitions

(a) Purpose. This URBAN OUTFITTERS, INC. 1997 STOCK OPTION PLAN is intended to
provide a means whereby URBAN OUTFITTERS, INC. may, through the grant of Options
to purchase Common Stock to Key Employees and Consultants, attract and retain
such Key Employees and Consultants, and motivate such Key Employees and
Consultants to exercise their best efforts on behalf of the Company and of any
Related Corporation.
 Moreover, the Company may, through the grant of
Non-Qualified Stock Options to Non-Employee Directors under a formula, attract
and retain Non-Employee Directors and motivate such Non-Employee Directors to
exercise their best efforts on behalf of the Company and any Related
Corporation.

         (b Definitions.

            (1) Board. The term "Board" shall mean the Board of Directors of the
         Company.

            (2) Common Stock. The term "Common Stock" shall mean the common
         stock of the Company, par value $0.0001 per share.

            (3) Code. The term "Code" shall mean the Internal Revenue Code of
         1986, as amended.

            (4) Committee. The term "Committee" shall mean a committee which
         consists of not fewer than two (2) directors of the Company who are
         Outside Directors. The members of the Committee shall be appointed by,
         and serve at the pleasure of, the Board.

            (5) Company. The term "Company" shall mean Urban Outfitters, Inc.

            (6) Consultant. The term "Consultant" shall mean an individual who
         is not an employee of the Company or a Related Corporation, and who has
         entered into a consulting arrangement with the Company or a Related
         Corporation.

            (7) Fair Market Value. The term "Fair Market Value" shall mean the
         fair market value of the optioned shares of Common Stock, which



<PAGE>



         shall be arrived at by a good faith determination of the Committee and
         shall be:

                 (A) The arithmetic average of the highest and lowest quoted
              selling price, if there is a market for the Common Stock on a
              registered securities exchange or in an over the counter market,
              on the date of grant; or

                 (B) Such other method of determining fair market value as shall
              be authorized by the Code, or the rules or regulations thereunder,
              and adopted by the Committee.

            (8) Incentive Stock Option. The term "Incentive Stock Option"
         ("ISO") shall mean an option which, at the time such option is granted
         under the Plan, qualifies as an ISO within the meaning of section 422
         of the Code and is designated as an ISO in the Option Agreement.

            (9) Key Employees. The term "Key Employees" shall mean officers and
         other key employees of the Company or a Related Corporation.

            (10) Non-Employee Directors. The term "Non-Employee Directors" shall
         mean directors of the Company who:

                 (A) Are not employees of the Company or any Related
              Corporation; and

                 (B) Have not been employees of the Company or any Related
              Corporation during the immediately preceding 12-month period.

            (11) Non-Qualified Stock Option. The term "Non-Qualified Stock
         Option" ("NQSO") shall mean an option which, at the time such option is
         granted, does not qualify as an ISO, and/or is designated as an NQSO in
         the Option Agreement.

            (12) Option Agreement. The term "Option Agreement" shall mean a
         written document evidencing the grant of an Option, as described in
         Section 9.

            (13) Optionee. The term "Optionee" shall mean a Key Employee or
         Consultant to whom an Option has been granted.


                                       -2-



<PAGE>


            (14) Options. The term "Options" shall mean Incentive Stock Options
         and Non-Qualified Stock Options.

            (15) Outside Director. The term "Outside Director" shall mean a
         director who:

                 (A) Is not currently an officer (as defined in 17 CFR
              240.16a-1(f)) of, or otherwise currently employed by, the Company
              or a parent or subsidiary of the Company within the meaning of 17
              CFR 240.16b-3(b)(3),

                 (B) Does not receive compensation, either directly or
              indirectly, from the Company or a parent or subsidiary of the
              Company within the meaning of 17 CFR 240.16b-3(b)(3) for services
              rendered as a consultant or in any other capacity other than as a
              director, except for an amount that does not exceed the dollar
              amount for which disclosure would be required under 17 CFR
              229.404(a),

                 (C) Does not possess an interest in any other transaction for
              which disclosure would be required pursuant to 17 CFR 229.404(a),

                 (D) Is not engaged in a business relationship for which
              disclosure would be required pursuant to 17 CFR 229.404(b), and

                 (E) Is an outside director within the meaning of Treas. Reg.
              (section)1.162-27(e)(3), or any successor thereto.

            (16) Plan. The term "Plan" shall mean the Urban Outfitters, Inc.
         1997 Stock Option Plan, as set forth herein and as amended from time to
         time.

            (17) Related Corporation. The term "Related Corporation" shall mean
         either a corporate subsidiary of the Company, as defined in section
         424(f) of the Code or the corporate parent of the Company, as defined
         in section 424(e) of the Code.

         Notwithstanding Sections 1(b)(8) and (11) if an Option granted to a Key
Employee is not designated in the Option Agreement as an ISO or NQSO, the option
shall constitute an ISO if it complies with the terms of Section 422 of the
Code, and otherwise, it shall constitute an NQSO.


                                       -3-




<PAGE>


                           SECTION 2 - Administration

         The Plan shall be administered by the Committee. Each member of the
Committee, while serving as such, shall be deemed to be acting in his or her
capacity as a director of the Company.

         The Committee shall have full authority, subject to the terms of the
Plan, to select the Key Employees to be granted ISOs and/or NQSOs under the
Plan, to select the Consultants to be granted NQSOs under the Plan, to grant
Options on behalf of the Company and to set the date of grant and the other
terms of such Options. The Committee may correct any defect, supply any omission
and reconcile any inconsistency in this Plan and in any Option granted hereunder
in the manner and to the extent it shall deem desirable. The Committee also
shall have the authority to establish such rules and regulations, not
inconsistent with the provisions of the Plan, for the proper administration of
the Plan, and to amend, modify or rescind any such rules and regulations, and to
make such determinations and interpretations under, or in connection with, the
Plan, as it deems necessary or advisable. All such rules, regulations,
determinations and interpretations shall be binding and conclusive upon the
Company, its shareholders and all employees, and upon their respective legal
representatives, beneficiaries, successors and assigns and upon all other
persons claiming under or through any of them.

         Notwithstanding the foregoing, the terms and conditions of grants of
NQSOs to Non-Employee Directors are intended to be fixed in advance.
Consequently, the grants of NQSOs to Non-Employee Directors shall be as set
forth in Section 7 and neither the Committee nor the Board shall have any
discretionary authority with respect thereto.

         No member of the Board or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Option
granted under it.


                             SECTION 3 - Eligibility

         Key Employees shall be eligible to receive Options under the Plan. Non-
Employee Directors shall be eligible to receive NQSOs (but not ISOs) pursuant to
Section 7. Consultants shall be eligible to receive NQSOs (but not ISOs)
pursuant to Section 8. More than one Option may be granted to a Key Employee,
Non-Employee Director or Consultant under the Plan.

                                       -4-


<PAGE>

                                SECTION 4 - Stock

         Options may be granted under the Plan to purchase up to a maximum of
one million two hundred and fifty thousand (1,250,000) shares of Common Stock
subject to adjustment as hereinafter provided; provided, however, that no Key
Employee shall receive Options for more than four hundred thousand (400,000)
shares of Common Stock over the life of the Plan. Shares issuable under the Plan
may be authorized but unissued shares or reacquired shares, and the Company may
purchase shares required for this purpose, from time to time, if it deems such
purchase to be advisable.

         If any Option granted under the Plan expires or otherwise terminates
for any reason whatever (including, without limitation, the Key Employee's, Non-
Employee Director's or Consultant's surrender thereof) without having been
exercised, the shares subject to the unexercised portion of such Option shall
continue to be available for the granting of Options under the Plan as fully as
if such shares had never been subject to an Option; provided, however, that (a)
if an Option is cancelled, the cancelled Option is counted against the maximum
number of shares for which Options may be granted to a Key Employee, and (b) if
the Option price is reduced after the date of grant, the transaction is treated
as a cancellation of an Option and the grant of a new Option for purposes of
counting the maximum number of shares for which Options may be granted to a Key
Employee.


                         SECTION 5 - Granting of Options

         From time to time until the expiration or earlier suspension or
discontinuance of the Plan, the Committee may, on behalf of the Company, grant
to Key Employees and Consultants under the Plan such Options as it determines
are warranted; provided, however, that grants of ISOs and NQSOs shall be
separate and not in tandem; and further provided that Consultants shall not be
eligible to receive grants of ISOs. The granting of an Option under the Plan
shall not be deemed either to entitle the Key Employee or Consultant to, or to
disqualify the Key Employee or Consultant from, any participation in any other
grant of Options under the Plan. In making any determination as to whether a Key
Employee or Consultant shall be granted an Option and as to the number of shares
to be covered by such Option, the Committee shall take into account the duties
of the Key Employee or Consultant, his or her present and potential
contributions to the success of the Company or a Related Corporation, and such
other factors as the Committee shall deem relevant in accomplishing the purposes
of the Plan. Moreover, the Committee may provide in a Key Employee's or
Consultant's Option Agreement that said Option may be exercised only if certain
conditions, as determined by the Committee, are fulfilled.

                                       -5-


<PAGE>



         The Committee shall grant NQSOs to Non-Employee Directors in accordance
with Section 7.


                            SECTION 6 - Annual Limit

            (a) ISOs. The aggregate Fair Market Value (determined as of the date
         the ISO is granted) of the Common Stock with respect to which ISOs are
         exercisable for the first time by a Key Employee during any calendar
         year (under this Plan and any other ISO plan of the Company or a
         Related Corporation) shall not exceed one hundred thousand dollars
         ($100,000).

            (b) NQSOs. The annual limit set forth above for ISOs shall not apply
         to NQSOs.

                 SECTION 7 - Options for Non-Employee Directors

            (a) Granting of NQSOs to Non-Employee Directors

               (1) Initial Grant. An NQSO to purchase 10,000 shares of Common
            Stock (as adjusted pursuant to Section 10) automatically shall be
            granted to a Non-Employee Director, who was not a Non-Employee
            Director prior to the Company's 1998 annual shareholders' meeting,
            on the date he or she becomes a Non-Employee Director, whether by
            reason of his or her election by shareholders or appointment by the
            Board to be a director, or, if applicable, the expiration of the
            12-month period specified in Section 1(b)(10)(B) with respect to a
            present or future director who had previously been an employee of
            the Company or any Related Corporation; provided, that if a
            Non-Employee Director who previously received an NQSO grant under
            Section 5(a) of the Urban Outfitters, Inc. 1993 Non-Employee
            Directors' Non-Qualified Stock Option Plan or Section 7(a)(1) of
            this Plan terminates service as a director and is subsequently
            elected or appointed to the Board again, such director shall not be
            eligible to receive an NQSO grant under this Section 7(a)(1).

               (2) Subsequent Grants. In addition to the initial grant, pursuant
            to Section 5(a) of the Urban Outfitters, Inc. 1993 Non-Employee
            Directors' Non-Qualified Stock Option Plan or Section 7(a)(1) of
            this Plan, on the first business day immediately following each of
            the dates on which an incumbent Non-Employee Director is elected or
            re-elected to the Board by shareholders subsequent to the 1997
            annual shareholders' meeting, he or she shall automatically be
            granted an NQSO

                                       -6-


<PAGE>

             to purchase 10,000 shares of Common Stock (as adjusted pursuant to
             Section 10), except that in the case of the first election or
             re-election following the date of the Non-Employee Director's
             initial election or appointment to the Board, no grant shall be
             made on account of such first election or re-election unless at
             least six months have elapsed since such initial election or
             appointment.

            (b) Terms and Conditions of Options. Options granted to Non-
Employee Directors shall expressly specify that they are NQSOs. In addition,
such NQSOs shall include expressly or by reference the following terms and
conditions, as well as such other provisions not inconsistent with the
provisions of the Plan:

               (1) Number of Shares. A statement of the number of shares of
            Common Stock to which the NQSO pertains.

               (2) Price. A statement of the NQSO exercise price, which shall be
            the higher of one hundred percent (100%) of the Fair Market Value
            per share of the Common Stock, or the par value thereof, on the date
            the NQSO is granted.

               (3) Term. Subject to earlier termination as provided in Section
            7(b)(5), (6), and (7) and Section 10 below, the term of each NQSO
            granted under this Section 7 shall be ten (10) years from the date
            of grant.

               (4) Exercise. NQSOs granted under this Section 7 shall be
            exercisable on the business day immediately preceding the annual
            meeting of shareholders next succeeding the date of grant of such
            NQSOs. Except as otherwise provided in Sections 7(b)(5), (6) and (7)
            below, NQSOs shall only be exercisable by a Non-Employee Director
            while he or she remains a director of the Company. Any NQSO shares,
            the right to the purchase of which has accrued, may be purchased at
            any time up to the expiration or termination of the NQSO.
            Exercisable NQSOs may be exercised, in whole or in part, from time
            to time by giving written notice of exercise to the Company at its
            principal office, specifying the number of shares to be purchased
            and accompanied by payment in full of the aggregate price for such
            shares. Only full shares shall be issued under the Plan, and any
            fractional share which might otherwise be issuable upon exercise of
            an NQSO granted hereunder shall be forfeited.

            The NQSO exercise price shall be payable:

                                       -7-


<PAGE>


                  (A) In cash or its equivalent; or

                  (B) Unless in the opinion of counsel to the Company to do so
               may result in a possible loss of an exemption from short-swing
               profit liability, in whole or in part through the transfer of
               Common Stock newly acquired upon exercise of the NQSO or Common
               Stock previously acquired by the Non-Employee Director, provided
               the previously acquired Common Stock so transferred has been held
               by the Non-Employee Director for more than six (6) months on the
               date of exercise.

               In the event such NQSO exercise price is paid, in whole or in
            part, with Common Stock, the portion of the NQSO exercise price so
            paid shall equal the Fair Market Value of Common Stock so
            surrendered (determined in accordance with Section 1(b)(7), but on
            the date of exercise rather than on the date of grant).

               (5) Expiration of Term or Removal as Director. If a Non-Employee
            Director's service as a director of the Company terminates prior to
            the expiration date fixed for his or her NQSO under this Section 7
            for any reason (such as, without limitation, failure to be
            re-elected by the Company's shareholders) other than by disability
            or death, such NQSO may be exercised, to the extent of the number of
            shares of Common Stock with respect to which he or she could have
            exercised it on the date of such termination, by the Non-Employee
            Director at any time prior to the earlier of:

                  (A) The expiration date specified in such NQSO; or

                  (B) One (1) year after the date of such termination of service
               as a director.

               (6) Exercise upon Disability of Non-Employee Director. If a
            Non-Employee Director shall become disabled (within the meaning of
            Section 22(e)(3) of the Code) during his or her term as a director
            of the Company and, prior to the expiration date fixed for his or
            her NQSO, his or her term as a director is terminated as a
            consequence of such disability, such NQSO may be exercised, to the
            extent of the number of shares of Common Stock with respect to which
            the Non-Employee Director could have exercised it on the date of
            such termination, by the Non-Employee Director at any time prior to
            the earlier of:


                                       -8-


<PAGE>




                  (A) The expiration date of such NQSO; or

                  (B) One (1) year after the date of such termination of service
               as a director.

               In the event of the Non-Employee Director's legal disability,
             such NQSO may be so exercised by his or her legal representative.

               (7) Exercise upon Death of Non-Employee Director. If a Non-
            Employee Director shall die during his or her term as a director of
            the Company and prior to the expiration date fixed for his or her
            NQSO, or if a Non-Employee Director whose term as a director has
            been terminated for any reason shall die following his or her
            termination as a director, but prior to the earlier of:

                  (A) The expiration date fixed for his or her NQSO; or

                  (B) The expiration of the period determined under Section
               7(b)(5) and (6) above;

            such NQSO may be exercised, to the extent of the number of shares
            with respect to which the Non-Employee Director could have exercised
            it on the date of his or her death, by the Non-Employee Director's
            estate, personal representative or beneficiary who acquired the
            right to exercise such NQSO by bequest or inheritance or by reason
            of the death of the Non-Employee Director, at any time prior to the
            earlier of:

                        (i) The expiration date specified in such NQSO (which
                     may be the expiration date determined under Section 7(b)(5)
                     and (6) above); or

                        (ii) One (1) year after the date of death.

            (c) Transferability. A Non-Employee Director may transfer an NQSO
granted pursuant to this Section 7 to (1) a member of his or her immediate
family, (2) a partnership of which the only partners are members of his or her
immediate family, or (3) a trust established solely for the benefit of his or
her immediate family members. Except as provided in the preceding sentence, or
by will or the laws of descent and distribution, NQSOs granted pursuant to this
Section 7 shall not be assignable or transferable by the Non-Employee Director,
and during the lifetime of the Non-Employee Director, the NQSO shall be
exercisable only by him or her or by his or her guardian or legal
representative. Any NQSO transferred by a Non-Employee Director shall not be
assignable or

                                       -9-



<PAGE>


transferable by the transferee. If the Non-Employee Director is married at the
time of exercise and if the Non-Employee Director so requests at the time of
exercise, the certificate or certificates shall be registered in the name of the
Non-Employee Director and the Non-Employee Director's spouse, jointly, with
right of survivorship.


  SECTION 8 - Terms and Conditions of Options for Key Employees and Consultants

            The Options granted to Key Employees pursuant to the Plan shall
expressly specify whether they are ISOs or NQSOs; however, if the Option is not
designated in the Option Agreement as an ISO or NQSO, the Option shall
constitute an ISO if it complies with the terms of Section 422 of the Code, and
otherwise, it shall constitute an NQSO. The Options granted to Consultants
pursuant to the Plan shall expressly state that they are NQSOs. In addition, the
Options granted to Key Employees and Consultants pursuant to the Plan shall
include expressly or by reference the following terms and conditions, as well as
such other provisions not inconsistent with the provisions of this Plan and, for
ISOs granted under this Plan, the provisions of Section 422(b) of the Code, as
the Committee shall deem desirable:

               (a) Number of Shares. A statement of the number of shares to
            which the Option pertains.

               (b) Price. A statement of the Option price which shall be
            determined and fixed by the Committee in its discretion but shall
            not be less than the higher of one hundred percent (100%) (one
            hundred ten percent (110%) in the case of an ISO granted to a Key
            Employee who is a more than ten percent (10%) shareholder as
            discussed in (i) below) of the Fair Market Value per share of Common
            Stock, or the par value thereof, on the date the Option is granted.

               (c) Term. Subject to earlier termination as provided in
            Subsections (e), (f) and (g) below and in Section 10 hereof, the
            term of each Option shall be not more than ten (10) years (five (5)
            years in the case of an ISO granted to a Key Employee who is a more
            than ten percent (10%) shareholder as discussed in (i) below) from
            the date of grant.

               (d) Exercise.

                  (1) General. Options shall be exercisable in such installments
               and on such dates, not less than six (6) months from the date of
               grant, and not more than seven (7) years from the date of grant,
               as the Committee may specify, provided that:

                                      -10-


<PAGE>


                     (A) In the case of new Options granted in replacement for
                  Options (whether granted under the Plan or otherwise) held by
                  the Key Employee or Consultant, the new Options may be made
                  exercisable, if so determined by the Committee, in its
                  discretion, at the earliest date the replaced Options were
                  exercisable, but not earlier than three (3) months from the
                  date of grant of the new Options; and

                     (B) The Committee may accelerate the exercise date of any
                  outstanding Options (including, without limitation, the three
                  (3) month exercise date referred to in (A) above), in its
                  discretion, if it deems such acceleration to be desirable.

                  Any Option shares, the right to the purchase of which has
               accrued, may be purchased at any time up to the expiration or
               termination of the Option. Exercisable Options may be exercised,
               in whole or in part, from time to time by giving written notice
               of exercise to the Company at its principal office, specifying
               the number of shares to be purchased and accompanied by payment
               in full of the aggregate Option price for such shares. Only full
               shares shall be issued under the Plan, and any fractional share
               which might otherwise be issuable upon exercise of an Option
               granted hereunder shall be forfeited.

                  (2) Manner of Payment. The Option price shall be payable:

                     (A) In cash or its equivalent;

                     (B) If the Committee, in its discretion, so provides in the
                  Option Agreement or, in the case of Options which are not
                  ISOs, if the Committee, in its discretion, so determines at or
                  prior to the time of exercise, in whole or in part, in Common
                  Stock previously acquired by the Optionee, provided that if
                  such shares of Common Stock were acquired through the exercise
                  of an ISO and are used to pay the Option price of an ISO, such
                  shares have been held by the Key Employee for a period of not
                  less than the holding period described in Section 422(a)(1) of
                  the Code on the date of exercise, or if such shares of Common
                  Stock were acquired through exercise of an NQSO or of an
                  Option under a similar plan or through exercise of an ISO and
                  are used to pay the Option price of an NQSO, such shares have
                  been held by the Optionee for a period of more than six (6)
                  months on the date of exercise;

                                      -11-


<PAGE>

                     (C) If the Committee, in its discretion, so provides in the
                  Option Agreement or, in the case of Options which are not
                  ISOs, if the Committee, in its discretion, so determines at or
                  prior to the time of exercise, in whole or in part, in Common
                  Stock newly acquired by the Optionee upon exercise of such
                  Option (which shall constitute a disqualifying disposition in
                  the case of an Option which is an ISO);

                     (D) If the Committee, in its discretion, so provides in the
                  Option Agreement or, in the case of Options which are not
                  ISOs, if the Committee, in its discretion, so determines at or
                  prior to the time of exercise, in any combination of (A), (B)
                  and (C) above; or

                     (E) If the Committee, in its discretion, so provides in the
                  Option Agreement or, in the case of Options which are not
                  ISOs, if the Committee, in its discretion, so determines at or
                  prior to the time of exercise, by permitting the Optionee to
                  deliver a properly executed notice of exercise of the Option
                  to the Company and a broker, with irrevocable instructions to
                  the broker promptly to deliver to the Company the amount of
                  sale or loan proceeds necessary to pay the exercise price of
                  the Option.

                  In the event such Option price is paid, in whole or in part,
               with shares of Common Stock, the portion of the Option price so
               paid shall be equal to the Fair Market Value of Common Stock so
               surrendered (determined in accordance with Section 1(b)(7), but
               on the date of exercise rather than on the date of grant).

               (e) Termination of Employment. If a Key Employee's employment by,
            or a Consultant's consulting arrangement with, the Company (and
            Related Corporations) is terminated by either party prior to the
            expiration date fixed for his or her Option for any reason other
            than death or disability, such Option may be exercised, to the
            extent of the number of shares with respect to which the Optionee
            could have exercised it on the date of such termination, or to any
            greater extent permitted by the Committee, by the Optionee at any
            time prior to the earlier of:

                  (1) The expiration date specified in such Option; or

                                      -12-


<PAGE>

                  (2) An accelerated termination date determined by the
               Committee, in its discretion, except that, subject to Section 10
               hereof, such accelerated termination date shall not be earlier
               than the date of the Optionee's termination of employment or
               consultancy, and such termination date shall not be later than
               thirty (30) days after the date of such termination of employment
               or consultancy.

               (f) Exercise upon Disability. If a Key Employee or Consultant
            shall become disabled (within the meaning of Section 22(e)(3) of the
            Code) during his or her employment or consultancy and, prior to the
            expiration date fixed for his or her Option, his or her employment
            or consultancy is terminated as a consequence of such disability,
            such Option may be exercised, to the extent of the number of shares
            with respect to which the Optionee could have exercised it on the
            date of such termination, or to any greater extent permitted by the
            Committee, by the Optionee at any time prior to the earlier of:

                  (1) The expiration date specified in such Option; or

                  (2) An accelerated termination date determined by the
               Committee, in its discretion, except that, subject to Section 10
               hereof, such accelerated termination date shall not be earlier
               than the date of the Optionee's termination of employment or
               consultancy by reason of disability, and such date shall not be
               later than six (6) months after the date of such termination of
               employment or consultancy. In the event of the Optionee's legal
               disability, such Option may be so exercised by the Optionee's
               legal representative.

               (g) Exercise upon Death. If a Key Employee or Consultant shall
            die during his or her employment or consultancy, and prior to the
            expiration date fixed for his or her Option, or if an Optionee whose
            employment or consultancy is terminated for any reason, shall die
            following his or her termination of employment or consultancy but
            prior to the earliest of:

                  (1) The expiration date fixed for his or her Option;

                  (2) The expiration of the period determined under Subsections
               (e) and (f) above; or

                  (3) In the case of an ISO, three (3) months following
               termination of employment,

                                      -13-

<PAGE>


         such Option may be exercised, to the extent of the number of shares
         with respect to which the Optionee could have exercised it on the date
         of his or her death, or to any greater extent permitted by the
         Committee, by the Optionee's estate, personal representative or
         beneficiary who acquired the right to exercise such Option by bequest
         or inheritance or by reason of the death of the Optionee, at any time
         prior to the earlier of:

                     (A) The expiration date specified in such Option; or

                     (B) An accelerated termination date determined by the
                  Committee, in its discretion except that, subject to Section
                  10 hereof, such accelerated termination date shall not be
                  later than six (6) months after the date of death.

               (h) Transferability.

                  (1) ISOs. No ISO shall be assignable or transferable by the
               Key Employee otherwise than by will or by the laws of descent and
               distribution, and during the lifetime of the Key Employee, the
               ISO shall be exercisable only by him or her or by his or her
               guardian or legal representative. If the Key Employee is married
               at the time of exercise and if the Key Employee so requests at
               the time of exercise, the certificate or certificates shall be
               registered in the name of the Key Employee and the Key Employee's
               spouse, jointly, with right of survivorship.

                  (2) NQSOs. Except as otherwise provided in any Option
               Agreement, no NQSO shall be assignable or transferable by the Key
               Employee or Consultant otherwise than by will or by the laws of
               descent and distribution, and during the lifetime of the
               Optionee, the NQSO shall be exercisable only by him or her or by
               his or her guardian or legal representative. If an Optionee's
               Option Agreement provides that the NQSO is transferrable, such
               Option Agreement shall set forth any limitations on the transfer
               of the NQSO. If the Optionee is married at the time of exercise
               and if the Optionee so requests at the time of exercise, the
               certificate or certificates shall be registered in the name of
               the Optionee and the Optionee's spouse, jointly, with right of
               survivorship.

                  (i) Ten Percent Shareholder. If the Key Employee owns more
            than ten percent (10%) of the total combined voting power of all
            shares of stock of the Company or of a Related Corporation at the
            time an ISO is granted to such Key Employee, the Option price for
            the ISO shall be not less than one hundred ten percent (110%) of the

                                      -14-

<PAGE>

            Fair Market Value of the optioned shares of Common Stock on the date
            the ISO is granted, and such ISO, by its terms, shall not be
            exercisable after the expiration of five (5) years from the date the
            ISO is granted. The conditions set forth in this Subsection (i)
            shall not apply to NQSOs.

                  (j) Withholding and Use of Shares to Satisfy Tax Obligations.
            The obligation of the Company to deliver shares of Common Stock upon
            the exercise of any Option shall be subject to applicable federal,
            state and local tax withholding requirements.

                  If the exercise of any Option is subject to the withholding
            requirements of applicable federal, state and/or local tax laws, the
            Committee, in its discretion (and subject to such withholding rules
            ("Withholding Rules") as shall be adopted by the Committee), may
            permit the Key Employee to satisfy the minimum required federal,
            state and/or local withholding tax, in whole or in part, by electing
            to have the Company withhold (or by returning to the Company) shares
            of Common Stock, which shares shall be valued, for this purpose, at
            their Fair Market Value (determined in accordance with Section
            1(b)(7), but on the date of exercise (rather that the date of
            grant), or if later, the date on which the Optionee recognizes
            ordinary income with respect to such exercise) (the "Determination
            Date"). An election to use shares of Common Stock to satisfy tax
            withholding requirements must be made in compliance with and subject
            to the Withholding Rules. The Committee may not withhold shares in
            excess of the number necessary to satisfy the minimum federal, state
            and/or local income tax withholding requirements. In the event
            shares of Common Stock acquired under the exercise of an ISO are
            used to satisfy such withholding requirement, such shares of Common
            Stock must have been held by the Key Employee for a period of not
            less than the holding period described in Section 422(a)(1) of the
            Code on the Determination Date.


                SECTION 9 - Option Agreements - Other Provisions

         Options granted under the Plan shall be evidenced by Option Agreements
in such form as the Committee shall, from time to time, approve, which Option
Agreements shall contain such provisions, not inconsistent with the provisions
of the Plan for NQSOs granted pursuant to the Plan, and such conditions, not
inconsistent with Section 422(b) of the Code or the provisions of the Plan for
ISOs granted pursuant to the Plan, as the Committee shall deem advisable, and
which Option Agreements shall specify whether the Option is an ISO or NQSO;
provided, however, if an Option granted to a Key Employee is not designated in
the Option Agreement as an ISO or NQSO, the Option shall constitute an ISO if it

                                      -15-


<PAGE>


complies with the terms of Section 422 of the Code, and otherwise, it shall
constitute an NQSO. Each Key Employee, Non-Employee Director and Consultant
shall enter into, and be bound by, such Option Agreement.


                        SECTION 10 - Capital Adjustments

         The number of shares which may be issued under the Plan, and the
maximum number of shares with respect to which Options may be granted during a
specified period to any Key Employee under the Plan, both as stated in Section 4
hereof, the number of shares with respect to which NQSOs are granted to Non-
Employee Directors under Section 7(a), and the number of shares issuable upon
exercise of outstanding Options under the Plan (as well as the Option price per
share under such outstanding Options), shall, subject to the provisions of
Section 424(a) of the Code, be adjusted proportionately, to reflect any stock
dividend, stock split, share combination, or similar change in the
capitalization of the Company.

         In the event of a corporate transaction (as that term is described in
Section 424(a) of the Code and the Treasury Regulations issued thereunder as,
for example, a merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation), each outstanding Option shall be
assumed by the surviving or successor corporation; provided, however, that, in
the event of a proposed corporate transaction, the Committee may terminate all
or a portion of the outstanding Options issued to Key Employees and Consultants
if it determines that such termination is in the best interests of the Company.
If the Committee decides to terminate outstanding Options issued to Key
Employees and Consultants, the Committee shall give each Key Employee and
Consultant holding an Option to be terminated not less than seven (7) days'
notice prior to any such termination by reason of such a corporate transaction,
and any such Option which is to be so terminated may be exercised (if and only
to the extent that it is then exercisable) up to, and including the date
immediately preceding such termination. Further, as provided in Section 8(d)
hereof the Committee, in its discretion, may accelerate, in whole or in part,
the date on which any or all Options issued to Key Employees and Consultants
become exercisable.

         Notwithstanding the foregoing, in the event of a corporate transaction
(as described above) in which holders of Common Stock are to receive cash,
securities or other property, and provision is not made for the continuance and
assumption of NQSOs granted to Non-Employee Directors, all such outstanding
NQSOs shall terminate as of the last business day immediately preceding the
closing date of such corporate transaction and the Company shall pay to each
Non-Employee Director an amount in cash with respect to each share to which a
terminated NQSO pertains equal to the difference between the NQSO exercise price
and the value of the consideration to be received by the holders of Common Stock
in connection with such transaction.

                                      -16-


<PAGE>

              SECTION 11 - Amendment or Discontinuance of the Plan

            (a) General. The Board from time to time may suspend or discontinue
         the Plan or amend it in any respect whatsoever, except that the
         following amendments shall require shareholder approval (given in the
         manner set forth in Section 11(b) below):

               (1) With respect to ISOs, any amendment which would:

                  (A) Change the class of employees eligible to participate in
               the Plan;

                  (B) Except as permitted under Section 10 hereof, increase the
               maximum number of shares of Common Stock with respect to which
               ISOs may be granted under the Plan; or

                  (C) Extend the duration of the Plan under Section 12 hereof
               with respect to any ISOs granted hereunder;

               (2) With respect to Options to be granted to Key Employees, any
            amendment which would require shareholder approval pursuant to
            Treas. Reg. (section) 1.162-27(e)(4)(vi) or any successor thereto;
            and

               (3) Any amendment for which shareholder approval is required
            under the rules of an exchange or market on which Common Stock is
            listed.

            Notwithstanding the foregoing, no such suspension, discontinuance or
         amendment shall materially impair the rights of any holder of an
         outstanding Option without the consent of such holder.

            (b) Shareholder Approval Requirements. Shareholder approval must
         meet the following requirements:

               (1) The approval of shareholders must be by a majority of the
            outstanding shares of Common Stock present, or represented, and
            entitled to vote at a meeting duly held in accordance with the
            applicable laws of the Commonwealth of Pennsylvania;

                                      -17-

<PAGE>

               (2) The approval of shareholders must be by a majority of the
            votes cast on the issue (including abstentions to the extent
            abstentions are counted as voting under applicable state law); and

               (3) The approval of shareholders must comply with all applicable
            provisions of the corporate charter, bylaws, and applicable state
            law prescribing the method and degree of shareholder approval
            required for the issuance of corporate stock or options. If the
            applicable state law does not prescribe a method and degree of
            shareholder approval in such case, the approval of shareholders must
            be effected:

                  (A) By a method and in a degree that would be treated as
               adequate under applicable state law in the case of an action
               requiring shareholder approval (i.e., an action on which
               shareholders would be entitled to vote if the action were taken
               at a duly held shareholders' meeting); or

                  (B) By a majority of the votes cast at a duly held
               shareholders' meeting at which a quorum representing a majority
               of all outstanding voting stock is, either in person or by proxy,
               present and voting on the Plan.

            (c) Amendments Affecting Non-Employee Directors. Notwithstanding the
         foregoing, no amendment to any provision of the Plan that would affect
         NQSOs to be awarded to Non-Employee Directors shall be made if such
         amendment would cause the terms and conditions of grants made pursuant
         to Section 7 of the Plan to fail to be fixed in advance, within the
         meaning of Securities and Exchange Commission interpretations under
         Section 16(b) of the Securities Exchange Act of 1934.


                        SECTION 12 - Termination of Plan

         Unless earlier terminated as provided in the Plan, the Plan and all
authority granted hereunder shall terminate absolutely at 12:00 midnight on
March 18, 2002, which date is five (5) years after the date the Plan was adopted
by the Board (or the date the Plan was approved by the shareholders of the
Company, whichever is earlier), and no Options hereunder shall be granted
thereafter. Nothing contained in this Section 12, however, shall terminate or
affect the continued existence of rights created under Options issued hereunder
and outstanding on March 18, 2002, which by their terms extend beyond such date.

                                      -18-


<PAGE>

                        SECTION 13 - Shareholder Approval

         This Plan shall become effective on March 19, 1997 (the date the Plan
was adopted by the Board); provided, however, that if the Plan is not approved
by the shareholders in the manner described in Section 11(b), within twelve (12)
months before or after said date, the Plan and all Options granted hereunder
shall be null and void.


                           SECTION 14 - Miscellaneous

            (a) Governing Law. With respect to any ISOs granted pursuant to the
         Plan and the Option Agreements thereunder, the Plan, such Option
         Agreements and any ISOs granted pursuant thereto shall be governed by
         the applicable Code provisions to the maximum extent possible.
         Otherwise, the operation of, and the rights of Key Employees,
         Non-Employee Directors and Consultants under, the Plan, the Option
         Agreements and any Options granted thereunder shall be governed by
         applicable federal law and otherwise by the laws of the Commonwealth of
         Pennsylvania.

            (b) Rights. Neither the adoption of the Plan nor any action of the
         Board or the Committee shall be deemed to give any individual any right
         to be granted an Option, or any other right hereunder, unless and until
         the Committee shall have granted such individual an Option, and then
         his or her rights shall be only such as are provided by the Option
         Agreement.

            Any Option under the Plan shall not entitle the holder thereof to
         any rights as a shareholder of the Company prior to the exercise of
         such Option and the issuance of the shares pursuant thereto. Further,
         notwithstanding any provisions of the Plan or the Option Agreement with
         a Key Employee, the Company shall have the right, in its discretion, to
         retire a Key Employee at any time pursuant to its retirement rules or
         otherwise to terminate his or her employment at any time for any reason
         whatsoever.

            (c) Indemnification of Board and Committee. Without limiting any
         other rights of indemnification which they may have from the Company
         and any Related Corporation, the members of the Board and the members
         of the Committee shall be indemnified by the Company against all costs
         and expenses reasonably incurred by them in connection with any claim,
         action, suit, or proceeding to which they or any of them may be a party
         by reason of any action taken or failure to act under, or in connection
         with, the Plan, or any Option granted thereunder, and against all

                                      -19-


<PAGE>

         amounts paid by them in settlement thereof (provided such settlement is
         approved by legal counsel selected by the Company) or paid by them in
         satisfaction of a judgment in any such action, suit, or proceeding,
         except a judgment based upon a finding of willful misconduct or
         recklessness on their part. Upon the making or institution of any such
         claim, action, suit, or proceeding, the Board or Committee member shall
         notify the Company in writing, giving the Company an opportunity, at
         its own expense, to handle and defend the same before such Board or
         Committee member undertakes to handle it on his or her own behalf.

            (d) Application of Funds. The proceeds received by the Company from
         the sale of Common Stock pursuant to Options granted under the Plan
         shall be used for general corporate purposes. Any cash received in
         payment for shares upon exercise of an Option to purchase Common Stock
         shall be added to the general funds of the Company and shall be used
         for its corporate purposes. Any Common Stock received in payment for
         shares upon exercise of an Option to purchase Common Stock shall become
         treasury stock.

            (e) No Obligation to Exercise Option. The granting of an Option
         shall impose no obligation upon a Key Employee, Non-Employee Director
         or Consultant to exercise such Option.

            (f) Listing and Registration of Shares. Each Option shall be subject
         to the requirement that, if at any time the Committee shall determine,
         in its discretion, that the listing, registration or qualification of
         the shares covered thereby upon any securities exchange or under any
         state or federal law, or the consent or approval of any governmental
         regulatory body, is necessary or desirable as a condition of, or in
         connection with, the granting of such Option or the purchase of shares
         thereunder, or that action by the Company, Key Employee, Non-Employee
         Director or Consultant should be taken in order to obtain an exemption
         from any such requirement, no such Option may be exercised, in whole or
         in part, unless and until such listing, registration, qualification,
         consent, approval, or action shall have been effected, obtained, or
         taken under conditions acceptable to the Committee. Without limiting
         the generality of the foregoing, each Key Employee, Non-Employee
         Director or Consultant or his or her legal representative or
         beneficiary may also be required to give satisfactory assurance that
         shares purchased upon exercise of an Option are being purchased for
         investment and not with a view to distribution, and certificates
         representing such shares may be legended accordingly.

            (g) Rights as a Shareholder. A Key Employee, Non-Employee Director,
         or Consultant shall have no rights as a shareholder with respect to any
         shares covered by his or her Option until the issuance of a stock
         certificate to him or her for such shares.

                                      -20-



<PAGE>


         IN WITNESS WHEREOF, URBAN OUTFITTERS, INC. has caused these presents to
be duly executed, under seal, this ____ day of March, 1997


ATTEST:                                     URBAN OUTFITTERS, INC.
[SEAL]


                                             By:
- -------------------------------------           --------------------------------
Jay Hammer, Secretary                           Richard A. Hayne, President


                                      -21-



<PAGE>




                                                                    Exhibit 21.1


                              LIST OF SUBSIDIARIES



Inter-Urban, Inc.,
a Delaware corporation

U.O. Fenwick, Inc.,
a Delaware corporation

U.O.D., Inc.,
a Delaware corporation

Anthropologie, Inc.,
a Pennsylvania corporation

Urban Outfitters Wholesale, Inc.,
a Pennsylvania corporation

Urban Outfitters UK, Limited,
a United Kingdom corporation

Urban Outfitters Canada, Inc.
a Canadian corporation



<PAGE>






Urban Outfitters, Inc.                                              Exhibit 22
INCOME PER SHARE CALCULATION:
JANUARY 31, 1997 & 1996



<TABLE>
<CAPTION>

INCOME PER SHARE CALCULATION:
                                                           Three Months Ended January 31,                
                                    ----------------------------------------------------------------------------
                                                 1997                                      1996              
                                    -----------------------------------      -----------------------------------
<S>                                    <C>              <C>                     <C>              <C>   
                                           $               Per Share                $               Per Share
NET INCOME                             2,852,000             $0.16              3,589,000             $0.20   
                                       =========        ==========              =========        ==========   

WEIGHTED AVERAGE COMMON
   SHARES & COMMON SHARE
   EQUIVALENTS OUTSTANDING                              17,772,298                               17,638,686     
                                                        ==========                               ==========     


COMPUTATION OF COMMON SHARES
    & COMMON SHARE EQUIVALENTS OUTSTANDING:




INCOME PER SHARE CALCULATION:
                                                           Twelve Months Ended January 31,                
                                    ----------------------------------------------------------------------------
                                                 1997                                      1996              
                                    -----------------------------------      -----------------------------------
                                          $                Per Share               $                Per Share
NET INCOME                            13,260,000             $0.75             12,308,000             $0.70   
                                      ==========        ==========             ==========        ==========   

WEIGHTED AVERAGE COMMON
   SHARES & COMMON SHARE
   EQUIVALENTS OUTSTANDING                              17,782,896                               17,619,888     
                                                        ==========                               ==========     


COMPUTATION OF COMMON SHARES
    & COMMON SHARE EQUIVALENTS OUTSTANDING:




                                                           Three Months Ended January 31,               
                                    ----------------------------------------------------------------------------
                                                   1997                                      1996             
                                    -----------------------------------      -----------------------------------
                                     End of Period       Weighted Ave.        End of Period       Weighted Ave.         
                                     -------------       -------------        --------------      -------------         

COMMON SHARES OUTSTANDING               17,528,698         17,528,698            17,080,372         17,080,372  
                                                         -------------                            ------------- 

COMMON SHARE EQUIVALENTS:
         OPTIONS                           472,937            472,937               783,942            783,942      
         ASSUMED REPURCHASED
                AT AVERAGE PRICE                             (229,337)                                (225,628)   
                                                         -------------                            ------------- 

WEIGHTED AVERAGE COMMON
    EQUIVALENTS                                               243,600                                  558,314    
                                                         -------------                            -------------    

TOTAL WEIGHTED AVERAGE
   COMMON SHARES & COMMON
   SHARE EQUIVALENTS OUTSTANDING                           17,772,298                               17,638,686          
                                                         =============                            =============          



                                                           Twelve Months Ended January 31,               
                                    ----------------------------------------------------------------------------
                                                   1997                                      1996             
                                    -----------------------------------      -----------------------------------
                                     End of Period       Weighted Ave.        End of Period       Weighted Ave.         
                                     -------------       -------------        --------------      -------------         

COMMON
 SHARES OUTSTANDING               17,528,698         17,429,375            17,080,372         17,028,856  
                                                         -------------                            ------------- 

COMMON SHARE EQUIVALENTS:
         OPTIONS                           472,937            537,931               783,942            793,142
         ASSUMED REPURCHASED
                AT AVERAGE PRICE                             (184,409)                                (202,110)   
                                                         -------------                            ------------- 

WEIGHTED AVERAGE COMMON
    EQUIVALENTS                                               353,522                                  591,032    
                                                         -------------                            -------------    

TOTAL WEIGHTED AVERAGE
   COMMON SHARES & COMMON
   SHARE EQUIVALENTS OUTSTANDING                           17,782,896                               17,619,888          
                                                         =============                            =============          

</TABLE>






<PAGE>



<TABLE> <S> <C>


<ARTICLE>                     5
<MULTIPLIER>                  1,000
       
<S>                             <C>
<PERIOD-TYPE>                 YEAR
<FISCAL-YEAR-END>                              JAN-31-1997
<PERIOD-END>                                   JAN-31-1997
<CASH>                                         14,581
<SECURITIES>                                   9,255
<RECEIVABLES>                                  2,827
<ALLOWANCES>                                   0
<INVENTORY>                                    16,965
<CURRENT-ASSETS>                               50,864
<PP&E>                                         25,209
<DEPRECIATION>                                 0
<TOTAL-ASSETS>                                 89,675
<CURRENT-LIABILITIES>                          11,625
<BONDS>                                        0
<PREFERRED-MANDATORY>                          0
<PREFERRED>                                    0
<COMMON>                                       2
<OTHER-SE>                                     75,691
<TOTAL-LIABILITY-AND-EQUITY>                   89,675
<SALES>                                        156,414
<TOTAL-REVENUES>                               156,414
<CGS>                                          77,909
<TOTAL-COSTS>                                  77,909
<OTHER-EXPENSES>                               57,342
<LOSS-PROVISION>                               0
<INTEREST-EXPENSE>                             (1,506)
<INCOME-PRETAX>                                22,669
<INCOME-TAX>                                   9,409
<INCOME-CONTINUING>                            13,260
<DISCONTINUED>                                 0
<EXTRAORDINARY>                                0
<CHANGES>                                      0
<NET-INCOME>                                   13,260
<EPS-PRIMARY>                                  .75
<EPS-DILUTED>                                  .75
        


</TABLE>