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                                  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, 1998

                           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 ]
           -----

     17,700,024 Common Shares were outstanding at April 10, 1998

     The aggregate market value of voting shares held by non-affiliates at April
10, 1998 was $153,117,331

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Proxy Statement for Registrant's 1998 Annual Meeting of
Shareholders -- Part III.

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<PAGE>


                                TABLE OF CONTENTS



<TABLE>
<CAPTION>

                                      PART I

<S>        <C>                                                                                       <C>

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


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


Item 3     Legal Proceedings ......................................................................    8


Item 4     Submission of Matters to a Vote of Security Holders ....................................    8


                                      PART II


Item 5     Market for Registrant's Common Equity and Related Shareholder Matters...................    9


Item 6     Selected Financial Data ................................................................   10


Item 7     Management's Discussion and Analysis of Financial Condition and Results of Operations...   11


Item 8     Financial Statements and Supplementary Data ............................................   16


Item 9     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....   16


                                     PART III


Item 10    Directors and Executive Officers of the Registrant .....................................   17


Item 11    Executive Compensation .................................................................   19


Item 12    Security Ownership of Certain Beneficial Owners and Management .........................   19


Item 13    Certain Relationships and Related Transactions .........................................   19


                                      PART IV


Item 14    Exhibits, Financial Statement Schedules and Reports on Form 8-K ........................   20


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

FINANCIAL STATEMENT SCHEDULES........................................................................S-1
</TABLE>


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

As used in this Report on Form 10-K, "Fiscal 1994," "Fiscal 1995," "Fiscal
1996," "Fiscal 1997" and "Fiscal 1998" 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 27 Urban Retail stores in 21 metropolitan areas
throughout the United States and Canada. The Company has opened nine
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. A
smaller format store is being developed that would average 6,000 net selling
square feet, and carry somewhat less SKUs. The first store in this new format
was opened in March, 1998 in Bloomington, Indiana. 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 64.4% and 69.3% of the Company's net sales in Fiscal 1998 and in
Fiscal 1997, 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 18.0% and
12.6% of the

                                        3


<PAGE>



Company's net sales in Fiscal 1998 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. Anthropologie introduced a direct
response catalog in early March 1998. If successful, the catalog will be
expanded to a second mailing in the fall catalog season.

         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
four labels: Free People, Ecote, CoOperative and Bulldog. Wholesale accounted
for approximately 17.6% and 18.1% of the Company's net sales in Fiscal 1998 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 25,000 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.


Store Expansion Strategy

     The Company strategy is to open five new stores each year for both retail
concepts. In Fiscal 1998, Urban Retail opened two new stores while Anthropologie
opened only one. The Fiscal 1999 plan anticipates seven Urban Retail stores and
five Anthropologie store openings.


                                        4


<PAGE>



Company Operations

     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.

     The Company plans to open a third party distribution facility in Nevada in
late May or early June of 1998. The purpose of this facility will be to service
the west coast stores with a faster turn around from west coast vendors at lower
cost per unit in freight. The Company currently uses third party distribution in
Canada.

     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 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.

     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.


                                        5


<PAGE>



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 certain service
marks and trademarks (collectively "marks"), including without limitation,
"Urban Outfitters," "Anthropologie," "Ecote," "Co-Operative," "Urban Renewal,"
"Free People," "R.V.," "Slant," "Big Smokey," "Fink," "Lisa L.," "Lip Gloss,"
and "Shag." Each mark is renewable indefinitely, contingent upon continued use
at the time of renewal.

     In addition, the Company currently has pending registration applications
with the U.S. Patent and Trademark Office covering certain other marks. The
Company is also the owner of marks which have been registered in foreign
countries, including without limitation, 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 marks
are pending in various foreign countries as well.

     The Company regards its marks as important to its business due to their
name recognition with the Company's customers. The Company believes that the
marks are so important that in order to protect them from infringement and to
defend against any claim of infringement, the Company established a separate
company whose primary purpose is to maintain and manage those and future marks
thereby increasing their value to the operating companies. The Company is not
aware of any claims of infringement or challenges to the Company's right to use
any of its marks in the United States, however, there can be no assurance that
the Company's marks 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 marks, any of which could have an adverse
effect on the Company.


Employees

     The Company employs approximately 1,460 persons, 874 (60%) of whom are
full-time employees and 586 (40%) of whom are part-time employees. Of the
Company's total employees, 1,146 (78%) work at Urban Retail, 246 (17%) work at
Anthropologie and 68 (5%) work at

                                        6


<PAGE>


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 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.
Total estimate net selling square feet under lease at January 31, 1998 by Urban
Retail was 258,700 and by Anthropologie was 75,410. The average store net
selling square feet is 10,000 for Urban Retail and 8,500 to 9,000 for
Anthropologie. The new smaller format Urban Retail stores are expected to
average 6,000 net selling square feet. The Bloomington store was 5,100 net
selling square feet.


<TABLE>
<CAPTION>
LOCATION                         LOCATION                          LOCATION
- --------                         --------                          --------

<S>                              <C>                           <C>
Urban Outfitters Stores          Urban Outfitters Stores         Anthropologie Stores
- -----------------------          -----------------------         --------------------

Cambridge, MA                    Costa Mesa, CA                             Wayne, PA
11 J.F. Kennedy Street           2930 Bristol Street            201 W. Lancaster Ave.

Philadelphia, PA                 Chicago, IL                            Rockville, MD
1801 Walnut Street               2352 N. Clark Street            11500 Rockville Pike

New York, NY                     Pasadena, CA                            Westport, CT
628 Broadway                     139 W. Colorado Blvd.           1365 Post Road, East

Washington, DC                   Chicago, IL                            Greenvale, NY
3111 M Street, N.W.              935 N. Rush Street                  9 Northern Blvd.

New York, NY                     Austin, TX                                  SoHo, NY
374 Avenue of Americas           2406 Guadalupe Street              375 West Broadway

Madison, WI                      Tempe, AZ                          Newport Beach, CA
604 State Street                 545 South Mill Ave.         823 Newport Center Drive

Ann Arbor, MI                    Houston, TX                         Santa Monica, CA
231 S. State Street              2501 University Blvd.    1402 Third Street Promenade

Boston, MA                       Miami, FL                                Chicago, IL
361 Newbury Street               653 Collins Ave.                1120 N. State Street

Minneapolis, MN                  Boulder, CO                        Highland Park, IL
3006 Hennepin Ave., S.           934 Pearl Street                 1780 Green Bay Road

New York, NY                     Portland, OR
127 East 59th Street             2320 N.W. Westover Road

Seattle, WA                      Montreal, PQ
401 Broadway, East               1246 Ste. Catherine Street, W.

Berkeley, CA                     Toronto, ON
2590 Bancroft Way                235 Yonge Street

Santa Monica, CA                 Bloomington, IN
1440 Third Street Promenade      530 E. Kirkwood Ave.

San Francisco, CA
80 Powell Street
</TABLE>


                                        7

<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, 1998, 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.


                                        8


<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 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


     Fiscal 1998

     Quarter ended April 30, 1997            14        10 1/2
     Quarter ended July 31, 1997             18 1/2    12
     Quarter ended October 31, 1997          19 3/4    15 1/8
     Quarter ended January 31, 1998          19        14 1/2


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

                                        9


<PAGE>



Holders

     On April 1, 1998, 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 balance
sheet and income statement data, at the fiscal year end 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,
                                                                --------------------------------------------------------------------
                                                                     1994         1995          1996           1997          1998
                                                                     ----         ----          ----           ----          ----
                                                                            (In thousands, except share and per share data)
<S>                                                              <C>           <C>           <C>           <C>           <C>        
Income Statement Data:
Net sales ....................................................   $    84,486   $   110,121   $   133,036   $   156,414   $   173,121

Gross profit .................................................        43,989        57,334        67,583        78,505        85,739


Income from operations .......................................        13,302        17,576        19,867        21,356        22,062

Net income ...................................................   $     7,806   $    10,817   $    12,308   $    13,260   $    13,880
                                                                 ===========   ===========   ===========   ===========   ===========

Net income per common share ..................................   $       .52   $       .64   $       .72   $       .76   $       .79
                                                                 ===========   ===========   ===========   ===========   ===========

Weighted average common shares outstanding ...................    14,942,636    16,790,740    17,028,856    17,429,375    17,576,203

Net income per common share - assuming dilution...............   $       .49   $       .62   $       .70   $       .75   $       .78
                                                                 ===========   ===========   ===========   ===========   ===========

Weighted average common shares outstanding - assuming dilution    15,896,412    17,407,608    17,487,673    17,722,629    17,843,873


Balance Sheet Data:
Working capital ..............................................   $    28,285   $    26,872   $    36,487   $    39,239   $    52,133
Total assets .................................................        43,400        56,766        71,117        89,675       107,424
Total liabilities ............................................         7,902        10,015        11,665        13,983        16,766
Long-term debt, excluding current maturities .................          --            --            --            --            --
Total shareholders' equity ...................................        35,498        46,751        59,452        75,692        90,658
</TABLE>



                                       10

<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 26 stores opened at January 31, 1998 and
25 at January 31, 1997. The Company's first Anthropologie store opened in
October 1992. Anthropologie had nine stores opened at January 31, 1998 and eight
at January 31, 1997. The Company has plans to open seven Urban Retail stores and
five Anthropologie stores in Fiscal 1999. The recent growth in the Wholesale
company is from both the domestic and international markets.

     Fiscal 1998 and 1997 continued as very profitable years for Urban
Outfitters with earnings to net sales of 8.0% and 8.5%, respectively, as well as
return on shareholders' equity of 15.3% and 17.5%, respectively. The slight
contraction of earnings as a percent of net sales in Fiscal 1998 and the
direction of return on shareholders' equity in that year resulted primarily from
a slowdown in retail sales growth in Fiscal 1998. The Wholesale company recorded
sales growth of 8% and 30% in Fiscal years 1998 and 1997, respectively. The
Wholesale company is not expected to grow at those rates in Fiscal 1999 and
could experience a reduction in sales during Fiscal 1999.

     The Company has established a European subsidiary (Urban Outfitters U.K.
Ltd.) and expects to open its first Urban Retail store in London in May 1998.
The European subsidiary incurred expenses without the benefit of sales during
Fiscal 1998. While Fiscal 1999 is expected to have sales from the London store,
the subsidiary will still operate at a loss during Fiscal 1999.

     In late Fiscal 1998 and in early Fiscal 1999, the Company invested in two
direct marketing concepts. The first is a 100% owned catalog under the
Anthropologie retail subsidiary and carries the Anthropologie name. The second
is a minority investment in a teenage catalog/magazine combination called
moXIEgirl(TM). Both are expected to incur losses during their start-up phases.
The period of start-up could encompass two years for either or both.


                               11


<PAGE>


     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 1998 Fiscal year ended on
January 31, 1998. 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 income statement data from period to period.

                                                       Fiscal Year Ended
                                                           January 31,
                                                ------------------------------
As a Percentage of Net Sales                     1996       1997          1998
                                                -----      -----        ------

Net sales..................................     100.0%     100.0%        100.0%
Cost of goods sold.........................      49.2       49.8          50.5
                                               ------     ------        ------
  Gross profit.............................      50.8       50.2          49.5
Selling, general and administrative expenses     35.9       36.5          36.8
                                               ------     ------        ------
  Income from operations...................      14.9       13.7          12.7
Net interest and other expenses (income)...      (1.0)       (.8)         (1.0)
                                               ------     ------        ------
  Income before income taxes...............      15.9       14.5          13.7
Income tax expense.........................       6.6        6.0           5.7
                                               ------     ------        ------
  Net income...............................       9.3%       8.5%          8.0%
                                               ======     ======        ======

Period over Period Dollar Growth

Net sales..................................                 17.6%         10.7%
Gross profit...............................                 16.2%          9.2%
Income from operations.....................                  7.5%          3.3%
Net income.................................                  7.7%          4.7%
                                                           =====         =====

Fiscal 1998 Compared to Fiscal 1997

     Net sales in Fiscal 1998 increased to $173.1 million from $156.4 million in
the prior Fiscal year, a 10.7% increase. The $16.7 million increase was
attributable to a combination of comparable store net sales decreases of $1.6
million, net sales increases of $16.1 million from stores opened or enlarged
during Fiscal 1997 and Fiscal 1998 and net sales increases of $2.2 million from
the Wholesale company. The decrease in comparable store sales of 1% or $1.6
million results primarily from one merchandise division that did not perform to
prior year levels. Average selling prices were

                               12


<PAGE>

not a significant determinate of Fiscal 1998 sales levels. New and enlarged
stores included seven stores opened in Fiscal 1997 and three opened in Fiscal
1998. The Company believes increased net sales from the Wholesale subsidiary
during Fiscal 1997 and 1998 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.

     The Company's gross profit margin declined from 50.2% in Fiscal 1997 to
49.5% in Fiscal 1998. The primary contributors to the decline were higher
markdowns in the retail companies and a higher sales mix in the lower gross
profit margin companies -- Anthropologie and Wholesale. Markdowns were triggered
by lower than planned comparable store sales.

     Selling, general and administrative expenses grew to $63.7 million in
Fiscal 1998 from $57.1 million in the prior Fiscal year, an 11.4% increase. As a
percentage of net sales, the expenses increased to 36.8% in Fiscal 1998 from
36.5% in the prior Fiscal year. The increase in percentage was attributable to
the Retail companies' lower comparable store sales and investments in people and
systems to accommodate the sales growth in the Wholesale company over the last
two years of 8% and 30%.

     Net income increased to $13.9 million in Fiscal 1998 from $13.3 million in
the prior Fiscal year, a 4.7% increase. This increase was principally achieved
through increases in net sales.


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 leaves $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.

     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.


                                       13


<PAGE>

     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.


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.
Most recently, the company invested in two direct response catalogs and in a new
European subsidiary. In addition to cash generated from operations, sources of
cash have included the net proceeds from the exercise of certain employee stock
options in each of Fiscal 1996, 1997 and 1998. 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, including investments in the catalog
companies.

     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 $16.5 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 an as offered basis not to exceed LIBOR plus 3/8 of 1
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, 1997 and 1998 were $4.3 million and $4.7
million, respectively. There were no short-term or long-term debts outstanding
at January 31, 1997 or at January 31, 1998. 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.


Other Matters

Year 2000

The Company has examined each area of its business systems from IBM operating
systems, to business application systems, to store register systems that it
believes could be affected by the date change issue of the year 2000. It has
also reviewed the implemented changes or planned changes of its major suppliers
that it believes would be effected by the year 2000 date changes. Many of the
needed changes are complete, some are still taking place and all are expected to
be completed and in place before the critical times in calendar 1999. The
expenses associated with the changes are not expected to be of a material nature
to the Company.


                                       14

<PAGE>


Future Accounting Changes

In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and No.
131, "Disclosures about Segments of an Enterprise and Related Information." The
Company will adopt these new accounting standards in Fiscal 1999. While
management has not yet completed its assessment of how and if SFAS 131 will
impact the Company's existing segment disclosures, both standards are for
disclosure purposes only and will have no adverse effect on the Company's
financial position, cash flows or results of operations.


Seasonality and Quarterly Results

     While Urban Outfitters has been profitable in each of its last 32 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. Fluctuations in the bookings
and shipments of the Wholesale products between quarters can also have positive
or negative effects on earnings during the quarters.

     The following tables, which are unaudited, set forth the Company's net
sales, gross profit, net income and income 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 1997 Quarter Ended
                                                        ---------------------------------------------
                                                       (Dollars in thousands, except per share data)

                                                          April 30,  July 31,   Oct. 31,  Jan. 31,
                                                            1996       1996      1996       1997
                                                          --------   -------    -------    -------
<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
Net income per share - assuming dilution ..............   $   .17    $   .16    $   .26    $   .16

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


                                      15


<PAGE>



<TABLE>
<CAPTION>

                                                                 Fiscal 1998 Quarter Ended
                                                         --------------------------------------------
                                                        (Dollars in thousands, except per share data)

                                                         April 30,   July 31,   Oct. 31,   Jan. 31,
                                                           1997        1997       1997      1998 
                                                          -------    -------    -------    -------
<S>                                                       <C>        <C>        <C>        <C>
Net sales .............................................   $37,197    $41,316    $48,373    $46,235
Gross profit ..........................................    18,608     20,350     24,026     22,755
Net income ............................................     2,423      2,855      4,783      3,819
Net income per share - assuming dilution ..............   $   .14    $   .16    $   .27    $   .21

As a Percentage of Fiscal Year:
Net sales .............................................        21%        24%        28%        27%
Net income ............................................        17%        21%        34%        28%
</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.

                                       16


<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:


<TABLE>
<CAPTION>
NAME                               AGE                  POSITION
- ----                               ---                  --------
<S>                               <C>        <C>
Richard A. Hayne                   51        Chairman of the Board of Directors and
                                             President

Kenneth K. Cleeland                57        Chief Financial Officer and Treasurer

Jay M. Hammer                      42        Secretary and Director of Stores

Michael A. Schultz                 44        President, Urban Outfitters Wholesale, Inc.

Glen T. Senk                       41        President, Anthropologie, Inc.

Scott A. Belair(1)(2)              50        Director

Harry S. Cherken, Jr.              48        Director

Joel S. Lawson III(1)(2)           50        Director

Burton M. Sapiro                   71        Director
</TABLE>

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

(1)  Member of the Audit Committee.
(2)  Member of the Compensation Committee.



                                       17

<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.

                               18


<PAGE>



Item 11.  Executive Compensation

       Information required by this item is incorporated herein by reference
from the Company's Proxy Statement for the 1998 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 1998 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 1998 Annual Meeting of Shareholders.



                               19


<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
- --------------           -----------

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.

                                       20

<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 incorporated by reference
                to Exhibit 10.6 of the Company's Annual Report on
                Form 10-K for the Fiscal year ended January 31, 1997.

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.


                                       21


<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, 1998
- ---------------------------------       Board, President and
Richard A. Hayne                        Director
(Principal Executive Officer)         

/s/ Kenneth K. Cleeland               Chief Financial Officer     April 21, 1998
- ---------------------------------       and Treasurer
Kenneth K. Cleeland 
(Principal Financial and             
 Accounting Officer)

/s/ Scott A. Belair                   Director                    April 21, 1998
- ---------------------------------
Scott A. Belair

/s/ Harry S. Cherken, Jr.             Director                    April 21, 1998
- ---------------------------------
Harry S. Cherken, Jr.

/s/ Joel S. Lawson III                Director                    April 21, 1998
- ---------------------------------
Joel S. Lawson III

/s/ Burton M. Sapiro                  Director                    April 21, 1998
- ---------------------------------
Burton M. Sapiro





                                       22


<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                             URBAN OUTFITTERS, INC.


                                                              Page
                                                              ----


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

     Consolidated Balance Sheets at January 31, 1998
          and January 31, 1997.............................    F-3

     Consolidated Statements of Income for the
       years ended January 31, 1998, 1997 and 1996.........    F-4

     Consolidated Statements of Shareholders' Equity for the
       years ended January 31, 1998, 1997 and 1996.........    F-5

     Consolidated Statements of Cash Flows for the
       years ended January 31, 1998, 1997 and 1996.........    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) present fairly, in all material respects,
the financial position of Urban Outfitters, Inc. and its subsidiaries at January
31, 1998 and 1997, and the results of their operations and their cash flows for
each of the three years in the period ended January 31, 1998, 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 13, 1998



                                       F-2


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




                                                                  January 31,
                                                             -------------------
                         Assets                                 1998       1997
                                                             --------   --------
Current assets:

     Cash and cash equivalents ...........................   $ 26,712   $ 14,581
     Marketable securities................................     10,865      9,255
     Accounts receivable, net of allowance of
          doubtful accounts of $616 and $643 at January 31,
          1998 and 1997, respectively ....................      4,497      2,827
     Inventory ...........................................     17,128     16,965
     Prepaid expenses and other current assets ...........      4,662      4,776
     Deferred taxes ......................................      1,929      2,460
                                                             --------    -------
Total current assets .....................................     65,793     50,864

Property and equipment, less accumulated depreciation and      
     amortization.........................................     26,893     25,209
Marketable securities.....................................     11,993     12,047
Other assets .............................................      2,745      1,555
                                                             --------    -------
                                                             $107,424    $89,675
                                                             ========    =======

            Liabilities and shareholders' equity

Current liabilities:
     Accounts payable ....................................   $ 10,386    $ 8,699
     Income taxes payable ................................        366        388
     Accrued compensation ................................      1,024        951
     Accrued expenses and other current liabilities ......      1,884      1,587
                                                             --------    -------
Total current liabilities ................................     13,660     11,625

Accrued rent and other liabilities .......................      3,106      2,358
                                                             --------    -------
Total liabilities.........................................     16,766     13,983
                                                             --------    -------
Shareholders' equity:
     Preferred shares; $.0001 par, 10,000,000 authorized,
          none issued.....................................         --         --
     Common shares; $.0001 par, 50,000,000 authorized,
          17,649,360 and 17,528,698 issued at January 31,
          1998 and 1997, respectively                               2          2
     Additional paid-in capital ..........................     21,482     20,396
     Retained earnings ...................................     69,174     55,294
                                                             --------    -------
Total shareholders' equity ...............................     90,658     75,692
                                                             --------    -------
                                                             $107,424    $89,675
                                                             ========    =======


                             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,
                                                      ----------------------------------------
                                                         1998           1997          1996
                                                      -----------    -----------   -----------
<S>                                                  <C>            <C>            <C>
Net sales ..........................................  $   173,121    $   156,414   $   133,036
Cost of sales ......................................       87,382         77,909        65,453
                                                      -----------    -----------   -----------
       Gross profit ................................       85,739         78,505        67,583

Selling, general and administrative expenses........       63,677         57,149        47,716
                                                      -----------    -----------   -----------
     Income from operations.........................       22,062         21,356        19,867
Interest (income)...................................       (1,772)        (1,506)       (1,285)
Other expense, net..................................          209            193            22
                                                      -----------    -----------   -----------
     Income before income taxes.....................       23,625         22,669        21,130
Income tax expense..................................        9,745          9,409         8,822
                                                      -----------    -----------   -----------
     Net income ....................................  $    13,880    $    13,260   $    12,308
                                                      ===========    ===========   ===========

Net income per common share.........................  $       .79    $       .76   $       .72
                                                      ===========    ===========   ===========
Weighted average common shares outstanding .........   17,576,203     17,429,375    17,028,856
                                                      ===========    ===========   ===========
Net income per common share - assuming dilution.....  $       .78    $       .75   $       .70
                                                      ===========    ===========   ===========
Weighted average common shares outstanding - 
  assuming dilution ................................   17,843,873     17,722,629    17,487,673
                                                      ===========    ===========   ===========
</TABLE>







                      See accompanying notes.

                               F-4


<PAGE>

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


<TABLE>
<CAPTION>
                                                           Common Shares
                                          -------------------------------------------------
                                                                    Additional
                                           Number of                  Paid-In     Retained
                                            Shares        Par Value   Capital     Earnings         Total
                                          ----------      ---------  ----------   ---------      --------
<S>                                      <C>              <C>        <C>          <C>            <C>
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

Exercise of stock options................    120,662           --          558           --           558
Tax effect of exercises..................         --           --          528           --           528
Net income...............................         --           --           --       13,880        13,880
                                          ----------         ----     --------    ---------      --------
Balances at January 31, 1998............. 17,649,360         $  2     $ 21,482    $  69,174      $ 90,658
                                          ==========         ====     ========    =========      ========

</TABLE>





                                 See accompanying notes.

                                          F-5


<PAGE>

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



<TABLE>
<CAPTION>
                                                                        Fiscal Year Ended January 31,
                                                                      ----------------------------------
                                                                         1998         1997        1996
                                                                      ----------    --------    --------
<S>                                                                   <C>           <C>         <C>
Cash flows from operating activities:
     Net income.....................................................  $   13,880    $ 13,260    $ 12,308
     Adjustments to reconcile net income to net cash
          provided by operating activities:
          Depreciation and amortization ............................       4,588       3,461       2,925
          Provision for deferred income taxes ......................         531        (705)       (341)
          Provision for losses (recovery) of accounts receivable ...         (27)        112        (187)
          Changes in assets and liabilities:
               Increase in receivables .............................      (1,643)     (1,366)       (214)
               Increase in inventory ...............................        (163)     (6,488)        (96)
               Increase in prepaid expenses and other assets .......      (1,076)     (1,549)       (564)
               Increase in payables, accrued expenses and other
                 liabilities .......................................       2,783       2,318       1,820
                                                                        --------    --------    --------
     Net cash provided by operating activities .....................      18,873       9,043      15,651
                                                                        --------    --------    --------

Cash flows from investing activities:
     Capital expenditures ..........................................      (6,272)    (11,980)     (6,229)
     Purchases of investments held-to-maturity .....................      (9,333)    (20,522)     (5,463)
     Purchases of investments available-for-sale ...................      (8,075)     (2,425)     (2,911)
     Sales of investments available-for-sale .......................       6,100       5,035          --
     Maturities of investments held-to-maturity ....................       9,752      12,356       9,545
                                                                        --------    --------    --------
     Net cash used in investing activities .........................      (7,828)    (17,536)     (5,058)
                                                                        --------    --------    --------

Cash flows from financing activities:
     Exercise of stock options .....................................       1,086       2,979         466
     Purchase of common shares .....................................          --          --         (73)
                                                                        --------    --------    --------
     Net cash provided by financing activities .....................       1,086       2,979         393
                                                                        --------    --------    --------

     Increase (decrease) in cash and cash equivalents ..............      12,131      (5,514)     10,986

Cash and cash equivalents at beginning of period ...................      14,581      20,095       9,109
                                                                        --------    --------    --------
Cash and cash equivalents at end of period .........................    $ 26,712    $ 14,581    $ 20,095
                                                                        ========    ========    ========
</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, 1998 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 that 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

     The Company has adopted the provisions of SFAS No. 128, "Earnings Per
Share." All prior period net income per share data presented has been restated
in accordance with SFAS No. 128.

  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
Fiscal 1998 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, 1998                 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 ...........................     $ 7,272          $ 7,294          $ 7,340        $ 7,379
     U.S. government securities ................................       1,318            1,318            1,615          1,638
                                                                     -------          -------          -------        -------
   Total current held-to-maturity ..............................       8,590            8,612            8,955          9,017
                                                                     -------          -------          -------        -------

   Available-for-sale
     Tax-exempt municipal securities, puta2,275 ................       2,275            2,275              300            300
                                                                     -------          -------          -------        -------
   Total current marketable securities .........................      10,865           10,887            9,255          9,317
                                                                     -------          -------          -------        -------

NONCURRENT PORTION
   Held-to-maturity
     Tax-exempt municipal securities ...........................      11,993           12,111           11,798         11,755
     U.S. government securities ................................        --               --                249            251
                                                                     -------          -------          -------        -------
   Total noncurrent held-to-maturity ...........................      11,993           12,111           12,047         12,006
                                                                     -------          -------          -------        -------

Total marketable securities ....................................     $22,858          $22,998          $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,
                                   ----------------------
                                       1998       1997
                                   ---------    ---------

     Work-in-progress............  $     861    $   1,151
     Finished goods..............     16,267       15,814
                                  ----------    ---------
                  Total..........  $  17,128    $  16,965
                                   =========    =========


4.   Property and Equipment

     Property and equipment is summarized as follows:


                                        January 31,
                                    -------------------
                                      1998       1997
                                    --------  ---------

     Land........................   $    543   $    543
     Furniture and fixtures......     13,739     12,402
     Leasehold improvements......     28,267     23,720
     Other operating equipment...      2,034      1,646
                                    --------   --------
                                      44,583     38,311
     Accumulated depreciation and
       amortization..............    (17,690)   (13,102)
                                     -------    -------
                  Total..........    $26,893    $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,
                                    ------------------
                                       1998      1997
                                    --------   --------

     Accrued sales taxes ........    $   489   $    661
     Other current liabilities...      1,395        926
                                     -------   --------
                  Total..........    $ 1,884   $  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 $16,500 revolving line of credit to facilitate
letter of credit transactions and cash advances. Interest on outstanding
balances is payable monthly based on an "as offered" rate not to exceed the
London Interbank Offered Rate (LIBOR) plus 3/8%. No principal amounts were
outstanding under this line at January 31, 1998 and 1997. Outstanding letters of
credit totaled $4,706 and $4,263 as of January 31, 1998 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.

     No contributions were made by the Company for the years ended January 31,
1998, January 31, 1997 or January 31, 1996.


8.   Income Taxes

     Income tax expense consists of:

                            Fiscal Year Ended January 31,
                           ------------------------------
                            1998         1997       1996
                           ------       ------     ------
Current:
  Federal..............    $8,433       $8,041     $7,202
  State and local......     2,106        2,073      1,961
Deferred:
  Federal..............      (499)        (613)      (291)
  State and local......       (32)         (92)       (50)
  Foreign .............      (263)          --         --
                           ------       ------     ------
Total..................    $9,745       $9,409     $8,822
                           ======       ======     ======



                                      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,
                                           -----------------------------
                                            1998       1997     1996
                                            ----       ----     ----
Expected provision at federal
   statutory rate.......................     35%        35%      35%
State and local income taxes, net of
  federal tax benefit, and other........      6          7        7
                                            ---        ---      ---   
Effective rate.........................      41%        42%      42%
                                            ===        ===      ===


     The significant components of deferred tax assets and liability at January
31, 1998 and 1997 are as follows:


                                              1998       1997
                                             ------     ------
Deferred tax liability:
  Prepaid expenses.......................    $ (242)    $ (138)

Deferred tax assets:
  Depreciation and lease transactions....     2,221      1,667
  Inventory..............................     1,328      1,484
  Accounts receivable....................       533        408
  Loss carryforwards.....................       263         --
  Accrued salaries and benefits..........       145        113
  Other..................................        15         19
                                            -------    -------
Net deferred tax assets..................   $ 4,263    $ 3,553
                                            =======    =======


     At January 31, 1998, the Company had net operating loss carry forwards for
tax purposes of approximately $800 in the United Kingdom which do not expire. At
January 31, 1998 and 1997, a deferred tax asset of $2,334 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:


                1999.........................  $ 11,897
                2000.........................    11,489
                2001.........................    11,093
                2002.........................    11,167
                2003 ........................    10,612
                Thereafter...................    43,958
                                                -------
                Total minimum lease payments   $100,216

       Certain store leases provide for predetermined escalations in future
minimum annual rentals. The pro rata portion of future minimum rent escalations,
amounting to $3,095 and $2,302, at January 31, 1998 and 1997, respectively, has
been included in Other liabilities in the accompanying consolidated balance
sheets. Subsequent to year end, the Company entered into leases for additional
locations. Commitments related to these leases are included in the above.

       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,
                                             -----------------------------
                                              1998       1997       1996
                                             -------    -------    ------
              Minimum rentals.............   $11,631    $ 9,946    $8,274
              Contingent rentals..........       380        599       783
                                             -------    -------    ------
                        
                   Total..................   $12,011    $10,545    $9,057
                                             =======    =======    ======





                                      F-13


<PAGE>

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



10.  Stock Option Plans

       At the May 20, 1997 Annual Shareholders Meeting, approval was given to
adopt the Company's 1997 Stock Option Plan. The 1997 Plan authorizes up to an
aggregate of 1,250,000 common shares which can be granted as either incentive
stock options or nonqualified stock options. The vesting period for this Plan
can range from one to ten years. This 1997 Plan replaced the previous 1987, 1992
and 1993 Plans which were precluded from making additional grants due either to
expiration or insufficiently available shares. Individual grants outstanding
under the superseded plans, however, have expiration dates which extend into the
year 2007.

       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 1998, 1997 and 1996, the Company's net
earnings and earnings per share would have been reduced to the pro forma amounts
indicated below:


<TABLE>
<CAPTION>
                                                                      For the year ended January 31,
                                                                    -----------------------------------
                                                                     1998           1997          1996
                                                                    -------       -------       -------
<S>                                                                 <C>           <C>          <C>
Net income - as reported ........................................   $13,880       $13,260       $12,308
Net income - pro forma ..........................................   $12,693       $12,649       $11,930
Net income per share - assuming dilution - as reported ..........       .78       $   .75       $   .70
Net income per share - assuming dilution - pro forma ............   $   .72       $   .72       $   .68
</TABLE>


       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:

                                1998      1997        1996
                                -----     -----      ------
Expected life (years) ......     6.7       5.7        6.1
Risk-free interest rate.....     6.9%      6.1%       6.6%
Volatility .................    50.7%     49.5%      49.5%
Dividend rate ..............       0%        0%         0%




                                      F-14


<PAGE>


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



       Information regarding these option plans for Fiscal 1998, 1997 and 1996
is as follows:


<TABLE>
<CAPTION>

                                                           FY 1998                    FY 1997                    FY 1996
                                                    --------------------    --------------------------    ---------------------
                                                                 Weighted                     Weighted                  Weighted
                                                                 Average                      Average                   Average
                                                                 Exercise                     Exercise                  Exercise
Fixed Options                                         Shares      Price       Shares            Price       Shares        Price
- -------------                                       ---------    -------    ---------         --------    ---------      -------
<S>                                                 <C>          <C>       <C>                <C>       <C>             <C>
Options outstanding at beginning of year .......    1,010,756    $ 9.50     1,274,582          $ 5.99     1,152,912      $ 4.67
Options granted ................................      415,000     11.54       185,000           15.02       564,000       10.23
Options exercised ..............................     (120,662)     4.62      (448,326)           1.80      (142,330)       1.23
Options canceled ...............................         --         n/a          (500)          15.19      (300,000)      12.38
                                                    ---------               ---------                     ---------
Options outstanding at end of year .............    1,305,094    $10.60     1,010,756          $ 9.50     1,274,582      $ 5.99
                                                    =========    ======     =========          ======     =========      ======
Options exercisable at end of year .............      603,426                 472,920                       783,942
                                                    =========               =========                     =========
Weighted average fair value of grants per share     $    6.89               $    7.99                     $    5.75
                                                    =========               =========                     =========
</TABLE>




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


<TABLE>
<CAPTION>
                           Options Outstanding                      Options Exercisable
                  ---------------------------------------         ------------------------
                                    Wtd. Avg.
                     Amount         Remaining     Wtd. Avg.         Amount       Wtd. Avg.
   Range of       Outstanding      Contractual    Exercise        Exercisable    Exercise
Exercise Prices    at 1/31/98         Life         Price          at 1/31/98      Price
- ---------------   -----------      -----------   ---------        -----------    -------- 
<S>               <C>               <C>          <C>              <C>            <C>
$ 2.33 -  9.88      366,594         4.5 years     $ 6.84            299,926      $ 6.36
$10.63 - 11.81      746,000         7.1            10.99            196,000       11.17
$13.25 - 20.88      192,500         6.5            16.22            107,500       17.31
</TABLE>




                                     F-15


<PAGE>



11. Net Income Per Share

       The following is a reconciliation of the denominators of net income per
share and net income per share (assuming dilution) computations:

                                    Fiscal Year Ended January 31,
                                             (in shares)
                               ---------------------------------------
                                  1998           1997           1996
                               ----------     ----------    ----------
Net income per share .....     17,576,203     17,429,375    17,028,856
Effect of dilutive options        267,670        293,254       458,817
                               ----------     ----------    ----------

Net income per share -         
   assuming dilution.....      17,843,873     17,722,629    17,487,673
                               ==========     ==========    ==========


       Options to purchase 40,000 shares at $20.88 per share, 10,000 shares at
$17.69 per share, 35,000 shares at $16.88 per share and 69,500 shares at $15.19
per share were outstanding during Fiscal 1998, but were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares.


12.  Supplemental Cash Flow Information

                                      Fiscal year ended January 31,
                                      -----------------------------
                                       1998       1997       1996
                                      ------     ------     ------
Interest paid .................       $   29     $   28     $   50
Income taxes paid .............       $9,668     $8,260     $9,439


13.  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.


14.  Subsequent Event

       On February 5, 1998 the Company entered into an agreement with HMB
Publishing, Inc. for the purchase of a minority interest in the company through
Series B Convertible Preferred Stock and certain convertible debentures. The
agreement calls for additional investments and ownership if HMB meets certain
performance milestones. To date, the Company has invested approximately $804.
HMB publishes moXIEgirl(TM), a combination magazine and catalog catering to
teenage girls.

                                      F-16


<PAGE>

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



                                         Charged
                             Balance at  to costs               Balance
                             beginning     and                   at end
Description                  of period   expenses  Deductions  of period
- -----------                  ----------  --------  ----------- ---------

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

Year ended January 31, 1998
  Inventory reserves ......    $2,726     $2,190     $2,144      $2,772




                                  S-1


<PAGE>





                                                                    Exhibit 21.1



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







                             URBAN OUTFITTERS, INC.                   EXHIBIT 22
                         INCOME PER SHARE CALCULATION:
                            January 31, 1998 & 1997


INCOME PER SHARE CALCULATION:

<TABLE>
<CAPTION>

                                              Three Months Ended January 31,                 Twelve Months Ended January 31,
                                   -----------------------------------------------    --------------------------------------------
                                            1998                     1997                     1998                   1997
                                   ----------------------    ---------------------    ---------------------   --------------------
                                        $       Per Share        $       Per Share        $       Per Share      $       Per Share

<S>                                <C>         <C>           <C>       <C>           <C>         <C>          <C>        <C>
NET INCOME                         3,819,000        $0.21    2,852,000       $0.16    13,880,000      $0.78   13,260,000      $0.75
                                   =========   ==========    =========  ==========    ========== ==========   ========== ==========

WEIGHTED AVERAGE COMMON
    SHARES & COMMON SHARE
     EQUIVALENTS OUTSTANDING                   17,967,161               17,741,431               17,843,873              17,722,629
                                               ==========               ==========               ==========              ==========
</TABLE>






COMPUTATION OF COMMON SHARES
      & COMMON SHARE EQUIVALENTS OUTSTANDING:


<TABLE>
<CAPTION>
                                           Three Months Ended January 31,                    Twelve Months Ended January 31,
                                  ------------------------------------------------    ---------------------------------------------
                                            1998                     1997                     1998                     1997
                                  ------------------------   ---------------------    ---------------------   ---------------------
                                    End of      Weighted     End of      Weighted       End of     Weighted      End of   Weighted
                                    Period        Ave.       Period        Ave.         Period      Ave.         Period       Ave.
                                  ----------   ----------   ----------  ----------    ---------- ----------   ---------- ----------
<S>                               <C>         <C>           <C>         <C>          <C>         <C>          <C>        <C>       
Common Shares Outstanding         17,649,360   17,646,288   17,528,698  17,528,698    17,649,360 17,576,203   17,528,698 17,429,375
                                               ----------               ----------               ----------              ----------

Common Share Equivalents:
        Options                    1,305,108    1,311,440    1,010,773   1,010,773     1,305,108  1,368,167    1,010,773  1,052,580
        Assumed Repurchased at
              Average Price                      (990,567)                (798,040)              (1,100,497)               (759,326)
                                               ----------               ----------               ----------              ----------

Weighted Average Common Equivalents               320,873                  212,733                  267,670                 293,254
                                               ----------               ----------               ----------              ----------

Total Weighted Average Common Shares
       & Common Share Equivalents
       Outstanding                             17,967,161               17,741,431               17,843,873              17,722,629
                                               ==========               ==========               ==========              ==========
</TABLE>








<TABLE> <S> <C>


<ARTICLE>                     5
                       
<MULTIPLIER>                                    1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          JAN-31-1998
<PERIOD-END>                               JAN-31-1998
<CASH>                                          26,712
<SECURITIES>                                    10,865
<RECEIVABLES>                                    4,497
<ALLOWANCES>                                         0
<INVENTORY>                                     17,128
<CURRENT-ASSETS>                                65,793
<PP&E>                                          26,893
<DEPRECIATION>                                       0
<TOTAL-ASSETS>                                 107,424
<CURRENT-LIABILITIES>                           13,660
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                             2
<OTHER-SE>                                      90,656
<TOTAL-LIABILITY-AND-EQUITY>                   107,424
<SALES>                                        173,121
<TOTAL-REVENUES>                               173,121
<CGS>                                           87,382
<TOTAL-COSTS>                                   87,382
<OTHER-EXPENSES>                                63,886
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              (1,772)
<INCOME-PRETAX>                                 23,625
<INCOME-TAX>                                     9,745
<INCOME-CONTINUING>                             13,880
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    13,880
<EPS-PRIMARY>                                      .79
<EPS-DILUTED>                                      .78
        


</TABLE>