Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) August 16, 2016

 

 

URBAN OUTFITTERS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Pennsylvania   000-22754   23-2003332

(State or other jurisdiction

of incorporation)

  (Commission File Number)  

(IRS Employer

Identification No.)

5000 South Broad St, Philadelphia PA   19112
(Address of principal executive offices)   (Zip Code)

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

N/A

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4))

 

 

 


Item 2.02. Results of Operations and Financial Condition

On August 16, 2016, Urban Outfitters, Inc. (the “Company”) issued an earnings release, which is attached hereto as Exhibit 99.1 and incorporated herein by reference. The earnings release disclosed material non-public information regarding the Company’s earnings for the three and six months ended July 31, 2016.

 

Item 9.01. Financial Statements and Exhibits

 

  99.1 Earnings Release dated August 16, 2016 – Operating results for the three and six months ended July 31, 2016

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    URBAN OUTFITTERS, INC.
Date: August 17, 2016     By:   /s/ Francis J. Conforti
      Francis J. Conforti
      Chief Financial Officer

 

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Exhibit Index

 

Exhibit No.

  

Description

EX-99.1    Earnings Release dated August 16, 2016 – Operating results for the three and six months ended July 31, 2016

 

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EX-99.1

Exhibit 99.1

URBAN OUTFITTERS, INC.

Second Quarter Results

Philadelphia, PA – August 16, 2016

 

For Immediate Release   Contact:    Oona McCullough
     Director of Investor Relations
     (215) 454-4806

Urban Outfitters Reports Record Q2 Sales and EPS

PHILADELPHIA, PA, August 16, 2016 – Urban Outfitters, Inc. (NASDAQ:URBN), a portfolio of global consumer brands comprised of Anthropologie, Bhldn, Free People, Terrain, Urban Outfitters and Vetri Family brands, today announced net income of $77 million and $106 million for the three and six months ended July 31, 2016, respectively. Earnings per diluted share were $0.66 and $0.91 for the three and six months ended July 31, 2016, respectively.

Total Company net sales for the second quarter of fiscal 2017 increased 3% over the same quarter last year to a record $891 million. Comparable Retail segment net sales, which include our comparable direct-to-consumer channel, increased 1%. Comparable Retail segment net sales increased 5% at Urban Outfitters, was flat at Free People, and decreased 3% at the Anthropologie Group. Wholesale segment net sales increased 4%.

“I am pleased to announce our teams delivered record second quarter sales and earnings per share,” said Richard A. Hayne, Chief Executive Officer. “These results were driven by a positive Retail segment ‘comp’ and substantial improvement in merchandise margins,” finished Mr. Hayne.

Net sales by brand and segment for the three and six month periods were as follows:

 

     Three Months Ended
July 31,
     Six Months Ended
July 31,
 
     2016      2015      2016      2015  

Net sales by brand

           

Urban Outfitters

   $ 354,260       $ 342,207       $ 653,560       $ 637,882   

Anthropologie Group

     368,283         370,672         683,617         682,048   

Free People

     164,421         154,581         308,935         286,540   

Other1

     3,604         0         7,033         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Company

   $ 890,568       $ 867,460       $ 1,653,145       $ 1,606,470   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net sales by segment

           

Retail Segment

   $ 815,762       $ 795,740       $ 1,515,955       $ 1,480,749   

Wholesale Segment

     74,806         71,720         137,190         125,721   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Company

   $ 890,568       $ 867,460       $ 1,653,145       $ 1,606,470   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

1  Other consists of Vetri Family restaurants that were acquired during the first quarter of fiscal 2017.


For the three and six months ended July 31, 2016, the gross profit rate increased by 179 basis points and 142 basis points versus the prior year’s comparable periods, respectively. The increase in gross profit rate for the three months ended July 31, 2016 was primarily driven by improvement in the Urban Outfitters and Anthropologie Group brands maintained margins, with both brands delivering higher initial margins and lower merchandise markdowns compared to the prior year. The increase in gross profit rate for the six months ended July 31, 2016 was primarily driven by improvement in the Urban Outfitters and Anthropologie Group brands maintained margins, with both brands delivering lower merchandise markdowns compared to the prior year. For the three and six months ended July 31, 2016, the increase was partially offset by a lower gross profit rate at the Free People brand, which was primarily driven by lower maintained margins due to higher merchandise markdowns.

As of July 31, 2016, total inventory decreased by $17 million, or 4%, on a year-over-year basis. The decrease in total inventory is primarily related to the decline in comparable Retail segment inventory, which decreased 4% at cost.

For the three and six months ended July 31, 2016, selling, general and administrative expenses, expressed as a percentage of net sales, increased by 48 basis points and 98 basis points when compared to the prior year’s comparable periods, respectively. The deleverage in both periods was primarily due to an increase in direct marketing and technology related expenses to support our direct-to-consumer growth and direct store controllable expenses in order to support our 4% square footage growth.

The Company’s effective tax rate for the second quarter of fiscal 2017 was 35.5% compared to 35.2% in the prior year period. The effective tax rate for the first half of fiscal 2017 is 36.7% compared to 35.4% in the first half of fiscal 2016. The increase in the year-to-date tax rate was due to the ratio of foreign taxable losses to global taxable profits for the year.

On February 23, 2015, the Company’s Board of Directors authorized the repurchase of 20 million common shares under a share repurchase program. Under this authorization, the Company repurchased and subsequently retired 0.3 million common shares for approximately $11 million during the six months ended July 31, 2016. The Company repurchased and subsequently retired a total of 12.7 million common shares for approximately $382 million during fiscal 2016 under this authorization.

On May 27, 2014, the Company’s Board of Directors authorized the repurchase of 10 million common shares under a share repurchase program. During the six months ended July 31, 2015, the Company repurchased and subsequently retired 2.3 million shares at a total cost of $83 million, which completed this authorization.

During the six months ended July 31, 2016, the Company opened a total of 12 new stores including: 8 Free People stores, 3 Anthropologie Group stores and 1 Urban Outfitters store; and closed 3 stores including: 1 Free People store, 1 Anthropologie Group store and 1 Urban Outfitters store. During the six months ended July 31, 2016, the Company opened 1 new Vetri Family restaurant and acquired 6 Vetri Family restaurants.

Urban Outfitters, Inc. is a portfolio of global consumer brands which offers a variety of lifestyle merchandise and consumer products to highly defined customer niches through 240 Urban Outfitters stores in the United States, Canada, and Europe, catalogs and websites; 220 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 121 Free People stores in the United States and Canada, catalogs and websites; Free People wholesale, which sells its product to approximately 1,800 specialty stores and select department stores worldwide; and 7 Vetri family restaurants, as of July 31, 2016.


A conference call will be held today to discuss second quarter results and will be webcast at 5:00 pm. ET at: http://edge.media-server.com/m/p/6bkgzor3

This news release is being made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Certain matters contained in this release may constitute forward-looking statements. When used in this release, the words “project,” “believe,” “plan,” “will,” “anticipate,” “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Any one, or all, of the following factors could cause actual financial results to differ materially from those financial results mentioned in the forward-looking statements: the difficulty in predicting and responding to shifts in fashion trends, changes in the level of competitive pricing and promotional activity and other industry factors, overall economic and market conditions and the resultant impact on consumer spending patterns, lowered levels of consumer confidence and higher levels of unemployment, continuation of lowered levels of consumer spending resulting from a worldwide political and economic crisis, any effects of terrorist acts or war, natural disasters or severe weather conditions, availability of suitable retail space for expansion, timing of store openings, risks associated with international expansion, seasonal fluctuations in gross sales, the departure of one or more key senior executives, import risks, including potential disruptions and changes in duties, tariffs and quotas, the closing of any of our distribution centers, our ability to protect our intellectual property rights, risks associated with internet sales, response to new store concepts, failure of our manufacturers to comply with our social compliance program, changes in accounting standards and subjective assumptions, regulatory changes and legal matters and other risks identified in the Company’s filings with the Securities and Exchange Commission. The Company disclaims any intent or obligation to update forward-looking statements even if experience or future changes make it clear that actual results may differ materially from any projected results expressed or implied therein.

###

(Tables follow)


URBAN OUTFITTERS, INC.

Condensed Consolidated Statements of Income

(in thousands, except share and per share data)

(unaudited)

 

     Three Months Ended
July 31,
    Six Months Ended
July 31,
 
     2016     2015     2016     2015  

Net sales

   $ 890,568      $ 867,460      $ 1,653,145      $ 1,606,470   

Cost of sales

     548,057        549,355        1,048,743        1,041,944   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     342,511        318,105        604,402        564,526   

Selling, general, and administrative expenses

     224,299        214,354        435,707        407,721   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     118,212        103,751        168,695        156,805   

Other income (expense), net

     1,071        (596     (506     (2,717
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     119,283        103,155        168,189        154,088   

Income tax expense

     42,368        36,314        61,712        54,471   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 76,915      $ 66,841      $ 106,477      $ 99,617   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share:

        

Basic

   $ 0.66      $ 0.52      $ 0.91      $ 0.77   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.66      $ 0.52      $ 0.91      $ 0.76   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares and common share equivalents outstanding:

        

Basic

     117,133,169        127,910,026        117,218,013        129,529,108   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     117,383,132        129,080,594        117,484,131        130,931,093   
  

 

 

   

 

 

   

 

 

   

 

 

 

AS A PERCENT OF NET SALES

        

Net sales

     100.0     100.0     100.0     100.0

Cost of sales

     61.5     63.3     63.4     64.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     38.5     36.7     36.6     35.1

Selling, general, and administrative expenses

     25.2     24.7     26.4     25.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     13.3     12.0     10.2     9.8

Other income (expense), net

     0.1     (0.1 %)      0.0     (0.2 %) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     13.4     11.9     10.2     9.6

Income tax expense

     4.8     4.2     3.8     3.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     8.6     7.7     6.4     6.2
  

 

 

   

 

 

   

 

 

   

 

 

 


URBAN OUTFITTERS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)

 

     July 31,
2016
    January 31,
2016
    July 31,
2015
 
ASSETS       

Current assets:

      

Cash and cash equivalents

   $ 243,116      $ 265,276      $ 194,441   

Marketable securities

     59,231        61,061        71,926   

Accounts receivable, net of allowance for doubtful accounts of $876, $664 and $813, respectively

     95,003        75,723        70,014   

Inventory

     367,197        330,223        384,404   

Prepaid expenses, deferred taxes and other current assets

     94,663        102,078        118,678   
  

 

 

   

 

 

   

 

 

 

Total current assets

     859,210        834,361        839,463   

Property and equipment, net

     878,607        863,137        900,302   

Marketable securities

     26,000        36,600        72,764   

Deferred income taxes and other assets

     110,279        99,203        94,804   
  

 

 

   

 

 

   

 

 

 

Total Assets

   $ 1,874,096      $ 1,833,301      $ 1,907,333   
  

 

 

   

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

      

Current liabilities:

      

Accounts payable

   $ 134,825      $ 118,035      $ 134,673   

Accrued expenses, accrued compensation and other current liabilities

     222,352        211,196        218,604   
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     357,177        329,231        353,277   

Long-term debt

     50,000        150,000        115,000   

Deferred rent and other liabilities

     221,901        216,843        207,808   
  

 

 

   

 

 

   

 

 

 

Total Liabilities

     629,078        696,074        676,085   
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity:

      

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

     —          —          —     

Common shares; $.0001 par value, 200,000,000 shares authorized, 117,136,520, 117,321,120 and 125,126,008 shares issued and outstanding, respectively

     12        12        13   

Additional paid-in capital

     7,112        —          —     

Retained earnings

     1,264,821        1,160,666        1,241,227   

Accumulated other comprehensive loss

     (26,927     (23,451     (9,992
  

 

 

   

 

 

   

 

 

 

Total Shareholders’ Equity

     1,245,018        1,137,227        1,231,248   
  

 

 

   

 

 

   

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 1,874,096      $ 1,833,301      $ 1,907,333