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) May 11, 2006
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.) |
| 1809 Walnut Street, Philadelphia PA | 19103 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (215) 564-2313
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© under the Exchange Act (17 CFR 240.13e-4)) |
Item 2.02. Results of Operations and Financial Condition
On May 11, 2006, 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 months ended April 30, 2006.
Item 9.01. Financial Statements and Exhibits
99.1 Earnings release dated May 11, 2006 – Operating results for the three months ended April 30, 2006.
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: May 12, 2006 | By: | /s/ John E. Kyees | ||
| John E. Kyees | ||||
| Chief Financial Officer | ||||
Exhibit Index
| Exhibit No. | Description | |
| 99.1 | Earnings release dated May 11, 2006 – Operating results for the three months ended April 30, 2006. |
Exhibit 99.1
URBAN OUTFITTERS, INC.
First Quarter Results
Philadelphia, PA – May 11, 2006
| For Immediate Release |
Contact: |
John E. Kyees | ||
| Chief Financial Officer | ||||
| (215) 564-2313 |
Urban Outfitters Announces Q1 Earnings
Urban Outfitters, Inc. (NASDAQ:URBN), a leading lifestyle consumer products company operating under the Anthropologie, Free People and Urban Outfitters brands, today announced first quarter earnings of $20.3 million for the three months ended April 30, 2006 and first quarter diluted earnings per share of $0.12.
As previously stated in our sales release on May 4, 2006, net sales for the first quarter increased by 17% to $270 million. Fueling this increase over the prior year was:
| • | a 22% increase in the number of stores in operation; |
| • | a 65% jump in Free People wholesale sales; and |
| • | a 17% gain in direct-to-consumer sales. |
The combination of these factors more than offset a 3% decrease in total Company comparable store sales during the first quarter. By brand, ‘comp’ store sales decreased by 2% at Anthropologie and 4% at Urban Outfitters, and increased by 14% at Free People. In the prior year’s first quarter, ‘comps’ at those brands increased by 9%, 13% and 45%, respectively, and total Company ‘comps’ rose by 11%.
“The recent seismic shift in women’s fashion presents both challenges and opportunities for our Company,” stated Richard A. Hayne, Chairman and President. “In order to better capitalize on future opportunities, we appropriately applied heavy markdowns during the first quarter to turn slower moving merchandise and rationalize our weeks of supply. Our ‘comp’ store inventories decreased by 1,000 basis points during the three months, ending the quarter up 3% - a more appropriate number given the current sales trend. We continue to be cautious as the customers’ response to our product offerings remains inconsistent,” added Mr. Hayne.
Net sales for the three months were as follows:
| Three months ended April 30, | ||||||
| 2006 | 2005 | |||||
| (in thousands) | ||||||
| Urban Outfitters store sales |
$ | 117,113 | $ | 104,109 | ||
| Anthropologie store sales |
99,928 | 87,307 | ||||
| Direct-to-consumer sales |
33,486 | 28,722 | ||||
| Free People sales |
19,480 | 11,187 | ||||
| Total net sales |
$ | 270,007 | $ | 231,325 | ||
For the three months, gross profit margins decreased by 636 basis points versus the prior year’s comparable quarter. The two factors impacting this decline were the increase in markdowns to clear seasonal merchandise and the increase in store occupancy rates, as a percentage of net sales, compared to the comparable quarter last year as a result of the reduction in ‘comp’ sales.
As of April 30, 2006, total Company inventories grew by 24% or $27.2 million on a year-over-year basis. The acquisition of inventory to stock new retail stores was the primary factor for this increase. Comparable store inventories increased by 3%.
For the three months, selling, general and administrative expenses, expressed as a percentage of net sales, increased by 125 basis points versus the comparable quarter last year. This increase was primarily a result of the de-leveraging of store-related and other fixed administrative expenses due to the decrease in the comparable store sales.
Thus far this fiscal year, the Company has opened five new Urban Outfitters stores and three new Anthropologie stores, including its newest store at Rockefeller Center in New York. The Company plans to open an additional 27 to 30 stores during the remainder of the fiscal year.
Urban Outfitters, Inc. is an innovative specialty retailer and wholesaler which offers a variety of lifestyle merchandise to highly defined customer niches through 95 Urban Outfitters stores in the United States, Canada, and Europe; an Urban Outfitters catalog and web site; 82 Anthropologie stores in the United States; an Anthropologie catalog and web site; and Free People, the Company’s wholesale division, which sells its product to approximately 1,500 specialty stores, department stores and catalogs, as well as through six Free People stores, a web site and a catalog.
A conference call will be held today to discuss first quarter results and will be web cast at 11:00 a.m. EDT on:
http://ir.urbanoutfittersinc.com/ireye/ir_site.zhtml?ticker=URBN&script=1010&item_id=1308681
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. 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, including any effects of terrorist acts or war, availability of suitable retail space for expansion, timing of store openings, seasonal fluctuations in gross sales, the departure of one or more key senior managers, import risks, including potential disruptions and changes in duties, tariffs and quotas and other risks identified in 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 April 30, |
||||||||
| 2006 | 2005 | |||||||
| Net sales |
$ | 270,007 | $ | 231,325 | ||||
| Cost of sales, including certain buying, distribution and occupancy costs |
173,239 | 133,708 | ||||||
| Gross profit |
96,768 | 97,617 | ||||||
| Selling, general and administrative expenses |
65,217 | 52,839 | ||||||
| Income from operations |
31,551 | 44,778 | ||||||
| Other income, net |
1,412 | 764 | ||||||
| Income before income taxes |
32,963 | 45,542 | ||||||
| Income tax expense |
12,664 | 18,102 | ||||||
| Net income |
$ | 20,299 | $ | 27,440 | ||||
| Net income per common share: |
||||||||
| Basic |
$ | 0.12 | $ | 0.17 | ||||
| Diluted |
$ | 0.12 | $ | 0.16 | ||||
| Weighted average common shares outstanding: |
||||||||
| Basic |
164,576,157 | 162,956,454 | ||||||
| Diluted |
168,020,879 | 169,057,896 | ||||||
| PERCENT OF NET SALES |
||||||||
| Net sales |
100 | % | 100 | % | ||||
| Cost of sales, including certain buying, distribution and occupancy costs |
64.2 | 57.8 | ||||||
| Gross profit |
35.8 | 42.2 | ||||||
| Selling, general and administrative expenses |
24.1 | 22.8 | ||||||
| Income from operations |
11.7 | 19.4 | ||||||
| Other income, net |
0.5 | 0.3 | ||||||
| Income before income taxes |
12.2 | 19.7 | ||||||
| Income tax expense |
4.7 | 7.8 | ||||||
| Net income |
7.5 | % | 11.9 | % | ||||
URBAN OUTFITTERS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
| April 30, 2006 |
January 31, 2006 |
April 30, 2005 | |||||||
| Assets | |||||||||
| Current assets: |
|||||||||
| Cash and cash equivalents |
$ | 28,106 | $ | 49,912 | $ | 22,124 | |||
| Marketable securities |
146,725 | 141,883 | 134,681 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $753, $445 and $621, respectively |
23,686 | 14,324 | 13,754 | ||||||
| Inventories |
140,726 | 140,377 | 113,477 | ||||||
| Prepaid expenses, deferred taxes and other current assets |
38,299 | 38,687 | 21,820 | ||||||
| Total current assets |
377,542 | 385,183 | 305,856 | ||||||
| Property and equipment, net |
335,307 | 299,291 | 203,163 | ||||||
| Marketable securities |
63,711 | 64,748 | 66,622 | ||||||
| Deferred income taxes and other assets |
22,375 | 19,983 | 12,581 | ||||||
| $ | 798,935 | $ | 769,205 | $ | 588,222 | ||||
| Liabilities and Shareholders’ Equity | |||||||||
| Current liabilities: |
|||||||||
| Accounts payable |
$ | 57,468 | $ | 41,291 | $ | 38,846 | |||
| Accrued expenses, accrued compensation and other current liabilities |
77,641 | 92,217 | 52,140 | ||||||
| Total current liabilities |
135,109 | 133,508 | 90,986 | ||||||
| Deferred rent and other liabilities |
78,017 | 74,817 | 57,609 | ||||||
| Total liabilities |
213,126 | 208,325 | 148,595 | ||||||
| Shareholders’ equity: |
|||||||||
| Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued |
— | — | — | ||||||
| Common shares; $.0001 par value, 200,000,000 shares authorized, 165,137,317, 164,831,477 and 163,694,752 issued and outstanding, respectively |
17 | 16 | 16 | ||||||
| Additional paid-in capital |
138,054 | 134,146 | 114,276 | ||||||
| Retained earnings |
446,489 | 426,190 | 322,834 | ||||||
| Accumulated other comprehensive income |
1,249 | 528 | 2,501 | ||||||
| Total shareholders’ equity |
585,809 | 560,880 | 439,627 | ||||||
| $ | 798,935 | $ | 769,205 | $ | 588,222 | ||||
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Three Months Ended April 30, |
||||||||
| 2006 | 2005 | |||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 20,299 | $ | 27,440 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
11,937 | 8,799 | ||||||
| Stock-based compensation expense |
693 | 281 | ||||||
| Loss on disposition of property and equipment, net |
275 | — | ||||||
| Excess tax benefits from stock-based compensation |
(1,808 | ) | — | |||||
| Changes in assets and liabilities: |
||||||||
| Increase in receivables |
(9,330 | ) | (5,384 | ) | ||||
| Increase in inventories |
(146 | ) | (14,440 | ) | ||||
| Decrease in prepaid expenses and other assets |
2,007 | 3,006 | ||||||
| Increase (decrease) in payables, accrued expenses and other liabilities |
11,113 | (2,966 | ) | |||||
| Net cash provided by operating activities |
35,040 | 16,736 | ||||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
(55,692 | ) | (18,451 | ) | ||||
| Purchases of marketable securities |
(35,607 | ) | (157,835 | ) | ||||
| Sales and maturities of marketable securities |
31,061 | 145,145 | ||||||
| Net cash used in investing activities |
(60,238 | ) | (31,141 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Exercise of stock options |
1,409 | 6,699 | ||||||
| Excess tax benefits from stock-based compensation |
1,808 | — | ||||||
| Net cash provided by financing activities |
3,217 | 6,699 | ||||||
| Effect of exchange rate changes on cash and cash equivalents |
175 | 99 | ||||||
| Decrease in cash and cash equivalents |
(21,806 | ) | (7,607 | ) | ||||
| Cash and cash equivalents at beginning of period |
49,912 | 29,731 | ||||||
| Cash and cash equivalents at end of period |
$ | 28,106 | $ | 22,124 | ||||