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Urban Outfitters Q4 Earnings(a) Jump 72%
PHILADELPHIA, March 10, 2005 (PRIMEZONE) -- Urban Outfitters, Inc. (Nasdaq:URBN), a leading lifestyle consumer products company operating under the Anthropologie, Urban Outfitters and Free People brands, today announced record earnings(a) of $31.7 million for the fourth quarter ended January 31, 2005, a 72% increase over the comparable quarter last year. Fourth quarter diluted earnings per share(a) rose to $0.38 this year versus $0.22 in the prior year.
As previously stated, net sales for the fourth quarter increased by 43% to a record $251.6 million. Fueling this increase over the prior year was:
- New and noncomparable store sales increases of $40.5 million
- A 13% increase in total Company comparable store sales
- A 69% rise in direct-to-consumer sales
- A 106% jump in wholesale sales
Comparable store sales at Anthropologie, Free People and Urban Outfitters were up 17%, 58% and 10%, respectively, for a combined 13% increase versus a combined 21% 'comp' increase for the same quarter last year.
"It is gratifying to be able to report such exceptional results for both the quarter and year," said Richard A. Hayne, Chairman and President. "In each quarter this past year, we produced strong double-digit 'comp' store sales gains while improving margins and leveraging SG&A expenses. In addition, we opened twenty-eight new stores and produced exceptional growth in both our direct-to-consumer and wholesale businesses. Each of our three brands strengthened their brand positions during the year and delivered results that produced record sales and earnings for the Company and record value for our shareholders."
"Looking forward," Mr. Hayne added, "customer reaction to our spring assortments at all of our brands are strong, and February comparable store sales continued to significantly exceed our plan. As such, we remain cautiously optimistic about our spring results."
Net sales for the periods were as follows:
Three months ended Twelve months ended
January 31, January 31,
2005 2004 2005 2004
---- ---- ---- ----
(in thousands) (in thousands)
Urban Outfitters
store sales $112,241 $ 83,492 $384,371 $267,641
Anthropologie
store sales 98,814 69,451 320,621 211,144
Direct-to-
consumer sales 33,434 19,723 93,913 51,144
Free People
sales 7,134 3,457 28,845 18,432
-------- -------- -------- --------
Total net sales $251,623 $176,123 $827,750 $548,361
======== ======== ======== ========
For the quarter and twelve months, gross profit margins increased by 148 and 293 basis points, respectively, versus the comparable prior year periods. These gains were primarily due to higher initial merchandise margins and the leveraging of occupancy expenses.
As of January 31, 2005, total Company inventories grew by $35.7 million on a year-over-year basis. The acquisition of inventory to stock new retail stores was the primary factor in this increase. On a comparable store basis, inventories grew by 19.8% versus the prior year. The Company believes this inventory position is appropriate to meet existing demand and the comparable inventory increase is primarily a product of last year's inventory attrition due to the extraordinary comparable store sales performance experienced during the fourth quarter.
For the quarter and twelve months, selling, general and administrative expenses, expressed as a percentage of sales, decreased by 91 and 121 basis points, respectively, versus the same periods of the prior year. These improvements were primarily a result of the leveraging of store-related expenses.
During the year ended January 31, 2005, the Company opened 13 new Anthropologie stores, 14 new Urban Outfitters stores and 1 Free People store or 28 new stores in total. The Company plans to open 30 to 32 new stores, including 2 to 3 new Free People stores, during the current fiscal year.
(a) Accounting for Leases
Similar to other retailers, the Company is reviewing the accounting treatment for its leases based on a recent letter from the Securities and Exchange Commission ("SEC") to the American Institute of Certified Public Accountants ("AICPA") concerning certain lease issues. The Company is currently in the process of reviewing the accounting treatment for its leases. All results presented in this press release are preliminary and exclude the impact of the Company's review and any resulting adjustments. The Company believes any potential adjustments will not have a major impact on its earnings.
The Company's independent registered public accounting firm has advised the Company that its current method of accounting for leases and lease transactions is incorrect based on views recently expressed by the Securities and Exchange Commission ("SEC") to the American Institute of Certified Public Accountants ("AICPA") on February 7, 2005 concerning certain lease accounting issues. The Company is currently in the process of reviewing the accounting treatment for its leases. The Company has consistently applied the same method of accounting for leases since its Initial Public Offering in 1993. Then, and each year until this year, a nationally accredited public accounting firm has found the Company's consolidated financial statements to be consistent and in accordance with Generally Accepted Accounting Principles ("GAAP"). The Company believes any potential adjustments will not have a major impact on its earnings.
The Company has historically recorded rent expense on a straight-line basis over the lease period, commencing on the date the store opened. This method applied the accounting concept of matching revenue with related expenses. The lease period did not include the construction period for which the Company improved the lease space to make it suitable for operation during which the company was not permitted to occupy the space. The Company will change its straight-line period to add this construction period in its calculation of rent expense over the lease term.
The Company has also historically classified tenant improvement allowances on the Company's consolidated balance sheets as a reduction of property and equipment. The related amortization was classified as a reduction of depreciation expense on the Company's consolidated statements of income. The Company's consolidated statements of cash flows historically reflected tenant improvement allowances as a reduction of capital expenditures within cash flows from investing activities. The Company will change its classification of tenant improvement allowances on its consolidated financial statements to reflect such items as deferred rent that will be amortized as a reduction of rent expense over the straight-line period. Furthermore, tenant improvement allowance activity will be presented within cash flows from operating activities on the consolidated statements of cash flows.
The Company, in conjunction with its independent registered public accounting firm, is in the process of completing its review of the above changes. At this time, the Company has not determined whether these changes will require a restatement of prior period financial statements. The Company does not believe these adjustments will have a major impact on its earnings. These changes will not affect the Company's historical or future cash flows nor will they impact the timing of payments as required by the Company's leases.
Urban Outfitters, Inc. is an innovative specialty retailer and wholesaler which offers a variety of lifestyle merchandise to highly defined customer niches through 75 Urban Retail stores in the United States, Canada, and Europe; an Urban catalog and web site (www.urbn.com); 65 Anthropologie stores in the United States; an Anthropologie catalog and web site (www.anthropologie.com); and Free People, the Company's wholesale division, which sells its product to approximately 1,100 specialty stores, department stores and catalogs, as well as through two Free People stores and a web-site as of January 31, 2005.
A conference call will be held today to discuss fourth quarter and annual results and will be web cast at 11:00 a.m. EST on: http://ir.urbanoutfittersinc.com/ireye/ir_site.zhtml?ticker=URBN&script=1010&item_id=996322
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 filing 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)
Three Months Ended Twelve Months Ended
January 31, January 31,
------------------- -------------------
2005 2004 2005 2004
------ ------ ------ ------
Net sales $ 251,623 $ 176,123 $ 827,750 $ 548,361
Cost of sales,
including
certain buying,
distribution
and occupancy
costs 143,506 103,042 481,263 334,888
----------- ----------- ----------- -----------
Gross profit 108,117 73,081 346,487 213,473
Selling, general
and
administrative
expenses 57,712 42,014 190,384 132,767
----------- ----------- ----------- -----------
Income from
operations 50,405 31,067 156,103 80,706
Other income
(expense), net 948 (94) 1,826 598
----------- ----------- ----------- -----------
Income before
income taxes 51,353 30,973 157,929 81,304
Income tax
expense 19,615 12,544 62,778 32,928
----------- ----------- ----------- -----------
Net income $ 31,738 $ 18,429 $ 95,151 $ 48,376
=========== =========== =========== ===========
Net income per
common share:
Basic $ 0.39 $ 0.23 $ 1.18 $ 0.62
=========== =========== =========== ===========
Diluted $ 0.38 $ 0.22 $ 1.14 $ 0.60
=========== =========== =========== ===========
Weighted average
common shares
outstanding:
Basic 81,349,760 79,384,036 80,709,949 78,534,926
=========== =========== =========== ===========
Diluted 84,582,132 82,315,342 83,651,725 80,831,138
=========== =========== =========== ===========
PERCENT OF NET
SALES
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales,
including
certain buying,
distribution
and occupancy
costs 57.0 58.5 58.1 61.1
------ ------ ------ ------
Gross profit 43.0 41.5 41.9 38.9
Selling, general
and
administrative
expenses 23.0 23.9 23.0 24.2
------ ------ ------ ------
Income from
operations 20.0 17.6 18.9 14.7
Other income
(expense), net 0.4 -- 0.2 0.1
------ ------ ------ ------
Income before
income taxes 20.4 17.6 19.1 14.8
Income tax
expense 7.8 7.1 7.6 6.0
------ ------ ------ ------
Net income 12.6% 10.5% 11.5% 8.8%
====== ====== ====== ======
URBAN OUTFITTERS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
January 31,
-----------------
2005 2004
---- ----
Assets
Current assets:
Cash and cash equivalents $ 29,731 $ 3,319
Marketable securities 125,953 83,854
Accounts receivable, net of
allowance for doubtful
accounts of $586 and $651,
respectively 8,364 6,711
Inventories 98,996 63,247
Other current assets 25,033 18,704
--------- ---------
Total current assets 288,077 175,835
Property and equipment, net 156,707 121,919
Marketable securities 63,457 52,315
Deferred income taxes and
other assets 9,691 9,526
--------- ---------
$ 517,932 $ 359,595
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 39,102 $ 27,353
Other current liabilities 58,693 30,409
--------- ---------
Total current liabilities 97,795 57,762
Deferred rent and other
liabilities 12,347 11,703
--------- ---------
Total liabilities 110,142 69,465
--------- ---------
Shareholders' equity:
Preferred shares; $.0001 par
value, 10,000,000 shares
authorized; none issued -- --
Common shares; $.0001 par
value, 200,000,000 shares
authorized; 81,447,444 and
79,776,542 issued and
outstanding, respectively 8 8
Additional paid-in capital 110,314 83,279
Unearned compensation (5,058) --
Retained earnings 300,056 204,905
Accumulated other
comprehensive income 2,470 1,938
--------- ---------
Total shareholders' equity 407,790 290,130
--------- ---------
$ 517,932 $ 359,595
========= =========
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
Fiscal Year Ended January 31,
-----------------------------
2005 2004
---- ----
Cash flows from operating
activities:
Net income $ 95,151 $ 48,376
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 28,036 22,415
Provision for deferred income
taxes 83 (1,132)
Tax benefit of stock option
exercises 14,352 7,581
Stock compensation 708 --
Changes in assets and
liabilities:
Increase in receivables (1,635) (3,437)
Increase in inventories (35,651) (14,306)
Increase in prepaid expenses
and other assets (6,532) (5,148)
Increase in payables,
accrued expenses and other
liabilities 40,484 15,428
--------- ---------
Net cash provided by operating
activities 134,996 69,777
--------- ---------
Cash flows from investing
activities:
Capital expenditures (60,141) (33,079)
Net change in marketable
securities (55,792) (75,446)
--------- ---------
Net cash used in investing
activities (115,933) (108,525)
--------- ---------
Cash flows from financing
activities:
Exercise of stock options 6,916 8,542
--------- ---------
Net cash provided by financing
activities 6,916 8,542
--------- ---------
Effect of exchange rate changes
on cash and cash equivalents 433 398
--------- ---------
Increase (decrease) in cash and
cash equivalents 26,412 (29,808)
Cash and cash equivalents at
beginning of period 3,319 33,127
--------- ---------
Cash and cash equivalents at end
of period $ 29,731 $ 3,319
========= =========
CONTACT: Urban Outfitters, Inc.
John Kyees
Chief Financial Officer
(215) 564-2313
