<< Back
Urban Outfitters Reports Q3 Earnings
PHILADELPHIA, Nov. 9, 2006 (PRIMEZONE) -- Urban Outfitters, Inc. (Nasdaq:URBN), a leading lifestyle consumer products company operating under the Anthropologie, Free People and Urban Outfitters brands, today announced earnings of $34.5 million and $80.5 million for the three and nine months ended October 31, 2006, respectively. Earnings per diluted share were $0.21 for the quarter and $0.48 for the nine months.
As stated in the Company's previous sales release on November 7, 2006, net sales for the quarter increased by 7%, to $308.4 million. The growth was primarily driven by a 24% increase in the number of stores in operation contributing to new and non-comparable stores sales gains of $35.6 million, a 15% increase in Free People Wholesale sales and a 17% rise in direct-to-consumer sales through the Company's catalogs and web sites.
These factors offset a 10% decrease in total Company comparable store sales during the third quarter. By brand, 'comp' store sales decreased by 10% at Anthropologie, 10% at Urban Outfitters and increased by 9% at Free People. In the prior year's third quarter, 'comps' at these brands increased by 7%, 19% and 21%, respectively, and total Company 'comps' rose by 13%.
"I see significant opportunity for our brands in the coming quarters," stated Richard A. Hayne, Chairman and President. "More customers are embracing the new fashion silhouette, we begin to anniversary weaker 'comp' store sales and we continue to make headway on improving our fashion offering. In addition, we enter the fourth quarter with appropriately conservative inventory levels, store related operating expenses are tightly controlled and our new store opening schedule is on-track for our two largest brands," added Mr. Hayne.
Net sales for the three and nine months were as follows:
Three months ended Nine months ended
October 31, October 31,
2006 2005 2006 2005
---- ---- ---- ----
(in thousands) (in thousands)
Urban Outfitters store
sales $143,510 $137,483 $386,232 $363,901
Anthropologie store sales 106,093 101,410 313,761 279,320
Direct-to-consumer sales 36,070 30,921 101,074 87,916
Free People sales 22,682 18,987 62,854 42,381
-------- -------- -------- --------
Total net sales $308,355 $288,801 $863,921 $773,518
======== ======== ======== ========
For the three and nine months ended October 31, 2006, gross profit margins decreased by 339 basis points and 474 basis points, respectively, versus the prior year's comparable periods. These reductions were primarily due to a higher rate of fixed store occupancy expense caused by 'comp' store sales decreases, additional markdowns to clear seasonal inventories and increases in inventory related valuation reserves.
As of October 31, 2006, total Company inventories grew by $9.4 million or 5.5% on a year-over-year basis. The acquisition of inventory to stock new retail stores was the primary factor for this increase. Total comparable store inventories fell by 13.2%.
For the three and nine months ended October 31, 2006, selling, general and administrative expenses, expressed as a percentage of net sales, increased by 288 and 189 basis points, respectively, versus the same periods last year. The increase was primarily caused by the effect of 'comp' store sales declines on fixed store related expenses and the anniversary of a one-time gain on the sale of property of $1.6 million (55 and 21 basis point impact for the quarter and year, respectively) which occurred during the third quarter of last fiscal year.
As well during the third quarter, the Company's annual effective tax rate improved by approximately 450 basis points based upon receipt of certification for work performed on the development of its new offices that qualifies for certain one-time federal tax incentives. The Company believes it will receive an additional and similar one-time benefit that it can realize upon further certification of additional work related to the same project, for which it has not yet applied. The Company anticipates it will recognize the additional benefit during the fourth quarter of this fiscal year or early next fiscal year. For the three and nine months, the adjustment impacted net income by $4.4 million. Without the adjustment, diluted earnings per share would have been $0.18 and $0.45 for the quarter and nine months ended October 31, 2006, respectively.
The Company plans to open a total of 32-33 new stores by the end of the current fiscal year. During the first nine months of this fiscal year, the Company has opened 22 new stores.
Urban Outfitters, Inc. is an innovative specialty retailer and wholesaler which offers a variety of lifestyle merchandise to highly defined customer niches through 102 Urban Outfitters stores in the United States, Canada, and Europe, an Urban Outfitters web site and catalog; 87 Anthropologie stores in the United States; an Anthropologie web site and catalog, and Free People, the Company's wholesale segment, which sells its product to approximately 1,500 specialty stores, department stores and catalogs, as well as through 8 Free People stores, a web site and catalog, as of October 31, 2006.
A conference call will be held today to discuss third quarter 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=1411158
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.
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Income
(in thousands, except share and per share data)
(unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
October 31, October 31,
------------ ------------
2006 2005 2006 2005
---- ---- ---- ----
Net sales $ 308,355 $ 288,801 $ 863,921 $ 773,518
Cost of sales,
including
certain buying,
distribution
and occupancy
costs 190,407 168,550 544,453 450,814
--------- --------- --------- ---------
Gross profit 117,948 120,251 319,468 322,704
Selling,
general and
administrative
expenses 72,484 59,592 203,744 167,802
--------- --------- --------- ---------
Income from
operations 45,464 60,659 115,724 154,902
Other income, net 1,365 1,021 4,527 3,111
--------- --------- --------- ---------
Income
before
income
taxes 46,829 61,680 120,251 158,013
Income tax
expense 12,315 24,518 39,776 62,810
--------- --------- --------- ---------
Net income $ 34,514 $ 37,162 $ 80,475 $ 95,203
========= ========= ========= =========
Net income per
common share:
Basic $ 0.21 $ 0.23 $ 0.49 $ 0.58
========= ========= ========= =========
Diluted $ 0.21 $ 0.22 $ 0.48 $ 0.56
========= ========= ========= =========
Weighted average
common shares
and common share
equivalents
outstanding:
Basic 164,707,980 163,953,135 164,760,387 163,698,505
=========== =========== =========== ===========
Diluted 168,306,967 170,328,859 168,675,078 169,934,178
=========== =========== =========== ===========
AS A PERCENT OF
NET SALES:
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales,
including
certain buying,
distribution
and occupancy
costs 61.8% 58.4% 63.0% 58.3%
---- ---- ---- ----
Gross profit 38.2% 41.6% 37.0% 41.7%
Selling,
general and
administrative
expenses 23.5% 20.6% 23.6% 21.7%
---- ---- ---- ----
Income from
operations 14.7% 21.0% 13.4% 20.0%
Other income, net 0.5% 0.4% 0.5% 0.4%
---- ---- ---- ----
Income
before
income
taxes 15.2% 21.4% 13.9% 20.4%
Income tax
expense 4.0% 8.5% 4.6% 8.1%
---- ---- ---- ----
Net income 11.2% 12.9% 9.3% 12.3%
==== ==== ==== ====
URBAN OUTFITTERS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
Oct. 31, Jan. 31, Oct. 31,
2006 2006 2005
--------- --------- ---------
Assets
Current assets:
Cash and cash equivalents $ 30,544 $ 49,912 $ 20,067
Marketable securities 96,048 141,883 136,273
Accounts receivable, net
of allowance for doubtful
accounts of $1,238, $445
and $855, respectively 19,553 14,324 18,509
Inventories 179,592 140,377 170,232
Prepaid expenses, deferred
taxes and other current
assets 33,197 38,687 27,170
--------- --------- ---------
Total current assets 358,934 385,183 372,251
Property and equipment,
net 426,430 299,291 255,091
Marketable securities 58,636 64,748 65,946
Deferred income taxes and
other assets 21,204 19,983 17,165
--------- --------- ---------
$ 865,204 $ 769,205 $ 710,453
========= ========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 61,988 $ 41,291 $ 53,299
Accrued expenses, accrued
compensation and other
current liabilities 88,015 92,217 74,409
--------- --------- ---------
Total current liabilities 150,003 133,508 127,708
Deferred rent and other
liabilities 80,626 74,817 66,392
--------- --------- ---------
Total liabilities 230,629 208,325 194,100
--------- --------- ---------
Shareholders' equity:
Preferred shares; $.0001
par value, 10,000,000
shares authorized, none
issued -- -- --
Common shares; $.0001 par
value, 200,000,000 shares
authorized, 164,663,037,
164,831,477 and 164,434,327
issued and outstanding,
respectively 17 16 17
Additional paid-in capital 124,970 134,146 125,125
Retained earnings 506,665 426,190 390,597
Accumulated other
comprehensive income 2,923 528 614
--------- --------- ---------
Total shareholders' equity 634,575 560,880 516,353
--------- --------- ---------
$ 865,204 $ 769,205 $ 710,453
========= ========= =========
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
October 31,
--------------------------
2006 2005
---- ----
Cash flows from operating activities:
Net income $ 80,475 $ 95,203
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 39,239 28,483
Excess tax benefits from
stock-based compensation (5,014) --
Stock-based compensation
expense 2,515 862
Loss (gain) on disposition of
property and equipment, net 1,236 (1,562)
Changes in assets and
liabilities:
Increase in receivables (5,178) (10,187)
Increase in inventories (38,694) (71,546)
Decrease (increase) in
prepaid expenses and other
assets 4,720 (7,628)
Increase in payables,
accrued expenses and
other liabilities 30,686 34,076
-------- --------
Net cash provided by operating
activities 109,985 67,701
-------- --------
Cash flows from investing
activities:
Cash paid for property and
equipment (168,243) (78,093)
Proceeds from disposition of
building -- 3,769
Purchases of marketable
securities (114,913) (396,716)
Sales and maturities of
marketable securities 165,724 381,854
-------- --------
Net cash used in investing
activities (117,432) (89,186)
-------- --------
Cash flows from financing
activities:
Exercise of stock options 4,430 11,937
Excess tax benefits from
stock-based compensation 5,014 --
Share repurchases (20,801) --
-------- --------
Net cash (used in) provided
by financing activities (11,357) 11,937
-------- --------
Effect of exchange rate changes
on cash and cash equivalents (564) (116)
-------- --------
Decrease in cash and cash
equivalents (19,368) (9,664)
Cash and cash equivalents at
beginning of period 49,912 29,731
-------- --------
Cash and cash equivalents at
end of period $ 30,544 $ 20,067
======== ========
CONTACT: Urban Outfitters, Inc.
John E. Kyees, Chief Financial Officer
(215) 454-5500
