URBN Reports Record Q4 Sales And Strong Start To Spring

PHILADELPHIA, March 06, 2018 (GLOBE NEWSWIRE) -- Urban Outfitters, Inc. (NASDAQ:URBN), a leading lifestyle products and services company which operates a portfolio of global consumer brands comprised of Anthropologie, BHLDN, Free People, Terrain and Urban Outfitters brands and the Food and Beverage division, today announced net income of $1 million and $108 million for the three months and year ended January 31, 2018, respectively. Earnings per diluted share were $0.01 and $0.96 for the three months and year ended January 31, 2018, respectively. For the three months ended January 31, 2018, adjusted net income was $75 million and adjusted earnings per diluted share were $0.69. See "Reconciliation of Non-GAAP Financial Measures" included at the end of this release.

Total Company net sales for the fourth quarter of fiscal 2018 increased 5.7% over the same period last year to a record $1.09 billion. Comparable Retail segment net sales increased 4%, driven by strong, double-digit growth in the digital channel partially offset by negative retail store sales. By brand, comparable Retail segment net sales increased 8% at Free People, 5% at the Anthropologie Group and 2% at Urban Outfitters. Wholesale segment net sales increased 6.3%.

For the year ended January 31, 2018, total Company net sales increased to $3.6 billion or 2.0% over the prior year. Comparable Retail segment net sales were flat. Wholesale segment net sales increased 9.5%.

"I am pleased to announce that URBN produced record Q4 sales primarily driven by positive 'comps' at all three brands," said Richard A. Hayne, Chief Executive Officer. "We are particularly pleased with how well the brands transitioned in January. Positive customer reaction to the new spring fashion offerings at all our brands has been strong and makes us optimistic regarding the first half of the year," finished Mr. Hayne.

Net sales by brand and segment for the three and twelve-month periods were as follows:
  Three Months Ended     Twelve Months Ended  
  January 31,     January 31,  
  2018     2017     2018     2017  
Net sales by brand                              
Urban Outfitters $ 433,924     $ 413,799     $ 1,396,420     $ 1,414,996  
Anthropologie Group   447,184       423,985       1,472,769       1,445,395  
Free People   201,659       186,346       721,966       662,726  
Food and Beverage   6,352       6,028       24,859       22,677  
Total Company $ 1,089,119     $ 1,030,158     $ 3,616,014     $ 3,545,794  
                               
Net sales by segment                              
Retail Segment $ 1,010,188     $ 955,909     $ 3,299,714     $ 3,256,890  
Wholesale Segment   78,931       74,249       316,300       288,904  
Total Company $ 1,089,119     $ 1,030,158     $ 3,616,014     $ 3,545,794  

¿For the three months ended January 31, 2018, the gross profit rate decreased by 176 basis points and the adjusted gross profit rate decreased 113 basis points versus the prior year's comparable period. The decline in the adjusted gross profit rate was primarily driven by deleverage in delivery and logistics expenses and initial merchandise mark-ups. The deleverage in delivery and logistics expenses was primarily due to increased penetration of the digital channel, increased expedited shipments around holiday in order to hit guaranteed delivery dates, and penetration of international and furniture shipments. These decreases were partially offset by lower merchandise markdowns as a result of improved sales performance and well controlled inventory. For the year ended January 31, 2018, the gross profit rate decreased by 259 basis points versus the prior year's comparable period. The decline in gross profit rate was driven by deleverage in delivery and logistics expenses, initial merchandise mark-ups and merchandise markdowns. The increase in delivery and logistics expenses was primarily due to the increased penetration of the digital channel and penetration of international and furniture shipments.

As of January 31, 2018, total inventory increased by $12.8 million, or 3.8%, on a year-over-year basis. The increase in inventory relates to a 3% increase in comparable Retail segment inventory at cost.

Selling, general and administrative expenses increased by $9.1 million, or 3.8%, and $9.5 million, or 1.1%, during the three months and year ended January 31, 2018, respectively, compared to the prior year's comparable periods. Adjusted selling, general and administrative expenses, increased by $7.0 million, or 2.9%, during the three months ended January 31, 2018, and expressed as a percentage of net sales, leveraged 62 basis points when compared to the prior year comparable period.  The leverage for the three months and year ended January 31, 2018, was primarily due to the net savings associated with our store reorganization project, partially offset by increased investments in digital marketing. The increase in expenses for both periods primarily related to increased investments in digital marketing.

The Company's effective tax rate for the fourth quarter of fiscal 2018 was 98.6% compared to 34.9% in the prior year period. The effective tax rate for the year ended January 31, 2018, was 58.6% compared to 35.5% in the prior year comparable period. The increase in the effective tax rate for the three months and year ended January 31, 2018, was primarily due to a one-time charge on our foreign earnings and profits as well as a write down of certain net deferred tax assets in relation to the comprehensive United States tax legislation commonly referred to as the Tax Cuts and Jobs Act of approximately $64.7 million.

Net income for the three months and year ended January 31, 2018, was $1 million and $108 million, respectively, and earnings per diluted share was $0.01 and $0.96, respectively. For the three months ended January 31, 2018, adjusted net income was $75 million and adjusted earnings per diluted share was $0.69.

During the year ended January 31, 2018, the Company repurchased and subsequently retired 8.1 million common shares for approximately $157 million. These repurchases completed the Board's February 23, 2015, repurchase authorization, leaving 17.9 million common shares remaining under the Board's August 22, 2017, authorization to repurchase 20 million common shares.

During the year ended January 31, 2018, the Company opened a total of 18 new locations including: 8 Free People stores, 5 Urban Outfitters stores, 4 Anthropologie Group stores and 1 Food and Beverage restaurant; and closed 11 locations including: 3 Free People stores, 2 Urban Outfitters stores, 3 Anthropologie Group stores and 3 Food and Beverage restaurants.

Urban Outfitters, Inc., offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands comprised of 245 Urban Outfitters stores in the United States, Canada, and Europe and websites; 226 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites; 132 Free People stores in the United States and Canada, catalogs and websites and 10 Food and Beverage restaurants, as of January 31, 2018. Free People and Anthropologie Group wholesale sell their products through approximately 2,100 department and specialty stores worldwide, third-party websites and the Company's own retail stores.

A conference call will be held today to discuss fourth quarter results and will be webcast at 5:00 pm. ET at: https://edge.media-server.com/m6/p/fy4y5dd3 

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 worldwide political events and the resultant impact on consumer spending patterns, any effects of war, terrorism, and civil unrest, natural disasters or severe weather conditions, increases in labor costs, 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, changes to U.S. and foreign trade policies, including the enactment of tariffs, border adjustment taxes or increases in duties or quotas, the closing or disruption of, or any damage to, any of our distribution centers, our ability to protect our intellectual property rights, risks associated with internet sales, response to new store concepts, our ability to integrate acquisitions, failure of our manufacturers and third-party vendors to comply with our social compliance program, changes in our effective income tax rate, 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 (amounts in thousands, except share and per share data) (unaudited)

           
  Three Months Ended     Twelve Months Ended  
  January 31,     January 31,  
  2018     2017     2018     2017  
                               
Net sales $ 1,089,119     $ 1,030,158     $ 3,616,014     $ 3,545,794  
Cost of sales   748,481       689,844       2,440,507       2,301,181  
Gross profit   340,638       340,314       1,175,507       1,244,613  
Selling, general and administrative expenses   249,850       240,787       915,615       906,086  
Income from operations   90,788       99,527       259,892       338,527  
Other income (expense), net   301       (776 )     1,474       (428 )
Income before income taxes   91,089       98,751       261,366       338,099  
Income tax expense   89,771       34,463       153,103       119,979  
Net income $ 1,318     $ 64,288     $ 108,263     $ 218,120  
                               
Net income per common share:                              
Basic $ 0.01     $ 0.55     $ 0.97     $ 1.87  
Diluted $ 0.01     $ 0.55     $ 0.96     $ 1.86  
                               
Weighted-average common shares outstanding:                              
Basic   108,248,440       116,233,694       111,887,308       116,873,023  
Diluted   109,214,592       116,810,034       112,367,924       117,291,117  
                               
                               
AS A PERCENTAGE OF NET SALES                              
Net sales 100.0%     100.0%     100.0%     100.0%  
Cost of sales 68.7%     67.0%     67.5%     64.9%  
Gross profit 31.3%     33.0%     32.5%     35.1%  
Selling, general and administrative expenses 23.0%     23.3%     25.3%     25.6%  
Income from operations 8.3%     9.7%     7.2%     9.5%  
Other income (expense), net 0.1%     (0.1%)     0.0%     0.0%  
Income before income taxes 8.4%     9.6%     7.2%     9.5%  
Income tax expense 8.3%     3.4%     4.2%     3.3%  
Net income 0.1%     6.2%     3.0%     6.2%  
                       

URBAN OUTFITTERS, INC. Condensed Consolidated Balance Sheets (amounts in thousands, except share data) (unaudited)
           
  January 31,     January 31,  
  2018     2017  
ASSETS              
Current assets:              
Cash and cash equivalents $ 282,220     $ 248,140  
Marketable securities   165,125       111,067  
Accounts receivable, net of allowance for doubtful accounts of $1,326 and $588, respectively   76,962       54,505  
Inventory   351,395       338,590  
Prepaid expenses and other current assets   103,055       129,095  
Total current assets   978,757       881,397  
               
Property and equipment, net   813,768       867,786  
Marketable securities   58,688       44,288  
Deferred income taxes and other assets   101,567       109,166  
Total Assets $ 1,952,780     $ 1,902,637  
               
LIABILITIES AND SHAREHOLDERS ' EQUITY              
Current liabilities:              
Accounts payable $ 128,246     $ 119,537  
Accrued expenses, accrued compensation and other current liabilities   231,968       233,391  
Total current liabilities   360,214       352,928  
Long-term debt          
Deferred rent and other liabilities   291,663       236,625  
Total Liabilities   651,877       589,553  
               
Shareholders' equity:              
 Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued          
Common shares; $.0001 par value, 200,000,000 shares authorized, 108,248,568 and 116,233,781 issued and outstanding, respectively 11     12  
Additional paid-in-capital 684        
Retained earnings   1,310,859       1,347,141  
Accumulated other comprehensive loss   (10,651 )     (34,069 )
Total Shareholders' Equity   1,300,903       1,313,084  
Total Liabilities and Shareholders' Equity $ 1,952,780     $ 1,902,637  
               

Important Information Regarding Non-GAAP Financial Measures

In addition to evaluating the financial condition and results of our operations in accordance with U.S. generally accepted accounting principles ("GAAP"), from time to time our management evaluates and analyzes results and any impact on the Company of certain events outside of normal, or "core," business and operations, by considering adjusted financial measures not prepared in accordance with GAAP. Examples of items that we consider non-core include impairment charges, gains or losses on the disposal of our stores or restaurant locations and the nonrecurring impact of the comprehensive United States tax legislation commonly referred to as the Tax Cuts and Jobs Act. In order to improve the transparency of our disclosures, provide a meaningful presentation of results from our core business operations and improve period-over-period comparability, we have included certain adjusted financial measures that exclude the impact of these non-core business items.

We believe these adjusted financial measures are important indicators of our recurring results of operations because they exclude items that may not be indicative of, or are unrelated to, our underlying results of operations and provide a useful baseline for analyzing trends in our underlying business. Management uses adjusted financial measures for planning, forecasting and evaluating business and financial performance.

Non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the Company's financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the Company's financial position, results of operations or cash flows and should therefore be considered in assessing the Company's actual and future financial condition and performance. These adjusted financial measures are not consistent with GAAP and may not be calculated the same as similarly titled measures used by other companies.

URBAN OUTFITTERS, INC. Reconciliation of Non-GAAP Financial Measures (amounts in thousands, except per share data) (unaudited)
                           
Reconciliation of Adjusted Gross Profit:                          
  Three Months Ended  
  January 31,  
  2018     2017  
  $'s   % of Net Sales     $'s   % of Net Sales  
                           
Gross profit (GAAP) $ 340,638     31.3 %   $ 340,314     33.0 %
Adjustments:                          
Impairment charges (a)   11,410             4,341        
Adjusted gross profit (Non-GAAP) $ 352,048     32.3 %   $ 344,655     33.5 %
                           
Reconciliation of Adjusted Selling, General and Administrative Expenses:  
  Three Months Ended  
  January 31,  
  2018     2017  
  $'s   % of Net Sales     $'s   % of Net Sales  
                           
Selling, general and administrative expenses (GAAP) $ 249,850     23.0 %   $ 240,787     23.3 %
Adjustments:                          
Loss on disposal of restaurant (b)   (2,061 )                  
Adjusted selling, general and administrative expenses (Non-GAAP) $ 247,789     22.7 %   $ 240,787     23.3 %
                           
Reconciliation of Income from Operations:                          
  Three Months Ended  
  January 31,  
  2018     2017  
  $'s   % of Net Sales     $'s   % of Net Sales  
                           
Income from operations (GAAP) $ 90,788     8.3 %   $ 99,527     9.7 %
Adjustments:                          
Impairment charges (a)   11,410             4,341        
Loss on disposal of restaurant (b)   2,061                    
Adjusted income from operations (Non-GAAP) $ 104,259     9.6 %   $ 103,868     10.2 %
                           

URBAN OUTFITTERS, INC. Reconciliation of Non-GAAP Financial Measures (amounts in thousands, except per share data)
                           
Reconciliation of Adjusted Net Income and Adjusted EPS:                          
  Three Months Ended  
  January 31,  
  2018     2017  
  $'s   % of Net Sales     $'s   % of Net Sales  
                           
Net income (GAAP) $ 1,318     0.1 %   $ 64,288     6.2 %
Adjustments:                          
Impairment charges (a)   11,410             4,341        
Loss on disposal of restaurant (b)   2,061                    
Provision for income taxes on adjustments (c)   (4,450 )           (1,694 )      
Impact of Tax Cuts and Jobs Act, net (d)   64,705                    
Adjusted net income (Non-GAAP) $ 75,044     6.9 %   $ 66,935     6.5 %
                           
Diluted earnings per share (GAAP) $ 0.01           $ 0.55        
Adjustments, net of tax   0.68             0.02        
Adjusted EPS (Non-GAAP) $ 0.69           $ 0.57        
                           
(a) Impairment charges relate to ten retail locations during the three months ended January 31, 2018, and three retail locations during the three months ended January 31, 2017. The Company assesses the current and future performance of its retail locations and it was determined that these locations would not be able to generate sufficient cash flow over the expected remaining lease term to recover the carrying value of the respective assets.  
                           
(b) During the three months ended January 31, 2018, the Company disposed of one of the restaurants it previously acquired as part of the purchase of certain assets of the Vetri Family group of restaurants in fiscal 2017. Included in the loss on disposal was a reduction of goodwill of the Food & Beverage division recorded in connection with the purchase of certain assets of the Vetri Family group of restaurants.  
                           
(c) The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate in effect for the respective non-GAAP adjustments.  
                           
(d) During the three months ended January 31, 2018, the Company recorded one-time charges for the effects of the comprehensive United States tax legislation commonly referred to as the Tax Cuts and Jobs Act.  

¿Contact:Oona McCulloughDirector of Investor Relations(215) 454-4806

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