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For Urban Outfitters, Design Trumps Discounts

The lesson of Urban Outfitters’ recent success is that sometimes trendy design trumps steep discounts. The teen apparel retailer reported some very healthy second quarter results, especially considering a generally limp economy.

Urban Outfitters achieved a 9 percent spike in same-store sales, bettering the prevailing estimate of 8.1 percent. Also, it expanded its gross margins to 39.3 percent from 37.6 percent. CEO Richard Hayne said that the rise was “driven by improvements at the Anthropologie brand,” specifically citing  a decrease in discount pricing. “The improvements in product led to higher full-price sell-throughs and lower merchandise markdowns.”

Urban Outfitters’ flourishing is all the more remarkable given the continued underperformance of competitors like Wal-Mart and Macy’s, both of which suffered from considerably less impressive comparable store sales. Given the persistently low employment among youthful shoppers, and a generally languid economy, they have struggled to capture significant gains during the back-to-school shopping season. Urban Outfitters has also outdone its primary rivals, American Eagle and Aeropostale.

However, Anthropologie’s net sales have been brisk, rising 12 percent to $315.1 million. The brand has benefitted especially from targeting teenage female shoppers looking for edgier fashion-forward looks rather than preppier styles.

Overall, net sales for Urban Outfitters has leapt a substantial 8 percent to $336 million while net income has increased to $76.4 million from $61.3 million. Revenue also jumped 12 percent to $758.5 million.  This Monday the company’s shares closed at $39.32.