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Earnings Roundup: Markdowns Hit Urban, Express Profit Plummets, Children’s Place Wins, Vera Bradley Reevaluates

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Children’s clothing is outperforming women’s and accessories, promotions are still killing margins and the retail environment is still “challenging.”

Here’s a look at how Urban Outfitters, Express, The Children’s Place and Vera Bradley fared in their most recent quarters.

Urban Outfitters

Anthropologie, it seems, has been the drag on Urban Outfitters.

Though net sales for the total company—which includes Urban Outfitters, Anthropologie, Bhldn, Free People and Terrain—increased 3 percent to $3.5 billion, sales at Anthropologie fell 2.9 percent while sales at Urban Outfitters and Free People increased, albeit slightly.

Direct-to-consumer sales, which saw double digit growth, were what proved most positive for the company, and CEO Richard A. Hayne said in the report released Wednesday Urban Outfitters will continue to shift efforts in that direction.

Profits fell 142 basis points for the three months ended Jan. 31, which the company owed to the delivery and logistics expenses that came with the success of its direct-to-consumer business. Higher markdowns at both Anthropologie and Urban Outfitters didn’t help profits either.

Urban Outfitters Inc. opened 29 new stores last year and closed seven, bringing its totals to 242 Urban Outfitters stores, 225 Anthropologie stores and 127 Free People locations.

Express

Express has seen better quarters.

Net sales at the women’s specialty retailer fell 11 percent in the period ended Jan. 28, dropping to $678.8 million. Comparable sales (including e-commerce) slid 13 percent, compared to a 4 percent increase in the prior year period. Express expects comp sales to be down in the negative high single digits for the coming quarter.

For the full year, net sales were down 7 percent to $2.2 billion.

Increased promotions led to a 560-basis point decline in gross margin and net income in the quarter fell more than 59 percent to $22.8 million.

“Our store performance continued to be impacted by challenging mall traffic and a promotional retail environment,” Express president and CEO David Kornberg said. As such, the company focused its efforts on omnichannel offerings, which Kornberg said drove e-commerce sales up 9 percent in the quarter. “We enter 2017 with confidence that the actions we have taken and the initiatives underway will translate into stronger performance as we move through the year. These initiatives include improving the fashion clarity in our stores through reduced choice counts, launching a new brand campaign, introducing compelling new products, and improving upon key existing categories.”

The Children’s Place

Children’s apparel appears to be faring much better than women’s—at least for The Children’s Place.

The company posted a 6.9 percent increase in comparable retail sales for the fourth quarter ended Jan. 28. Net income was up a substantial 114 percent to $34.2 million. For the full fiscal year 2016, net sales at The Children’s Place were up 3.4 percent to $1.785 billion and net income was up 76 percent to $102.3 million.

The Children’s Place closed 22 stores and didn’t open any in the fourth quarter, bringing their count to 1,039 stores—2.4 percent fewer than in the prior year. The company has closed 142 stores since announcing its fleet optimization initiative in 2013 and plans are in place to close another 300 by 2020.

“By any measure, 2016 was a spectacular year for The Children’s Place,” company president and CEO Jane Elfers said. “We made significant progress on our numerous self-help initiatives. And our product assortment, supported by a foundation of superior design, sourcing and merchandising capabilities, clearly resonated with our customers.”

Vera Bradley

The fourth quarter wasn’t a good one for fashion accessories firm Very Bradley either.

“The retail environment became even more challenging in the fourth quarter,” company CEO Robert Wallstrom said. “Consequently, both total revenues and our gross profit percentage were modestly below our expectations.”

Revenues were down 12 percent to $134.8 million. Comparable sales fell 9.5 percent (reflecting an 11.2 percent decline in store sales and a 6.5 percent decrease in e-commerce sales), which the company attributed to lackluster traffic. Gross profit for the quarter was down 16 percent to $75.1 million compared to the prior year period.

In looking ahead to the first quarter, Vera Bradley said profits will likely be down as the company expects an “increased level of promotional activity.”

“We have a strong brand, a talented team, and a solid financial foundation and are focused on ensuring Vera Bradley’s prosperous future,” Wallstrom said. “However, our transformation is taking longer than we had originally planned, and the overall retail environment and accessories space are significantly more challenging than anticipated.”

To combat the challenging environment and restore the company to success, Wallstrom said Vera Bradley will focus on driving brand desirability, product desirability and strengthening its distribution network in fiscal 2018.

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