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Financial Roundup: Free People Lifts URBN, Walmart Forges Ahead, Losses Narrow at Bon-Ton, Victoria’s Secret Drags on L Brands

Urban Outfitters, Inc.

In a Nutshell: Urban Outfitters, Inc. was led by strong product in Free People during the second quarter while Anthropologie and Urban Oufitters’ missteps were a drag on performance.

Urban Outfitters faltered thanks to an overcorrection from a slowdown in dresses that resulted in too few for spring, while separates skewed too tomboy and commanded lower AURs (average unit retails). The team has responded by flip flopping its buying strategy, buying less upfront and chasing more in season. At Anthropologie, the retailer strayed too far from the pattern-filled, colorful assortment customers expect and offered goods that were too causal. Free People saw gains based on fewer markdowns and a strong regular price business, which resulted in better IMUs and margins.

The company is looking to expand its wholesale activity both domestically and internationally for all brands and is exploring opportunities for international retail as well.

Sales: Net sales for the quarter, ended July 31, were $873 million, which represents a 2 percent decline from the same period last year. Comp retail sales fell by 4.9%, with Free People up 2.9%, Anthropologie down 4 percent and Urban Outfitters dropping 7.9%. Wholesale net sales were up 10 percent.

Earnings: The retailer reported net income of $49.9 million in the apparel division, down from $76.9 million in the same period last year. Earnings per diluted share were 44 cents, down from 66 cents during the second quarter last year.

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CEO’s Take: “Let me say at the outset that URBN’s overall second quarter performance fell far short of our expectations. A very slow start for the quarter led to disappointing results in Anthropologie and Urban Outfitters in North America. At the same time, we saw excellent comp sales gains at both larger brands in Europe with the women’s apparel category particularly strong. In North America however, the underperformance was driven primarily by the women’s product. In addition, decreases in total comp store sales more than offset the positive sales delivered by the wholesale segment and the direct to consumer channel,” Richard Hayne, CEO and chairman of Urban Outfitters, Inc.

L Brands

In a Nutshell: L Brands struggled in the second quarter, primarily due to weakness in its Victoria’s Secret stores. Victoria’s Secret experienced a high single digit decline in traffic and a comp sales drop of 14 percent, as shoppers stayed away in response to reduced promotions. Direct sales took a 26 percent hit due to the retailer’s swim and apparel exit. The Pink and beauty categories were the bright spots with increased sales. Internationally, comps were down everywhere except China, which helped drive a 14 percent revenue increase.

On the positive side, online continued to grow with 11 percent gains in the remaining categories at Victoria’s Secret and 16 percent increases at Bath & Body Works.

The company adjusted its third quarter comps outlook from up in the low single digit range to a flat to low-single digit decline. EPS are expected to be 25 cents to 30 cents, down from last year’s 42 cents. Full year comps are expected to be down in the low to mid single digit range. EPS for the year are forecasted to be $3.00 to $3.20.

Sales: Net sales were down 5 percent to $2.8 billion, while total comps decreased 8 percent.

Sales at Victoria’s Secret were down 12 percent. Meanwhile, sales at Bath & Body Works increased 7 percent with a 6 percent comp increase. E-commerce sales were up 16 percent.

Earnings: Earnings per share decreased by 31 percent to 48 cents, outpacing guidance of 40 cents to 45 cents. The company attributes the performance in part to expense control.

CEO’s Take: “My focus right now and for the past year has been on the deep consumer connection, literally beginning the experience by working in stores and being in the market every week since day one. The consumer connection we have with millions of women is a competitive advantage every day. From that we build product in the most excellent and innovative form, resetting how we as a team optimize our merch, design, planning and supply chain teams for speed, relevance and innovation is a new way of working and one that I’m excited to bring and lead the team on,” said Victoria’s Secret CEO Jan Singer.


In a Nutshell: Walmart continues to attract customers with its everyday low price model—both in store and online. With its online acquisitions and focus on bolstering that business, the retailer’s e-commerce sales are skyrocketing with a 60 percent increase for Walmart U.S., owing in part to a larger selection. Consumers are also responding to increased delivery options, including employee delivery and the roll out of 100 automated pickup towers. The business also received a boost from grocery with food delivering the strongest quarterly comps in five years.

Third quarter guidance is 90 cents to 98 cents. The outlook for the full-year adjusted EPS is $4.30 to $4.40, up from the previous guidance of $4.20 to $4.40. Comp sales for both Walmart U.S. and Sam’s Club, excluding fuel, are expected to be in the low single digits.

Sales: Net sales for Walmart U.S. increased by 3.3% to $78.7 billion from $76.2 billion in the prior year period. Sam’s Club was up 2.3% to $14.9 billion from $14.5 billion. Walmart International net sales dipped 1 percent to $28.3 billion from $28.6 billion.

Overall, the company saw a 1.7% increase in comp sales in the U.S., excluding fuel. Walmart U.S. achieved its 12th consecutive quarter of positive comp sales and 11th consecutive quarter of positive traffic.

Nine of 11 international markets posted positive comps, lead by Walmex, which includes Mexico and Central America, which reported a 7 percent gain in comp sales in the quarter.

Earnings: Net income fell 23.2% to $2.9 billion from $3.8 billion. Adjusted earnings per share was $1.08, performing at the top of the company’s guidance.

CEO’s Take: “We believe that we’re uniquely positioned to grow and delight customers by providing the seamless shopping experience they desire. Having stores within 10 miles of approximately 90 percent of the U.S. population allows us to serve customers in ways that are most convenient for them,” said Doug McMillon, Walmart president and CEO.


In a Nutshell: Bon-Ton continued to rack up losses but at a smaller margin in the second quarter. Bright spots in the business were fine jewelry, young men’s, denim, and big and tall, while Under Armour, Tommy Hilfiger and Vera Bradley performed well.

Going forward, the company plans to change its merchandising strategy, including expanding in gifting with the launch of FAO Schwartz and expanding Discovery Kids product; dominating cold weather merchandise with in-season buys and a glove and beanie bar; enhancing activewear, including more Under Armour product, the launch of Adidas kids and Champion across all categories; focusing on denim trends; and growing private and exclusive brands from 17 percent penetration to 25 percent over the next several years.

For the full year, the company expects losses per share to be in the $2.08 to $2.59 and adjusted EBITDA to be in the range of $115 million to $125 million. The Bon-Ton has adjusted its comp sales outlook to a 3.5% to 4.5% decrease.

Sales: Comp store sales decreased by 6.1%, compared to the prior year period. Total sales dropped 7 percent to $504.4 million, from $542.4 million. Sales via its e-commerce, mobile and Let Us Find it customer service program were up by double digits.

Earnings: The Bon-Ton reported a net loss of $33.2 million, compared to a net loss of $38.7 million during the same period last year.

CEO’s Take: “Looking forward, we will focus on efforts to further enhance our merchandise assortment with an emphasis on our targeted growth categories, refine our marketing strategy to increase traffic and customer engagement, and drive growth in our omnichannel business. In addition, we expect to achieve further cost reductions through the continued rollout of our profit improvement initiative. We believe that these actions will drive improved performance in the back half of the year,” said William Tracy, incoming Bon-Ton president and CEO.