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Urban Outfitters Sees Record Fourth Quarter Sales and Spike in Net Income

Urban Outfitters saw net income skyrocket in the fourth quarter and full year, while registering a record $1.3 billion in net sales in the final three months of its fiscal year.

In a Nutshell: With sales gains across divisions–Anthropologie, Urban Outfitters and Free People–the company credited that growth, improved direct selling and increased marketing efforts for substantial gains in income for the fourth quarter and year.

The jump in net income came even as selling, general and administrative expenses (SG&A) increased 3.4 percent, or $8.5 million, compared to the prior-year period. For the year, SG&A increased 5.4 percent, or $49.8 million.

The company said profitability was primarily driven by net sales growth and continued savings associated with a store reorganization project. The growth in SG&A in both periods was primarily due to increased direct selling and marketing expenses to support and drive the increase in retail segment net sales and higher bonus and share-based compensation expense.

During the year, the company opened 18 new retail locations, including six Free People stores, five Urban Outfitters units, four Anthropologie Group stores and three Food and Beverage restaurants. It closed 11 retail locations.

Sales: Net sales for the fourth quarter ended Jan. 31 increased 3.7 percent over the same period last year to a record $1.13 billion. Comparable retail segment net sales increased 3 percent, driven by double-digit growth in the digital channel, partially offset by negative retail store sales.

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By brand, net sales at Urban Outfitters rose 3.1 percent to $447.53 million, while Anthropologie notched a 3.9 percent gain to $464.61 million and Free People posted a 3.8 percent increase to $209.32 million.

For the year, net sales increased 9.3 percent to $4 billion over the prior year. Comparable retail segment net sales increased 8 percent, boosted by double-digit growth in the digital channel and positive retail store sales. Wholesale segment net sales increased 10 percent.

Earnings: Net income in the quarter jumped to $86.41 million from $1.32 million a year earlier. For the year, net income more than doubled to $298 million compared to $108.26 million in the prior year.

For the three months, the gross profit rate improved by 172 basis points and the adjusted gross profit rate improved by 99 basis points versus the prior-year period. The company credited lower markdown rates and improved initial mark-ups. Anthropologie delivered the most significant improvement, followed by Urban Outfitters.

CEO’s Take: Richard A. Hayne, CEO, said: “The fourth quarter closed what was an incredibly successful year for URBN and all of our brands.”