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Urban Outfitters Posts Mixed Fourth-Quarter Figures

Urban Outfitters Inc. managed sales increases at most of its store and digital channels in the fourth quarter, but saw earnings drop after taking markdowns to reduce inventories.

Net income for the period ended Jan. 31 fell to $31.5 million, or $0.34 per share, from $40.95 million, or $0.42 a share in the year-ago period, the company indicated in its latest financial report issued Tuesday.

Total sales increased 3.9 percent to a record $1.38 billion.

Retail segment net sales increased 2 percent, with comparable sales increasing 3 percent, partially offset by a 1 percent negative impact of foreign currency translation. This increase was driven by midsingle-digit positive growth with sales at stores and low single-digit positive growth in digital sales.

By brand, comparable sales increased 15 percent at the Free People Group and 9 percent at the Anthropologie Group and decreased 10 percent at Urban Outfitters. That divide in sales between the groups has been going on for awhile with the more affluent Anthropologie and Free People customers continuing to spend, while the younger crowd at Urban Outfitters pulled back.

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Across the industry for the past six months, retailers have been seeing consumers pull back on spending for discretionary items, impacted by inflation and concerns about the economy.

At the wholesale segment, net sales decreased 7 percent with a 13 percent decrease in Free People Group, while Urban Outfitters wholesale sales increased by $3 million. At the Nuuly segment, net sales increased by $25.5 million, driven by a 149 percent increase in subscribers by the end of the fourth quarter versus the end of the prior year’s quarter.

“We are pleased to report record fourth quarter sales driven by strength at the Anthropologie, Free People and Nuuly brands,” chief executive officer Richard A. Hayne said in a statement. “We enter the spring selling season with an improved inventory position which bodes well for merchandise margin opportunity in fiscal 2024.”

In the fourth quarter, the gross profit rate decreased by 68 basis points compared to the year-ago period. This decrease was primarily due to store impairment charges of $5.5 million, or 39 basis points last quarter, the company indicated. Gross profit dollars increased 1.4 percent, to $372.3 million from $367.3 million.

Retail segment merchandise margins were slightly lower as improved initial merchandise markups were offset by higher markdowns at the Urban Outfitters and Free People Group brands. A decline in the wholesale segment gross profit rate also contributed to the total company gross profit decline as a result of increased sales discounts to clear out excess merchandise.

The Nuuly segment gross profit rate improved due to operating leverage from the significant growth in subscribers.

For the year overall, the company earned $159.7 million compared to $310.62 million in 2021.

Total net sales in 2022 increased 5.4 percent compared to the prior year. Total and comparable retail segment sales increased 4 percent.

“The relative proportion of retail segment sales attributable to store and digital channels changed due in large part to the temporary global store closures and occupancy restrictions in the prior year due to the COVID-19 pandemic,” the company indicated in its statement. “With those restrictions not present in the current year, Retail segment comparable sales increased due to high single-digit positive growth in retail store sales due to increased store traffic and low single-digit positive growth in digital channel sales.”

The company’s portfolio includes the Anthropologie, BHLDN, Free People, FP Movement, Terrain, Urban Outfitters, Nuuly and Menus & Venues brands.