GlobeNewswire Inc | Nov 23, 2020 04:05PM EST

November 23, 2020

PHILADELPHIA, Nov. 23, 2020 (GLOBE NEWSWIRE) -- Urban Outfitters, Inc. (NASDAQ:URBN), a leading lifestyle products and services company which operates a portfolio of global consumer brands comprised of the Anthropologie, BHLDN, Free People, FP Movement, Terrain, Urban Outfitters, Nuuly and Menus & Venues brands, today announced net income of $77 million and record earnings per diluted share of $0.78 for the three months ended October 31, 2020. For the nine months ended October 31, 2020, net loss was $27 million and loss per diluted share was $0.28.

Total Company net sales for the three months ended October 31, 2020, decreased 1.8% over the same period last year to $970 million. Comparable Retail segment net sales were flat as a result of negative retail store sales driven by lower store productivity due to reduced store traffic, offset by strong double-digit growth in the digital channel. By brand, comparable Retail segment net sales increased 17% at Free People and 4% atUrban Outfitters and decreased 9% at theAnthropologie Group. Wholesale segment net sales decreased 24%.

I am pleased to announce URBN delivered record Q3 earnings per share in spite of an incredibly difficult operating environment, said Richard A. Hayne, Chief Executive Officer. Our 38% increase in net profits was driven by strong product assortments combined with tight control of inventory and expenses, finished Mr.Hayne.

Net sales by brand and segment for the three and nine-month periods were as follows:

Three Months Ended Nine Months Ended October 31, October 31, 2020 2019 2020 2019 Net sales by brandUrban Outfitters $ 394,050 $ 374,459 $ 955,259 $ 1,046,310 Anthropologie 358,482 398,709 887,683 1,147,977 GroupFree People 206,669 205,475 492,352 597,606 Menus & Venues 3,664 6,794 8,378 20,286 Nuuly 6,742 2,032 17,684 2,032 Total Company $ 969,607 $ 987,469 $ 2,361,356 $ 2,814,211 Net sales by segmentRetail Segment $ 895,608 $ 897,130 $ 2,214,311 $ 2,558,386 Wholesale Segment 67,257 88,307 129,361 253,793 Subscription 6,742 2,032 17,684 2,032 SegmentTotal Company $ 969,607 $ 987,469 $ 2,361,356 $ 2,814,211

For the three months ended October 31, 2020, the gross profit rate increased by 79 basis points versus the prior years comparable period. Gross profit dollars increased 0.6% to $322.9 million from $321.1 million. The increase in gross profit rate was due in part to record low merchandise markdowns in the Retail segment. The record low Retail segment markdown rate was driven by improvement at all three brands with the Urban Outfitters and Free People brands recording significant improvement. The Wholesale segment also delivered healthy improvement in merchandise margins due to lower discounts and allowances. Additionally, gross profit improved as a result of the benefits associated with negotiated rent concessions with landlords and European government assistance programs. These were partially offset by an increase in delivery and logistics expense primarily due to the penetration of the digital channel.

For the nine months ended October 31, 2020, the gross profit rate decreased to 24.3% from 32.2% in the prior years comparable period. The decrease in the gross profit rate was primarily driven by an increase in delivery and logistics expense primarily due to penetration of the digital channel, followed by store occupancy expense rate deleverage. The deleverage in store occupancy expense was due to lower sales as a result of mandated store closures as well as lower store traffic due to the COVID-19 pandemic. Additionally, during the nine months ended October 31, 2020, the Company recorded a $15.9 million year-over-year increase in inventory obsolescence reserves and a $14.5 million store impairment charge.

As of October 31, 2020, total inventory decreased by $42.3 million, or 8.0%, on a year-over-year basis. The decrease in total inventory was primarily due to an 11% decrease in comparable Retail segment inventory at cost.

For the three months ended October 31, 2020, selling, general and administrative expenses decreased by $21.4 million, or 8.7%, compared to the prior years comparable period and expressed as a percentage of net sales, leveraged by 175 basis points. The leverage and decrease in selling, general and administrative expenses for the three months ended October 31, 2020, was primarily related to disciplined store payroll management and overall expense control measures. Digital marketing expenses grew during the quarter to support strong digital channel sales and customer growth.

For the nine months ended October 31, 2020, selling, general and administrative expenses decreased by $109.1 million, or 15.3%, compared to the prior years comparable period and expressed as a percentage of net sales, deleveraged by 24 basis points. The deleverage was primarily driven by an increase in digital marketing and other expenses in order to support strong digital channel sales and customer growth partially offset by disciplined store payroll management and other expense control measures. The decrease in selling, general and administrative expenses for the nine months ended October 31, 2020, was primarily due to disciplined store payroll management, overall expense control measures and the benefit of COVID-19 related government relief packages.

The Companys effective tax rate for the three months ended October 31, 2020, was 21.4% compared to 26.6% in the prior year period. The Companys effective tax rate for the nine months ended October 31, 2020, was a benefit of 14.8% compared to an expense of 25.8% in the prior year period. The change in the effective tax rate for the three and nine months ended October 31, 2020, was primarily driven by the year-to-date operating loss compared to operating income in the prior year period.

Net income for the three months ended October 31, 2020, was $77 million and earnings per diluted share was $0.78. Net loss for the nine months ended October 31, 2020, was $27 million and loss per diluted share was $0.28.

During the three months ended October 31, 2020, the Company repaid the remaining $120.0 million outstanding on its Amended Credit Facility. The Company had borrowed $220.0 million during the three months ended April 30, 2020, in order to preserve financial flexibility and maintain liquidity and flexibility in response to the coronavirus pandemic and had already repaid $100.0 million during the three months ended July 31, 2020.

On August 22, 2017, the Companys Board of Directors authorized the repurchase of 20 million common shares under a share repurchase program. The Company did not repurchase any shares during the third quarter, while during the nine months ended October 31, 2020, the Company repurchased and subsequently retired 0.5 million common shares for approximately $7 million under this program. These shares were repurchased prior to the known spread of the coronavirus pandemic in the United States that forced the Company to close its stores for an extended period of time. During the year ended January 31, 2020, the Company repurchased and subsequently retired 8.1 million common shares for approximately $217 million under this program. On June 4, 2019, the Companys Board of Directors authorized the repurchase of 20 million common shares under a new share repurchase program. As of October 31, 2020, 25.9 million common shares were remaining under the programs.

During the nine months endedOctober 31, 2020, the Company opened a total of twelve new retail locations including: six Urban Outfittersstores, three Anthropologie Groupstores and three Free People stores (including one FP Movement store); and closed five retail locations including: four Urban Outfittersstores and one Free People store. During the nine months endedOctober 31, 2020, four Urban Outfitters franchisee-owned stores and one Free People franchisee-owned store were closed.

Urban Outfitters, Inc., offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands comprised of 250Urban Outfittersstores inthe United States,CanadaandEuropeand websites; 234Anthropologie Groupstores inthe United States,CanadaandEurope, catalogs and websites; 146 Free People stores inthe United States,CanadaandEurope, catalogs and websites, 11 Menus & Venues restaurants, 1Urban Outfittersfranchisee-owned store and 1Anthropologie Groupfranchisee-owned store, as ofOctober 31, 2020. Free People andUrban Outfitterswholesale sell their products through approximately 2,300 department and specialty stores worldwide, digital businesses and the Companys Retail segment.

A conference call will be held today to discuss third quarter results and will be webcast at 5:00 pm. ET at: https://edge.media-server.com/mmc/p/usdcoxym

This news release is being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.Certain matters contained in this release may contain forward-looking statements. When used in this release, the words project, believe, plan, will, anticipate, expect and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Any one, or all, of the following factors could cause actual financial results to differ materially from those financial results mentioned in the forward-looking statements: the impacts of public health crises such as the coronavirus (COVID-19) pandemic, the difficulty in predicting and responding to shifts in fashion trends, changes in the level of competitive pricing and promotional activity and other industry factors, overall economic and market conditions and worldwide political events and the resultant impact on consumer spending patterns,the effects of the implementation of theUnited Kingdom'swithdrawal from membership in theEuropean Union(commonly referred to as Brexit), including currency fluctuations, economic conditions and legal or regulatory changes, any effects of war, terrorism and civil unrest, natural disasters, severe or unseasonable weather conditions or public health crises, increases in labor costs, increases in raw material costs, availability of suitable retail space for expansion, timing of store openings, risks associated with international expansion, seasonal fluctuations in gross sales, the departure of one or more key senior executives, import risks, changes toU.S.and foreign trade policies, including the enactment of tariffs, border adjustment taxes or increases in duties or quotas, the closing or disruption of, or any damage to, any of our distribution centers, our ability to protect our intellectual property rights, risks associated with digital sales, our ability to maintain and expand our digital sales channels, response to new store concepts, our ability to integrate acquisitions, any material disruptions or security breaches with respect to our technology systems, failure of our manufacturers and third-party vendors to comply with our social compliance program, changes in our effective income tax rate (including the uncertainties associated with theU.S.Tax Cuts and Jobs Act), changes in accounting standards and subjective assumptions, regulatory changes and legal matters and other risksidentified in our filings with theSecurities and Exchange Commission. The Company disclaims any intent or obligation to update forward-looking statements even if experience or future changes make it clear that actual results may differ materially from any projected results expressed or implied therein.

(Tables follow)

URBAN OUTFITTERS, INC.Condensed Consolidated Statements of Operations(amounts in thousands, except share and per share data)(unaudited)

Three Months Ended Nine Months Ended October 31, October 31, 2020 2019 2020 2019 Net sales $ 969,607 $ 987,469 $ 2,361,356 $ 2,814,211 Cost of sales(excluding store 646,666 666,367 1,774,006 1,908,178 impairment)Store impairment ? ? 14,528 ? Gross profit 322,941 321,102 572,822 906,033 Selling, generaland 224,433 245,833 603,630 712,683 administrativeexpensesIncome (loss) 98,508 75,269 (30,808 ) 193,350 from operationsOther (loss) (890 ) 576 (1,261 ) 6,754 income, netIncome (loss)before income 97,618 75,845 (32,069 ) 200,104 taxesIncome taxexpense 20,914 20,193 (4,731 ) 51,547 (benefit)Net income $ 76,704 $ 55,652 $ (27,338 ) $ 148,557 (loss) Net income(loss) per common share:Basic $ 0.78 $ 0.57 $ (0.28 ) $ 1.48 Diluted $ 0.78 $ 0.56 $ (0.28 ) $ 1.47 Weighted-averagecommon shares outstanding:Basic 97,784,661 97,972,864 97,823,948 100,458,726 Diluted 98,583,032 98,628,169 97,823,948 101,147,025 AS A PERCENTAGE OF NET SALESNet sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales(excluding store 66.7 % 67.5 % 75.1 % 67.8 % impairment)Store impairment ? ? 0.6 % ? Gross profit 33.3 % 32.5 % 24.3 % 32.2 % Selling, generaland 23.1 % 24.9 % 25.6 % 25.3 % administrativeexpensesIncome (loss) 10.2 % 7.6 % -1.3 % 6.9 % from operationsOther (loss) -0.1 % 0.1 % -0.1 % 0.2 % income, netIncome (loss)before income 10.1 % 7.7 % -1.4 % 7.1 % taxesIncome taxexpense 2.2 % 2.1 % -0.2 % 1.8 % (benefit)Net income 7.9 % 5.6 % -1.2 % 5.3 % (loss)

URBAN OUTFITTERS, INC.Condensed Consolidated Balance Sheets(amounts in thousands, except share data)(unaudited)

October 31, January 31, October 31, 2020 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 624,945 $ 221,839 $ 167,070 Marketable securities 2 211,453 170,697 Accounts receivable, net ofallowance for doubtful accounts 87,187 88,288 99,971 of $3,098, $880 and $1,084,respectivelyInventory 489,234 409,534 531,565 Prepaid expenses and other 170,193 122,282 143,710 current assetsTotal current assets 1,371,561 1,053,396 1,113,013 Property and equipment, net 930,564 890,032 890,538 Operating lease right-of-use 1,101,495 1,170,531 1,119,280 assetsMarketable securities 9,350 97,096 83,121 Deferred income taxes and other 117,705 104,578 114,641 assetsTotal Assets $ 3,530,675 $ 3,315,633 $ 3,320,593 LIABILITIES AND SHAREHOLDERS? EQUITYCurrent liabilities: Accounts payable $ 349,793 $ 167,871 $ 232,901 Current portion of operating 255,122 221,593 213,911 lease liabilitiesAccrued expenses, accruedcompensation and other current 341,983 249,306 264,240 liabilitiesTotal current liabilities 946,898 638,770 711,052 Non-current portion of operating 1,069,434 1,137,495 1,119,340 lease liabilitiesLong-term debt ? ? ? Deferred rent and other 83,024 84,013 60,348 liabilitiesTotal Liabilities 2,099,356 1,860,278 1,890,740 Shareholders? equity: Preferred shares; $.0001 parvalue, 10,000,000 shares ? ? ? authorized,none issuedCommon shares; $.0001 par value,200,000,000 shares authorized,97,786,381, 97,976,815 and 10 10 10 97,975,343 issued andoutstanding,respectivelyAdditional paid-in-capital 15,669 9,477 5,201 Retained earnings 1,446,534 1,473,872 1,454,333 Accumulated other comprehensive (30,894 ) (28,004 ) (29,691 )lossTotal Shareholders? Equity 1,431,319 1,455,355 1,429,853 Total Liabilities and $ 3,530,675 $ 3,315,633 $ 3,320,593 Shareholders? Equity

URBAN OUTFITTERS, INC.Condensed Consolidated Statements of Cash Flows(amounts in thousands)(unaudited)

Nine Months Ended October 31, 2020 2019 Cash flows from operating activities: Net (loss) income $ (27,338 ) $ 148,557 Adjustments to reconcile net (loss) income to net cash provided by operating activities:Depreciation and amortization 78,308 83,617 Non-cash lease expense 147,198 142,210 (Benefit) provision for deferred income taxes (15,293 ) 211 Share-based compensation expense 17,030 16,807 Store impairment 14,528 ? Loss on disposition of property and equipment, net 706 819 Changes in assets and liabilities: Receivables 1,137 (19,550 )Inventory (79,462 ) (161,255 )Prepaid expenses and other assets (35,403 ) (37,228 )Payables, accrued expenses and other liabilities 235,618 100,534 Operating lease liabilities (122,360 ) (153,320 )Net cash provided by operating activities 214,669 121,402 Cash flows from investing activities: Cash paid for property and equipment (89,153 ) (171,121 )Cash paid for marketable securities (93,945 ) (299,322 )Sales and maturities of marketable securities 384,999 382,629 Net cash provided by (used in) investing activities 201,901 (87,814 )Cash flows from financing activities: Borrowings under long-term debt 220,000 ? Repayments of long-term debt (220,000 ) ? Proceeds from the exercise of stock options ? 974 Share repurchases related to share repurchase (7,036 ) (217,421 )programShare repurchases related to taxes for share-based (3,802 ) (5,574 )awardsNet cash used in financing activities (10,838 ) (222,021 )Effect of exchange rate changes on cash and cash (2,626 ) (2,757 )equivalentsIncrease (decrease) in cash and cash equivalents 403,106 (191,190 )Cash and cash equivalents at beginning of period 221,839 358,260 Cash and cash equivalents at end of period $ 624,945 $ 167,070 Supplemental cash flow information: Cash paid during the year for: Income taxes $ 11,549 $ 56,910 Non-cash investing activities?Accrued capital $ 54,137 $ 14,769 expenditures

Contact: Oona McCullough Director of Investor Relations (215) 454-4806