GlobeNewswire Inc | Aug 25, 2020 04:05PM EDT

August 25, 2020

PHILADELPHIA, Aug. 25, 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, Terrain, Urban Outfitters, Nuuly and Menus & Venues brands, today announced net income of $34 million and earnings per diluted share of $0.35 for the three months ended July 31, 2020. For the six months ended July 31, 2020, net loss was $104 million and loss per diluted share was $1.06.

Total Company net sales for the three months ended July 31, 2020, decreased 16.5% over the same period last year to $803 million. Comparable Retail segment net sales decreased 13%, driven by negative retail store sales due to stores being closed for part of the quarter and lower store productivity once opened, partially offset by strong double-digit growth in the digital channel. By brand, comparable Retail segment net sales increased 11% at Free People and decreased 8% atUrban Outfitters and 25% at theAnthropologie Group. Total Retail segment net sales decreased 14%. Wholesale segment net sales decreased 51%.

Im pleased to announce URBN produced solid revenues and profits for the second quarter driven by strength in the digital channel, said Richard A. Hayne, Chief Executive Officer. Notably, all brands were profitable and enter the fall selling season with lean inventories and positive momentum, finished Mr.Hayne.

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

Three Months Ended Six Months Ended July 31, July 31, 2020 2019 2020 2019 Net sales by brand Anthropologie Group $ 295,126 $ 394,280 $ 529,201 $ 749,268 Urban Outfitters 323,889 355,045 561,209 671,851 Free People 178,019 205,940 285,683 392,131 Menus & Venues 1,560 7,064 4,714 13,492 Nuuly 4,672 ? 10,942 ? Total Company $ 803,266 $ 962,329 $ 1,391,749 $ 1,826,742 Net sales by segment Retail Segment $ 757,471 $ 878,693 $ 1,318,703 $ 1,661,256 Wholesale Segment 41,123 83,636 62,104 165,486 Subscription Segment 4,672 ? 10,942 ? Total Company $ 803,266 $ 962,329 $ 1,391,749 $ 1,826,742

For the three months ended July 31, 2020, the gross profit rate decreased to 29.6% from 32.8% in the prior years comparable period. Gross profit dollars decreased 24.6% to $238.0 million from $315.9 million. The decrease in gross profit rate was primarily due to an increase in delivery and logistics expense due to penetration of the digital channel, followed by store occupancy expense rate deleverage. The deleverage in store occupancy expense was due to store closures during the quarter as well as lower store sales productivity once stores reopened. Merchandise markdowns were lower in the quarter while initial merchandise mark-up rate was flat versus the prior years comparable period. Both the Urban Outfitters and Free People brands delivered record low markdown rates in the quarter. Lastly, due to disciplined inventory control and better than planned product performance, inventory reserves for the Retail and Wholesale segments were reduced by $21.7 million in total during the quarter versus the prior years comparable period. For the six months ended July 31, 2020, the gross profit rate decreased to 18.0% from 32.0% versus the prior years comparable period. The decrease in the gross profit rate was primarily driven by an increase in delivery and logistics expense due to penetration of the digital channel, followed by store occupancy expense rate deleverage. The deleverage in store occupancy expense was due to mandated store closures as well as lower store sales productivity once stores reopened. Additionally, during the six months ended July 31, 2020, the Company recorded a $21.7 million year-over-year increase in inventory obsolescence reserves and a $14.5 million store impairment charge.

As of July 31, 2020, total inventory decreased by $88.3 million, or 20.1%, on a year-over-year basis. Comparable Retail segment inventory decreased 14% at cost. The decrease in inventory was due to a 14% decrease in Retail segment inventory and a 53% decrease in Wholesale segment inventory.

For the three months ended July 31, 2020, selling, general and administrative expenses decreased by $69.2 million, or 29.1%, compared to the prior years comparable period and expressed as a percentage of net sales, leveraged by 372 basis points. The leverage and decrease in selling, general and administrative expenses for the three months ended July 31, 2020, was primarily related to disciplined store payroll management, overall expense control measures and the benefit of COVID-19 related government relief packages. Digital marketing expenses grew during the quarter to support strong digital channel sales and customer growth. For the six months ended July 31, 2020, selling, general and administrative expenses decreased by $87.7 million, or 18.8%, compared to the prior years comparable period and expressed as a percentage of net sales, deleveraged by 169 basis points. The deleverage was primarily driven by an increase in digital marketing expenses in order to support strong digital channel sales and customer growth. The decrease in selling, general and administrative expenses for the six months ended July 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 July 31, 2020, was 50.1% compared to 26.0% in the prior year period. The Companys effective tax rate for the six months ended July 31, 2020, was a benefit of 19.8% compared to an expense of 25.2% in the prior year period. The increase in expense for the three months ended July 31, 2020, was due to the partial reversal of the tax benefit recorded in the three months ended April 30, 2020, based on the improved company performance in the second quarter. The change in the effective tax rate for the six months ended July 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 July 31, 2020, was $34 million and earnings per diluted share was $0.35. Net loss for the six months ended July 31, 2020, was $104 million and loss per diluted share was $1.06.

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 second quarter, while during the six months ended July 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 which 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 July 31, 2020, 25.9 million common shares were remaining under the programs.

During the six months endedJuly 31, 2020, the Company opened a total of five new retail locations including: threeUrban Outfittersstores and twoAnthropologie Groupstores; and closed four retail locations including: threeUrban Outfittersstores and one Free People store. During the six months endedJuly 31, 2020, three 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 248Urban Outfittersstores inthe United States,CanadaandEuropeand websites; 233Anthropologie Groupstores inthe United States,CanadaandEurope, catalogs and websites; 143 Free People stores inthe United States,CanadaandEurope, catalogs and websites, 11 Menus & Venues restaurants, 2Urban Outfittersfranchisee-owned stores and 1Anthropologie Groupfranchisee-owned store, as ofJuly 31, 2020. Free People,Anthropologie GroupandUrban 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 second quarter results and will be webcast at 5:30 pm. ET at: https://edge.media-server.com/mmc/p/9nrrdtyy

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 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 such as the coronavirus (COVID-19) pandemic, 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 Six Months Ended July 31, July 31, 2020 2019 2020 2019 Net sales $ 803,266 $ 962,329 $ 1,391,749 $ 1,826,742 Cost of sales(excluding store 565,228 646,454 1,127,340 1,241,811 impairment)Store impairment ? ? 14,528 ? Gross profit 238,038 315,875 249,881 584,931 Selling, generaland 168,619 237,814 379,197 466,850 administrativeexpensesIncome (loss) 69,419 78,061 (129,316 ) 118,081 from operationsOther (loss) (533 ) 3,498 (371 ) 6,178 income, netIncome (loss)before income 68,886 81,559 (129,687 ) 124,259 taxesIncome taxexpense 34,486 21,239 (25,645 ) 31,354 (benefit)Net income $ 34,400 $ 60,320 $ (104,042 ) $ 92,905 (loss) Net income(loss) per common share:Basic $ 0.35 $ 0.61 $ (1.06 ) $ 0.91 Diluted $ 0.35 $ 0.61 $ (1.06 ) $ 0.91 Weighted-averagecommon shares outstanding:Basic 97,778,749 99,095,562 97,843,796 101,722,244 Diluted 98,104,918 99,602,465 97,843,796 102,427,040 AS A PERCENTAGE OF NET SALESNet sales 100.0% 100.0% 100.0% 100.0% Cost of sales(excluding store 70.4% 67.2% 81.0% 68.0% impairment)Store impairment ? ? 1.0% ? Gross profit 29.6% 32.8% 18.0% 32.0% Selling, generaland 21.0% 24.7% 27.3% 25.5% administrativeexpensesIncome (loss) 8.6% 8.1% -9.3% 6.5% from operationsOther (loss) ? 0.4% ? 0.3% income, netIncome (loss)before income 8.6% 8.5% -9.3% 6.8% taxesIncome taxexpense 4.3% 2.2% -1.8% 1.7% (benefit)Net income 4.3% 6.3% -7.5% 5.1% (loss)

URBAN OUTFITTERS, INC.Condensed Consolidated Balance Sheets(amounts in thousands, except share data)(unaudited) July 31, January 31, July 31, 2020 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 662,860 $ 221,839 $ 162,018 Marketable securities 501 211,453 171,398 Accounts receivable, net ofallowance for doubtful accounts 60,441 88,288 95,131 of $4,123, $880 and $939,respectivelyInventory 351,771 409,534 440,087 Prepaid expenses and other 195,393 122,282 131,763 current assetsTotal current assets 1,270,966 1,053,396 1,000,397 Property and equipment, net 889,126 890,032 867,434 Operating lease right-of-use 1,134,678 1,170,531 1,085,543 assetsMarketable securities 9,216 97,096 78,857 Deferred income taxes and other 121,292 104,578 105,814 assetsTotal Assets $ 3,425,278 $ 3,315,633 $ 3,138,045 LIABILITIES AND SHAREHOLDERS? EQUITYCurrent liabilities: Accounts payable $ 207,261 $ 167,871 $ 181,955 Current portion of operating 270,326 221,593 209,072 lease liabilitiesAccrued expenses, accruedcompensation and other current 293,629 249,306 235,106 liabilitiesTotal current liabilities 771,216 638,770 626,133 Non-current portion of operating 1,102,250 1,137,495 1,090,623 lease liabilitiesLong-term debt 120,000 ? ? Deferred rent and other 81,219 84,013 59,885 liabilitiesTotal Liabilities 2,074,685 1,860,278 1,776,641 Shareholders? equity: Preferred shares; $.0001 parvalue, 10,000,000 shares ? ? ? authorized, none issuedCommon shares; $.0001 par value,200,000,000 shares authorized,97,779,586, 97,976,815 and 10 10 10 97,965,012 issued andoutstanding, respectivelyAdditional paid-in-capital 9,956 9,477 ? Retained earnings 1,369,830 1,473,872 1,398,681 Accumulated other comprehensive (29,203 ) (28,004 ) (37,287 )lossTotal Shareholders? Equity 1,350,593 1,455,355 1,361,404 Total Liabilities and $ 3,425,278 $ 3,315,633 $ 3,138,045 Shareholders? Equity

URBAN OUTFITTERS, INC.Condensed Consolidated Statements of Cash Flows(amounts in thousands)(unaudited) Six Months Ended July 31, 2020 2019 Cash flows from operating activities: Net (loss) income $ (104,042 ) $ 92,905 Adjustments to reconcile net (loss) income to net cash provided by operating activities:Depreciation and amortization 53,388 55,395 Non-cash lease expense 97,655 94,173 (Benefit) provision for deferred income taxes (17,074 ) 1,107 Share-based compensation expense 11,257 11,461 Store impairment 14,528 ? Loss on disposition of property and equipment, 679 593 netChanges in assets and liabilities: Receivables 27,912 (15,032 )Inventory 58,002 (71,899 )Prepaid expenses and other assets (62,170 ) (23,121 )Payables, accrued expenses and other liabilities 94,196 16,009 Operating lease liabilities (59,115 ) (100,338 )Net cash provided by operating activities 115,216 61,253 Cash flows from investing activities: Cash paid for property and equipment (72,103 ) (116,465 )Cash paid for marketable securities (92,949 ) (235,094 )Sales and maturities of marketable securities 383,056 320,411 Net cash provided by (used in) investing 218,004 (31,148 )activitiesCash flows from financing activities: Borrowings under long-term debt 220,000 ? Repayments of long-term debt (100,000 ) ? Proceeds from the exercise of stock options ? 974 Share repurchases related to share repurchase (7,036 ) (217,421 )programShare repurchases related to taxes for (3,742 ) (5,429 )share-based awardsNet cash provided by (used in) financing 109,222 (221,876 )activitiesEffect of exchange rate changes on cash and cash (1,421 ) (4,471 )equivalentsIncrease (decrease) in cash and cash equivalents 441,021 (196,242 )Cash and cash equivalents at beginning of period 221,839 358,260 Cash and cash equivalents at end of period $ 662,860 $ 162,018

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