GlobeNewswire Inc | May 25, 2021 04:05PM EDT

May 25, 2021

PHILADELPHIA, May 25, 2021 (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 $54 million and record first quarter earnings per diluted share of $0.54 for the three months ended April 30, 2021.

Due to the material impact of COVID-19 on our business operations in fiscal 2021, including mandated store closures, this release includes a comparison of fiscal 2022 results to fiscal 2020, in addition to a comparison of fiscal 2022 results to fiscal 2021. Management views the comparison of fiscal 2022 results to fiscal 2020 as the more meaningful measurement of the Companys business performance.

Sales Results for Fiscal 2022 Compared to Fiscal 2020 and Fiscal 2021

Total Company net sales for the three months ended April 30, 2021, were a record $927 million. Net sales increased 7.3% compared to the three months ended April 30, 2019. Comparable Retail segment net sales increased 10%, driven by strong double-digit growth in digital channel sales, partially offset by negative retail store sales due to reduced store traffic impacted by temporary store closures and occupancy restrictions in Europe and Canada. By brand, comparable Retail segment net sales increased 44% at the Free People Group, 9% atUrban Outfitters and 1% at theAnthropologie Group. Total Retail segment net sales also increased 10%. Wholesale segment net sales decreased 24% due in part to realigning the Free People brand customer base to focus on more regular price selling.

Total Company net sales for the three months ended April 30, 2021, increased 57.6% compared to the three months ended April 30, 2020. Comparable Retail segment net sales increased 51%, driven by strong double-digit growth in both retail store and digital channel sales. By brand, comparable Retail segment net sales increased 77% at the Free People Group, 50% at theAnthropologie Group and 42% atUrban Outfitters. Total Retail segment net sales increased 53%. Wholesale segment net sales increased 196%. Net sales for the three months ended April 30, 2020, were significantly impacted by the COVID-19 pandemic including mandated store closures for all of the Companys stores and the majority of its wholesale partners.

The first quarter was one for the record books; record sales, a record low markdown rate, and record earnings per share, said Richard A. Hayne, Chief Executive Officer. Strong comps were driven by powerful demand and superb execution by all teams. In May, sales trends have accelerated further which we believe bodes well for second quarter results, finished Mr. Hayne.

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

Three Months Ended April 30, 2021 2020 2019 Net sales by brand Urban Outfitters $ 349,681 $ 237,320 $ 316,806 Anthropologie Group 353,567 234,075 354,988 Free People Group 212,751 107,664 186,191 Menus & Venues 3,596 3,154 6,428 Nuuly ^(1) 7,820 6,270 ? Total Company $ 927,415 $ 588,483 $ 864,413

Three Months Ended April 30, 2021 2020 2019 Net sales by segment Retail Segment $ 857,486 $ 561,232 $ 782,563 Wholesale Segment 62,109 20,981 81,850 Subscription Segment ^(1) 7,820 6,270 ? Total Company $ 927,415 $ 588,483 $ 864,413

^ The Subscription segment (which is comprised of the Nuuly brand) began(1) operations on July 30, 2019.

Operating Results for the Three Months Ended April 30, 2021, Compared to Three Months Ended April 30, 2019

Total Company net sales for the three months ended April 30, 2021, were a record $927 million. Net sales increased 7.3% compared to the three months ended April 30, 2019. Comparable Retail segment net sales increased 10%, driven by strong double-digit growth in digital channel sales, partially offset by negative retail store sales due to reduced store traffic impacted by temporary store closures and occupancy restrictions in Europe and Canada. By brand, comparable Retail segment net sales increased 44% at the Free People Group, 9% atUrban Outfitters and 1% at theAnthropologie Group. Total Retail segment net sales also increased 10%. Wholesale segment net sales decreased 24% due in part to realigning the Free People brand customer base to focus on more regular price selling.

For the three months ended April 30, 2021, the gross profit rate increased to 32.4% from 31.1% in the three months ended April 30, 2019. Gross profit dollars increased 11.7% to $300.7 million from $269.1 million. The increase in gross profit rate was primarily due to record low first quarter merchandise markdown rates in the Retail segment and benefits associated with negotiated rent concessions with landlords and international government assistance programs. All three brands recorded lower merchandise markdown rates with the Urban Outfitters and Free People brands achieving record low first quarter merchandise markdown rates. This was partially offset by an increase in delivery and logistics expenses and lower initial merchandise markups. Delivery and logistics expense deleverage was primarily driven by the increased penetration of the digital channel as well as an increase in home category net sales. Lower initial merchandise markups are primarily due to higher inbound freight and logistics expenses.

As of April 30, 2021, total inventory increased by $69.4 million, or 17.0%, compared to total inventory as of April 30, 2019. The increase in inventory is due to the improving sales trend as well as ongoing challenges in the supply chain. Due to extended lead times, we are bringing in product earlier to ensure we can meet our sales demand.As a result, while Retail segment comparable inventory was down 3% as compared to April 30, 2019, the significant increase in inventory in-transit more than offset it.

For the three months ended April 30, 2021, selling, general and administrative expenses decreased by $1.9 million, or 0.8%, compared to the three months ended April 30, 2019, and expressed as a percentage of net sales, decreased to 24.5% from 26.5% in the three months ended April 30, 2019. The leverage in selling, general and administrative expenses as a rate to sales and decrease in dollars was primarily related to disciplined store payroll management and overall expense control. This was partially offset by an increase in digital marketing expenses during the quarter to support the strong digital sales and customer growth.

The Companys effective tax rate for the three months ended April 30, 2021, was 27.0% compared to 23.7% in the three months ended April 30, 2019. The increase in the effective tax rate for the three months ended April 30, 2021, was primarily due to the ratio of foreign taxable losses to global taxable profits and a lower benefit of equity activity compared to the three months ended April 30, 2019.

Net income for the three months ended April 30, 2021, was $54 million and record first quarter earnings per diluted share was $0.54.

Operating Results for the Three Months Ended April 30, 2021, Compared to Three Months Ended April 30, 2020

Total Company net sales for the three months ended April 30, 2021, increased 57.6% compared to the three months ended April 30, 2020. Comparable Retail segment net sales increased 51%, driven by strong double-digit growth in both retail store and digital channel sales. By brand, comparable Retail segment net sales increased 77% at the Free People Group, 50% at theAnthropologie Group and 42% atUrban Outfitters. Total Retail segment net sales increased 53%. Wholesale segment net sales increased 196%. Net sales for the three months ended April 30, 2020, were significantly impacted by the COVID-19 pandemic including mandated store closures for all of the Companys stores and the majority of its wholesale partners.

For the three months ended April 30, 2021, the gross profit rate increased to 32.4% from 2.0% in the prior years comparable period. Gross profit dollars increased by $288.8 million to $300.7 million from $11.8 million in the prior years comparable period. The increase in gross profit rate was due to the negative impacts the COVID-19 mandated store closures had on the Companys Retail segment and its partners in the Wholesale segment in the prior year quarter. The mandated store closures resulted in a significant deleverage in store occupancy and an increase in merchandise markdowns in the prior year quarter. The Company also recorded a meaningful increase in inventory obsolescence reserves in the prior year quarter due to the impact the store closures had on the aging of the Companys inventory. Finally, during the prior year quarter the Company recorded a $14.5 million store impairment charge.

As of April 30, 2021, total inventory increased by $142.1 million, or 42.3%, on a year-over-year basis. During the three months ended April 30, 2020, the Company cancelled or delayed many orders to reduce inventory levels as a result of the significant impacts the COVID-19 pandemic was having on its operations, particularly with the mandated store closures, and recorded a meaningful increase in inventory obsolescence reserves.

For the three months ended April 30, 2021, selling, general and administrative expenses increased by $16.6 million, or 7.9%, compared to the prior years comparable period and expressed as a percentage of net sales, decreased to 24.5% from 35.8% in the prior years comparable period. The leverage in selling, general and administrative expenses for the three months ended April 30, 2021, was primarily related to leverage in store and field management expense due to the Company continuing to employ and pay a large portion of regional and store management teams despite store closures and reduced sales related to the COVID-19 pandemic in the prior year quarter.Additionally, in the prior year quarter the Company recorded a significant increase in allowance for doubtful accounts reserves for wholesale customer accounts receivables as a result of the significant disruption and uncertainty in the wholesale macro environment due to the COVID-19 pandemic.

The Companys effective tax rate for the three months ended April 30, 2021, was an expense of 27.0% compared to a benefit of 30.3% in the prior year period.

Net income for the three months ended April 30, 2021, was $54 million and record first quarter earnings per diluted share was $0.54.

Other Information

On August 22, 2017, the Companys Board of Directors authorized the repurchase of 20 million common shares under a share repurchase program. On June 4, 2019, the Companys Board of Directors authorized the repurchase of 20 million common shares under a new share repurchase program. During the three months ended April 30, 2021, the Company did not repurchase any shares. During the year endedJanuary 31, 2021, the Company repurchased and subsequently retired 0.5 million common shares for approximately$7 million. These shares were repurchased prior to the known spread of the COVID-19 pandemic inthe United Statesthat forced the Company to close its stores for an extended period of time.As of April 30, 2021, 25.9 million common shares were remaining under the programs.

During the three months endedApril 30, 2021, the Company opened a total of twelve new retail locations including: six Free People Group stores (including one FP Movement store), fourUrban Outfittersstores and twoAnthropologie Groupstores; and closed two Free People Group stores and oneAnthropologie Group store. During the three months endedApril 30, 2021, no franchisee-owned stores were opened or closed.

Urban Outfitters, Inc., offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands comprised of 251Urban Outfittersstores inthe United States,CanadaandEuropeand websites; 238Anthropologie Groupstores inthe United States,CanadaandEurope, catalogs and websites; 153 Free People Group stores inthe United States,CanadaandEurope, catalogs and websites, 11 Menus & Venues restaurants and 1Urban Outfittersfranchisee-owned store, as ofApril 30, 2021. Free People, FP MovementandUrban Outfitterswholesale sell their products through department and specialty stores worldwide, digital businesses and the Companys Retail segment.

A conference call will be held today to discuss first quarter results and will be webcast at 5:30 pm. ET at: https://edge.media-server.com/mmc/p/jq8yytc5

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, overall economic and market conditions and worldwide political events and the resultant impact on consumer spending patterns, 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, the effects of the implementation of the United Kingdom's withdrawal from membership in the European 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 (including as a result of climate change) 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, response to new store concepts, our ability to integrate acquisitions, risks associated with digital sales, our ability to maintain and expand our digital sales channels, any material disruptions or security breaches with respect to our technology systems, the departure of one or more key senior executives, import risks (including any shortage of transportation capacities or delays at ports), changes to U.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, failure of our manufacturers and third-party vendors to comply with our social compliance program, risks related to environmental, social and governance activities, changes in our effective income tax rate, changes in accounting standards and subjective assumptions, regulatory changes and legal matters and other risks identified in our filings with the Securities 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 April 30, 2021 2020 2019 Net sales $ 927,415 $ 588,483 $ 864,413 Cost of sales (excluding 626,764 562,112 595,357 store impairment)Store impairment ? 14,528 ? Gross profit 300,651 11,843 269,056 Selling, general and 227,148 210,578 229,036 administrative expensesIncome (loss) from operations 73,503 (198,735 ) 40,020 Other (loss) income, net (155 ) 162 2,680 Income (loss) before income 73,348 (198,573 ) 42,700 taxesIncome tax expense (benefit) 19,801 (60,131 ) 10,115 Net income (loss) $ 53,547 $ (138,442 ) $ 32,585 Net income (loss) per common share:Basic $ 0.55 $ (1.41 ) $ 0.31 Diluted $ 0.54 $ (1.41 ) $ 0.31 Weighted-average common shares outstanding:Basic 98,108,245 97,910,314 104,437,460 Diluted 99,322,220 97,910,314 105,340,148 AS A PERCENTAGE OF NET SALES Net sales 100.0 % 100.0 % 100.0 %Cost of sales (excluding 67.6 % 95.5 % 68.9 %store impairment)Store impairment ? 2.5 % ? Gross profit 32.4 % 2.0 % 31.1 %Selling, general and 24.5 % 35.8 % 26.5 %administrative expensesIncome (loss) from operations 7.9 % -33.8 % 4.6 %Other (loss) income, net 0.0 % 0.1 % 0.3 %Income (loss) before income 7.9 % -33.7 % 4.9 %taxesIncome tax expense (benefit) 2.1 % -10.2 % 1.1 %Net income (loss) 5.8 % -23.5 % 3.8 %

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

April 30, January 31, April 30, April 30, 2021 2021 2020 2019 ASSETS Current assets: Cash and cash $ 364,247 $ 395,635 $ 588,740 $ 291,199 equivalentsMarketable 164,430 174,695 65,121 229,163 securitiesAccountsreceivable, netof allowance fordoubtful 85,307 89,952 55,910 88,390 accountsof$2,155, $4,028,$6,304 and $892,respectivelyInventory 477,777 389,618 335,640 408,362 Prepaid expensesand other current 189,268 173,432 131,517 122,183 assetsTotal current 1,281,029 1,223,332 1,176,928 1,139,297 assetsProperty and 988,973 967,422 880,353 829,072 equipment, netOperating leaseright-of-use 1,093,037 1,114,762 1,116,597 1,088,290 assetsMarketable 100,680 123,662 13,272 93,894 securitiesDeferred incometaxes and other 115,888 117,167 169,054 101,267 assetsTotal Assets $ 3,579,607 $ 3,546,345 $ 3,356,204 $ 3,251,820 LIABILITIES ANDSHAREHOLDERS? EQUITYCurrent liabilities:Accounts payable $ 251,944 $ 237,386 $ 104,702 $ 174,258 Current portionof operating 246,226 254,703 243,671 214,443 lease liabilitiesShort-term debt ^ ? ? 220,000 ? (1)Accrued expenses,accruedcompensation and 393,430 414,043 315,204 259,478 othercurrentliabilitiesTotal current 891,600 906,132 883,577 648,179 liabilitiesNon-currentportion of 1,060,228 1,074,009 1,088,932 1,092,180 operating leaseliabilitiesLong-term debt ^ ? ? ? ? (1)Deferred rent and 93,270 88,846 85,587 63,490 other liabilitiesTotal Liabilities 2,045,098 2,068,987 2,058,096 1,803,849 Shareholders? equity:Preferred shares;$.0001 par value,10,000,000 shares ? ? ? ? authorized, noneissuedCommon shares;$.0001 par value,200,000,000sharesauthorized,98,235,127, 10 10 10 10 97,815,985,97,777,322 and103,599,364shares issued andoutstanding,respectivelyAdditional 17,585 19,360 3,593 ? paid-in-capitalRetained earnings 1,528,655 1,475,108 1,335,430 1,478,678 Accumulated othercomprehensive (11,741 ) (17,120 ) (40,925 ) (30,717 )lossTotalShareholders? 1,534,509 1,477,358 1,298,108 1,447,971 EquityTotal Liabilitiesand Shareholders? $ 3,579,607 $ 3,546,345 $ 3,356,204 $ 3,251,820 Equity

As noted in the Company?s Quarterly Report on Form 10-Q for the period^ ended July 31, 2020, the Company reclassified the borrowings under the(1) Amended Credit Facility as of April 30, 2020 from long-term debt to short-term debt. See Note 6 in such filing for further discussion.

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

Three Months Ended April 30, 2021 2020 2019 Cash flows from operating activities:Net income (loss) $ 53,547 $ (138,442 ) $ 32,585 Adjustments to reconcile net income(loss) to net cash provided by (used in) operating activities:Depreciation and amortization 25,633 27,924 27,809 Non-cash lease expense 45,422 48,370 46,626 Provision (benefit) for deferred 37 (14,388 ) 4,163 income taxesShare-based compensation expense 4,570 4,872 5,553 Store impairment ? 14,528 ? Loss on disposition of property and 121 439 552 equipment, netChanges in assets and liabilities: Receivables 4,760 32,118 (8,003 )Inventory (87,427 ) 71,759 (38,551 )Prepaid expenses and other assets (1,355 ) (50,542 ) (12,396 )Payables, accrued expenses and 43,442 (29,071 ) 15,081 other liabilitiesOperating lease liabilities (51,644 ) (27,219 ) (47,526 )Net cash provided by (used in) 37,106 (59,652 ) 25,893 operating activitiesCash flows from investing activities:Cash paid for property and (42,589 ) (43,518 ) (37,716 )equipmentCash paid for marketable securities (94,889 ) (45,517 ) (129,896 )Sales and maturities of marketable 73,848 311,258 151,761 securitiesNet cash (used in) provided by (63,630 ) 222,223 (15,851 )investing activitiesCash flows from financing activities:Borrowings under debt ? 220,000 ? Proceeds from the exercise of stock 1,073 ? 974 optionsShare repurchases related to share ? (7,036 ) (71,242 )repurchase programShare repurchases related to taxes (7,418 ) (3,720 ) (5,383 )for share-based awardsNet cash (used in) provided by (6,345 ) 209,244 (75,651 )financing activitiesEffect of exchange rate changes on 1,481 (4,914 ) (1,452 )cash and cash equivalents(Decrease) increase in cash and (31,388 ) 366,901 (67,061 )cash equivalentsCash and cash equivalents at 395,635 221,839 358,260 beginning of periodCash and cash equivalents at end of $ 364,247 $ 588,740 $ 291,199 period

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