URBN » Topics » Three Months Ended April 30, 2009 Compared To Three Months Ended April 30, 2008

This excerpt taken from the URBN 10-Q filed Jun 9, 2009.

Three Months Ended April 30, 2009 Compared To Three Months Ended April 30, 2008

Net sales for the first quarter of fiscal 2010 decreased by $9.5 million or 2.4% to $384.8 million from $394.3 million in the first quarter of fiscal 2009. This decrease was due to a $9.5 million, or 2.6%, decrease in retail segment net sales. Retail segment net sales for the first quarter of fiscal 2010 accounted for 93.7% of total net sales compared to 93.9% of net sales for the first quarter of fiscal 2009. Wholesale segment net sales, excluding net sales to our retail segment, were flat to last year’s first quarter at $24.2 million during the first quarters of fiscal 2010 and 2009. The decrease in our retail segment net sales during the first quarter of fiscal 2010 was driven by a $29.1 million decrease in comparable store net sales which was partially offset by an increase of $17.0 million in new and non-comparable store net sales and a $2.6 million increase in direct-to-consumer net sales. The comparable store net sales decrease of 9.6% for the first quarter of fiscal 2010 was comprised of decreases of 6.2% at Urban Outfitters, 12.7% at Anthropologie and 23.0% at Free People, respectively.

The increase in net sales attributable to non-comparable and new stores during the first quarter of fiscal 2010 was primarily the result of operating 55 new or existing stores that were not in operation for the full comparable quarter last fiscal year. Comparable store net sales decreases for the first quarter of fiscal 2010 were primarily driven by decreases in the number of transactions and units per transaction, which were partially offset by an increase in average unit retail prices per transaction. For fiscal 2010, thus far in the second quarter, comparable store sales are negative but have modestly improved from the first quarter’s rate. Direct-to-consumer net sales increased over the prior year primarily due to an increase in traffic to our web sites. Wholesale net sales results were primarily driven by an increase in the average unit selling price to department and specialty stores partially offset by a decrease in units sold to these stores. Leifsdottir, Anthropologie’s wholesale division, net sales were not comparable during the first quarter of fiscal 2010, as it launched during the second quarter of fiscal 2009.

Gross profit for the first quarter of fiscal 2010 decreased to 37.2% of net sales or $143.3 million from 40.2% of net sales or $158.7 million in fiscal 2009. The decrease was primarily due to de-leveraging of store occupancy expense driven by the decrease in comparable store sales, and merchandise markdowns to clear seasonal merchandise. Total inventories at April 30, 2009 decreased by 0.7% to $189.9 million from $191.3 million as of April 30, 2008. The decrease was due to comparable store inventory declines that more than offset additions to inventories in new stores. On a comparable store basis, inventories decreased by 7.3%.

 

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Selling, general and administrative expenses during the first quarter of fiscal 2010 increased to 25.2% of net sales compared to 24.2% of net sales for the first quarter of fiscal 2009. The increase was primarily attributable to the de-leveraging of fixed store costs driven by the decrease in comparable store sales. Selling, general and administrative expenses in the first quarter of fiscal 2010 increased to $97.2 million from $95.7 million in the comparable quarter in fiscal 2009. The increase primarily related to the operating expenses of new and non-comparable stores.

As a result of the foregoing, income from operations was 12.0% of net sales or $46.1 million for the first quarter of fiscal 2010 compared to 16.0% of net sales, or $62.9 million, for the comparable quarter in fiscal 2009.

Our tax rate for the quarter increased to 36.1% of income before income taxes for the first quarter of fiscal 2010 from 35.7% of income before income taxes for the first quarter of fiscal 2009. The increase was primarily attributable to a decrease in the weight of tax-exempt interest income relative to net income as a whole. We anticipate our annual effective tax rate to remain consistent with the first quarter fiscal 2010 rate.

These excerpts taken from the URBN 10-K filed Apr 1, 2009.

Fiscal 2009 Compared to Fiscal 2008

Net sales in fiscal 2009 increased by 21.7% to $1.83 billion, from $1.51 billion in the prior fiscal year. The $327 million increase was primarily attributable to a $311 million or 22.0% increase, in retail segment sales. Our wholesale segment contributed $16 million to this increase for fiscal year 2009 as Free People wholesale net sales increased $13 million or 13.4%, excluding sales to our retail segment, and Leifsdottir contributed $3 million. The growth in our retail segment sales during fiscal 2009 was driven by an increase of $156 million in non-comparable and new store net sales, an increase in direct-to-consumer net sales of $67 million or 32.4%, an increase to comparable store net sales of $88 million or 7.8%. The increase in comparable store net sales was comprised of 3.4%, 4.1% and 11.9% increases at Anthropologie, Free People and Urban Outfitters, respectively.

The increase in net sales attributable to non-comparable and new stores was primarily the result of opening 49 new stores in fiscal 2009 and 38 new stores in fiscal 2008 that were considered non-comparable during fiscal 2009. Comparable store net sales increases were primarily the result of increases in average unit sales prices and increases in transactions resulting from an increased response to our merchandise offerings. These increases more than offset a slight decrease in the number of units sold per transaction. Thus far during fiscal 2010 total Company sales are less than the same period in the prior year and our comparable store sales trend has declined from our most recently completed quarter. Direct-to-consumer net sales in fiscal year 2009 increased over the prior year primarily due to increased traffic to our web sites, which more than offset minor decreases in conversion rate and average order value. Circulation modestly increased by 688,000 catalogs or 1.7%. The increase in Free People wholesale net sales was driven by increased average unit sale prices and increased transactions.

Gross profit rates in fiscal 2009 increased to 38.9% of net sales or $713 million from 38.3% of net sales or $577 million in fiscal 2008. This improvement is primarily due to leveraging of our store occupancy expenses and improvements in our initial merchandise margins which are partially offset by adjustments to record anticipated markdowns during the fourth quarter of fiscal 2009. Total inventories at January 31, 2009 decreased by 1.3% to $170 million from $172 million in the prior fiscal year. The decrease is primarily due to a 13% decrease in comparable store inventory which more than offset additions to inventories for new and non-comparable stores.

Selling, general and administrative expenses during fiscal 2009 decreased to 22.6% of net sales versus 23.3% of net sales for fiscal 2008. The rate reduction is primarily due to controlling selling and store support related expenses in addition to lower corporate expenses resulting from non-recurring legal fees incurred in the prior year. Selling, general and administrative expenses in fiscal 2009 increased to $414 million from $352 million in the prior fiscal year. The increase primarily related to the operating expenses of new and non-comparable stores.

Income from operations increased to 16.3% of net sales or $299 million for fiscal 2009 compared to 15.0% of net sales or $225 million for fiscal 2008.

Our annual effective income tax rate increased to 35.6% of income for fiscal 2009 compared to 31.6% of income for fiscal 2008. The increase in this year’s tax rate is due to the prior year’s annual effective tax rate being favorably impacted by the receipt of one-time federal tax incentives for work performed on the development of our new home offices. See Note 8 “Income Taxes” in our consolidated financial statements, included elsewhere in this report, for a reconciliation of the statutory U.S. federal income tax rate to our effective tax rate. We expect the tax rate for fiscal year 2010 to be similar to fiscal year 2009.

 

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Fiscal 2009 Compared to Fiscal 2008

FACE="Times New Roman" SIZE="2">Net sales in fiscal 2009 increased by 21.7% to $1.83 billion, from $1.51 billion in the prior fiscal year. The $327 million increase was primarily attributable to a $311 million or 22.0% increase, in retail segment
sales. Our wholesale segment contributed $16 million to this increase for fiscal year 2009 as Free People wholesale net sales increased $13 million or 13.4%, excluding sales to our retail segment, and Leifsdottir contributed $3 million. The growth
in our retail segment sales during fiscal 2009 was driven by an increase of $156 million in non-comparable and new store net sales, an increase in direct-to-consumer net sales of $67 million or 32.4%, an increase to comparable store net sales of
$88 million or 7.8%. The increase in comparable store net sales was comprised of 3.4%, 4.1% and 11.9% increases at Anthropologie, Free People and Urban Outfitters, respectively.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">The increase in net sales attributable to non-comparable and new stores was primarily the result of opening 49 new stores in fiscal 2009 and 38 new
stores in fiscal 2008 that were considered non-comparable during fiscal 2009. Comparable store net sales increases were primarily the result of increases in average unit sales prices and increases in transactions resulting from an increased response
to our merchandise offerings. These increases more than offset a slight decrease in the number of units sold per transaction. Thus far during fiscal 2010 total Company sales are less than the same period in the prior year and our comparable store
sales trend has declined from our most recently completed quarter. Direct-to-consumer net sales in fiscal year 2009 increased over the prior year primarily due to increased traffic to our web sites, which more than offset minor decreases in
conversion rate and average order value. Circulation modestly increased by 688,000 catalogs or 1.7%. The increase in Free People wholesale net sales was driven by increased average unit sale prices and increased transactions.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Gross profit rates in fiscal 2009 increased to 38.9% of net sales or $713 million from 38.3% of net sales or $577 million in fiscal 2008. This
improvement is primarily due to leveraging of our store occupancy expenses and improvements in our initial merchandise margins which are partially offset by adjustments to record anticipated markdowns during the fourth quarter of fiscal 2009. Total
inventories at January 31, 2009 decreased by 1.3% to $170 million from $172 million in the prior fiscal year. The decrease is primarily due to a 13% decrease in comparable store inventory which more than offset additions to inventories for
new and non-comparable stores.

Selling, general and administrative expenses during fiscal 2009 decreased to 22.6% of net sales versus
23.3% of net sales for fiscal 2008. The rate reduction is primarily due to controlling selling and store support related expenses in addition to lower corporate expenses resulting from non-recurring legal fees incurred in the prior year. Selling,
general and administrative expenses in fiscal 2009 increased to $414 million from $352 million in the prior fiscal year. The increase primarily related to the operating expenses of new and non-comparable stores.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Income from operations increased to 16.3% of net sales or $299 million for fiscal 2009 compared to 15.0% of net sales or $225 million for fiscal 2008.

Our annual effective income tax rate increased to 35.6% of income for fiscal 2009 compared to 31.6% of income for fiscal 2008. The
increase in this year’s tax rate is due to the prior year’s annual effective tax rate being favorably impacted by the receipt of one-time federal tax incentives for work performed on the development of our new home offices. See Note 8
“Income Taxes” in our consolidated financial statements, included elsewhere in this report, for a reconciliation of the statutory U.S. federal income tax rate to our effective tax rate. We expect the tax rate for fiscal year 2010 to be
similar to fiscal year 2009.

 


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