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Urban Outfitters 8-K 2007

Documents found in this filing:

  1. 8-K
  2. Ex-99.1
  3. Ex-99.2
  4. Ex-99.2
Earnings Release

Exhibit 99.2

URBAN OUTFITTERS, INC.

Second Quarter Results

Philadelphia, PA – August 9, 2007

 

For Immediate Release    Contact:   John Kyees
     Chief Financial Officer
     (215) 454-5500

Urban Outfitters Boosts Q2 Earnings 24%

Urban Outfitters, Inc. (NASDAQ:URBN), a leading lifestyle consumer products company operating under the Anthropologie, Free People and Urban Outfitters brands, today announced earnings of $31.9 million and $61.2 million for the three and six months ended July 31, 2007, respectively. Earnings per diluted share were $0.19 for the quarter and $0.36 for the six months.

As stated in the Company’s previous sales release on August 7, 2007, net sales jumped during the quarter by 22% to $348.4 million. Total Company comparable store sales grew 5% driven by increases of 14% and 28% at Anthropologie and Free People stores, respectively. Direct-to-consumer sales leaped 35% and Free People Wholesale sales improved 28% for the quarter. Urban Outfitters comparable store sales decreased 3% for the quarter.

“We delivered excellent results this quarter driven by outstanding performances at the Anthropologie and Free People brands,” stated Richard A. Hayne, Chairman and President. “The Urban Outfitters brand was less successful as its stores experienced gross margin pressure due to the de-leveraging of occupancy expenses and the need to take significant merchandise mark-downs. We feel confident that the recent personnel and structural realignments made at Urban NA will yield positive results in future quarters,” concluded Mr. Hayne.

Net sales for the periods were as follows:

 

     Three months ended
July 31,
   Six months ended
July 31,
     2007    2006    2007    2006
     (in thousands)    (in thousands)

Urban Outfitters store sales

   $ 140,931    $ 125,609    $ 270,839    $ 242,722

Anthropologie store sales

     137,558      107,740      256,157      207,668

Direct-to-consumer sales

     42,538      31,518      86,045      65,004

Free People sales

     27,422      20,692      49,952      40,172
                           

Total net sales

   $ 348,449    $ 285,559    $ 662,993    $ 555,566
                           

For the three and six months ended July 31, 2007, gross profit margins increased by 64 basis points and 33 basis points, respectively, versus the prior year’s comparable periods. The increase for both periods were primarily due to a reduction in markdowns and a lower rate of fixed store occupancy expense leveraged by ‘comp’ store sales improvements.


As of July 31, 2007, total Company inventories grew by $37.1 million or 25% on a year-over-year basis. The acquisition of inventory to stock new retail stores was the primary factor for this increase. Total comparable store inventories rose by 3%.

For the three and six months ended July 31, 2007, selling, general and administrative expenses, expressed as a percentage of net sales, increased by 62 and 41 basis points, respectively, versus the same periods last year. These increases related to non-comparable expenses to operate our new home office facility which starts to anniversary its phased opening in the third quarter of fiscal 2008 as well as certain non-recurring legal fees for intellectual property defense. The combination of these two items more than offset favorable rate reductions from controlling store related expenses.

During the six months ended July 31, 2007, the Company has opened 11 new stores and is scheduled to open a total of 38 new stores in the current fiscal year.

Urban Outfitters, Inc. is an innovative specialty retailer and wholesaler which offers a variety of lifestyle merchandise to highly defined customer niches through 111 Urban Retail stores in the United States, Canada, and Europe, two Urban Outfitters web sites and an Urban catalog; 96 Anthropologie Retail stores; an Anthropologie web site and catalog, and Free People, the Company’s wholesale division, which sells its product to approximately 1,500 specialty stores, department stores and catalogs, as well as through 11 Free People stores, a web site and catalog.

A conference call will be held today to discuss second quarter results and will be web cast at 11:00 a.m. EDT on: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=115825&eventID=1610866

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 constitute forward-looking statements. 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 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 the resultant impact on consumer spending patterns, including any effects of terrorist acts or war, availability of suitable retail space for expansion, timing of store openings, seasonal fluctuations in gross sales, the departure of one or more key senior managers, import risks, including potential disruptions and changes in duties, tariffs and quotas and other risks identified in 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 Income

(in thousands, except share and per share data)

(unaudited)

 

    

Three Months Ended

July 31,

   

Six Months Ended

July 31,

 
     2007     2006     2007     2006  

Net sales

   $ 348,449     $ 285,559     $ 662,993     $ 555,566  

Cost of sales, including certain buying, distribution and occupancy costs

     218,422       180,807       420,351       354,046  
                                

Gross profit

     130,027       104,752       242,642       201,520  

Selling, general and administrative expenses

     82,756       66,043       159,355       131,260  
                                

Income from operations

     47,271       38,709       83,287       70,260  

Other income, net

     2,037       1,750       3,840       3,162  
                                

Income before income taxes

     49,308       40,459       87,127       73,422  

Income tax expense

     17,442       14,797       25,894       27,461  
                                

Net income

   $ 31,866     $ 25,662     $ 61,233     $ 45,961  
                                

Net income per common share:

        

Basic

   $ 0.19     $ 0.16     $ 0.37     $ 0.28  
                                

Diluted

   $ 0.19     $ 0.15     $ 0.36     $ 0.27  
                                

Weighted average common shares and common share equivalents outstanding:

        

Basic

     165,315,656       164,994,329       165,076,476       164,787,024  
                                

Diluted

     169,710,489       168,595,378       169,260,752       168,859,567  
                                

AS A PERCENT OF NET SALES

        

Net sales

     100.0 %     100.0 %     100.0 %     100.0 %

Cost of sales, including certain buying, distribution and occupancy costs

     62.7 %     63.3 %     63.4 %     63.7 %
                                

Gross profit

     37.3 %     36.7 %     36.6 %     36.3 %

Selling, general and administrative expenses

     23.7 %     23.1 %     24.0 %     23.6 %
                                

Income from operations

     13.6 %     13.6 %     12.6 %     12.7 %

Other income, net

     0.6 %     0.6 %     0.6 %     0.5 %
                                

Income before income taxes

     14.2 %     14.2 %     13.2 %     13.2 %

Income tax expense

     5.0 %     5.2 %     4.0 %     4.9 %
                                

Net income

     9.2 %     9.0 %     9.2 %     8.3 %
                                


URBAN OUTFITTERS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

 

    

July 31,

2007

  

January 31,

2007

   July 31,
2006
     (unaudited)    (audited)    (unaudited)

Assets

        

Current assets:

        

Cash and cash equivalents

   $ 42,387    $ 27,267    $ 59,722

Marketable securities

     130,748      132,011      92,809

Accounts receivable, net of allowance for doubtful accounts of $1,562, $849 and $1,014, respectively

     24,516      20,871      22,299

Inventories

     185,619      154,387      148,528

Prepaid expenses, deferred taxes and other current assets

     18,988      31,869      37,419
                    

Total current assets

     402,258      366,405      360,777

Property and equipment, net

     468,972      445,698      394,706

Marketable securities

     68,357      62,322      60,195

Deferred income taxes and other assets

     41,419      24,826      23,375
                    
   $ 981,006    $ 899,251    $ 839,053
                    

Liabilities and Shareholders’ Equity

        

Current liabilities:

        

Accounts payable

   $ 61,058    $ 57,934    $ 52,396

Accrued expenses, accrued compensation and other current liabilities

     72,047      77,384      92,015
                    

Total current liabilities

     133,105      135,318      144,411

Deferred rent and other liabilities

     102,628      88,650      79,800
                    

Total liabilities

     235,733      223,968      224,211
                    

Shareholders’ equity:

        

Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued

              

Common shares; $.0001 par value, 200,000,000 shares authorized, 165,810,665, 164,987,463 and 165,536,017 issued and outstanding, respectively

     17      17      17

Additional paid-in capital

     136,551      128,586      140,816

Retained earnings

     602,977      542,396      472,151

Accumulated other comprehensive income

     5,728      4,284      1,858
                    

Total shareholders’ equity

     745,273      675,283      614,842
                    
   $ 981,006    $ 899,251    $ 839,053
                    


URBAN OUTFITTERS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

     Six Months Ended
July 31,
 
     2007     2006  

Cash flows from operating activities:

    

Net income

   $ 61,233     $ 45,961  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     33,648       25,034  

Excess tax benefits from stock-based compensation

     (3,270 )     (4,685 )

Stock-based compensation expense

     1,631       1,574  

Loss on disposition of property and equipment, net

     144       297  

Changes in assets and liabilities:

    

Increase in receivables

     (3,569 )     (7,941 )

Increase in inventories

     (30,977 )     (7,897 )

Increase in prepaid expenses and other assets

     (3,615 )     (2,018 )

Increase in payables, accrued expenses and other liabilities

     14,435       7,278  
                

Net cash provided by operating activities

     69,660       57,603  
                

Cash flows from investing activities:

    

Capital expenditures

     (55,457 )     (105,701 )

Purchases of marketable securities

     (60,716 )     (75,643 )

Sales and maturities of marketable securities

     55,218       128,269  
                

Net cash used in investing activities

     (60,955 )     (53,075 )
                

Cash flows from financing activities:

    

Exercise of stock options

     3,064       3,249  

Excess tax benefits from stock-based compensation

     3,270       4,685  

Share repurchases

     —         (2,928 )
                

Net cash provided by financing activities

     6,334       5,006  
                

Effect of exchange rate changes on cash and cash equivalents

     81       276  
                

Increase in cash and cash equivalents

     15,120       9,810  

Cash and cash equivalents at beginning of period

     27,267       49,912  
                

Cash and cash equivalents at end of period

   $ 42,387     $ 59,772  
                
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