Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock, $0.0001 par value—~~159,690,475~~153,918,661 shares outstanding on ~~June 6,~~September 1, 2011.


	April 30, 2011			January 31, 2011			April 30, 2010			July 31, 2011			January 31, 2011			July 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	243,939		$	340,257		$	259,348		$	226,381		$	340,257		$	244,954
Marketable securities		68,688			116,420			323,910			59,347			116,420			346,107
Accounts receivable, net of allowance for doubtful accounts of $1,078, $1,015 and $1,220, respectively		46,539			36,502			35,448
Accounts receivable, net of allowance for doubtful accounts of $994, $1,015 and $1,360, respectively											52,560			36,502			42,474
Inventories		264,278			229,561			221,984			303,159			229,561			243,203
Prepaid expenses, deferred taxes and other current assets		77,846			81,237			79,840			57,121			81,237			85,875

Total current assets		701,290			803,977			920,530			698,568			803,977			962,613
Property and equipment, net		601,249			586,346			548,575			626,188			586,346			559,945
Marketable securities		333,946			351,988			189,467			322,902			351,988			157,607
Deferred income taxes and other assets		57,774			52,010			49,606			57,766			52,010			46,902

Total Assets	$	1,694,259		$	1,794,321		$	1,708,178		$	1,705,424		$	1,794,321		$	1,727,067

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	109,444		$	82,904		$	100,439		$	110,759		$	82,904		$	92,151
Accrued expenses, accrued compensation and other current liabilities		102,562			128,120			96,738			117,756			128,120			106,260

Total current liabilities		212,006			211,024			197,177			228,515			211,024			198,411

Deferred rent and other liabilities		169,773			171,749			150,855			172,589			171,749			155,369

Total Liabilities		381,779			382,773			348,032			401,104			382,773			353,780

Commitments and contingencies (see Note 10)

Shareholders’ equity:
Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued		—			—			—			—			—			—
Common shares; $.0001 par value, 200,000,000 shares authorized, 159,667,925, 164,413,427 and 169,376,345 shares issued and outstanding, respectively		16			17			17
Common shares; $.0001 par value, 200,000,000 shares authorized, 157,524,395, 164,413,427 and 168,100,495 shares issued and outstanding, respectively											16			17			17
Additional paid-in-capital		—			27,603			198,702			—			27,603			138,413
Retained earnings		1,317,036			1,394,190			1,174,189			1,309,964			1,394,190			1,245,846
Accumulated other comprehensive loss		(4,572	)		(10,262	)		(12,762	)		(5,660	)		(10,262	)		(10,989	)

Total Shareholders’ Equity		1,312,480			1,411,548			1,360,146			1,304,320			1,411,548			1,373,287

Total Liabilities and Shareholders’ Equity	$	1,694,259		$	1,794,321		$	1,708,178		$	1,705,424		$	1,794,321		$	1,727,067

The accompanying notes are an integral part of these condensed consolidated financial statements.


	Three Months Ended April 30,				Three Months Ended July 31,				Six Months Ended July 31,
	2011		2010		2011		2010		2011		2010
Net sales	$	524,019	$	479,961	$	609,181	$	552,159	$	1,133,200	$	1,032,120
Cost of sales, including certain buying, distribution and occupancy costs		330,654		279,175		378,091		317,378		708,745		596,553

Gross profit		193,365		200,786		231,090		234,781		424,455		435,567
Selling, general and administrative expenses		134,529		118,575		143,095		127,912		277,624		246,487

Income from operations		58,836		82,211		87,995		106,869		146,831		189,080
Other income, net		1,365		423		935		616		2,300		1,039

Income before income taxes		60,201		82,634		88,930		107,485		149,131		190,119
Income tax expense		21,577		29,677		32,237		35,828		53,814		65,505

Net income	$	38,624	$	52,957	$	56,693	$	71,657	$	95,317	$	124,614

Net income per common share:
Basic	$	0.24	$	0.31	$	0.36	$	0.42	$	0.59	$	0.74

Diluted	$	0.23	$	0.31	$	0.35	$	0.42	$	0.59	$	0.72

Weighted average common shares outstanding:
Weighted average common shares:
Basic		162,407,330		168,852,072		158,581,618		168,908,598		160,436,550		168,880,803

Diluted		165,293,594		172,819,037		160,743,743		172,325,996		162,960,745		172,572,985

The accompanying notes are an integral part of these condensed consolidated financial statements.


	Three Months Ended April 30,						Six Months Ended July 31,
	2011			2010			2011			2010
Cash flows from operating activities:
Net income	$	38,624		$	52,957		$	95,317		$	124,614
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		26,551			24,347			53,304			49,051
Provision for deferred income taxes		(4,246	)		(1,649	)		(2,197	)		(2,336	)
Excess tax benefit on share-based compensation		(361	)		(7,673	)		(498	)		(10,249	)
Share-based compensation expense		2,579			2,200			4,884			4,527
Loss (gain) on disposition of property and equipment, net		626			(28	)
Loss on disposition of property and equipment, net								657			22
Changes in assets and liabilities:
Receivables		(9,915	)		3,162			(15,978	)		(4,112	)
Inventories		(33,802	)		(36,344	)		(73,056	)		(57,182	)
Prepaid expenses and other assets		2,312			6,301			21,109			6,215
Payables, accrued expenses and other liabilities		(2,328	)		8,758			8,000			13,788

Net cash provided by operating activities		20,040			52,031			91,542			124,338

Cash flows from investing activities:
Cash paid for property and equipment		(35,738	)		(32,351	)		(77,547	)		(64,570	)
Cash paid for marketable securities		(51,119	)		(46,299	)		(73,740	)		(169,646	)
Sales and maturities of marketable securities		115,442			116,392			157,467			247,721

Net cash provided by investing activities		28,585			37,742			6,180			13,505

Cash flows from financing activities:
Exercise of stock options		2,353			4,209			3,466			11,000
Excess tax benefits from stock option exercises		361			7,673			498			10,249
Share repurchases		(148,674	)		—			(215,993	)		(71,988	)

Net cash (used in) provided by financing activities		(145,960	)		11,882
Net cash used in financing activities								(212,029	)		(50,739	)

Effect of exchange rate changes on cash and cash equivalents		1,017			(1,331	)		431			(1,174	)

(Decrease) increase in cash and cash equivalents		(96,318	)		100,324			(113,876	)		85,930
Cash and cash equivalents at beginning of period		340,257			159,024			340,257			159,024

Cash and cash equivalents at end of period	$	243,939		$	259,348		$	226,381		$	244,954

Supplemental cash flow information:
Cash paid during the year for:
Income taxes	$	46,990		$	34,282		$	48,200		$	70,424

Non-cash investing activities—Accrued capital expenditures	$	8,281		$	13,727		$	9,514		$	14,340

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed financial statements should be read in conjunction with Urban Outfitters, Inc.’s (“the ~~Company’s~~Company”) Annual Report on Form 10-K for the fiscal year ended January 31, 2011, filed with the United States Securities and Exchange Commission on April 1, 2011.

The Company’s business is subject to seasonal variations in which a greater percentage of the Company’s annual net sales and net income typically occur during the period from August 1 through December 31 of the fiscal year. Accordingly, the results of operations for the three and six months ended ~~April 30,~~July 31, 2011 are not necessarily indicative of the results to be expected for the full year.

The Company’s fiscal year ends on January 31. All references in these notes to the Company’s fiscal years refer to the fiscal years ended on January 31 in those years. For example, the Company’s fiscal year 2012 will end on January 31, 2012.

In January 2010, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update that amended fair value measurements and disclosures and aimed to improve the transparency of financial reporting of assets and liabilities measured at fair value. The update required new disclosures for transfers in and out of Level 1 and Level 2 and the basis for such transfers. Also required are disclosures for activity in Level 3, including purchase, sale, issuance and settlement information. Lastly, it clarified guidance regarding disaggregation and disclosure of information about valuation techniques and inputs used to measure fair value for both recurring and non-recurring fair value measurements in Level 2 and Level 3 categories.

We adopted the provisions of this accounting standards update effective February 1, 2010, except for the requirement to disclose purchases, sales, issuances, and settlements related to Level 3 measurements, which we adopted February 1, 2011. ~~This adoption~~These adoptions had no impact on our financial condition, results of operations or cash flows.

~~3. Comprehensive Income~~In May 2011, the FASB issued an additional update that amended fair value measurements and disclosures. This amendment provides that the inputs and measures used to value assets that fall within Level 3 of the valuation hierarchy be quantitatively presented. Application is required prospectively for interim and annual periods beginning after December 15, 2011. Other than the change in presentation, this accounting standards update will not have an impact on our financial position and results of operations.

~~The Company’s total~~In June 2011, the FASB issued an accounting standards update that requires an increase in the prominence of other comprehensive income and its components within the financial statements. The update provides entities the option to present the components of net income and other comprehensive income in either one or two consecutive financial statements. It also eliminates the option to present other comprehensive income in the statements of changes in shareholders’ equity. Application is ~~presented below.~~to be applied retrospectively and is effective for interim and annual periods beginning after December 15, 2011. Other than the change in presentation, this accounting standards update will not have an impact on our financial position and results of operations.

During all periods presented, marketable securities are classified as available-for-sale. The amortized cost, gross unrealized gains (losses) and fair value of available-for-sale securities by major security type and class of security as of ~~April 30,~~July 31, 2011, January 31, 2011 and ~~April 30,~~July 31, 2010 were as follows:


	Amortized Cost		Unrealized Gains		Unrealized (Losses)			Fair Value		Amortized Cost		Unrealized Gains		Unrealized (Losses)			Fair Value
As of April 30, 2011
As of July 31, 2011
Short-term Investments:
Corporate bonds	$	5,377	$	18	$	—		$	5,395
Corporate Bonds										$	10,062	$	22	$	(6	)	$	10,078
Municipal and pre-refunded municipal bonds		36,498		24		(30	)	$	36,492		38,079		57		(17	)		38,119
Federal government agencies		16,284		17		—			16,301		7,130		16		—			7,146
FDIC insured corporate bonds		10,478		22		—			10,500		4,000		4		—			4,004

		68,637		81		(30	)		68,688		59,271		99		(23	)		59,347

Long-term Investments:
Corporate bonds		132,937		513		(46	)		133,404		134,199		857		(13	)		135,043
Municipal and pre-refunded municipal bonds		96,748		367		(269	)		96,846		85,639		624		(39	)		86,224
Federal government agencies		55,122		205		—			55,327		49,872		386		—			50,258
Auction rate securities		30,150		—		(3,434	)		26,716		26,525		—		(3,021	)		23,504
Treasury bills		19,661		92		—			19,753		19,639		190		—			19,829
Certificate of deposit											5,144		—		(1	)		5,143
Variable rate demand notes		1,900		—		—			1,900		2,902		—		(1	)		2,901

		336,518		1,177		(3,749	)		333,946		323,920		2,057		(3,075	)		322,902

	$	405,155	$	1,258	$	(3,779	)	$	402,634	$	383,191	$	2,156	$	(3,098	)	$	382,249

As of January 31, 2011
Short-term Investments:
Municipal and pre-refunded municipal bonds	$	42,996	$	48	$	(9	)	$	43,035
Federal government agencies		40,842		80		—			40,922
Treasury bills		7,004		4		—			7,008
Variable rate demand notes		1,900		—		—			1,900
FDIC insured corporate bonds		23,489		66		—			23,555

		116,231		198		(9	)		116,420

Long-term Investments:
Corporate bonds		137,540		173		(154	)		137,559
Municipal and pre-refunded municipal bonds		143,711		216		(558	)		143,369
Federal government agencies		18,225		30		(2	)		18,253
Auction rate securities		33,250		—		(3,788	)		29,462
Treasury bills		23,311		34		—			23,345

		356,037		453		(4,502	)		351,988

	$	472,268	$	651	$	(4,511	)	$	468,408


	Amortized Cost		Unrealized Gains		Unrealized (Losses)			Fair Value		Amortized Cost		Unrealized Gains		Unrealized (Losses)			Fair Value
As of April 30, 2010
As of January 31, 2011
Short-term Investments:
Municipal and pre-refunded municipal bonds	$	111,075	$	178	$	(24	)	$	111,229	$	42,996	$	48	$	(9	)	$	43,035
Federal government agencies		127,336		212		(15	)		127,533		40,842		80		—			40,922
Treasury bills		49,711		26		—			49,737		7,004		4		—			7,008
FDIC insured corporate bonds		35,211		200		—			35,411		23,489		66		—			23,555
Variable rate demand notes											1,900		—		—			1,900

											116,231		198		(9	)		116,420

Long-term Investments:
Corporate bonds											137,540		173		(154	)		137,559
Municipal and pre-refunded municipal bonds											143,711		216		(558	)		143,369
Federal government agencies											18,225		30		(2	)		18,253
Auction rate securities											33,250		—		(3,788	)		29,462
Treasury bills											23,311		34		—			23,345

											356,037		453		(4,502	)		351,988

										$	472,268	$	651	$	(4,511	)	$	468,408

As of July 31, 2010
Short-term Investments:
Municipal and pre-refunded municipal bonds										$	75,590	$	104	$	(9	)	$	75,685
Federal government agencies											172,200		335		—			172,535
Treasury bills											49,631		36		—			49,667
FDIC insured corporate bonds											37,697		181		(83	)		37,795
Variable rate demand notes											10,425		—		—			10,425

		323,333		616		(39	)		323,910		345,543		656		(92	)		346,107

Long-term Investments:
Municipal and pre-refunded municipal bonds		40,163		234		(46	)		40,351		119,316		835		(52	)		120,099
Federal government agencies		99,828		201		(45	)		99,984		2,004		11		—			2,015
Auction rate securities		37,625		—		(4,120	)		33,505		35,325		—		(3,868	)		31,457
FDIC insured corporate bonds		15,537		90		—			15,627		4,002		34		—			4,036

		193,153		525		(4,211	)		189,467		160,647		880		(3,920	)		157,607

	$	516,486	$	1,141	$	(4,250	)	$	513,377	$	506,190	$	1,536	$	(4,012	)	$	503,714

Proceeds from the sale and maturities of available-for-sale securities were ~~$115,442~~$157,467 and ~~$116,392~~$247,721 for the ~~three~~six months ended ~~April 30,~~July 31, 2011 and 2010, respectively. The Company included in other income, net realized gains of ~~$28~~$23 and $51 for the three and six months ended July 31, 2011, respectively. The Company included in other income, net realized gains of $80 and net realized losses of ~~$100~~$20 for the three and six months ended ~~April 30, 2011 and April 30,~~July 31, 2010, respectively. Amortization of discounts and premiums, net, resulted in charges of ~~$2,322~~$2,007 and ~~$2,237~~$4,329 for the three and six months ended ~~April 30,~~July 31, 2011, respectively. Amortization of discounts and ~~April 30,~~premiums, net, resulted in charges of $2,092 and $4,329 for the three and six months ended July 31, 2010, respectively.

As of ~~April 30,~~July 31, 2011, the par value of the Company’s auction rate securities (“ARS”) was ~~$30,150~~$26,525 and the estimated fair value was ~~$26,716.~~$23,504. The Company’s ARS portfolio consists of “A” or better rated ARS that represent interests in municipal and student loan related collateralized debt obligations, all of which are guaranteed by either government agencies and/or insured by private insurance agencies at 97% or greater of par value. To date, the Company has collected all interest payable on outstanding ARS when due and ~~have~~has not been informed by the issuers that accrued interest payments are currently at risk. The Company does not have the

intent to sell the underlying securities prior to their full recovery and the Company believes it is not likely that it will be required to sell the underlying securities prior to their anticipated recovery of full amortized cost.

The Company utilizes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach that relate to its financial assets and financial liabilities). The levels of the hierarchy are described as follows:

Management’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement, in its entirety, falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The Company recognizes transfers between levels at the end of each reporting period. As of ~~April 30,~~July 31, 2011 and ~~April 30,~~July 31, 2010 there were no transfers of assets between levels. The Company’s financial assets that are accounted for at fair value on a recurring basis are presented in the tables below:


	Marketable Securities Fair Value as of April 30, 2011								Marketable Securities Fair Value as of July 31, 2011
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Corporate bonds	$	138,799	$	—	$	—	$	138,799	$	145,121	$	—	$	—	$	145,121
Municipal and pre-refunded municipal bonds		—		133,338		—		133,338		—		124,343		—		124,343
Federal government agencies		71,628		—		—		71,628		57,404		—		—		57,404
Auction rate securities		—		—		26,716		26,716		—		—		23,504		23,504
Treasury bills		19,753		—		—		19,753		19,829		—		—		19,829
Certificate of deposit										5,143		—		—		5,143
FDIC insured corporate bonds		10,500		—		—		10,500		4,004		—		—		4,004
Variable demand notes		—		1,900		—		1,900		—		2,901		—		2,901

	$	240,680	$	135,238	$	26,716	$	402,634	$	231,501	$	127,244	$	23,504	$	382,249


	Marketable Securities Fair Value as of January 31, 2011								Marketable Securities Fair Value as of January 31, 2011
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Corporate bonds	$	137,559	$	—	$	—	$	137,559	$	137,559	$	—	$	—	$	137,559
Municipal and pre-refunded municipal bonds		—		186,404		—		186,404		—		186,404		—		186,404
Federal government agencies		59,175		—		—		59,175		59,175		—		—		59,175
Auction rate securities		—		—		29,462		29,462		—		—		29,462		29,462
Treasury bills		30,353		—		—		30,353		30,353		—		—		30,353
FDIC insured corporate bonds		23,555		—		—		23,555		23,555		—		—		23,555
Variable demand notes		—		1,900		—		1,900		—		1,900		—		1,900

	$	250,642	$	188,304	$	29,462	$	468,408	$	250,642	$	188,304	$	29,462	$	468,408


	Marketable Securities Fair Value as of April 30, 2010								Marketable Securities Fair Value as of July 31, 2010
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Municipal and pre-refunded municipal bonds	$	—	$	151,580	$	—	$	151,580	$	—	$	195,784	$	—	$	195,784
Federal government agencies		227,517		—		—		227,517		174,550		—		—		174,550
Auction rate securities		—		—		33,505		33,505		—		—		31,457		31,457
Treasury bills		49,737		—		—		49,737		49,667		—		—		49,667
FDIC insured corporate bonds		51,038		—		—		51,038		41,831		—		—		41,831
Variable rate demand notes										—		10,425		—		10,425

	$	328,292	$	151,580	$	33,505	$	513,377	$	266,048	$	206,209	$	31,457	$	503,714

As of ~~April 30,~~July 31, 2011, all of the Company’s Level 3 financial instruments consisted of ARS that failed at auction. There was insufficient observable market information to determine fair value for these financial instruments. The Company estimated the fair values for these securities by incorporating assumptions that market participants would use in their estimates of fair value. Some of these assumptions included credit quality,

collateralization, final stated maturity, estimates of the probability of being called or becoming liquid prior to final maturity, redemptions of similar ARS, previous market activity for the same investment security, impact due to extended periods of maximum auction rates and valuation models. As a result of this review, the Company determined its ARS to have a temporary impairment of ~~$3,434,~~$3,021, $3,788, and ~~$4,120~~$3,868 as of ~~April 30,~~July 31, 2011, January 31, 2011 and ~~April 30,~~July 31, 2010, respectively. The estimated fair values could change significantly based on future market conditions. The Company will continue to assess the fair value of its ARS for substantive changes in relevant market conditions, changes in its financial condition or other changes that may alter its estimates described above. Failed ARS represented approximately ~~4.1%~~3.9% of the Company’s total cash, cash equivalents and marketable securities as of ~~April 30,~~July 31, 2011.

Below is a reconciliation of the beginning and ending ARS balances that the Company valued using a Level 3 valuation for the periods shown.


	Three Months Ended April 30, 2011			Fiscal Year Ended January 31, 2011			Three Months Ended April 30, 2010			Three Months Ended July 31, 2011			Fiscal Year Ended January 31, 2011			Three Months Ended July 31, 2010
Balance at beginning of period	$	29,462		$	33,505		$	33,505		$	26,716		$	33,505		$	33,505
Total gains (losses) realized/unrealized:
Total gains or (losses) realized/unrealized:
Included in earnings		—			—			—			—			—			—
Included in other comprehensive income		354			332			—			413			332			252
Purchases, issuances and settlements		(3,100	)		(4,375	)		—
Settlements											(3,625	)		(4,375	)		(2,300	)
Transfers in and/or out of Level 3		—			—			—			—			—			—

Balance at end of period	$	26,716		$	29,462		$	33,505		$	23,504		$	29,462		$	31,457

Unrealized losses included in accumulated other comprehensive income related to assets still held at reporting date	$	(3,434	)	$	(3,788	)	$	(4,120	)
Unrealized losses included in accumulated other comprehensive loss related to assets still held at reporting date										$	(3,021	)	$	(3,788	)	$	(3,868	)

Total gains for the period included in earnings attributable to the change in unrealized gains or losses related to assets still held at reporting date	$	—		$	—		$	—		$	—		$	—		$	—

On April 25, 2011, the Company amended its line of credit facility (the “Line”) with Wells Fargo Bank, National Association (successor by merger to Wachovia Bank, National Association). This amendment extended the term of the Line for three years, increased the accordion feature from $100 million to $175 million, reduced the interest rate margin for certain cash advances and modified certain financial covenants and terms. The Line contains a sub-limit for borrowings by the Company’s European subsidiaries that ~~are~~is guaranteed by the Company. Cash advances bear interest at LIBOR plus 0.50% to 1.50% based on the Company’s achievement of prescribed adjusted debt ratios. The Line subjects the Company to various restrictive covenants, including maintenance of certain financial ratios such as adjusted debt. The covenants also include limitations on the Company’s capital expenditures, ability to repurchase shares and the payment of cash dividends. As of and during the ~~three~~six months ended ~~April 30,~~July 31, 2011, there were no borrowings under the Line and the Company was in compliance with all covenants under the Line. Outstanding letters of credit and stand-by letters of credit under the Line totaled approximately ~~$62,365~~$63,131 as of ~~April 30,~~July 31, 2011. The available credit, including the accordion feature, under the Line was ~~$112,635~~$111,869 as of ~~April 30,~~July 31, 2011.

The Company maintains stock incentive plans pursuant to which it can grant restricted shares, unrestricted shares, incentive stock options, nonqualified stock options, restricted stock units, performance share units (“PSU’s”) or as stock appreciation rights (“SAR’s”). A Lattice Binomial pricing model was used to estimate the fair value of stock options and SAR’s. The fair value of the PSU’s are determined using a Monte Carlo simulation.

Share-based compensation expense included in the Condensed Consolidated Statements of Income for the three and six months ended ~~April 30,~~July 31, 2011 and 2010 was as follows:


					Three Months Ended July 31,				Six Months Ended July 31,
	Three Months Ended April 30, 2011		Three Months Ended April 30, 2010		2011		2010		2011		2010
Stock Options	$	819	$	996	$	502	$	1,010	$	1,321	$	2,006
Stock Appreciation Rights		257		—		256		—		513		—
Performance Share Units		1,500		1,204		1,544		1,317		3,044		2,521
Restricted Shares		3		—		3		—		6		—

Total	$	2,579	$	2,200	$	2,305	$	2,327	$	4,884	$	4,527

The Company recognized tax benefits related to stock options of ~~$241~~$173 and ~~$276~~$414 in its Condensed Consolidated Statements of Income for the three and six months ended ~~April 30,~~July 31, 2011, respectively. The Company recognized tax benefits related to stock options of $283 and $559 in its Condensed Consolidated Statements of Income for the three and six months ended July 31, 2010, respectively.

The Company ~~did not grant any share-based awards during the three months ended April 30, 2011. The Company~~ granted ~~105,000~~100,000 stock option awards, with a weighted average fair value of ~~$11.14,~~$10.36, during the three and six months ended ~~April 30, 2010.~~July 31, 2011. The Company granted 327,000 and 432,000 stock option awards, with a weighted average fair value of $12.36 and $12.07 during the three and six months ended July 31, 2010, respectively.

The total unrecognized compensation cost and the weighted average period in which the cost is expected to be recognized as of ~~April 30,~~July 31, 2011 is as follows:


	April 30, 2011				July 31, 2011
	Unrecognized Compensation Cost		Weighted Average Years		Unrecognized Compensation Cost		Weighted Average Years
Stock Options	$	10,382		3.1	$	8,342		2.5
Stock Appreciation Rights		4,924		4.4		4,512		4.1
Performance Share Units		27,237		4.5		25,398		4.3
Restricted Shares		31		2.6		28		2.3

Total	$	42,574		4.2	$	38,280		3.9

On February 28, 2006, the Company’s Board of Directors approved a stock repurchase program. The program authorized the Company to repurchase of up to 8,000,000 common shares. On November 16, 2010, the Company’s Board of Directors authorized the repurchase of up to 10,000,000 additional common ~~shares. This authorization supplements~~shares under the Company’s 2006 stock repurchase program.

During the three and six months ended July 31, 2011, the Company repurchased and subsequently retired 2,340,330 common shares at a total cost of $67,319 and 7,165,199 common shares at a total cost of $215,993, respectively. The average cost per share of the repurchases for the three and six months ended July 31, 2011 was $28.76 and $30.14, respectively, including commissions. During the three and six months ended July 31, 2010

~~The~~the Company repurchased and subsequently retired ~~4,824,869~~2,015,180 common shares at a total cost of ~~$148,674 during the three months ended April 30, 2011.~~$68,002. The average cost per share ~~of the repurchases~~ was ~~$30.81,~~$33.74, including commissions. ~~The Company did not repurchase any shares during~~During the three and six months ended ~~April 30, 2010. The repurchases completed~~July 31, 2010, the ~~Company’s 2006 share repurchase program~~Company repurchased and ~~reduced the 2010 repurchase program by 4,333,316 shares.~~subsequently retired 112,770 common shares for $3,986 from an employee to meet a minimum statutory tax withholding requirement. As of ~~April 30,~~July 31, 2011, a total of ~~5,666,684~~3,326,354 common shares ~~remain~~remained available under the 2010 ~~repurchase program.~~authorization.

As a result of the share repurchase activity noted above, the Company reduced the balance of additional paid-in-capital to zero which required subsequent share ~~repurchases~~repurchase activity to be recorded as a reduction of retained earnings. During the ~~three~~six months ended ~~April 30,~~July 31, 2011, the Company reduced retained earnings by ~~$115,778~~$179,543, related to these share repurchases.

The following is a reconciliation of the weighted average shares outstanding used for the computation of basic and diluted net income per common share:


	Three Months Ended April 30,				Three Months Ended July 31,				Six Months Ended July 31,
	2011		2010		2011		2010		2011		2010
Basic weighted average shares outstanding		162,407,330		168,852,072		158,581,618		168,908,598		160,436,550		168,880,803
Effect of dilutive stock options, non-vested shares and stock appreciation rights		2,886,264		3,966,965
Effect of dilutive options, restricted stock and performance shares						2,162,125		3,417,398		2,524,195		3,692,182

Diluted weighted average shares outstanding		165,293,594		172,819,037		160,743,743		172,325,996		162,960,745		172,572,985

For the three months ended ~~April 30,~~July 31, 2011 and 2010, ~~options~~awards to purchase ~~1,333,550 common shares with an exercise price range of $35.01 to $39.58 and options to purchase 932,150~~4,448,250 common shares with an exercise price range of $30.93 to ~~$37.51,~~$39.58 and awards to purchase 1,250,650 common shares with an exercise price range of $37.35 to $39.58, respectively, were outstanding but were not included in the Company’s computation of diluted weighted average common shares and common share equivalents outstanding because their effect would have been anti-dilutive. Furthermore, awards to purchase 2,890,900 and 1,091,400 common shares were outstanding for the six months ended July 31, 2011 and 2010, respectively, but were not included in the Company’s computation because their effect would have been anti-dilutive. The exercise price of the awards range from $30.93 to $39.58 and $37.35 to $39.58 for the six months ended July 31, 2011 and 2010, respectively.

The Company is party to various legal proceedings arising from normal business activities. Management believes that the ultimate resolution of these matters will not have a material effect on the Company’s financial position or results of operations.

The Company is a global retailer of lifestyle-oriented general merchandise with two reporting segments—“Retail” and “Wholesale.” The Company’s Retail segment consists of the aggregation of its five brands operating through ~~382~~392 stores under the retail names “Urban Outfitters,” “Anthropologie,” “Free People,” ~~“BHLDN “~~“BHLDN” and “Terrain” and includes its direct marketing campaigns, which consisted of five catalogs and nine web sites as of ~~April 30,~~July 31, 2011. The Company operates its retail stores and its direct marketing campaigns as a single operating segment. Net sales from the Retail segment accounted for approximately ~~94% and~~ 95% of total consolidated net sales for the three and six months ended ~~April 30,~~July 31, 2011 and ~~April 30, 2010, respectively.~~July 31, 2010. The remainder is derived from the Company’s Wholesale segment, which manufactures and distributes apparel to its retail segment and to approximately 1,400 better department and specialty retailers worldwide through its Free People brand.

The Company has aggregated its retail stores and associated direct marketing campaigns into a retail segment based upon their unique management, customer base and economic characteristics. Reporting in this format provides management with the financial information necessary to evaluate the success of the segments and the overall business. The Company evaluates the performance of the segments based on the net sales and pre-tax income from operations (excluding inter-company charges) of the segment. Corporate expenses include expenses incurred and directed by the corporate office that are not allocated to segments. The principal identifiable assets for each operating segment are inventories and property and equipment. Other assets are comprised primarily of general corporate assets, which principally consist of cash and cash equivalents, marketable securities, and other assets, and which are typically not allocated to the Company’s segments. The Company accounts for inter-segment sales and transfers as if the sales and transfers were made to third parties making similar volume purchases.

The accounting policies of the operating segments are the same as those described in Note 2, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2011. Both the Retail and Wholesale segments are highly diversified. No customer comprises more than 10% of sales. A summary of the information about the Company’s operations by segment is as follows:


	April 30, 2011		January 31, 2011		April 30, 2010		July 31, 2011		January 31, 2011		July 31, 2010
Inventories
Retail operations	$	251,935	$	213,420	$	214,760	$	288,989	$	213,420	$	231,033
Wholesale operations		12,343		16,141		7,224		14,170		16,141		12,170

Total inventories	$	264,278	$	229,561	$	221,984	$	303,159	$	229,561	$	243,203

Property and equipment, net
Retail operations	$	597,600	$	582,241	$	543,923	$	622,695	$	582,241	$	555,461
Wholesale operations		3,649		4,105		4,652		3,493		4,105		4,484

Total property and equipment, net	$	601,249	$	586,346	$	548,575	$	626,188	$	586,346	$	559,945


	Three Months Ended April 30,						Three Months Ended July 31,						Six Months Ended July 31,
	2011			2010			2011			2010			2011			2010
Net sales
Retail operations	$	493,462		$	454,808		$	577,282		$	522,225		$	1,070,744		$	977,035
Wholesale operations		31,583			25,970			35,194			31,217			66,777			57,186
Intersegment elimination		(1,026	)		(817	)		(3,295	)		(1,283	)		(4,321	)		(2,101	)

Total net sales	$	524,019		$	479,961		$	609,181		$	552,159		$	1,133,200		$	1,032,120

Income from operations
Retail operations	$	62,968		$	83,858		$	88,182		$	108,174		$	151,150		$	192,032
Wholesale operations		2,958			5,163			7,278			6,704			10,236			11,867
Intersegment elimination		(71	)		(65	)		(607	)		(119	)		(678	)		(184	)

Total segment operating income		65,855			88,956			94,853			114,759			160,708			203,715
General corporate expenses		(7,018	)		(6,745	)		(6,858	)		(7,890	)		(13,877	)		(14,635	)

Total income from operations	$	58,836		$	82,211		$	87,995		$	106,869		$	146,831		$	189,080

The Company has foreign operations in Europe and Canada. Revenues and long-lived assets, based upon the Company’s domestic and foreign operations, are as follows:


	April 30, 2011		January 31, 2011		April 30, 2010		July 31, 2011		January 31, 2011		July 31, 2010
Property and equipment, net
Domestic operations	$	499,025	$	497,521	$	482,241	$	517,430	$	497,521	$	490,176
Foreign operations		102,224		88,825		66,334		108,758		88,825		69,769

Total property and equipment, net	$	601,249	$	586,346	$	548,575	$	626,188	$	586,346	$	559,945


	Three Months Ended April 30,				Three Months Ended July 31,				Six Months Ended July 31,
	2011		2010		2011		2010		2011		2010
Net sales
Domestic operations	$	466,851	$	433,985	$	535,055	$	495,980	$	1,001,906	$	929,657
Foreign operations		57,168		45,976		74,126		56,179		131,294		102,463

Total net sales	$	524,019	$	479,961	$	609,181	$	552,159	$	1,133,200	$	1,032,120

Subsequent to July 31, 2011 and through August 29, 2011, the Company repurchased and retired the remaining 3,326,354 common shares under the November 2010 authorization for approximately $88,181, including commissions, at an average price of $26.51 per share.

On August 25, 2011, the Company’s Board of Directors authorized the repurchase of an additional 10,000,000 common shares under the Company’s stock repurchase program. Subsequent to this authorization and through September 6, 2011, the Company has repurchased and retired 429,292 common shares for approximately $10,851, including commissions, at an average price of $25.28 per share. As of September 6, 2011, there were 9,570,708 common shares remaining available for repurchase under the August 2011 authorization.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This filing with the United States Securities and Exchange Commission (“SEC”) is being made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Certain matters contained in this filing may constitute forward-looking statements. When used in this Form 10-Q, the words “project,” “believe,” “plan,” “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 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, lowered levels of consumer confidence and higher levels of unemployment, and continuation of lowered levels of consumer spending resulting from the continuing worldwide economic downturn, 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, the closing of any of our distribution centers, our ability to protect our intellectual property rights, risks associated with internet sales, response to new store concepts, potential difficulty liquidating certain marketable security investments, changes in accounting standards and subjective assumptions, regulatory changes and other risks identified in our filings with the SEC, including our Form 10-K for the fiscal year ended January 31, 2011, filed on April 1, 2011. We disclaim 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.

Unless the context otherwise requires, all references to “Urban Outfitters,” the “Company,” “we,” “us,” “our” or “our company” refer to Urban Outfitters, Inc., together with its subsidiaries.

We operate two business ~~segments,~~segments; a leading lifestyle merchandising retailing segment and a wholesale apparel segment. Our retailing segment consists of our Urban Outfitters, Anthropologie, Free People, BHLDN and Terrain brands, whose merchandise is sold directly to our customers through our stores, catalogs, call centers and web sites. Our wholesale apparel segment consists of our Free People wholesale division that designs, develops and markets young women’s contemporary casual apparel.

Our comparable retail segment net sales data includes our comparable store and comparable direct-to-consumer channels. A store is included in comparable retail segment net sales data, as presented in this discussion, if it has been open at least one full fiscal year, unless it was materially expanded or remodeled within that year or was not otherwise operating at its full capacity within that year. A direct-to-consumer channel is included in comparable retail segment net sales data, as presented in this discussion, if it has been operational for at least one full fiscal year. Sales from stores and direct-to-consumer channels that do not fall within the definition of a comparable store or channel are considered non-comparable. The effects of foreign currency translation are also considered non-comparable.

Although we have no precise empirical data as it relates to customer traffic or customer conversion rates in our stores, we believe that, based only on our observations, changes in transaction volume, as discussed in our results of operations, may correlate to changes in customer traffic. Transaction volume changes may be caused by a response to our brands’ fashion offerings, our web advertising, circulation of our catalogs and an overall growth in brand recognition as we expand our store base.

Our fiscal year ends on January 31. All references in this discussion to our fiscal years refer to the fiscal years ended on January 31 in those years. For example, our fiscal year 2012 will end on January 31, 2012.

Our historical and long-term goal is to achieve a net sales compounded annual growth rate of20% or better through a combination of opening new stores, growing comparable store sales, continuing the growth of our direct-to-consumer and wholesale operations and introducing new concepts.

As of ~~April 30,~~July 31, 2011, we operated ~~178~~180 Urban Outfitters stores, of which ~~146~~148 were located in the United States, 10 were located in Canada and 22 were located in Europe. For the ~~three~~six months ended ~~April 30,~~July 31, 2011, we opened ~~two~~four new Urban Outfitters stores, ~~both~~all of which were located ~~within~~in the United States. Urban Outfitters targets young adults aged 18 to 28 through a unique merchandise mix and compelling store environment. Urban Outfitters’ product offering includes women’s and men’s fashion apparel, footwear and accessories, as well as an eclectic mix of apartment wares and gifts. We plan to open additional stores over the next several years, some of which may be outside the United States. Urban Outfitters’ North American and European store net sales accounted for approximately ~~31.3%~~31.2% and ~~5.3%~~5.4% of consolidated net sales, respectively, for the ~~three~~six months ended ~~April 30,~~July 31, 2011, compared to ~~31.3%~~31.4% and ~~5.1%~~5.0%, respectively, for the comparable period in fiscal 2011.

As of ~~April 30,~~July 31, 2011, we operated ~~156~~160 Anthropologie stores, of which ~~150~~152 were located in the United States, 45 were located in Canada and 23 were located in Europe. During the ~~three~~six months ended ~~April 30,~~July 31, 2011, we opened ~~three~~seven new Anthropologie stores, ~~all~~ of which five were located ~~within~~in the United ~~States.~~States, one which was located in Canada and one which was located in Europe. Anthropologie tailors its merchandise to sophisticated and contemporary women aged 28 to 45. Anthropologie’s product assortment includes women’s casual apparel and accessories, shoes, home furnishings and a diverse array of gifts and decorative items. We plan to open additional stores over the next several years, some of which may be outside the United States. Anthropologie’s North American store net sales accounted for approximately ~~34.3%~~34.9% of consolidated net sales for the ~~three~~six months ended ~~April 30,~~July 31, 2011, compared to ~~37.3%~~37.1% for the comparable period in fiscal 2011. Anthropologie’s European stores accounted for less than 1% of total consolidated net sales for each of the ~~three~~six months ended ~~April 30,~~July 31, 2011 and ~~April 30,~~July 31, 2010.

As of ~~April 30,~~July 31, 2011, we operated 4751 Free People stores, all of which were located in the United States. During the ~~three~~six months ended ~~April 30,~~July 31, 2011, we opened ~~five~~nine new Free People stores. Free People primarily offers private label branded merchandise targeted to young contemporary women aged 25 to 30. Free People provides a unique merchandise mix of casual women’s apparel, intimates, shoes, accessories and gifts. We plan to open additional stores over the next several years. Free People’s retail store net sales accounted for ~~2.5%~~2.6% of consolidated net sales for the ~~three~~six months ended ~~April 30,~~July 31, 2011, compared to 2.1% for the comparable period in fiscal 2011.

As of ~~April 30,~~July 31, 2011, we operated one Terrain store, which was located in Glen Mills, Pennsylvania. Terrain is designed to appeal to customers interested in a creative, sophisticated outdoor living and gardening experience. Terrain seeks to create a compelling shopping environment, inspired by the ‘greenhouse.’ The site is large and free standing. Merchandise includes lifestyle home and garden products combined with antiques, live plants, flowers, wellness products and accessories. Terrain also offers a variety of landscape and design services. We will continue to evaluate locations for future Terrain garden centers during fiscal 2012. Terrain’s store net sales accounted for less than 1% of consolidated net sales for each of the ~~three~~six months ended ~~April 30,~~July 31, 2011 and ~~April 30,~~July 31, 2010.

For all brands combined, we plan to open approximately 5055 to 5557 new stores during fiscal 2012, including one BHLDN store and approximately 14 Free People stores. The remaining new stores will be divided approximately evenly between Urban Outfitters and Anthropologie.

Anthropologie offers a direct-to-consumer catalog that markets selected merchandise, most of which is also available in our Anthropologie stores. During the three months ended ~~April 30,~~July 31, 2011, we circulated approximately ~~6.2~~5.4 million catalogs compared to ~~5.8~~4.6 million catalogs during the same period in fiscal 2011. We plan to circulate

approximately 23.2 million catalogs during fiscal 2012, up from approximately ~~17.6~~21.8 million catalogs circulated during fiscal 2011.

Our Anthropologie European customers are offered a direct-to-consumer catalog that markets selected merchandise, most of which is also offered at our Anthropologie stores located in Europe. We circulated approximately ~~150,000~~130,000 catalogs in Europe for the three months ended ~~April 30,~~July 31, 2011. We plan to circulate approximately 595,000 catalogs during fiscal 2012, up from approximately 126,000 catalogs circulated during fiscal 2011. We anticipate the number of catalogs circulated to grow ~~consistent~~ with the anticipated demand from our European Anthropologie customers.

Anthropologie operates a web site that accepts orders directly from consumers. The web site captures the spirit of the store by offering a similar yet broader array of women’s casual apparel and accessories, shoes, home furnishings, gifts and decorative items as found in ~~the~~our stores.

Anthropologie also operates a web site ~~that targets~~targeting our European customers. ~~The web site was launched in March 2010.~~ The web site captures the spirit of our European stores by offering a similar yet broader selection of merchandise as found in our stores. Fulfillment was provided by a third-party located in the United Kingdom. In May 2011, we transitioned our fulfillment and distribution operations over to separate distribution and fulfillment facilities located in Rushden, England, which we own and operate. We believe that these facilities will better support our European growth for the next several years.

Urban Outfitters offers a direct-to-consumer catalog that markets selected merchandise, much of which is also available in our Urban Outfitters stores. During the three months ended ~~April 30,~~July 31, 2011, we circulated approximately ~~3.7~~2.9 million catalogs compared to approximately ~~3.4~~2.2 million catalogs during the comparable period in fiscal 2011. We plan to circulate approximately ~~15.4~~15.7 million catalogs during fiscal 2012, up from approximately 14.2 million catalogs circulated during fiscal 2011.

Our Urban Outfitters European customers are offered a direct-to-consumer catalog that markets selected merchandise, most of which is also offered at our Urban Outfitters stores located in Europe. ~~The catalog was launched in November 2010. We did not circulate any catalogs for~~During the three months ended ~~April 30, 2011.~~July 31, 2011, we circulated approximately 94,000 catalogs. We plan to circulate approximately 800,000 catalogs during Fiscal 2012, up from approximately 200,000 circulated during Fiscal 2011. We anticipate the number of catalogs circulated to grow ~~consistent~~ with the anticipated demand from our European Urban Outfitters customers.

Urban Outfitters operates a web site that accepts orders directly from customers. The web site captures the spirit of the store by offering a similar yet broader selection of merchandise as found in ~~the~~our stores.

Urban Outfitters also operates three web sites targeting our European customers. The web sites capture the spirit of our European stores by offering a similar yet broader selection of merchandise as found in our stores. Fulfillment was provided by a third-party located in the United Kingdom. In May 2011, we transitioned our fulfillment and distribution operations over to separate distribution and fulfillment facilities located in Rushden, England, which we own and operate. We believe that these facilities will better support our European growth for the next several years.

Free People offers a direct-to-consumer catalog that markets selected merchandise, most of which is also available in our Free People stores. For the three months ended ~~April 30,~~July 31, 2011, we circulated approximately ~~2.3~~1.4 million catalogs compared to approximately ~~1.9~~1.1 million catalogs during the comparable period in fiscal 2011. We plan to circulate approximately 8.8 million catalogs during fiscal 2012, up from approximately 7.6 million catalogs circulated during fiscal 2011 and intend to further increase the level of catalog circulation over the next few years.

Free People also operates a web site that accepts orders directly from consumers. The web site exposes consumers to the entire Free People product assortment found at Free People retail stores as well as all of the Free People wholesale offerings.

Terrain operates a web site that accepts orders directly from consumers. The web site exposes customers to a portion of the product assortment found at the Terrain retail store.

The BHLDN brand emphasizes every element that makes up a wedding. BHLDN launched its website on February 14, 2011. The website accepts orders directly from customers and exposes consumers to all product offerings from the BHLDN ~~concept,~~brand, which includes a curated collection of heirloom quality wedding gowns, bridesmaid frocks, party dresses, assorted jewelry, headpieces, footwear, lingerie and ~~lingerie. Decorations will round out the collection later in fiscal 2012. One retail store is planned to open in Houston, Texas during fiscal 2012.~~decorations.

Increases in our catalog circulation are driven by our evaluation of the response rate to each individual catalog. Based upon that evaluation, we adjust the frequency and circulation of our catalog portfolio as needed. In addition, we evaluate the buying pattern of our direct-to-consumer customers to determine which customers respond to our catalog mailings. We also utilize list rental companies to help us identify potential customers that will receive future catalogs.

We believe that our web sites increase the reputation and recognition of our brands with our target customers and help support the strength of our stores operations. We plan on increasing our spending on investments in web marketing in fiscal 2012 for all brands. These increases will be based on our daily evaluation of the customer’s response rate to our marketing investments.

Direct-to-consumer sales for all brands combined were approximately ~~19.5%~~19.0% of consolidated net sales for the ~~three~~six months ended ~~April 30,~~July 31, 2011 compared to ~~18.0%~~17.7% for the comparable period in fiscal 2011.

The Free People wholesale division designs, develops and markets young women’s contemporary casual apparel. Free People’s range of tops, bottoms, sweaters and dresses are sold worldwide through approximately 1,400 better department and specialty stores, including Bloomingdale’s, Nordstrom, Lord & Taylor, Belk, and our own Free People stores. Free People wholesale sales accounted for approximately ~~5.0%~~5.1% of consolidated net sales for the ~~three~~six months ended ~~April 30,~~July 31, 2011 compared to ~~4.7%~~4.8% for the comparable period in fiscal 2011.

Our condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. These generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period.

Our senior management has reviewed the critical accounting policies and estimates with our audit committee. Our significant accounting policies are described in Note 2 to our consolidated financial statements, “Summary of Significant Accounting Policies,” for the fiscal year ended January 31, 2011, which are included in our Annual Report on Form 10-K filed with the SEC on April 1, 2011. We believe that the following discussion addresses our critical accounting policies, which are those that are most important to the portrayal of our financial condition, ~~and~~ results of operations and cash flows and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. If actual results were to differ significantly from estimates made, the reported results could be materially affected. We are not currently aware of any reasonably likely events or circumstances that would cause our actual results to be materially different from our estimates.

Revenue is recognized at the point-of-sale for retail store sales or when merchandise is shipped to customers for wholesale and direct-to-consumer sales, net of estimated customer returns. Revenue is recognized at the completion of a job or service for landscape sales. Revenue is presented on a net basis and does not include any tax assessed by a governmental authority. Payment for merchandise at our stores and through our direct-to-consumer channel is tendered by cash, check, credit card, debit card or gift card. Therefore, our need to collect outstanding accounts receivable for our retail and direct-to-consumer channel is negligible and mainly results from returned checks or unauthorized credit card transactions. We maintain an allowance for doubtful accounts for our wholesale and landscape service accounts receivable, which management reviews on a regular basis and believes is sufficient to cover potential credit losses and billing adjustments. Deposits for custom orders are recorded as a liability and recognized as a sale upon delivery of the merchandise to the customer. These custom orders, typically for upholstered furniture, are not material. Deposits for landscape services are recorded as a liability and recognized as a sale upon completion of service. Landscape services and related deposits are not material.

We account for a gift card transaction by recording a liability at the time the gift card is issued to the customer in exchange for consideration from the customer. A liability is established and remains on our books until the card is redeemed by the customer at which time we record the redemption of the card for merchandise as a sale or when we determine the likelihood of redemption is remote. We determine the probability of the gift cards being redeemed to be remote based on historical redemption patterns. Revenues attributable to gift card liabilities relieved after the likelihood of redemption becomes remote are included in sales and have not been material. Our gift cards do not expire.

We record a reserve for estimated product returns where the sale has occurred during the period reported, but the return is likely to occur subsequent to the period reported and may otherwise be considered in-transit. The reserve for estimated in-transit product returns is based on our most recent historical return trends. If the actual return rate or experience is materially different than our estimate, sales ~~returns~~return reserves would be adjusted in the future. As of ~~April 30,~~July 31, 2011, January 31, 2011 and ~~April 30,~~July 31, 2010, reserves for estimated sales returns in-transit totaled ~~$10.1~~$10.2 million, $11.4 million and ~~$10.1~~$10.0 million, representing ~~2.6%~~2.5%, 3.0% and ~~2.9%~~2.8% of total liabilities, respectively.

Our marketable securities may be classified as either held-to-maturity or available-for-sale. Held-to-maturity securities represent those securities that are held at amortized cost and that we have both the intent and the belief that it is not likely that we will be required to sell the debt security prior to its maturity and recovery of full amortized cost. Interest on these securities, as well as amortization of discounts and premiums, is included in interest income. Available-for-sale securities represent securities that do not meet the classification of held-to-maturity, are not actively traded and are carried at fair value, which approximates amortized cost. Unrealized gains and losses on these securities are considered temporary and therefore are excluded from earnings and are reported as a separate component of shareholders’ equity until realized. Other than temporary impairment losses related to credit losses are considered to be realized losses. When available-for-sale securities are sold, the cost of the securities is specifically identified and is used to determine the realized gain or loss. Securities classified as current have maturity dates of less than one year from the balance sheet date. Securities classified as non-current have maturity dates greater than one year from the balance sheet date. Available for sale securities such as auction rate securities ~~(“ARS”)~~ that fail at auction and do not liquidate in the normal course are classified as non-current assets. All of our marketable securities as of ~~April 30,~~July 31, 2011, January 31, 2011 and ~~April 30,~~July 31, 2010 were classified as available-for-sale.

We value our inventories, which consist primarily of general consumer merchandise held for sale, at the lower of cost or market. Cost is determined on the first-in, first-out method and includes the cost of merchandise and import related costs, including freight, import taxes and agent commissions. A periodic review of inventory is performed in order to determine if inventory is properly stated at the lower of cost or market. Factors related to current inventories, such as future expected consumer demand and fashion trends, current aging, current and anticipated retail markdowns or wholesale discounts, and class or type of inventory, are analyzed to determine estimated net realizable values. Criteria that we utilize to quantify aging trends includes factors such as average selling cycle and seasonality of merchandise, the historical rate at which merchandise has sold below cost during the average selling cycle and the value and nature of merchandise currently priced below original cost. A provision is recorded to reduce the cost of inventories to its estimated net realizable value, if appropriate. The majority of inventory at ~~April 30,~~July 31, 2011, January 31, 2011, and ~~April 30,~~July 31, 2010 consisted of finished goods. Unfinished goods and work-in-process were not material to the overall net inventory value. Inventories as of ~~April 30,~~July 31, 2011, January 31, 2011 and ~~April 30,~~July 31, 2010 totaled ~~$264.3~~$303.2 million, $229.6 million and ~~$222.0~~$243.2 million, representing ~~15.6%~~17.8%, 12.8% and ~~13.0%~~14.1% of total assets, respectively. Any significant unanticipated changes in the factors noted above could have a significant impact on the value of our inventories and our reported operating results.

Adjustments to provisions related to the net realizable value of our inventories are primarily based on the market value of our physical inventories, cycle counts and recent historical trends. Our estimates generally have been accurate and our reserve methods have been applied on a consistent basis. We expect the amount of our reserves to increase over time as we expand our store base and accordingly, related inventories.

Our long-lived assets consist principally of store leasehold improvements, buildings, furniture and fixtures and are included in the “Property and equipment, net” line item in our condensed consolidated balance sheets included in this report. Store leasehold improvements are recorded at cost and are amortized using the straight-line method over the lesser of the applicable store lease term, including lease renewals which are reasonably assured, or the estimated useful life of the leasehold improvements. The typical initial lease term for our stores is ten years. Buildings are recorded at cost and are amortized using the straight-line method over 39 years. Furniture and fixtures are recorded at cost and are amortized using the straight-line method over their useful life, which is typically five years. Net property and equipment as of ~~April 30,~~July 31, 2011, January 31, 2011 and ~~April 30,~~July 31, 2010 totaled ~~$601.2~~$626.2 million, $586.3 million and ~~$548.6~~$559.9 million, respectively, representing ~~35.5%~~36.7%, 32.7% and ~~32.1%~~32.4% of total assets, respectively.

In assessing potential impairment of these assets, we periodically evaluate historical and forecasted operating results and cash flows on a store-by-store basis. Newly opened stores may take time to generate positive operating and cash flow results. Factors such as store type (e.g., mall versus free-standing), store location (e.g., urban area versus college campus or suburb), current marketplace awareness of our brands, local customer demographic data and current fashion trends are all considered in determining the time frame required for a store to achieve positive financial results, which, in general, is assumed to be within three years from the date a store location has opened. If economic conditions are substantially different from our expectations, the carrying value of certain of our long-lived assets may become impaired. For the ~~three~~six months ended ~~April 30,~~July 31, 2011 and 2010, as well as for fiscal 2011, write downs of long-lived assets were not material.

We have not historically encountered material early retirement charges related to our long-lived assets. The cost of assets sold or retired and the related accumulated depreciation or amortization is removed from the accounts with any resulting gain or loss included in net income. Maintenance and repairs are charged to selling, general and administrative expense as incurred. Major renovations or improvements that extend the service lives of our assets are capitalized over the extension period or life of the improvement, whichever is less.

As of ~~April 30,~~July 31, 2011, all of our stores opened in excess of three years are expected to generate positive annual cash flow before allocation of corporate overhead.

As part of the process of preparing our condensed consolidated financial statements, we are required to estimate our income taxes in each of the tax jurisdictions in which we operate. This process involves estimating our actual current tax obligations together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences result in deferred tax assets and liabilities, which are included within our condensed consolidated balance sheet. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income. Actual results could differ from this assessment if adequate taxable income is not generated in future periods. Net deferred tax assets as of ~~April 30,~~July 31, 2011, January 31, 2011 and ~~April 30,~~July 31, 2010 totaled ~~$54.3~~$53.3 million, $52.1 million and ~~$45.9~~$46.3 million, representing ~~3.2%~~3.1%, 2.9% and 2.7% of total assets, respectively.

To the extent we believe that recovery of an asset is at risk, we establish valuation allowances. To the extent we establish valuation allowances or increase the allowances in a period, we include an expense within the tax provision in the condensed consolidated statement of income. Valuation allowances as of ~~April 30,~~July 31, 2011, January 31, 2011 and ~~April 30,~~July 31, 2010 were ~~$2.6~~$2.5 million, $2.6 million and $2.4 million, respectively. Valuation allowances are based on evidence of our ability to generate sufficient taxable income in certain foreign and state jurisdictions. In the future, if enough evidence of our ability to generate sufficient future taxable income in these jurisdictions becomes apparent, we would be required to reduce our valuation allowances, resulting in a reduction in income tax expense in the condensed consolidated statement of income. On a quarterly basis, management evaluates the likelihood that we will realize the deferred tax assets and adjusts the valuation allowances, if appropriate.

Our tax liability for uncertain tax positions contains uncertainties because we are required to make assumptions and to apply judgment to estimate the exposures associated with our various filing positions. Although we believe that the judgments and estimates discussed herein are reasonable, actual results may differ, and we may be exposed to losses or gains that could be material.

From time to time, we are named as a defendant in legal actions arising from our normal business activities. We are required to record an estimated loss contingency when information available prior to issuance of our financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Accounting for contingencies arising from contractual disputes or legal proceedings requires management to use its best judgment when estimating an accrual related to such contingencies. As additional information becomes known, our accrual for a loss contingency could fluctuate, thereby creating variability in our results of operations from period to period. Likewise, an actual loss arising from a loss contingency that significantly exceeds the amount accrued in our financial statements could have a material adverse impact on our operating results for the period in which such actual loss becomes known.

The following tables set forth, for the periods indicated, the percentage of our net sales represented by certain income statement data and the change in certain income statement data from period to period. This table should be read in conjunction with the discussion that follows:


	Three Months Ended April 30,						Three Months Ended July 31,						Six Months Ended July 31,
	2011			2010			2011			2010			2011			2010
Net sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales, including certain buying, distribution and occupancy costs		63.1			58.2			62.1			57.5			62.5			57.8

Gross profit		36.9			41.8			37.9			42.5			37.5			42.2
Selling, general and administrative expenses		25.7			24.7			23.5			23.1			24.5			23.9

Income from operations		11.2			17.1			14.4			19.4			13.0			18.3
Other income, net		0.3			0.1			0.2			0.1			0.2			0.1

Income before income taxes		11.5			17.2			14.6			19.5			13.2			18.4
Income tax expense		4.1			6.2			5.3			6.5			4.8			6.3

Net income		7.4	%		11.0	%		9.3	%		13.0	%		8.4	%		12.1	%

Three Months Ended ~~April 30,~~July 31, 2011 Compared To Three Months Ended ~~April 30,~~July 31, 2010

Net sales in the ~~first~~second quarter of fiscal 2012 increased by ~~9.2%~~10.3% to ~~$524.0~~$609.2 million, from ~~$480.0~~$552.2 million in the ~~first~~second quarter of fiscal 2011. The ~~$44.0~~$57.0 million increase was attributable to a ~~$38.6~~$55.0 million, or ~~8.5%~~10.5%, increase in ~~Retail~~retail segment net sales and a ~~$5.4~~$2.0 million, or ~~21.5%~~6.6%, increase in our wholesale segment net sales (excluding sales to our ~~Retail~~retail segment). Retail segment net sales for the ~~first~~second quarter of fiscal 2012 accounted for ~~94.2%~~94.8% of total net sales compared to ~~94.8%~~94.6% of total net sales in the ~~first~~second quarter of fiscal 2011.

The growth in our retail segment net sales during the ~~first~~second quarter of fiscal 2012 was driven by increases of ~~$40.3~~$47.2 million in non-comparable and new store net sales and a $16.0 million, or ~~18.6%~~16.6%, increase in direct-to-consumer net sales. These increases were partially offset by ~~a $17.7~~an $8.2 million, or ~~4.9%~~2.0%, decrease in comparable store net sales. Our total company comparable retail segment net sales ~~decrease~~increase of ~~1.1%~~1.2% was comprised of ~~a decrease of 5.9% at Anthropologie, partially offset by~~ increases of ~~29.8%~~17.9% and ~~1.2%,~~1.1% at Free People and Urban Outfitters, ~~respectively.~~respectively, while Anthropologie remained flat. The increase in net sales attributable to non-comparable and new stores was primarily the result of operating 5861 new or existing stores during the ~~first~~second quarter of fiscal 2012 that were not in operation for the full comparable quarter last fiscal year. The comparable store net sales decreases at Anthropologie and Urban Outfitters for the first quarter of fiscal 2012 were primarily due to a decrease in transactions and lower average unit sales prices. The comparable store net sales increase at Free People in the first quarter of fiscal 2012 was due to an increase in transactions and higher average unit sales prices. Direct-to-consumer net sales increased during the ~~first~~second quarter of fiscal 2012 versus the ~~first~~second quarter of fiscal ~~2011,~~2011. This increase was driven by increased traffic to our web sites combined with an increase in average order value, which more than offset a decline in the conversion rate. Catalog circulation across all brands increased by ~~1.4~~2.1 million, or ~~12.3%~~27.2%. Comparable store net sales decreases for the second quarter of fiscal 2012 were primarily due to a decrease in transactions and lower average unit sales prices. Thus far during the ~~second~~third quarter of fiscal 2012, comparable retail segment net sales are low single-digit negative.

The increase in our wholesale segment net sales induring the ~~first~~second quarter of fiscal 2012, as compared to the ~~first~~second quarter of fiscal 2011, was primarily due to a ~~$3.4~~$4.3 million, or a ~~15.1%~~15.8%, increase at Free People wholesale ~~and a $2.0 million increase at Leifsdottir wholesale. The~~driven by an increase in ~~Free People~~transactions and partially offset by a decrease in average unit selling price. This increase in wholesale segment net sales was ~~driven~~partially offset by ~~increases~~$2.3 million due to lower sales volume as a result of the discontinuation of the Leifsdottir brand in ~~transactions and average unit sale prices. The increase in Leifsdottir wholesale~~the first quarter of fiscal 2012.

primarily related to higher volume due to increased off-price net sales related to our announcement that we will discontinue wholesale distribution of our Leifsdottir brand with the conclusion of spring 2011 deliveries.

~~Gross profit percentage~~ for the ~~first~~second quarter of fiscal 2012 decreased to ~~36.9%~~37.9% of net sales from ~~41.8%~~42.5% of net sales in the comparable period in fiscal 2011. The decrease in the gross profit percentage in the ~~first~~second quarter of fiscal 2012 was principally due to increased merchandise markdowns to clear slow-moving inventory, primarily associated with women’s apparel at Anthropologie and Urban Outfitters ~~and Leifsdottir wholesale inventories.~~as well as occupancy deleverage caused by negative comparable store sales. Gross profit for the ~~first~~second quarter of fiscal 2012 decreased by ~~$7.4~~$3.7 million, or ~~3.7%~~1.6%, to ~~$193.4~~$231.1 million from ~~$200.8~~$234.8 million in the comparable quarter in fiscal 2011. The decrease was primarily due to lower merchandise margins resulting from higher markdowns. Total inventories at ~~April 30, 2012~~July 31, 2011 increased by ~~$42.3~~$60.0 million, or ~~19.1%~~24.7%, to ~~$264.3~~$303.2 million from ~~$222.0~~$243.2 million at ~~April 30, 2011.~~July 31, 2010. This increase was primarily due to non-comparable receipts of inventory, specifically; early receipts during the final week of July 2011 versus July 2010, higher levels of inventory in-transit, fabric and BHLDN inventories. The addition of inventory to stock new stores, as well as inventory to support growth in the direct-to-consumer ~~channel.~~channel also contributed to the increase.

Selling, general and administrative expenses as a percentage of net sales increased during the ~~first~~second quarter of fiscal 2012 to ~~25.7%~~23.5% of net sales, compared to ~~24.7%~~23.1% of net sales for the ~~first~~second quarter of fiscal 2011. The increase in percentage was primarily due to ~~deleveraging of direct store operating costs driven by negative comparable store sales.~~e-commerce and related catalog investments. Investments in both new technology and ~~planned transition costs for~~in our new distribution and fulfillment facilities in ~~Europe~~Rushden, England also contributed to the ~~increase in~~ percentage ~~during the first quarter of fiscal 2012 compared to the first quarter of fiscal 2011.~~increase. Selling, general and administrative expenses, in the ~~first~~second quarter of fiscal 2012, increased by ~~$15.9~~$15.2 million, to ~~$134.5~~$143.1 million, from ~~$118.6~~$127.9 million in the ~~first~~second quarter of fiscal 2011. The dollar increase versus the prior year was primarily related to the operating expenses of new and non-comparable stores.

Income from operations decreased to ~~11.2%~~14.4% of net sales, or ~~$58.8~~$88.0 million, for the ~~first~~second quarter of fiscal 2012 compared to ~~17.1%,~~19.4% of net sales, or ~~$82.2~~$106.9 million, for the ~~first~~second quarter inof fiscal 2011.

Our effective tax rate for the ~~first~~second quarter of fiscal 2012 ~~was 35.8%~~increased to 36.3% of income before income taxes ~~which was slightly less than~~compared to 33.3% of income before income taxes for the second quarter of fiscal 2011. The prior year comparable period effective tax rate ~~for the first quarter of fiscal 2011 of 35.9%.~~was favorably affected by certain non-recurring items. We expect our annual effective tax rate to be approximately 36.5% of income before income taxes for the full year for fiscal 2012.

Net sales for the six months ended July 31, 2011 increased by $101.1 million, or 9.8%, to $1.13 billion from $1.03 billion in the comparable period of fiscal 2011. This increase was attributable to a $93.7 million, or 9.6%, increase in Retail segment net sales in addition to a $7.4 million, or 13.4%, increase in wholesale segment net sales (excluding sales to our Retail segment). Retail segment net sales for the six months ended July 31, 2011 accounted for 94.5% of total net sales compared to 94.7% of net sales for the six months ended July 31, 2010.

The growth in our retail segment net sales during the six months ended July 31, 2011 was driven by increases of $86.7 million in non-comparable and new store net sales and a $32.1 million, or 17.5%, increase in direct-to-consumer net sales. These increases were partially offset by a $25.1 million, or 3.3%, decrease in comparable store net sales. Our total company comparable retail segment net sales were flat as increases of 23.7% and 1.2% at Free People and Urban Outfitters, respectively, were offset by a decrease of 3.2% at Anthropologie. The increase in net sales attributable to non-comparable and new stores was primarily the result of operating 70 new or existing stores that were not in operation for the full comparable period last fiscal year. Direct-to-consumer net sales, during the first six months of fiscal 2012, increased over the comparable prior year period, driven by increased traffic to our web sites combined with an increase in average order value, which more than offset a decline in the conversion rate. Catalog circulation across all brands increased by 3.5 million, or 18.5%. Comparable store net sales decreases for the first six months of fiscal 2012 were primarily due to a decrease in transactions, lower units per transaction and lower average unit sales prices.

The increase in our wholesale segment net sales during the first six months of fiscal 2012, as compared to the comparable period in fiscal 2011, was primarily due to a $7.7 million, or a 15.5%, increase at Free People wholesale driven by an increase in transactions.

Gross profit percentage for the six months ended July 31, 2011 decreased to 37.5% of net sales from 42.2% of net sales in the comparable period in fiscal 2011. The decrease in the gross profit percentage was principally due to increased merchandise markdowns to clear slow-moving inventory, primarily associated with women’s apparel at Anthropologie and Urban Outfitters. Gross profit for the six months ended July 31, 2011 decreased by $11.1 million, or 2.6%, to $424.5 million from $435.6 million in the comparable quarter in fiscal 2011. This decrease was primarily related to lower merchandise margins resulting from higher markdowns.

Selling, general and administrative expenses as a percentage of net sales increased for the six months ended July 31, 2011 to 24.5% of net sales compared to 23.9% of net sales for the comparable period in fiscal 2011. The increase was primarily due to higher e-commerce and related catalog investments. Selling, general and administrative expenses for the six months ended July 31, 2011 increased by $31.1 million, or 12.6%, to $277.6 million from $246.5 million in the comparable period in fiscal 2011. The dollar increase versus the prior year was primarily related to the operating expenses of new and non-comparable stores.

Income from operations decreased to 13.0% of net sales, or $146.8 million, during the six months ended July 31, 2011 compared to 18.3% of net sales, or $189.1 million, for the comparable period in fiscal 2011.

Our effective tax rate increased to 36.1% of income before income taxes for the six months ended July 31, 2011 from 34.5% of income before income taxes for the comparable period of fiscal 2011. The prior year comparable period effective tax rate was favorably affected by certain non-recurring items.

Cash, cash equivalents and marketable securities were ~~$646.6~~$608.6 million as of ~~April 30,~~July 31, 2011, as compared to $808.7 million as of January 31, 2011 and ~~$772.7~~$748.7 million as of ~~April 30,~~July 31, 2010. Cash provided by operating activities infor the ~~first quarter of fiscal 2012~~six months ended July 31, 2011 decreased by ~~$32.0~~$32.8 million to ~~$20.0~~$91.5 million from ~~$52.0~~$124.3 million infor the ~~first quarter of fiscal 2011.~~six months ended July 31, 2010. This decrease in cash provided by operating activities was primarily due to a decrease in net income in the ~~first~~second quarter of fiscal 2012 versus the ~~first~~second quarter of fiscal ~~2011and by the use of cash in working capital during the three months ended April 30,~~ 2011.

Cash provided by investing activities infor the ~~first quarter of fiscal 2012~~six months ended July 31, 2011 was ~~$28.6~~$6.2 million, primarily resulting from sales and maturities of marketable securities, partially offset by purchases of marketable securities and cash used to construct new ~~stores.~~stores and distribution facilities.

Cash used in financing activities infor the ~~first quarter of fiscal 2012~~six months ended July 31, 2011 was ~~$146.0~~$212.0 million, which largely related to share repurchases during the period. Our working capital was ~~$489.3~~$470.1 million at ~~April 30,~~July 31, 2011 compared to $593.0 million at January 31, 2011 and ~~$723.4~~$764.2 million at ~~April 30,~~July 31, 2010. Changes in working capital principally relate to the volume of cash, cash equivalents, marketable securities and inventories relative to inventory-related payables and store-related accruals.

During the last three years, we have mainly satisfied our cash requirements through our cash flow from operations. Our primary uses of cash have been to repurchase shares of our common stock, open new stores and purchase inventories. ~~We have also used our cash to repurchase shares of our common stock.~~ We have also continued to invest in our direct-to-consumer efforts, ~~wholesale businesses,~~ technology, warehouse and distribution facilities, home office and our international subsidiaries.

Cash paid for property and equipment for the ~~three~~six months ended ~~April 30,~~July 31, 2011 and 2010 was ~~$35.7~~$77.5 million and ~~$32.4~~$64.6 million, respectively, and was mainly used to expand and support our store ~~base.~~base and our distribution and fulfillment facilities.

During fiscal 2012, we plan to construct and open approximately 5055 to 5557 new stores, renovate certain existing stores, ~~construct additional~~continue construction on our distribution and fulfillment ~~facilities~~facility in ~~Rushden, England and~~ Reno, Nevada, continue to expand our home office in Philadelphia, Pennsylvania, upgrade our systems, increase our catalog circulation by approximately 9 million catalogs to approximately 49 million catalogs, and purchase inventory for our stores, direct-to-consumer and wholesale businesses at levels appropriate to maintain our planned sales growth. We plan to increase the level of capital expenditures during fiscal 2012 to a range of approximately $175 million to $195 million. We believe that our new store, catalog and inventory investments have the ability to generate positive cash flow within a year. We believe improvements to our home office, distribution and fulfillment facilities are necessary to adequately support our growth. We may also enter into one or more acquisitions or transactions related to the expansion of our brands.

On February 28, 2006, our Board of Directors approved a stock repurchase program. The program authorized the repurchase of up to 88.0 million common shares. On November 16, 2010, our Board of Directors authorized the repurchase of 1010.0 million additional common shares. This authorization ~~supplements~~supplemented our 2006 stock repurchase program.

WeDuring the three and six months ended July 31, 2011, we repurchased and subsequently retired ~~4.8~~2.3 million common shares at a total cost of ~~$148.7~~$67.3 million ~~during the three months ended April 30, 2011.~~and 7.2 million common shares at a total cost of $216.0 million, respectively. The average cost per share of the repurchases for the three and six months ended July 31, 2011 was ~~$30.81,~~$28.76 and $30.14 per share, respectively, including commissions. ~~We did not repurchase any~~During the six months ended July 31, 2010, we repurchased and subsequently retired 2.0 million common shares ~~during~~at a total cost of $68.0 million. The average cost per share was $33.74, including commissions. During the three and six months ended ~~April 30, 2010. The repurchases completed our 2006 share repurchase program~~July 31, 2010, the Company repurchased and ~~reduced the 2010 repurchase program by 4.3~~subsequently retired 112,770 common shares for $4.0 million ~~shares.~~from an employee to meet a minimum statutory tax withholding requirement. As of ~~April 30,~~July 31, 2011, a total of ~~5.7~~3.3 million common shares ~~remain~~remained available under the 2010 ~~repurchase program.~~authorization.

On April 25, 2011 we executed a renewal and amendment of our line of credit facility (the “Line”) with Wells Fargo Bank, National Association (successor by merger to Wachovia Bank, National Association). The amendment extended the term of the Line for three years, increased the accordion feature from $100.0 million to $175.0 million, reduced the interest rate margin for certain cash advances and modified certain covenants and terms. The Line currently includes an $80.0 million revolving credit facility with an accordion feature allowing an increase to $175.0 million at our discretion. The Line contains a sub-limit for borrowings by our European subsidiaries that ~~are~~is guaranteed by us. Cash advances bear interest at LIBOR plus 0.50% to 1.50% based on our achievement of prescribed adjusted debt ratios. The Line subjects us to various restrictive covenants, including maintenance of certain financial ratios and covenants such as adjusted debt. The covenants also include limitations on our capital expenditures, ability for share repurchases and the payment of cash dividends on our common shares. As of and during the ~~three~~six months ended ~~April 30,~~July 31, 2011, there were no borrowings under the Line and we were in compliance with all covenants under the Line. Outstanding letters of credit and stand-by letters of credit under the Line totaled approximately ~~$62.4~~$63.1 million as of ~~April 30,~~July 31, 2011. The available credit, including the accordion feature, under the Line was ~~$112.6~~$111.9 million as of ~~April 30,~~July 31, 2011. We expect the ~~renewal~~Line will satisfy our credit needs through at least fiscal 2014.

As of and for the ~~three~~six months ended ~~April 30,~~July 31, 2011, except for operating leases entered into in the normal course of business, we were not party to any material off-balance sheet arrangements.

See Note 2,Recently ~~Issued Accounting Pronouncements,~~issued accounting pronouncements, of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a description of recently issued and adopted accounting pronouncements, including the dates of adoption and impacts on our results of operations, financial position and cash flows.

We are exposed to the following types of market risks—fluctuations in the purchase price of merchandise, as well as other goods and services; the value of foreign currencies in relation to the U.S. dollar; and changes in interest rates. Due to our inventory turnover rate and our historical ability to pass through the impact of any generalized changes in our cost of goods to our customers through pricing adjustments, commodity and other product risks are not expected to be material. We purchase substantially all of our merchandise in U.S. dollars, including a portion of the goods for our stores located in Canada and Europe.

Our exposure to market risk for changes in interest rates relates to our cash, cash equivalents and marketable securities. As of ~~April 30,~~July 31, 2011 and 2010, our cash, cash equivalents and marketable securities consisted primarily of funds invested in money market accounts, corporate bonds, Federal Government Agencies, pre-refunded tax-exempt municipal bonds rated “A” or better, FDIC insured corporate bonds, ~~and ARS~~auction rate securities (“ARS”) rated “A” or better, which bear interest at a variable ~~rate.~~rate and treasury bills. Due to the average maturity and conservative nature of our investment portfolio, we believe a 100 basis point change in interest rates would not have a material effect on the condensed consolidated financial statements. As the interest rates on a material portion of our cash, cash equivalents and marketable securities are variable, a change in interest rates earned on the cash, cash equivalents and marketable securities would impact interest income along with cash flows, but would not impact the fair market value of the related underlying instruments.

Approximately ~~4.1%~~3.9% of our cash, cash equivalents and marketable securities are invested in “A” or better rated ARS that represent interests in municipal and student loan related collateralized debt obligations, all of which are guaranteed by either government agencies and/or insured by private insurance agencies up to 97% or greater of par value. Our ARS had a par value and fair value of ~~$30.1~~$26.5 million and ~~$26.7~~$23.5 million as of ~~April 30,~~July 31, 2011, $33.3 million and $29.5 million as of January 31, 2011 and ~~$37.6~~$35.3 million and ~~$33.5~~$31.5 million as of ~~April 30,~~July 31, 2010, respectively. As of ~~April 30,~~July 31, 2011, all of the ARS we held failed to liquidate at auction due to lack of market demand. Based on review of credit quality, collateralization, final stated maturity, estimates of the probability of being called or becoming liquid prior to final maturity, redemptions of similar ARS, previous market activity for the same investment security, impact due to extended periods of maximum auction rates and valuation models, we have recorded ~~$3.4~~$3.0 million of temporary impairment on our ARS as of ~~April 30,~~July 31, 2011, $3.8 million as of January 31, 2011 and ~~$4.1~~$3.9 million as of ~~April 30,~~July 31, 2010. To date, we have collected all interest payable on outstanding ARS when due and expect to continue to do so in the future. We do not have the intent to sell the underlying securities prior to their recovery and we believe that it is not likely that we will be required to sell the underlying securities prior to their anticipated recovery of full amortized cost. As a result of the current illiquidity, we have classified all ARS as non-current assets under marketable securities. We continue to monitor the market for ARS and consider the impact, if any, on the fair value of our investments.

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed by us in our Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported on a timely basis and that such information is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate, to allow timely decisions regarding the required disclosure. As of the end of the period covered by this Form 10-Q, an evaluation was performed under the supervision and with the participation of our management, including the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the design and operation of these disclosure controls and procedures. Based on that evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures were effective.

There have been no changes in our internal controls over financial reporting during the quarter ended ~~April 30,~~July 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

We are party to various legal proceedings arising from normal business activities. Management believes that the ultimate resolution of these matters will not have a material adverse effect on our financial position or results of operations.

There have been no material changes in our risk factors since January 31, 2011. Please refer to our Annual Report on Form 10-K for the fiscal year ended January 31, 2011, filed with the United States Securities and Exchange Commission on April 1, 2011, for a list of our risk factors.

A summary of the repurchase activity under the 2006 stock repurchase program and its 2010 ~~supplement~~authorization for the quarter ended ~~April 30,~~July 31, 2011 is as follows:

Attached as Exhibits 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the three months and six months ended ~~April 30,~~July 31, 2011, filed with the Securities and Exchange Commission on ~~June 8,~~September 6, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of ~~Income and~~Income; (iii) the Condensed Consolidated Statements of Cash Flows and (iv) ~~related notes~~the Notes to ~~these financial statements, tagged as blocks of text.~~Condensed Consolidated Financial Statements. Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” as a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Pennsylvania		23-2003332
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

5000 South Broad Street, Philadelphia, PA		19112-1495
(Address of Principal Executive Offices)		(Zip Code)


Large accelerated filer x	Accelerated filer	¨

Non-accelerated filer ¨	Smaller reporting company	¨


Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets as of ~~April 30,~~July 31, 2011, January 31, 2011 and ~~April 30,~~July 31, 2010	1

	Condensed Consolidated Statements of Income for the three and six months ended ~~April 30,~~July 31, 2011 and 2010	2

	Condensed Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~April 30,~~July 31, 2011 and 2010	3

	Notes to Condensed Consolidated Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1314

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2325

Item 4.	Controls and Procedures	2325

	PART II
	OTHER INFORMATION

Item 1.	Legal Proceedings	2426

Item 1A.	Risk Factors	2426

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2426

Item 6.	Exhibits	2527

	Signatures	2628


	Three Months Ended April 30,
	2011		2010
Net income	$	38,624	$	52,957
Foreign currency translation		4,817		(3,418	)
Unrealized gains (losses) on marketable securities, net of tax		873		(250	)

Comprehensive income	$	44,314	$	49,289


	Three Months Ended July 31,					Six Months Ended July 31,
	2011			2010		2011		2010
Net income	$	56,693		$	71,657	$	95,317	$	124,614
Foreign currency translation		(2,113	)		1,361		2,704		(2,057	)
Unrealized gains on marketable securities, net of tax		1,025			412		1,898		162

Comprehensive income	$	55,605		$	73,430	$	99,919	$	122,719


	Six Months Ended July 31, 2011			Six Months Ended July 31, 2010
Balance at beginning of period	$	29,462		$	33,505
Total gains or (losses) realized/unrealized:
Included in earnings		—			—
Included in other comprehensive income		767			252
Settlements		(6,725	)		(2,300	)
Transfers in and/or out of Level 3		—			—

Balance at end of period	$	23,504		$	31,457
Unrealized losses included in accumulated other comprehensive loss related to assets still held at reporting date	$	(3,021	)	$	(3,868	)

Total gains for the period included in earnings attributable to the change in unrealized gains or losses related to assets still held at reporting date	$	—		$	—


	Total Number of Shares (or Units) Purchased		Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs^1,2
February 1, 2011 through February 28, 2011		—		—		—		10,491,553
March 1, 2011 through March 31, 2011		4,824,869	$	30.81		4,824,869		5,666,684
April 1, 2011 through April 30, 2011		—		—		—		5,666,684

Total Fiscal 2012 First Quarter		4,824,869				4,824,869		5,666,684


Exhibit Number		Description

3.1		Amended and Restated Articles of Incorporation incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q filed on September 9, 2004.

3.2		Amendment No. 1 to Amended and Restated Articles of Incorporation incorporated by reference to Exhibit 3.2 of the Company’s Quarterly Report on Form 10-Q filed on September 9, 2004.

3.3		Amended and Restated Bylaws are incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on March 2, 2009.

10.1*		Fourth Amendment to the Amended and Restated Credit Agreement, dated April 25, 2011, by and among Urban Outfitters, Inc. and Wells Fargo Bank, National Association (successor by merger to Wachovia Bank, National Association).

31.1*		Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer.

31.2*		Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer.

32.1**		Section 1350 Certification of the Principal Executive Officer.

32.2**		Section 1350 Certification of the Principal Financial Officer.

101.INS**		XBRL Instance Document.

101.SCH**		XBRL Taxonomy Extension Schema.

101.CAL**		XBRL Taxonomy Extension Calculation Linkbase.

101.LAB**		XBRL Taxonomy Extension Label Linkbase.

101.PRE**		XBRL Taxonomy Extension Presentation Linkbase.

101.DEF**		XBRL Taxonomy Extension Definition Linkbase.


URBAN OUTFITTERS, INC.

By:		/s/ GLEN T. SENK
		Glen T. Senk Chief Executive Officer (Principal Executive Officer)


URBAN OUTFITTERS, INC.

By:		/s/ ERIC ARTZ
		Eric Artz Chief Financial Officer (Principal Financial Officer)