Exhibit 99.2
URBAN OUTFITTERS, INC.
Second Quarter Results
Philadelphia, PA – August 9, 2007
For Immediate Release | Contact: | John Kyees | ||
Chief Financial Officer | ||||
(215) 454-5500 |
Urban Outfitters Boosts Q2 Earnings 24%
Urban Outfitters, Inc. (NASDAQ:URBN), a leading lifestyle consumer products company operating under the Anthropologie, Free People and Urban Outfitters brands, today announced earnings of $31.9 million and $61.2 million for the three and six months ended July 31, 2007, respectively. Earnings per diluted share were $0.19 for the quarter and $0.36 for the six months.
As stated in the Company’s previous sales release on August 7, 2007, net sales jumped during the quarter by 22% to $348.4 million. Total Company comparable store sales grew 5% driven by increases of 14% and 28% at Anthropologie and Free People stores, respectively. Direct-to-consumer sales leaped 35% and Free People Wholesale sales improved 28% for the quarter. Urban Outfitters comparable store sales decreased 3% for the quarter.
“We delivered excellent results this quarter driven by outstanding performances at the Anthropologie and Free People brands,” stated Richard A. Hayne, Chairman and President. “The Urban Outfitters brand was less successful as its stores experienced gross margin pressure due to the de-leveraging of occupancy expenses and the need to take significant merchandise mark-downs. We feel confident that the recent personnel and structural realignments made at Urban NA will yield positive results in future quarters,” concluded Mr. Hayne.
Net sales for the periods were as follows:
Three months ended July 31, | Six months ended July 31, | |||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||
(in thousands) | (in thousands) | |||||||||||
Urban Outfitters store sales | $ | 140,931 | $ | 125,609 | $ | 270,839 | $ | 242,722 | ||||
Anthropologie store sales | 137,558 | 107,740 | 256,157 | 207,668 | ||||||||
Direct-to-consumer sales | 42,538 | 31,518 | 86,045 | 65,004 | ||||||||
Free People sales | 27,422 | 20,692 | 49,952 | 40,172 | ||||||||
Total net sales | $ | 348,449 | $ | 285,559 | $ | 662,993 | $ | 555,566 | ||||
For the three and six months ended July 31, 2007, gross profit margins increased by 64 basis points and 33 basis points, respectively, versus the prior year’s comparable periods. The increase for both periods were primarily due to a reduction in markdowns and a lower rate of fixed store occupancy expense leveraged by ‘comp’ store sales improvements.
As of July 31, 2007, total Company inventories grew by $37.1 million or 25% on a year-over-year basis. The acquisition of inventory to stock new retail stores was the primary factor for this increase. Total comparable store inventories rose by 3%.
For the three and six months ended July 31, 2007, selling, general and administrative expenses, expressed as a percentage of net sales, increased by 62 and 41 basis points, respectively, versus the same periods last year. These increases related to non-comparable expenses to operate our new home office facility which starts to anniversary its phased opening in the third quarter of fiscal 2008 as well as certain non-recurring legal fees for intellectual property defense. The combination of these two items more than offset favorable rate reductions from controlling store related expenses.
During the six months ended July 31, 2007, the Company has opened 11 new stores and is scheduled to open a total of 38 new stores in the current fiscal year.
Urban Outfitters, Inc. is an innovative specialty retailer and wholesaler which offers a variety of lifestyle merchandise to highly defined customer niches through 111 Urban Retail stores in the United States, Canada, and Europe, two Urban Outfitters web sites and an Urban catalog; 96 Anthropologie Retail stores; an Anthropologie web site and catalog, and Free People, the Company’s wholesale division, which sells its product to approximately 1,500 specialty stores, department stores and catalogs, as well as through 11 Free People stores, a web site and catalog.
A conference call will be held today to discuss second quarter results and will be web cast at 11:00 a.m. EDT on:http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=115825&eventID=1610866
This news release is being made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Certain matters contained in this release may constitute forward-looking statements. Any one, or all, of the following factors could cause actual financial results to differ materially from those financial results mentioned in the forward-looking statements: the difficulty in predicting and responding to shifts in fashion trends, changes in the level of competitive pricing and promotional activity and other industry factors, overall economic and market conditions and the resultant impact on consumer spending patterns, including any effects of terrorist acts or war, availability of suitable retail space for expansion, timing of store openings, seasonal fluctuations in gross sales, the departure of one or more key senior managers, import risks, including potential disruptions and changes in duties, tariffs and quotas and other risks identified in filings with the Securities and Exchange Commission. The Company disclaims any intent or obligation to update forward-looking statements even if experience or future changes make it clear that actual results may differ materially from any projected results expressed or implied therein.
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(Tables follow)
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Income
(in thousands, except share and per share data)
(unaudited)
Three Months Ended July 31, | Six Months Ended July 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Net sales | $ | 348,449 | $ | 285,559 | $ | 662,993 | $ | 555,566 | ||||||||
Cost of sales, including certain buying, distribution and occupancy costs | 218,422 | 180,807 | 420,351 | 354,046 | ||||||||||||
Gross profit | 130,027 | 104,752 | 242,642 | 201,520 | ||||||||||||
Selling, general and administrative expenses | 82,756 | 66,043 | 159,355 | 131,260 | ||||||||||||
Income from operations | 47,271 | 38,709 | 83,287 | 70,260 | ||||||||||||
Other income, net | 2,037 | 1,750 | 3,840 | 3,162 | ||||||||||||
Income before income taxes | 49,308 | 40,459 | 87,127 | 73,422 | ||||||||||||
Income tax expense | 17,442 | 14,797 | 25,894 | 27,461 | ||||||||||||
Net income | $ | 31,866 | $ | 25,662 | $ | 61,233 | $ | 45,961 | ||||||||
Net income per common share: | ||||||||||||||||
Basic | $ | 0.19 | $ | 0.16 | $ | 0.37 | $ | 0.28 | ||||||||
Diluted | $ | 0.19 | $ | 0.15 | $ | 0.36 | $ | 0.27 | ||||||||
Weighted average common shares and common share equivalents outstanding: | ||||||||||||||||
Basic | 165,315,656 | 164,994,329 | 165,076,476 | 164,787,024 | ||||||||||||
Diluted | 169,710,489 | 168,595,378 | 169,260,752 | 168,859,567 | ||||||||||||
AS A PERCENT OF NET SALES | ||||||||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of sales, including certain buying, distribution and occupancy costs | 62.7 | % | 63.3 | % | 63.4 | % | 63.7 | % | ||||||||
Gross profit | 37.3 | % | 36.7 | % | 36.6 | % | 36.3 | % | ||||||||
Selling, general and administrative expenses | 23.7 | % | 23.1 | % | 24.0 | % | 23.6 | % | ||||||||
Income from operations | 13.6 | % | 13.6 | % | 12.6 | % | 12.7 | % | ||||||||
Other income, net | 0.6 | % | 0.6 | % | 0.6 | % | 0.5 | % | ||||||||
Income before income taxes | 14.2 | % | 14.2 | % | 13.2 | % | 13.2 | % | ||||||||
Income tax expense | 5.0 | % | 5.2 | % | 4.0 | % | 4.9 | % | ||||||||
Net income | 9.2 | % | 9.0 | % | 9.2 | % | 8.3 | % | ||||||||
URBAN OUTFITTERS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
July 31, 2007 | January 31, 2007 | July 31, 2006 | |||||||
(unaudited) | (audited) | (unaudited) | |||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 42,387 | $ | 27,267 | $ | 59,722 | |||
Marketable securities | 130,748 | 132,011 | 92,809 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $1,562, $849 and $1,014, respectively | 24,516 | 20,871 | 22,299 | ||||||
Inventories | 185,619 | 154,387 | 148,528 | ||||||
Prepaid expenses, deferred taxes and other current assets | 18,988 | 31,869 | 37,419 | ||||||
Total current assets | 402,258 | 366,405 | 360,777 | ||||||
Property and equipment, net | 468,972 | 445,698 | 394,706 | ||||||
Marketable securities | 68,357 | 62,322 | 60,195 | ||||||
Deferred income taxes and other assets | 41,419 | 24,826 | 23,375 | ||||||
$ | 981,006 | $ | 899,251 | $ | 839,053 | ||||
Liabilities and Shareholders’ Equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 61,058 | $ | 57,934 | $ | 52,396 | |||
Accrued expenses, accrued compensation and other current liabilities | 72,047 | 77,384 | 92,015 | ||||||
Total current liabilities | 133,105 | 135,318 | 144,411 | ||||||
Deferred rent and other liabilities | 102,628 | 88,650 | 79,800 | ||||||
Total liabilities | 235,733 | 223,968 | 224,211 | ||||||
Shareholders’ equity: | |||||||||
Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued | – | – | – | ||||||
Common shares; $.0001 par value, 200,000,000 shares authorized, 165,810,665, 164,987,463 and 165,536,017 issued and outstanding, respectively | 17 | 17 | 17 | ||||||
Additional paid-in capital | 136,551 | 128,586 | 140,816 | ||||||
Retained earnings | 602,977 | 542,396 | 472,151 | ||||||
Accumulated other comprehensive income | 5,728 | 4,284 | 1,858 | ||||||
Total shareholders’ equity | 745,273 | 675,283 | 614,842 | ||||||
$ | 981,006 | $ | 899,251 | $ | 839,053 | ||||
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended July 31, | ||||||||
2007 | 2006 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 61,233 | $ | 45,961 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 33,648 | 25,034 | ||||||
Excess tax benefits from stock-based compensation | (3,270 | ) | (4,685 | ) | ||||
Stock-based compensation expense | 1,631 | 1,574 | ||||||
Loss on disposition of property and equipment, net | 144 | 297 | ||||||
Changes in assets and liabilities: | ||||||||
Increase in receivables | (3,569 | ) | (7,941 | ) | ||||
Increase in inventories | (30,977 | ) | (7,897 | ) | ||||
Increase in prepaid expenses and other assets | (3,615 | ) | (2,018 | ) | ||||
Increase in payables, accrued expenses and other liabilities | 14,435 | 7,278 | ||||||
Net cash provided by operating activities | 69,660 | 57,603 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (55,457 | ) | (105,701 | ) | ||||
Purchases of marketable securities | (60,716 | ) | (75,643 | ) | ||||
Sales and maturities of marketable securities | 55,218 | 128,269 | ||||||
Net cash used in investing activities | (60,955 | ) | (53,075 | ) | ||||
Cash flows from financing activities: | ||||||||
Exercise of stock options | 3,064 | 3,249 | ||||||
Excess tax benefits from stock-based compensation | 3,270 | 4,685 | ||||||
Share repurchases | — | (2,928 | ) | |||||
Net cash provided by financing activities | 6,334 | 5,006 | ||||||
Effect of exchange rate changes on cash and cash equivalents | 81 | 276 | ||||||
Increase in cash and cash equivalents | 15,120 | 9,810 | ||||||
Cash and cash equivalents at beginning of period | 27,267 | 49,912 | ||||||
Cash and cash equivalents at end of period | $ | 42,387 | $ | 59,772 | ||||