Exhibit 99.2
URBAN OUTFITTERS, INC.
Third Quarter Results
Philadelphia, PA – November 8, 2007
For Immediate Release | Contact: | John Kyees | ||||||
Chief Financial Officer | ||||||||
(215) 454-5500 |
Urban Outfitters Reports Q3 Earnings Jump 31%
Urban Outfitters, Inc. (NASDAQ:URBN), a leading lifestyle consumer products company operating under the Anthropologie, Free People and Urban Outfitters brands, today announced record earnings of $45.4 million and $106.6 million for the three and nine months ended October 31, 2007, respectively. Earnings per diluted share were $0.27 for the quarter and $0.63 for the nine months.
As stated in the Company’s previous sales release on November 6, 2007, net sales jumped during the quarter by 23% to $379.3 million. Total company comparable store sales grew by 8% driven by increases of 17% and 16% at Anthropologie and Free People stores, respectively. Urban Outfitters comparable store sales increased slightly during the quarter. Direct-to-consumer sales increased 30% and Free People Wholesale sales rose 34% for the quarter.
“All of our Brands’ positive ‘comp’ store sales trends were clearly reflected in our earnings performance,” stated Glen T. Senk, Chief Executive Officer. “We saw improvements in both merchandise margin and selling, general and administrative expenses during the quarter and these trends validate our optimism heading into the holiday season,” concluded Mr. Senk.
Net sales for the periods were as follows:
Three months ended October 31, | Nine months ended October 31, | |||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||
(in thousands) | (in thousands) | |||||||||||
Urban Outfitters store sales | $ | 160,864 | $ | 143,510 | $ | 431,703 | $ | 386,232 | ||||
Anthropologie store sales | 139,980 | 106,093 | 396,137 | 313,761 | ||||||||
Direct-to-consumer sales | 46,777 | 36,070 | 132,822 | 101,074 | ||||||||
Free People sales | 31,699 | 22,682 | 81,651 | 62,854 | ||||||||
Total net sales | $ | 379,320 | $ | 308,355 | $ | 1,042,313 | $ | 863,921 | ||||
For the three and nine months ended October 31, 2007, gross profit margins increased by 128 basis points and 68 basis points, respectively, versus the prior year’s comparable periods. The increase for both periods was primarily due to the combination of a lower rate of merchandise markdowns and leveraging of store occupancy expenses.
During the quarter, total company comparable store sales grew by 8%, while ending comparable store inventories rose by 6%. Total company inventories grew by $33.1 million or 18% on a year-over-year basis. The acquisition of inventory to stock new retail stores was the primary factor for this increase.
For the three months ended October 31, 2007, selling, general and administrative expenses (“SG&A”), expressed as a percentage of net sales, decreased by 15 basis points, versus the same quarter last year. For the nine months ended October 31, 2007, SG&A increased by 21 basis points as costs related to non-comparable expenses to operate our new home office facility as well as certain non-recurring legal fees more than offset favorable rate reductions from controlling store and store support related expenses.
During the quarter the company finalized its certification of certain tax credits received for work performed in conjunction with its home offices resulting in an additional one-time tax benefit of approximately $2.3 million applied to its tax expense (or $0.01 impact on diluted earnings per share). Excluding the one-time federal tax incentive benefits received thus far this fiscal year, the Company’s annual effective tax rate would have been approximately 34%. In the prior year’s comparable quarter the company received a $4.4 million one-time tax benefit (or $0.03 impact on diluted earnings per share) for work performed in conjunction with its home office.
Thus far during the fiscal year, the company has opened 23 new stores and expects to open a total of 38 new stores by the end of the 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 117 Urban Retail stores in the United States, Canada, and Europe, two Urban Outfitters web sites and an Urban catalog; 100 Anthropologie Retail stores; an Anthropologie web site and a 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 13 Free People stores, a web site and a catalog.
A conference call will be held today to discuss third quarter results and will be web cast at 11:00 a.m. EST on:http://phx.corporate-ir.net/phoenix.zhtml?c=115825&p=irol-eventDetails&EventId=1669251
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 October 31, | Nine Months Ended October 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Net sales | $ | 379,320 | $ | 308,355 | $ | 1,042,313 | $ | 863,921 | ||||||||
Cost of sales, including certain buying, distribution and occupancy costs | 229,382 | 190,407 | 649,733 | 544,453 | ||||||||||||
Gross profit | 149,938 | 117,948 | 392,580 | 319,468 | ||||||||||||
Selling, general and administrative expenses | 88,611 | 72,484 | 247,966 | 203,744 | ||||||||||||
Income from operations | 61,327 | 45,464 | 144,614 | 115,724 | ||||||||||||
Other income, net | 2,151 | 1,365 | 5,991 | 4,527 | ||||||||||||
Income before income taxes | 63,478 | 46,829 | 150,605 | 120,251 | ||||||||||||
Income tax expense | 18,096 | 12,315 | 43,989 | 39,776 | ||||||||||||
Net income | $ | 45,382 | $ | 34,514 | $ | 106,616 | $ | 80,475 | ||||||||
Net income per common share: | ||||||||||||||||
Basic | $ | 0.27 | $ | 0.21 | $ | 0.65 | $ | 0.49 | ||||||||
Diluted | $ | 0.27 | $ | 0.21 | $ | 0.63 | $ | 0.48 | ||||||||
Weighted average common shares and common share equivalents outstanding: | ||||||||||||||||
Basic | 165,430,768 | 164,707,980 | 165,195,871 | 164,760,387 | ||||||||||||
Diluted | 169,933,513 | 168,306,967 | 169,486,304 | 168,675,078 | ||||||||||||
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 | 60.5 | % | 61.8 | % | 62.3 | % | 63.0 | % | ||||||||
Gross profit | 39.5 | % | 38.2 | % | 37.7 | % | 37.0 | % | ||||||||
Selling, general and administrative expenses | 23.3 | % | 23.5 | % | 23.8 | % | 23.6 | % | ||||||||
Income from operations | 16.2 | % | 14.7 | % | 13.9 | % | 13.4 | % | ||||||||
Other income, net | 0.6 | % | 0.5 | % | 0.6 | % | 0.5 | % | ||||||||
Income before income taxes | 16.8 | % | 15.2 | % | 14.5 | % | 13.9 | % | ||||||||
Income tax expense | 4.8 | % | 4.0 | % | 4.2 | % | 4.6 | % | ||||||||
Net income | 12.0 | % | 11.2 | % | 10.3 | % | 9.3 | % | ||||||||
URBAN OUTFITTERS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
October 31, 2007 | January 31, 2007 | October 31, 2006 | |||||||
(unaudited) | (audited) | (unaudited) | |||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 36,393 | $ | 27,267 | $ | 30,544 | |||
Marketable securities | 154,410 | 132,011 | 96,048 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $1,699, $849 and $1,238, respectively | 24,879 | 20,871 | 19,553 | ||||||
Inventories | 212,696 | 154,387 | 179,592 | ||||||
Prepaid expenses, deferred taxes and other current assets | 38,259 | 31,869 | 33,197 | ||||||
Total current assets | 466,637 | 366,405 | 358,934 | ||||||
Property and equipment, net | 489,434 | 445,698 | 426,430 | ||||||
Marketable securities | 78,510 | 62,322 | 58,636 | ||||||
Deferred income taxes and other assets | 31,621 | 24,826 | 21,204 | ||||||
$ | 1,066,202 | $ | 899,251 | $ | 865,204 | ||||
Liabilities and Shareholders’ Equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 78,845 | $ | 57,934 | $ | 61,988 | |||
Accrued expenses, accrued compensation and other current liabilities | 81,303 | 77,384 | 88,015 | ||||||
Total current liabilities | 160,148 | 135,318 | 150,003 | ||||||
Deferred rent and other liabilities | 110,410 | 88,650 | 80,626 | ||||||
Total liabilities | 270,558 | 223,968 | 230,629 | ||||||
Shareholders’ equity: | |||||||||
Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued | — | — | — | ||||||
Common shares; $.0001 par value, 200,000,000 shares authorized, 165,936,965 164,987,463 and 164,663,037 issued and outstanding, respectively | 17 | 17 | 17 | ||||||
Additional paid-in capital | 139,637 | 128,586 | 124,970 | ||||||
Retained earnings | 648,360 | 542,396 | 506,665 | ||||||
Accumulated other comprehensive income | 7,630 | 4,284 | 2,923 | ||||||
Total shareholders’ equity | 795,644 | 675,283 | 634,575 | ||||||
$ | 1,066,202 | $ | 899,251 | $ | 865,204 | ||||
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended October 31, | ||||||||
2007 | 2006 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 106,616 | $ | 80,475 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 51,291 | 39,239 | ||||||
Excess tax benefits from stock-based compensation | (4,512 | ) | (4,680 | ) | ||||
Stock-based compensation expense | 2,541 | 2,515 | ||||||
Loss on disposition of property and equipment, net | 441 | 1,236 | ||||||
Changes in assets and liabilities: | ||||||||
Increase in receivables | (3,879 | ) | (5,178 | ) | ||||
Increase in inventories | (57,750 | ) | (38,694 | ) | ||||
(Increase) decrease in prepaid expenses and other assets | (13,011 | ) | 4,720 | |||||
Increase in payables, accrued expenses and other liabilities | 41,881 | 30,685 | ||||||
Net cash provided by operating activities | 123,618 | 110,318 | ||||||
Cash flows from investing activities: | ||||||||
Cash paid for property and equipment | (84,249 | ) | (168,243 | ) | ||||
Cash paid for marketable securities | (144,311 | ) | (114,913 | ) | ||||
Sales and maturities of marketable securities | 105,074 | 165,724 | ||||||
Net cash used in investing activities | (123,486 | ) | (117,432 | ) | ||||
Cash flows from financing activities: | ||||||||
Exercise of stock options | 3,997 | 4,431 | ||||||
Excess tax benefits from stock-based compensation | 4,512 | 4,680 | ||||||
Share repurchases | — | (20,801 | ) | |||||
Net cash provided by (used in) financing activities | 8,509 | (11,690 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | 485 | (564 | ) | |||||
Increase in cash and cash equivalents | 9,126 | (19,368 | ) | |||||
Cash and cash equivalents at beginning of period | 27,267 | 49,912 | ||||||
Cash and cash equivalents at end of period | $ | 36,393 | $ | 30,544 | ||||