Urban Outfitters Net Plunges On Lower Gross Margin

Scott Peters
25 May, 2022
New York City

Urban Outfitters, the specialty apparel retailer, said its revenues and earnings were hit by higher freight and raw materials costs. 

Net sales increased 13.4% to $1.05 billion and net income declined on higher costs. 

All five brands controlled by the company registered higher sales in the quarter. Comparable store retail sales increased in double-digit partially offset by mid-single-digit sales decline in online sales. 

Comparable retail sales increased 11% from a year ago and by brand increased 18% at the Anthropologie Group, 15% at the Free People Group and 1% at Urban Outfitters. 

North America sales increased to $811.3 million from $750.2 million, an increase of 8% from a year ago. 

Europe and rest of the world sales surged 35% to $114.9 million from $84.9 million from a year ago. 

Wholesale segment net sales increased 6%, driven by a 9% increase in Free People Group wholesale sales. 

Nuuly segment net sales increased by $15.0 million driven by a "significant increase in our subscriber base."

Net income plunged to $31.5 million or 33 cents a share from $53.5 million or 54 cents a share a year ago. 

Gross profit in the first quarter declined to 30.7% from 32.4%, selling and general expenses rose to 26.3% from 24.5%, and operating income declined to 4.4% from 5.9% a year ago. 

Inventories at the end of the quarter shot up after Urban Outfitter branded goods sales were lower than expected, higher supply lead times also demand higher inventories, and rising costs of freight and raw materials added. 

At the end of the quarter inventories rose 31.9% to $152.2 million.  

In the quarter, the company repurchased and subsequently retired 2.4 million common shares for approximately $62 million and as of April 30 21.5 million common shares were remaining under the share repurchase programs.

During the quarter the retailer opened 5 new stores and closed 3 and the company plans to open 38 new stores, including 12 FP Movement stores, and close 16 existing stores. 

Guidance and Outlook

The company issued no revenue or earnings guidance for the next quarter or the rest of the year. 

Company and Stock 

Urban Outfitters, Inc., offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of consumer brands comprising of 262 Urban Outfitters stores,  237 Anthropologie Group stores, 174 Free People stores.

The company also owns and operates 11 Menus & Venues restaurants, 4 Urban Outfitters franchisee-owned stores and 2 Anthropologie Group franchisee-owned stores as of April 30, 2022.

In total, Urban Outfitters operates a total of 684 stores with selling retail square foot space of 4.5 million and employs 23,000 associated worldwide. 

Urban Outfitters gained 11.4% to $20.11 after the apparel retailer reported earnings. 

In the year-so-far Urban Outfitters stock has declined 32.5%.