Urban Outfitters Q4 Earnings Call Transcript

123jump.com Staff
10 Mar, 2010
New York City

The lifestyle specialty retailer quarterly sales increased 16% to $589 million on comparable store sales rise of 4%. Net quarterly income surged 92% to $78 million due to significant improvements in initial merchandise margins. Earnings per share rose to 45 cents from 24 cents a year-ago quarter.

Urban Outfitters, Inc. ((URBN))
Q4 2010 Earnings Call Transcript
March 4, 2010 11:00 a.m. ET

Executives

Glen T. Senk – Chief Executive Officer and Director
Eric Artz – Chief Financial Officer
Tedford G. Marlow – President – Urban Outfitters Brand, Worldwide
Calvin Hollinger – Chief Investment Officer

Analysts

Adrienne Tennant - Friedman, Billings, Ramsey & Co.
Lorraine Hutchinson - Bank of America/Merrill Lynch
Betty Chen – Wedbush Morgan Securities
Michelle Tan - Goldman Sachs
Brian Tunick - JPMorgan Chase & Co.
Michelle Clark - Morgan Stanley
Paul Lejuez - Credit Suisse
Samantha Panella – Raymond James & Associates, Inc.
Edward Yruma – KeyBanc Capital Markets
Christine Chen – Needham & Company, LLC
Richard Jaffe - Stifel Nicolaus & Co.
Liz Dunn - Thomas Weisel Partners
Dana Telsey - Telsey Advisory Group
Stacy Pak - SP Research
Barbara Wyckoff - Jesup & Lamont
Sharon Zackfia - William Blair & Company
Erika Maschmeyer - Robert W. Baird & Co.
Roxanne Meyer – UBS
Laura Champine - Cowan and Company
Holly Guthrie - Boenning & Scattergood
Marni Shapiro – The Retail Tracker
Randy Konik – Jefferies & Company
Howard Tubin - RBC Capital Markets
Maggie Gilliam - Gilliam & Co.
David Weiner - Deutsche Bank

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Urban Outfitters Incorporated fourth quarter fiscal 2010 earnings call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. Please do not queue for the Q&A portion of this call until announced. Anyone doing so prematurely will be deleted from the queue. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference call is being recorded.

The following discussions may include forward-looking statements. Please note that actual results may differ materially from those statements. Additional information concerning factors that could cause actual results to differ materially from projected results is contained in the company’s filings with the Securities and Exchange Commission.

I would now like to introduce your host for today’s conference, Mr. Glen Senk, CEO. Sir, you may begin.

Glen T. Senk

Good morning. It’s my pleasure to welcome you to the URBN quarterly conference call. Joining me today is Eric Artz, Chief Financial Officer, John Kyees, Chief Investor Relations Officer and our senior team including the majority of our brand and shared service leads.

Earlier today the company issued a press release outlining the financial and operating results for the three and twelve month periods ending January 31, 2010. I will begin today’s call by reading prepared commentary regarding our performance; then the group and I will be pleased to answer any questions you may have.

As usual, you will be able access the text of today’s conference call on our corporate website at www.urbanoutfittersinc.com.

We are delighted to report a series of record-breaking results for the quarter and for the year. The following summarizes our fourth quarter fiscal 2010 performance versus the comparable quarter last year:

Net sales increased 16% to $589 million - the largest quarterly revenue performance in our history. Income from operations grew 88% to a record $119 million, resulting in a best-ever fourth quarter operating margin of 20%. Net income increased 92% to a record $78 million or $0.45 per diluted share.

Comparable retail segment sales, which includes our Direct-to-consumer channel, rose by 9%. Comparable store sales increased 4%; comp sales at Urban Outfitters were flat, and comp sales at Anthropologie, Free People and Terrain rose by 10%, 11% and 23% respectively.

Direct-to-consumer sales soared 28% despite a strategic 18% reduction in circulation, with all three brands posting double-digit increases. Wholesale segment revenues declined 2% to $23 million. Gross profit margins increased 771 basis points, driven by significant gains in initial margins and reductions in merchandise markdowns to clear seasonal product.

Comparable store inventories were 3% lower at quarter’s end. Selling, general and administrative expenses, expressed as a percentage of sales, declined one basis point for the period despite a significant accrual of additional incentive-based compensation expense related to our annual performance and earnings.

Finally, cash, cash equivalents and marketable securities grew by $224 million to $745 million.

I’ll begin this morning by providing more detail on each of our key business metrics for the quarter, starting with sales.

New and non-comparable store sales contributed $40 million including a gain of $3 million in currency translation adjustments for foreign-based sales. The company opened eight new stores in the quarter - four each for Anthropologie and Urban Outfitters, including one Urban Outfitters in Europe, bringing the total new stores opened for the year to 33.

Within the quarter, comparable store sales were positive each month but strongest in December. By region, sales at Anthropologie were positive in all locations but strongest in the Northeast and South; in comparison, sales at Urban Outfitters were strongest in the Midwest and lagged on the West Coast. By store venue, sales at Anthropologie were uniform across all types whereas sales at Urban Outfitters were strongest in mall locations.

The company’s comp store sales performance was driven by a 4% increase in transactions and a 4% increase in average unit selling price which more than offset a 4% decrease in average units per transaction. By brand, the number of transactions increased 8%, 25% and 2% at Anthropologie, Free People and Urban Outfitters respectively.

Average unit selling prices increased 14% at Anthropologie and decreased 8% and 2% at Free People and Urban Outfitters respectively. Finally, units per transaction were flat at Urban Outfitters and down 11% and 4% at Anthropologie and Free people respectively.

Direct-to-consumer sales increased 28% to $112 million despite a strategic circulation decrease of 18%. The penetration of Direct-to-consumer sales to net sales as a whole increased nearly 2 percentage points to 19%, highlighting a secular shift in the way our customer is shopping. The results were driven by more than 26 million website visits, a gain of 27% or five-and-a-half million additional visits.

The Direct-to-consumer channel was double-digit positive across all brands, and our strategic investments in assortment, site experience, fulfillment and social media continued to yield high returns. Since the Direct-to-consumer channel is becoming such a meaningful part of each brand’s revenue, effective next quarter, the company will begin to report comparable retail segment sales by brand and will limit comparable retail store sales information to the total company’s performance.

By merchandise category, women’s apparel and accessories led the pace at Anthropologie and men’s and women’s apparel were strongest at Urban Outfitters. As we’ve communicated consistently throughout the year, there were powerful fashion cues in our business, and our customers continued to discriminate by responding to newness, scarcity, and great, authentic design.

Our comparable store inventories were 3% lower at quarter’s end. The brand presidents are very comfortable with our inventory position, and as I have mentioned before, they will continue to focus on achieving appropriate reductions in our inventory weeks-of-supply because we believe it positively impacts the customer experience, and ultimately results in improvement to maintained margins.

I’d like to now turn your attention to our wholesale segment for the fourth quarter. With the addition of Leifsdottir, revenue declined by 2% to $23 million due primarily to a strategic reduction in clearance sales.

Free People’s wholesale revenue decreased by 5% to $21.9 million, with sales to specialty stores increasing 7%, sales to department stores decreasing 2%, and sales to clearance outlets decreasing 28%. The brand’s average unit selling price increased 17% while unit sales declined 19%, driven primarily by the reduction in closeout sales.

Leifsdottir’s wholesale revenue increased 77% to $1.6 million, and we continue to gain confidence in the brand’s long-term potential.

I’d like to now turn your attention to gross margin, operating expense and income. Gross margins for the quarter increased 771 basis points to 41.7% driven largely by gains in initial margin and a reduction in markdowns to clear seasonal product. Let me reiterate that over the long-term, we believe we have additional initial margin opportunity, and opportunity to reduce markdown levels to our historic average.

The organization continued to exhibit exceptional discipline in managing expenses while simultaneously making strategic investments in design, the supply chain, technology, our Direct-to-consumer businesses and our European infrastructure.

Total selling, general and administrative costs for the quarter, as a percentage of sales, decreased by 1 basis point to 21.6% despite a significant accrual of additional incentive-based compensation expense related to our annual performance and earnings.

The company generated an impressive 20% operating margin, earning a record $119 million of income from operations, an increase of 88% versus the same quarter last year. We also achieved our highest-ever net income for a quarter - $78 million, an increase of 92% from the prior year, with earnings per diluted share of $0.45.

The company’s annual effective tax rate for the year was 36.2% versus 35.6% for the prior year. The increase in the current year rate is primarily attributable to a lower proportion of tax free interest income due to a strategic shift to a mix of lower risk securities versus the prior year’s holdings. The company estimates that next year’s annual effective tax rate will be approximately 35.9%. The expected favorable change in next year’s rate will be due in part to an increase in income generated from foreign operations.

We’ve just completed a year that most of us will never forget - a year that was extraordinary in so many ways, and a true test of our organization. I think it’s fair to say that our company experienced the impact of the 2008 economic reset later than many of our peers. Given our exceptional fourth quarter results, I believe it’s also accurate to say that we adjusted to the reset faster than many of our peers.

Let me remind you that our business grew 22% in 2008; that we finished the year with an 8% comparable store sales gain and a 32% increase in our Direct-to-consumer channel. It wasn’t until the fourth quarter of 2008 that our performance decelerated to a 1% comp sales decline and 20% Direct-to-consumer sales growth. We reached the nadir of this cycle the following quarter - the first quarter of 2009 with a 10% comp sales decline and Direct-to-consumer growth of just 4%.

The organization reacted swiftly to the unprecedented challenge, and as soon as the environment began to stabilize, they were able to read patterns in the business and respond accordingly. Driven by the teams’ effective efforts, the trend improved in each quarter throughout 2009, culminating in our record fourth quarter performance. I’m equally pleased to announce that our current February sales results exceeded our fourth quarter performance which gives us confidence that our strategies have taken firm hold.

These are the results of an exceptional organization - an organization characterized by passion, tenacity, intellect, agility, discipline, creativity and alignment. I believe these results also highlight the efficacy of our operating model and strategy, and for that, I offer the organization’s appreciation to Dick and the Board.

Before I close the call I’d like to spend a few minutes reviewing our priorities for the year. We have four key initiatives, and I’ll touch on each of them briefly.

Our first focus is driving continuing gains in four-wall productivity. If we can continue our historic ten-year average comp rate over the next decade, we’ll drive an incremental $1.2 billion to the company’s top-line. Our strategies include making continued improvements in four key areas - right product, right time, right place, right price; site selection and store design; store operations; and marketing, including the launch of our cross channel database.

Our next priority is to continue to drive our e-commerce business resulting in a higher penetration of Direct-to-consumer sales to total company sales. We’re unwilling to set a limit to the level of penetration, and we’re increasingly channel-agnostic as to how the customer reaches us. Our strategies for the year revolve around making iterative and disruptive changes to our online merchandise content, continuing to improve our websites, continuing to increase access to our brands through mobile technology, continuing to improve fulfillment operations, and continuing to mine social media.

Our third priority is international expansion. We have every indication that the company can achieve an appropriate level of profit and productivity in Europe. Urban Outfitters has made great strides over the last several years including a successful entry into Germany and a thriving launch of e-commerce. Anthropologie opened very successfully in London last fall and is about to open its second London location and launch its e-commerce site this month; and Free People will begin a course of European wholesale expansion in the current year.

Andrew McLean, the company’s Chief Operating Officer for Europe, is leading many of our European infrastructure and tactical improvement initiatives including comprehensive market research and due diligence, the design and implementation of a logistics and fulfillment strategy, upgrades to our retail and Direct-to-Consumer operating systems and so on.

We have also begun to lay the groundwork for the company’s expansion to the Far East. It is unlikely that we will have anything definitive to report in the near future, but we are targeting a calendar 2012 or 2013 launch.

Our fourth and final priority is adding new brands to the Urban portfolio. We see our company as a group of niche brands, and because we feel so strongly that scarcity creates value, we envision the company will be comprised of a minimum of six significant brands over the next ten years. To that end, we are advancing our efforts with Leifsdottir. We launched the Leifsdottir website two weeks ago, we plan to launch shoes and handbags for shipment in the beginning of 2011, and we expect to open our first retail store in 2011. It’s still too early in the brand’s development to talk about long-term potential, but the early signs continue to be extremely positive.

We were also very pleased with the progress that Terrain made during the fourth quarter. I have said repeatedly that Terrain reminds me of Anthropologie in the early days. The customer loves it and her enthusiasm for the experience is now generating significant increases in comp sales. The Terrain team is confident that they can maintain the positive momentum.

I am also pleased to announce that the company will be launching its next brand on Valentine’s Day, 2011 - a wedding lifestyle concept that we hope will be as innovative as our existing brands. We plan to sell an event-based assortment of heirloom wedding gowns; bridesmaid and special occasion dresses; shoes, bags and accessories; intimate apparel; invitations, décor and gifts. We also expect to offer a community for brides before, during and after the wedding. The brand will initially launch with a website followed by a store opening later in the year.

Of course none of these initiatives happen without people and I’d like to take a moment to announce three important promotions in the company. I couldn’t be more pleased to recognize Barbara Rozsas who was just promoted to Chief Sourcing Officer and Wendy Wurtzburger and Wendy McDevitt who were just promoted to Co-President of the Anthropologie brand. Collectively these three women have more than 40 years with our company and they are each best of class at what they do. There is not a day that goes by when Barbara, Wendy and Wendy don’t make our organization better, nor is there a day that goes by when they don’t teach me something or make me a better leader. The organization and I are profoundly grateful to their commitment, and it is a joy to publicly recognize their extraordinary contribution to our company.

I firmly believe we are a better company today than we were a year ago, and I hope I have conveyed the sense of optimism we are feeling. As we have often stated, the company’s overarching goal is constant and simple: to grow revenue by at least 20%, to grow profit at a faster rate than sales, and to reach a minimum of 20% operating margin. As always, the leadership team and I look forward to continuing to inspire our customers and reward our shareholders and employees alike.

I will now open the call to questions, and as is our custom, I ask each of you to limit yourselves to one question. Thank you.

Question-and-Answer Session

Operator

Thank you. If you have a question at this time, please press the star then one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Please limit your question to one per caller. And if you are using a speakerphone, please lift the handset. One moment please for our first question.

Our first question comes from Adrienne Tennant of Friedman, Billings.

Adrienne Tennant - Friedman, Billings, Ramsey & Co.

Good morning and congratulations on a great end to the year. My question is on the direct, it''s pretty amazing what you''ve been able to do with the circulation reduction. What is behind that? What are you doing to reduce the circulation and increase the efficacy of what you''re circulating?

Glen T. Senk

Adrienne, it really goes back to the things we have been talking about on the last several conference calls. It’s the strategy that we have around product, around the site itself, around fulfillment and around social media and also around mobile, so access to the site.

So if I talk about each of those things briefly, with product we’ve made iterative changes to the assortments and by that I mean adding things like additional sizes within themes, expanding assortments where we don’t have the physical constraints of a brick and mortar store.

We’ve also begun to make disruptive changes to the assortment so by that I mean things that we believe are appropriate for each of our customers in each of our brands but things we wouldn’t normally carry in a store. So kind of a minor example of that might be swimsuits in Anthropologie. A more significant example of that might be the bicycles that Urban Outfitters offered this past season. So that’s the product offered.

Then you start to look at the websites themselves. Each of our brands have gone through multiple site redesigns over the last several years. As you know, we launched APG two years ago which both Urban Outfitters and Anthropologie run on, Free People runs on a different system. What all of the systems do is they allow the sites to be much more sticky, much more user-friendly, the checkout process is simpler, the analytics that we have to drive the business are more robust and so on.

I mentioned mobile. All of our brands have some version of mobile access. Free People right now I believe probably is leading the way but the other two brands will have mobile sites that they are very happy with in the next several months.

Social media – we’ve done a great job. I think in North America alone we collected over 200,000 names on Facebook between our three brands. I was just looking at some data yesterday. We are really using the blogs effectively.

Free People actually launched rating or reviews. Meg, what, made about a year-and-a-half ago. Urban followed suit. Anthropologie launched it in the middle of last year. That’s been tremendously effective. So, we’ve gotten smarter and smarter about how to monetize all the opportunities around social media.

And then lastly, fulfillment. We are very mindful of the fact that some of the e-tailer benchmarks have done a sensational job with the whole concept of past and pre. That’s an area that we are testing. We will be very methodical about it but certainly the kind of boundary is to direct response buying or for shrinking in the last several years and with all those things paper is just going away. I don’t think it is going away overnight but I think ten years from now it will probably be gone and I think you are seeing that in the world of magazine publishing and you are seeing that in many, many other areas. So, we are just trying to stay current. It’s a very, very exciting time for us.

Adrienne Tennant - Friedman, Billings, Ramsey & Co.

And what''s the circulation reduction for 2010, please?

Glen T. Senk

I think it is flattish.

Adrienne Tennant - Friedman, Billings, Ramsey & Co.

Okay, wonderful. Good luck.

Glen T. Senk

Thank you.

Operator

Our next question comes from Lorraine Hutchinson of Bank of America.

Lorraine Hutchinson - Bank of America/Merrill Lynch

Thank you. Good morning, was just hoping to get a little more detail on the gross margin. Can you just talk through some of the drivers of the IMU opportunity that you have going forward? And then if you did get markdown levels back to historic rates, what would the impact be to margin, and then any update on the move from third party to more private label at Urban and that impact on margins? Thanks.

Glen T. Senk

I’ll ask Eric to get started with that since he has been with us about two-and-a-half weeks. If he needs help John or I will jump in.

Eric Artz

Lorraine, the comparisons in our margins, I guess I will first start by comparing it to Q3. Our markup is rather consistent from the third quarter end to the fourth quarter. So that’s one piece of information, markdowns are clearly higher from quarter to quarter just based on the seasonality of our business.

As we look into fourth quarter comparisons, the improvement driven -- the 771 basis point improvement which is really shared by markup and markdown almost equally with a slight advantage to markup and we leveraged occupancy with a positive comp as well.

So, looking forward, the company has made great strides in IMU improvement but as you point out we do have opportunities in the markdown compared to our historical rates and we will continue to focus on that and when it comes to the mix of business driven on the private side I think we see slight improvement but not dramatic improvement going into fiscal ’11

Glen T. Senk

I know -- I’ll just add. I know everyone, I know you are all doing models and you want us to commit to specific numbers and all I can say is what I have heard Dick say for the 16 years I have been with the company is that our goal is to drive our profits faster than we drive our sales. And we – I reiterate what I said in the prepared comments.

We believe we continue to have significant IMU opportunity. We believe we have opportunity to reduce our markdowns to historic levels. I don’t want to get into specific details as to what that means but we think we have good upside with maintained margins in the next several years.

Lorraine Hutchinson - Bank of America/Merrill Lynch

Thank you.

Operator

Our next question comes from Betty Chen of Wedbush.

Betty Chen – Wedbush Morgan Securities

Thank you, good morning and congratulations.

Glen T. Senk

Thanks, Betty.

Betty Chen – Wedbush Morgan Securities

Glen, you said in our opening remarks that obviously you''re quite pleased with how all the brands performed during the holiday season. And so far I believe you said February has been trending above Q4 levels. Could you give us a sense of, at least during the holiday, what sort of unique and differentiated merchandise customers really reacted to for each brand? And then also in February, what sort of performance can you tell us by brand, have they all improved versus Q4 level? Thank you.

Glen T. Senk

Betty, I can give general merchandise comments. We’ve kind of gotten away from giving specifics on that. As I said in the prepared comments really, across the company the apparel business was quite strong and then in Anthropologie accessories was also strong and at Urban it was both men’s and women’s apparel.

I had said repeatedly that there is a lot of fashion. The shows in New York in the last several weeks, the shows in Europe, everything looks terrific and there’s great trend in all of our businesses and it goes back to what I have said repeatedly, the people are shopping their closets if they can shop their closet. So the kind of product that’s selling is the product that’s fresh, that’s new, that’s compelling. It’s not been about price for us. It’s been about how special the product is, how novel the product is, how unique the product is.

With regard to our February trend, our trend was positive for all of our businesses relative to the fourth quarter and that’s despite the snow which we didn’t talk about in the prepared commentary but obviously we have a lot of stores that are outside or in open centers. So, I am particularly pleased that we could report that given the record snow we had this past month.

Betty Chen – Wedbush Morgan Securities

As a follow-up to that, Glen, can you help us quantify what the snow impact could have been to February? And maybe how we could think about recouping that in March, especially with an earlier Easter this year?

Glen T. Senk

I am going to respond two ways. First of all, when I was at ICR a few weeks ago, everyone begged me for sticking to one question so I am going to do that because I think it just keeps the call crisper. With regard to the quantification I’ll answer this and this is the last time I will answer a second follow-up question.

I don’t want to give specifics. I have a feeling that everyone is listening to this call. It’s far better at calculating the specifics than I am. I don’t know what we will get back in March but I can tell you I feel great about our February.

Betty Chen – Wedbush Morgan Securities

Great. Thank you so much and good luck.

Glen T. Senk

Thank you.

Operator

Our next question comes from Michelle Tan of Goldman Sachs.

Michelle Tan - Goldman Sachs

Thanks. I was wondering if you could talk, Glen, a little more about some of the specific capabilities that you''re thinking about in the direct business to continue to drive the penetration of that higher, and then what the impact is as you look at your leverage point on the business from a comp perspective and you''re buying and occupancy as a percentage of sales going forward?

Glen T. Senk

Michelle, I am a little confused. There are two separate questions. You want to know what the impact on SG&A is as a result of the direct business improvement and penetration?

Michelle Tan - Goldman Sachs

Yes. And if you want to pick one to answer, go with the details on the development ideas.

Glen T. Senk

Yes. It’s building -- what we plan to do is continue to build on what we have done this past year. I think and I have said this before we do not benchmark ourselves against legacy brick and mortar retailers. We are benchmarking ourselves against e-tailers and so when you look at an Amazon, this is off the top of my head but I think they are doing about $25 billion this year. They clearly had better growth than we’ve had in the last decade.

We are not an Amazon. They are a marketplace and technology company with brands. But I certainly want to learn from Amazon. I want to learn from the off-price auction sites. I want to learn from Facebook and we are really having a lot of conversations internally that talk about the fact that the e-commerce world is probably long term – the best representation of who we are as a brand.

Historically, if you think about this we started as a brick and mortar retailer. We introduced wholesale. It was only a dozen years ago that we introduced the catalog to the company and we jokingly recall, I think it was maybe eight, nine years ago when Michael Robinson who now runs Anthropologie Direct in Europe carried the HP computer on his back into his office to run the direct-to-consumer systems.

So, we are moving maybe not as quickly as Amazon but relative to where we come from we think we are moving quickly. So, the kinds of improvements we are making are focused in the areas that I talked about. I think you will see much more around product innovation on all of our sites and all of our brands and I think you will see us testing new categories that we believe are customer brand appropriate but that you wouldn’t see in the stores.

I think you will see a lot of interesting things happen in our websites. We don’t have a lot of video for example right now and I am sure you’ve all have read the impact that video has on conversion. I think you will see us do a lot more with social media. I think you will see us testing this whole concept of past and pre. The Merkle database, which I am sure someone is going to ask me about I think will have a profound impact on our direct-to-consumer business.

And the other thing we are not really -- I’ve talked about on earlier calls is how our e-commerce and websites can synergistically impact our retail business, the brick and mortar retail business. Remember the only way that we have to talk to our retail customers which is still north of 80% of our business right now is through catalog and kind of general e –mails but they are not targeted. So when we have Merkle up and running, which will happen at the end of the year we will be able to understand exactly what impact we get at every e-mail that we send or every Facebook that we manage.

So I hope that gives you some clarity. With regard to the SG&A I will wait for someone else to answer the question.

Eric Artz

Michelle, this is Eric. I would just add on the direct business that in the fourth quarter fiscal ’09, we had double-digit increases, in the fourth quarter fiscal ’10, we had double-digit increases and as Glen mentioned in his comments February outpaced as well for all brands.

Michelle Tan - Goldman Sachs

Thank you.

Operator

Our next question comes from Brian Tunick of JPMorgan.

Brian Tunick - JPMorgan Chase & Co.

Okay. Thanks, and congrats as well. I guess Glen and Ted, I guess it''s very impressive obviously that the apparel comps at the core Urban division have been doing so well. Especially since it seems like a lot of the other teen and mall-based retailers seem to be copying some of your trends. My question more so is on the accessory and home business. I know you''re up against much easier comparisons here in the first half, but maybe can you talk about what you''re doing in that category -- accessory and home -- to get the momentum back in the business?

Glen T. Senk

I’ll just say one brief thing and then I’ll turn it over to Ted. I just want to remind everyone that on a two-year basis, that the Urban’s two-year comp was 3% for the fourth quarter and Anthropologie was 4% for the fourth quarter.

So, Urban Outfitters remember in our fiscal ’09 was positive in the fourth quarter where Anthropologie was down 6%. So, the performance on a two-year basis between the two brands is essentially within a point of one another. I think it is important for everyone to remember that.

Now I will turn it over to Ted.

Tedford G. Marlow

Yes Brian, on accessories and home we did see coming through fourth quarter, we did see a nice improvement in comp performance in women’s accessories and home. With both of those businesses, as we came through last year we began putting more emphasis into the design, with the proprietary design team that we’ve had in place with women’s. We put similar staff in place to support women’s accessories and home and we have seen improvement in product performance in the fourth quarter in both those businesses.

I would also add that that improved performance continued as we turned the corner into the New Year and we do like the way our women’s accessories business is treating us right now.

Eric Artz

I’d add a follow up Brian on that as well which is we obviously never disclose the profitability of our businesses. However, we did talk at the January release regarding sales, how markdowns were down for the Urban division as well. So when we talked in the grander scheme about profitability and $0.45 for the quarter, Urban had a great quarter.

Glen T. Senk

We had a record quarter.

Tedford G. Marlow

The Urban business for the quarter. I took a look at the trade in five years, the five-year average on op income, percentage basis; we were a number of 100 basis points north of that in the quarter. So the team did a great job for Q4.

Brian Tunick - JPMorgan Chase & Co.

All right. Congrats and good luck this year.

Glen T. Senk

Thank you.

Tedford G. Marlow

Thank you.

Operator

Our next question comes from Michelle Clark of Morgan Stanley.

Michelle Clark - Morgan Stanley

Thank you. Good morning and congratulations to the team. My question is on SG&A expense and how we should be thinking about for 2010, obviously very strong expense control in 2009 with dollars up 8% versus north of 20% over the past four years on average. Can you sustain that level? Or how should we be thinking about the leverage point in 2010, the sensitivity around that and then SG&A dollar growth in 2010? Thank you.

Eric Artz

Michelle, this is Eric. I think the leverage point is somewhere in the 2% to 3% range which we have talked about in the past as well. Just coming back to Glen’s prepared comments, he highlighted numerous initiatives in his remarks so relative to that and similar to the levels that we saw in Q4 I think we will be trending higher relative to our SG&A spend and that obviously depends on our comps as well.

We’ve also talked in the past about 30% of our base being bearable. So, I think in one of our previous calls John quoted SG&A growth somewhere in the double-digit range for fiscal ’11 and that’s a number that we feel comfortable with.

Michelle Clark - Morgan Stanley

Great. Thank you.

Operator

Our next question comes from Paul Lejuez of Credit Suisse.

Paul Lejuez - Credit Suisse

Thanks, guys. Can you talk about inventory levels by brand and how you see that playing out throughout the year? Thanks.

Glen T. Senk

Paul, I find myself answering the same way more or less every time. We manage two weeks of supply not to absolute inventory levels. So, right now the total comp inventories were down 3%. They were down most at the Urban brand and least at the Anthropologie brand, kind of following the comps.

But, as I said in my prepared comments each of the brand presidents feel very, very comfortable with where the inventories are. Over the long term, meaning over the next three to five years, I’d like to see a continued reduction in weeks of supply as we get up and running with our TradeStone software system, as we continue to make improvements in our planning and allocation systems. And the reason why we all feel so strongly about that is because we think it will, as I said in my prepared comments, improve the customer experience. The less the store has to handle the product, the more time they can spend with the customer, the crisper, and cleaner and fresher the product is and so on, and of course the benefit of that is improved merchandise margins.

So, we’ve had a lot of help from the sourcing group over the last couple of years reducing our weeks of supply and that’s really what you are seeing in the numbers and I think we will continue to see improvements there.

Paul Lejuez - Credit Suisse

Thanks.

Glen T. Senk

Thank you.

Operator

Our next question comes from Samantha Panella. Your line is open.

Samantha Panella – Raymond James & Associates, Inc.

Thank you and congratulations. I guess again going back to the direct business with this being such a growth priority. Can you help us think about, obviously it has a higher operating margin than the store level and what the opportunities to grow that operating margin at the direct business are? Thank you.

Glen T. Senk

Yes Sam, I think I know we’ve talked about in general terms the differences between the four wall brick and mortar profitability and the wholesale profitability and the direct profitability and we are absolutely most profitable in the direct business. So, it’s a nice thing that we continue to gain penetration.

Having said that, we are making a lot of investments in the direct area as we develop their plans for the current year. We didn’t plan to deleverage in many areas but one of the areas that we did plan to deleverage slightly is in the IT area. Calvin sitting to my right, I am sure someone is going to ask about some of the IT initiatives at some point but Calvin has got a lot on his plate much of which will impact the direct business. We also -- remember North America we have only one fulfillment center. We are looking to add a second fulfillment center this year.

We are also looking to go from third party fulfillment to in-house fulfillment in Europe. I think it’s likely that we will get to at least two fulfillment centers pretty quickly in Europe. I think it will continue to be the most profitable channel but we are also looking to make investments because when Eric came in one of the first things he did was look at the return on investment of every dollar we spent and obviously given the kind of profitability, our ROI in the direct-to-consumer business averages about two to three times better than any dollar we spend anywhere else in the company. So we are going to be spending money there.

Samantha Panella – Raymond James & Associates, Inc.

Great. Thank you and good luck.

Glen T. Senk

Thanks Sam.

Operator

Our next question comes from Edward Yruma of KeyBanc.

Edward Yruma – KeyBanc Capital Markets

Thanks very much for taking my question and congratulations on a great quarter.

Glen T. Senk

Thank you.

Edward Yruma – KeyBanc Capital Markets

Your cash continues to build and I know that you continue to review on a periodic basis. Can you give us some of your thought process behind the deployment of cash to new growth vehicles or the potential of turning back to shareholders? Thank you.

Glen T. Senk

I’ll ask Eric to take that.

Eric Artz

Edward, our cash position was rather consistent with our peer group through most of fiscal ’10. Obviously with the performance of our business in the fourth quarter seasonality that balance has grown considerably. So, I would just say that we’ve had numerous conversations about that situation here over the last couple of weeks and we will continue to look at it and I think we will just come back to you when we have more definitive direction in what we are going to do.

Glen T. Senk

We just finished the Board meeting Ed, and this is definitely a topic of our conversation in our board meeting and we will continue to look at it.

Edward Yruma – KeyBanc Capital Markets

Great. Thank you very much.

Glen T. Senk

Thank you.

Operator

Our next question comes from Christine Chen of Needham & Company.

Christine Chen – Needham & Company, LLC

Thank you and congratulations on yet another good quarter.

Glen T. Senk

Thanks, Christine.

Christine Chen – Needham & Company, LLC

I was wondering for the direct business within the brands, do you see the same trends at the store level? I''m wondering given that the Urban customer is younger, do they shop online more and maybe that’s hurting the stores a little bit? Thank you.

Glen T. Senk

Yes, Christine, as I said in the prepared comments we feel so strongly that customers are shopping across channels regularly that we are going to start to report our comps including direct for the new year that we just started. Having said that, based on the analysis that we’ve done and based on anecdotal information in my gut I think it is pretty similar across all of our brands.

Of course, the direct business at Free People is much more important to the total Free People retail segment than it is at Urban and Anthro because Free People has far fewer stores. But the way that customers toggle between a store one day, a website another day, a mobile experience the third day is very, very consistent and it is counter-intuitive because like you I would have thought that the Urban customer would have been the earliest adopter. But things are moving very, very quickly for the 30 to 45 group.

I am sure you know at Facebook the fastest growing component of Facebook users is that 35 to 45 or 30 to 45-year-old customer, actually the fastest growing segment of online games is women aged 30 to 45. So, it is pretty surprising how quickly this is all taking hold.

Christine Chen – Needham & Company, LLC

Great, thank you and good luck for spring.

Glen T. Senk

Thanks, Christine.

Operator

Our next question comes from Richard Jaffe of Stifel Nicolaus.

Richard Jaffe - Stifel Nicolaus & Co.

Well done. Thank you very much.

Glen T. Senk

We are all laughing, Richard.

Richard Jaffe - Stifel Nicolaus & Co.

I appreciate you laughing with me.

Glen T. Senk

Always.

Richard Jaffe - Stifel Nicolaus & Co.

Glen, it seems that the resources, the creative forces within your organization are unstoppable now that new idea for next February. Do the wheels keep turning, are there more ideas being granulated within Anthropologie, within Urban? Are there more creative forces being brought to bear on what are now the very, well the old citizens within your portfolio, Anthropologie and Urban?

Glen T. Senk

Yes, absolutely Richard. I think when we talk about the year that we’ve just finished; I said repeatedly that the company did an amazing job of dividing and conquering. There was a group of us who looked at the budgets, looked at the expenses in the business and did an amazing job with fiscal discipline and control. There was another group of us who said how is this economic environment impacting what the customer is going to want to experience and going to want to buy and I think that the improvement that you saw from quarter to quarter and the tremendous fourth quarter is really a result of the use of creativity to reconnect with the customer.

So, this is not a creative manifestation. It doesn’t just happen with new brands. It happens with the rebirth of each of our brands and quite frankly, almost every day. We have many sayings in this organization. One is, that the only thing that is constant is change. Another thing, if you look in the rearview mirror more than once every seventh second you are going to do a car accident. Nothing is more boring than last year’s bestseller.

We are an organization who constantly moves forward and redefines ourselves and we are true to take position from decades ago but it’s the concept vision. It is not the execution vision. That has to change. We drive our business with newness not with price. And just to build on what you said there are so many fun things about working for this company but probably the most fun thing is working with the creative folks in this organization because they are absolute best of class and if we kind of manage the creative process properly they just drive tremendous value for the organization and that’s what we are seeing.

Richard Jaffe - Stifel Nicolaus & Co.

Thank you.

Glen T. Senk

Thank you.

Operator

Our next question comes from Liz Dunn of Thomas Weisel Partners

Liz Dunn - Thomas Weisel Partners

Hello. Let me add my congratulations.

Glen T. Senk

Thanks, Liz.

Liz Dunn - Thomas Weisel Partners

My question is can you address your long-term top-line growth specifically in light of slowing domestic store growth? And what specific impact is expected from direct? How does Europe fit into your 45 openings for 2010? And then how should Europe ramp?

Glen T. Senk

Liz, we talked about this probably so I will kind of reiterate what I said. We have four key objectives. The first objective is continuing to drive for overall productivity and as I said in the prepared remarks it is pretty staggering but if we can average the 7% comp for the next 10 years like we have averaged for the last 10 years we will drive a $1.2 billion of incremental revenue to the top line. And you all listening to this call understand the profitability of that $1.2 billion of revenue.

We have many strategies for doing that. Strategies revolving around getting the right product in the right place at the right time at the right price and that relates to sourcing strategies, planning and allocation strategies and so on.

Our second kind of area with driving retail productivity relates to store design and site selection. Our third is store operations and the fourth and probably the most impactful is the database that will allow us to manage our retail business with a much higher level of optics we have today. So that’s number one.

Number two is e-commerce. I don’t want to limit how big a business, how much of that business e-commerce can be. If you asked me five or eight years ago if it could be more than 20% of the business I probably would have said no. Last year, internally we were saying it would be somewhere between 20% to 30% in all likelihood. Today, we are not going to limit it to 30%. It could be more than 30%. We are just going to keep doing everything we can do to drive that business.

We had internal goals that are very, very aggressive. International – as I said in my prepared comments, we have every indication based on the success of Urban Outfitters and the launch of Anthropologie that we can be as profitable as we need to be in Europe. Also based on the research we have done in the Far East we think the same holds true for there. So we are going as quickly as we can in Europe.

Andrew has done a great job laying the infrastructure which we need to have in place before we put the pedal, the medal so to speak but I think you will see us start to open stores more quickly there and you will certainly see us ramp up that e-commerce business very aggressively in Europe and other parts of the world.

And then lastly, new brands, as I said in the prepared comments something that Dick and the Board and I and the senior team here feel unbelievably passionate about is this idea that scarcity creates value. We never want any one of our brands to become so big that they lose their specialness in the customer’s minds and as a result we absolutely need additional brands to achieve our URBN objectives.

So we now -- with letting -- that’s our six brands, as I said I think we need a 10-year plan we need 60 meaningful brands. I don’t know, I will give a range on what meaningful means. Let’s say not less than $500 million and probably more than a billion dollars and that’s potential, not actual results in 10 years.

So, we are very, very committed to launching these brands that all share the URBN sensibility, DNA, business approach and so on. So, these four overall growth objectives are something that we talked about continually. There’s probably not a person, an employee in the organization who doesn’t know about these. I blog about them. We have brown bag lunches about them and people are very, very excited about them.

Liz Dunn - Thomas Weisel Partners

Can you tell us specifically the European opening for 2010?

Glen T. Senk

No. What I would say and again I am cheating. I am answering the second question which I promised not to do. But what we said in the release is that the general, Urban and Anthropologie will open in the teens and Free People is slightly less than that and those teen openings are on a global basis not on the North American basis.

Liz Dunn - Thomas Weisel Partners

Okay, thanks, good luck.

Glen T. Senk

Thank you.

Operator

Our next question comes from Dana Telsey of Telsey Advisory Group.

Dana Telsey - Telsey Advisory Group

Good afternoon, everyone and congratulations.

Glen T. Senk

Thanks, Dana.

Dana Telsey - Telsey Advisory Group

The growth initiatives are exciting, whether it''s the new wedding concept, Europe, how do you see the financial impact of that on the business whether in capital spending or management talent that you need to add and sales potential? And Terrain, how did that do this year as one of the growth initiatives? Thank you.

Eric Artz

I think I will just refer back to the comments in previous discussions where John highlighted that we thought that the investment and no initiatives caused us in fiscal ’10 about $0.03 a share.

As we look to fiscal ’11 obviously some of those initiatives as they build up some steam are doing better and then we are coming on behind it with things like wedding and investing there. So I think on an ongoing basis, well the 3%, sorry the $0.03 number is directionally correct for fiscal ’11.

Glen T. Senk

And then Terrain, Dana, as I said in the prepared comments we were really pleased with the comp performance in the fourth quarter and it got better and better within the fourth quarter. There is a lot of momentum in the business.

I think the group is still in the heavy learning phase. When I say that it reminds me of Anthropologie. I will remind everyone on the call, Anthropologie didn’t break even for three years and the way Anthropologie looks today is nothing like Anthropologie looked like when it started and that was a very iterative process of testing, testing, learning, responding and that’s what the Terrain Group is doing right now but we are very, very pleased with the way the customers is reacting to the store.

Dana Telsey - Telsey Advisory Group

Thank you.

Glen T. Senk

Thanks.

Operator

Our next question comes from Stacy Pak of SP Research.

Stacy Pak - SP Research

Hi, guys. Thanks. Can you talk some more about just the whole systems side of things and how that should unfold in 2010 and 2011? Specifically, right product to the right place at the right price at the right time, the allocation, the database, the site selection, that kind of stuff. Thanks.

Glen T. Senk

Yes, so I will ask Calvin to answer that question.

Calvin Hollinger

Hi Stacy, this is Calvin. A couple of things, the right product, right place. We have just deployed an assortment planning system. Anthropologie, we expect to be home (inaudible) is rolled it out and Urban is now rolling it out as well so we are going to see some results from the assortment planning system.

Glen mentioned TradeStone, our P&L system, have to recall in the rollout phase. We have some domestic vendors on that and in two weeks we will be covering Asia to get all of our own brand manufacturers on TradeZone as well. That will give increased us specificity on the logistics side. We expect all of our vendors on that by about Q3, Q4, or a great portion of that to get help in the whole week’s supply. The customer cross-channel database, as Glen mentioned to get a cross-channel view of the customer. We are on track to roll it out towards the end of the year. I am hopeful that we will get it out at the late part of Q3.

I am not sure if that will have significance or any impact on Q4. We are on track and rolling it out as well. (Inaudible), huge initiative to get (inaudible) between our retail and our direct channel. That is on track. We are hoping to get our first brand leap store up (inaudible) in the second quarter followed by Free People, then have all brands on (inaudible) by next year.

What that gives us is the ability to fulfill demand, to stock in the store, fulfill the demand for a different store or from an online channel. And conversely, if we have a demand online, that we can order online, pick up in the store or fulfill from a different fulfillment center.

So again, huge capabilities. We hope to begin to seeing that impact some time next year.

Stacy Pak - SP Research

And then just so I understand, the assortment planning you said, it''s rolled to Anthro now and where are you with Urban and how does that impact that you talked about, how does that unfold to 2010 in terms of the numbers?

Calvin Hollinger

After the home category, Urban expects to have all the classes rolled out in next couple of months. I think it is too early to discuss what the impact will have, better assortment planning and buying decision across the brands.

Tedford G. Marlow

This is something that I am happy to talk about with people offline. It is one of my favorite subjects and I think having been a buyer a million years ago and a Divisional Manager and so on, I am very passionate about how this new system is going to be able to help us in making much better decisions. So I am happy to talk about this with any of you offline.

Stacy Pak - SP Research

That''s great. Thank you.

Tedford G. Marlow

Thanks, Stacy.

Operator

Our next question comes from Barbara Wyckoff of Jesup & Lamont.

Barbara Wyckoff - Jesup & Lamont

Hi, everyone. Great job. You know, you''ve been so strong in footwear accessories, across all brands, I''m wondering if there''s an opportunity to open small box stores in select locations where these classifications are highlighted without apparel or whatever, anyway it was the thought I had. And if you could talk a little bit about real estate strategy and Free People -- where do the Free People stores do best the productivity is very, very high. Is there much of a difference where you have a big wholesale in the same mall? In a Bloomingdales or Nordstrom or someone like that. Could you talk a little bit about crossover business?

Glen T. Senk

Barbara, that sounds like two questions.

Barbara Wyckoff - Jesup & Lamont

I tried to make it with one period at the end. Thanks, sorry.

Glen T. Senk

We are looking at many new concept ideas. We do have a wonderful accessory business in all of our brands. We have dabbled with the idea of pulling that out and doing something different with it. What I can say is what I publicly said we are very excited about going after the shoe and handbag business at Leifsdottir and I think that will be our first entrée into a kind of serious shoe and handbag business.

With regard to Free People I don’t want to give too much detail. I think that the productivity -- the Free People stores is great. Like our other brands we have great stores and not so great stores. There is absolutely no relationship between our wholesale distribution and our retail performance. If anything I would say there is a positive relationship and that’s probably what other people talk about I’d expect and as we said on the last call given the momentum in the business we have every intention of getting back to regular opening cycle of Free People.

Barbara Wyckoff - Jesup & Lamont

Great, thanks. Good luck.

Glen T. Senk

Thank you.

Operator

Our next question comes from Sharon Zackfia of William Blair.

Sharon Zackfia - William Blair & Company

Hi. It''s actually Sharon Zackfia. I wanted to follow low up on the Anthro program. I think it''s been around now for close to 18 months. Feels like there''s still some opportunity there to optimize that further. Can you talk about how successfully you think it''s been and where it goes from here?

Glen T. Senk

Sharon, the frustration and we talked about this on prior calls is that the third party service provider that we are using to help manage database isn’t able to give us the kind of acceptability and maneuverability that we want. So, I think it’s fair to say we’ve had a fantastic sign up. Wendy, what do we have now? How many names?

It’s well over a million. I can get to you offline, Sharon, and I think it is around 1.3 million at this point. We have great ID. What we do the customers love but we are really not able to do a lot which is why we are still anxious to get our cross-channel database up and running which Calvin continues to assure me will be some time in the end of third quarter of this year.

So we are just a few months away and I think once we have it we will be able to do the kind of things that we have always envisioned doing. And let me remind everyone it is not a loyalty program. The way we think about it in all of our brands is the more we know about our customers the more we can do for our customers.

Personalization is one of the biggest trends in technology right now and what this database will allow us to do is personalize the experience, the offer, the communication on a customer-by-customer basis and that’s a big win with the Anthro program and when the other brands roll out similar programs.

Sharon Zackfia - William Blair & Company

Thank you.

Glen T. Senk

Thanks.

Operator

Our next question comes from Erika Maschmeyer of Robert W. Baird.

Erika Maschmeyer - Robert W. Baird & Co.

Thanks and congrats again on a great quarter.

Glen T. Senk

Thank you.

Erika Maschmeyer - Robert W. Baird & Co.

Could you talk about your management structure and remind us of your most pressing near-term hires?

Glen T. Senk

Obviously Eric is on the call and we issued an announcement about Eric six or eight weeks ago. And I think what we have said now is we have suspended the COO search. So Eric is serving as CFO. Freeman Zausner who is in the room with us, he is serving as Chief Administrative Officer and reporting into Freeman is Will Stay (ph), Technology and Talent and John is handling Investor Relations, Glen Bodzy has been our Counsel and house counsel and has been with us for over a decade. He does a support job.

Underneath Freeman we have Calvin Hollinger handling all technology, David Ziel handling all development, Bill Cody handling talent. All three of them do an absolute exception job.

In the brands we have Andrew McLean obviously in Europe. Okay, within the brands I just announced that we promoted Wendy and Wendy to be Co-President of Anthropologie. We also have James Bidwell as Managing Director of Anthropologie Europe. For Urban Outfitters, obviously we have Ted, reporting to Ted we have Hugh Wallace who runs Urban Europe, Meg Hayne runs Free People, Claire Sholties (ph) runs Leifsdottir.

We are about to announce someone to head for the wedding concept, Terrain, John, Barbara Rozsas who is not in the room so out of sight out of mind, sorry Barbara, I think you are on the call somewhere, our Chief Sourcing Director who has been with us also I think 13 years. So, I’d say it’s a very, very complete team.

You know Jim Brett left us mid-way through last year. Jim is our Chief Merchandising Officer. We have Sun Cho (ph) who is our Head Merchant for the Urban brand. He is doing a terrific job but we are planning on filling Jim’s job and I expect we will have an announcement on that in the near future. And other than that we certainly -- I think we have including plan redundancy something like 400 people that we have to get hired this year. But I wouldn’t say there is anything pressing.

And again, this gives me an opportunity to just thank the organization, many of whom are probably listening to this call. This company is amazing. These people and this company are amazing, I don’t do this. This organization delivered this result and it’s an amazing group. We have a broad and deep bench strength in this company.

Erika Maschmeyer - Robert W. Baird & Co.

Thanks. Good luck for Q1.

Glen T. Senk

Thank you.

Operator

Our next question comes from Roxanne Meyer of UBS.

Roxanne Meyer – UBS

Thank you. Let me add my congratulations.

Glen T. Senk

Thanks, Roxanne.

Roxanne Meyer – UBS

I was wondering if you could share your insights on your consumer and her ability, and more so her appetite to spend. Obviously you mentioned she''s seeking special and that''s what you''re all about, but I''m also wondering to what extent you think there''s pent-up demand versus your view of the opportunity for sustainable spending. And as part of that are you able to give us a progression of monthly average transaction size or metrics that would show as we moved from the fall through the holidays to February that her appetite is really coming back?

Glen T. Senk

Yes Roxanne, I think by and large, I don’t think we have returned to 2007 and everyone who is listening to this call probably knows much more about us than I do. So, I don’t think we are out of the woods.

I think the difference between today and a year ago is that there is much more stability. I mean none of us knew what was going to happen a year ago. Those of us with any kind of savings saw our savings account go down by 50%. We had property. Many of us had real estate issues, really underwater and I think that that has quietened down a bit. So I think people have more a sense of certainty but I don’t think that spending is going to return to 2007 levels.

I tend to think about things simply because I think it is easier to get things done when you simplify. I keep saying if a customer spent a 100 bucks on an average outing in 2007 she is spending 90 bucks today. So we have to be 10% or 11% better than we were in 2007 to be flat and I think we have to be 15% or 20% better to be comp positive and that’s how we think about it internally.

We, as a company, we don’t talk about weather. We don’t talk about the economy. We have just a culture of constant growth and we will grow or we will endeavor to grow however we need to do and we just had to be better. I think I spoke either on the last earnings call or the one before that about the customer is more discriminating, she is. She has more off-price merchandise available to her. I think a lot of the off-price retailers have done a great job. She has more information available than ever. She is using the Internet to make brick and mortar decisions now so that she can shop price easily. We just have to be better. We have to offer a better product and a better experience and I think that’s what we did and I think that’s why we had a good fourth quarter. And I don’t think that’s going to change any time soon. I think we are going to be years before we get back to the confidence levels that we had in 2006, 2007.

Roxanne Meyer – UBS

Okay, great. Thanks for that insight and best of luck.

Glen T. Senk

Thank you.

Operator

Our next question comes from Laura Champine - Cowan Group

Laura Champine - Cowan and Company

Hi, Glen. I wondered if you could talk just a little bit more about the wedding concept, who thought of it? Who is running it? What you think the opportunity is there, why now?

Glen T. Senk

A lot of the ideas -- I will remind everyone Free People Wholesale was given birth by the Urban Outfitters group and then Anthropologie was given birth by Free People. So Leifsdottir was given birth by Anthropologie and Terrain was given birth by Dick.

So, we have a flurry of ideas in this organization all the time and we talk about things all the time. We listen to each other and quite frankly, there is a lot of internal enthusiasm where there was initially a lot of internal enthusiasm around the idea of a wedding. Now, it just so happens that in especially Free People and Anthropologie a lot of bridesmaids or people going to weddings shop those brands for wedding dress and accessories and so on.

So not only we hear about it internally, we also hear about it from our customers so that is stage one. Stage two is we begin to do due diligence and most of you probably know something about the wedding industry and I am doing this from memory but I thi