Urban Outfitters sales and profits fall in Q2 but are better times ahead?

By

Sandra Halliday

Published
Aug 18, 2017

Net sales at Urban Outfitters in the three months to July 31 fell 2 per cent to $873 million. And net income was $50 million for the second quarter, down from $77 million a year ago. But the firm's share soared after the results with investors clearly thinking it has something up its sleeve.

And that something is more e-tail, more growth abroad and faster product development.

Comparable retail segment net sales, which include the comparable direct-to-consumer channel, fell 4.9 per cent. By brand, comp sales rose 2.9 per cent at Free People, but fell 4 per cent at the Anthropologie Group and 7.9 per cent at Urban Outfitters. The decline was due to negative retail store sales, which was partially offset by continued sales growth in the direct-to-consumer channel. Wholesale segment net sales increased 10 per cent.

"While we are disappointed in our second quarter performance, we have a number of initiatives underway including: speed to customer, international growth, wholesale expansion and digital investments. We believe these initiatives combined with encouraging fashion apparel trends could lead to improved topline performance in future quarters,” said CEO Richard A Hayne.

The gross profit rate fell 440 basis points, driven by higher markdowns due to underperforming womenswear and accessories product at Anthropologie and Urban Outfitters and other issues linked to logistics and a change in the product mix.

As of July 31, total inventory fell by $2 million, or 0.6 per cent, on a year-on-year basis. Comparable retail segment inventory decreased 4.6 per cent at cost, which was partially offset by inventory to stock non-comparable stores.