Urban Outfitters earnings sapped by markdowns

By

Robin Driver

Published
Mar 5, 2020

Urban Outfitters, Inc., the owner of the Anthropologie, Free People and Urban Outfitters brands, announced a significant decline in its fourth-quarter earnings on Tuesday, a disappointing end to the year that the company blamed on higher markdowns in its retail segment.
 

For the fourth quarter ended January 31, 2020, the Philadelphia-based company reported net income of $19.5 million, or $0.20 per diluted share, down from $86.4 million, or $0.80 per diluted share, in the same period in the previous year.
 
As previously reported, Urban Outfitters announced record fourth-quarter sales of $1.17 billion in January, up 3.6% from sales of $1.13 billion in Q4 2018. Growth was led by an increase in comparable sales of 9% at Free People and 6% at the Anthropologie Group. Total retail comps increased 4%, while the wholesale segment saw a 10% decline.

However, the company’s gross profit rate decreased 446 basis points during the quarter, due mainly to higher retail segment markdowns related to underperforming product at the Urban Outfitters and Anthropologie brands. Deleverage in delivery and logistics expenses and lower wholesale segment margins also took their toll on the group’s gross profit rate.
 
For the full fiscal year 2019, the company reported income of $168.1 million, or $1.67 per diluted share, down from $298.0 million, or $2.72 per diluted share, in the previous year.
 
Annual revenues were $3.98 billion, up 0.8% from $3.95 billion in 2018, reflecting a 1% increase in the retail segment and a 6% decrease in wholesale. Comparable retail segment sales rose 1%.
 
Over the course of the year the company opened a total of 26 new retail locations across its different banners and closed 12.
 
Looking forward, Urban Outfitters, Inc. CEO Richard Hayne pointed out in an earnings call on Tuesday that due to the ongoing coronavirus outbreak, its manufacturing facilities in China are currently working with approximately 50% output, which is likely to “impact production flow and could increase landing costs as well, as we form new factory relationships and use expedited shipping.”
 
Shares in Urban Outfitters fell 8% in Wednesday trading following the company’s announcement of its Q4 results.