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Aug 26, 2020
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Urban Outfitters swings to surprise profit on strong digital sales

Published
Aug 26, 2020

Shares in Philadelphia-based fashion retailer Urban Outfitters, Inc. (URBN) shot up more than 12% in the extended session on Tuesday, as the company reported surprise second-quarter earnings of $34.4 million, or $0.35 per diluted share, thanks to solid sales growth in its digital channel.


The Urban Outfitters brand posted an8% decline in comparable retail segment sales in the second quarter - Instagram: @urbanoutfitters

 
The group, which owns the Urban Outfitters, Anthropologie Group, and Free People brands, among others, reported net income of $60.3 million, or $0.61 per diluted share, in the prior-year period.
 
For the second quarter ended July 31, 2020, the company’s net sales totaled $803.3 million, falling 16.5% from $962.3 million in the same period in the previous year. A 13% decrease in comparable retail segment net sales resulted from temporary store closures during part of the quarter, as well as lower productivity once stores reopened, partially offset by double-digit growth in the retailer’s digital channel.

Analysts polled by FactSet and cited by MarketWatch had expected the company to report a Q2 loss of $0.40 per share on sales of $672 million.
 
The Free People brand put in the strongest performance of the quarter, achieving an 11% rise in comparable retail segment net sales, despite the challenges posed by the ongoing Covid-19 pandemic. Comparable retail segment sales declined 8% at the Urban Outfitters brand and 25% at Anthropologie Group.
 
Total retail segment sales at the company fell 14% overall, while the wholesale segment posted a 51% decrease.
 
“I’m pleased to announce URBN produced solid revenues and profits for the second quarter driven by strength in the digital channel,” said the company’s CEO, Richard A. Hayne, in a release. “Notably, all brands were profitable and enter the fall selling season with lean inventories and positive momentum.”
 
Taking into account the first quarter of the year, net loss for the six-month period ended July 31, 2020, came to $104.0 million, or $1.06 per diluted share, compared to net earnings of $92.9 million, or $0.91 per diluted share, in the same period in the previous year. First-half sales totaled $1.39 billion, down 24% year over year from $1.83 billion.
 
The retailer opened a total of five new retail locations during the first half of the fiscal year and closed four, finishing July with 624 company-owned stores across its three main brands in the U.S., Canada and Europe. Four franchisee-owned stores also closed during the period, leaving a total of three.
 
Urban Outfitters has not provided financial guidance for the third quarter or the rest of the fiscal year.

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