Urban Outfitters Profit Swells 25 Percent in Second Quarter

Andrew Klips |

Urban Outfitters, Inc. (URBN) beat analysts in the first quarter and did it again in the second quarter, reporting after Monday’s closing bell that profits improved 25 percent as sales increased at most all of their brands.  Headquartered in Philadelphia, Urban Outfitters operates its namesake brand, as well as Anthropologie, BHLDN, Free People and Terrain brands.

For the quarter ended July 31, the teen-oriented clothing retailer reported total sales of $758.52 million, up 12 percent from $676.27 million in the year prior quarter.  Net profit was a second-quarter record at $76.36 million, or 51 cents per share, compared to $61.29 million, or 42 cents per share, in the same quarter last year.

Wall Street was expecting earnings of 48 cent per share on revenue of $768.5 million.

Sales at Urban Outfitters stores increased year-over-year from $310.66 million to $336.58 million.  Revenue from Anthropologie, the second largest contributor to total sales, jumped from $281.81 million last year to $315.08 million in the latest quarter.  Free People sales rose to $97.22 from $73.79 million last year.  The small components of BHLDN and Terrain cumulatively saw a slight decline in sales, fading $360,000 to $10.01 million.

Comparable retail sales, including catalog and online sales, increased by 9 percent compared to Q2 2012.  Same-store sales, or stores open at least one year, are closely watched as a proxy of growth as they eliminate the impact of opening or closing stores.

"[The results] were driven by a favorable customer response to our product offerings, improved merchandise margins, the opening of additional stores, and better creative and marketing initiatives in our direct-to-consumer channel," said Richard A. Hayne, chief executive at Urban Outfitters.

Gross profit was $298.24 million, compared to $254.51 million last year.  Gross profit as a percent of net sales improved 169 basis points to 39.3 percent, boosted by fewer markdowns and improvements in the Anthropologie segment.

Selling, general and administrative costs were up about $20 million at $178.93 million mostly because of greater marketing expenses.  The cost of sales climbed 9 percent to $460.28 million.

Urban Outfitters is staying in fashion with analysts as it has outperformed rivals like Aeropostale (ARO) and American Eagle Outfitters (AEO) in the face of bellwether retailers like Wal-Mart (WMT) and Macy’s (M) failing to meet market expectations.

The earnings and revenue beats probably couldn’t have come at a more opportune time for Urban Outfitters.  Shares had slumped from around $44 at the beginning of the month to below $40, closing Monday at $39.92.  In extended trading, subsequent to the earnings report, shares hopped back over $42, to gain more than 6 percent, which puts the stock up about 7.5 percent so far in 2013.

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Symbol Name Price Change % Volume
ALDVF Aldever Resources n/a n/a n/a 0
URBN Urban Outfitters Inc. 33.58 -0.06 -0.18 1,540,234


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