URBN 10-Q
Urban Outfitters Inc (URBN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
For the Quarterly Period Ended
OR
For the transition period from to
Commission File No.
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
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(Address of Principal Executive Offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common shares, $0.0001 par value—
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. |
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Condensed Consolidated Balance Sheets as of April 30, 2023, January 31, 2023 and April 30, 2022 |
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Condensed Consolidated Statements of Income for the three months ended April 30, 2023 and 2022 |
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Condensed Consolidated Statements of Cash Flows for the three months ended April 30, 2023 and 2022 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 6. |
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
URBAN OUTFITTERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
(unaudited)
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April 30, |
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January 31, |
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April 30, |
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2023 |
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2023 |
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2022 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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$ |
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Marketable securities |
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Accounts receivable, net of allowance for doubtful accounts of |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Marketable securities |
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Deferred income taxes and other assets |
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Total Assets |
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$ |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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$ |
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Current portion of operating lease liabilities |
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Accrued expenses, accrued compensation and other current liabilities |
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Total current liabilities |
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Non-current portion of operating lease liabilities |
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Deferred rent and other liabilities |
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Total Liabilities |
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(see Note 11) |
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Shareholders’ equity: |
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Preferred shares; $ |
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Common shares; $ |
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Additional paid-in-capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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Total Shareholders’ Equity |
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Total Liabilities and Shareholders’ Equity |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
URBAN OUTFITTERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except share and per share data)
(unaudited)
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Three Months Ended |
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April 30, |
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2023 |
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2022 |
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Net sales |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general and administrative expenses |
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Income from operations |
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Other income (loss), net |
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Income before income taxes |
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Income tax expense |
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Net income |
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$ |
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$ |
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Net income per common share: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted-average common shares outstanding: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
URBAN OUTFITTERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(amounts in thousands)
(unaudited)
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Three Months Ended |
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April 30, |
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2023 |
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2022 |
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Net income |
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$ |
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$ |
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Other comprehensive income (loss): |
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Foreign currency translation |
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Change in unrealized gains (losses) on marketable securities, net of tax |
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Total other comprehensive income (loss) |
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Comprehensive income |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
URBAN OUTFITTERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(amounts in thousands, except share data)
(unaudited)
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Accumulated |
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Common Shares |
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Additional |
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Other |
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Number of |
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Par |
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Paid-in |
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Retained |
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Comprehensive |
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Shares |
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Value |
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Capital |
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Earnings |
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Loss |
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Total |
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Balances as of January 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Comprehensive income |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Share-based awards |
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— |
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— |
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— |
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— |
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— |
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Share repurchases |
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— |
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— |
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— |
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Balances as of April 30, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Accumulated |
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Common Shares |
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Additional |
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Other |
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Number of |
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Par |
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Paid-in |
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Retained |
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Comprehensive |
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Shares |
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Value |
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Capital |
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Earnings |
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Loss |
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Total |
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Balances as of January 31, 2022 |
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$ |
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$ |
— |
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$ |
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$ |
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$ |
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Comprehensive income |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Share-based awards |
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— |
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— |
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— |
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— |
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— |
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Share repurchases |
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— |
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Balances as of April 30, 2022 |
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$ |
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$ |
— |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
URBAN OUTFITTERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
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Three Months Ended |
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April 30, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Non-cash lease expense |
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Provision for deferred income taxes |
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Share-based compensation expense |
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Amortization of tax credit investment |
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Loss on disposition of property and equipment, net |
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Changes in assets and liabilities: |
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Receivables |
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Inventory |
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Prepaid expenses and other assets |
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Payables, accrued expenses and other liabilities |
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Operating lease liabilities |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities: |
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Cash paid for property and equipment |
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Cash paid for marketable securities |
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Sales and maturities of marketable securities |
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Initial cash payment for tax credit investment |
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Net cash (used in) provided by investing activities |
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Cash flows from financing activities: |
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Share repurchases related to share repurchase program |
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Share repurchases related to taxes for share-based awards |
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Tax credit investment liability payments |
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Net cash used in financing activities |
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Effect of exchange rate changes on cash and cash equivalents |
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Decrease in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental cash flow information: |
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Cash paid during the year for income taxes |
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$ |
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$ |
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Non-cash investing activities—Accrued capital expenditures |
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$ |
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$ |
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Right-of-use assets obtained in exchange for operating lease liabilities |
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$ |
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$ |
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Non-cash investing activities—Accrued tax credit investment installments |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
URBAN OUTFITTERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share and per share data)
(unaudited)
1. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed financial statements should be read in conjunction with Urban Outfitters, Inc.’s (the “Company’s”) Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed with the United States Securities and Exchange Commission on April 3, 2023.
The Company’s business experiences seasonal fluctuations in net sales and net income, with a more significant portion typically realized in the second half of each year predominantly due to the year-end holiday period. Historically, and consistent with the retail industry, this seasonality also impacts our working capital requirements, particularly with regard to inventory. Accordingly, the results of operations for the three months ended April 30, 2023 are not necessarily indicative of the results to be expected for the full year.
The Company’s fiscal year ends on January 31. All references in these notes to the Company’s fiscal years refer to the fiscal years ended on January 31 in those years. For example, the Company’s fiscal year 2024 will end on January 31, 2024.
Recent Accounting Pronouncements
The Company has considered all new accounting standards updates issued by the Financial Accounting Standards Board (“FASB”) and has concluded that there are no recent accounting standard updates that will have a material impact on its consolidated financial statements and related disclosures.
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Contract receivables occur when the Company satisfies all of its performance obligations under a contract and recognizes revenue prior to billing or receiving consideration from a customer for which it has an unconditional right to payment. Contract receivables arise from credit card, debit card and alternative payment method transactions throughout all segments and sales to the Company’s Wholesale segment customers and franchisees. For the three month period ended April 30, 2023, the opening and closing balances of contract receivables, net of allowance for doubtful accounts, were $
Contract liabilities represent unearned revenue and result from the Company receiving consideration in a contract with a customer for which it has not satisfied all of its performance obligations. The Company’s contract liabilities result from customer deposits, customer loyalty programs and the issuance of gift cards. Gift cards are expected to be redeemed within
6
3. Marketable Securities
During all periods shown, marketable securities are classified as available-for-sale.
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Amortized |
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Unrealized |
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Unrealized |
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Fair |
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Cost |
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Gains |
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(Losses) |
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Value |
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As of April 30, 2023 |
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Short-term Investments: |
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Corporate bonds |
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Municipal and pre-refunded municipal bonds |
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Commercial paper |
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US Treasury securities |
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Federal government agencies |
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Long-term Investments: |
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Corporate bonds |
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Municipal and pre-refunded municipal bonds |
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Federal government agencies |
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Mutual funds, held in rabbi trust |
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Certificates of deposit |
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$ |
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$ |
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$ |
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As of January 31, 2023 |
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Short-term Investments: |
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Corporate bonds |
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$ |
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$ |
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$ |
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$ |
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Municipal and pre-refunded municipal bonds |
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Commercial paper |
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US Treasury securities |
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( |
) |
|
|
|
|||
Federal government agencies |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Long-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Municipal and pre-refunded municipal bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Federal government agencies |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Mutual funds, held in rabbi trust |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
7
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
||||
|
|
Cost |
|
|
Gains |
|
|
(Losses) |
|
|
Value |
|
||||
As of April 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Municipal and pre-refunded municipal bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
|
|
|
|
||||
US Treasury securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Long-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Municipal and pre-refunded municipal bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Federal government agencies |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
US Treasury securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Mutual funds, held in rabbi trust |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Proceeds from the sales and maturities of available-for-sale securities were $
4
The Company utilizes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach that relate to its financial assets and financial liabilities). The levels of the hierarchy are described as follows:
8
Management’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and liabilities and their placement within the fair value hierarchy.
|
|
Marketable Securities Fair Value as of |
|
|||||||||||||
|
|
April 30, 2023 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Municipal and pre-refunded municipal bonds |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Federal government agencies |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
US Treasury securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Mutual funds, held in rabbi trust |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Certificates of deposit |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
Marketable Securities Fair Value as of |
|
|||||||||||||
|
|
January 31, 2023 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Municipal and pre-refunded municipal bonds |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Federal government agencies |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
US Treasury securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Mutual funds, held in rabbi trust |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Certificates of deposit |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
Marketable Securities Fair Value as of |
|
|||||||||||||
|
|
April 30, 2022 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Municipal and pre-refunded municipal bonds |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Federal government agencies |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
US Treasury securities |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Mutual funds, held in rabbi trust |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Certificates of deposit |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Financial assets
Level 1 assets consist of financial instruments whose value has been based on inputs that use, as their basis, readily observable market data that are actively quoted and are validated through external sources, including third-party pricing services and brokers.
Level 2 assets consist of financial instruments whose value has been based on quoted prices for similar assets and liabilities in active markets as well as quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3 assets consist of financial instruments where there has been no active market. The Company held no Level 3 financial instruments as of April 30, 2023, January 31, 2023 and April 30, 2022.
9
The fair value of cash and cash equivalents (Level 1) approximates carrying value since cash and cash equivalents consist of short-term highly liquid investments with maturities of less than three months at the time of purchase. As of April 30, 2023, January 31, 2023 and April 30, 2022, cash and cash equivalents included cash on hand, cash in banks, money market accounts and marketable securities with maturities of less than three months at the time of purchase.
Non-financial assets
The Company’s non-financial assets, primarily consisting of property and equipment and lease-related right-of-use assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
The fair value of property and equipment was determined using a discounted cash-flow model that utilized Level 3 inputs. The Company’s retail locations are reviewed for impairment at the retail location level, which is the lowest level at which individual cash flows can be identified. In calculating future cash flows, the Company makes estimates regarding future operating results based on its experience and knowledge of market factors in which the retail location is located. Right-of-use assets are tested for impairment in the same manner as property and equipment. For lease right-of-use assets, the Company determines the estimated fair value of the assets by comparing the discounted contractual rent payments to estimated market rent using an acceptable valuation methodology.
5. Debt
On February 10, 2023, the Company and certain of its subsidiaries entered into the fourth amendment (the “Fourth Amendment”) to the Company’s amended and restated credit agreement (the “Amended Credit Agreement”), amending the Company’s asset-based revolving credit facility with its lenders, including JPMorgan Chase Bank, N.A., as administrative agent, joint lead arranger and co-book managers along with Wells Fargo Bank, National Association. The Fourth Amendment permits the Company to purchase an equity membership interest in a federal low-income housing tax credit entity (the "Amended Credit Facility"). See Note 6, "Tax Credit Investment," for further discussion of the investment.
The Amended Credit Facility provides for loans and letters of credit up to $
The Amended Credit Facility provides for interest on borrowings, at the Company’s option, at either (i) adjusted SOFR, CDOR, SONIA or EURIBOR plus an applicable margin ranging from
All obligations under the Amended Credit Facility are unconditionally guaranteed by the Company and certain of its U.S. subsidiaries. The obligations under the Amended Credit Facility are secured by a first-priority security interest in inventory, accounts receivable and certain other assets of the Company and certain of its U.S. subsidiaries. The obligations of URBN Canada Retail, Inc. are secured by a first-priority security interest in its inventory, accounts receivable and certain other assets. The Amended Credit Agreement contains customary representations and warranties, negative and affirmative covenants and provisions relating to events of default.
As of April 30, 2023, the Company had $
10
Amended Credit Facility was $
6. Tax Credit Investment
On February 10, 2023, the Company committed $
|
April 30, |
|
|
|
2023 |
|
|
Deferred income taxes and other assets |
$ |
|
|
Accrued expenses, accrued compensation and other current liabilities |
|
|
|
Deferred rent and other liabilities |
|
|
|
7
The Company maintains stock incentive plans pursuant to which it can grant restricted shares, unrestricted shares, incentive stock options, non-qualified stock options, restricted stock units (“RSUs”), performance stock units (“PSUs”) or stock appreciation rights. The fair value of PSUs and RSUs is equal to the stock price on the date of the grant.
|
|
Three Months Ended |
|
|||||
|
|
April 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Performance Stock Units |
|
$ |
|
|
$ |
|
||
Restricted Stock Units |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Share-based awards granted and the weighted-average fair value of such awards for the three months ended April 30, 2023 was as follows:
|
|
|
|
|||||
|
|
April 30, 2023 |
|
|||||
|
|
|
|
|
Weighted- |
|
||
|
|
Awards |
|
|
Average Fair |
|
||
|
|
Granted |
|
|
Value |
|
||
Performance Stock Units |
|
|
|
|
$ |
|
||
Restricted Stock Units |
|
|
|
|
$ |
|
||
Total |
|
|
|
|
|
|
||
11
During the three months ended April 30, 2023,
The total unrecognized compensation cost related to outstanding share-based awards and the weighted-average period in which the cost is expected to be recognized as of April 30, 2023 was as follows:
|
|
April 30, 2023 |
|
|||||
|
|
Unrecognized |
|
|
Weighted- |
|
||
|
|
Compensation |
|
|
Average |
|
||
|
|
Cost |
|
|
Years |
|
||
Performance Stock Units |
|
$ |
|
|
|
|
||
Restricted Stock Units |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
|
|
||
8. Shareholders’ Equity
Share repurchase activity under the Company’s share repurchase programs was as follows:
|
|
Three Months Ended |
|
|||||
|
|
April 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Number of common shares repurchased and subsequently retired |
|
|
|
|
|
|
||
Total cost |
|
$ |
|
|
$ |
|
||
Average cost per share, including commissions |
|
$ |
|
|
$ |
|
||
On August 22, 2017, the Company’s Board of Directors authorized the repurchase of
During the three months ended April 30, 2023, the Company acquired and subsequently retired
12
9. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss
The following tables present the changes in “Accumulated other comprehensive loss,” by component, net of tax, for the three months ended April 30, 2023 and 2022:
|
|
Three Months Ended April 30, 2023 |
|
|||||||||
|
|
|
|
|
Unrealized Gains |
|
|
|
|
|||
|
|
Foreign |
|
|
and (Losses) on |
|
|
|
|
|||
|
|
Currency |
|
|
Available-for- |
|
|
|
|
|||
|
|
Translation |
|
|
Sale Securities |
|
|
Total |
|
|||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive |
|
|
|
|
|
|
|
|
|
|||
Amounts reclassified |
|
|
|
|
|
|
|
|
|
|||
Net current-period other |
|
|
|
|
|
|
|
|
|
|||
Balance at end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Three Months Ended April 30, 2022 |
|
|||||||||
|
|
|
|
|
Unrealized Gains |
|
|
|
|
|||
|
|
Foreign |
|
|
and (Losses) on |
|
|
|
|
|||
|
|
Currency |
|
|
Available-for- |
|
|
|
|
|||
|
|
Translation |
|
|
Sale Securities |
|
|
Total |
|
|||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amounts reclassified |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net current-period other |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
All unrealized gains and losses on available-for-sale securities reclassified from accumulated other comprehensive loss were recorded in “Other income (loss), net” in the Condensed Consolidated Statements of Income.
13
10. Net Income per Common Share
The following is a reconciliation of the weighted-average common shares outstanding used for the computation of basic and diluted net income per common share:
|
|
Three Months Ended |
|
|||||
|
|
April 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Basic weighted-average common shares |
|
|
|
|
|
|
||
Effect of dilutive options, performance stock units |
|
|
|
|
|
|
||
Diluted weighted-average shares outstanding |
|
|
|
|
|
|
||
For the three months ended April 30, 2023 and 2022, awards to purchase
Excluded from the calculation of diluted net income per common share as of April 30, 2023 and April 30, 2022, were
11. Commitments and Contingencies
The Company is party to various legal proceedings arising from normal business activities. Management believes that the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.
12. Segment Reporting
The Company offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands. The Company operates
The Company’s Retail segment consists of the Anthropologie, Free People, FP Movement, Terrain and Urban Outfitters brands. The Company has aggregated its brands into the Retail segment based upon their shared management, customer base and economic characteristics. Reporting in this format provides management with the financial information necessary to evaluate the success of the segments and the overall business. The Company’s Retail segment omni-channel strategy enhances its customers’ brand experience by providing a seamless approach to the customer shopping experience. All available Company-owned Retail segment shopping channels are fully integrated, including retail locations, websites, mobile applications, catalogs and customer contact centers.
The Company’s Wholesale segment consists of the Free People, FP Movement and Urban Outfitters brands. The Wholesale segment sells through department and specialty stores worldwide, digital businesses and the Retail segment.
The Nuuly segment consists of the Nuuly brand, which offers customers a more sustainable way to explore fashion. Nuuly Rent is a monthly women’s apparel subscription rental service.
The Company evaluates the performance of each segment based on the net sales and income from operations (excluding intercompany charges) of the segment. The Company accounts for intersegment sales and transfers as if the sales and transfers were made to third parties making similar volume purchases. Corporate expenses include expenses incurred and directed by the corporate office that are not allocated to segments. The principal identifiable assets for the Retail and Wholesale segments are inventory and property and equipment. The principal identifiable assets for the Nuuly segment are rental product and property and equipment.
14
The accounting policies of the reportable segments are the same as the policies described in Note 2, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2023. All of the Company’s segments are highly diversified.
|
|
Three Months Ended |
|
|||||
|
|
April 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Net sales |
|
|
|
|
|
|
||
Retail operations |
|
$ |
|
|
$ |
|
||
Wholesale operations |
|
|
|
|
|
|
||
Nuuly operations |
|
|
|
|
|
|
||
Intersegment elimination |
|
|
( |
) |
|
|
( |
) |
Total net sales |
|
$ |
|
|
$ |
|
||
Income from operations |
|
|
|
|
|
|
||
Retail operations |
|
$ |
|
|
$ |
|
||
Wholesale operations |
|
|
|
|
|
|
||
Nuuly operations |
|
|
( |
) |
|
|
( |
) |
Intersegment elimination |
|
|
( |
) |
|
|
|
|
Total segment operating income |
|
|
|
|
|
|
||
General corporate expenses |
|
|
( |
) |
|
|
( |
) |
Total income from operations |
|
$ |
|
|
$ |
|
||
|
|
April 30, |
|
|
January 31, |
|
|
April 30, |
|
|||
|
|
2023 |
|
|
2023 |
|
|
2022 |
|
|||
Inventory |
|
|
|
|
|
|
|
|
|
|||
Retail operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Wholesale operations |
|
|
|
|
|
|
|
|
|
|||
Total inventory |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Rental product, net (1) |
|
|
|
|
|
|
|
|
|
|||
Nuuly operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Total rental product, net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Property and equipment, net |
|
|
|
|
|
|
|
|
|
|||
Retail operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Wholesale operations |
|
|
|
|
|
|
|
|
|
|||
Nuuly operations |
|
|
|
|
|
|
|
|
|
|||
Total property and equipment, net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
15
The following tables summarize net sales and percentage of net sales from contracts with customers by merchandise category and by segment:
|
|
Three Months Ended |
|
|||||||||||||
|
|
April 30, |
|
|||||||||||||
|
|
2023 |
|
|
2022 |
|
||||||||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Apparel |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Home |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Accessories |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Other |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Retail operations |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Apparel |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Accessories |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Other |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Wholesale operations (1) |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Nuuly operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
The Apparel category includes intimates and activewear. The Home category includes home furnishings, electronics, gifts and decorative items. The Accessories category includes footwear, jewelry and handbags. The Other category includes beauty and shipping and handling.
The Company historically presented the merchandise categories on a company-wide basis. The Company has updated the presentation of the above tables to include a summary of net sales and percentage of net sales by both merchandise category and by segment. Prior year amounts have been reclassified to conform to the current year presentation.
The Company has foreign operations primarily in Europe and Canada. Revenues and long-lived assets, based upon the Company’s domestic and foreign operations, are as follows:
|
|
April 30, |
|
|
January 31, |
|
|
April 30, |
|
|||
|
|
2023 |
|
|
2023 |
|
|
2022 |
|
|||
Property and equipment, net |
|
|
|
|
|
|
|
|
|
|||
Domestic operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Foreign operations |
|
|
|
|
|
|
|
|
|
|||
Total property and equipment, net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
Three Months Ended |
|
|||||
|
|
April 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Net Sales |
|
|
|
|
|
|
||
Domestic operations |
|
$ |
|
|
$ |
|
||
Foreign operations |
|
|
|
|
|
|
||
Total net sales |
|
$ |
|
|
$ |
|
||
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Certain matters contained in this filing with the United States Securities and Exchange Commission (“SEC”) may contain forward-looking statements and are being made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. When used in this Quarterly Report on Form 10-Q, the words “project,” “believe,” “plan,” “will,” “anticipate,” “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Any one, or all, of the following factors could cause actual financial results to differ materially from those financial results mentioned in the forward-looking statements: overall economic and market conditions (including current levels of inflation) and worldwide political events and the resultant impact on consumer spending patterns and our pricing power, the difficulty in predicting and responding to shifts in fashion trends, changes in the level of competitive pricing and promotional activity and other industry factors, the effects of the implementation of the United Kingdom’s withdrawal from membership in the European Union (commonly referred to as “Brexit”), including currency fluctuations, economic conditions and legal or regulatory changes, any effects of war including geopolitical instability and impacts of the war between Russia and Ukraine and from related sanctions imposed by the United States, European Union, United Kingdom and others, terrorism and civil unrest, natural disasters, severe or unseasonable weather conditions (including as a result of climate change) or public health crises (such as the coronavirus (COVID-19)), labor shortages and increases in labor costs, raw material costs and transportation costs, availability of suitable retail space for expansion, timing of store openings, risks associated with international expansion, seasonal fluctuations in gross sales, response to new concepts, our ability to integrate acquisitions, risks associated with digital sales, our ability to maintain and expand our digital sales channels, any material disruptions or security breaches with respect to our technology systems, the departure of one or more key senior executives, import risks (including any shortage of transportation capacities or delays at ports), changes to U.S. and foreign trade policies (including the enactment of tariffs, border adjustment taxes or increases in duties or quotas), the closing or disruption of, or any damage to, any of our distribution centers, our ability to protect our intellectual property rights, failure of our manufacturers and third-party vendors to comply with our social compliance program, risks related to environmental, social and governance activities, changes in our effective income tax rate, changes in accounting standards and subjective assumptions, regulatory changes and legal matters and other risks identified in our filings with the SEC, including those set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed on April 3, 2023. We disclaim any intent or obligation to update forward-looking statements even if experience or future changes make it clear that actual results may differ materially from any projected results expressed or implied therein.
Unless the context otherwise requires, all references to the “Company,” “we,” “us” or “our” refer to Urban Outfitters, Inc., together with its subsidiaries.
Overview
We operate under three reportable segments – Retail, Wholesale and Nuuly. Our Retail segment consists of our Anthropologie, Free People, FP Movement, Terrain and Urban Outfitters brands. Our Retail segment consumer products and services are sold directly to our customers through our retail locations, websites, mobile applications, social media and third-party digital platforms, catalogs and customer contact centers and franchisee-owned stores. The Wholesale segment consists of our Free People, FP Movement and Urban Outfitters brands that sell through department and specialty stores worldwide, digital businesses and our Retail segment. The Wholesale segment primarily designs, develops and markets apparel, intimates, activewear and shoes. Our Nuuly segment consists of the Nuuly brand, which offers customers a more sustainable way to explore fashion. Nuuly Rent is a monthly women’s apparel subscription rental service.
Our fiscal year ends on January 31. All references to our fiscal years refer to the fiscal years ended on January 31 in those years. For example, our fiscal year 2024 will end on January 31, 2024, and our fiscal year 2023 ended on January 31, 2023.
17
Retail Segment
Our Retail segment omni-channel strategy enhances our customers’ brand experience by providing a seamless approach to the customer shopping experience. All available Company-owned Retail segment shopping channels are fully integrated, including retail locations, websites, mobile applications, catalogs and customer contact centers. Our investments in areas such as marketing campaigns and technology advancements are designed to generate demand for the Retail segment omni-channel and not the separate store or digital channels. We manage and analyze our performance based on a single Retail segment omni-channel rather than separate channels and believe that the Retail segment omni-channel results present the most meaningful and appropriate measure of our performance.
Our comparable Retail segment net sales data is equal to the sum of our comparable store and comparable digital channel net sales. A store is considered to be comparable if it has been open at least 12 full months, unless it was materially expanded or remodeled within that year or was not otherwise operating at its full capacity within that year due to store specific closures from events such as damage from fire, flood and natural weather events. A digital channel is considered to be comparable if it has been operational for at least 12 full months. Sales from stores and digital channels that do not fall within the definition of comparable store or digital channel are considered to be non-comparable. Franchise net sales and the effects of foreign currency translation are also considered non-comparable.
We monitor Retail segment metrics including customer traffic, conversion rates, average units per transaction at our stores and on our websites and mobile applications and average unit selling price at our stores and average order value on our websites and mobile applications. We believe that changes in any of these metrics may be caused by a response to our brands’ fashion offerings, our marketing campaigns, circulation of our catalogs and an overall growth in brand recognition.
Urban Outfitters targets young adults aged 18 to 28 through a unique merchandise mix, compelling store environment, social media and third-party digital platforms, websites and mobile applications and a product offering that includes women’s and men’s fashion apparel, activewear, intimates, footwear, accessories, home goods, electronics and beauty. A large portion of our merchandise is exclusive to Urban Outfitters, consisting of an assortment of products designed internally or designed in collaboration with third-party brands. Urban Outfitters stores are in street locations in large metropolitan areas and select university communities, specialty centers and enclosed malls that accommodate our customers’ propensity not only to shop, but also to congregate with their peers. Urban Outfitters operates websites and mobile applications in North America and Europe that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in its stores and sells merchandise through franchisee-owned stores in the Middle East. Urban Outfitters’ North American Retail segment net sales accounted for approximately 19.2% of consolidated net sales for the three months ended April 30, 2023, compared to approximately 24.7% for the comparable period in fiscal 2023. European Retail segment net sales accounted for 8.0% of consolidated net sales for the three months ended April 30, 2023, compared to approximately 8.9% for the comparable period in fiscal 2023.
The Anthropologie Group consists of the Anthropologie and Terrain brands. Merchandise at the Anthropologie brand is tailored to sophisticated and contemporary women aged 28 to 45. The internally designed and third-party brand product assortment includes women’s apparel, accessories, intimates, shoes, home furnishings, a diverse array of gifts and decorative items and beauty and wellness. The brand also has a wedding collection consisting of wedding, bridesmaid and party dresses, bridal accessories and decor. The Terrain brand is designed to appeal to women and men interested in a creative and sophisticated outdoor living and gardening experience. Merchandise includes lifestyle home, garden and outdoor living products, antiques, live plants, flowers, wellness products and accessories. Anthropologie Group stores are located in specialty centers, upscale street locations and enclosed malls. The Anthropologie Group operates websites and mobile applications in North America and Europe that capture the spirit of its brands by offering a similar yet broader selection of merchandise as found in its stores, offers a catalog in North America that markets select merchandise, most of which is also available in Anthropologie brand stores and sells merchandise through franchisee-owned stores in the Middle East. The Anthropologie Group’s North American Retail segment net sales accounted for approximately 41.0% of consolidated net sales for the three months ended April 30, 2023, compared to approximately 38.1% for the comparable period in fiscal 2023. European Retail segment net sales accounted for 1.5% of consolidated net sales for the three months ended April 30, 2023, compared to approximately 1.8% for the comparable period in fiscal 2023.
The Free People Group consists of the Free People and FP Movement brands. The Free People brand focuses its product offering on private label merchandise targeted to young contemporary women aged 25 to 30 and provides
18
a unique merchandise mix of casual women’s apparel, intimates, FP Movement activewear, shoes, accessories, home products, gifts and beauty and wellness. The FP Movement brand offers performance-ready activewear, beyond-the-gym staples and wellness essentials. Free People Group stores are located in enclosed malls, upscale street locations and specialty centers. The Free People Group operates websites and mobile applications in North America and Europe that capture the spirit of its brands by offering a similar yet broader selection of merchandise as found in its stores, as well as substantially all of the Free People and FP Movement wholesale offerings. The Free People Group also offers catalogs that market select merchandise, most of which is also available in our Free People and FP Movement stores. The Free People Group’s North American Retail segment net sales accounted for approximately 19.0% of consolidated net sales for the three months ended April 30, 2023, compared to approximately 16.8% for the comparable period in fiscal 2023. European Retail segment net sales accounted for less than 1.0% of consolidated net sales for the three months ended April 30, 2023, and the comparable period in fiscal 2023.
Net sales from the Retail segment accounted for approximately 90.2% of consolidated net sales for the three months ended April 30, 2023, compared to 91.6% for the comparable period in fiscal 2023.
Store data for the three months ended April 30, 2023 was as follows:
|
|
January 31, |
|
|
Stores |
|
|
Stores |
|
|
April 30, |
|
||||
|
|
2023 |
|
|
Opened |
|
|
Closed |
|
|
2023 |
|
||||
Urban Outfitters |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
|
|
183 |
|
|
|
— |
|
|
|
(2 |
) |
|
|
181 |
|
Canada |
|
|
18 |
|
|
|
— |
|
|
|
— |
|
|
|
18 |
|
Europe |
|
|
62 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
61 |
|
Urban Outfitters Global Total |
|
|
263 |
|
|
|
— |
|
|
|
(3 |
) |
|
|
260 |
|
Anthropologie Group |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
|
|
207 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
206 |
|
Canada |
|
|
10 |
|
|
|
— |
|
|
|
— |
|
|
|
10 |
|
Europe |
|
|
21 |
|
|
|
— |
|
|
|
— |
|
|
|
21 |
|
Anthropologie Group Global Total |
|
|
238 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
237 |
|
Free People Group |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States (1) |
|
|
174 |
|
|
|
4 |
|
|
|
— |
|
|
|
178 |
|
Canada |
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
Europe |
|
|
11 |
|
|
|
1 |
|
|
|
— |
|
|
|
12 |
|
Free People Group Global Total |
|
|
188 |
|
|
|
5 |
|
|
|
— |
|
|
|
193 |
|
Menus & Venues (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
|
|
11 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
10 |
|
Menus & Venues Total |
|
|
11 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
10 |
|
Total Company-Owned Stores |
|
|
700 |
|
|
|
5 |
|
|
|
(5 |
) |
|
|
700 |
|
Franchisee-Owned Stores (3) |
|
|
8 |
|
|
|
1 |
|
|
|
— |
|
|
|
9 |
|
Total URBN |
|
|
708 |
|
|
|
6 |
|
|
|
(5 |
) |
|
|
709 |
|
19
Selling square footage by brand as of April 30, 2023 and 2022 was as follows:
|
|
April 30, |
|
|
April 30, |
|
|
|
|
|||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|||
Selling square footage (in thousands): |
|
|
|
|
|
|
|
|
|
|||
Urban Outfitters |
|
|
2,249 |
|
|
|
2,270 |
|
|
|
-0.9 |
% |
Anthropologie Group |
|
|
1,805 |
|
|
|
1,810 |
|
|
|
-0.3 |
% |
Free People Group (1) |
|
|
404 |
|
|
|
368 |
|
|
|
9.8 |
% |
Total URBN (2) |
|
|
4,458 |
|
|
|
4,448 |
|
|
|
0.2 |
% |
We plan for future store growth for all three brands to come from expansion domestically and internationally, which may include opening stores in new and existing markets or entering into additional franchise or joint venture agreements. We plan for future digital channel growth to come from expansion domestically and internationally.
Projected openings and closings for fiscal 2024 are as follows:
|
|
January 31, |
|
|
Projected |
|
|
Projected |
|
|
January 31, |
|
||||
|
|
2023 |
|
|
Openings |
|
|
Closings |
|
|
2024 |
|
||||
Urban Outfitters |
|
|
263 |
|
|
|
7 |
|
|
|
(12 |
) |
|
|
258 |
|
Anthropologie Group |
|
|
238 |
|
|
|
10 |
|
|
|
(7 |
) |
|
|
241 |
|
Free People Group (1) |
|
|
188 |
|
|
|
15 |
|
|
|
(4 |
) |
|
|
199 |
|
Menus & Venues |
|
|
11 |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
11 |
|
Total Company-Owned Stores |
|
|
700 |
|
|
|
33 |
|
|
|
(24 |
) |
|
|
709 |
|
Franchisee-Owned Stores |
|
|
8 |
|
|
|
1 |
|
|
|
— |
|
|
|
9 |
|
Total URBN |
|
|
708 |
|
|
|
34 |
|
|
|
(24 |
) |
|
|
718 |
|
Wholesale Segment
Our Wholesale segment consists of the Free People, FP Movement and Urban Outfitters brands that sell through department and specialty stores worldwide, third-party digital businesses and our Retail segment. The Wholesale segment primarily designs, develops and markets young women’s contemporary casual apparel, intimates, FP Movement activewear and shoes under the Free People Group brand and the BDG and “iets frans” brand apparel collections under the Urban Outfitters brand. Our Wholesale segment net sales accounted for approximately 5.2% of consolidated net sales for the three months ended April 30, 2023, compared to 6.2% for the comparable period in fiscal 2023.
Nuuly Segment
Our Nuuly segment consists of the Nuuly brand. Nuuly Rent is a monthly women’s apparel subscription rental service. For a monthly fee, Nuuly subscribers can select rental product from a wide selection of the Company’s own brands, third-party brands and one-of-a-kind vintage pieces via a custom-built, digital platform. Subscribers select their products each month, wear them as often as they like and then swap into new products the following month. Subscribers are also able to purchase the rented product. Our Nuuly segment net sales accounted for approximately 4.6% of consolidated net sales for the three months ended April 30, 2023, compared to approximately 2.2% for the comparable period in fiscal 2023.
20
Critical Accounting Policies and Estimates
Our Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States. These generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses during the reporting period.
Our senior management has reviewed the critical accounting policies and estimates with the Audit Committee of our Board of Directors. Our significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the Notes to our Consolidated Financial Statements for the fiscal year ended January 31, 2023, which are included in our Annual Report on Form 10-K filed with the SEC on April 3, 2023. Critical accounting policies are those that are most important to the portrayal of our financial condition, results of operations and cash flows and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. If actual results were to differ significantly from estimates made, the reported results could be materially affected. We are not currently aware of any reasonably likely events or circumstances that would cause our actual results to be materially different from our estimates. There have been no significant changes to our critical accounting policies during the three months ended April 30, 2023.
Results of Operations
As a Percentage of Net Sales
The table below sets forth, for the periods indicated, certain income statement data and the percentage of our net sales represented by such data. The table should be read in conjunction with the discussion that follows.
Three Months Ended April 30, 2023 (Fiscal 2024) Compared To
Three Months Ended April 30, 2022 (Fiscal 2023)
(amounts in millions) |
Three Months Ended |
||||||||||||||||
|
April 30, |
||||||||||||||||
|
2023 |
|
2022 |
||||||||||||||
Net sales |
$ |
1,113.7 |
|
|
|
100.0 |
|
% |
|
$ |
1,051.9 |
|
|
|
100.0 |
|
% |
Cost of sales |
|
742.5 |
|
|
66.7 |
|
|
|
|
728.6 |
|
|
|
69.3 |
|
|
|
Gross profit |
|
371.2 |
|
|
|
33.3 |
|
|
|
|
323.3 |
|
|
|
30.7 |
|
|
Selling, general and administrative expenses |
|
299.8 |
|
|
26.9 |
|
|
|
|
277.1 |
|
|
|
26.3 |
|
|
|
Income from operations |
|
71.4 |
|
|
|
6.4 |
|
|
|
|
46.2 |
|
|
|
4.4 |
|
|
Other income (loss), net |
|
1.0 |
|
|
|
0.1 |
|
|
|
|
(2.0 |
) |
|
(0.2) |
|
|
|
Income before income taxes |
|
72.4 |
|
|
|
6.5 |
|
|
|
|
44.2 |
|
|
|
4.2 |
|
|
Income tax expense |
|
19.6 |
|
|
1.8 |
|
|
|
|
12.7 |
|
|
|
1.2 |
|
|
|
Net income |
$ |
52.8 |
|
|
|
4.7 |
|
% |
|
$ |
31.5 |
|
|
|
3.0 |
|
% |
Net sales for the first quarter of fiscal 2024 were $1.11 billion, compared to $1.05 billion in the first quarter of fiscal 2023. The $61.7 million increase was attributable to a $40.6 million, or 4.2%, increase in Retail segment net sales and an increase in Nuuly segment net sales of $28.6 million, or 125.3%, partially offset by a $7.5 million, or 11.5%, decrease in Wholesale segment net sales. Retail segment net sales for the first quarter of fiscal 2024 accounted for 90.2% of total net sales compared to 91.6% of total net sales in the first quarter of fiscal 2023.
The increase in our Retail segment net sales during the first quarter of fiscal 2024 was due to an increase of $41.9 million, or 4.5%, in Retail segment comparable net sales, partially offset by a decrease of $1.3 million in non-comparable net sales. Retail segment comparable net sales increased 17.4% at the Free People Group and 13.4% at the Anthropologie Group and decreased 13.1% at Urban Outfitters. Retail segment comparable net sales increased in North America and decreased in Europe. The overall increase in Retail segment comparable net sales was driven by high single-digit positive digital channel sales and low single-digit positive retail store sales. The digital channel net sales increase was driven by increases in sessions and average order value, while conversion rate and units per transaction decreased. Comparable store net sales increased as higher store traffic and average unit retail price were
21
partially offset by a decrease in conversion rate, units per transaction and transactions. The decrease in non-comparable net sales during the first quarter of fiscal 2024 was primarily due to the negative impact of foreign currency translation, partially offset by the 38 new Company-owned stores and restaurants opened and 20 Company-owned stores and restaurants closed since the prior comparable period.
The decrease in Wholesale segment net sales in the first quarter of fiscal 2024, as compared to the first quarter of fiscal 2023, was due to a $8.9 million, or 14.4%, decrease in sales for the Free People Group, partially offset by a $1.3 million increase in Urban Outfitters wholesale sales. The Free People Group wholesale sales decrease was primarily due to a decrease in sales to department stores and specialty stores. The increase in Nuuly segment net sales was due to a 118% increase in our subscribers as of the current quarter end versus the end of the prior year's comparable quarter.
Gross profit percentage for the first quarter of fiscal 2024 increased to 33.3% of net sales, from 30.7% of net sales in the first quarter of fiscal 2023. Gross profit increased to $371.2 million in the first quarter of fiscal 2024 from $323.3 million in the first quarter of fiscal 2023. The increase in gross profit rate was primarily due to higher initial merchandise markups at all three brands primarily driven by lower inbound transportation costs due in part to the adverse impact COVID-19 had on the global supply chain environment in the prior year period. Gross profit rate also benefitted from lower merchandise markdowns at the Anthropologie Group and Free People Group brands. The increase in gross profit dollars was due to higher net sales and improved gross profit rate.
Total inventory at April 30, 2023, as compared to April 30, 2022, decreased by $39.6 million, or 6.3%, to $590.3 million. Retail segment inventory decreased by 4.5% primarily due to better inventory control supported by a more reliable supply chain. Wholesale segment inventory decreased by 22.9% in line with the reduction in wholesale sales.
Selling, general and administrative expenses increased by $22.8 million, or 8.2%, in the first quarter of fiscal 2024, compared to the first quarter of fiscal 2023. Selling, general and administrative expenses as a percentage of net sales increased in the first quarter of fiscal 2024 to 26.9% of net sales, compared to 26.3% of net sales for the first quarter of fiscal 2023. The deleverage in selling, general and administrative expenses as a rate to sales and the dollar growth in selling, general and administrative expenses were primarily related to higher compensation costs, including higher incentive-based compensation costs due to improved Company performance. The dollar growth in selling, general and administrative expenses was also driven by increased marketing expenses to support increased sales and customer growth.
Income from operations was 6.4% of net sales, or $71.4 million, for the first quarter of fiscal 2024 compared to 4.4% of net sales, or $46.2 million, for the first quarter of fiscal 2023. The increase in operating income rate was primarily due to the higher gross profit rate. The increase in dollars was primarily driven by the increase in net sales and the higher gross profit rate.
Our effective tax rate for the first quarter of fiscal 2024 was 27.1% compared to 28.7% in the first quarter of fiscal 2023. The change in effective tax rate for the three months ended April 30, 2023 was attributable to the ratio of foreign taxable earnings to global taxable earnings and the favorable impact of general business credits in the current year.
22
Liquidity and Capital Resources
The following tables set forth certain balance sheet and cash flow data for the periods indicated. These tables should be read in the conjunction with the discussion that follows:
(amounts in millions) |
|
|
|
|
|
|
|
|
|
|||
|
|
April 30, |
|
|
January 31, |
|
|
April 30, |
|
|||
|
|
2023 |
|
|
2023 |
|
|
2022 |
|
|||
Cash, cash equivalents and marketable securities |
|
$ |
467.6 |
|
|
$ |
485.5 |
|
|
$ |
438.7 |
|
Working capital |
|
|
373.6 |
|
|
|
347.3 |
|
|
|
288.0 |
|
|
|
|
|
|||||
|
|
April 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Net cash provided by (used in) operating activities |
|
$ |
36.3 |
|
|
$ |
(79.6 |
) |
Net cash (used in) provided by investing activities |
|
|
(57.5 |
) |
|
|
13.6 |
|
Net cash used in financing activities |
|
|
(8.3 |
) |
|
|
(68.7 |
) |
The increase in working capital as of April 30, 2023, as compared to January 31, 2023, was primarily due to the timing of accounts receivable. The increase in working capital as of April 30, 2023, as compared to April 30, 2022, was primarily due to the increase in cash, cash equivalents and current marketable securities.
During the last two years, we have satisfied our cash requirements primarily through our cash flow from operating activities and through the sales and maturities of marketable securities. Our primary uses of cash have been to fund business operations, purchase inventory and rental product, expand our fulfillment centers, open new stores and repurchase our common shares.
Cash Flows from Operating Activities
Our major source of cash from operations was merchandise sales and our primary outflow of cash from operations was for the payment of operational costs. The change in cash provided by operating activities in the first three months of fiscal 2024 compared to cash used in operating activities in the first three months of fiscal 2023 was primarily due to lower inventory purchases in the first three months of fiscal 2024, the timing of disbursements and higher net income.
Cash Flows from Investing Activities
Cash used in investing activities in the first three months of fiscal 2024 primarily related to purchases of marketable securities, property and equipment and the initial cash payment for a tax credit investment, partially offset by the sales and maturities of marketable securities. Cash provided by investing activities in the first three months of fiscal 2023 primarily related to the sales and maturities of marketable securities, partially offset by purchases of property and equipment and marketable securities. Cash paid for property and equipment in the first three months of fiscal 2024 and 2023 was $32.9 million and $73.7 million, respectively, which was primarily used to expand our store base and fulfillment center network in fiscal 2024 and our fulfillment center network in fiscal 2023.
Cash Flows from Financing Activities
Cash used in financing activities in the first three months of fiscal 2024 primarily related to repurchases of our common shares from employees to meet payroll tax withholding requirements on vested awards. Cash used in financing activities in the first three months of 2023 primarily related to repurchases of our common shares under our share repurchase programs and from employees to meet payroll tax withholding requirements on vested awards.
23
Credit Facilities
See Note 5, “Debt,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding the Company’s debt.
Capital and Operating Expenditures
During fiscal 2024, we plan to complete construction on a new omni-channel fulfillment center in Kansas City, Kansas, open approximately 33 new Company-owned retail locations, expand or relocate certain existing retail locations, increase capacity at our Bristol, Pennsylvania Nuuly fulfillment center and invest in a new Nuuly fulfillment center in Raymore, Missouri in response to growth in the number of Nuuly subscribers, invest in new products, markets and brands, purchase inventory and rental product for our operating segments at levels appropriate to maintain our planned sales, upgrade our systems, improve and expand our digital capabilities and invest in omni-channel marketing when appropriate. We may also repurchase common shares. We believe that our new brand initiatives, new store openings, merchandise expansion programs, international growth opportunities and our marketing, social media, website and mobile initiatives are significant contributors to our sales. During fiscal 2024, we plan to continue our investment in these initiatives for all brands. We anticipate our capital expenditures during fiscal 2024 to be approximately $230 million, primarily to support new and expanded fulfillment and distribution centers and new store openings. All fiscal 2024 capital expenditures are expected to be financed by cash flow from operating activities and existing cash and cash equivalents. We believe that our new store investments generally have the potential to generate positive cash flow within a year. We may also enter into one or more acquisitions or transactions related to the expansion of our brand offerings, including additional franchise and joint venture agreements. We believe that our existing cash and cash equivalents, availability under our current credit facilities and future cash flows provided by operations will be sufficient to fund these initiatives.
Share Repurchases
See Note 8, “Shareholders’ Equity,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding the Company’s share repurchases.
Other Matters
See Note 1, “Basis of Presentation,” Recent Accounting Pronouncements, of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to our quantitative or qualitative disclosures found in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2023.
24
Item 4. Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed by us in our Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported on a timely basis and that such information is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate, to allow timely decisions regarding the required disclosure. As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of our management, including the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the design and operation of these disclosure controls and procedures. Based on that evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures were effective.
There have been no changes in our internal controls over financial reporting during the three months ended April 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
25
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
We are party to various legal proceedings arising from normal business activities. Management believes that the ultimate resolution of these matters will not have a material adverse effect on our financial position, results of operations or cash flows.
Item 1A. Risk Factors
There have been no material changes in our risk factors since January 31, 2023. Please refer to our Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed with the SEC on April 3, 2023, for our risk factors.
26
Item 6. Exhibits
Exhibit Number |
|
Description
|
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
3.3 |
|
|
|
|
|
3.4 |
|
|
|
|
|
31.1* |
|
Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer. |
|
|
|
31.2* |
|
Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer. |
|
|
|
32.1** |
|
Section 1350 Certification of the Principal Executive Officer. |
|
|
|
32.2** |
|
Section 1350 Certification of the Principal Financial Officer. |
|
|
|
101.INS* |
|
Inline XBRL Instance Document. |
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema. |
|
|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase. |
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase. |
|
|
|
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase. |
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase. |
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* Filed herewith
** Furnished herewith
Attached as Exhibits 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the three months ended April 30, 2023, filed with the Securities and Exchange Commission on June 9, 2023, formatted in inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Income; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Shareholders’ Equity; (v) the Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements.
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
URBAN OUTFITTERS, INC. |
|
|
|
|
|
Date: June 9, 2023 |
By: |
|
/s/ RICHARD A. HAYNE |
|
|
|
Richard A. Hayne |
|
|
|
Chief Executive Officer |
|
|
URBAN OUTFITTERS, INC. |
|
|
|
|
|
Date: June 9, 2023 |
By: |
|
/s/ MELANIE MAREIN-EFRON |
|
|
|
Melanie Marein-Efron |
|
|
|
Chief Financial Officer |
28