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Source: Urban Outfitters.
reported earnings for the second quarter of fiscal 2015 on
Monday. Although sales at its namesake Urban Outfitters brand
remain quite weak, the company is generating impressive
performance from Anthropologie and Free People. Let's go over
Urban Outfitters' latest earnings report and highlight a few
important takeaways for investors.
Total net sales came in at $811 million during the quarter
ended on July 31, a 7% increase versus the same quarter in the
prior year, and above Wall Street analysts' forecasts of $805
million. Comparable retail segment net sales, which include the
comparable direct-to-consumer channel, were flat during the
Comparable sales performance was quite uneven across the
company's brands, with its namesake Urban Outfitters brand
dragging on performance to a considerable degree. Comparable
retail segment net sales declined 10% for the Urban Outfitters
brand, while they increased by an impressive 21% at Free People
and 6% at Anthropologie.
On a total sales basis, Free People and Anthropologie were
powerful growth drivers for the company, with total revenues
increasing 32% and 9%, respectively. On the other hand, total
sales from the Urban Outfitters brand declined by 2% during the
||Sales Q2 2015
||Sales Q2 2014
||% Total Sales
Earnings and profitability
Earnings per share came in at $0.49 during the quarter, lower
than the $0.51 the company delivered in the same quarter of last
year, but in line with Wall Street analysts' expectations.
Gross profit margin decreased by 194 basis points to 37.38% of
sales, versus 39.3% of revenues in the year-ago quarter.
Management had warned
in the previous earnings conference call that profit margins were
going to remain under pressure because of the negative impact
from declining sales in its Urban Outfitters brand, so this
should come as no big surprise to investors.
On a more positive note, inventory increased by $15 million,
or 4% versus the same quarter in 2013. Comparable retail segment
inventories increased 1% when measured at cost, and declined 8%
The fact that inventories are coming down in comparison with
sales suggests that Urban Outfitters is making progress when it
comes to improving merchandising and streamlining inventories,
and this bodes well for the company in the coming quarters.
Selling, general, and administrative expenses represented
24.4% of revenues during the quarter, an increase against 23.6%
of sales in the same quarter last year. Management attributed
this increase to: "increased marketing and technology expenses
which drove higher direct-to-consumer traffic."
Although the decline of 10% in comparable sales at the Urban
Outfitters brand was better than the 12% drop the company
reported in the first quarter of fiscal 2015, there is still a
lot that needs to be done when it comes to reinvigorating that
segment. On the other hand, remarkably strong performance from
Anthropologie and Free People is allowing Urban Outfitters to
still deliver healthy sales growth on a total company level.
The decline in gross margin is no big surprise, and
inventories seem to be under control, which is an encouraging
sign regarding future prospects. Investments in marketing and
technology can be a drag on performance in the short term, but
they can build the foundation for long-term growth when done
In all, Urban Outfitters seems to be moving in the right
direction, even if it's not doing it very rapidly.
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Urban Outfitters Is Making Progress
originally appeared on Fool.com.
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