Urban Outfitters swings to surprise profit on strong digital sales

By

Robin Driver

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 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.