Urban Outfitters(US:URBN)2024-09-09 20:30markdown PART I FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Urban Outfitters, Inc. as of and for the three and six months ended July 31, 2024, including balance sheets, statements of income, comprehensive income, shareholders' equity, and cash flows, along with detailed notes explaining the basis of presentation and key accounting policies [Condensed Consolidated Financial Statements](index=3&type=page&id=Condensed%20Consolidated%20Financial%20Statements) The financial statements show a year-over-year increase in total assets to $4.26 billion. For the second quarter, net sales grew to $1.35 billion, and net income rose to $117.5 million, or $1.24 per diluted share. For the first six months, net cash from operations was $163.8 million, a decrease from the prior year, primarily due to higher inventory purchases and timing of disbursements Condensed Consolidated Balance Sheet Highlights (in millions/billions) | Account | July 31, 2024 | January 31, 2024 | July 31, 2023 | | :--- | :--- | :--- | :--- | | **Total current assets** | $1.47B | $1.28B | $1.37B | | **Total Assets** | **$4.26B** | **$4.11B** | **$3.97B** | | **Total current liabilities** | $1.01B | $0.99B | $0.96B | | **Total Liabilities** | $2.02B | $2.00B | $2.00B | | **Total Shareholders' Equity** | **$2.24B** | **$2.11B** | **$1.97B** | Condensed Consolidated Statements of Income Highlights (in millions/billions, except per share data) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $1.35B | $1.27B | $2.55B | $2.39B | | **Gross profit** | $493.3M | $455.6M | $901.7M | $826.8M | | **Income from operations** | $145.1M | $132.1M | $219.8M | $203.5M | | **Net income** | $117.5M | $104.1M | $179.3M | $156.9M | | **Diluted EPS** | $1.24 | $1.10 | $1.89 | $1.67 | Condensed Consolidated Statements of Cash Flows Highlights (in millions) | Cash Flow Activity | Six Months Ended July 31, 2024 | Six Months Ended July 31, 2023 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $163.8M | $211.2M | | **Net cash used in investing activities** | ($61.1M) | ($178.0M) | | **Net cash used in financing activities** | ($69.1M) | ($9.3M) | | **Increase in cash and cash equivalents** | $30.8M | $23.5M | [Notes to Condensed Consolidated Financial Statements](index=14&type=page&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed information on accounting policies and specific financial statement items, including segment performance where the Nuuly segment shows significant growth, the company's $350 million credit facility, share repurchase activity, revenue recognition, marketable securities portfolio, and fair value measurements - The company operates an asset-based revolving credit facility of up to **$350 million**, maturing in June 2027. As of July 31, 2024, there were no borrowings under the facility, and outstanding stand-by letters of credit were **$9.0 million**[26](index=26&type=chunk)[29](index=29&type=chunk) - During the three months ended July 31, 2024, the company repurchased **1.2 million common shares** for **$52.3 million**. As of July 31, 2024, **18.0 million common shares** remained available for repurchase under the existing program[36](index=36&type=chunk)[37](index=37&type=chunk) Segment Net Sales and Operating Income (in millions) | Segment | Q2 2024 Sales | Q2 2023 Sales | Q2 2024 Op. Income | Q2 2023 Op. Income | | :--- | :--- | :--- | :--- | :--- | | **Retail** | $1.19B | $1.16B | $139.2M | $144.0M | | **Nuuly** | $90.7M | $55.8M | $5.3M | ($2.4M) | | **Wholesale** | $66.8M | $60.8M | $13.4M | $6.7M | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's performance, highlighting a 6.3% increase in total net sales for Q2 fiscal 2025, driven by strong growth in the Nuuly segment (up 62.6%) and modest growth in the Retail segment (up 3.1%), while maintaining a healthy liquidity position and planning capital expenditures of approximately $210 million for fiscal 2025 [Overview](index=31&type=page&id=Overview) The company operates three segments: Retail (including Anthropologie, Free People, and Urban Outfitters brands), Nuuly (a subscription rental service), and Wholesale, operating 716 company-owned stores as of July 31, 2024, with projections to open 57 new stores and close 25 in fiscal 2025 - The company operates three reportable segments: Retail, Nuuly, and Wholesale. For the six months ended July 31, 2024, the Retail segment accounted for **88.5%** of consolidated net sales, Nuuly for **6.6%**, and Wholesale for **4.9%**[57](index=57&type=chunk)[65](index=65&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) Store Count Activity (Six Months Ended July 31, 2024) | Brand | Start (Jan 31, 2024) | Opened | Closed | End (July 31, 2024) | | :--- | :--- | :--- | :--- | :--- | | Urban Outfitters | 262 | 5 | (4) | 263 | | Anthropologie | 237 | 5 | (3) | 239 | | Free People | 198 | 9 | (2) | 205 | | **Total Company-Owned** | **706** | **19** | **(9)** | **716** | - For fiscal year 2025, the company projects opening approximately **57 new stores** and closing **25**, for a net increase of 32 company-owned stores[69](index=69&type=chunk) [Results of Operations](index=36&type=page&id=Results%20of%20Operations) For Q2 fiscal 2025, net sales increased 6.3% year-over-year to $1.35 billion, driven by significant growth in Nuuly sales (62.6%) and modest increases in Wholesale (15.1%) and Retail (3.1%) segments, with gross profit margin expanding to 36.5% Q2 Fiscal 2025 vs. Q2 Fiscal 2024 Performance | Metric | Q2 FY2025 | Q2 FY2024 | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $1.35B | $1.27B | +6.3% | | **Gross Profit %** | 36.5% | 35.8% | +70 bps | | **SG&A %** | 25.8% | 25.4% | +40 bps | | **Operating Income %** | 10.7% | 10.4% | +30 bps | - Retail segment comparable net sales increased by **2.0%** in Q2, driven by a **7.1%** increase at Free People and a **6.7%** increase at Anthropologie, which was partially offset by a **9.3%** decrease at Urban Outfitters[77](index=77&type=chunk) - Nuuly segment net sales surged **62.6%** in Q2, driven by a **55.0%** increase in the average number of active subscribers compared to the prior year[76](index=76&type=chunk)[78](index=78&type=chunk) [Liquidity and Capital Resources](index=40&type=page&id=Liquidity%20and%20Capital%20Resources) The company's financial position remains solid with $771.0 million in cash, cash equivalents, and marketable securities as of July 31, 2024, with working capital increasing to $463.5 million, and plans for approximately $210 million in capital expenditures for fiscal 2025 Key Liquidity Metrics (in millions) | Metric | July 31, 2024 | January 31, 2024 | July 31, 2023 | | :--- | :--- | :--- | :--- | | **Cash, cash equivalents & marketable securities** | $771.0M | $779.2M | $597.9M | | **Working capital** | $463.5M | $288.3M | $408.0M | - Net cash provided by operating activities decreased to **$163.8 million** in the first six months of fiscal 2025 from **$211.2 million** in the prior-year period, mainly due to higher inventory purchases and the timing of disbursements[91](index=91&type=chunk)[93](index=93&type=chunk) - The company anticipates capital expenditures of approximately **$210 million** for fiscal 2025, primarily to support new store openings and the expansion of fulfillment and distribution centers[97](index=97&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that there have been no material changes to its quantitative or qualitative disclosures about market risk from those reported in its Annual Report on Form 10-K for the fiscal year ended January 31, 2024 - There have been **no material changes** to the company's market risk disclosures since the fiscal year ended January 31, 2024[100](index=100&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation as of July 31, 2024, the company's management concluded that the disclosure controls and procedures are effective, with no material changes in internal controls over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were **effective** as of the end of the period[101](index=101&type=chunk) - **No changes** in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[102](index=102&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is party to various legal proceedings arising from normal business activities, which management does not expect to have a material adverse effect on the company's financial position, results of operations, or cash flows - The company states that ongoing legal proceedings from normal business activities are **not expected to have a material adverse effect** on its financial results[104](index=104&type=chunk) [Item 1A. Risk Factors](index=43&type=page&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors since those disclosed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2024 - **No material changes** have occurred in the company's risk factors since the filing of its Annual Report on Form 10-K on April 1, 2024[105](index=105&type=chunk) [Item 2. Unregistered Sales of Equity Securities and the Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20the%20Use%20of%20Proceeds) During the second quarter of fiscal 2025, the company repurchased 1.2 million shares of its common stock under its publicly announced share repurchase program, with 18.0 million shares remaining authorized for repurchase as of July 31, 2024 Share Repurchase Activity (Quarter Ended July 31, 2024) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Remaining in Program | | :--- | :--- | :--- | :--- | | May 2024 | 0 | N/A | 19.2M | | June 2024 | 0.3M | $43.86 | 18.9M | | July 2024 | 0.9M | $43.45 | 18.0M | | **Total** | **1.2M** | **-** | **18.0M** | [Item 5. Other Information](index=43&type=section&id=Item%205.%20Other%20Information) The company reports that no director or executive officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended July 31, 2024 - During the second quarter, **no director or executive officer adopted, modified, or terminated** a Rule 10b5-1 trading arrangement[107](index=107&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, certifications by the Principal Executive Officer and Principal Financial Officer, and financial data in Inline XBRL format - The report includes **certifications** from the Principal Executive Officer and Principal Financial Officer as required by Rule 13a-14(a)/15d-14(a) and Section 1350[108](index=108&type=chunk)