Urban Outfitters(URBN) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total URBN sales grew by 9%, reaching a Q4 record of $1.6 billion, with record fourth-quarter sales for four of the five brands [11][12] - Gross profit increased by 17% to $528 million, with the gross profit rate improving by over 200 basis points to 32.3% [13] - Operating income rose by 54% to $125 million, while net income increased by 49% to $98 million or $1.04 per diluted share [15] Business Line Data and Key Metrics Changes - Anthropologie achieved an 8% Retail segment comp, with double-digit increases in the digital channel and mid-single-digit increases in the store channel [16] - Free People saw total retail and wholesale segment sales increase by 13%, driven by an 8% Retail segment comp and a 27% increase in wholesale revenues [19] - Urban Outfitters recorded a 3% decline in Retail segment comp, with improvements in merchandise margin rate due to lower markdowns [23][24] Market Data and Key Metrics Changes - The Retail segment comp for URBN was driven by a high single-digit DTC channel comp and a low single-digit store comp [12] - Nuuly delivered a 56% increase in brand revenue, ending the quarter with 300,000 average active subscribers [29][30] - The Wholesale segment saw a 26% revenue increase, primarily due to full-price sales at Free People [12] Company Strategy and Development Direction - The company plans to open approximately 58 new stores and close about 19 stores during fiscal year 2026, focusing on growth in FP Movement, Free People, and Anthropologie [38] - The Urban Outfitters brand is pivoting to a renewed focus on growth, emphasizing regular price growth and customer acquisition [25][26] - The company aims to improve gross profit margins by approximately 50 to 100 basis points for the first quarter and full year of fiscal 2026 [34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about fiscal 2026, expecting mid-single-digit sales growth driven by low single-digit retail segment comps [32] - The company noted that customer demand remains consistent, with strong revenue gains across all business segments [41][45] - Management highlighted the importance of evolving product assortments and marketing strategies to attract new customers [73][76] Other Important Information - The company ended FY25 with slightly elevated inventory levels, planning to increase product turns in the coming year [36] - Capital expenditures for FY26 are planned at approximately $240 million, with a focus on retail store expansion and technology investments [37] - The company plans to repurchase shares to offset any dilution that may occur in FY26, contingent on market conditions [39] Q&A Session Summary Question: Did you hit the goal to improve IMU by 500 basis points? - Management acknowledged progress but fell short of the goal, indicating continued efforts for improvement [54] Question: Can you discuss the mix of branded versus private brands? - Urban Outfitters is focusing on growing national brands, while Anthropologie has achieved 70% owned brand penetration in women's apparel [60][61] Question: What notable trends across categories do you see emerging this year? - Management noted strong sales in bottoms, outerwear, and activewear, with expectations for continued growth in these categories [66] Question: Where are you on the Urban Outfitters transformation strategy? - Management reported good progress on customer focus, product assortment, and inventory management, with ongoing efforts to improve profitability [73][78] Question: What are the real estate plans for Anthropologie and Urban Outfitters? - Anthropologie plans to ramp up store growth due to brand momentum, while Urban Outfitters is rationalizing its footprint to improve profitability [90][94] Question: What is the outlook for Urban Outfitters' profitability? - Management indicated that Urban Outfitters needs to return to positive comps to leverage improvements in occupancy and profitability [142]