Urban Outfitters(URBN) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues grew by 12%, reaching a record $1.5 billion for Q3 [5][6] - Net income increased by 13% to a new Q3 record of $116 million, or $1.28 per diluted share [7][6] - Gross profit increased by 13% to $563 million, with a gross profit rate of 36.8% [6][7] - SG&A expenses rose by 14%, leading to a deleveraging of 32 basis points [6][7] Business Line Data and Key Metrics Changes - Free People brand revenue increased by 9%, driven by a 4% retail segment comp and significant non-comp sales growth [8][9] - Urban Outfitters brand recorded a 13% global retail segment comp, with North America at 10% and Europe at 17% [10][12] - Nuuly brand revenue grew by 49%, driven by a 40% increase in average active subscribers [14][15] Market Data and Key Metrics Changes - The wholesale segment saw an 8% revenue increase, primarily from specialty store accounts [6][7] - European operations for Urban Outfitters delivered double-digit retail segment comps, indicating strong market performance [12][13] Company Strategy and Development Direction - The company aims to continue scaling the Nuuly business and building brand awareness through logistics and marketing investments [14][15] - There is a focus on maintaining opening price points and strategic pricing to protect customer value [33][34] - The Anthropologie Group is investing in its own brands, which have shown strong growth and customer affinity [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving record sales and operating profit for the year, despite tariff headwinds [16][17] - The company anticipates a competitive holiday season but expects to maintain improved operating margins [31][32] - There is a recognition of changing consumer behavior, with customers waiting for promotions, which is seen as a return to pre-pandemic shopping habits [54][55] Other Important Information - The company plans to open approximately 69 new stores and close about 17 this year, with significant expansion in the FP Movement and Free People brands [27][28] - Tariffs are expected to impact gross margins, but the company is actively working on mitigation strategies [16][26] Q&A Session Summary Question: Follow-up on pricing strategy and customer reaction - Management stated that small price increases have seen little to no resistance, and they remain committed to protecting opening price points [33][34] Question: Own brand penetration and global footprint - Own brand penetration has increased by nearly 100 basis points, with plans for continued growth and expansion in the U.K. [37][38] Question: Urban Outfitters brand profitability - Urban Outfitters achieved profitability in Q3, driven by strong performance in Europe and reduced losses in North America [39][40] Question: Drivers of business acceleration - Increased traffic in stores and online was identified as a key driver of sales growth, with expectations for a strong holiday season [40][41] Question: Long-term EBIT margin targets - The company aims for a long-term EBIT margin of 10%, with ongoing opportunities for improvement across brands [49][50]