Urban Outfitters, whose brands include Anthropologie, BHLDN, Free People, Terrain and Urban Outfitters brands, as well as a Food and Beverage division, on Tuesday reported that second quarter total net sales rose 13.7% over the year-ago period to a record $992 million. Comparable retail net sales rose 13%, driven by strong, double-digit growth in e-commerce and positive retail store sales, according to a company press release.
Total company net income in the quarter rose to $92.8 million from $49.9 million a year ago, the company also said. Gross profit as a percentage of sales expanded by 180 basis points to 35.9%, driven by lower markdowns at all three brands and leverage in store occupancy cost.
The gross profit improvement was also thanks to strong comps, partially offset by costs due in part to the e-commerce sales rise, the company also said. By brand, comparable retail net sales rose 17% at Free People, 15% at Urban Outfitters and 11% at the Anthropologie Group. Wholesale segment net sales rose 10%, the company said.
In the past year or so Urban CEO Richard Hayne often lamented a dearth of new fashion trends, which he blamed in large part for lackluster sales. But that has now changed, and on Tuesday he said the company's brands are taking full advantage of that.
"Over the last six months, I have spoken on these calls about the strengthening of the U.S. economy, growing consumer confidence and a changing fashion silhouette," he told analysts, according to a conference call transcript from Seeking Alpha. "These factors have combined to create a brisk tailwind for fashion retailers. As they did in the first quarter, our brand teams in Q2 took full advantage of this opportunity."
The company's major brands — Anthropologie, Urban Outfitters and, especially, Free People — have elevated the company to among the best-performing retailers in both this quarter and the first quarter, according to analysts at investment research firm Trefis. Higher consumer spending is certainly helping, as are the company's past weaker results, which help boost the year-over-year improvements.
The company's brands aren't relying just on wholesale or e-commerce, although they're two major pillars of growth executives outlined in recent months as key to turning results around. Shoppers are returning to the company's stores, which saw traffic and ticket increases in the quarter. All three of its major brands' double-digit comp sales were driven by strength in apparel and accessories.
"[E]ven though the digital comps continued to outpace stores, total store comps were the best they have been in eight years," Hayne said, noting that, in addition to higher footfall, average prices were higher and markdowns fewer. "The markdown rate improved at all brands, but we believe opportunity remains for further improvement in the back half of the year, especially at the Anthropologie brands," he said.
In a sign that the e-commerce surge won't entirely define its approach, Urban Outfitters continues to expand its brick-and-mortar footprint. In the six months ended July 31, the company opened seven new locations, including three Free People stores, two Urban Outfitters stores and two Anthropologie Group stores, and closed one Urban Outfitters store and one Anthropologie Group store, according to the release.