Urban Outfitters, which runs apparel and home goods brands Anthropologie, Bhldn, Free People, Terrain and Urban Outfitters as well as a food and beverage division, on Tuesday reported that first quarter net sales rose 12.4% to a record $856 million, besting the Zacks Consensus Estimate for $837.1 million. Retail net sales rose 12.3% to $775.6 million, according to a company press release. E-commerce continued to outperform stores, posting a double-digit sales increase, driven by increases in average order value, sessions and conversion rate, CFO Frank Conforti told analysts, according to a conference call transcript from Seeking Alpha.
Same-store retail net sales in the quarter rose 10%, driven by strong, double-digit growth in the digital channel and positive retail store sales, the company said. By brand, same-store sales at Free People rose 15%, 10% at the Anthropologie Group and 8% at Urban Outfitters. The results accrued from increased average unit selling price partially offset by decreased transactions and units per transaction; store traffic was up slightly, Conforti said.
Wholesale segment net sales rose 13.1% to $80.1 million thanks in part to the recently launched Anthropologie home. Food division sales in the quarter, however, fell 20.9% from the prior-year quarter to $4.6 million, the company said. Gross profit also surged 17% to $280.7 million, and gross margin expanded 130 basis points to some 32.8%, thanks to fewer markdowns at all three retail brands and falling store occupancy costs, the company said.
This quarter marked the first in four years when Urban Outfitters' store comps have been positive overall and at each of its brands, and the strength first seen in March has only accelerated this month, executives said on Tuesday. The total company markdown rate in the quarter was the lowest of any in the last ten years, according to CEO Richard Hayne. "Better fashion execution, strong demand for apparel and accessories, plus disciplined inventory control reduced the need to take markdowns and drove strong comps and full-priced selling," he said.
He credited both the economy and fashion trends — the latter something he had bemoaned in recent years — and said that improvements were even better than he had anticipated. "It seems I underestimated the power of that tailwind and how well our teams would execute," he told analysts.
During the quarter, the company opened four new locations, including two new Free People stores in North America, two new Urban Outfitters stores in Europe, and closed one Urban Outfitters store in Europe. Plans for the year are to open 18 new stores while closing 10.
As much as its stores have recovered, the company is seeing its strongest growth online. Digital penetration of the company's overall retail comp sales exceeded 40% for the first time, and Hayne said that was achieved by offering larger and better assortments, creating compelling visual imagery and effective marketing and building sites where shopping is easier and more enjoyable. "Our proprietary technology shared by all three brands includes web and mobile platforms that are fast, reliable and scalable," Hayne said.
Both the Urban Outfitters and Anthropologie brands in May launched new online marketplaces, with curated assortments from third party sellers, with a goal of expanding the online assortment and driving site traffic. The company has also added payment options from Apple Pay and Afterpay, and the latter could boost conversion rates and average order values because of its no-interest charges and lack of credit checks, he said.
The company isn't just depending on retail, though, with Free People in particular offering wholesale opportunity in athleisure and denim, executives said. Urban is also working to expand overseas to stoke growth.