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Earnings Analysis: 
Urban Outfitters Third Quarter Earnings Call
Author: Albena Toncheva
123jump.com
Last Update: 8:21 AM EST November 15 2007


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The operator of lifestyle specialty retail stores reported revenue of $379.3 million, up 23% from prior year, on increases of 17% and 16% at Anthropologie and Free People stores, respectively. The company, which has implemented the new e-commerce platform at Anthropologie and Urban Outfitters, expects to launch its fourth concept, Terrain, in calendar 2008. Fiscal year to date, Urban Outfitters opened 23 new stores and plans to open a total of 38 new stores in fiscal 2008.

 
Margaret Whitfield (Sterne, Agee & Leach): Urban Europe struggled a bit, although it was certainly strong earlier. Can you comment on that? Could you elaborate on your plans for Anthropologie outside US?

Tedford G. Marlow: For Urban in Europe, in particular in the U.K., comps did soften for us in the quarter. They were, however, going up against mid-20% comps last year. The business was still in a very good place in regard to bottom line profitability to plan. But they did struggle on the top line in the quarter.

Glen T. Senk: We are thinking about opening the first Anthropologie store in Europe in 2010. In fact, the real estate group is leaving to do their initial exploration next week.

Marc Bettinger (Stanford Group): On Urban, can you comment on the traffic or transactions during the quarter?

John E. Kyees: The transactions were up 4% at Urban for the quarter.

Christine Chen (Needham & Company): Could you expand on some details on the potential for Anthropologie''s wholesale business?

Glen T. Senk: We are launching a brand next year called Leaves Dotter. We have presold it at this point to roughly 40 doors. It will sit along lines like Tracy Reiss, Tibi, Nanette Lepore, and it will be sold in a limited number of doors outside of our own and roughly half of our own doors.

Barbara Wyckoff (Buckingham Research): Are you seeing different sell-throughs in your own stores versus the department stores and the specialty stores? What are you doing to manage the momentum in Free People?

Meg Hayne: No, we’re not seeing a difference in selling in categories. The same categories are strong both at retail and at wholesale. In terms of the momentum, the momentum is high. We have a lot of energy. There’s a lot of enthusiasm for the success of the brand, so we are very happy and optimistic about the holiday season.

Robin Murchison (SunTrust Robinson Humphrey): Is 34% closer to where we ought to be using the tax rate next year?

John E. Kyees: The tax rate this year is 34%. We would expect you to probably model 35% to 36%. Not that we couldn’t get to 34%, but so many issues come up in taxes in terms of states and changes there and a variety of other things. We’d rather not someday miss an earnings number because the tax rate was planned too conservatively.
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