This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Urban Outfitters, Inc. (URBN: chart) on March 08, 2007.
Key Investors Issues
- EPS were flat at 21 cents compared to a year ago.
- Net income was $35.7 million compared to $35.6 million in the prior year period.
- Sales increased 13 % to $360.8 million from $318.6 million last year.
Fourth Quarter Highlights
The company produced net revenues of $360.8 million, a 13.2% gain over the same period last year.
Three factors drove this increase:
- The majority of the increase came from sales generated by newly opened and non-comparable stores. There were 48 of these new stores in operation at the end of the quarter on a base of 159 comparable stores opened at the beginning of last year’s fourth quarter. On a dollar basis, these 48 new stores accounted for $40 million in additional revenues during the quarter. The company opened a total of 10 new stores.
- The second factor lifting quarterly sales was a 23% growth in the company’s direct-to-consumer business. Not only did direct sales grow in the fourth quarter, but they grew as a percent to total sales as well. Total direct sales topped $52.6 million or 15% of total revenues in the quarter, versus $42.7 million last year, or 13%. The quarterly sales gain resulted from a 31% increase in the total number of visits to brands e-commerce websites, a 21% gain in the total number of direct orders, a 1% increase in the average direct order value. Catalog circulation at the Urban brand decreased by over 11%, which caused total company catalog circulation to decrease by 3%. The new Urban brand e-commerce site in Europe launched successfully and delivered fourth quarter sales that exceeded plan by nearly 100%.
- The third factor driving total sales growth was 29% jump in Free People wholesale sales. The gain was achieved primarily with the existing account base and was driven by an 8% increase in the average unit cost, a 47% surge in department store purchases and one additional delivery period in the month of November.
For Anthropologie, the 7% decrease in comparable store sales was caused by an 11% drop in the average number of comparable store transactions.
This deficit more than offset the positive effects of a 3% gain in the average unit price or AUR, and increase in the average number of units sold per transaction or UPT.
The Urban brand had a 4% decrease in comparable store sales.
It was generated by 4% fewer comparable store transactions, a 2% drop in AUR, a 2% increase in UPT.
The Free People comparable stores delivered a 4% increase in sales.
It was comprised of a 2% increase in number of transactions, a 3% rise in UPT, and decline in AUR.
Total comparable store sales improved each month during the fourth quarter.
That trend has continued into February and early March. Customer reaction to the current women’s apparel assortment at Anthropologie has been strong. That business which accounts for approximately 75% of Anthropologie’s revenues has been comparable store sales positive for a number of weeks and appears to be gaining momentum as the season progresses.
Total operating margins were 13.4% of total net sales, which was 320 basis points below the fourth quarter results from the previous year.
The decrease was driven by product assortments at the two major retail brands that were less compelling than those offered during the fourth quarter of the previous year. This, in turn, assisted in a greater merchandize marked tabs and price adjustments to clear seasonal products and caused a decrease in same-store sales that resulted in the de-leveraging of store occupancy and operating costs. Helping to partially offset these factors was an improvement in the operating margins at both the Urban Direct and Urban European businesses.
Total company inventory this year included a $154.4 million, an increase of $14 million over the same day last year. 
