This summary is based on the third quarter fiscal 2007 earnings call conducted by Urban Outfitters, Inc. (URBN: chart) on November 09, 2006.

Key Investors Issues

- EPS were 21 cents per share compared to 22 cents per share a year ago.
- Sales reached $308.4 million, up from $288.8 million in the year ago quarter.
- Total company inventories grew by $9.4 million or 5.5% on a year-over-year basis.

Third Quarter Fiscal 2007 Financial Highlights

In the third quarter the company produced record sales of $308.4 million.

This is a 7% increase over the same period last year. Three factors drove this increase:

- The biggest is the sales generated by new stores. There were 46 new stores in operation at the end of the period on a base of 151 comparable stores in operation at the beginning of last year’s third quarter. As of October 31, the company operated a total of 1.66 million selling square feet of retail space this year versus 1.38 million last year. This is a 21% increase in selling square feet on a year over year basis. New and non-comparable stores accounted for $35.6 million in additional revenues during the quarter.
- The second factor lifting quarterly sales was the 17% rise in direct-to-consumer sales. Fueling this gain was a 16% increase in total catalog circulation, a 3% rise in average order size in dollars and the launch of a commerce-enabled web site for the Urban brand in Europe. The increase in catalog circulation was primarily driven by the Free People brand. By brand, circulation was up 7% for Anthropologie and was flat for Urban. Total web visits to the brand''s web sites during the period rose by 24% on a year over year basis.

- The last factor that added to the quarterly sales increase was the 15% gain in the
Free People wholesale business. This business benefited from a 19% increase in fall bookings and a slight rise in the average unit price.

These three factors – the growth in the number of stores in operation, the increase in direct-to-consumer sales and the rise in wholesale sales – combined to more than offset the effects of a 10% decrease in total company comparable store sales during the quarter.

During the quarter same store sales of both Anthropologie and Urban Outfitters fell by 10% while the same store sales of Free People grew 9% over prior year.

In the third quarter last year, comparable store sales at these same brands rose by 7%, 19%, and 21%, respectively and total company comparable store sales grew by 13%.

During the quarter, Anthropologie experienced a 3% increase in the average unit retail price (AUR), a 4% decrease in the number of units per transaction (UPT) and a 9% drop in comparable store transactions.

Comparable store sales at the Urban brand were negatively impacted by a 2% decrease in AUR and a 10% drop in comparable store transactions but helped by a 2% increase in UPT. The Free People brand had 9% higher AUR, with a flat UPT.

Business in the Midwest was difficult for both Urban and Anthropologie while both of these brands performed best in metropolitan stores, especially in New York City.

By product category, the women’s accessories business was weak across all three brands. Urban performed best in the men’s apparel and home categories, while the women’s apparel area was the best performing category for the Anthropologie and Free People brands.

Operating margins

The company produced operating margins for the quarter of 14.7% of net sales. The 626 basis point drop from the previous year was primarily the result of negative comparable store sales. Increases in fixed occupancy costs, store payroll and other store controllable expenses and additional mark-downs taken to clear less desirable seasonal merchandise were all caused by negative comparable store sales. In addition, margins this quarter were negatively impacted by a non-recurring gain last year stemming from the sale of a company owned property. In spite of the de-leveraging, each brand delivered solid, double-digit operating margins for the quarter.

Inventories

- At the end of the period, the company owned $179.6 million in total inventory, up 5.5% from the same date last year. The great majority of this increase was purchased to stock new stores.
- On a comparable store basis, total inventory decreased by 13% on both a dollar and unit basis. By brand, comparable store inventory measured in dollar was down by 11% at Anthropologie, 15% at Urban, and 4% at Free People.
- During the quarter both the Anthropologie and Urban brands successfully utilized aggressive mark-downs to turn the inventories and maintain an acceptable weeks-of-supply on-hand.

Net Income