UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

For the fiscal year ended January 31, 20162020

For the transition period from ________ to ________                

Commission File No. 000-22754

URBAN OUTFITTERS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Registrant’s telephone number, including area code: (215) 454-5500

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x☒    No  ¨☐

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨☐    No  x☒

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x☒    No  ¨☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x☒    No  ¨

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x☐

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by a checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨☐    No  x☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, was $3,014,925,747.$1,744,868,754.

The number of shares outstanding of the registrant’s common stock on March 24, 201625, 2020 was 117,401,220.97,777,322.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Items 10, 11, 12, 13 and 14 is incorporated by reference into Part III hereof from portions of the Proxy Statement for the registrant’s 20162020 Annual Meeting of Shareholders.

TABLE OF CONTENTS

Certain matters contained in this filing with the United States Securities and Exchange Commission (“SEC”) may contain forward-looking statements and are being made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. When used in this Annual Report on Form 10-K, the words “project,” “believe,” “plan,” “will,” “anticipate,” “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Any one, or all, of the following factors could cause actual financial results to differ materially from those financial results mentioned in the forward-looking statements: impacts of the coronavirus (COVID-19) pandemic, the difficulty in predicting and responding to shifts in fashion trends, changes in the level of competitive pricing and promotional activity and other industry factors, overall economic and market conditions and worldwide political events and the resultant impact on consumer spending patterns, lowered levelsthe effects of consumer confidencethe implementation of the United Kingdom's withdrawal from membership in the European Union (commonly referred to as “Brexit”), including currency fluctuations, economic conditions and higher levels of unemployment, lowered levels of consumer spending resulting from worldwide political and economic events,legal or regulatory changes, any effects of war, terrorism and civil unrest, natural disasters, severe or severeunseasonable weather conditions or public health crises such as the coronavirus (COVID-19) pandemic, increases in labor costs, increases in raw material costs, availability of suitable retail space for expansion, timing of store openings, risks associated with international expansion, seasonal fluctuations in gross sales, the departure of one or more key senior executives, import risks, changes to U.S. and foreign trade policies, including potential disruptions and changesthe enactment of tariffs, border adjustment taxes or increases in duties tariffs andor quotas, the closing or disruption of, or any damage to, any of our distribution centers, our ability to protect our intellectual property rights, risks associated with internetdigital sales, our ability to maintain and expand our digital sales channels, response to new store concepts, our ability to integrate acquisitions, failure of our manufacturers and third-party vendors to comply with our social compliance program, changes in our effective income tax rate (including the uncertainties associated with the U.S. Tax Cuts and Jobs Act), changes in accounting standards and subjective assumptions, regulatory changes and legal matters and other risks identified in our filings with the SEC, including those set forth in Item 1A of this Annual Report on Form 10-K for the fiscal year ended January 31, 2016.2020. We disclaim any intent or obligation to update forward-looking statements even if experience or future changes make it clear that actual results may differ materially from any projected results expressed or implied therein.

Unless the context otherwise requires, all references to “Urban Outfitters,” the “Company,” “we,” “us,”“us” or “our” or “our company” refer to Urban Outfitters, Inc., together with its subsidiaries.

PART I

Item 1. Business

General

We are a leading lifestyle specialty retailproducts and services company that operates undera portfolio of global consumer brands comprised of the Anthropologie, Bhldn, Free People, Terrain, Urban Outfitters and Nuuly brands and our Menus & Venues (formerly known as “Food and Beverage”) division. We have achieved compounded annual sales growth of approximately 4% over the past five years, with sales of approximately $4.0 billion during the fiscal year ended January 31, 2020.

We operate under three reportable segments – Retail, Wholesale and Subscription. Our Retail segment consists of our Anthropologie, Bhldn, Free People, Terrain and Bhldn brands. We also operate a Wholesale segment under the Free People brand.Urban Outfitters brands and our Menus & Venues division. We have over 4549 years of experience creating and managing retail stores that offer highly differentiated collections of fashion apparel, accessories and home goods, among other things, in inviting and dynamic store settings. Our core strategy is to provide unified environments that establish emotional bonds with the customer.customer, primarily through Company-owned stores but also through franchised or third-party operated stores. In addition to our retail stores, we offer our products and market our brandsservices directly to the consumerour customers through our e-commerce websites, mobile applications, catalogs, customer contact centers and our catalogs. We have achieved compounded annual sales growth of approximately 9% over the past five years, with sales of approximately $3.4 billion during the fiscal year ended January 31, 2016.digital businesses. The Menus & Venues division includes various casual dining concepts.

We opened our first Urban Outfitters store in 1970 near the University of Pennsylvania campus in Philadelphia, Pennsylvania and were incorporated in Pennsylvania in 1976. The first Anthropologie store opened inoperate a suburb of Philadelphia in October 1992. We started doing business in Europe in June 1998, with our first European Urban Outfitters store located in London. We opened our first Free

People store in the Garden State Plaza Mall in Paramus, New Jersey in November 2002. We opened our first Terrain garden center in Glen Mills, Pennsylvania in April 2008. We opened our first European Anthropologie store in London in October 2009. In August 2011, we opened our first Bhldn store in Houston, Texas.

In 1984 we establishedWholesale segment under the Free People, wholesale division to develop, in conjunction withAnthropologie and Urban Outfitters private labelbrands. The Wholesale segment sells through department and specialty stores worldwide, digital businesses and our Retail segment. The Wholesale segment primarily designs, develops and markets apparel, lines of young women’s casual wear that could be effectively sold at attractive prices in Urban Outfitters stores.intimates, activewear and home goods.

In February 2016, we acquired substantially allOur Subscription segment consists of the assets of the Vetri Family group of restaurants.Nuuly brand, which is a monthly women’s apparel subscription rental service that launched on July 30, 2019.

Milestones in our Company’s growth are as follows:

Our Retail segment omni-channel strategy enhances our customers’ brand experience by providing a seamless approach to the customer shopping experience. We have substantially integrated allAll available Company-owned Retail segment shopping channels are fully integrated, including stores, websites, (onlinemobile applications, catalogs and through mobile devices) and catalogs.customer contact centers. Our investments in areas such as marketing campaigns and technology advancements are designed to generate demand for the Retail segment omni-channel and not the separate store or direct-to-consumerdigital channels. Store sales are primarily fulfilled from that store’s inventory, but may also be shipped from any of our fulfillment centers or from a different store location if an item is not available at the original store. Direct-to-consumer orders are primarily shipped to our customers through our fulfillment centers, but may also be shipped from any store, or a combination of fulfillment centers and stores depending on the availability of a particular item. Direct-to-consumer orders may also be picked up at a store location. Customers may also return certain merchandise purchased through direct-to-consumer channels at retail locations. As our customers continue to shop across multiple channels, we have adapted our approach towards meeting this demand. Due to the availability of like product in a variety of shopping channels, we now source these products utilizing single stock keeping units (“SKUs”) based on the omni-channel demand rather than the demand of the separate channels. These and other technological capabilities allow us to better serve our customers and help us complete sales that otherwise may not have occurred due to out-of-stock positions. As a result of changing customer behavior and the substantial integration of the operations of our store and direct-to-consumer channels, weWe manage and analyze our performance based on a single Retail segment omni-channel rather than separate channels and believe that the Retail segment omni-channel results present the most meaningful and appropriate measure of our performance.

Our fiscal year ends on January 31. All references to our fiscal years refer to the fiscal years ended on January 31 in those years. For example, our fiscal 20162020 ended on January 31, 2016.2020.

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed with, or furnished to, the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our investor relations website,www.urbanoutfittersinc.comwww.urbn.com/investor-relations, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC. We will voluntarily provide electronic or paper copies (other than exhibits) of our filings free of charge upon written request. You may also obtain any materials we file with, or furnish to, the SEC on its website atwww.sec.gov.

Retail Segment

Urban Outfitters. Urban Outfitters targets young adults aged 18 to 28 through itsa unique merchandise mix, and compelling store environment, websites and website environment.mobile applications. We have established a reputation

with these young adults, who are culturally sophisticated, self-expressive and concerned with acceptance by their peer group. The product offering includes women’s and men’s fashion apparel, activewear, intimates, footwear, beauty and accessories, home goods, activewearproducts, electronics and gear, electronics, as well asbeauty. A large portion of our merchandise is exclusive to Urban Outfitters, consisting of an eclectic mixassortment of apartment waresproducts designed internally and gifts. Apartment wares range from rugs, pillows and shower curtains to books, candles and novelties.designed in collaboration with third-party brands. Stores average approximately 9,000square feet of selling space. The brand offers an estimated 70,000 to 75,000 SKUs across the Retail segment. Our stores are located in street locations in large metropolitan areas and select university communities, specialty centers and enclosed malls. Our storesmalls that accommodate our customers’ propensity not only to shop, but also to congregate with their peers.

As of January 31, 2016,2020, we operated 240 248Urban Outfitters stores, of which 179 177were located in the United States, 18 17were located in Canada and 43 54were located in Europe.Europe, and sold merchandise through franchisee-owned stores in Israel and the United Arab Emirates. We plan to open approximately five13 Urban Outfitters stores and close approximately four Urban Outfitters stores due to lease expiration, globally, in fiscal 2017.2021. We plan for future store growth to come from expansion domestically and internationally, which may include opening stores in new and existing markets or entering into additional franchise or joint venture agreements. Urban Outfitters operates websites and mobile applications in North America and Europe that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in our stores. Urban Outfittersits stores, offers a catalog in Europe offering select merchandise, most of which is also available in our Urban Outfitters stores.its stores and partners with third-party digital businesses to offer a limited selection of merchandise, which is available globally. We plan for future digital channel growth to come from expansion domestically and internationally. Urban Outfitters’ North American and European Retail segment net sales accounted for approximately 32.5% 29.5%and 8.0% 7.9%of consolidated net sales, respectively, for fiscal 2016.2020.

Anthropologie Group. The Anthropologie Group consists of the Anthropologie, Bhldn and Terrain brands. We initially operated the Bhldn and Terrain brands as standalone concepts and opened two Bhldn stores and two Terrain garden centers. We ultimately determined that the Bhldn and Terrain brands were complementary to the Anthropologie brand and integrated those brands into the Anthropologie Group during fiscal 2015 and 2016, respectively.

The Anthropologie brand tailors its merchandise and inviting store environment to sophisticated and contemporary women aged 28 to 45. The Anthropologie brand’s unique and eclectic product assortment includes women’s casual apparel, and accessories, intimates, shoes, beauty, home furnishings, and a diverse array of gifts and decorative items. The home furnishingsitems and beauty and wellness. APlus by Anthropologie, which was launched during fiscal 2020, is an apparel line that offers an extended size range from furniture, rugs, lighting and antiques to table top items, bedding and gifts. The brand offers registry services through our website and mobile applications and in all of our stores throughout the United States, allowing our customers to create gift registries for any occasion. Thewithin certain Anthropologie brand alsoclothing collections. In addition, the brand offers catalogs in North America and Europe that market select merchandise, most of which is also available in our Anthropologie brand stores.

The Bhldn brand emphasizes every element that contributes to a wedding. The brand offers a curated collection of heirloom quality wedding gowns, bridesmaid frocks, party dresses, assorted jewelry, headpieces, footwear, lingerie and decorations. In addition to the two standalone Bhldn stores, we operate shop-within-shop locations within our Anthropologie brand stores that offer a comparable product assortment to our Bhldn stores and website.

The Terrain brand is designed to appeal to women and men interested in a creative and sophisticated outdoor living and gardening experience. Terrain’s product offering includes lifestyle home, garden and gardenoutdoor living products, combined with antiques, live plants, flowers, wellness products and accessories. Both Terrain garden centers also offer a full service restaurant and coffee bar.

As of January 31, 2016,2020, we operated 218 231Anthropologie Group stores, of which 197 200were located in the United States, 12 11were located in Canada and nine 20were located in Europe. Stores average

approximately 7,0008,000 square feet of selling space. TheIn addition to individual brand stores, we operate expanded format stores that include multiple Anthropologie Group offersbrands, allowing us to present an estimated 80,000 to 85,000 SKUs across the Retail segment.expanded assortment of products in certain categories, and sell merchandise through a franchisee-owned store in Israel. Our stores are located in specialty retail centers, upscale street locations and enclosed malls. We plan to open approximately ten12 Anthropologie Group stores and close approximately four Anthropologie Group stores due to lease expiration, globally, in fiscal 2017.2021. We plan for future store growth to come from expansion domestically and internationally, which may include opening stores in new and existing markets or entering into additional franchise or joint venture agreements. The Anthropologie Group operates websites and mobile applications in North America and Europe that capture the spirit of its brands by offering a similar yet broader selection of merchandise as found in our stores.its stores, offers catalogs in North America and Europe that market select merchandise, most of which is also available in Anthropologie brand stores and partners with third-party digital businesses to offer a limited selection of merchandise, which is available globally. We plan for future digital channel growth to come from expansion domestically and internationally. The Anthropologie Group’s North American and European Retail segment net sales accounted for approximately 40.2%39.2% and 1.6%1.7% of consolidated net sales, respectively, for fiscal 2016.2020.

Free People. Our Free People retail stores primarily offer private label branded merchandise targeted to young contemporary women aged 25 to 30. Free People offers a unique merchandise mix of casual women’s apparel, intimates, FP Movement activewear, shoes, accessories, activewear, home products, gifts and gifts.beauty and wellness. Free People retail stores average approximately 1,8002,000 square feet of selling space. The brand offers an estimated 20,000 to 25,000 SKUs across the Retail segment. Our stores are located in enclosed malls, upscale street locations and specialty retail centers. The retail channels of Free People expose both our wholesale accounts and retail customers to the full Free People product assortment and store environment.

As of January 31, 2016,2020, we operated 114144 Free People stores, of which 109134 were located in the United States, and fivesix were located in Canada.Canada and four were located in Europe. Free People opened its first European retail stores in fiscal 2019 and sells merchandise through a franchisee-owned store in Israel. We plan to open approximately 1213 new Free People stores (including three standalone FP Movement stores) and close approximately one Free People store due to lease expiration, globally, in fiscal 2017.2021. We plan for future store growth to come from expansion domestically and internationally, which may include opening stores (including standalone FP Movement stores) in new and existing markets or entering into additional franchise or joint venture agreements. Free People operates websites and mobile applications in North America, Europe and Asia that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in ourits stores, as well as substantially all of the Free People wholesale offerings. Free People also offers a catalog offeringthat markets select merchandise, most of which is also available in our Free People stores.stores, and partners with third-party digital businesses to offer a limited selection of merchandise, which is available globally. We plan for future digital channel growth to come from expansion domestically and internationally. Free People’s North American and European Retail segment net sales accounted for approximately 10.1% 12.5%and less than 1.0% of consolidated net sales, respectively, for fiscal 2020.

Menus & Venues. The Menus & Venues division focuses on a dining experience that provides excellence in food, beverage and service. As of January 31, 2020, we operated 11restaurants, all of which were located in the United States. The Menus & Venues division net sales accounted for less than 1.0%of consolidated net sales for fiscal 2016.2020.

Wholesale Segment

The Wholesale segment consists of the Free People, wholesale divisionAnthropologie and Urban Outfitters brands. The Wholesale segment was established in 1984 with the Free People brand to develop, in conjunction with Urban Outfitters, private label apparel lines of young women’s casual wear that could be effectively sold at attractive prices in Urban Outfitters stores. In order to achieve minimum production lots, Free People wholesalestores and later began selling to other retailers throughoutdepartment and specialty stores worldwide. The Anthropologie wholesale division, established in fiscal 2018, designs and sells home goods including gifts, tabletop and textiles to select department stores. The Urban Outfitters wholesale division, established in fiscal 2019, designs and sells the United States.BDG apparel collection to select department stores. We distributedisplay our Free Peoplewholesale products in certain department stores using a shop-within-shop sales model. We believe that the shop-within-shop model allows for a more complete merchandising of our Free People products, and will givewhich allows us greater freedom in differentiating the presentation ofto differentiate ourselves from our productscompetition and further strengthening of our brandstrengthens each brand’s image. During fiscal 2016, Free People’s2020, the Wholesale segment’s range of tops, bottoms, sweaters, dresses,young women’s contemporary casual apparel, intimates, FP Movement activewear and shoes under the Free People brand, home goods, including gifts, tabletop and activeweartextiles, under the Anthropologie brand and the BDG apparel collection under the Urban Outfitters brand were sold through approximately 1,800 better 2,300department and specialty stores worldwide, including Macy’s, Nordstrom, Bloomingdale’s, Lord & Taylor,Dillard’s, Selfridge’s, third-party digital businesses and our own Free People stores.Retail segment. We monitor the styles and products that are popular with our wholesale customers to give us insight into current fashion trends, helping us to better serve our retail customers. Free People wholesaleWholesale sales and showroom facilities are located in New York City, Los Angeles, Chicago and London. Free People’s wholesaleOur Wholesale segment net sales accounted for approximately 7.6%8.2% of consolidated net sales for fiscal 2016.2020.

Subscription Segment

Nuuly. Our Subscription segment consists of the Nuuly brand, which is a monthly women’s apparel subscription rental service that launched on July 30, 2019. For a monthly fee, Nuuly subscribers can select rental product from a wide selection of the Company’s own

brands, third-party labels and one-of-a-kind vintage pieces via a custom-built, digital platform. Subscribers select their products each month, wear them as often as they like, then swap into new products the following month. Subscribers are also able to purchase the rented product.Subscription segment net sales accounted for less than 1.0% of consolidated net sales for fiscal 2020.

Store Environment

We create a unified environment in our stores that establishes an emotional bond with the customer. Every element of the environment is tailored to the aesthetic preferences of our target customers. Through creative design, much of the existing retail space is modified to incorporate a

mosaic of fixtures, finishes and revealed architectural details. In our stores, merchandise is integrated into a variety of creative vignettes and displays designed to offer our customers an entire look at a distinct lifestyle. This dynamic visual merchandising and display technique provides the connection among the store design, the merchandise and the customer. Essential components of the ambiance of each store may include playing music that appeals to our target customers, using unique signage and employing a staff that understands and identifies with the target customer.

Our Urban Outfitters, Anthropologie Group and Free People stores are primarily located in upscale street locations, free-standing locations, enclosed malls and specialty retail centers. Our two Terrain garden centers are both free-standing locations. Our Bhldn stores are located in a specialty retail center and an upscale street location. We plan for our store environment and location strategy to implement a store location expansion strategy in fiscal 2017 similar to our strategy in fiscal 2016.remain consistent over the next several years.

Buying and Design Operations

Maintaining a constant flow of fresh and fashionable merchandise for our Retail segment is critically important to our ongoing performance. We maintain our own buying groups that select and develop products to satisfy our target customers and provide us with the appropriate amount and timing of products offered. Merchandise managers may supervise several buyers and assistant buyers. Our buyers stay in touch with the evolving tastes of their target customers by shopping at major trade markets, attending national and regional trade shows and staying current with mass media influences, including social media, music, video, film, magazines and pop culture.

Our buyers and designers play an important role in our ability to identify and deliver the latest fashion trends to our customers. The success of our brands relies upon our ability to attract, train and retain talented, highly motivated buying and design employees. In addition to management training programs for both newly hired and existing employees, we have a number of retention programs that offer qualitative and quantitative performance-based incentives.

Merchandise

Our Urban Outfitters stores, websites and mobile applications offerbrand offers a wide array of eclectic merchandise, including women’s and men’s fashion apparel, activewear, intimates, footwear, beauty and accessories, home goods, activewearproducts, electronics and gear, electronics, as well as an eclectic mix of apartment wares and gifts.beauty. Our Anthropologie stores, websites, mobile applications and catalogbrand product offerings include women’s casual apparel, and accessories, intimates, shoes, beauty, home furnishings, and a diverse array of gifts and decorative items.items and beauty and wellness. Our Bhldn retail stores, shop-within-shop locations and website offerbrand offers a curated collection of heirloom quality wedding gowns, bridesmaid frocks, party dresses, assorted jewelry, headpieces, footwear, lingerie and decorations. Our Terrain garden centers and websitebrand product offerings include lifestyle home, furnishingsgarden and decorative items, gardenoutdoor living products, includingantiques, live plants, and flowers, outdoor living furnishings and entertainmentwellness products and a wide variety of gifts.accessories. Our Free People retail stores, websites, mobile applications and catalogs offerbrand offers a showcase for casual women’s apparel, intimates, FP Movement activewear, shoes, accessories, activewear, home products, gifts and gifts.beauty and wellness. Our Nuuly brand allows subscribers to select women’s apparel from a wide selection of the Company’s own brands, third-party labels and one-of-a-kind vintage pieces. Our merchandise is continuously updated to appeal to our target customers’ changing tastes and is supplied by a large number of domestic and foreign vendors, with new shipments of merchandise arriving at our stores and fulfillment centers almost daily.

The wide breadth of merchandise offered by our Retail segmentbrands includes a combination of national third-party brands, as well asprivate label product designed in collaboration with third-party brands and exclusive merchandise developed and designed internally by our brands. This combination allows us to offer fashionable merchandise and to differentiate our product mix from that of traditional department stores, as well as that of other specialty and direct-to-consumerdigital retailers. Merchandise designedPrivate label and developed by our brandsexclusive merchandise generally yields higher gross profit margins than third-party branded merchandise, and helps to keep our product offerings current and unique.

The ever-changing mix of products available to our customers allows us to adapt our merchandise to prevailing fashion trends, and together with the inviting atmosphere and experience of our stores and websites, encourages our core customers to visit our shopping channels frequently.

We select price points for our merchandise that are consistent with the spending patterns of our target customers. As such, our stores carry merchandise at a wide range of price points that may vary considerably within product categories.

Store Operations

We have organized our retail store operations by brand into geographic areas or districts that each have a district manager.leader. District managersleaders are responsible for several stores and monitor and supervise individual store managers.leaders. Each store managerleader is responsible for overseeing the daily operations of one of our stores. In addition to a store manager,leader, the staff of a typical store includes a combination ofsome or all of the following positions: a visual merchandising manager, several department managers and full and part-time sales and visual staff. The staff of a typical Anthropologie brand store may also include a customer care manager who helps tailor the shopping experience to the needs of Anthropologie’s target customers. The staff of a Bhldn locationAn expanded format Anthropologie Group store may also include a bridal

and event manager, appointment stylist, and a bridal category specialist. A Terrain garden center may also includespecialist and merchandise care and maintenance staff.staff to support the Bhldn and Terrain brands.

An essential requirement for the success of our stores is our ability to attract, train and retain talented, highly motivated store managers,leaders, visual merchandising managers and other key employees. In addition to management training programs for both newly hired and existing employees, we have a number of retention programs that offer qualitative and quantitative performance-based incentives to district-level managers,leaders, store managersleaders and full-time sales associates.

Marketing and Promotion

We believe we have highly effective marketing tools in our websites, mobile applications, catalogs, email campaigns and social media. We refresh this media as frequently as daily to reflect the most cutting edge changes in fashion and culture. We also believe that highly visible store locations, broad merchandise selection and creative and visual presentation within our stores, on our websites and on our mobile applications are key enticements forentice our customers to explore these channels and purchase merchandise. Consequently, we rely on these enticements,elements, as well as the brand recognition created by our direct marketing activities, to draw customers to our omni-channel operations, rather than traditional forms of advertising such as print, radio and television media. Marketing activities for each of our brand’s retail store conceptsstores may include special event promotions and a variety of public relations activities designed to create community awareness of our stores and products. We plan for our catalog circulation to remain consistent in fiscal 2021 as we continue to increase our emphasis on digital marketing. We also are active in social media and blogs. We believe that the traditional method of a one-way communication to customers is no longer enough. We believe that by starting a conversation and interacting directly with our customers, most notably via Instagram, Facebook, Twitter, Pinterest, InstagramYouTube, Snapchat, Tumblr and our own mobile applications, we are more effective at understanding and serving their fashion needs. We also believe that our blogs continue this conversation. Not only do our blogs allow us to communicate what inspires us, they also allow our customers to tell us what inspires them. This fosters our relationships with our customers and encourages them to continue shopping with us.

During fiscal 2016, we circulated approximately 29.2 million catalogs across multiple brands. We planCustomer Loyalty Programs

Loyalty programs offer customers access to member-only benefits and rewards, which promotes brand loyalty. The Urban Outfitters brand offers UO Rewards, a customer loyalty program designed to create authentic, lasting relationships with customers by rewarding devoted members with reward coupons, exclusive offers and unique experiences. Members can earn and accumulate points based on purchase activity and engaging with the brand through social media. Upon reaching the specified point threshold, members are issued a reward coupon which can be redeemed for both in-store and online purchases.

The Anthropologie brand offers AnthroPerks. AnthroPerks is a customer loyalty program that is designed to deliver benefits and experiences to help make our catalog circulationcustomers’ shopping journey in-store and online easier and more inspirational. Members are given free shipping benefits, birthday discounts, receipt look up, exclusive offers, early access to remain consistent in fiscal 2017.

Suppliers

To serve our target customers and to recognize changes in fashion trends and seasonality, we purchase merchandise from numerous foreign and domestic vendors.vendors, the majority of which is settled in U.S. dollars. We also have arrangements with agents and third partythird-party manufacturers to produce our private label and exclusive merchandise. To keep our future inventory levels lean and maintain a lower merchandise weeks of supply on hand, we plan to continue to quicken our supply chain capabilities and place more frequent merchandise orders at lower quantities. To the extent that our vendors are located overseas or, in the case of third-party vendors, rely on overseas sources for a large portion of their merchandise, any event causing a disruption of imports, such as the imposition of increased security or regulatory requirements applicable to imported goods, war, public health concerns (including global pandemics such as COVID-19), acts of terrorism, natural disasters, port security considerations or labor disputes,financial or political instability in any of the countries in which merchandise we purchase is manufactured, the effects of Brexit, changes to U.S. or foreign trade restrictions inpolicies, including the formenactment of tariffs, border adjustment taxes, or increases in duties or quotas, or both, disruption in the supply of fabrics or raw materials, increases in the cost of fuel or decreases in the value of the U.S. dollar relative to foreign currencies could adversely affect our business. During fiscal 2016,2020, we purchased merchandise from approximately 5,000 vendors.vendors located throughout the world. No single vendor or manufacturer accounted for more than 10% of merchandise purchased during that time. While certain of our vendors have limited financial resources and production capabilities, weWe do not believe that the loss of any one vendor would have a material adverse effect on our business.

Company Operations

Distribution.We own a 291,000 square foot distribution facilitycenter in Gap, Pennsylvania that receives and distributes approximately half of our retail store merchandise in North America. We also lease a 214,500 square foot distribution center located in Reno, Nevada that receives and distributes the remaining half of our retail store merchandise.

In June 2015,fiscal 2020, we openedcompleted construction on an approximately 956,000 square foot fulfillment center in Indiana, Pennsylvania, which we own and operate. The center primarily stores and distributes home products, home furnishings and electronics.

We own and operate a new 1,000,000 square foot fulfillment center in Gap, Pennsylvania, which we own and operate. OperationsPennsylvania. Primary operations at the center include direct-to-consumerRetail and wholesaleWholesale segment fulfillment services, including inventory warehousing, receiving and customer shipping. We lease a 459,000 square foot fulfillment center in Trenton, South Carolina. This facility currently services a portion of our Wholesale segment customer orders and processes all of our Wholesale segment returns. In fiscal 2016, we transitioned all of the Retail segment fulfillment operations and a portion of the Wholesale segment operations from this location to our new facility in Gap, Pennsylvania. We plan to transition the remaining Wholesale segment operations to our new facility and close the Trenton facility when the lease expires in fiscal 2017.

We also own and operate a 463,000 square foot fulfillment center located in Reno, Nevada. This facilitycenter is used primarily to house and distribute merchandise to our western United States direct-to-consumer customers, significantly improvingdigital customers.

In fiscal 2019, we signed a lease for a 309,000 square foot fulfillment center located in Bristol, Pennsylvania, to conduct our fulfillment capability. The facility also includes a data center.Subscription segment operations. Construction was completed and operations commenced in fiscal 2020.

We lease separate distribution and fulfillment facilitiescenters each located in Rushden, England. Our 98,000 square foot distribution facilitycenter supports our entire European store base and our 142,000 square foot fulfillment facility supportscenter primarily provides fulfillment services for our European direct-to-consumer channel.Retail segment and global Wholesale segment customers. We believe both ofare nearing maximum capacity at these facilitiescenters and during fiscal 2020 began construction on an omni-channel fulfillment center in Peterborough, England that will support our European operations forstores and digital and wholesale channels. We own the next several years.facility, which is approximately 400,000 square feet. Construction is expected to be completed during fiscal 2022.

In fiscal 2020, we signed an agreement with a third-party logistics provider in China to store and distribute merchandise sold through our relationship with a third-party digital marketplace.

Information Systems. Very early in our growth, we recognized We recognize the need for high-quality information in order to manage merchandise planning, buying, inventory management and control functions. Wefunctions and have therefore invested in a retail software package that metmeets our processing and reporting requirements. We utilize point-of-sale register systems connected by a secure data network to our

home offices. Additionally, our stores have mobile point-of-sale devices that have virtually the same functionality as our cash registers. These systems provide for register efficiencies, timely customer checkout and instant back office access to register information, as well as daily updates of sales, inventory data and price changes. Our direct-to-consumerdigital channel, which includes our retail websites, mobile applications and catalogs, maintains separate software systems that manage the merchandise and customer information for our in-house customer contact center and fulfillment functions. Our Wholesale segment uses a separate software system for customer service, order entry, production planning and inventory management. Our Subscription segment uses a custom-built digital platform that helps us manage merchandising functions, customer information and service, financial accounting and fulfillment of customer orders. We have a second fully redundant data center located in our Reno fulfillment center that functions as a disaster recovery site for our direct-to-consumer,digital, data communication and other business critical systems.

Competition

Our Retail and Wholesale segments compete with individual and chain fashion specialty stores as well as department stores, both in stores and online, in highly competitive domestic and international markets. Our Retail segment competes on the basis of, among other things, the location of our stores; stores,website, mobile application and catalog presentation;presentation, website design;and mobile application design, the breadth, quality, style, price and availability of our merchandise and the level of customer service offered. Although we believe that the eclectic mix of products and the unique store and websitedigital experiences offered by our Retail segment help differentiate us, it also means that our stores compete against a wide variety of smaller, independent specialty retailers, as well as department stores and national specialty chains. ManySome of our competitors have substantially greater name recognition as well as financial, marketing and other resources. Our Anthropologie Group and Free People and Bhldn stores also face competition from small boutiques that offer an individualized shopping experience similar to the one we strive to provide to our target customers. In addition, some of our third partythird-party vendors offer products directly to consumers and certain of our competitors.

Along with certain Retail segment competitive factors noted above, other key factors for our direct-to-consumerdigital channel include the effectiveness of our merchandise delivery, website and mobile application availability, the effectiveness of our customer lists and customer lists. Our direct-to-consumerthe speed and accuracy of our merchandise delivery. Additionally, our digital channel competes against numerous websites, mobile applications and catalogs, which may have a greater volume of circulation and web traffic or more effective marketing through online media and social networking sites.

Our Wholesale segment competes with numerous wholesale companies on the basis of quality, price, performance and fashion of our merchandise offerings. Many of our Wholesale segment competitors have a wider product distribution network. In addition, certain of our wholesale competitors have greater name recognition and greater financial, marketing and other resources than us.

Our Subscription segment operates in an evolving apparel subscription rental market in which our competitors offer varying types of subscription rental models and products that may have greater appeal to consumers.

Trademarks and Service Marks

We are the registered owner in the United States of certain service marks and trademarks, including, but not limited to “Urban Outfitters,” “Anthropologie,” “Free People,” “Bhldn,” “Terrain,” “Vetri,” “BDG,” “Ecote,”“BDG” and “FP Me,” “Intimately Free People,” “Pizzeria Vetri,” “Pure + Good,” “Urban Renewal,” “Urbn.com,” and “We The Free.Movement.” Each mark is renewable indefinitely, contingent upon continued use at the time of renewal. In addition, we currently have pending registration applications with the U.S. Patent and Trademark Office covering certain other marks. We also own marks that have been registered in foreign countries, and have applications for marks pending in

additional foreign countries. We regard our marks as important to our business due to their

name recognition with our customers. We are not aware of any valid claims of infringement or challenges to our right to use any of our marks in the United States.

Employees

As of January 31, 2016,2020, we employed approximately 24,000people, approximately 39% 40%of whom were full-time employees. The number of part-time employees fluctuates depending on seasonal needs. Of our total employees, approximately 1%work in the Wholesale segment, 1% work in the Subscription segment and the remaining 99%98% work in our Retail segment. None ofExcept in certain international locations, our employees are not covered by a collective bargaining agreement, and weagreement. We believe that our relations with our employees are excellent.

Financial Information about Operations

We aggregate our operations into twothree reportable segments, the Retail segment, the Wholesale segment and the WholesaleSubscription segment. See Note 15,17, “Segment Reporting,” in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

Financial Information about Geographical Areas

See Note 15,17, “Segment Reporting,” in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding net sales and long-lived assets from domestic and foreign operations.

Seasonality

Our business is subject to seasonal fluctuations in net sales and operatingnet income, with a more significant portion typically realized in the fourth quartersecond half of each year reflectingpredominantly due to the year-end holiday period. Historically, and consistent with the retail industry, this seasonality also impacts our working capital requirements, particularly with regard to inventory. See Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations—Seasonality and Quarterly Results for additional information.

Item 1A. Risk Factors

The recent Coronavirus outbreak has been declared a pandemic by the World Health Organization, has spread to the United States and many other parts of the world and will adversely affect our business operations globally, store traffic, employee availability, financial condition, liquidity and cash flow and the length of such impacts are uncertain.

The outbreak of the Coronavirus (“COVID-19”) continues to grow both in the United States and globally, and related government and private sector responsive actions have and will continue to adversely affect our business operations. It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic as the situation is rapidly evolving.

The spread of COVID-19 has caused public health officials to recommend precautions to mitigate the spread of the virus, including warning against congregating in heavily populated areas, such as malls and shopping centers. On March 14, 2020, we announced that we temporarily closed all stores globally and have since extended the temporary closures until further notice. There is significant uncertainty around the breadth and duration of these store closures and other business disruptions related to COVID-19, as well as its impact on the U.S. and global economy, consumer willingness to visit malls and shopping centers, and employee willingness to staff our stores once they re-open. While our distribution and fulfillment centers currently remain open, there is risk that any of these facilities: 1) may become less productive or encounter disruptions due to employees at the facilities becoming infected with the virus; and/or 2) are no longer allowed to operate based on directives from public health officials or government authorities. The extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions taken to contain it or treat its impact. In our offices globally, we have asked our corporate employees whose jobs allow them to work remotely to do so for the foreseeable future. Such precautionary measures could create operational challenges as we adjust to a remote workforce, which could adversely impact our business. Additionally, to the extent COVID-19 adversely impacts the operations of our Wholesale segment customers, it could negatively impact our sales and collection of accounts receivables from such customers. On March 31, 2020, we announced we are furloughing a substantialnumber of store, wholesale and home office employees for 60 days beginning April 1, 2020.  We also announced taking many additional measures to protect our financial position and increase financial flexibility.

Our reportable segments are sensitive to economic conditions, consumer spendingmarket disruptions and other business factors.factors that affect consumer confidence and discretionary spending.

We are subject to seasonal variations and face numerous business risk factors. Consumer purchases and rentals of discretionary retail items and specialty retail products, including our products, may decline during recessionary periods and also may decline at other times when disposable income is lower. A prolonged economic downturn could have a material adverse impact on our business, financial condition or results of operations. There is

Economic conditions, both on a riskglobal level and in particular markets, may have significant effects on consumer confidence and discretionary spending that consumer sentiment may decline due to economic and/would in turn, affect our business or geo-political factors, which could negatively impact our financial position and resultsthe retail industry generally. Some of operations.

Our performance is subject to worldwidethese economic conditions and their impact on levels of consumer spending remains uncertain and may remain depressed for the foreseeable future. Some of the factors impacting discretionary consumer spending include general economic conditions, wages and employment, consumer debt, reductions in net worth based on severe market declines, residential real estate and mortgage markets, taxation, fuel and energy prices, interest rates, consumer confidence,volatility in credit markets, credit availability, political and economic crises and other macroeconomic factors. The current economyThese factors may continue to affect consumer purchases and rentals of our merchandise and adversely impact our results of operations and continued growth. The economic conditions may also affect the number ofdepartment stores and specialty retail businesses and impact their ability to purchase merchandise from our Wholesale segment. It is difficult to predict near term and/or future economic, capital and credit market conditions and what impact they will have on our business.

In addition, there is a risk that consumer confidence may decline as a result of market disruptions caused by severe weather conditions, unseasonable weather, natural disasters, health hazards, actual or threatened health epidemics and pandemics (such as COVID-19), terrorist activities, political crises or other major events or the prospect of these events, which could negatively impact our financial position and results of operations. The recovery we receive under any insurance we maintain for these purposes may be delayed or may be insufficient to fully offset potential losses.

We rely heavily on our ability to identify changes in fashion.

Customer tastes and fashion trends are volatile and can change rapidly. Our success depends in part on our ability to effectively predict and respond to changing fashion tastes and consumer demands, and to translate market trends into appropriate, saleable product offerings. If we are unable to predict or respond to changing styles or trends successfully or if we misjudge the market for products or new product lines, our sales may be impacted and we may be faced with a substantial amount of unsold inventory or missed opportunities. In response, we may be forced to rely on additional markdowns or promotional sales to dispose of excess, slow-moving inventory, which could decrease our revenues or gross profit margins. Conversely, if we underestimate consumer demand for our merchandise, or if our manufacturers fail to supply quality products in a timely manner, we may experience inventory shortages, which may negatively impact customer relationships, diminish brand loyalty and result in lost sales. In addition, we could be at a competitive disadvantage if we are unable to leverage data analytics to obtain timely customer insights to appropriately respond to customer demands.

Compared to our Retail segment,and Subscription segments, our Wholesale segment is more sensitive to changes in fashion trends because of longer lead times in the manufacturing and sale of its apparel. Our fashion decisions, if unsuccessfully forecasted, constitute a material risk and may have an adverse effect on our financial condition and results of operations.

We may not be successful in expanding our business, executing our omni-channel strategy, opening new retail stores or extending our existing store leases.

The retail environment is rapidly evolving with customer shopping preferences continuing to shift to digital channels. We have made significant investments in capital spending and labor to develop our omni-channel strategy pursuant to which all available Company-owned Retail segment shopping channels are fully integrated, including stores, websites, mobile applications, catalogs and customer contact centers. As omni-channel retailing continues to grow and evolve, our customers increasingly interact with our brands through a variety of media, including smart phones and tablets, and expect seamless integration across all touchpoints. Our success depends on our ability to introduce innovative means of engaging our customers and our ability to respond to shifting consumer traffic patterns and digital buying trends. There is no assurance that we will be able to continue to successfully maintain or expand our digital sales channels and omni-channel initiatives, or that we will realize a return on our significant investments, and failure to adequately respond to these risks and uncertainties or to successfully maintain and expand our digital business may have an adverse impact on our results of operations.

Our growth strategy also depends on our ability to open and operate new retail stores on a profitable basis. We also must be ablebasis and to effectively extend our existing store leases. There can be no assurance that these stores will achieve long term success.

Our operating complexity will increase as our store base grows, and we may face challenges in managing our future growth. Such growth will require that we continue to expand and improve our operating capabilities, and expand, train and manage our employee base. We may be unable to hire and train a sufficient number of qualified personnel or successfully manage our growth.

Our expansion prospects also depend on a number of other factors, many of which are beyond our control, including, among other things, competition, the availability of financing for capital expenditures and working capital requirements and the availability of suitable sites for new store locations on acceptable lease terms. There can be no assurance that we will be able to achieve our store expansion goals, nor is there any assurance that our newly opened stores will achieve revenue or profitability levels comparable to those of our existing stores in the time periods estimated by us, or at all. If our stores fail to achieve, or are unable to sustain, acceptable revenue, profitability and cash flow levels, we may incur additional store asset impairment charges, significant costs associated with closing those stores or both, which could adversely affect our results of operations and financial condition.

Existing and increased competition in the specialty retail, wholesale apparel and apparel subscription rental industries may reduce our net revenues, profits and market share.

The specialty retail and wholesale apparel industries are each highly competitive. Our Retail segment competes on the basis of, among other things, the location of our stores, website, mobile application and catalog presentation, website and mobile application design, the breadth, quality, style, price and availability of our merchandise and the level of customer service offered. Our Anthropologie Group and Free People stores also face competition from small boutiques that offer an individualized shopping experience similar to the one we strive to provide to our target customers.

Additionally, the internet and other technologies facilitate competitive entry and comparison shopping in our Retail and Subscription segments. Our digital channel competes against numerous websites, mobile applications and catalogs, which may have a greater volume of circulation and web traffic or more effective marketing through online media and social networking sites. We offer an omni-channel shopping experience for our customers and use social media and mobile applications as a way to interact with them to enhance their shopping experiences. Omni-channel retailing is constantly evolving, and we must keep pace with changing customer expectations and new developments by our competitors. There is no assurance that we will be able to continue to successfully maintain or expand our digital sales channels and respond to shifting consumer traffic patterns and digital buying trends. Our inability to adequately respond to these risks and uncertainties or successfully maintain and expand our digital business could have an adverse impact on our results of operations.

In addition, some of our third-party vendors offer products directly to consumers and certain of our competitors. Our Wholesale segment competes with numerous wholesale companies, many of whose products have a wider distribution, based on the quality, fashion and price of its product offerings. Our Subscription segment operates in an evolving apparel subscription rental market in which our competitors offer varying types of subscription rental models and products that may have greater appeal to consumers. New competitors frequently enter, and existing competitors enter or increase their presence in, the markets in which we operate, expand their merchandise offerings, add new sales channels or change their pricing strategies, all of which affect the competitive landscape. In addition, many of our competitors have greater name recognition and greater financial, marketing and other resources than us.

We cannot assure you that we will continue to be able to compete successfully against existing or future competitors. Changing economic and retail environments may result in our competitors forcing a markdown or promotional sales environment, which could impair our ability to achieve our historical profit margins. Our expansion into markets served by our competitors and entry of new competitors or expansion of existing competitors into our markets could have a material adverse effect on our business, financial condition and results of operations.

We may not be successful expanding our business internationally.internationally and our ability to conduct business in international markets may be adversely affected by legal, regulatory, political, economic, and public health risks.

Our current growth strategy includes plans to continue to open new stores, expand our digital marketing and grow our wholesale customer base and retail and digital presence internationally over the next several years againstyears. As we seek to expand internationally, we face competition from more established international competitors. InternationalIn addition, international stores and digital operations have different operational characteristics, including employment and labor, transportation, logistics, real estate and legal requirements. Furthermore, consumer demand and behavior, as well as tastes and purchasing trends may differ internationally, and as a result, sales of our merchandise may not be successful, or the margins on those sales may not be in line with those we anticipate. Additionally, our ability to conduct business internationally may be adversely impacted by political, economic, and economicpublic health risks (such as the COVID-19 pandemic), as well as the global economy. Any challenges that we encounter as we expand internationally may divert financial, operational and managerial resources from our existing operations, which could adversely impact our financial condition and results of operations.

To the extent we expand internationally under franchise or joint venture arrangements, we may face counterparty and/or operational risk. In addition, we are increasingly exposed to foreign currency exchange rate risk with respect to our revenue, profits, assets and liabilities denominated in currencies other than the U.S. dollar. We currently do not utilize hedging instruments to mitigate these foreign currency risks. In the future, however, we may initiate strategies to hedge certain foreign currency risks that may not succeed in offsetting all of the negative impact of foreign currency exchange rate movements on our business and results of operations.

As we continue to expand our international operations, we are subject to certain U.S. laws, including the Foreign Corrupt Practices Act, as well as the laws of the foreign countries in which we operate.operate, including the U.K. Bribery Act. We are required to use all commercially reasonable efforts to ensure compliance with these laws. Violations of these laws could subject us to sanctions or other penalties that could negatively affect our reputation, business and operating results.

ExistingOn January 31, 2020, the United Kingdom formally exited the European Union, commonly referred to as “Brexit.” A transition period is in place until December 31, 2020, during which time the United Kingdom will remain in both the European Union customs union and increased competitionsingle market and follow European Union rules. Following this date, there is significant uncertainty over the terms of the United Kingdom’s future relationship with the European Union. The United Kingdom’s withdrawal from the European Union has created political and economic uncertainty, particularly in the specialty retailUnited Kingdom and wholesale apparel industriesthe European Union, and this uncertainty may reduce our net revenues, profitspersist for years. The withdrawal could significantly disrupt the free movement of goods, services and market share.

people between the United Kingdom and the European Union and result in increased legal and regulatory complexities, as well as potential higher costs of conducting business in Europe. The specialty retailUnited Kingdom’s exit from the European Union could also result in similar referendums or votes in other European countries in which we do business. The uncertainty surrounding the consequences of the United Kingdom’s withdrawal could adversely impact consumer and wholesale apparel industries are each highly competitive. Our retail stores compete oninvestor confidence, particularly in the basis of, among other things, location, the breadth, quality, style, and availability of merchandiseUnited Kingdom, and the level of customer service offeredconsumer purchases of discretionary items and merchandise price. Our Anthropologie, Free People and Bhldn stores also face competition from small boutiques that offer an individualized shopping experience similar to the one we strive to provide toretail products, including our target customers. Additionally, the internet and other new technologies facilitate competitive entry and comparison shopping in our Retail

segment. We strive to offer an omni-channel shopping experience for our customers and use social media and mobile applications as a way to interact with them to enhance their shopping experiences. Omni-channel retailing is constantly evolving and we must keep pace with changing customer expectations and new developments by our competitors. In addition, someproducts. Any of our third party vendors offer products directly to consumers and certain of our competitors. Our Wholesale segment competes with numerous wholesale companies based on the quality, fashion and price of its product offerings, many of whose products have a wider distribution. Many of our competitors have greater name recognition and greater financial, marketing and other resources than us. We cannot assure you that we will continue to be able to compete successfully against existing or future competitors. Due to difficult economic conditions our competitors may force a markdown or promotional sales environment whichthese effects, among others, could impair our ability to achieve our historical profit margins. Our expansion into markets served by our competitors and entry of new competitors or expansion of existing competitors into our markets could have a material adverse effect onmaterially adversely affect our business, financial condition and results of operations.operations, and financial condition.

Our business depends on effective marketing and high customer traffic.

We have many initiatives in our marketing programs particularly with regard to our websites, mobile applications and mobile applications.our social media presence. If our competitors increase their spending on marketing, if our marketing expenses increase, if our marketing becomes less effective than that of our competitors, or if we do not adequately leverage technology and data analytics capabilities needed to generate concise competitive insight, we could experience a material adverse effect on our results of operations. AAmong other factors, (1) a failure to sufficiently innovate or maintain adequate and effective marketing strategies could inhibitand (2) U.S. and foreign laws and regulations that make it more difficult or costly to digitally market, such as the European Union General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act of 2018 (“CCPA”), may adversely impact our ability to maintain brand relevance and drive increased sales.

We depend on key personnel and may not be able to retain or replace these employees or recruit additional qualified personnel, which would harmcould adversely impact our business.

We believe that we have benefited substantially from the leadership and experience of our senior executives, including our co-founder, Chairman of the Board and Chief Executive Officer, Richard A. Hayne. The loss of the services of any of our senior executives could have a material adverse effect on our business and prospects, as we may not be able to find suitable management personnel to replace departing executives on a timely basis. In addition, if our senior executives do not fully integrate within the structure of our management team and core business, we may be adversely affected. We do not have an employment agreement with our Chief Executive Officer or any other key personnel. In addition, as our business expands, we believe that our future success will depend greatly on our continued ability to attract and retain highly skilled and qualified personnel. There is a high level of competition for personnel in the retail industry. Our inability to meet our staffing requirements in the future could impair our ability to increase revenue and could otherwise harm our business.

Increases in labor costs, including wages, could adversely impact our operational results, financial condition and results of operations.

Our retail store and distribution and fulfillment center operations are subject to laws governing such matters as minimum wages, working conditions and overtime pay. As minimum wage rates increase or related laws and regulations change, we may need to increase not only the wage rates of our minimum wage employees, but also the wages paid to our other hourly or salaried employees as well.employees. Any increase in the cost of our labor could have an adverse effect on our operating results, financial condition and results of operations. In

addition, wage actions by other retailers may require us to increase wage rates in order to attract and retain talented employees. Labor shortages, and increased employee turnover and our inability to successfully implement our expanded format store strategy could also increase our labor costs. This in turn could lead us to increase prices, which could adversely impact our sales. We are also subject to risks related to other store and distribution and fulfillment center expenses and operational costs. Conversely, if competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline.

We could be materially and adversely affected if any ofDamage or disruption to our distribution or fulfillment centers are damaged or closed or if their operations are diminishedcould have material adverse effects on our operations.

We operate seveneight distribution and fulfillment facilitiescenters worldwide to support our Retail and Wholesale segments in the United States, Western Europe and Canada, including the fulfillment of catalog, website and websitemobile application orders around the world. We also utilize a third-party distributorlogistics provider to store and distribute merchandise for certain home furnishings.our Asia digital operations. The merchandise purchased for our United States and Canadian retail store operations is shipped directly to our distribution centers in Gap, Pennsylvania and Reno, Nevada. Merchandise purchased for our direct-to-consumerdigital operations is shipped directly to our fulfillment centers in Gap, Pennsylvania, Reno, Nevada and Reno, Nevada.Indiana, Pennsylvania. Merchandise purchased for our wholesale operations is shipped directly to our fulfillment centers in Trenton, South CarolinaGap, Pennsylvania and Gap, Pennsylvania.Rushden, England. The merchandise purchased for our Western Europe retail and direct-to-consumerdigital operations is shipped to Rushden, England. Merchandise purchased for our Subscription segment is shipped directly to our fulfillment center in Bristol, Pennsylvania.  Damage to, or disruption of the operations at, any of these facilitiescenters due to work stoppages, system failures, accidents, economic or weather conditions, natural disasters, demographic and population changes, health epidemics, as well as other unforeseen events and circumstances could have a material adverse effect on our financial condition, results of operations or cash flows. In addition, if any of our distribution or fulfillment centers were to close unexpectedly or operate significantly below historical efficiency levels for an extended period of time, the other centers may not be able to support the resulting additional volume demands. As a result, we could incur significantly higher costs and longer lead times associated with distributing our products to our stores and customers during the time it takes for us to re-open or replace the center.

We rely significantly on international sources of production.

We receive a substantial portion of our apparel and other merchandise from foreign sources, both purchased directly in foreign markets and indirectly through domestic vendors with foreign sources. The majority of these purchases are settled in U.S. dollars. To the extent that our vendors are located overseas or, in the case of third-party vendors, rely on overseas sources for a large portion of their products, any event causing a disruption of imports, including the imposition of increased security or regulatory requirements applicable to imported goods, war, public health concerns acts of terrorism and natural disasters could adversely affect our business. New initiatives may be proposed that may have an impact on the trading status of certain countries and may include retaliatory duties or other trade sanctions that, if enacted, could increase the cost of products purchased from suppliers in such countries or restrict the importation of products from such countries. If foreign sourced products become difficult or impossible to bring into the United States due to significant labor issues, such as strikes at any of our ports in the United States, and if we cannot obtain such merchandise from other sources at similar costs, our sales and profit margins may be adversely affected. The flow of products from our vendors could also be adversely affected by financial or political instability in any of the countries in which the products we purchase are manufactured, if the instability affects the production or export of merchandise from those countries. Moreover, in the event of a significant disruption in the supply of the fabrics or raw materials used by our vendors in the manufacture of our products, our vendors may not be able to locate alternative

suppliers of materials of comparable quality at an acceptable price, or at all. Trade restrictions in the form of tariffs or quotas, or both, applicable to the products we sell could also affect the importation of those products and could increase the cost and reduce the supply of products available to us. The cost of fuel is a significant component in transportation costs, therefore, increases in the petroleum products can adversely affect our gross margins. In addition, decreases in the value of the U.S. dollar relative to foreign currencies could increase the cost of products we purchase from overseas vendors.

Regulations related to “conflict minerals” will require us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 contains provisions to improve transparency and accountability concerning the supply of minerals originating from the conflict zones of the Democratic Republic of Congo and adjoining countries. As a result, the SEC adopted new requirements for companies that manufacture products that contain certain minerals and metals, known as “conflict minerals,” that are necessary to the functionality or production of products manufactured or contracted to be manufactured by public companies. We have developed a framework and management system and are currently performing due diligence on our supply chain. We have and expect to continue to incur additional costs to comply with these disclosure requirements, including costs related to determining the sources of the specified minerals used in our products, in addition to the cost of any changes to products, processes, or sources of supply as a consequence of such verification activities, whichfollowing risks may adversely affectimpact our business. In addition, the number of suppliers who provide “conflict-free” minerals may be limited, which may make it difficult to satisfy customers who require that all of the components of our products be certified as conflict-free, which could place us at a competitive disadvantage if we are unable to do so. There is also uncertainty relating to the requirements of the regulations as a result of ongoing litigation challenging the constitutionality of portions of the regulations. Most recently, we filed our annual Specialized Disclosure Report on Form SD with respect to these minerals on June 1, 2015, as required by the rules.business:

Our operating results fluctuate from period to period.

Our business experiences seasonal fluctuations in net sales and operating income, with a more significant portion of operatingnet income typically realized in the fourth quartersecond half of each year reflectingpredominantly due to the year-end holiday period. Historically, and consistent with the retail industry, this seasonality also impacts our working capital requirements, particularly with regard to inventory. Any decrease in sales or marginsgross profit during this period, or in the availability of working capital needed in the months preceding this period, could have a more material adverse effect on our business, financial condition and results of operations than in other periods. Seasonal fluctuations also affect our inventory levels, as we usually order merchandise in advance of peak selling periods and sometimes before new fashion trends are confirmed by customer purchases. We must carry a significant amount of inventory, especially before the holiday selling periods. If we are not successful in selling our inventory during this period, we may be forced to rely on markdowns or promotional sales to dispose of the excess inventory or we may not be able to sell the inventory at all, which could have a material adverse effect on our business, financial condition and results of operations.

We may be unable to protect our trademarks and other intellectual property rights.

We believe that our trademarks and service marks are important to our success and our competitive position due to their name recognition with our customers. We devote substantial

resources to the establishment and protection of our trademarks and service marks on a worldwide basis. We are not aware of any valid claims of infringement or challenges to our right to use any of our trademarks and service marks in the United States. Nevertheless, there can be no assurance that the actions we have taken to establish and protect our trademarks and service marks will be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products as a violation of the trademarks, service marks and intellectual property of others. Also, others may assert rights in, or ownership of, our trademarks and other intellectual property, and we may not be able to successfully resolve these types of conflicts to our satisfaction.

In addition, we face additional risks as we continue to expand our business outside the United States. Effective trademark and service mark protection may not be available in every country in which we sell our products, or the laws of certain foreign countries may not protect proprietary rights to the same extent as do the laws of the United States. This could increase the risk that our intellectual property is misappropriated. We may also encounter jurisdictions in which one or more third parties have a pre-existing trademark registration. This may prevent us from registering our own marks in those jurisdiction, and could adversely affect our ability to effectively operate our business or market certain products.

War, terrorism, civil unrest, or other violence, or public health crises may negatively impact availability of merchandise and/or otherwise adversely impact our business.

In the event of war, terrorism, civil unrest or other violence, our ability to obtain merchandise available for sale in our stores or on our websites may be negatively impacted. A substantial portion of our merchandise is imported from other countries, see “—We rely significantly on international sources of production.” If commercial transportation is curtailed or substantially delayed, our business may be adversely impacted, as we may have difficulty shipping merchandise to our distribution and fulfillment centers and stores, as well as fulfilling catalog, website and websitemobile application orders. Our stores are located in public areas where large numbers of people typically gather. Terrorist attacks, threats of terrorist attacks, or civil unrest, or health epidemics and pandemics (such as COVID-19) involving public areas could cause people not to visit areas where our stores are located. In addition, other types of violence in malls or in other public areas could lead to lower customer traffic in areas in which we operate stores. If any of these events were to occur, we may be required to suspend operations in some or all of our stores in the impacted areas, which could have a material adverse impact on our business, financial condition and results of operations.

We may not be successful in introducing additional store concepts or brands.

We may, from time to time, seek to develop and introduce new concepts or brands in addition to our established brands. Our ability to succeed in the early stages of new concepts could require significant capital expenditures and management attention. Additionally, any new concept is subject to certain risks, including customer acceptance, competition, product differentiation, challenges relating to economies of scale in merchandise sourcing and the ability to attract and retain qualified personnel, including management and designers. There can be no assurance that we will be able to develop and grow these or any other new concepts to a point where they will become profitable, or generate positive cash flow. If we cannot successfully develop and grow these new concepts, our financial condition and results of operations may be adversely impacted.

We may develop new store concepts through acquisitions, and we may not be successful in integrating those acquisitions.

Acquisitions involve numerous risks, including the diversion of our management’s attention from other business concerns, the possibility that current operating and financial systems and controls may be inadequate to deal with our growth and the potential loss of key employees.

We also may encounter difficulties in integrating any businesses we may acquire with our existing operations. The success of these transactions depends on our ability to:

In addition, there may be liabilities that we fail, or are unable, to discover in the course of performing due diligence investigations on any company that we may acquire, or have recently acquired. Also, there may be additional costs relating to acquisitions including, but not limited to, possible purchase price adjustments. Any of our rights to indemnification from sellers to us, even if obtained, may not be enforceable, collectible or sufficient in amount, scope or duration to fully offset the possible liabilities associated with the business or property acquired. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business and financial condition.

We rely on information technology systems, and a material disruption or failure of such systems or technologies could adversely affect our business.

Our operations, in particular our direct-to-consumerdigital sales, are subject to numerous risks, including reliance on third-party computer hardware/software, rapid technological change, diversion of sales from our stores, liability for online content, violations of state or federal laws, including those relating to online privacy, credit card fraud, risks related to the failure of the information technology systems that operate our websites, including computer viruses, telecommunications failures and electronic break-ins and similar disruptions. In addition, we regularly evaluate our information technology systems and have implemented modifications and/or upgrades to the information technology systems that support our business. Modifications include replacing legacy systems with successor systems, making changes to legacy systems or acquiring new systems with new functionality. There are inherent risks associated with replacing and modifying these systems, including inaccurate system information and system disruptions, which we may not be able to alleviate through testing, training, staging implementation and in-sourcing certain processes, or by securing appropriate commercial contracts with third-party vendors supplying such replacement and redundancy technologies. If our information systems or other technologies are damaged or cease to function properly, we may have to make a significant investment to fix or replace them, and we may suffer loss of critical data and interruptions or delays in our operations in the interim. Although we have not experienced any interruptions or shutdowns of our systems for any material length of time for the reasons described above, such disruptions could lead to delays in our business operations and, if significant, affect our sales and profitability.

Further, potential issues associated with implementing technology initiatives and the time and resources required in seeking to optimize the benefits of new elements of our systems and infrastructure could reduce the efficiency of our operations in the short term. The efficient operation and successful growth of our business depends upon our information systems, including our ability to operate, maintain and develop them effectively. A failure of those systems could disrupt our business, subject us to liability, damage our reputation or otherwise impact our financial results.

If we are unable to safeguard against security breaches with respect to our information technology systems, our business and our reputation may be adversely affected.

During the course of business, we obtain and transmit confidential customer, employee, vendor and Company information through our information technology systems. The protection of customer, employee, vendor and Company data is critical. The regulatory environment surrounding information security and privacy is demanding, with the frequent imposition of new and changing requirements, such as the GDPR and CCPA. With a heightened degree of public awareness and scrutiny.scrutiny regarding information security and privacy, customers have a high expectation that companies will adequately protect their personal information from cyber attack or other security breaches.

Although we have implemented systems and procedures that are designed to protect customer, employee, vendor and Company information, prevent data loss and other security breaches, and otherwise identify, assess, and analyze cybersecurity risks, these measures may not be effective. Development and maintenance of these systems is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures increase and become more sophisticated. We face an evolving threat landscape in which cybercriminals, among others, employ a complex array of techniques designed to access personal data and other information, including, for example, the use of fraudulent or stolen access credentials, malware, ransomware, phishing, denial of service and other types of attacks. While, to the best of our knowledge, we have not experienced any material misappropriation,

loss or other unauthorized disclosure of confidential or personally identifiable information as a result of a security breach or cyber attack that could materially increase financial risk to the Company or our customers, such a security breach or cyber attack could adversely affect our business and operations, including by damaging our reputation and our relationships with our customers, employees and investors, and exposing us to riskslitigation, fines, penalties or remediation costs and inhibiting our ability to accept debit and credit cards as forms of litigationpayment.

Our efforts to protect customer, employee, vendor and liability.Company information may also be adversely impacted by data security or privacy breaches that occur at our third-party vendors or unrelated third parties. While we believe we are diligent in selecting vendors, systems and procedures to enable us to maintain the integrity of our systems, we recognize that there are inherent risks and we cannot assure that any future interruptions, shutdowns or unauthorized disclosures will not occur.

Manufacturers and third-party vendors may not comply with our legal and social compliance program requirements, which could adversely affect our reputation.

We have a manufacturer compliance program that is monitored on a regular basis by our buying offices. Our production facilities are either certified as in compliance with our program, or areas of improvement are identified and corrective follow-up action is taken. All manufacturers are required to follow applicable national labor laws, as well as international compliance standards regarding workplace safety, such as standards that require clean and safe working environments, clearly marked exits and paid overtime. We believe in protecting the safety and working rights of the people who manufacture the products we sell, while recognizing and respecting cultural and legal differences found throughout the world. We require our third party outsidethird-party vendors to register through an online website and agree that they and their suppliers will abide by certain standards and conditions of employment. If our third partythird-party vendors fail to comply with our social compliance program, our reputation may be adversely affected.

Our results can be adversely affected by market disruptions.

Market disruptions due to severe weather conditions, natural disasters, health hazards, terrorist activities, financial crises, political crises or other major events or the prospect of these events can affect consumer spending and confidence levels which may result in financial losses or otherwise adversely affect our results or prospects in affected markets. The recovery we receive under any insurance we maintain for these purposes may be delayed or may be insufficient to fully offset our losses.

Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results or financial condition.

Generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business, including but not limited to revenue recognition, leases, impairment of goodwill and intangible assets, inventory, income taxes and litigation, are highly complex and involve many subjective assumptions, estimates and judgments. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments could significantly change or increase volatility of our reported or expected financial performance or financial condition. See Note 2, “Summary of Significant Accounting Policies,” in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for a description of recent accounting pronouncements.

We could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities.

A number of factors influence our effective income tax rate, including changes in tax law, tax treaties, interpretation of existing laws, changes in generally accepted accounting principles and related accounting pronouncements, and our ability to sustain our reporting positions on examination. Changes in any of those factors could change our effective tax rate, which could adversely affect our net income. In addition, our operations outside of the United States may cause greater volatility in our effective tax rate. Moreover, there are still some uncertainties associated with the major changes in U.S. tax law that were enacted in December 2017 (the Tax Cuts and Job Act (the “Tax Act”)), which could have adverse effects on us.

We are subject to numerous regulations and legal matters that could adversely affect our business.

We are subject to customs, child labor, tax, employment, privacy, truth-in-advertising, e-commerce and other laws, including consumer protection regulations and zoning and occupancy ordinances that regulate

retailers generally and/or govern the importation, promotion and sale of merchandise and the operation of retail stores and distribution and fulfillment centers. Additional legal and regulatory requirements, and the fact that foreign laws occasionally conflict with domestic laws, have increased the complexity of the regulatory environment and the cost of compliance. If these laws change without our knowledge, or are violated by importers, designers, manufacturers or distributors, we could experience delays in shipments and receipt of products or be subject to fines or other penalties under the controlling regulations, any of which could adversely affect our business. In addition, various governmental authorities in jurisdictions in which we do business regulate the quality and safety of the merchandise we sell. If we or our vendors are unable to comply with regulatory requirements on a timely basis or at all, or to adequately monitor new regulations that may apply to us, significant fines or penalties could be incurred or we could have to curtail some aspects of our sales or operations, which could have a material adverse effect on our financial results. Moreover, legal actions may be filed against us from time to time, including class actions. These actions may assert commercial, tort, intellectual property, customer, employment, data privacy, securities or other claims. We may also be impacted by litigation trends, including class action lawsuits involving former employees, consumers and shareholders, which could have a material adverse effect on our reputation, the market price of our common shares, or our results of operations, financial condition and cash flows.

Regulations related to “conflict minerals” require us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 contains provisions to improve transparency and accountability concerning the supply of minerals originating from the conflict zones of the Democratic Republic of Congo and adjoining countries. As a result, the SEC adopted requirements for companies that manufacture products that contain certain minerals and metals, known as “conflict minerals,” that are necessary to the functionality or production of products manufactured or contracted to be manufactured by public companies. We have developed a framework and management system and continuously undertake due diligence

efforts on our supply chain. We have and expect to continue to incur additional costs to comply with these disclosure requirements, including costs related to determining the sources of the specified minerals used in our products, in addition to the cost of any changes to products, processes, or sources of supply as a consequence of such verification activities, which may adversely affect our business. In addition, the number of suppliers who provide “conflict-free” minerals may be limited, which may make it difficult to satisfy customers who require that all of the components of our products be certified as conflict-free. An inability to satisfy these requirements could place us at a competitive disadvantage. There is uncertainty about the future of the regulations related to “conflict minerals” as a result of legal challenges and statements by the SEC. We filed our most recent annual Specialized Disclosure Report on Form SD with respect to these minerals on May 31, 2019, as required by the rules.

Item 1B. Unresolved Staff Comments

We have no outstanding comments with the staff of the SEC.

Item 2. Properties

Since 2006, our North American home office has been located in several buildings on one campus in the historic core of the Philadelphia, Pennsylvania Navy Yard. The consolidated offices at the Navy Yard campus allow for an efficient operation of our Philadelphia-based offices and will help to support our growth needs for the foreseeable future. During fiscal 2015, we completed construction on a 93,000 square foot building which expanded ourOur North American home offices are approximately 575,000 square feet, and we own or have options to approximately 497,000 square feet. During fiscal 2014, we purchased a 122,000 square foot building in the Navy Yard, for future expansion. This building is leased to a third party through January 2017. In addition, we hold options that are available for at least the next ten years on severalpurchase adjacent buildings that would allow for additional expansion if necessary.

During fiscal 2016, we entered into a lease agreement for approximately 8,000 square feet of office space in Los Angeles, California to support our design and production teams.

Our three European home offices are locatedwere consolidated into one location on the former Truman Brewery Site in London, England during the fourth quarter of fiscal 2020. The new office is approximately 70,000 square feet and consisthouses all of four leased properties totalingour brand and shared leadership teams as well as a wholesale showroom and photo studio. The term of this lease is set to expire in July 2029, and we have the option to renew for up to an additional 10 years. The lease terms for two of the previously used offices in London, England, expire in 2023 and 2024, and total approximately 25,00014,000 square feet. The leased properties have varyingWe are exploring options such as lease term expirations rangingassignment and subleasing to mitigate costs from 2019 through 2024.these locations.

Our North American retail stores are supported by two distribution facilities.centers. We own a 291,000 square foot distribution center in Gap, Pennsylvania, which supports approximately half of our retail stores.store merchandise. We lease a 214,500 square foot distribution facilitycenter in Reno, Nevada that supports the remaining half of our retail stores.store merchandise. The term of this operating lease is set to expire in June 2017 with Company options2027, and we have the option to renew for up to an additional tentwenty years.

In fiscal 2016,2020, we openedcompleted construction on an approximately 956,000 square foot fulfillment center in Indiana, Pennsylvania, which we own and operate. The center primarily stores and distributes certain home products, home furnishings and electronics and includes a newcustomer contact center.

We own and operate a 1,000,000 square foot fulfillment center in Gap, Pennsylvania, which we own and operate.Pennsylvania. The new facilitycenter primarily fulfills Retail segment customer orders and a portion of our Wholesale segment customer orders.

We lease a 459,000 square foot fulfillment center in Trenton, South Carolina. This facility currently services a portion of our Wholesale segment customer ordersown and processes all of our

Wholesale segment returns. In fiscal 2016, we transitioned all of the Retail segment fulfillment operations and a portion of the Wholesale segment operations from this location to our new facility in Gap, Pennsylvania. We plan to transition the remaining Wholesale segment operations to our new facility and close the Trenton facility when the lease expires in fiscal 2017.

We ownoperate a 463,000 square foot fulfillment center in Reno, Nevada that is used primarily to house and distribute merchandise to our western United States direct-to-consumerdigital customers.

We lease an approximately 40,000 square foot customer contact center in Martinez, Georgia. The lease term expires in fiscal 2024 with two five-year renewal options.

In fiscal 2014,2019, we relocated our customer contact center to Martinez, Georgia. This leased facility consists of approximately 40,000 square feet and hassigned a lease term expiringfor a 309,000 square foot fulfillment center located in Bristol, Pennsylvania, to conduct our Subscription segment operations. Construction was completed and operations commenced in fiscal 2019 with three five year renewal options.2020. The term of this lease is set to expire in July 2034, and we have options to renew for up to an additional ten years.

We lease separate distribution and fulfillment centers each located in Rushden, England to support our retail and direct-to-consumerdigital channels in Europe.Europe and global Wholesale segment customers. The distribution center occupies approximately 98,000 square feet and the fulfillment center occupies approximately 142,000 square feet, which also includes our European customer contact center. The termterms of both of these leases are set to expire in September 2020. We are nearing maximum capacity at these centers and during fiscal 2020 began construction on an omni-channel fulfillment center in Peterborough, England that will support our stores and digital and wholesale channels. We own the facility, which is approximately 400,000 square feet. Construction is expected to be completed during fiscal 2022. We anticipate extending the lease terms on the existing Rushden facilities so that they expire with the beginning of operations in Peterborough.

In fiscal 2020, we signed an agreement with a third-party logistics provider in China to store and distribute merchandise sold through our relationship with a third-party digital marketplace.

Improvements in recent years, including those in fiscal 2016as described in Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources, were necessary to adequately support our growth. We believe we may need to further expand the square footage of our home office to support our growth over the next several years. For more information on our

distribution center properties, see Item 1: Business—Company Operations—Distribution. We believe that our facilitiescenters are well maintained and in good operating condition.

All of our stores are leased, well maintained and in good operating condition. Our retail stores are typically leased for a term of ten years with renewal options for an additional five to ten years. Total estimated selling square feet for stores open, under lease as of January 31, 2016,2020, by Urban Outfitters, the Anthropologie Group and Free People was approximately 2,159,000, 1,517,000,2,218,000, 1,776,000, and 203,000,325,000, respectively. The average store selling square feet is approximately 9,000 for Urban Outfitters, 7,0008,000 for the Anthropologie Group and 1,8002,000 for Free People. Selling square feet can sometimes change due to factors such as floor moves, use of staircases and cash register configuration and other factors.configuration.

The following table shows the location of each of our existing retail stores,locations, as of January 31, 2016:2020:

In addition to the stores listed above, Free People alsothe Wholesale segment operates wholesale sales and showroom facilities in New York City, London, Los Angeles, Chicago and ChicagoLondon that are leased through 2017, 2018, 20192023, 2024, 2028 and 2019,2029, respectively.

Item 3. Legal Proceedings

We are party to various legal proceedings arising from normal business activities. Management believes that the ultimate resolution of these matters will not have a material adverse effect on our financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common shares are traded on the NASDAQ Global Select Market under the symbol “URBN.” The following table sets forth, for the periods indicated below, the reported high and low sale prices for our common shares as reported on the NASDAQ Global Select Market.

Market Information

Holders of Record

On March 24, 201625, 2020 there were 11189 holders of record of our common shares.

Dividend Policy

Our current credit facility includes certain limitations on the payment of cash dividends on our common shares. We have not paid any cash dividends since our initial public offering and do not anticipate paying any cash dividends on our common shares in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

All of the Company’s equity compensation plans have been approved by stockholders of the Company.its shareholders. See Note 9,11, “Share-Based Compensation,” in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for details of the Company’s equity compensation plans and outstanding awards.

Stock Performance

The following graph and table compares the cumulative total shareholder return on our common shares with the cumulative total return on the Standard and Poor’s 500 Composite Stock Index and the Standard and Poor’s 500 Apparel Retail Index for the period beginning January 31, 20112015 and ending January 31, 2016,2020, assuming the reinvestment of any dividends and assuming an initial investment of $100 in each. The comparisons in this table are required by the SEC and are not intended to forecast or be indicative of possible future performance of the common shares or the referenced indices.

*$100 invested on 1/31/11 in stock or index, including reinvestment of dividends.

Fiscal years ending January 31.

A summary of the repurchase of our common shares under the 2015 share repurchase program for the quarter ended January 31, 2016 is as follows:

Item 6. Selected Financial Data

The following table sets forth selected consolidated income statement and balance sheet data for the periods indicated. The selected consolidated income statement and balance sheet data for each of the five fiscal years presented below is derived from our Consolidated Financial Statements. The data presented below should be read in conjunction with Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements of the Company and the related notes thereto, which appear elsewhere in this Annual Report on Form 10-K. The results of operations for past accounting periods are not necessarily indicative of the results to be expected for any future accounting period.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We operate twounder three reportable segments: a leading lifestyle specialtysegments – Retail, segmentWholesale and a Wholesale segment.Subscription. Our Retail segment consists of our Urban Outfitters, Anthropologie, Bhldn, Free People, Terrain and BhldnUrban Outfitters brands whose merchandise isand our Menus & Venues (formerly known as “Food and Beverage”) division. Our Retail segment consumer products and services are sold directly to our customers through retailour stores, websites, mobile applications, catalogs and customer contact centers. Ourcenters and franchised or third-party operated stores and digital businesses. The Wholesale segment consists of theour Free People, wholesale divisionAnthropologie and Urban Outfitters brands that sell through department and specialty stores worldwide, digital businesses and our Retail segment. The Wholesale segment primarily designs, develops and markets youngapparel, intimates, activewear and home goods. Our Subscription segment consists of the Nuuly brand, which is a monthly women’s contemporary casual apparel and shoes through individual and chain specialty stores and department stores.subscription rental service that launched on July 30, 2019.

Our fiscal year ends on January 31. All references to our fiscal years refer to the fiscal years ended on January 31 in those years. For example, our fiscal year 20162020 ended on January 31, 2016.2020.

Retail Segment

Our Retail segment omni-channel strategy enhances our customers’ brand experience by providing a seamless approach to the customer shopping experience. We have substantially integrated allAll available Company-owned Retail segment shopping channels are fully integrated, including stores, websites, (onlinemobile applications, catalogs and through mobile devices) and catalogs.customer contact centers. Our investments in areas such as marketing campaigns and technology advancements are designed to generate demand for the Retail segment omni-channel and not the separate store or direct-to-consumerdigital channels. Store sales are primarily fulfilled from that store’s inventory, but may also be shipped from any of our fulfillment centers or from a different store location if an item is not available at the original store. Direct-to-consumer orders are primarily shipped to our customers through our fulfillment centers, but may also be shipped from any store, or a combination of fulfillment centers and stores depending on the availability of particular items. Direct-to-consumer orders may also be picked up at a store location. As our customers continue to shop across multiple channels, we have adapted our approach towards meeting this demand. Due to the availability of like product in a variety of shopping channels, we now source these products utilizing single stock keeping units based on the omni-channel demand rather than the demand of the separate channels. These and other technological capabilities allow us to better serve our customers and help us complete sales that otherwise may not have occurred due to out-of-stock positions. As a result of changing customer behavior and the substantial integration of the operations of our store and direct-to-consumer channels, weWe manage and analyze our performance based on a single Retail segment omni-channel rather than separate channels and believe that the Retail segment omni-channel results present the most meaningful and appropriate measure of our performance.

Our comparable Retail segment net sales data is equal to the sum of our comparable store and comparable direct-to-consumerdigital channel net sales. A store is considered to be comparable if it has been open at least twelve12 full months, unless it was materially expanded or remodeled within that year or was not otherwise operating at its full capacity within that year. A direct-to-consumerdigital channel is considered to be comparable if it has been operational for at least twelve12 full months. There is no overlap between comparable store net sales and comparable direct-to-consumer net sales. Sales from stores and direct-to-consumerdigital channels that do not fall within the definition of comparable store or channel are considered to be non-comparable. TheFranchise net sales and the effects of foreign currency translation are also considered non-comparable.

We monitor Retail segment metrics including customer traffic and customer conversion ratesaverage units per transaction at our stores, websites and mobile applications. We additionally monitor average unit selling price and transactions at our stores and customer sessions, average order value and conversion rates on our websites.websites and mobile applications. We believe that changes in any of these

metrics may be caused by a response to our brands’ fashion offerings, our marketing campaigns, circulation of our catalogs and an overall growth in brand recognition as we expandrecognition.

Urban Outfitters targets young adults aged 18 to 28 through a unique merchandise mix, compelling store environment, websites and mobile applications and a product offering that includes women’s and men’s fashion apparel, activewear, intimates, footwear, accessories, home goods, electronics and beauty. A large portion of our store base.

Asmerchandise is exclusive to Urban Outfitters, consisting of January 31, 2016, we operated 240an assortment of products designed internally and designed in collaboration with third-party brands. Urban Outfitters stores of which 179 were locatedare in the United States, 18 were locatedstreet locations in Canadalarge metropolitan areas and 43 were located in Europe. During fiscal 2016, we opened four new Urban Outfitters stores, of which two were located in the United Statesselect university communities, specialty centers and two were located in Canada, and we closed two stores in the United States. Total store selling square footage as of January 31, 2016 was 2.2 million and was flat as comparedenclosed malls that accommodate our customers’ propensity not only to the prior year.shop, but also to congregate with their peers. Urban Outfitters operates websites and mobile applications in North America and Europe that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in our stores. Urban Outfittersits stores, offers a catalog in Europe offering select merchandise, most of which is also available in our Urban Outfitters stores. Urban Outfitters targets young adults aged 18its stores, sells merchandise through franchisee-owned stores in Israel and the United Arab Emirates, and partners with third-party digital businesses to 28 throughoffer a uniquelimited selection of merchandise, mix, compelling store environment and websites. Urban Outfitters’ product offering includes women’s and men’s fashion apparel, intimates, footwear, beauty and accessories, activewear and gear, electronics, as well as an eclectic mix of apartment wares and gifts. We plan to open additional stores over the next several years.which is available globally. Urban Outfitters’ North American and European Retail segment net sales accounted for approximately 32.5% 29.5%and 8.0% 7.9%of consolidated net sales, respectively, for fiscal 2016,2020, compared to 32.9%30.5% and 8.8%8.2%, respectively, for fiscal 2015.2019.

The Anthropologie Group consists of the Anthropologie, Bhldn and Terrain brands. We initially operated the Bhldn and Terrain brands as standalone concepts and opened two Bhldn stores and two Terrain garden centers. We ultimately determined that the Bhldn and Terrain brands were complementary toMerchandise at the Anthropologie brand and integrated those brands with the Anthropologie brand during fiscal 2015 and 2016, respectively, to form the Anthropologie Group. As of January 31, 2016, we operated 218 Anthropologie Group stores, of which 197 were located in the United States, 12 were located in Canada and nine were located in Europe. During fiscal 2016, we opened 14 new Anthropologie Group stores, of which 12 were located in the United States and two were located in Europe, and we closed two stores in the United States. Total store selling square footage as of January 31, 2016 increased 4.7% over the prior year period to 1.5 million. The Anthropologie Group operates websites in North America and Europe that capture the spirit of our brands by offering a similar yet broader selection of merchandise as found in our stores. The Anthropologie brand offers registry services through our website and mobile applications and in all of our stores throughout the United States, allowing our customers to create gift registries for any occasion. The Anthropologie brand offers a catalog in North America and in Europe that markets select merchandise, most of which is also available in our Anthropologie brand stores. The Anthropologie brand tailors its merchandisetailored to sophisticated and contemporary women aged 28 to 45. The Anthropologie brand’s product assortment includes women’s casual apparel, and accessories, intimates, shoes, beauty, home furnishings, and a diverse array of gifts and decorative items.items and beauty and wellness. APlus by Anthropologie, which was launched during fiscal 2020, is an apparel line that offers an extended size range within certain Anthropologie brand clothing collections. The Bhldn brand emphasizes every element that contributes to a wedding. The Bhldn brand offers a curated collection of heirloom quality wedding gowns, bridesmaid frocks, party dresses, assorted jewelry, headpieces, footwear, lingerie and decorations. The Terrain brand is designed to appeal to women and men interested in a creative and sophisticated outdoor living and gardening experience. Merchandise includes lifestyle home, garden and gardenoutdoor living products, combined with antiques, live plants, flowers, wellness products and accessories. Both Terrain gardenIn addition to individual brand stores, the Anthropologie Group operates expanded format stores that include multiple Anthropologie Group brands, which allows for the presentation of an expanded assortment of products in certain categories. Anthropologie Group stores are located in specialty centers, upscale street locations and enclosed malls. The Anthropologie Group operates websites and mobile applications in North America and Europe that capture the spirit of its brands by offering a similar yet broader selection of merchandise as found in its stores, offers catalogs in North America and Europe that market select merchandise, most of which is also offer a full service restaurant and coffee bar. We plan to open additionalavailable in Anthropologie brand stores, over the next several years, somesells merchandise through a franchisee-owned store in Israel, and partners

with third-party digital businesses to offer a limited selection of merchandise, which will include Bhldn or Terrain shop-within-shop concepts.is available globally. The Anthropologie Group’s North American and European Retail segment net sales accounted for approximately 40.2%39.2% and 1.6%1.7% of consolidated net sales, respectively, for fiscal 2016,2020, compared to 40.1%38.6% and 1.5%1.7%, respectively, for fiscal 2015.

AsFree People focuses its product offering on private label merchandise targeted to young contemporary women aged 25 to 30 and provides a unique merchandise mix of January 31, 2016, we operated 114casual women’s apparel, intimates, FP Movement activewear, shoes, accessories, home products, gifts and beauty and wellness. Free People stores of which 109 wereare located in the United Statesenclosed malls, upscale street locations and five were locatedspecialty centers. We plan to open three standalone FP Movement stores in Canada. During fiscal 2016, we opened 13 new Free People stores, of which 12 were located2021 and expect to open more in the United States and one was located in Canada, and we closed one store located in the United States due to lease expiration. Total store selling square footage as of January 31, 2016, increased 27.8% over the prior year period to 203,000.future. Free People operates websites and mobile applications in North America, Europe and Asia that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in ourits stores, as well as substantially all of the Free People wholesale offerings. Free People also offers a catalog that markets select merchandise, most of which is also available in our Free People stores.stores, sells merchandise through a franchisee-owned store in Israel, and partners with third-party digital businesses to offer a limited selection of merchandise, which is available globally. Free People focusesopened its product offering on private label merchandise targeted to young contemporary women aged 25 to 30.first European retail stores in fiscal 2019. Free People provides a unique merchandise mix of casual women’s apparel, intimates, shoes, activewear, accessories, home products and gifts. We plan to open additional stores over the next several years. Free People’s North American Retail segment net sales accounted for approximately 10.1%12.5% of consolidated net sales for fiscal 2016,2020, compared to approximately 9.2%11.6% for fiscal 2015.2019. European Retail segment net sales accounted for less than 1.0% of consolidated net sales for fiscal 2020 and fiscal 2019.

ForThe Menus & Venues division focuses on a dining experience that provides excellence in food, beverage and service. The Menus & Venues division net sales accounted for less than 1.0% of consolidated net sales for fiscal 2020 and fiscal 2019.

Net sales from the Retail segment accounted for approximately 91.6%, 91.2% and 91.3% of total consolidated net sales for fiscal 2020, 2019 and 2018, respectively.

Store data for fiscal 2020 was as follows:

Selling square footage by brand as of January 31, 2020 and January 31, 2019 was as follows:

We plan for future store growth for all three brands combined, weto come from expansion domestically and internationally, which may include opening stores (including standalone FP Movement stores) in new and existing markets or entering into additional franchise or joint venture agreements. We plan for future digital channel growth to open approximately 27 new stores duringcome from expansion domestically and internationally.

Projected openings and closings for fiscal 2017, including five Urban Outfitters stores, ten Anthropologie Group stores and 12 Free People stores.2021 are as follows:

Wholesale Segment

Our Wholesale segment consists of the Free People, wholesale divisionAnthropologie and Urban Outfitters brands that sell through approximately 2,300 department and specialty stores worldwide, third-party digital businesses and our Retail segment. The Wholesale segment primarily designs, develops and markets young women’s contemporary casual apparel. Free People’s range of tops, bottoms, sweaters, dresses,apparel, intimates, FP Movement activewear and shoes and activewear are sold through approximately 1,800 better department and specialty stores worldwide, and our ownunder the Free People stores.brand, home goods including gifts, tabletop and textiles under the Anthropologie brand and the BDG apparel collection under the Urban Outfitters brand. The Anthropologie wholesale division was established in fiscal 2018 and the Urban Outfitters wholesale division was established in fiscal 2019. Our Wholesale segment net sales accounted for approximately 7.6%8.2% of consolidated net sales for fiscal 2016,2020, compared to 6.8%8.8% for fiscal 2015.2019.

Subscription Segment

Our Subscription segment consists of the Nuuly brand, which is a monthly women’s apparel subscription rental service that launched on July 30, 2019. For a monthly fee, Nuuly subscribers can select rental product from a wide selection of the Company’s own brands, third-party labels and one-of-a-kind vintage pieces via a custom-built, digital platform. Subscribers select their products each month, wear them as often as they like, then swap into new products the following month. Subscribers are also able to purchase the rented product. Our Subscription segment net sales accounted for less than 1.0% of consolidated net sales for fiscal 2020.

Critical Accounting Policies and Estimates

Our Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States. These generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses during the reporting period.

Our senior management has reviewed the critical accounting policies and estimates with the Audit Committee of our Audit Committee.Board of Directors. Our significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the Notes to our Consolidated Financial Statements.Statements included in this Annual Report on Form 10-K. We believe that the following discussion addresses our critical accounting policies, which are those that are most important to the portrayal of our financial condition, results of operations and cash flows and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. If actual results were to differ significantly from estimates made, the reported results could be materially affected. We are not currently aware of any reasonably likely events or circumstances that would cause our actual results to be materially different from our estimates.

Revenue Recognition

Merchandise: Merchandise is sold through retail stores, catalogs and the digital sales channel, as well as to wholesale customers, franchise partners and subscription customers. Revenue is recognized when control of the promised goods is transferred to the customer. We have elected to treat shipping and handling as fulfillment activities and not a separate performance obligation. Accordingly, we will recognize merchandise revenue in ourfor the Retail segment for our single performance obligation at the point-of-sale for merchandisepoint of sale or at the customer takes possessiontime of at our store orshipment, which is when merchandise is shippedtransfer of control to the customer occurs. A Subscription segment customer may purchase merchandise in each case,her possession that was included in the order that was delivered as part of the monthly subscription rental service. We recognize merchandise revenue for the Subscription segment for our single performance obligation when the customer purchases the merchandise

through the website or mobile application. Revenue does not include taxes assessed by governmental authorities, including value-added and other sales-related taxes, that are imposed on and concurrent with revenue-producing activities. Revenue is recognized net of estimated customer returns. Revenue is recognizedRetail segment return policies vary by our Wholesale segment when merchandise is shippedbrand, but generally provide for no time limit on returns and the refund to be issued in either the customer, netform of estimated customer returns. Revenue is presented onoriginal payment or as a net basis and does not include any tax assessed by a governmental or municipal authority.gift card. Payment for merchandise in our Retail segment is tendered primarily by cash, check, credit card, debit card, gift card or gift card. Therefore, uncollectiblealternative payment method (such as Afterpay and Alipay). Uncollectible accounts receivable for our Retail segment is negligible and primarily results from unauthorized credit card transactions. We maintain an allowance for doubtful accounts for theour Wholesale segment accounts receivable, which we review on a regular basis and believe is sufficient to cover potential credit losses and billing adjustments. Payment terms in our Wholesale segment vary by customer with the most common being a net 30-day policy.

Menus & Venues: Revenue from restaurant sales and events is recognized upon completion of the service, when we satisfy our single performance obligation. Customer deposits may be received in advance for events, which represents a contract liability until we satisfy our performance obligation.

Subscription Fees: Revenue for the Subscription segment is generated through monthly subscription fees and the purchase of merchandise in a customer’s possession. The monthly subscription rental fee is recognized as revenue on the date the customer is billed, which is the monthly anniversary of when the customer initially signed up for the subscription rental service. A customer may pause the monthly subscription, at which point the customer will not be billed for future months until the subscription is no longer on hold. Merchandise sales to Subscription segment customers are discussed above under Merchandise.

Franchise Fees: Revenue from franchise operations primarily relates to merchandise sales to franchisees and royalty fees. Merchandise sales to franchisees are discussed above under Merchandise. Royalty fees are based upon a percentage of franchisee net sales to third party customers and are recognized when such sales occur.

Gift Cards: We account for a gift card transaction by recording a liability at the time the gift card is issued to the customer in exchange for consideration from the customer. AAt the time of issuance, we have an open performance obligation for the future delivery of promised goods or services. The liability is established and remains on our booksoutstanding until the card is redeemed by the customer, at which time we record the redemptionrecognize revenue. Over time, a portion of the card for merchandise as a sale, or when we determine the likelihood of redemption is remote. We determine the probability of theoutstanding gift cards beingwill not be redeemed by the customer which we refer to as “breakage”. Revenue is recognized from breakage over time in proportion to gift card redemptions. Judgment is used in determining the amount of breakage revenue to be remoterecognized and is based on historical gift card redemption patterns. Revenues attributable to the reduction of giftGift card liabilities for which the likelihood of redemption becomes remote arebreakage revenue is included in net sales and areis not material. Our gift cards do not expire.

Customer Loyalty Programs: We maintain a customer loyalty program under our Urban Outfitters brand. Under this program, customers can earn and accumulate points that convert to a reward coupon upon reaching a specified point threshold. Reward coupons can be redeemed for merchandise discounts and expire 60 days after issuance. Outstanding reward coupons and points earned through sale activity represent a performance obligation. Revenue is deferred in an amount equal to the standalone selling price, taking into account expected future redemptions, and recognized at the earlier of redemption or expiration. Judgment is used in determining the expected future redemption rates. The redemption and expiration of reward coupons are included in net sales. There are no material accounting policies related to the AnthroPerks customer loyalty program outside of our general revenue recognition practices.

Sales Return Reserve

We record a reserve for estimated product returns where the sale has occurred during the period reported, but the return is likely to occur subsequent to the period reported. The reserve for estimated product returns is based on our most recent historical return trends. If the actual return rate is materially different than our estimate, sales returns would be adjusted in the future. Beginning February 1, 2018, with the adoption of the accounting standards update for revenue from contracts with customers, costs of returns are recorded as a current asset rather than net with the sales return reserve liability. As of January 31, 20162020 and 2015,2019, reserves for estimated sales returns totaled $24.4 $51.4million and $19.8$52.0 million, representing 3.5%2.8% and 3.5%7.7% of total liabilities, respectively.

Marketable Securities

All of our marketable securities as of January 31, 2016 and January 31, 2015 are classified as available-for-sale and are carried at fair value, which approximates amortized cost. Interest on these securities, as well as the amortization of discounts and premiums, is included in “Interest income” in the Consolidated Statements of Income. We record unrealized gains and losses on these securities (other than mutual funds, held in the rabbi trust for the Urban Outfitters, Inc. Non-qualified Deferred Compensation Plan (See Note 3, “Marketable Securities,” in the Notes to Consolidated Financial Statements)) as a component of “Other comprehensive (loss) income” in the Consolidated Statements of Comprehensive Income and in “Accumulated other comprehensive loss” within “Shareholders’ equity” until realized, except when we consider declines in value to be other than temporary. Other than temporary impairment losses related to credit losses are considered to be realized losses. Mutual funds held in the rabbi trust have been accounted for under the fair value option, which results in all unrealized gains and losses being recorded in “Interest income” in the Consolidated Statements of Income. When available-for-sale securities are sold, the cost of the securities is specifically identified and is used to determine the realized gain or loss. Securities classified as current assets have maturity dates of less than or equal to one year from the balance sheet date. Securities classified as non-current assets have maturity dates greater than one year from the balance sheet date.

Inventory

We value our inventory, which consists primarily of general consumer merchandise held for sale, at the lower of cost or market.net realizable value. Cost is determined on the first-in, first-out method and includes the cost of merchandise and import relatedimport-related costs, including freight, import duties and taxes and agent commissions. A periodic review of inventory is performed in order to determine if inventory is properly stated at the lower of cost or market.net realizable value. Factors we consider in our review, such as future expected consumer demand and fashion trends, current aging, current and anticipated retail markdowns or wholesale discounts and class or type of inventory, are analyzed to determine estimated net realizable value. Criteria that we consider in our review of aging trends include average selling cycle and seasonality of merchandise, the historical rate at which merchandise has sold below cost during the prior twelve12 months and the value and nature of merchandise currently held in inventory and priced below original cost. A provision is recorded to reduce the cost of inventory to its estimated net realizable value, if appropriate. Any significant unanticipated changes in the factors noted above could have a significant impact on the value of our inventory and our reported operating results. Our estimates generally have been accurate, and our reserve methods have been applied on a consistent basis. We expect the amount of our provision and related inventory to increase over time as we increase our sales. The majority of inventory at January 31, 2016,2020 and 20152019 consisted of finished goods. Raw materials and work-in-process were not material to the overall inventory value. Inventory as of January 31, 20162020 and 20152019 totaled $330.2 $409.5million and $358.2$370.5 million, representing 18.0%12.4% and 19.0%17.1% of total assets, respectively.

Long-Lived AssetsRental Product

Our long-lived assets consist principallyThe cost of store leasehold improvements, buildings, furnitureour Subscription segment rental product is amortized to cost of sales based on the cost of each unit rented, which is estimated based on the number of times the unit is expected to be rented and fixtures,the cost of the rental product. Lost, damaged and other operating equipment and areretired rental product is also charged to cost of sales. We make assumptions as to the number of times each unit can be rented. If the actual number of times a unit can be rented were to vary significantly from our estimates, it could materially affect the amount of rental product amortization included in the “Property and equipment, net” line item in our Consolidated Balance Sheets. Store leasehold improvements are recorded at cost and are amortized using the straight-line method over the lesser of the applicable store lease term, including lease renewals which are reasonably assured, or the estimated useful life of the leasehold improvements. The typical initial lease term for our stores is ten years. Buildings are recorded at cost and are amortized using the straight-line method over 39 years. Furniture and fixtures are recorded at cost and are amortized using the straight-line method over their useful life, which is typically five years. Other operating equipment is recorded at cost and amortized using the straight-line method over its useful life, which is three to ten years. Net property and equipment as of January 31, 2016 and 2015 totaled $863.1 million and $889.2 million, representing 47.1% and 47.1%sales. Rental product represented less than 1.0% of total assets respectively.at January 31, 2020.

We have not historically encountered material early retirement charges related to our long-lived assets. The cost of assets sold or retired and the related accumulated depreciation or amortization is removed from the accounts with any resulting gain or loss included in net income. Maintenance and repairs are charged to expense as incurred. Major renovations or improvements that extend the service lives of our assets are capitalized over the lesser of the extension period, life of the improvement, or the remaining term of the lease.

Impairment of Long-lived Assets, Goodwill and Intangible Assets

We periodically review the carrying values of our definite-lived, long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Events that result in an impairment review include plans to close a store,retail location, distribution or fulfillment center or a significant decrease in the operating results of a long-lived asset. Our retail storeslocations are reviewed for impairment at

the storeretail location level, which is the lowest level at which individual cash flows can be identified. Newly opened storesretail locations may take time to generate positive operating and cash flow results. Factors such as store type (e.g., mall versus free-standing), store location (e.g., urban area versus college campus or suburb), current marketplace awareness of our brands, local customer demographic data and current fashion trends are all considered in determining the time frame required for a storeretail location to achieve positive financial results, which, in general, is assumed to be within three years from the date a store location has opened. In assessing an asset for potential impairment, we make estimates regarding future operating results, cash flows and estimated useful life.results. When events indicate that an asset may be impaired and the estimated undiscounted cash flows are less than the carrying amount of the asset, the impaired asset is adjusted to its estimated fair value and an impairment loss is recorded. Goodwill has been assigned to reporting units for purposes of impairment testing. We evaluate goodwill annually, or more frequently whenever events or changes in circumstances indicate that the carrying value of the reporting unit may exceed the fair value of the reporting unit. In assessing an asset for potential impairment, we make estimates regarding future operating results, cash flows and estimated useful life. We have not made any material changes in the methodology to assess and calculate impairment of long-lived assets in the past three fiscal years. During fiscal 2016,2020, we recorded impairment charges for fiveeight retail stores,locations, totaling $8.9$14.6 million, with a carrying value after impairment of which $7.4$51.9 million is in “Cost of sales” and $1.5 million is in “Selling, general and administrative expenses,” inprimarily related to the Consolidated Statements of Income.right-of-use assets. During fiscal 2019, we recorded impairment charges for fourretail locations, totaling $3.5million. During fiscal 2018, we recorded impairment charges for ten retail locations, totaling $11.4 million. During our assessment of current and future performance, it was determined that these storesretail locations would not be able to generate sufficient cash flow over the expected remaining lease term to recover the remaining carrying value of the respective storeretail location assets. Impairment chargesDuring fiscal 2020, we evaluated the fair value of the Menus & Venues division as compared to the carrying value and determined that the goodwill assigned to the reporting unit is impaired in full, resulting in a goodwill impairment charge of $13.9 million.

Leases

On February 1, 2019, we adopted the Financial Accounting Standards Board (“FASB”) accounting standards update that amended the existing accounting standards for fiscal 2015lease accounting. This update requires lessees to recognize a right-of-use asset and 2014 were immaterial.lease liability for both operating and finance leases. We adopted the new guidance using a modified retrospective approach at the beginning of the period of adoption. See Note 2, “Summary of Significant Accounting Policies,” in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for a further discussion of the adoption.

We have operating leases for stores, distribution and fulfillment centers, corporate offices and equipment. We sublease certain properties to third parties. We have elected not to record a lease liability and right-of-use asset for leases with original terms of 12 months or less. We have elected the practical expedient to not separate non-lease components from lease components as it pertains to real estate leases.

Store leases have remaining lease terms that range from less than one year up to 15 years, some of which contain options to extend the lease for one or two 5-year periods. Payments related to a renewal period are included in the lease liability and right-of-use asset only when we are reasonably certain that we will exercise the option to renew the lease for an extended period of time. Certain leases may contain variable lease payments such as rent based on a percentage of net sales. Variable lease payments may be subject to a breakpoint threshold of fixed rent. Variable lease payments, other than those that depend on an index or a rate, are not included in the measurement of the lease liability. The lease liability is calculated at the present value of certain future payments, discounted using our incremental borrowing rate, which approximates the rate of interest we would pay to borrow an amount equal to the lease payments on a fully collateralized basis over a similar term. Significant judgment is used in determining the incremental borrowing rate related to estimates for credit rating, credit spread and the impact of collateral. We developed incremental borrowing rates at a lease portfolio level. The right-of-use asset is initially equal to the value of the lease liability less any amounts received from the landlord as incentives or tenant improvement allowances.

Accounting for Income Taxes

As part of the process of preparing our Consolidated Financial Statements, we are required to estimate our income taxes in each of the tax jurisdictions in which we operate. This process involves estimating our actual current tax obligations together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences result in deferred tax assets and liabilities, which are included within our Consolidated Balance Sheets. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income. A valuation allowance is recognized if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax asset will not be realized. In making such a determination, we consider all material available

positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. Actual results could differ from this assessment if adequate taxable income is not generated in future periods. Net deferred tax assets as of January 31, 20162020 and January 31, 20152019 totaled $54.2 $51.1million and $68.7$52.9 million, respectively, representing 3.0%1.5% and 3.6%2.4% of total assets, respectively.

To the extent we believe that recovery of a deferred tax asset is at risk, we establish valuation allowances. To the extent we establish valuation allowances or increase the allowances in a period, we record additional income tax expense in the Consolidated Statements of Income. Valuation allowances were $6.6 $13.5million as of January 31, 20162020 and $0.1$3.9 million as of January 31, 2015, respectively.2019. Valuation allowances are based on evidence of our ability to generate sufficient taxable income in certain foreign and state jurisdictions. In the future, if enough evidence of our ability to generate sufficient future taxable income in these jurisdictions becomes apparent, we would be required to reduce our valuation allowances, resulting in a reduction in income“Income tax expenseexpense” in the Consolidated Statements of Income. On a quarterly basis, management evaluates the likelihood that we will realize the deferred tax assets and adjusts the valuation allowances, if appropriate.

We record uncertain tax positions on the basis of a two-step process whereby (1) we determine whether it is more-likely-than-not that the tax positions will be sustained on the basis of the technical

merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent50% likely to be realized upon ultimate settlement with the related tax authority.

Our tax liability for uncertain tax positions contains uncertainties because we are required to make assumptions and to apply judgment to estimate the exposures associated with our various filing positions. Although we believe that the judgments and estimates discussed herein are reasonable, actual results may differ, and we may be exposed to income tax expenses or benefits that could be material.

We consider certain earnings of non-U.S. subsidiaries to be indefinitely invested outside the United States on the basis of estimates that future United States cash generation will be sufficient to meet future United States cash needs and our specific plans for reinvestment of those subsidiaries’ earnings. Should we decide to repatriate the foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside the United States.

The SEC issued Staff Accounting Bulletin No. 118 (“SAB No. 118”), which allowed registrants to record provisional estimates for the Tax Act during a measurement period not to exceed one year from its enactment date, December 22, 2017. While management has completed its analysis within the applicable measurement period, pursuant to SAB No. 118, we are accounting for the income tax impacts of the provisions of U.S. tax reform based on the interpretation of existing statutory law, including guidance issued by the U.S. Treasury Department and the IRS. During the second half of fiscal 2019, the U.S. Treasury Department and the IRS issued certain proposed regulations addressing new provisions such as Global Intangible Low-Taxed Income, Base Erosion and Anti-abuse Tax, Foreign Tax Credit and the Anti-hybrid Regulations. The Tax Act requires complex computations to be performed that were not previously required by U.S. tax law, significant judgments to be made in interpretation of the provisions of the U.S. Tax Act, significant estimates in calculations, and the preparation and analysis of information not previously relevant or regularly produced. The U.S. Treasury Department, the IRS and other standard-setting bodies will continue to interpret or issue guidance on how provisions of the Tax Act will be applied or otherwise administered. As future guidance is issued, we may make adjustments to amounts that we have previously recorded that may impact our provision for income taxes in the period in which the adjustments are made.

See Note 10, “Income Taxes,” in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for a further description of provisional amounts recorded related to the Tax Act in fiscal 2019 and fiscal 2018.

Accounting for Contingencies

From time to time, we are named as a defendant in legal actions arising from our normal business activities. We are required to record a reserve for estimated losses when information available prior to issuance of our financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Accounting for contingencies arising from contractual disputes or legal proceedings requires management to use its best judgment when estimating an accrual related to such contingencies. As additional information becomes known, our reserves for loss contingencies could fluctuate, thereby creating variability in our results of operations from period to period. Likewise, an actual loss arising from a loss contingency which significantly exceeds our reserve could have a material adverse impact on our operating results for the period in which such actual loss becomes known. We believe that our reserves adequately reflect the anticipated final outcome of any matter currently pending against us and the ultimate settlement of such matters will not materially affect our financial position or results of operations.

Share-Based Compensation

Accounting for share-based compensation requires measurement of compensation cost for all share-based awards at fair value on the date of grant and recognition of compensation over the service period, net of estimated forfeitures.period.

We use a lattice binomial pricingA Black-Scholes model was used to determine the fair value of our stock options granted in the fiscal years ended January 31, 2020 and 2019. A Monte Carlo simulation was used to determine the fair value of our stock appreciation rights. Thisoptions granted in the fiscal year ended January 31, 2018. A different model useswas used to value fiscal 2020 and 2019 grants due to changes in grant provisions. Both models use assumptions including the risk-free rate of interest, expected volatility of our stock price and expected life of the awards. The fair value of the performance-based awards granted during fiscal 2020 equaled the stock price on the date of the grant. A Monte Carlo simulation which utilizes similar assumptions, iswas used to determine the fair value of performance-based awards.awards granted during fiscal 2019 and fiscal 2018. A different methodology was used to value fiscal 2020 grants due to the removal of certain conditions in the grant provisions. We review our assumptions and the valuations provided by independent third-party valuation advisors in order to determine the fair value of share-based compensation awards at the date of grant. The assumptions used in calculating the fair value of these share-based payment awards represent our best estimates, but these estimates involve inherent uncertainties and the application of judgment. Changes in these assumptions can materially affect the fair value estimate.

Additionally, we make certain estimates about the number of awards whichthat will become vested under performance-based incentive plans. We record expense for performance-based awards based on our current expectations of the probable number of awards that will ultimately vest. The estimation of awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised and could be materially different from share-based compensation expense recorded in prior periods.

We alsoBeginning in fiscal 2018, we elected to account for forfeitures as they occur rather than estimate the expected forfeiture rate. We consider many factors when estimating expected forfeitures, including types of awards and historical experience. We revise our forfeiture rates, when necessary, in subsequent periods if actual forfeitures differ from those originally estimated. As a result, if the actual forfeiture rate is different from the estimate at the completion of the vesting period, the share-based compensation expense may not be comparable to amounts recorded in prior periods.forfeitures.

Results of Operations

As a Percentage of Net Sales

The following table sets forth, for the periods indicated, the percentage of our net sales represented by certain income statement data and the change in certain income statement data from period to period. This table should be read in conjunction with the discussion that follows:

Fiscal 20162020 Compared to Fiscal 20152019

Net sales in fiscal 20162020 increased by 3.7%0.8% to $3.4$3.98 billion, from $3.3$3.95 billion in fiscal 2015.2019. The $122.1 $33.2million increase was attributable to a $87.7 $44.8million, or 2.8%1.2%,increase in Retail segment net

sales and $8.0 million in Subscription segment net sales, partially

offset by a $34.4 $19.6million, or 15.2%5.7%, increasedecrease in Wholesale segment net sales. Retail segment net sales for fiscal 20162020 accounted for 92.4%91.6% of total net sales compared to 93.2%91.2% of total net sales during fiscal 2015.2019.

The growth in our Retail segment net sales during fiscal 20162020 was due to an increase of $47.4 $41.5million, or 1.6%1.2%, in Retail segment comparable net sales, which includes our direct-to-consumerdigital channel, and an increase of $40.3 $3.3million in non-comparable andnet sales, including new store and franchise net sales. Our total company comparablesales partially offset by the negative impact of foreign currency translation. Retail segment comparable net sales increase was comprised of increases of 9.0%, 1.4% and 0.4% increased 6.6%at Free People Urban Outfitters and 2.2%at the Anthropologie Group respectively.and decreased by 1.4%at Urban Outfitters. Retail segment comparable net sales increased in North America but declined in Europe. The increase in Retail segment comparable net sales was driven by continued growth in the direct-to-consumerdigital channel, which was partially offset by negative comparable store net sales. Direct-to-consumerThe digital channel net sales wereincrease was driven by an increaseincreases in sessions orders,and conversion rate, while average order value and conversion rate. The negativeunits per transaction decreased. Negative comparable store net sales resulted from a reductiondecrease in store traffic,average unit selling price and transactions, and units per transaction, which were partially offset by an increase in average unit selling price.units per transaction. Store traffic for fiscal 2020 decreased. The increase in net sales attributable to non-comparable and sales was primarily due to the net impact of opening 44new stores was primarilyand restaurants and closing 23stores and restaurants since the result of opening 69 new storesprior comparable period and an increase in fiscal 2016 and 2015 that were not in operation for the full comparable periods. Thus far during the first quarter of fiscal 2017, comparable Retail segmentfranchise net sales are low single-digit positive which includesdue to the benefitopening of a leap year.two franchisee-owned stores during fiscal 2020 and the impact of full year operations of franchisee-owned stores opened during fiscal 2019, partially offset by the negative impact of foreign currency translation.