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 ~~checkmark~~check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock, $0.0001 par value—~~164,689,887~~165,683,935 shares outstanding on ~~December 4, 2006.~~June 7, 2007.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by ~~generally accepted accounting principles~~GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, ~~2006,~~2007, filed with the United States Securities and Exchange Commission on ~~April 12, 2006.~~

The retail segment of the Company’s business is subject to seasonal variations in which a greater percent of the Company’s annual net sales and net income typically occur during the period from August 1 through December 31 of the fiscal year. Accordingly, the results of operations for the ~~nine~~three months ended ~~October 31, 2006~~April 30, 2007 are not necessarily indicative of the results to be expected for the full year.

~~Our~~The Company’s fiscal year ends on January 31. All references in these notes to ~~our~~the Company’s fiscal years refer to the fiscal years ended on January 31 in those years. For example, ~~our~~the Company’s fiscal ~~2007~~year 2008 will end on January 31, ~~2007.~~2008.

On February 28, 2006, our Board of Directors approved a stock repurchase program. The program authorizes the Company to repurchase up to 8,000,000 common shares from time-to-time, based upon prevailing market conditions. As of the nine months ended October 31, 2006, the Company repurchased and subsequently retired 1,220,000 common shares at a total cost of $20,801. The average cost per share was $17.05, including broker commissions.

In ~~September 2006,~~February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities: Including an Amendment of FASB Statement No. 115.” SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value and requires entities to display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating what impact, if any, the adoption of SFAS No. 159 could have on its condensed consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in ~~U.S.~~ GAAP, and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating ~~the~~what impact, if any, the adoption of SFAS No. 157 could have on its condensed consolidated financial statements.

In September 2006, the SEC staff published Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 addresses quantifying the financial statement effects of misstatements, specifically, how the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year financial statements. This statement is effective for fiscal years ending after November 15, 2006. The Company is currently evaluating the impact SAB 108 could have on its consolidated financial statements.

In June 2006, the Emerging Issues Task Force (“EITF”) ratified its consensus on Issue No. 06-03, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income ~~Statement”.~~Statement.” EITF ~~06-3~~06-03 addresses what type of government assessments should be included within the scope of EITF ~~06-3,~~06-03, and how such government assessments should be presented in the income statement. The EITF

~~concluded~~ reached a conclusion that the scope of EITF ~~06-3~~06-03 includes any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added and some excise taxes. In addition, the EITF also ~~concluded~~reached a conclusion that the presentation of taxes, within the scope of EITF ~~06-3,~~06-03, on either a gross or net basis, is an accounting policy decision that should be disclosed pursuant to Accounting Principles Board Opinion No. 22, “Disclosure of Accounting Policies”. In addition, for any such taxes that are reported on a gross basis, a company should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. ~~The~~ EITF observed that because EITF 06-3 requires only the presentation of additional disclosures, an entity would not be required to re-evaluate its existing policies related to taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction between a seller and a customer. EITF 06-306-03 is effective for reporting periods beginning after December 15, 2006. The Company ~~will adopt~~adopted the disclosure requirements of EITF ~~06-3~~06-03 effective February 1, 2007, however, since the Company presents its revenue on a net basis, no further disclosure under EITF ~~06-3 will be~~06-03 is required.

In ~~June~~July 2006, the FASB issued FASB Interpretation No. 48, “Accounting ~~For~~for Uncertainty in Income Taxes” (“FIN 48”). The Company adopted FIN 48 on February 1, 2007. FIN 48 is an interpretation of ~~SFAS~~FASB Statement No. 109, “Accounting for Income ~~Taxes”,~~Taxes,” and it seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. ~~In addition,~~ FIN 48 ~~will require expanded disclosure with respect~~prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position that an entity takes or expects to ~~uncertain~~take in a tax ~~positions.~~return. Additionally, FIN 48 ~~is effective for fiscal years beginning after December 15, 2006.~~provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Under FIN 48, an entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. The Company ~~is currently evaluating what impact, if any,~~has recorded the ~~adoption~~cumulative effect of applying FIN 48 ~~will have~~of $0.7 million as an adjustment to the opening balance of retained earnings on ~~its consolidated financial statements and related disclosures.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~February 1, 2007. See Note 5, “Income Taxes,” for additional information.

During all periods presented, marketable securities are classified as available for sale. The amortized cost, gross unrealized gains (losses) and fair value of available-for-sale securities by major security type and class of security as of ~~October 31, 2006,~~April 30, 2007, January 31, ~~2006~~2007 and ~~October 31, 2005~~April 30, 2006 were as follows:


	Amortized Cost		Unrealized Gains		Unrealized (Losses)			Fair Value		Amortized Cost		Unrealized Gains		Unrealized (Losses)			Fair Value
As of October 31, 2006
As of April 30, 2007
Municipal bonds:
Maturing in less than one year	$	34,179	$	3	$	(159	)	$	34,023	$	27,926	$	—	$	(138	)	$	27,788
Maturing after one year through four years		58,939		67		(370	)		58,636		63,108		23		(266	)		62,865

		93,118		70		(529	)		92,659		91,034		23		(404	)		90,653

Auction rate instruments:
Maturing in less than one year		62,025		—		—			62,025		105,720		—		—			105,720

	$	155,143	$	70	$	(529	)	$	154,684	$	196,754	$	23	$	(404	)	$	196,373


As of January 31, 2006
As of January 31, 2007
Municipal bonds:
Maturing in less than one year	$	30,891	$	12	$	(95	)	$	30,808	$	33,287	$	—	$	(126	)	$	33,161
Maturing after one year through four years		65,472		1		(725	)		64,748		62,784		9		(471	)		62,322

		96,363		13		(820	)		95,556		96,071		9		(597	)		95,483

Auction rate instruments:
Maturing in less than one year		111,075		—		—			111,075		98,850		—		—			98,850

	$	207,438	$	13	$	(820	)	$	206,631	$	194,921	$	9	$	(597	)	$	194,333


As of October 31, 2005
As of April 30, 2006
Municipal bonds:
Maturing in less than one year	$	29,589	$	5	$	(146	)	$	29,448	$	34,194	$	12	$	(156	)	$	34,050
Maturing after one year through four years		66,729		—		(783	)		65,946		64,619		1		(909	)		63,711

		96,318		5		(929	)		95,394		98,813		13		(1,065	)		97,761

Auction rate instruments:
Maturing in less than one year		106,825		—		—			106,825		112,675		—		—			112,675

	$	203,143	$	5	$	(929	)	$	202,219	$	211,488	$	13	$	(1,065	)	$	210,436

Proceeds and maturities from the sale of available-for-sale securities were ~~$165,724~~$30,675 and ~~$381,854~~$31,061 for the ~~nine~~three months ended ~~October 31,~~April 30, 2007 and 2006, ~~and 2005,~~ respectively. For the ~~nine~~three months ended ~~October 31,~~April 30, 2007 there were no realized gains or losses included in other income. During the three months ended April 30, 2006, ~~and 2005,~~ $8 of realized losses ~~and $32 of realized gains, respectively,~~ were included in other income.

On September 30, 2004, the Company renewed and amended its line of credit facility (the “Line”). The Line is a three-year revolving credit facility with an accordion feature allowing an increase in available credit to ~~$50,000~~$50.0 million at the Company’s discretion, subject to a seven day request period. As of ~~October 31, 2006,~~April 30, 2007, the credit limit under the ~~line is $42,500.~~Line was $42.5 million. The Line contains a sub-limit for borrowings by ~~the Company’s~~ European subsidiaries that are guaranteed by the Company. Cash advances bear interest at LIBOR plus 0.50% to 1.60% based on the Company’s achievement of prescribed adjusted debt ratios. The Line subjects the Company to various restrictive covenants, including maintenance of certain financial ratios and covenants such as fixed charge coverage and adjusted ~~debt.~~debt ratios. The covenants also include limitations on the Company’s capital expenditures, ability to repurchase shares and the payment of cash dividends. On November 30, 2006 the Company amended its line to increase the capital expenditure limit and add additional subsidiaries that are permitted to borrow. As of ~~October 31, 2006,~~April 30, 2007, the Company was in compliance with all covenants under the Line. As of and during the ~~nine~~three months ended ~~October 31, 2006,~~April 30, 2007, there were no borrowings under the Line. Outstanding letters of credit and stand-by letters of credit under the Line totaled ~~$27,551~~approximately $28.0 million as of ~~October 31, 2006.~~April 30, 2007. The available ~~borrowing under the Line,~~credit, including the accordion feature, under the Line was ~~$22,449~~$22.0 million as of ~~October~~April 30, 2007. The Company plans to renew the Line during fiscal 2008 and expects the renewal will include the expansion of the available credit limit under the Line to an amount that will satisfy its letter of credit needs through fiscal 2010.

The Company adopted the provisions of FIN 48 on February 1, 2007. As a result of the implementation of FIN 48, the Company recorded a $5.0 million increase in the liability for unrecognized tax benefits, which is partially offset by an increase to the deferred tax asset of $4.3 million, resulting in a decrease to the February 1, 2007 retained earnings balance of $0.7 million. The amount of unrecognized tax benefits at February 1, 2007 was $8.7 million, of which $6.4 million would impact the Company’s effective tax rate if recognized. The amount of unrecognized tax benefits did not materially change as of April 30, 2007.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense in the Condensed Consolidated Statements of Income, which is consistent with the recognition of these items in prior reporting periods. As of February 1, 2007, the Company had recorded liabilities of approximately $1.4 million and $0.7 million for the payment of interest and penalties, respectively. The liabilities for the payment of interest and penalties did not materially change as of April 30, 2007.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. During the quarter ended April 30, 2007, the Company was notified by the Internal Revenue Service of its intent to examine the Company’s Federal income tax return for the period ended January 31, ~~2006.~~2005. The Company is no longer subject to U.S. federal tax examinations for years before fiscal 2004. State jurisdictions that remain subject to examination range from fiscal 2001 to 2006, with few exceptions. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months as a result of any of these examinations.

~~In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (revised 2004),~~ ~~“Share-Based Payment”~~, (“SFAS 123R”), which replaces SFAS 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” (APB No. 25). SFAS 123R requires all share-based payments, including grants of employee stock options and nonvested shares, to be recognized in the financial statements based on their fair values at date of grant. Under SFAS 123R, companies are required to measure the cost of services received in exchange for stock options and similar awards based on the grant-date fair value of the award and to recognize this cost in the income statement over the period during which an award recipient is required to provide service in exchange for the award. The pro forma disclosures previously permitted under SFAS 123 are no longer an alternative to financial statement recognition.

Effective February 1, 2006, the Company adopted SFAS No. 123R, “Share-Based Payment,” using the modified prospective ~~method and as such, results for prior periods have not been restated.~~method. Under this transition method, compensation cost in fiscal 2007 and fiscal 2008 includes the ~~measurement and~~portion of vesting in the ~~method of amortization of costs~~period for (1) all share-based payments granted prior to, but not yet vested as of January 31, 2006, ~~are~~ based on the same estimate of the grant-date fair value and primarily the same amortization method that was previously used in the SFAS 123 pro forma disclosure. The Company has used the Black-Scholes-Merton (“Black Scholes”) model to determine the grant date fair value ~~of its~~estimated in accordance with SFAS No. 123 and (2) all share-based ~~awards and FASB Interpretation No. 28 (“FIN 28”)~~payments granted subsequent to ~~amortize its stock-based compensation expense over the vesting term and has continued using these two methods under SFAS 123R. Compensation expense is recognized~~January 31, 2006, based on the grant date fair value ~~only for share-based payments expected to vest. The Company estimates forfeitures at~~estimated in accordance with the date of grant based on historical experience and future expectations. Prior to the adoption of SFAS 123R, the Company utilized the intrinsic-value based method of accounting under APB No. 25, and related interpretations, and adopted the pro forma disclosure requirementsprovisions of SFAS No. 123 and SFAS No. 148, “Accounting for Stock-Based Compensation —Transition and Disclosure.” The effect of forfeitures on the pro forma expense amounts were recognized based on actual historical forfeitures. No compensation expense was historically recognized for the Company’s stock option plans because the quoted market price of the Company’s common shares at the date of grant was not in excess of the amount an employee must pay to acquire the common shares.

The Company’s 2004 Stock Incentive Plan and 2000 Stock Incentive Plan both authorize up to 10,000,000 common shares, which can be granted as nonvested shares, incentive stock options or nonqualified stock options. Grants under these plans generally expire ten years from the date of grant, thirty days after termination, or six months after the date of death or termination due to disability. Stock options generally vest over a five year period, with options becoming exercisable in equal installments of twenty percent per year. However, options granted to non-employee directors generally vest over a period of one year and certain grants issued during fiscal 2006 and 2005 fully vested within six months after the date of grant. The Company’s 1997 Stock Option plan (the “1997 Plan”), which replaced the previous 1987, 1992 and 1993 Stock Option Plans (the “Superseded Plans”), expired during the year ended March 18, 2002. Individual grants outstanding under the 1997 Plan and certain of the Superseded Plans have expiration dates, which extend into the year 2010. Grants under the 1997 Plan and the Superseded Plans generally expire ten years from the date of grant, thirty days after termination, or six months after the date of death or termination due to disability. Stock options under the 1997 Plan generally vest over a five year period, with options becoming exercisable in equal installments of twenty percent per year. As of October 31, 2006, there were 848,750 and 639,200 common shares available for grant under the 2004 Stock Incentive Plan and 2000 Stock Incentive Plan, respectively.

Under the provisions of SFAS 123R, wethe Company recorded ~~$651~~$476 and ~~$1,653~~$410 of stock compensation related to stock option awards as well as related tax benefits of ~~$117~~$139 and ~~$341~~$78 in ~~the Company’s~~its Condensed Consolidated Statements of Income for the three ~~and nine~~ months ended ~~October 31,~~April 30, 2007 and 2006 respectively, or less than $.01 for both basic and diluted earnings per share for each of these periods. During the three ~~and nines~~ months ended ~~October 31, 2006,~~April 30, 2007, the Company granted 10,000 ~~and 90,000~~stock option awards. The Company did not grant any stock option awards ~~respectively.~~during the three months ended April 30, 2006. The estimated fair value of the options granted ~~during prior years~~ was calculated using a Black Scholes option pricing model. The Black Scholes model incorporates assumptions to value stock-based awards. The risk-free rate of interest for periods within the contractual life of the option is based on U.S. Government Securities Treasury Constant Maturities over the expected term of the equity instrument. Expected volatility is based on the historical volatility of the Company’s stock. The Company uses historical data on exercise timing to determine the expected life assumption. The table below outlines the weighted average assumptions for these award grants:

Based on the Company’s historical experience, the Company has assumed an annualized forfeiture rate of 2% for its unvested options. Under the true-up provisions of SFAS 123R, the Company will record additional expense if the actual forfeiture rate is lower than it estimated, and will record a recovery of prior expense if the actual forfeiture is higher than estimated.

No compensation expense related to stock option grants has been recorded in the Condensed Consolidated Statements of Income for the three and nine months ended October 31, 2005, as all of the options granted had an exercise price equal to the market value of the underlying stock on the date of grant. Results for prior periods have not been restated.

SFAS 123R requires the Company to present pro-forma information for the comparative period prior to the adoption as if it had accounted for all its employee stock options under the fair value method of the original SFAS 123. The following table illustrates the effect on net income and net income per common share if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation for the three and nine months ended October 31, 2005.

Total compensation cost of stock options granted but not yet vested, as of ~~October 31, 2006,~~April 30, 2007, was ~~$1,948,~~$1,278, which is expected to be recognized over the weighted average period of ~~1.03~~1.44 years.

~~The following tables summarize activity under all stock option plans for the respective periods:~~

The Company may make nonvested shares awards to employees, non-employee directors and consultants. A nonvested shares award is an award of common shares that is subject to certain restrictions during a specified period, such as an employee’s continued employment combined with the Company achieving certain financial goals. The Company holds the common shares during the restriction period, and the grantee cannot transfer the shares before the termination of that period. The grantee is, however, generally entitled to vote the common shares and receive any dividends declared and paid on the Company’s common shares during the restriction period. During the year ended January 31, 2005, the Company granted 400,000 shares of restricted common stock with a grant date fair value of ~~$5,766. Stock based~~$5,766 or $14.42 per share. Share-based compensation expense resulting from this grant of ~~$291 and $863 with related tax benefits of $111 and $349 are~~$281 is included in the accompanying Condensed Consolidated Statements of Income for each of the three month periods ended April 30, 2007 and ~~nine months ended October 31, 2006. Stock based compensation expense for the three and nine months ended October 31, 2005 was $291 and $863 with~~2006 as well as related tax benefits of $104 and $116, ~~and $343, respectively, and is also included in the accompanying Condensed Consolidated Statements of Income.~~respectively. As of ~~October 31, 2006,~~April 30, 2007, this iswas the only grant of ~~nonvested shares.~~non-vested shares, and none of these shares had vested as of that date. Total unrecognized compensation cost of ~~nonvested~~non-vested shares granted, as of ~~October 31, 2006,~~April 30, 2007, was ~~$ 3,042,~~$2,471, which is expected to be recognized over the weighted average period of ~~2.6~~2.1 years.

~~Nonvested shares activity under the Plan during the nine months ended October 31, 2006 is as follows:~~

The following is a reconciliation of the weighted average shares outstanding used for the computation of basic and diluted net income per common share:

For the three months ended ~~October 31,~~April 30, 2007 and 2006, ~~and 2005,~~ options to purchase ~~4,853,250~~4,249,750 common shares with an exercise price range of ~~$15.48~~$24.94 to $31.11 and options to purchase ~~180,000~~4,657,750 common shares with an exercise price of ~~$29.77,~~$27.45 to $31.11, respectively, were outstanding but were not included in the Company’s computation of diluted weighted average common shares and common share equivalents outstanding because their effect would have been anti-dilutive. Furthermore, options to purchase 4,774,750 and 650,000 common shares were outstanding for the nine months ended October 31, 2006 and 2005, respectively, but were not included in the Company’s computation, because their effect would have been anti-dilutive. The price of the options range from $15.48 to $31.11 and $23.55 to $29.77 for the nine months ended October 31, 2006 and 2005, respectively.

The Company is party to various ~~other~~ legal proceedings arising from normal business activities. Management believes that the ultimate resolution of these matters will not have a material effect on the Company’s financial position or results of operations.

The Company is a national retailer of lifestyle-oriented general merchandise with two reporting segments—”Retail” and ~~“Wholesale”.~~“Wholesale.” The Company’s Retail segment consists of the aggregation of its three brands operating through ~~197~~213 stores under the retail names “Urban Outfitters,” “Anthropologie” and “Free People” and includes their direct marketing campaigns, which ~~consist~~consisted of three catalogs and four web sites as of ~~October 31, 2006. Our~~April 30, 2007. The Company’s retail stores and their direct marketing campaigns are considered an operating ~~segments.~~segment. Net sales from the ~~retail~~Retail segment accounted for more than 93% of total consolidated net sales for the ~~nine~~three months ended ~~October 31, 2006~~April 30, 2007 and ~~2005.~~2006. The remainder is derived from the Company’s Wholesale segment that manufactures and distributes apparel to the ~~retail~~Retail segment and to approximately 1,500 better specialty retailers worldwide.

The Company has aggregated its retail stores and associated direct marketing campaigns into a Retail segment based upon their unique management, customer base and economic characteristics. Reporting in this format provides management with the financial information necessary to evaluate the success of the segments and the overall business. The Company evaluates the performance of the segments based on the net sales and pre-tax income from operations (excluding ~~intercompany~~inter-company charges) of the segment. Corporate expenses include expenses incurred and directed by the corporate office that are not allocated to segments. The principal identifiable assets for each operating segment are inventories and property and equipment. Other assets are comprised primarily of general corporate assets, which principally consist of cash and cash equivalents, marketable securities, and other assets, and which are typically not allocated to the Company’s segments. The Company accounts for inter-segment sales and transfers as if the sales and transfers were made to third parties making similar volume purchases.

The accounting policies of the operating segments are the same as the policies described in Item 2, “Critical Accounting Policies and Estimates.” Both the ~~retail~~Retail and ~~wholesale segment~~Wholesale segments are highly diversified. No customer comprises more than 10% of sales. A summary of the information about the Company’s operations by segment is as follows:

The Company has foreign operations in Europe and Canada. Revenues and long-term assets, based upon the Company’s domestic and foreign operations, are as follows:

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This filing with the United States Securities and Exchange Commission (“SEC”) is being made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Certain matters contained in this filing may constitute forward-looking statements. When used in this Form 10-Q, the words “project,” “believe,” “anticipate,” “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. The following are some of the factors that alone or together, could cause actual financial results to differ materially from those financial results mentioned in the forward-looking statements: 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 the resultant impact on consumer spending patterns, any effects of terrorist acts or war, ~~availability of suitable retail space for expansion,~~ timing of store openings, seasonal fluctuations in gross sales, the departure of one or more key senior managers, import risks, including potential disruptions and changes in duties, tariffs and quotas and other risks identified in our filings with the SEC, including our Form 10-K for the fiscal year ended January 31, ~~2006,~~2007, filed on ~~April 12, 2006.~~March 30, 2007. 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” or “our company” refer to Urban Outfitters, Inc., together with its subsidiaries.

We operate two business segments, a lifestyle merchandising retailing segment and a wholesale apparel segment. Our retailing segment consists of our Urban Outfitters, Anthropologie and Free People brands, whose merchandise is sold directly to our customers through our stores, catalogs, call centers and web sites. Our wholesale apparel segment consists of our Free People Wholesale division ~~which~~that designs, develops and markets young women’s contemporary casual apparel.

A store is included in comparable store net sales data, as presented in this discussion, if it ~~opened twelve or more~~has been open at least 12 full months ~~prior to~~from the beginning of the ~~periods~~period for which such date is presented, ~~in the accompanying Condensed Consolidated Statements of Income,~~ unless it was materially expanded or remodeled within that year or was not otherwise ~~consistently~~ operating at its full capacity within ~~the current or comparable period.~~that year. Sales from stores that do not fall within the definition of a comparable store are considered non-comparable. ~~Furthermore, non-store~~Non-store sales, such as catalog and internet sales, are also considered non-comparable.

Although we have no precise empirical data as it relates to customer traffic or customer conversion rates in our stores, we believe that, based only on our observations, changes in ~~our key sales metrics,~~transaction volume, as discussed in our results of operations, correlate to changes in customer traffic. We believe this may be caused by a combination of response to our brands’ fashion offerings, our web advertising, additional circulation of our catalogs and an overall growth in brand recognition as we expand our store base, including expansion into enclosed malls and specialty retail centers.

In April 2005, we acquired several buildings in the historic core of the Philadelphia Navy Yard. The acquisition has allowed for the consolidation of our multiple Philadelphia-based offices on one campus and will support our growth needs for at least the next ten years. Anthropologie took occupancy of one of the buildings during the third quarter of fiscal 2006 and the balance of our Philadelphia-based support employees took occupancy during the second and third quarters of fiscal 2007, once renovations were complete on the other buildings.

Our fiscal year ends on January 31. All references in this discussion to our fiscal years refer to the fiscal years ended on January 31 in those years. For example, our fiscal ~~2007 will end~~2008 ends on January 31, ~~2007.~~2008.

~~We plan~~Our goal is to ~~grow our store base~~increase net sales by ~~approximately~~at least 20% per ~~year.~~year through a combination of opening new stores, growing comparable store sales and continuing the growth of our direct-to-consumer and wholesale operations.

As of ~~October 31, 2006,~~April 30, 2007, we operated ~~102~~110 Urban Outfitters stores of which ~~91 are~~97 were located in the United States, 3four are located in Canada and 8nine were located in Europe. ~~During~~For the 9three months ended ~~October 31, 2006,~~April 30, 2007, we opened 12four new Urban Outfitters stores, 11three of which ~~are~~were located within the United States and 1one that was located in ~~Europe.~~Canada. Urban Outfitters targets young adults aged 18 to 30 through a unique merchandise mix and compelling store environment. Our product offering includes women’s and men’s fashion apparel, footwear and accessories, as well as an eclectic mix of apartment wares and gifts. ~~Urban Outfitters~~We plan to open additional stores over the next several years, some of which may be outside the United States. Urban’s North American and European store sales accounted for approximately ~~40%~~35.5% and 5%5.8% of consolidated net sales, respectively, for the ~~nine~~three months ended ~~October 31, 2006,~~April 30, 2007, compared to ~~43%~~39.1% and 4%4.3%, respectively, for the comparable period in fiscal ~~2006.~~2007.

WeAs of April 30, 2007, we operated 8795 Anthropologie stores ~~as of October 31, 2006,~~ all of which ~~are~~were located in the United States. During the ~~nine~~three months ended ~~October 31, 2006,~~April 30, 2007, we opened ~~eight~~two new Anthropologie stores. Anthropologie tailors its merchandise to sophisticated and contemporary women aged 30 to 45. Our product assortment includes women’s casual apparel and accessories, home furnishings and a diverse array of gifts and decorative items. We plan to open additional stores over the next several years. Anthropologie’s store sales accounted for approximately ~~36%~~37.7% of consolidated net sales for the ~~nine~~three months ended ~~October 31, 2006 and 2005.~~April 30, 2007, compared to 37.0% for the comparable period in fiscal 2007.

WeAs of April 30, 2007, we operated eight Free People stores ~~as of October 31, 2006,~~ all of which ~~are~~were located in the United States. ~~During the nine months ended October 31, 2006, we opened two new stores.~~ Free People primarily offers private

label branded merchandise targeted to young contemporary women aged 25 to 30. Free People provides a unique merchandise mix of casual women’s apparel, accessories and gifts. We plan to open additional stores over the next several years. Free People’s store sales accounted for less than 1% of consolidated net sales for the ~~nine~~three months ended ~~October 31, 2006~~April 30, 2007 and ~~2005.~~2006.

~~All~~For all brands combined, we plan to open ~~approximately 32 to 33~~at least 38 stores during fiscal ~~2007,~~2008, including ~~two~~six to eight new Free People stores. The remaining new stores will be divided approximately evenly between Urban Outfitters and Anthropologie. ~~Furthermore, we~~We plan to ~~open additional stores over the next several years, some of which as in the case of Urban Outfitters may be outside the United States. Our goal is~~continue to ~~increase net sales~~grow our store base at ~~least 20%~~a similar rate per ~~year through a combination of opening new stores, growing comparable store sales and continuing the growth of our direct-to-consumer and wholesale operations.~~year.

~~In March 1998,~~ Anthropologie ~~introduced~~distributes a direct-to-consumer catalog offering selected merchandise, most of which is also available in our Anthropologie stores. During the ~~nine~~three months ended ~~October 31, 2006,~~April 30, 2007, we circulated approximately ~~17.0~~6.3 million catalogs compared to ~~14.2~~5.9 million catalogs during the same period in fiscal ~~2006.~~2007. We believe that this catalog has been instrumental in helping to build the Anthropologie brand identity with our target customers. We plan to ~~circulate~~modestly expand circulation to approximately 21.9 million catalogs during fiscal 2008 compared to approximately 21.8 million catalogs circulated during fiscal 2007.

Anthropologie operates ~~an Internet~~a web site,www.anthropologie.com, that accepts orders directly from consumers. ~~The web site,~~~~www.anthropologie.com~~~~, debuted in December 1998.~~ The web site captures the spirit of the store by offering a similar array of apparel, accessories, ~~home furnishings~~household and gift ~~merchandise.~~merchandise as found in the stores. As with ~~our~~the Anthropologie catalog, we believe that the web site ~~improves~~increases Anthropologie’s reputation and brand recognition with its target customers and helps support the strength of Anthropologie’s store operations.

~~In March 2003,~~ Urban Outfitters ~~introduced~~distributes a direct-to-consumer catalog offering selected merchandise, much of which is also available in our Urban Outfitters stores. During the ~~nine~~three months ended ~~October 31, 2006,~~April 30, 2007, we circulated approximately ~~7.9~~2.8 million Urban Outfitters catalogs compared to approximately ~~6.9~~3.4 million catalogs during the comparable period in fiscal ~~2006.~~2007. We believe ~~Urban Outfitters catalogs expand~~this catalog has expanded our distribution channels and ~~increase~~increased brand awareness. We plan to ~~circulate~~expand circulation to approximately 12.0 million catalogs in fiscal 2008 compared to approximately 11.4 million catalogs incirculated during fiscal 2007.

Urban Outfitters also operates a web site,www.urbanoutfitters.com, that accepts orders directly from consumers. ~~The web site,~~~~www.urbanoutfitters.com~~~~, was launched in May 2000.~~ The web site captures the spirit of the store by offering a similar selection of ~~merchandise.~~merchandise as found in the stores. As with the Urban Outfitters catalog, we believe the web site increases the reputation and recognition of the brand with its target customers, as well as helps to support the strength of Urban Outfitters store operations.

In August 2006, Urban Outfitters launched a web site targeting our European customers. The web site,www.urbanoutfitters.co.uk, captures the spirit of our European stores by offering a similar selection of merchandise ~~shipped directly~~as found in our stores. Fulfillment is provided from a third-party distribution center located in the United Kingdom. We believe the web site increases the reputation and recognition of the brand with ~~its target~~our European customers as well as helps to support our Urban Outfitters European store operations.

~~We successfully launched the Free People web site in September 2004. The web site,~~~~www.freepeople.com~~~~, offers consumers the entire Free People product assortment found in Free People retail stores as well as all of the Free People wholesale offerings.~~ In October 2005, Free People introduced a direct-to-consumer catalog offering selected merchandise much of which is also available in our Free People stores. ~~During~~For the ~~nine~~three months ended ~~October 31, 2006,~~April 30, 2007, we circulated approximately ~~1.9 million catalogs. During~~750 thousand Free People catalogs compared to approximately 850 thousand catalogs during the comparable period in fiscal ~~2006, we did not circulate any catalogs.~~2007. We believe Free People catalogs expand our distribution channels and increase brand awareness. We plan to ~~circulate~~expand circulation to approximately ~~3.3~~4.3 million catalogs in fiscal ~~2007.~~2008 and intend to increase the level of catalog circulation over the next few years.

We successfully launched the Free People web site,www.freepeople.com,in September 2004. The web site offers consumers the entire Free People product assortment found at Free People retail stores as well as all of the Free People wholesale offerings. As with the Free People catalog, we believe the web site increases the reputation and recognition of the brand with its target customers, as well as helps to support the strength of Free People store operations.

Direct-to-consumer sales for all brands ~~for the nine months ended October 31, 2006 and 2005~~combined were approximately ~~12% and 11%, respectively,~~13.8% of consolidated net ~~sales.~~sales for the three months ended April 30, 2007 compared to 12.4% for the comparable period in fiscal 2007.

The Free People wholesale division designs, develops and markets young women’s contemporary casual apparel. ~~Our~~Free People’s range of tops, bottoms, sweaters and dresses are sold worldwide through approximately 1,500 better department and specialty stores, including Bloomingdale’s, ~~Nordstrom, Macy*s, Parisian,~~ Lord & Taylor, Parisian, Nordstrom, Urban Outfitters and our own Free People stores. Free People wholesale sales accounted for approximately 7%6.3% of consolidated net sales for the ~~nine~~three months ended ~~October 31, 2006~~April 30, 2007, compared to 5%6.5% for the comparable period in fiscal ~~2006.~~

Our condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles ~~generally accepted~~ in the United ~~States.~~States of America. These generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period.

Our senior management has reviewed the critical accounting policies and estimates with our audit committee. Our significant accounting policies are described in Note 2-~~Summary of Significant Accounting Policies~~,2 to our consolidated financial statements, “Summary of Significant Accounting Policies,” for the fiscal year ended January 31, ~~2006,~~2007 which are included in our Annual Report on Form 10-K filed with the SEC on ~~April 12, 2006.~~March 30, 2007. 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 and results of operations 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 is recognized at the point-of-sale for retail store sales or when merchandise is shipped to customers for wholesale and direct-to-consumer sales, net of estimated customer returns. ~~Customers pay~~Payment for merchandise at our stores and through our direct-to-consumer business ~~using~~is by cash, check, credit card, debit card or gift card. Therefore, our need to collect outstanding accounts receivable for our retail and direct-to-consumer business is negligible and mainly results from returned checks or unauthorized credit card charges. We maintain an allowance for doubtful accounts for our wholesale business accounts receivable, which management reviews on a regular basis and believes is sufficient to cover potential credit losses and billing adjustments. Deposits for custom orders are recorded as a liability and recognized as a sale upon delivery of the merchandise to the customer. These custom orders, typically for upholstered furniture, ~~are~~have not been material. Gift card sales to customers are initially recorded as liabilities and recognized as sales upon redemption.

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 and may otherwise be considered in-transit. The reserve for estimated in-transit product returns is based on our most recent historical return trends. If the actual return rate or experience is materially different than our estimate, the reserve will be adjusted in the future. As of ~~October 31, 2006,~~April 30, 2007, January 31, ~~2006~~2007 and ~~October 31, 2005,~~April 30, 2006, reserves for estimated sales returns in-transit totaled ~~$7.4~~$9.8 million, ~~$6.4~~$8.9 million and ~~$5.8~~$6.8 million, representing ~~3.2%~~4.4%, ~~3.1%~~4.0% and ~~3.0%~~3.2% of total liabilities, respectively.

We value our inventories, which consist primarily of general consumer merchandise held for sale, at the lower of cost or market. Cost is determined on the first-in, first-out method and includes the cost of merchandise and freight. A periodic review of inventory quantities on hand is performed in order to determine if inventory is

properly stated at the lower of cost or market. Factors related to current inventories, such as future 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 values. Criteria we use to quantify aging trends includes factors such as average selling cycle and seasonality of merchandise, the historical rate at which merchandise has sold below cost during the average selling cycle, and merchandise currently priced below original cost. A provision is recorded to reduce the cost of inventories to its estimated net realizable value, if required. Inventories as of ~~October 31, 2006,~~April 30, 2007, January 31, 2007 and April 30, 2006 ~~and October 31, 2005~~ totaled ~~$179.6~~$168.1 million, ~~$140.4~~$154.4 million and ~~$170.2,~~$140.7 million, representing ~~20.8%~~17.9%, ~~18.2%~~17.2% and ~~24.0%~~17.6% of total assets, respectively. Any significant unanticipated changes in the factors noted above could have a significant impact on the value of our inventories and our reported operating results.

Adjustments to reserves related to the net realizable value of our inventories are primarily based on recent historical trends. Our estimates generally have been accurate and our reserve methods have been applied on a consistent basis. We expect the amount of our reserves to increase over time as we expand our store base and accordingly, related inventories.

Our long-lived assets consist principally of store leasehold improvements, as well as furniture and fixtures, and are included in the “Property and equipment, net” line item in our consolidated balance sheets included in this report. 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. Net property and equipment as of ~~October 31, 2006,~~April 30, 2007, January 31, 2007 and April 30, 2006 ~~and October 31, 2005~~ totaled ~~$426.4~~$455.6 million, ~~$299.3~~$445.7 million and ~~$255.1~~$335.3 million, respectively, representing ~~49.3%~~48.6%, ~~38.9%~~49.6% and ~~35.9%~~42.0% of total assets, respectively.

In assessing potential impairment of these assets, we periodically evaluate historical and forecasted operating results and cash flows on a store-by-store basis. Newly opened stores 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 store to achieve positive financial results, which, in general, is assumed to be within three years from the date a store location has opened. If economic conditions are substantially different from our expectations, the carrying value of certain of our long-lived assets may become impaired. For the three ~~and nine~~ months ended ~~October 31,~~April 30, 2007 and 2006, ~~and 2005,~~ as well as for fiscal ~~2006,~~2007, write downs of long-lived assets were not material.

We have only closed three store locations in our history, which in all cases were eventually re-located and took place at the expiration of the lease ~~and~~or renewal terms. 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 isare removed from the accounts with any resulting gain or loss included in net income. Maintenance and repairs are charged to ~~operating~~selling, general and administrative expense as incurred. Major renovations or improvements that extend the service lives of our assets are capitalized over the extension period or life of the improvement, whichever is less.

As of the date of this report, all of our stores opened in excess of three years are expected to generate positive annual cash flow before allocation of corporate overhead.

As part of the process of preparing our condensed 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 condensed consolidated balance sheet. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income. Actual results could differ from this assessment if adequate taxable income is not generated in future periods. Deferred tax assets as of ~~October 31, 2006,~~April 30, 2007, January 31, 2007 and April 30, 2006 ~~and October 31, 2005~~ totaled ~~$24.1~~$33.7 million, ~~$23.9~~$28.5 million and ~~$20.6~~$27.8 million, respectively, representing ~~2.8%~~3.6%, ~~3.1%~~3.2% and ~~2.9%~~3.5% of total assets, respectively. To the extent we believe that recovery of an asset is at risk, we establish valuation allowances. To the extent we establish valuation allowances or increase the allowances in a period, we include an expense within the tax provision in the Condensed Consolidated Statement of Income.

We had valuation allowances of ~~$2.3~~$0.1 million as of ~~October 31, 2006~~April 30, 2007 due to uncertainties related to our ability to utilize the net operating loss carryforwards of certain foreign subsidiaries. In the future, if enough evidence of our ability to generate sufficient future taxable income in these foreign jurisdictions becomes apparent, we would be required to reduce our valuation allowances, resulting in a reduction in income tax expense in the ~~consolidated statement~~Condensed Consolidated Statement of ~~income.~~Income. On a quarterly basis, management evaluates the likelihood that we will realize the deferred tax assets and adjusts the valuation allowances, if appropriate.

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). We adopted FIN 48, on February 1, 2007. FIN 48 is an interpretation of FASB Statement No. 109, “Accounting for Income Taxes,” and it seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position that an entity takes or expects to take in a tax return. Additionally, FIN 48 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Under FIN 48, an entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. We recorded the cumulative effect of applying FIN 48, of $0.7 million as an adjustment to the opening balance of retained earnings on February 1, 2007. See Note 5, “Income Taxes” for additional information.

From time to time, we are named as a defendant in legal actions arising from our normal business activities. We account for contingencies such as these in accordance with Statement of Financial Accounting Standards ~~(“SFAS”)~~ No. 5, “Accounting for Contingencies.” SFAS No. 5 requires us to record an estimated loss contingency when information available prior to issuance of our financial statements indicates that it is probable that an asset has been impaired or 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 or legal proceedings requires management to use its best judgment when estimating an accrual related to such contingencies. As additional information becomes known, our accrual for a loss contingency could fluctuate, thereby creating variability in our results of operations from period to period. Likewise, an actual loss arising from a loss contingency ~~which~~that significantly exceeds the amount accrued in our financial statements could have a material adverse impact on our operating results for the period in which such actual loss becomes known.

The following tables set 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:


	Three Months Ended April 30,
	2007		2006
Net sales	100.0	%	100.0	%
Cost of sales, including certain buying, distribution and occupancy costs	64.2		64.2

Gross profit	35.8		35.8
Selling, general and administrative expenses	24.4		24.1

Income from operations	11.4		11.7
Other income, net	0.6		0.5

Income before income taxes	12.0		12.2
Income tax expense	2.7		4.7

Net income	9.3	%	7.5	%

Three Months Ended ~~October 31, 2006~~April 30, 2007 Compared To Three Months Ended ~~October 31, 2005~~April 30, 2006

Net sales for the ~~third~~first quarter of fiscal ~~2007~~2008 increased by ~~6.8%~~16.5% to ~~$308.4~~$314.5 million from ~~$288.8~~$270.0 million in the ~~third~~first quarter of fiscal ~~2006.~~2007. The ~~$19.6~~$44.5 million increase was primarily attributable to a ~~$16.9~~$42.4 million, ~~increase,~~ or ~~6.2%~~16.8%, increase in retail segment net sales. Retail segment net sales for the ~~third~~first quarter of fiscal ~~2007~~2008 accounted for ~~93.5%~~93.7% of total net sales compared to ~~94.0%~~93.5% of net sales for the ~~third~~first quarter of fiscal ~~2006.~~2007. Free People wholesale sales, excluding sales to our retail segment, increased ~~$2.6~~$2.1 million, or ~~15.1%~~12.3%, to ~~$19.9 million from $17.3~~$19.8 million during the ~~third~~first quarter of fiscal ~~2006. Free People wholesale sales accounted for 6.5% of total net sales for the third quarter of fiscal 2007 compared to 6.0% for the third quarter of fiscal 2006.~~2008. The growth in our retail segment sales during the ~~third~~first quarter of fiscal ~~2007~~2008 was driven by a ~~$35.1~~$35.7 million increase in new and non-comparable store net sales and an increase in direct-to-consumer net sales of ~~$5.1~~$10.0 million, partially offset by a comparable store sales decrease of $3.3 million. Total Company comparable store sales decrease of 1.6% was comprised of a 5.2% decline at Urban Outfitters that more than offset ~~a 10.2% decrease in comparable store sales, or $23.3 million. By brand, comparable store sales decreased by 10.5% at Urban Outfitters, 10.0%~~improvements of 2.3% and 8.4% at Anthropologie and ~~increased 8.9% at~~ Free ~~People.~~

The increase in net sales attributable to non-comparable and new stores was primarily the result of operating 4841 new or existing stores that were not in operation for the full comparable quarter last fiscal year. Comparable store net sales decreases for the ~~third~~first quarter of fiscal ~~2007~~2008 were primarily driven by a decrease in ~~transactions along with slight decreases in average~~the number of transactions. Average unit retail prices increased slightly, and units per ~~transactions.~~transaction were flat. Thus far during the ~~fourth~~second quarter of fiscal ~~2007,~~2008, total Company comparable store sales are ~~below the same period in fiscal 2006.~~positive. Direct-to-consumer net sales increased over the prior year primarily due to an increase in ~~average order value, increased~~ traffic to ~~the~~our web ~~sites and an increase in our catalog circulation of approximately 1.5 million additional catalogs over the prior year.~~sites. The increase in ~~Free People~~ wholesale segment net sales was primarily driven by ana 24.4% lift in sales to specialty stores and a slight increase in the average ~~order size coupled with an increase in average~~ unit selling price.

Gross profit for the ~~third~~first quarter of fiscal 2008 compared to the first quarter of fiscal 2007 ~~decreased to 38.2%~~remained flat as a percentage of net sales ~~or $117.9~~at 35.8% and increased to $112.6 million from ~~41.6%, or $120.3~~$96.8 million. Total inventories at April 30, 2007 increased by 19.5% to $168.1 million ~~of net sales during~~from $140.7 million at the same period ~~in fiscal 2006. The decrease was primarily driven by de-leveraging~~end date of store related occupancy expenses due to the decrease in comparable store sales, additional markdowns to clear seasonal inventories and increases in inventory related valuation reserves. Total inventories at October 31, 2006 increased by 5.5% to $179.6 million from $170.2 million in the prior ~~period.~~year. The increase primarily related to the acquisition of inventory to stock new retail stores. On a comparable store basis, inventories ~~decreased~~increased by ~~13.2% versus the same quarter end last year.~~

Selling, general and administrative expenses during the ~~third~~first quarter of fiscal ~~2007~~2008 increased to ~~23.5%~~24.4% of net sales compared to ~~20.6%~~24.1% of net sales for the ~~third~~first quarter of fiscal ~~2006.~~2007. The increase ofin selling, general and

administrative expenses was primarily attributable to the de-leveraging of store-related expenses as the result of the decrease in comparable store ~~sales and the anniversary of a one-time $1.6 million gain on the sale of property which occurred during the third quarter of fiscal 2006.~~sales. Selling, general and administrative expenses in the ~~third~~first quarter of fiscal ~~2007~~2008 increased to ~~$72.5~~$76.6 million from ~~$59.6~~$65.2 million in the comparable quarter in fiscal ~~2006.~~2007. The increase primarily related to the operating expenses of new and non-comparable stores.

Income from operations ~~decreased to 14.7%~~was 11.4% of net sales or ~~$45.5~~$36.0 million for the ~~third~~first quarter of fiscal ~~2007~~2008 compared to ~~21.0%~~11.7% of net sales, or ~~$60.7~~$31.6 million, for the comparable quarter in fiscal ~~2006.~~

Our effective tax rate decreased to 22.3% of income before income taxes for the ~~third quarter was 26.3% resulting in an annualized effective tax rate of 33.1%, which decreased from an effective rate of 39.8% of income for the third~~first quarter of fiscal ~~2006.~~2008 from 38.4% of income before income taxes for the first quarter of fiscal 2007. This decrease was primarily attributable to receipt of certification for work performed on the development of our new offices that qualifies for certain one-time federal tax ~~incentives.~~

~~Nine Months Ended October 31, 2006 Compared To Nine Months Ended October 31, 2005~~

~~Net sales~~incentives and the benefit of certain reorganizational efforts. We anticipate an annual effective tax rate of approximately 36.2% for the nine months ended October 31, 2006 increased by 11.7% to $863.9 million from $773.5 million in the comparable period of fiscal 2006. The $90.4 million increase was primarily attributable to a $73.5 million, or 10.0% increase, in retail segment net sales. Retail segment net sales for the nine months ended October 31, 2006 accounted for 93.5% of total net sales compared to 94.9% of net sales for the comparable period of fiscal 2006. Free People wholesale sales, excluding sales to our retail segment, increased $16.9 million, or 42.8%, to $56.5 million compared to $39.5 million during the nine months ended October 31, 2005. Free People wholesale sales accounted for 6.5% of total net sales compared to 5.1% for the comparable period of fiscal 2006. The growth in our retail segment sales was driven by a $100.6 million increase in non-comparable and new store net sales and an increase in direct-to-consumer net sales of $13.2 million, offset by a decrease in comparable store sales of $40.3 million. By brand, comparable store sales decreased by 8.5% at Urban Outfitters, 4.5% at Anthropologie and increased 10.8% at Free People.

The increase in net sales attributable to non-comparable and new stores was primarily the result of operating 58 new or existing stores that were not in operation for the full comparable period last fiscal year. Comparable store net sales decreases for the nine months ended October 31, 2006 were primarily driven by decreases in transactions. Direct-to-consumer net sales increased over the prior year primarily due to an increase in average order value, increased traffic to the web sites and an increase in our catalog circulation of approximately 5.6 million additional catalogs over the prior period. The increase in Free People wholesale sales was driven by an increase in the average order size coupled with a slight increase in average unit selling price.

Gross profit for the nine months ended October 31, 2006, decreased to 37.0% of net sales, or $319.5 million, from 41.7% of net sales, or $322.7 million during the same period in fiscal 2006. The decrease was primarily driven by an increase in markdowns, compared to the prior period, in order to clear seasonal inventories and the de-leveraging of store related occupancy expenses due to the decrease in comparable store sales.

Selling, general and administrative expenses during the nine months ended October 31, 2006, increased to 23.6% of net sales compared to 21.7% of net sales for the comparable period of fiscal 2006. The increase of selling, general and administrative expenses was primarily attributable to the de-leveraging of store-related expenses as the resultremainder of the ~~decrease in comparable store sales. Selling, general and administrative expenses during the period increased to $203.7 million from $167.8 million in the comparable period of~~ fiscal ~~2006. The increase primarily related to the operating expenses of new and non-comparable stores.~~

Income from operations decreased to 13.4% of net sales or $115.7 million for the nine months ended October 31, 2006, compared to 20.0% of net sales or $154.9 million for the comparable period of fiscal 2006.

Our effective income tax rate decreased to 33.1% of income for the nine months ended October 31, 2006 from 39.8% of income for the comparable period of fiscal 2006. This decrease was primarily attributable to receipt of certification for work performed on the development of our new offices that qualifies for certain one-time federal tax incentives.

Cash, cash equivalents and marketable securities were ~~$185.2~~$227.5 million as of ~~October 31, 2006,~~April 30, 2007, as compared to ~~$256.5~~$221.6 million as of January 31, ~~2006~~2007 and ~~$222.3~~$238.5 million as of ~~October 31, 2005.~~April 30, 2006. Cash provided by operating activities ~~increased by $42.6~~was $29.5 million for the ~~nine~~three months ended October 31, 2006 versus the comparable period last fiscal year as reductions in comparable store inventory levels more than offset a $14.7 million decrease in net income for the period. The improvement in net cash provided by operating activities is also due to a $2.8 million improvement in disposition of property, which reflects a write-off of $1.2 million during the quarter ended October 31, 2006, compared to $1.6 million gain on the sale of our former Anthropologie home office located in Center City Philadelphia during the comparable quarter last year. The write-off is primarily driven by leasehold

improvements located in our Center City offices which we abandoned during the quarter ended October 31, 2006, as part of our relocation to our Navy Yard home office. However, the write-offs were practically offset by reimbursements and allowances received by one of our primary Center City landlords.April 30, 2007. Cash used in investing activities ~~increased by $28.2~~for the three months ended April 30, 2007 was $31.8 million, ~~as cash paid~~of which the primary use was for ~~property and equipment increased, compared to the same period in fiscal 2006, as a result of completing~~ construction of ~~our~~ new home office campus. We liquidated a portion of our marketable securities to fund the increase in capital expenditures and our share repurchase program. During the nine months ended October 31, 2006, we used $11.7 million of cash in our financing activities compared to providing $11.9 million of cash by financing activities during the same period in fiscal 2006. The change was mainly driven by our stock repurchase program and a decrease in option exercises.stores. Our net working capital was ~~$208.9~~$254.9 million at ~~October 31, 2006~~April 30, 2007 compared to ~~$251.7~~$231.1 million at January 31, ~~2006~~2007 and ~~$244.5~~$242.4 million at ~~October 31, 2005. The decrease~~April 30, 2006. Increases in ~~net~~ working capital is primarily ~~a product~~relate to the volume of ~~the activity mentioned above.~~

cash, cash equivalents, marketable securities and inventories relative to inventory-related payables and store-related accruals.

During the last three years, we have mainly satisfied our cash requirements through our cash flow from operations. Our primary uses of cash have been to open new stores and purchase ~~inventories.~~inventories, as well as the construction of our home offices at the Navy Yard in Philadelphia, PA, which was completed in fiscal 2007. We have also continued to invest in our direct-to-consumer efforts and in our European subsidiaries. ~~Store related capital expenditures, net of tenant improvement allowances included in deferred rent,~~Cash paid for property and equipment for the ~~nine~~three months ended ~~October 31,~~April 30, 2007 and 2006 ~~and 2005~~ were ~~$80.6~~$29.4 million and ~~$49.3~~$55.7 million, respectively, and were primarily used to expand and support our store ~~base.~~base, as well as our home office in the three month period ended April 30, 2006. During fiscal ~~2007,~~2008, we expect to construct and open ~~32 to 33~~approximately 38 new stores, renovate certain existing stores, increase our catalog circulation by ~~4.5~~approximately 1.7 million, to approximately ~~36.5~~38.2 million catalogs, and purchase inventory for our stores and direct-to-consumer business at levels appropriate to maintain our planned sales growth. We expect the level of capital expenditures during fiscal ~~2007~~2008 to approximate ~~$150~~$120 million, ~~net of related allowances,~~ which will be used primarily to expand our store ~~base and finalize construction of our new home office campus.~~base. We believe that our new store, catalog and inventory investments generally have the ability to generate positive operating cash flow within a year. Improvements to our home office and distribution facilities are necessary to adequately support our growth. We disbursed approximately $71.5 million for Navy Yard home office improvements during the first nine months of fiscal 2007. Net expenditures on the project are expected to be a total of $75 million to improve the property, net of anticipated incentive credits, most of which will be capitalized and depreciated based on the useful life of the improvements and fixtures. The initial project was complete and in service at the end of the third quarter of fiscal 2007.

On February 28, 2006, our Board of Directors approved a stock repurchase program. The program authorizes us to repurchase up to 8,000,000 common shares from time-to-time, based upon prevailing market conditions. During the three ~~and nine~~ months ended ~~October 31,~~April 30, 2007 and April 30, 2006, no shares were repurchased.

During fiscal 2008 we ~~repurchased~~will be making investments to evaluate our fourth retail concept. We are still in the stages of developing the format and ~~subsequently retired 1,050,000~~market objectives of the concept and ~~1,220,000 shares at~~have yet to determine or quantify the extent of such an investment. Expenditures may include the costs of strategic research and development, hiring personnel to develop and execute a ~~cost of $17.9~~store format, obtaining leases and ~~$20.8 million, respectively.~~

related store inventory, property and equipment, construction costs, acquiring assets or existing businesses, intellectual property and trade secrets or intangible knowledge and any other costs related to developing and executing this new concept.

Accumulated cash and future cash from operations, as well as available credit under our line of credit facility, are expected to fund our commitments and all such expansion-related cash needs at least through fiscal ~~2009.~~2010.

On September 30, 2004, we renewed and amended our line of credit facility (the “Line”). The Line is a three-year revolving credit facility with an accordion feature allowing an increase in available credit to $50.0 million at our discretion, subject to a seven day request period. As of ~~October 31, 2006,~~April 30, 2007, the credit limit under the Line iswas $42.5 million. The Line contains a sub-limit for borrowings by our European subsidiaries that are guaranteed by us. Cash advances bear interest at LIBOR plus 0.50% to 1.60% based on our achievement of prescribed adjusted debt ratios. The Line subjects us to various restrictive covenants, including maintenance of certain financial ratios and covenants such as fixed charge coverage and adjusted ~~debt.~~debt ratios. The covenants also include limitations on our capital expenditures, ability to repurchase shares and the payment of cash dividends. On November 30, 2006, we amended our line to increase our capital expenditure limit and add additional subsidiaries that are permitted to borrow. As of ~~October 31, 2006,~~April 30, 2007, we were in compliance with all covenants under the Line. As of and during the ~~nine~~three months ended ~~October 31, 2006,~~April 30, 2007, there were no borrowings under the Line. Outstanding letters of credit and stand-by letters of credit under the Line totaled approximately ~~$27.6~~$28.0 million as of ~~October 31, 2006.~~April 30, 2007. The available ~~borrowing,~~credit, including the accordion feature, under the Line was ~~$22.4~~$22.0 million as of ~~October 31, 2006.~~April 30, 2007. We plan to renew the Line during fiscal 2008 and expect the renewal will include the expansion of the available credit limit under the Line to an amount that will satisfy our letter of credit needs through fiscal 2010.

As of and for the three ~~and nine~~ months ended ~~October 31, 2006,~~April 30, 2007, except for operating leases entered into in the normal course of business, we were not party to any ~~material~~ off-balance sheet arrangements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities: Including an Amendment of FASB Statement No. 115.” SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value and requires entities to display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently evaluating what impact, if any, the adoption of SFAS No. 159 could have on our condensed consolidated financial statements.

In September 2006, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in ~~U.S. GAAP,~~generally accepted accounting principles in the United States of America, and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating ~~the~~what impact, if any, the adoption of SFAS No. 157 could have on our condensed consolidated financial statements.

In September 2006, the SEC staff published Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 addresses quantifying the financial statement effects of misstatements, specifically, how the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year financial statements. This statement is effective for fiscal years ending after November 15, 2006. We are currently evaluating the impact SAB 108 could have on our consolidated financial statements.

~~In March~~June 2006, the Emerging Issues Task Force (“EITF”) ~~reached a~~ratified its consensus on Issue No. 06-03, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement”. EITF ~~06-3~~06-03 addresses what type of government assessments should be included within the scope of EITF ~~06-3,~~06-03, and how such government assessments should be presented in the income statement. The EITF reached a ~~tentative~~ conclusion that the scope of EITF ~~06-3~~06-03 includes any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added and some excise taxes. In addition, the EITF also reached a ~~tentative~~ conclusion that the presentation of taxes, within the scope of EITF ~~06-3,~~06-03, on either a gross or net basis, is an accounting policy decision that should be disclosed pursuant to Accounting Principles Board Opinion No. 22, “Disclosure of Accounting ~~Policies”.~~Policies.” In addition, for any such taxes that are reported on a gross basis, a company should disclose the amounts of those taxes in interim and annual financial statements for each period for which an

income statement is presented if those amounts are significant. ~~The~~ EITF observed that because the tentative conclusion requires only the presentation of additional disclosures, an entity would not be required to re-evaluate its existing policies related to taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction between a seller and a customer. EITF 06-306-03 is effective for reporting periods beginning after December 15, 2006. We ~~will adopt~~have adopted the disclosure requirements of EITF ~~06-3~~06-03 effective February 1, 2007, however, since we present our revenue on a net basis, no further disclosure under EITF ~~06-3 will be~~06-03 is required.

In July 2006, the FASB issued ~~FASB Interpretation No.~~FIN 48. We adopted FIN 48 ~~“Accounting For Uncertainty in Income Taxes” (“FIN 48”).~~on February 1, 2007. FIN 48 is an interpretation of ~~SFAS~~FASB Statement No. 109, “Accounting for Income ~~Taxes”,~~Taxes,” and it seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. ~~In addition,~~ FIN 48 ~~will require expanded disclosure with respect~~prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position that an entity takes or expects to ~~uncertain~~take in a tax ~~positions.~~return. Additionally, FIN 48 ~~is effective for fiscal years beginning after December 15, 2006. We are currently evaluating what impact, if any, the adoption of~~provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Under FIN 48, ~~will have~~an entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. We recorded the cumulative effect of applying FIN 48, of $0.7 million as an adjustment to the opening balance of retained earnings on ~~our financial statements and related disclosures.~~February 1, 2007. See Note 5, “Income Taxes,” for additional information.

~~We are~~The Company is exposed to the following types of market risks—fluctuations in the purchase price of merchandise, as well as other goods and services; the value of foreign currencies in relation to the U.S. dollar; and changes in interest rates. Due to ~~our~~the Company’s inventory turnover rate and its historical ability to pass through the impact of any generalized changes in ~~our~~its cost of goods to ~~our~~its customers through pricing adjustments, commodity and other product risks are not expected to be material. ~~We purchased the majority~~The Company purchases substantially all of ~~our~~its merchandise in U.S. ~~dollars.~~

~~Our~~The Company’s exposure to market risk for changes in interest rates relates to ~~our~~its cash, cash equivalents and marketable securities. As of ~~October 31,~~April 30, 2007 and 2006, ~~our~~the Company’s cash, cash equivalents and marketable securities consisted primarily of funds invested in ~~tax exempt~~tax-exempt municipal bonds rated AA or better, auction rate securities rated AA or better and money market accounts, which bear interest at a variable rate. Due to the average maturity and conservative nature of ~~our~~the Company’s investment portfolio, we believe a ~~sudden~~100 basis point change in interest rates would not have a material effect on the ~~value of our investment portfolio.~~condensed consolidated financial statements. As the interest rates on a material portion of our cash, cash equivalents and marketable securities are variable, a change in interest rates earned on the cash, cash equivalents and marketable securities would impact interest income along with cash flows, but would not impact the fair market value of the related underlying instruments.

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized and reported on a timely basis and that such information is accumulated and communicated to management, including the ~~Chief~~Principal Executive Officer and the ~~Chief~~Principal Financial Officer, as appropriate, to allow timely decisions regarding the required disclosure. As of the end of the period covered by this Form 10-Q, an evaluation was performed under the supervision and with the participation of our management, including the ~~Chief~~Principal Executive Officer and the ~~Chief~~Principal Financial Officer, of the effectiveness of the design and operation of these disclosure controls and procedures. Based on that evaluation, the ~~Chief~~Principal Executive Officer and the ~~Chief~~Principal Financial Officer concluded that our disclosure controls and procedures were effective.

There have been no changes in our internal controls over financial reporting during the quarter ended ~~October 31, 2006~~April 30, 2007 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

The Company is 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 the Company’s financial position or results of operations.

~~The~~There have been no material changes in the Company’s risk factors ~~have remained unchanged~~ since January 31, ~~2006.~~2007. Please refer to the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, ~~2006,~~2007, filed with the United States Securities and Exchange Commission on ~~April 12, 2006,~~March 30, 2007, for a list of its risk factors.

~~A summary of the repurchase activity under the Company’s current stock repurchase program for the quarter ended October 31, 2006 is as follows:~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


URBAN OUTFITTERS, INC.

By:		/s/ RICHARD A. HAYNE
		Richard A. Hayne
		~~Richard A. Hayne~~Chairman of the Board and President ~~President~~(Principal Executive Officer)


URBAN OUTFITTERS, INC.

By:		/s/ JOHN E. KYEES
		John E. Kyees
		~~John E. Kyees~~ Chief Financial Officer (Principal Financial Officer)


5000 South Broad Street, Philadelphia, PA		~~19112~~19112-1495
(Address of Principal Executive Offices)		(Zip Code)


PART I FINANCIAL INFORMATION

Item 1.	Financial Statements ~~(unaudited)~~

	Condensed Consolidated Balance Sheets as of ~~October 31, 2006,~~April 30, 2007 (unaudited), January 31, ~~2006~~2007 and ~~October 31, 2005~~April 30, 2006 (unaudited)	1

	Condensed Consolidated Statements of Income for the three ~~and nine~~ months ended ~~October 31,~~April 30, 2007 and 2006 ~~and 2005~~ (unaudited)	2

	Condensed Consolidated Statements of Shareholders’ Equity for the ~~nine~~three months ended ~~October 31,~~April 30, 2007 and 2006 ~~and 2005~~ (unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~October 31,~~April 30, 2007 and 2006 ~~and 2005~~ (unaudited)	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1511

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2420

Item 4.	Controls and Procedures	2520

			PART II
	OTHER INFORMATION

Item 1.	Legal Proceedings	2621

Item 1A.	Risk Factors	26

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	2621

Item 6.	Exhibits	2722

	Signatures	2823


	October 31, 2006		January 31, 2006		October 31, 2005
Assets
Current assets:
Cash and cash equivalents	$	30,544	$	49,912	$	20,067
Marketable securities		96,048		141,883		136,273
Accounts receivable, net of allowance for doubtful accounts of $1,238, $445 and $855, respectively		19,553		14,324		18,509
Inventories		179,592		140,377		170,232
Prepaid expenses, deferred taxes and other current assets		33,197		38,687		27,170

Total current assets		358,934		385,183		372,251
Property and equipment, net		426,430		299,291		255,091
Marketable securities		58,636		64,748		65,946
Deferred income taxes and other assets		21,204		19,983		17,165

	$	865,204	$	769,205	$	710,453


Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	61,988	$	41,291	$	53,299
Accrued expenses, accrued compensation and other current liabilities		88,015		92,217		74,409

Total current liabilities		150,003		133,508		127,708
Deferred rent		80,626		74,817		66,392

Total liabilities		230,629		208,325		194,100


Commitments and contingencies (see Note 8)

Shareholders’ equity:
Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued		—		—		—
Common shares; $.0001 par value, 200,000,000 shares authorized, 164,663,037, 164,831,477 and 164,434,327 shares issued and outstanding, respectively		17		16		16
Additional paid-in capital		124,970		134,146		125,126
Retained earnings		506,665		426,190		390,597
Accumulated other comprehensive income		2,923		528		614

Total shareholders’ equity		634,575		560,880		516,353

	$	865,204	$	769,205	$	710,453


	April 30, 2007		January 31, 2007		April 30, 2006
	(unaudited)		(audited)		(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	31,171	$	27,267	$	28,106
Marketable securities		133,508		132,011		146,725
Accounts receivable, net of allowance for doubtful accounts of $820, $849 and $753, respectively		22,037		20,871		23,686
Inventories		168,131		154,387		140,726
Prepaid expenses, deferred taxes and other current assets		33,927		31,869		38,299

Total current assets		388,774		366,405		377,542
Property and equipment, net		455,601		445,698		335,307
Marketable securities		62,865		62,322		63,711
Deferred income taxes and other assets		30,046		24,826		22,375

Total Assets	$	937,286	$	899,251	$	798,935


Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	61,794	$	57,934	$	57,468
Accrued expenses, accrued compensation and other current liabilities		72,076		77,384		77,641

Total current liabilities		133,870		135,318		135,109
Deferred rent and other liabilities		91,620		88,650		78,017

Total liabilities		225,490		223,968		213,126


Commitments and contingencies (see Note 8)

Shareholders’ equity:
Preferred Shares; $.0001 par value, 10,000,000 shares authorized, none issued		—		—		—
Common shares; $.0001 par value, 200,000,000 shares authorized, 165,555,935, 164,987,463 and 165,137,317 shares issued and outstanding, respectively		17		17		17
Additional paid-in capital		135,334		128,586		138,054
Retained earnings		571,111		542,396		446,489
Accumulated other comprehensive income		5,334		4,284		1,249

Total shareholders’ equity		711,796		675,283		585,809

Total Liabilities and Shareholders’ Equity	$	937,286	$	899,251	$	798,935


	Three Months Ended October 31,				Nine Months Ended October 31,
	2006		2005		2006		2005
Net sales	$	308,355	$	288,801	$	863,921	$	773,518
Cost of sales, including certain buying, distribution and occupancy costs		190,407		168,550		544,453		450,814

Gross profit		117,948		120,251		319,468		322,704
Selling, general and administrative expenses		72,484		59,592		203,744		167,802

Income from operations		45,464		60,659		115,724		154,902
Other income, net		1,365		1,021		4,527		3,111

Income before income taxes		46,829		61,680		120,251		158,013
Income tax expense		12,315		24,518		39,776		62,810

Net income	$	34,514	$	37,162	$	80,475	$	95,203

Net income per common share:
Basic	$	0.21	$	0.23	$	0.49	$	0.58

Diluted	$	0.21	$	0.22	$	0.48	$	0.56

Weighted average common shares and common share equivalents outstanding:
Basic		164,707,980		163,953,135		164,760,387		163,698,505

Diluted		168,306,967		170,328,859		168,675,078		169,934,178


~~Large accelerated filer~~ x		~~Accelerated filer~~ ¨		Large accelerated filer x Accelerated filer ¨Non-accelerated filer ¨


	Three Months Ended April 30,
	2007		2006
Net sales	$	314,544	$	270,007
Cost of sales, including certain buying, distribution and occupancy costs		201,929		173,239

Gross profit		112,615		96,768
Selling, general and administrative expenses		76,599		65,217

Income from operations		36,016		31,551
Other income, net		1,802		1,412

Income before income taxes		37,818		32,963
Income tax expense		8,451		12,664

Net income	$	29,367	$	20,299

Net income per common share:
Basic	$	0.18	$	0.12

Diluted	$	0.17	$	0.12

Weighted average common shares outstanding:
Basic		164,826,058		164,576,157

Diluted		168,799,775		168,020,879


	Comprehensive Income						Common Shares				Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income			Total
	Quarter			Year to- Date			Number of Shares		Par Value		Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income			Total
Balances at February 1, 2006							164,831,477		$	16	$	134,146		$	426,190	$	528		$	560,880
Net Income	$	34,514		$	80,475		—			—		—			80,475		—			80,475
Foreign currency translation		774			2,170		—			—		—			—		2,170			2,170
Unrealized gain on marketable securities, net of tax		291			225		—			—		—			—		225			225

Comprehensive income	$	35,579		$	82,870

Stock-based compensation										—		2,515			—		—			2,515
Stock retirement							(1,220,000	)		—		(20,801	)		—		—			(20,801	)
Exercise of stock options							1,051,560			1		4,430			—		—			4,431
Tax effect of stock option exercises							—			—		4,680			—		—			4,680

Balances at October 31, 2006							164,663,037		$	17	$	124,970		$	506,665	$	2,923		$	634,575

Balances at February 1, 2005							162,894,888		$	16	$	104,364		$	295,394	$	2,470		$	402,244
Net income	$	37,162		$	95,203		—			—		—			95,203		—			95,203
Foreign currency translation		326			(1,750	)	—			—		—			—		(1,750	)		(1,750	)
Unrealized loss on marketable securities, net of tax		(122	)		(106	)	—			—		—			—		(106	)		(106	)

Comprehensive income	$	37,366		$	93,347

Stock-based compensation										—		862			—		—			862
Exercise of stock options							1,539,439					11,937								11,937
Tax effect of stock option exercises							—			—		7,963			—		—			7,963

Balances at October 31, 2005							164,434,327		$	16	$	125,126		$	390,597	$	614		$	516,353


	Three Months Ended October 31, 2005			Nine Months Ended October 31, 2005
Net income—as reported	$	37,162		$	95,203
Add: Stock based employee compensation expense included in the determination of net income as reported, net of related tax effects		175			520
Deduct: Total stock-based employee compensation expense determined under fair value-based method for all grants, net of related tax effects		(2,871	)		(6,547	)

Net income—pro forma	$	34,466		$	89,176

Net income per common share—basic—as reported	$	0.23		$	0.58

Net income per common share—basic—pro forma	$	0.21		$	0.54

Net income per common share—diluted—as reported	$	0.22		$	0.56

Net income per common share—diluted—pro forma	$	0.20		$	0.53


	Three Months Ended					Nine Months Ended
*(In thousands, except per share data)*	October 31, 2006			October 31, 2005		October 31, 2006		October 31, 2005
Weighted-average fair value of options granted per share	$	11.20		$	17.30	$	11.69	$	17.03
Intrinsic value of options exercised	$	1,615		$	2,342	$	15,208	$	25,455
Cash received from option exercises	$	1,182		$	791	$	4,431	$	11,925
Actual tax benefit realized for tax deductions from option exercises	$	(308	)	$	589	$	4,468	$	7,963


	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (1)
Balance at January 31, 2006	15,022,161		$	14.76
Options granted	90,000		$	19.71
Options exercised	(1,051,560	)	$	4.35
Options forfeited	(59,600	)	$	3.83
Options expired	(193,400	)	$	23.93

Balance at October 31, 2006	13,807,601		$	15.42	7.2	$	90,475

Exercisable, October 31, 2006	11,840,321		$	17.10	7.9	$	66,273


	Shares	Weighted Average Grant Date Fair Value
Balance at January 31, 2006, nonvested	400,000	$	14.42
Granted	—		—
Vested	—		—
Forfeited	—		—

Outstanding at October 31, 2006, nonvested	400,000	$	14.42


	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs¹
August 1 – August 31, 2006	300,000	$	16.05	300,000	7,530,000
September 1 – 30, 2006	500,000	$	16.79	500,000	7,030,000
October 1 – 31, 2006	250,000	$	18.66	250,000	6,780,000

Total	1,050,000	$	17.02	1,050,000


Exhibit Number		Description

3.1		Amended and Restated Articles of Incorporation incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q filed on September 9, 2004.

3.2		Amendment No. 1 to Amended and Restated Articles of Incorporation incorporated by reference to Exhibit 3.2 of the Company’s Quarterly Report on Form 10-Q filed on September 9, 2004.

3.3		Amended and Restated Bylaws are incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1 (File No. 33-69378) filed on September 24, 1993.

~~31.1~~	* 31.1*	Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer.

~~31.2~~	* 31.2*	Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer.

~~32.1~~	32.1***	Section 1350 Certification of the Principal Executive Officer.

~~32.2~~	32.2***	Section 1350 Certification of the Principal Financial Officer.