UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended OctoberJuly 31, 20182019
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. 000-22754
Urban Outfitters, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Pennsylvania | 23-2003332 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
|
|
5000 South Broad Street, Philadelphia, PA | 19112-1495 |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (215) 454-5500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Shares, par value $.0001 per share | URBN | NASDAQ Global Select Market |
Indicate by check mark 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☒No☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒No☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
|
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common shares, $0.0001 par value—107,642,28397,975,343 shares outstanding on December 4, 2018.September 3, 2019.
PART I
FINANCIAL INFORMATION
Item 1. |
| |
|
|
|
| 1 | |
|
|
|
| 2 | |
|
|
|
| 3 | |
|
|
|
| 4 | |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
|
|
|
Item 3. |
| |
|
|
|
Item 4. |
| |
|
|
|
PART II OTHER INFORMATION | ||
|
|
|
Item 1. |
| |
|
|
|
Item 1A. |
| |
|
|
|
Item 2. | Unregistered Sales of Equity Securities and the Use of Proceeds |
|
|
|
|
Item 6. |
| |
|
|
|
|
|
URBAN OUTFITTERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
(unaudited)
|
| October 31, |
|
| January 31, |
|
| October 31, |
|
| July 31, |
|
| January 31, |
|
| July 31, |
| ||||||
|
| 2018 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
| ||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 329,021 |
|
| $ | 282,220 |
|
| $ | 234,726 |
|
| $ | 162,018 |
|
| $ | 358,260 |
|
| $ | 405,727 |
|
Marketable securities |
|
| 237,391 |
|
|
| 165,125 |
|
|
| 93,228 |
|
|
| 171,398 |
|
|
| 279,232 |
|
|
| 198,166 |
|
Accounts receivable, net of allowance for doubtful accounts of $1,572, $1,326 and $710, respectively |
|
| 90,954 |
|
|
| 76,962 |
|
|
| 78,348 |
| ||||||||||||
Accounts receivable, net of allowance for doubtful accounts of $939, $1,499 and $1,613, respectively |
|
| 95,131 |
|
|
| 80,461 |
|
|
| 90,646 |
| ||||||||||||
Inventory |
|
| 451,659 |
|
|
| 351,395 |
|
|
| 449,957 |
|
|
| 440,087 |
|
|
| 370,507 |
|
|
| 375,657 |
|
Prepaid expenses and other current assets |
|
| 139,774 |
|
|
| 103,055 |
|
|
| 111,050 |
|
|
| 131,763 |
|
|
| 114,296 |
|
|
| 131,572 |
|
Total current assets |
|
| 1,248,799 |
|
|
| 978,757 |
|
|
| 967,309 |
|
|
| 1,000,397 |
|
|
| 1,202,756 |
|
|
| 1,201,768 |
|
Property and equipment, net |
|
| 808,883 |
|
|
| 813,768 |
|
|
| 829,106 |
|
|
| 867,434 |
|
|
| 796,029 |
|
|
| 807,084 |
|
Operating lease right-of-use assets |
|
| 1,085,543 |
|
|
| — |
|
|
| — |
| ||||||||||||
Marketable securities |
|
| 36,033 |
|
|
| 58,688 |
|
|
| 41,254 |
|
|
| 78,857 |
|
|
| 57,292 |
|
|
| 45,514 |
|
Deferred income taxes and other assets |
|
| 103,327 |
|
|
| 101,567 |
|
|
| 115,778 |
|
|
| 105,814 |
|
|
| 104,438 |
|
|
| 104,169 |
|
Total Assets |
| $ | 2,197,042 |
|
| $ | 1,952,780 |
|
| $ | 1,953,447 |
|
| $ | 3,138,045 |
|
| $ | 2,160,515 |
|
| $ | 2,158,535 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 191,684 |
|
| $ | 128,246 |
|
| $ | 208,567 |
|
| $ | 181,955 |
|
| $ | 144,414 |
|
| $ | 149,947 |
|
Current portion of operating lease liabilities |
|
| 209,072 |
|
|
| — |
|
|
| — |
| ||||||||||||
Accrued expenses, accrued compensation and other current liabilities |
|
| 263,289 |
|
|
| 231,968 |
|
|
| 214,506 |
|
|
| 235,106 |
|
|
| 242,230 |
|
|
| 279,991 |
|
Total current liabilities |
|
| 454,973 |
|
|
| 360,214 |
|
|
| 423,073 |
|
|
| 626,133 |
|
|
| 386,644 |
|
|
| 429,938 |
|
Long-term debt |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||
Non-current portion of operating lease liabilities |
|
| 1,090,623 |
|
|
| — |
|
|
| — |
| ||||||||||||
Deferred rent and other liabilities |
|
| 281,460 |
|
|
| 291,663 |
|
|
| 245,566 |
|
|
| 59,885 |
|
|
| 284,773 |
|
|
| 284,925 |
|
Total Liabilities |
|
| 736,433 |
|
|
| 651,877 |
|
|
| 668,639 |
|
|
| 1,776,641 |
|
|
| 671,417 |
|
|
| 714,863 |
|
Commitments and contingencies (see Note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||
Common shares; $.0001 par value, 200,000,000 shares authorized, 107,638,846, 108,248,568 and 108,248,471 shares issued and outstanding, respectively |
|
| 11 |
|
|
| 11 |
|
|
| 11 |
| ||||||||||||
Preferred shares; $.0001 par value, 10,000,000 shares authorized, NaN issued |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||
Common shares; $.0001 par value, 200,000,000 shares authorized, 97,965,012, 105,642,283 and 108,951,308 shares issued and outstanding, respectively |
|
| 10 |
|
|
| 11 |
|
|
| 11 |
| ||||||||||||
Additional paid-in-capital |
|
| — |
|
|
| 684 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18,770 |
|
Retained earnings |
|
| 1,492,691 |
|
|
| 1,310,859 |
|
|
| 1,309,541 |
|
|
| 1,398,681 |
|
|
| 1,516,190 |
|
|
| 1,451,492 |
|
Accumulated other comprehensive loss |
|
| (32,093 | ) |
|
| (10,651 | ) |
|
| (24,744 | ) |
|
| (37,287 | ) |
|
| (27,103 | ) |
|
| (26,601 | ) |
Total Shareholders’ Equity |
|
| 1,460,609 |
|
|
| 1,300,903 |
|
|
| 1,284,808 |
|
|
| 1,361,404 |
|
|
| 1,489,098 |
|
|
| 1,443,672 |
|
Total Liabilities and Shareholders’ Equity |
| $ | 2,197,042 |
|
| $ | 1,952,780 |
|
| $ | 1,953,447 |
|
| $ | 3,138,045 |
|
| $ | 2,160,515 |
|
| $ | 2,158,535 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except share and per share data)
(unaudited)
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| October 31, |
|
| October 31, |
|
| July 31, |
|
| July 31, |
| ||||||||||||||||||||
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
Net sales |
| $ | 973,533 |
|
| $ | 892,774 |
|
| $ | 2,821,675 |
|
| $ | 2,526,895 |
|
| $ | 962,329 |
|
| $ | 992,454 |
|
| $ | 1,826,742 |
|
| $ | 1,848,142 |
|
Cost of sales |
|
| 635,835 |
|
|
| 595,028 |
|
|
| 1,847,473 |
|
|
| 1,692,026 |
|
|
| 646,454 |
|
|
| 636,610 |
|
|
| 1,241,811 |
|
|
| 1,211,638 |
|
Gross profit |
|
| 337,698 |
|
|
| 297,746 |
|
|
| 974,202 |
|
|
| 834,869 |
|
|
| 315,875 |
|
|
| 355,844 |
|
|
| 584,931 |
|
|
| 636,504 |
|
Selling, general and administrative expenses |
|
| 241,341 |
|
|
| 224,858 |
|
|
| 707,097 |
|
|
| 665,765 |
|
|
| 237,814 |
|
|
| 238,992 |
|
|
| 466,850 |
|
|
| 465,756 |
|
Income from operations |
|
| 96,357 |
|
|
| 72,888 |
|
|
| 267,105 |
|
|
| 169,104 |
|
|
| 78,061 |
|
|
| 116,852 |
|
|
| 118,081 |
|
|
| 170,748 |
|
Other income (expense), net |
|
| 1,235 |
|
|
| (882 | ) |
|
| 3,061 |
|
|
| 1,173 |
| ||||||||||||||||
Other income, net |
|
| 3,498 |
|
|
| 1,746 |
|
|
| 6,178 |
|
|
| 1,826 |
| ||||||||||||||||
Income before income taxes |
|
| 97,592 |
|
|
| 72,006 |
|
|
| 270,166 |
|
|
| 170,277 |
|
|
| 81,559 |
|
|
| 118,598 |
|
|
| 124,259 |
|
|
| 172,574 |
|
Income tax expense |
|
| 20,072 |
|
|
| 26,914 |
|
|
| 58,577 |
|
|
| 63,332 |
|
|
| 21,239 |
|
|
| 25,789 |
|
|
| 31,354 |
|
|
| 38,505 |
|
Net income |
| $ | 77,520 |
|
| $ | 45,092 |
|
| $ | 211,589 |
|
| $ | 106,945 |
|
| $ | 60,320 |
|
| $ | 92,809 |
|
| $ | 92,905 |
|
| $ | 134,069 |
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.71 |
|
| $ | 0.41 |
|
| $ | 1.95 |
|
| $ | 0.95 |
|
| $ | 0.61 |
|
| $ | 0.85 |
|
| $ | 0.91 |
|
| $ | 1.23 |
|
Diluted |
| $ | 0.70 |
|
| $ | 0.41 |
|
| $ | 1.92 |
|
| $ | 0.94 |
|
| $ | 0.61 |
|
| $ | 0.84 |
|
| $ | 0.91 |
|
| $ | 1.22 |
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 108,778,483 |
|
|
| 109,667,224 |
|
|
| 108,702,575 |
|
|
| 113,113,597 |
|
|
| 99,095,562 |
|
|
| 108,831,399 |
|
|
| 101,722,244 |
|
|
| 108,663,990 |
|
Diluted |
|
| 110,262,879 |
|
|
| 110,100,254 |
|
|
| 110,149,105 |
|
|
| 113,432,367 |
|
|
| 99,602,465 |
|
|
| 110,433,840 |
|
|
| 102,427,040 |
|
|
| 110,091,586 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(amounts in thousands)
(unaudited)
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| October 31, |
|
| October 31, |
| ||||||||||
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
| ||||
Net income |
| $ | 77,520 |
|
| $ | 45,092 |
|
| $ | 211,589 |
|
| $ | 106,945 |
|
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
| (5,358 | ) |
|
| (1,388 | ) |
|
| (21,208 | ) |
|
| 9,342 |
|
Change in unrealized losses (gains) on marketable securities, net of tax |
|
| (134 | ) |
|
| (13 | ) |
|
| (234 | ) |
|
| (17 | ) |
Total other comprehensive (loss) income |
|
| (5,492 | ) |
|
| (1,401 | ) |
|
| (21,442 | ) |
|
| 9,325 |
|
Comprehensive income |
| $ | 72,028 |
|
| $ | 43,691 |
|
| $ | 190,147 |
|
| $ | 116,270 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(amounts in thousands, except share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |
|
| Common Shares |
|
| Additional |
|
|
|
|
|
| Other |
|
|
|
|
| |||||||
|
| Number of |
|
| Par |
|
| Paid-in |
|
| Retained |
|
| Comprehensive |
|
|
|
|
| |||||
|
| Shares |
|
| Value |
|
| Capital |
|
| Earnings |
|
| Loss |
|
| Total |
| ||||||
Balances as of January 31, 2018 |
|
| 108,248,568 |
|
| $ | 11 |
|
| $ | 684 |
|
| $ | 1,310,859 |
|
| $ | (10,651 | ) |
| $ | 1,300,903 |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 211,589 |
|
|
| (21,442 | ) |
|
| 190,147 |
|
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 17,076 |
|
|
| — |
|
|
| — |
|
|
| 17,076 |
|
Share-based awards |
|
| 1,142,897 |
|
|
| — |
|
|
| 13,618 |
|
|
| — |
|
|
| — |
|
|
| 13,618 |
|
Cumulative effect of change in accounting pronouncements (see Note 2) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,564 |
|
|
| — |
|
|
| 6,564 |
|
Share repurchases |
|
| (1,752,619 | ) |
|
| — |
|
|
| (31,378 | ) |
|
| (36,321 | ) |
|
| — |
|
|
| (67,699 | ) |
Balances as of October 31, 2018 |
|
| 107,638,846 |
|
| $ | 11 |
|
| $ | — |
|
| $ | 1,492,691 |
|
| $ | (32,093 | ) |
| $ | 1,460,609 |
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| July 31, |
|
| July 31, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Net income |
| $ | 60,320 |
|
| $ | 92,809 |
|
| $ | 92,905 |
|
| $ | 134,069 |
|
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
| (6,771 | ) |
|
| (7,881 | ) |
|
| (10,571 | ) |
|
| (15,850 | ) |
Change in unrealized gains (losses) on marketable securities, net of tax |
|
| 201 |
|
|
| (7 | ) |
|
| 387 |
|
|
| (100 | ) |
Total other comprehensive loss |
|
| (6,570 | ) |
|
| (7,888 | ) |
|
| (10,184 | ) |
|
| (15,950 | ) |
Comprehensive income |
| $ | 53,750 |
|
| $ | 84,921 |
|
| $ | 82,721 |
|
| $ | 118,119 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSHAREHOLDERS’ EQUITY
(amounts in thousands)thousands, except share data)
(unaudited)
|
| Nine Months Ended |
| |||||
|
| October 31, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 211,589 |
|
| $ | 106,945 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 89,319 |
|
|
| 96,966 |
|
Benefit for deferred income taxes |
|
| (10,168 | ) |
|
| (4,771 | ) |
Share-based compensation expense |
|
| 17,076 |
|
|
| 13,831 |
|
Loss on disposition of property and equipment, net |
|
| 2,734 |
|
|
| 3,276 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Receivables |
|
| (14,664 | ) |
|
| (23,567 | ) |
Inventory |
|
| (104,569 | ) |
|
| (109,258 | ) |
Prepaid expenses and other assets |
|
| (17,748 | ) |
|
| 2,815 |
|
Payables, accrued expenses and other liabilities |
|
| 96,614 |
|
|
| 83,411 |
|
Net cash provided by operating activities |
|
| 270,183 |
|
|
| 169,648 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Cash paid for property and equipment |
|
| (89,979 | ) |
|
| (63,338 | ) |
Cash paid for marketable securities |
|
| (280,153 | ) |
|
| (174,938 | ) |
Sales and maturities of marketable securities |
|
| 211,174 |
|
|
| 209,937 |
|
Net cash used in investing activities |
|
| (158,958 | ) |
|
| (28,339 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from the exercise of stock options |
|
| 13,618 |
|
|
| — |
|
Share repurchases related to share repurchase program |
|
| (57,512 | ) |
|
| (157,044 | ) |
Share repurchases related to taxes for share-based awards |
|
| (10,187 | ) |
|
| (2,180 | ) |
Net cash used in financing activities |
|
| (54,081 | ) |
|
| (159,224 | ) |
Effect of exchange rate changes on cash and cash equivalents |
|
| (10,343 | ) |
|
| 4,501 |
|
Increase (decrease) in cash and cash equivalents |
|
| 46,801 |
|
|
| (13,414 | ) |
Cash and cash equivalents at beginning of period |
|
| 282,220 |
|
|
| 248,140 |
|
Cash and cash equivalents at end of period |
| $ | 329,021 |
|
| $ | 234,726 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
Income taxes |
| $ | 73,454 |
|
| $ | 61,119 |
|
Non-cash investing activities—Accrued capital expenditures |
| $ | 13,580 |
|
| $ | 8,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |
|
| Common Shares |
|
| Additional |
|
|
|
|
|
| Other |
|
|
|
|
| |||||||
|
| Number of |
|
| Par |
|
| Paid-in |
|
| Retained |
|
| Comprehensive |
|
|
|
|
| |||||
|
| Shares |
|
| Value |
|
| Capital |
|
| Earnings |
|
| Loss |
|
| Total |
| ||||||
Balances as of April 30, 2019 |
|
| 103,599,364 |
|
| $ | 10 |
|
| $ | — |
|
| $ | 1,478,678 |
|
| $ | (30,717 | ) |
| $ | 1,447,971 |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 60,320 |
|
|
| (6,570 | ) |
|
| 53,750 |
|
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 5,908 |
|
|
| — |
|
|
| — |
|
|
| 5,908 |
|
Share-based awards |
|
| 5,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Share repurchases |
|
| (5,639,352 | ) |
|
| — |
|
|
| (5,908 | ) |
|
| (140,317 | ) |
|
| — |
|
|
| (146,225 | ) |
Balances as of July 31, 2019 |
|
| 97,965,012 |
|
| $ | 10 |
|
| $ | — |
|
| $ | 1,398,681 |
|
| $ | (37,287 | ) |
| $ | 1,361,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |
|
| Common Shares |
|
| Additional |
|
|
|
|
|
| Other |
|
|
|
|
| |||||||
|
| Number of |
|
| Par |
|
| Paid-in |
|
| Retained |
|
| Comprehensive |
|
|
|
|
| |||||
|
| Shares |
|
| Value |
|
| Capital |
|
| Earnings |
|
| Loss |
|
| Total |
| ||||||
Balances as of April 30, 2018 |
|
| 108,670,688 |
|
| $ | 11 |
|
| $ | 6,434 |
|
| $ | 1,358,683 |
|
| $ | (18,713 | ) |
| $ | 1,346,415 |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 92,809 |
|
|
| (7,888 | ) |
|
| 84,921 |
|
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 5,466 |
|
|
| — |
|
|
| — |
|
|
| 5,466 |
|
Share-based awards |
|
| 300,328 |
|
|
| — |
|
|
| 7,747 |
|
|
| — |
|
|
| — |
|
|
| 7,747 |
|
Share repurchases |
|
| (19,708 | ) |
|
| — |
|
|
| (877 | ) |
|
| — |
|
|
| — |
|
|
| (877 | ) |
Balances as of July 31, 2018 |
|
| 108,951,308 |
|
| $ | 11 |
|
| $ | 18,770 |
|
| $ | 1,451,492 |
|
| $ | (26,601 | ) |
| $ | 1,443,672 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(amounts in thousands, except share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |
|
| Common Shares |
|
| Additional |
|
|
|
|
|
| Other |
|
|
|
|
| |||||||
|
| Number of |
|
| Par |
|
| Paid-in |
|
| Retained |
|
| Comprehensive |
|
|
|
|
| |||||
|
| Shares |
|
| Value |
|
| Capital |
|
| Earnings |
|
| Loss |
|
| Total |
| ||||||
Balances as of January 31, 2019 |
|
| 105,642,283 |
|
| $ | 11 |
|
| $ | — |
|
| $ | 1,516,190 |
|
| $ | (27,103 | ) |
| $ | 1,489,098 |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 92,905 |
|
|
| (10,184 | ) |
|
| 82,721 |
|
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 11,461 |
|
|
| — |
|
|
| — |
|
|
| 11,461 |
|
Share-based awards |
|
| 568,989 |
|
|
| — |
|
|
| 974 |
|
|
| — |
|
|
| — |
|
|
| 974 |
|
Share repurchases |
|
| (8,246,260 | ) |
|
| (1 | ) |
|
| (12,435 | ) |
|
| (210,414 | ) |
|
| — |
|
|
| (222,850 | ) |
Balances as of July 31, 2019 |
|
| 97,965,012 |
|
| $ | 10 |
|
| $ | — |
|
| $ | 1,398,681 |
|
| $ | (37,287 | ) |
| $ | 1,361,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |
|
| Common Shares |
|
| Additional |
|
|
|
|
|
| Other |
|
|
|
|
| |||||||
|
| Number of |
|
| Par |
|
| Paid-in |
|
| Retained |
|
| Comprehensive |
|
|
|
|
| |||||
|
| Shares |
|
| Value |
|
| Capital |
|
| Earnings |
|
| Loss |
|
| Total |
| ||||||
Balances as of January 31, 2018 |
|
| 108,248,568 |
|
| $ | 11 |
|
| $ | 684 |
|
| $ | 1,310,859 |
|
| $ | (10,651 | ) |
| $ | 1,300,903 |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 134,069 |
|
|
| (15,950 | ) |
|
| 118,119 |
|
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 10,990 |
|
|
| — |
|
|
| — |
|
|
| 10,990 |
|
Share-based awards |
|
| 860,758 |
|
|
| — |
|
|
| 13,020 |
|
|
| — |
|
|
| — |
|
|
| 13,020 |
|
Cumulative effect of change in accounting pronouncements |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,564 |
|
|
| — |
|
|
| 6,564 |
|
Share repurchases |
|
| (158,018 | ) |
|
| — |
|
|
| (5,924 | ) |
|
| — |
|
|
| — |
|
|
| (5,924 | ) |
Balances as of July 31, 2018 |
|
| 108,951,308 |
|
| $ | 11 |
|
| $ | 18,770 |
|
| $ | 1,451,492 |
|
| $ | (26,601 | ) |
| $ | 1,443,672 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
URBAN OUTFITTERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
|
| For the Six Months Ended |
| |||||
|
| July 31, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 92,905 |
|
| $ | 134,069 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 55,395 |
|
|
| 60,158 |
|
Right-of-use asset amortization |
|
| 94,173 |
|
|
| — |
|
Provision (benefit) for deferred income taxes |
|
| 1,107 |
|
|
| (9,506 | ) |
Share-based compensation expense |
|
| 11,461 |
|
|
| 10,990 |
|
Loss on disposition of property and equipment, net |
|
| 593 |
|
|
| 2,452 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Receivables |
|
| (15,032 | ) |
|
| (14,196 | ) |
Inventory |
|
| (71,899 | ) |
|
| (26,807 | ) |
Prepaid expenses and other assets |
|
| (23,121 | ) |
|
| (10,086 | ) |
Payables, accrued expenses and other liabilities |
|
| 16,009 |
|
|
| 71,728 |
|
Operating lease liabilities |
|
| (100,338 | ) |
|
| — |
|
Net cash provided by operating activities |
|
| 61,253 |
|
|
| 218,802 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Cash paid for property and equipment |
|
| (116,465 | ) |
|
| (55,642 | ) |
Cash paid for marketable securities |
|
| (235,094 | ) |
|
| (168,823 | ) |
Sales and maturities of marketable securities |
|
| 320,411 |
|
|
| 130,029 |
|
Net cash used in investing activities |
|
| (31,148 | ) |
|
| (94,436 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from the exercise of stock options |
|
| 974 |
|
|
| 13,020 |
|
Share repurchases related to share repurchase program |
|
| (217,421 | ) |
|
| — |
|
Share repurchases related to taxes for share-based awards |
|
| (5,429 | ) |
|
| (5,924 | ) |
Net cash (used in) provided by financing activities |
|
| (221,876 | ) |
|
| 7,096 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
| (4,471 | ) |
|
| (7,955 | ) |
(Decrease) increase in cash and cash equivalents |
|
| (196,242 | ) |
|
| 123,507 |
|
Cash and cash equivalents at beginning of period |
|
| 358,260 |
|
|
| 282,220 |
|
Cash and cash equivalents at end of period |
| $ | 162,018 |
|
| $ | 405,727 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
Income taxes |
| $ | 37,839 |
|
| $ | 39,698 |
|
Non-cash investing activities—Accrued capital expenditures |
| $ | 22,325 |
|
| $ | 15,002 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
URBAN OUTFITTERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share and per share data)
(unaudited)
1. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed financial statements should be read in conjunction with Urban Outfitters, Inc.’s (the “Company’s”) Annual Report on Form 10-K for the fiscal year ended January 31, 2018,2019, filed with the United States Securities and Exchange Commission on April 2, 2018.1, 2019.
The Company’s business experiences seasonal fluctuations in net sales and net income, with a more significant portion typically realized in the second half of each year predominantly due to the year-end holiday period. Historically, and consistent with the retail industry, this seasonality also impacts our working capital requirements, particularly with regard to inventory. Accordingly, the results of operations for the three and ninesix months ended OctoberJuly 31, 20182019 are not necessarily indicative of the results to be expected for the full year.
The Company’s fiscal year ends on January 31. All references in these notes to the Company’s fiscal years refer to the fiscal years ended on January 31 in those years. For example, the Company’s fiscal year 20192020 will end on January 31, 2019.2020.
2. Recent Accounting Pronouncements
In OctoberFebruary 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update that amends the existing guidance on the income tax effects of intra-entity asset transfers with the exception of transfers of inventory. The update requires the recognition of tax expense when an intra-entity asset transfer occurs as opposed to being deferred under the existing guidance. The Company adopted the new guidance on February 1, 2018 using the modified retrospective approach. The net cumulative effect of this change was $4,496 and was recognized as a decrease to retained earnings as of February 1, 2018.
In May 2014, the FASB issued an accounting standards update that clarifies the principles for recognizing revenue from contracts with customers. The update outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes the most current revenue recognition guidance, including industry-specific guidance. The update states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in the amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Entities are required to apply the following steps when recognizing revenue under the update: (1) identify the contract(s) with a customer; (2) identify the performance obligation in the contract(s); (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract(s); and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The Company adopted this update on February 1, 2018 using the modified retrospective approach and applied the new guidance to all contracts that were not completed as of the adoption date. Adoption resulted in a change in the timing of recognizing breakage income related to its gift cards and in recognizing estimated sales returns on a gross basis on its balance sheet. The net cumulative effect of this change was $11,060, after tax, and was recognized as an increase to retained earnings as of February 1, 2018. The difference in financial statement line item amounts in the current period under the new accounting guidance as compared to what the balances would be as reported under the previous accounting guidance is immaterial.
Recently Issued
In June 2016, the FASB issued an accounting standards update that introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. This includes loan commitments, accounts receivable, trade receivables, and certain off-balance sheet credit exposures. The guidance
also modifies the impairment model for available-for-sale debt securities. The update will be effective for the Company on February 1, 2020 and early adoption is permitted. The Company is currently assessing the potential effects this update may have on its consolidated financial statements and related disclosures.
In February 2016, the FASB issued an accounting standards update that amends the existing accounting standards for lease accounting. This update requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Lessees are permitted to make an accounting policy election to not recognize the assetboth operating and liability for leases with a term of 12 months or less. The update will be effective for the Company on February 1, 2019 and early adoption is permitted. The update allows for a modified retrospective transition approach applied either as of the earliest period presented in the financial statements or as of the beginning of the period of adoption.finance leases. The Company has determined it will adopt this updateadopted the new guidance on February 1, 2019 using a modified retrospective approach at the beginning of the period of adoption.The update includes a number of practical expedients, of which the Company will electelected the “package of three” practical expedients and willdid not reassess expired or existing leases as of the effective date. The Company will also electelected the practical expedient to not separate non-lease components from lease components. Whilecomponents as it pertains to real estate leases. Adoption on February 1, 2019 resulted in the Company expects adoption torecognition of approximately $1.3 billion of lease liabilities based on the present value of the remaining minimum rental payments using discount rates as of the effective date. Corresponding right-of-use assets of approximately $1.1 billion were recognized, with the offsetting balance representing a reduction in the previously recognized deferred rent balance. Adoption did not result in a significant increase in the assets and liabilities recorded on its balance sheet, the Company is currently assessing the overallmaterial impact on its consolidated financial statements and related disclosures.the Company’s Consolidated Statements of Income or Consolidated Statements of Cash Flows.
3. Revenue from Contracts with Customers
Revenue Recognition
Merchandise: Merchandise is sold through retail stores, catalogs and the digital sales channel, as well as to wholesale customers and franchise partners. Revenue is recognized when control of the promised goods is transferred to the customer. The Company has elected to treat shipping and handling as fulfillment activities, and not a separate performance obligation. Accordingly, the Company will recognize revenue for its single performance obligation at the point of sale or at the time of shipment, which is when transfer of control to the customer occurs. Revenue does not include taxes assessed by governmental authorities, including value-added and other sales-related taxes, that are imposed on and concurrent with revenue-producing activities. Revenue is recognized net of estimated customer returns. Retail segment return policies vary by brand, but generally provide for no time limit on returns and the refund to be issued in either the form of original payment or as a gift card. Payment for merchandise is tendered primarily by cash, check, credit card, debit card or gift card. Uncollectible accounts receivable primarily results from unauthorized credit card transactions. The Company maintains an allowance for doubtful accounts for its Wholesale segment accounts receivable, which management reviews on a regular basis and believes is sufficient to cover potential credit losses and billing adjustments. Payment terms in the Wholesale segment vary by customer with the most common being a net 30-day policy.
Food and Beverage: Revenue from restaurant sales and events is recognized upon completion of the service, when the Company satisfies its single performance obligation. Customer deposits may be received in advance for events which represents a contract liability until the Company satisfies its performance obligation.
Franchise Fees: Revenue from franchise operations primarily relates to merchandise sales to franchisees and royalty fees. Merchandise sales to franchisees are discussed above under Merchandise. Royalty fees are based upon a percentage of franchisee net sales to third party customers and are recognized when such sales occur.
Gift Cards: The Company accounts for a gift card transaction by recording a liability at the time the gift card is issued to the customer in exchange for consideration from the customer. At the time of issuance, the Company has an open performance obligation for the future delivery of promised goods or services. The liability remains outstanding until the card is redeemed by the customer, at which time the Company recognizes revenue. Over time, a portion of the outstanding gift cards will not be redeemed by the customer (“breakage”). Revenue is recognized from breakage over time in proportion to gift card redemptions. Judgment is used in determining the amount of breakage revenue to be recognized and is based on historical gift card redemption patterns. Gift card breakage revenue is included in net sales and is not material. The Company’s gift cards do not expire.
See Note 13, “Segment Reporting,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information including net sales recorded by reportable segment and net sales from contracts with customers by merchandise category.
Contract receivables occur when the Company satisfies all of its performance obligations under a contract and recognizes revenue prior to billing or receiving consideration from a customer for which it has an unconditional right to payment. Contract receivables arise from credit card transactions and sales to Wholesale segment customers and franchisees. For the ninesix month period ended OctoberJuly 31, 2018,2019, the opening and closing balancebalances of contract receivables, net of allowance for doubtful accounts, was $76,962were $80,461 and $90,954,$95,131, respectively. For the ninesix month period ended OctoberJuly 31, 2017,2018, the opening and closing balancebalances of contract receivables, net of allowance for doubtful accounts, was $54,505were $76,962 and $78,348,$90,646, respectively. Contract receivables are included in “Accounts receivable, net of allowance for doubtful accounts” in the Condensed Consolidated Balance Sheets.
Contract liabilities represent unearned revenue and result from the Company receiving consideration in a contract with a customer for which it has not satisfied all of its performance obligations. The Company’s contract liabilities result from customer deposits, customer loyalty programs and the issuance of gift cards. Gift cards are expected to be redeemed within two years of issuance, with the majority of redemptions occurring in the first year. For the ninesix month period ended OctoberJuly 31, 2019, the opening and closing balances of contract liabilities were $49,747 and $41,585, respectively. For the six month period ended July 31, 2018, the opening and closing balancebalances of contract liabilities waswere $56,637 and $34,253, respectively. For the nine month period ended October 31, 2017, the opening and closing balance of contract liabilities was $59,013 and $45,006,$32,013, respectively. Contract liabilities are included in “Accrued expenses, accrued compensation and other current liabilities” in the Condensed Consolidated Balance Sheets. During the ninesix month period ended OctoberJuly 31, 2018,2019, the Company recognized $26,562$23,081 of revenue that was included in the contract liability balance at the beginning of the period.
During all periods shown, 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 OctoberJuly 31, 2018,2019, January 31, 20182019 and OctoberJuly 31, 20172018 were as follows:
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||||||
|
| Cost |
|
| Gains |
|
| (Losses) |
|
| Value |
|
| Cost |
|
| Gains |
|
| (Losses) |
|
| Value |
| ||||||||
As of October 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of July 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Short-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
| $ | 200,910 |
|
| $ | — |
|
| $ | (466 | ) |
| $ | 200,444 |
|
| $ | 125,943 |
|
| $ | 190 |
|
| $ | (31 | ) |
| $ | 126,102 |
|
Municipal and pre-refunded municipal bonds |
|
| 33,291 |
|
|
| — |
|
|
| (59 | ) |
|
| 33,232 |
|
|
| 42,023 |
|
|
| 40 |
|
|
| (9 | ) |
|
| 42,054 |
|
Certificates of deposit |
|
| 755 |
|
|
| — |
|
|
| — |
|
|
| 755 |
|
|
| 1,745 |
|
|
| — |
|
|
| — |
|
|
| 1,745 |
|
Commercial paper |
|
| 2,960 |
|
|
| — |
|
|
| — |
|
|
| 2,960 |
| ||||||||||||||||
Federal government agencies |
|
| 1,495 |
|
|
| 2 |
|
|
| — |
|
|
| 1,497 |
| ||||||||||||||||
|
|
| 237,916 |
|
|
| — |
|
|
| (525 | ) |
|
| 237,391 |
|
|
| 171,206 |
|
|
| 232 |
|
|
| (40 | ) |
|
| 171,398 |
|
Long-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
| 24,793 |
|
|
| — |
|
|
| (175 | ) |
|
| 24,618 |
|
|
| 49,385 |
|
|
| 174 |
|
|
| (33 | ) |
|
| 49,526 |
|
Municipal and pre-refunded municipal bonds |
|
| 2,573 |
|
|
| — |
|
|
| (7 | ) |
|
| 2,566 |
|
|
| 19,526 |
|
|
| 6 |
|
|
| (50 | ) |
|
| 19,482 |
|
Mutual funds, held in rabbi trust |
|
| 6,932 |
|
|
| — |
|
|
| (473 | ) |
|
| 6,459 |
|
|
| 7,826 |
|
|
| 56 |
|
|
| (7 | ) |
|
| 7,875 |
|
Certificates of deposit |
|
| 2,390 |
|
|
| — |
|
|
| — |
|
|
| 2,390 |
|
|
| 1,847 |
|
|
| — |
|
|
| — |
|
|
| 1,847 |
|
Federal government agencies |
|
| 126 |
|
|
| 1 |
|
|
| — |
|
|
| 127 |
| ||||||||||||||||
|
|
| 36,688 |
|
|
| — |
|
|
| (655 | ) |
|
| 36,033 |
|
|
| 78,710 |
|
|
| 237 |
|
|
| (90 | ) |
|
| 78,857 |
|
|
| $ | 274,604 |
|
| $ | — |
|
| $ | (1,180 | ) |
| $ | 273,424 |
|
| $ | 249,916 |
|
| $ | 469 |
|
| $ | (130 | ) |
| $ | 250,255 |
|
As of January 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of January 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Short-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
| $ | 111,612 |
|
| $ | — |
|
| $ | (184 | ) |
| $ | 111,428 |
|
| $ | 227,287 |
|
| $ | 24 |
|
| $ | (214 | ) |
| $ | 227,097 |
|
Municipal and pre-refunded municipal bonds |
|
| 52,474 |
|
|
| 11 |
|
|
| (39 | ) |
|
| 52,446 |
|
|
| 43,677 |
|
|
| 15 |
|
|
| (18 | ) |
|
| 43,674 |
|
Certificates of deposit |
|
| 1,251 |
|
|
| — |
|
|
| — |
|
|
| 1,251 |
|
|
| 1,050 |
|
|
| — |
|
|
| — |
|
|
| 1,050 |
|
Federal government agencies |
|
| 1,458 |
|
|
| — |
|
|
| — |
|
|
| 1,458 |
| ||||||||||||||||
Commercial paper |
|
| 2,979 |
|
|
| — |
|
|
| — |
|
|
| 2,979 |
| ||||||||||||||||
Treasury bills |
|
| 2,975 |
|
|
| — |
|
|
| (1 | ) |
|
| 2,974 |
| ||||||||||||||||
|
|
| 165,337 |
|
|
| 11 |
|
|
| (223 | ) |
|
| 165,125 |
|
|
| 279,426 |
|
|
| 39 |
|
|
| (233 | ) |
|
| 279,232 |
|
Long-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
| 39,853 |
|
|
| — |
|
|
| (228 | ) |
|
| 39,625 |
|
|
| 34,265 |
|
|
| 34 |
|
|
| (63 | ) |
|
| 34,236 |
|
Municipal and pre-refunded municipal bonds |
|
| 9,873 |
|
|
| 8 |
|
|
| (24 | ) |
|
| 9,857 |
|
|
| 7,554 |
|
|
| 7 |
|
|
| (3 | ) |
|
| 7,558 |
|
Mutual funds, held in rabbi trust |
|
| 5,973 |
|
|
| 274 |
|
|
| (10 | ) |
|
| 6,237 |
|
|
| 6,301 |
|
|
| 450 |
|
|
| — |
|
|
| 6,751 |
|
Certificates of deposit |
|
| 2,969 |
|
|
| — |
|
|
| — |
|
|
| 2,969 |
|
|
| 2,143 |
|
|
| — |
|
|
| — |
|
|
| 2,143 |
|
Federal government agencies |
|
| 6,603 |
|
|
| 2 |
|
|
| (1 | ) |
|
| 6,604 |
| ||||||||||||||||
|
|
| 58,668 |
|
|
| 282 |
|
|
| (262 | ) |
|
| 58,688 |
|
|
| 56,866 |
|
|
| 493 |
|
|
| (67 | ) |
|
| 57,292 |
|
|
| $ | 224,005 |
|
| $ | 293 |
|
| $ | (485 | ) |
| $ | 223,813 |
|
| $ | 336,292 |
|
| $ | 532 |
|
| $ | (300 | ) |
| $ | 336,524 |
|
As of October 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Short-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Corporate bonds |
| $ | 67,275 |
|
| $ | 2 |
|
| $ | (71 | ) |
| $ | 67,206 |
| ||||||||||||||||
Municipal and pre-refunded municipal bonds |
|
| 24,676 |
|
|
| 4 |
|
|
| (14 | ) |
|
| 24,666 |
| ||||||||||||||||
Certificates of deposit |
|
| 1,356 |
|
|
| — |
|
|
| — |
|
|
| 1,356 |
| ||||||||||||||||
|
|
| 93,307 |
|
|
| 6 |
|
|
| (85 | ) |
|
| 93,228 |
| ||||||||||||||||
Long-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Corporate bonds |
|
| 30,051 |
|
|
| 2 |
|
|
| (87 | ) |
|
| 29,966 |
| ||||||||||||||||
Municipal and pre-refunded municipal bonds |
|
| 1,362 |
|
|
| — |
|
|
| (2 | ) |
|
| 1,360 |
| ||||||||||||||||
Mutual funds, held in rabbi trust |
|
| 5,639 |
|
|
| 109 |
|
|
| (2 | ) |
|
| 5,746 |
| ||||||||||||||||
Certificates of deposit |
|
| 4,182 |
|
|
| — |
|
|
| — |
|
|
| 4,182 |
| ||||||||||||||||
|
|
| 41,234 |
|
|
| 111 |
|
|
| (91 | ) |
|
| 41,254 |
| ||||||||||||||||
|
| $ | 134,541 |
|
| $ | 117 |
|
| $ | (176 | ) |
| $ | 134,482 |
|
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||
|
| Cost |
|
| Gains |
|
| (Losses) |
|
| Value |
| ||||
As of July 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
| $ | 150,648 |
|
| $ | — |
|
| $ | (261 | ) |
| $ | 150,387 |
|
Municipal and pre-refunded municipal bonds |
|
| 46,904 |
|
|
| 10 |
|
|
| (43 | ) |
|
| 46,871 |
|
Certificates of deposit |
|
| 908 |
|
|
| — |
|
|
| — |
|
|
| 908 |
|
|
|
| 198,460 |
|
|
| 10 |
|
|
| (304 | ) |
|
| 198,166 |
|
Long-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
| 34,333 |
|
|
| — |
|
|
| (213 | ) |
|
| 34,120 |
|
Municipal and pre-refunded municipal bonds |
|
| 2,130 |
|
|
| 1 |
|
|
| (7 | ) |
|
| 2,124 |
|
Mutual funds, held in rabbi trust |
|
| 6,401 |
|
|
| 171 |
|
|
| (1 | ) |
|
| 6,571 |
|
Certificates of deposit |
|
| 2,699 |
|
|
| — |
|
|
| — |
|
|
| 2,699 |
|
|
|
| 45,563 |
|
|
| 172 |
|
|
| (221 | ) |
|
| 45,514 |
|
|
| $ | 244,023 |
|
| $ | 182 |
|
| $ | (525 | ) |
| $ | 243,680 |
|
Proceeds from the sales and maturities of available-for-sale securities were $211,174$320,411 and $209,937$130,029 for the ninesix months ended OctoberJuly 31, 20182019 and 2017,2018, respectively. The Company included in “Other income, (expense), net,” in the Condensed Consolidated Statements of Income, net realized losses gainsof $3$19 and $16$26 for the three and nine
six months ended OctoberJuly 31, 2018,2019, respectively, and net realized losses of $2$0 and $11$13 for the three and ninesix months ended OctoberJuly 31, 2017,2018, respectively. Amortization of discounts and premiums, net, resulted in a reduction of “Other income, (expense), net” of $328$152 and $1,479$271 for the three and ninesix months ended OctoberJuly 31, 2018,2019, respectively, and $538$517 and $2,066$1,151 for the three and ninesix months ended OctoberJuly 31, 2017,2018, respectively. Mutual funds represent assets held in an irrevocable rabbi trust for the Company’s Non-qualified Deferred Compensation Plan (“NQDC”). These assets are a source of funds to match the funding obligations to participants in the NQDC but are subject to the Company’s general creditors. The Company elected the fair value option for financial assets for the mutual funds held in the rabbi trust resulting in all unrealized gains and losses being recorded in “Other income, (expense), net” in the Condensed Consolidated Statements of Income.
5. Fair Value
The Company utilizes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach that relate to its financial assets and financial liabilities). The levels of the hierarchy are described as follows:
Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.
• | Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. |
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
• | Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. |
• | Level 3: Unobservable inputs that reflect the Company’s own assumptions. |
Level 3: Unobservable inputs that reflect the Company’s own assumptions.
Management’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and liabilities and their placement within the fair value hierarchy. The Company’s financial assets that are accounted for at fair value on a recurring basis are presented in the tables below:
|
| Marketable Securities Fair Value as of |
|
| Marketable Securities Fair Value as of |
| ||||||||||||||||||||||||||
|
| October 31, 2018 |
|
| July 31, 2019 |
| ||||||||||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
| $ | 225,062 |
|
| $ | — |
|
| $ | — |
|
| $ | 225,062 |
|
| $ | 175,628 |
|
| $ | — |
|
| $ | — |
|
| $ | 175,628 |
|
Municipal and pre-refunded municipal bonds |
|
| — |
|
|
| 35,798 |
|
|
| — |
|
|
| 35,798 |
|
|
| — |
|
|
| 61,536 |
|
|
| — |
|
|
| 61,536 |
|
Mutual funds, held in rabbi trust |
|
| 6,459 |
|
|
| — |
|
|
| — |
|
|
| 6,459 |
|
|
| 7,875 |
|
|
| — |
|
|
| — |
|
|
| 7,875 |
|
Certificates of deposit |
|
| — |
|
|
| 3,145 |
|
|
| — |
|
|
| 3,145 |
|
|
| — |
|
|
| 3,592 |
|
|
| — |
|
|
| 3,592 |
|
Commercial paper |
|
| — |
|
|
| 2,960 |
|
|
| — |
|
|
| 2,960 |
| ||||||||||||||||
Federal government agencies |
|
| 1,624 |
|
|
| — |
|
|
| — |
|
|
| 1,624 |
| ||||||||||||||||
|
| $ | 231,521 |
|
| $ | 41,903 |
|
| $ | — |
|
| $ | 273,424 |
|
| $ | 185,127 |
|
| $ | 65,128 |
|
| $ | — |
|
| $ | 250,255 |
|
|
| Marketable Securities Fair Value as of |
|
| Marketable Securities Fair Value as of |
| ||||||||||||||||||||||||||
|
| January 31, 2018 |
|
| January 31, 2019 |
| ||||||||||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
| $ | 151,053 |
|
| $ | — |
|
| $ | — |
|
| $ | 151,053 |
|
| $ | 261,333 |
|
| $ | — |
|
| $ | — |
|
| $ | 261,333 |
|
Municipal and pre-refunded municipal bonds |
|
| — |
|
|
| 62,303 |
|
|
| — |
|
|
| 62,303 |
|
|
| — |
|
|
| 51,232 |
|
|
| — |
|
|
| 51,232 |
|
Mutual funds, held in rabbi trust |
|
| 6,237 |
|
|
| — |
|
|
| — |
|
|
| 6,237 |
|
|
| 6,751 |
|
|
| — |
|
|
| — |
|
|
| 6,751 |
|
Certificates of deposit |
|
| — |
|
|
| 4,220 |
|
|
| — |
|
|
| 4,220 |
|
|
| — |
|
|
| 3,193 |
|
|
| — |
|
|
| 3,193 |
|
Federal government agencies |
|
| 8,062 |
|
|
| — |
|
|
| — |
|
|
| 8,062 |
| ||||||||||||||||
Commercial paper |
|
| — |
|
|
| 2,979 |
|
|
| — |
|
|
| 2,979 |
| ||||||||||||||||
Treasury bills |
|
| 2,974 |
|
|
| — |
|
|
| — |
|
|
| 2,974 |
| ||||||||||||||||
|
| $ | 157,290 |
|
| $ | 66,523 |
|
| $ | — |
|
| $ | 223,813 |
|
| $ | 279,120 |
|
| $ | 57,404 |
|
| $ | — |
|
| $ | 336,524 |
|
|
| Marketable Securities Fair Value as of |
|
| Marketable Securities Fair Value as of |
| ||||||||||||||||||||||||||
|
| October 31, 2017 |
|
| July 31, 2018 |
| ||||||||||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
| $ | 97,172 |
|
| $ | — |
|
| $ | — |
|
| $ | 97,172 |
|
| $ | 184,507 |
|
| $ | — |
|
| $ | — |
|
| $ | 184,507 |
|
Municipal and pre-refunded municipal bonds |
|
| — |
|
|
| 26,026 |
|
|
| — |
|
|
| 26,026 |
|
|
| — |
|
|
| 48,995 |
|
|
| — |
|
|
| 48,995 |
|
Mutual funds, held in rabbi trust |
|
| 5,746 |
|
|
| — |
|
|
| — |
|
|
| 5,746 |
|
|
| 6,571 |
|
|
| — |
|
|
| — |
|
|
| 6,571 |
|
Certificates of deposit |
|
| — |
|
|
| 5,538 |
|
|
| — |
|
|
| 5,538 |
|
|
| — |
|
|
| 3,607 |
|
|
| — |
|
|
| 3,607 |
|
|
| $ | 102,918 |
|
| $ | 31,564 |
|
| $ | — |
|
| $ | 134,482 |
|
| $ | 191,078 |
|
| $ | 52,602 |
|
| $ | — |
|
| $ | 243,680 |
|
Financial assets
Level 1 assets consist of financial instruments whose value has been based on inputs that use, as their basis, readily observable market data that are actively quoted and are validated through external sources, including third-party pricing services and brokers.
Level 2 assets consist of financial instruments whose value has been based on quoted prices for similar assets and liabilities in active markets as well as quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3 assets consist of financial instruments where there has been no active market. The Company held no Level 3 financial instruments as of OctoberJuly 31, 2018,2019, January 31, 20182019 and OctoberJuly 31, 2017.2018.
The fair value of cash and cash equivalents (Level 1) approximates carrying value since cash and cash equivalents consist of short-term highly liquid investments with maturities of less than three months at the time of purchase. As of OctoberJuly 31, 2018,2019, January 31, 20182019 and OctoberJuly 31, 2017,2018, cash and cash equivalents included cash on hand, cash in banks, money market accounts and marketable securities with maturities of less than three months at the time of purchase.
Non-financial assets
The Company’s non-financial assets, primarily consisting of property and equipment, lease-related right-of-use assets and goodwill, are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable and, in the case of goodwill, an annual assessment is performed.
The fair value of property and equipment was determined using a discounted cash-flow model that utilized Level 3 inputs. The Company’s retail locations are reviewed for impairment at the retail location level, which is the lowest level at which individual cash flows can be identified. In calculating future cash flows, the Company makes estimates regarding future operating results based on its experience and knowledge of market factors in which the retail location is located. Right-of-use assets are tested for impairment in the same manner as property and equipment. Goodwill has been assigned to reporting units for purposes of impairment testing. The Company evaluates goodwill to determine if the carrying value exceeds the fair value of the reporting unit. For the three and ninesix months ended OctoberJuly 31, 20182019 and 2017,2018, impairment charges were zero.0.
6. Debt
On June 29, 2018, the Company and its domestic subsidiaries entered into an amended and restated credit agreement (the “Amended Credit Agreement”) that amended the Company’s asset-based revolving credit facility with certain lenders, including JPMorgan Chase Bank, N.A., as administrative agent, and J.P. Morgan Chase Bank, N.A. and Wells Fargo Bank, National Association, as joint lead arrangers and co-book managers.
The Amended Credit Agreement extended the maturity date of the senior secured revolving credit facility to June 2023 (the “Amended Credit Facility”). The Amended Credit Facility provides for loans and letters of credit up to $350,000, subject to a borrowing base that is comprised of the Company’s eligible accounts receivable and inventory. The Amended Credit Facility includes a swing-line sub-facility, a multicurrency sub-facility and the option to expand the facility by up to $150,000. The funds available under the Amended Credit Facility may be used for working capital and other general corporate purposes.
The Amended Credit Facility provides for interest on borrowings, at the Company’s option, at either (i) adjusted LIBOR, CDOR or EURIBOR plus an applicable margin ranging from 1.125% to 1.375%, or (ii) an adjusted ABR plus an applicable margin ranging from 0.125% to 0.375%, each such applicable margin depending on the level of availability under the Amended Credit Facility. Depending on the type of borrowing, interest on the Amended Credit Agreement is payable monthly, quarterly or at the end of the interest period. A commitment fee of 0.20% is payable quarterly on the unused portion of the Amended Credit Facility.
All obligations under the Amended Credit Facility are unconditionally guaranteed by the Company and certain of its U.S. subsidiaries. The obligations under the Amended Credit Facility are secured by a first-priority security interest in inventory, accounts receivable and certain other assets of the Company and certain of its U.S. subsidiaries. The obligations of URBN Canada Retail, Inc. are secured by a first-priority security interest in its inventory, accounts receivable and certain other assets. The Amended Credit Agreement contains customary representations and warranties, negative and affirmative covenants and provisions relating to events of default.
As of OctoberJuly 31, 2018,2019, the Company was in compliance with all terms of the Amended Credit Agreement and borrowings under the Amended Credit Facility totaled $0. Outstanding stand-by letters of credit, which reduce the funds available under the Amended Credit Facility, were $12,737.$13,704.
Additionally, the Company has borrowing agreements with two2 separate financial institutions under which the Company may borrow an aggregate of $130,000 for the purposes of trade letter of credit issuances. The availability
of any future borrowings under the trade letter of credit facilities is subject to acceptance by the respective financial institutions. As of OctoberJuly 31, 2018,2019, the Company had outstanding trade letters of credit of $56,563,$83,875 and available trade letters of credit of $73,437$46,125 under these facilities.
7. Income TaxesLeases
The new federal tax legislation commonly referredCompany has operating leases for stores, distribution and fulfillment centers, corporate offices and equipment. The Company subleases certain properties to third parties. The Company has elected not to record a lease liability and right-of-use asset for leases with original terms of 12 months or less. The Company has elected the practical expedient to not separate non-lease components from lease components as it pertains to real estate leases.
Store leases have remaining lease terms that range from less than one year up to 15 years, some of which contain options to extend the U.S. Tax Cut and Jobs Act (the “Tax Act”) enacted on December 22, 2017 (the “Enactment Date”) introduced significant changeslease for one or two 5-year periods. Payments related to U.S. income tax law. Effective for tax years beginning on or after January 1, 2018, the Tax Act reduced the U.S. federal corporate income tax rate from 35% to 21% and created new taxes on certain foreign-sourced earnings and certain intercompany payments.
The Company’s effective tax rate for the three months ended October 31, 2018 was 20.6% of income before income taxes compared to 37.4% of income before income taxesa renewal period are included in the three months ended October 31, 2017. The Company’s effective taxlease liability and right-of-use asset only when the Company is reasonably certain that it will exercise the option to renew the lease for an extended period of time. Certain leases may contain variable lease payments such as rent based on a percentage of net sales. Variable lease payments may be subject to a breakpoint threshold of fixed rent. Variable lease payments, other than those that depend on an index or a rate, for the nine months ended October 31, 2018 was 21.7% of income before income taxes compared to 37.2% of income before income taxesare not included in the nine months ended October 31, 2017.measurement of the lease liability. The decreaselease liability is calculated at the present value of certain future payments, discounted using the Company’s incremental borrowing rate, which approximates the rate of interest the Company would pay to borrow an amount equal to the lease payments on a fully collateralized basis over a similar term. Significant judgment is used in determining the effective tax rate forincremental borrowing rate.
Total operating lease costs were $67,827 and $134,075 during the three and ninesix months ended OctoberJuly 31, 2018, compared2019, respectively. Total variable lease costs were $16,770 and $34,709 during the three and six months ended July 31, 2019, respectively. Short-term lease costs and sublease income were not material during the three and six months ended July 31, 2019.
Other information related to leases was as follows:
|
| Six Months Ended |
| |
|
| July 31, 2019 |
| |
Other information |
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
Operating cash flows from operating leases |
| $ | 144,380 |
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
| $ | 34,274 |
|
Weighted-average remaining lease term - operating leases |
| 7.5 years |
| |
Weighted-average discount rate - operating leases |
|
| 6.5 | % |
|
|
|
|
|
The following is a schedule by year of the maturities of operating lease liabilities with original terms in excess of one year, as of July 31, 2019:
|
| Operating |
| |
|
| Leases | �� | |
Fiscal Year |
|
|
|
|
2020 (excluding the six months ended July 31, 2019) |
| $ | 147,926 |
|
2021 |
|
| 275,325 |
|
2022 |
|
| 241,618 |
|
2023 |
|
| 214,691 |
|
2024 |
|
| 181,685 |
|
Thereafter |
|
| 673,472 |
|
Total undiscounted future minimum lease payments |
|
| 1,734,717 |
|
Less imputed interest |
|
| (435,022 | ) |
Total discounted future minimum lease payments |
| $ | 1,299,695 |
|
|
|
|
|
|
As of July 31, 2019, the same periods in 2017, was primarily affected by the Tax Act, which reduced the Company’s income tax rate to 21%, and by the favorable impactCompany had commitments of share-based award activity and certain other discrete items occurringapproximately $32,736 not included in the fiscal 2019 periods.amounts above related to 8 executed but not yet commenced store leases.
Staff Accounting Bulletin No. 118 (“SAB 118”) issuedThe following is a schedule by year of the U.S. Securities and Exchange Commission allows registrants to record provisional estimatesfuture minimum lease payments for the Tax Act during a measurement period not to exceedoperating leases with original terms in excess of one year, from the Enactment Date. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company made reasonable estimates of the effects and recorded provisional amounts in its financial statements as of January 31, 2018 amounting2019:
|
| Operating |
| |
|
| Leases |
| |
Fiscal Year |
|
|
|
|
2020 |
| $ | 294,527 |
|
2021 |
|
| 263,209 |
|
2022 |
|
| 228,596 |
|
2023 |
|
| 200,776 |
|
2024 |
|
| 167,130 |
|
Thereafter |
|
| 558,655 |
|
Total minimum lease payments |
| $ | 1,712,893 |
|
|
|
|
|
|
The Company, through its wholly-owned subsidiary, Anthropologie, Inc., is party to a net expense of $64,705. The impactsground lease (the “Lease”) with Waterloo Devon, L.P. (the “Landlord”). Wade L. McDevitt was a minority owner of the Tax Act may differ fromLandlord and its general partner and is the brother-in-law of Scott Belair, one of the Company’s provisional estimates dueformer directors. Pursuant to many factors, including, but not limitedthe Lease, the Company rented approximately six acres located in Devon, Pennsylvania to changesdevelop a lifestyle center, which includes an expanded format Anthropologie store, a Terrain store, several restaurant concepts under the Food and Beverage division and a boutique event space. The Lease, which commenced on June 14, 2017, has an initial term of 40 years with 2 options to its interpretationsextend, each for an additional ten-year term. The initial rental rate is $1,087 per year, and rent increases 10% every five years during the initial term. The aggregate amount of rental payments payable under the initial term of the provisions in the Tax Act; guidance that mayLease is approximately $62,135. Real estate taxes, insurance, construction costs and other third-party expenses will also be issued; and actions that the Company may take.
For the three and nine months ended October 31, 2018, the Company recorded an additional measurement-period adjustment to its provisional estimate for the deemed repatriation transition tax obligation, with an immaterial impact to income tax expense. The Company has not made any measurement-period adjustments related to reduction of U.S. federal corporate tax rate or global intangibles low-tax income and amounts remain provisional. The Company is still evaluating the effects of the Tax Act’s provisions on its consolidated financial statements; however, the Company expects to complete its evaluation within the applicable measurement period, pursuant to SAB 118. As such, the Company’s provisional estimates for the Tax Act could change significantly within this period, resulting in a material impact to its financial position, results of operations, or cash flows. The accounting for the tax effects of the Tax Act will be completed during fiscal 2019.
Each year, the Company files income tax returns in U.S. federal and state jurisdictions and non-U.S. jurisdictions. These tax returns are subject to examination and possible challenge by taxing authorities. Positions challenged by the taxing authorities may be settled or appealedpaid by the Company. AsIf the Company exercises its option to extend the Lease, rental payments during such extension term will be 90% of the market rental rate. An independent committee of the Board of Directors retained a result, income tax uncertainties are recognized innational commercial real estate services firm to provide an appraisal of the initial market rental value of a portion of the property, which confirmed that the proposed initial rental rate per acre was consistent with market rates. The Lease and appraisal were reviewed by a committee of disinterested members of the Company’s Condensed Consolidated Financial Statements in accordance with accounting for income taxes under FASB Accounting Standards Codification 740, Income Taxes, when applicable.Board of Directors and the Lease was approved by such committee and by the Company’s Board of Directors.
8. Share-Based Compensation
The Company maintains stock incentive plans pursuant to which it can grant restricted shares, unrestricted shares, incentive stock options, non-qualified stock options, restricted stock units (“RSU’s”), performance stock units (“PSU’s”) or stock appreciation rights (“SAR’s”). A lattice binomial pricingBlack-Scholes model was used to estimate the fair valuesvalue of stock options and SAR’s.options. The fair value of eachRSU’s is equal to the stock price on the date of the grant. The fair value of the PSU’s awarded during fiscal 2020 equaled the stock price on the date of the grant. The fair value of the PSU’s awarded during fiscal 2019 was determined using a Monte Carlo simulation. A different methodology was used to value fiscal 2020 grants due to the removal of market-based conditions in the grant provisions. Share-based compensation expense included in “Selling, general and administrative expenses” in the Condensed Consolidated Statements of Income, for the three and ninesix months ended OctoberJuly 31, 20182019 and 20172018 was as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| October 31, |
|
| October 31, |
|
| July 31, |
|
| July 31, |
| ||||||||||||||||||||
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
Stock Options |
| $ | 604 |
|
| $ | 216 |
|
| $ | 1,250 |
|
| $ | 673 |
|
| $ | 453 |
|
| $ | 429 |
|
| $ | 1,038 |
|
| $ | 646 |
|
Stock Appreciation Rights |
|
| — |
|
|
| 24 |
|
|
| 4 |
|
|
| 125 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
Performance Stock Units |
|
| 1,869 |
|
|
| (3,107 | ) |
|
| 5,439 |
|
|
| 5,702 |
|
|
| 1,134 |
|
|
| 1,549 |
|
|
| 2,211 |
|
|
| 3,570 |
|
Restricted Stock Units |
|
| 3,613 |
|
|
| 2,742 |
|
|
| 10,383 |
|
|
| 7,331 |
|
|
| 4,321 |
|
|
| 3,488 |
|
|
| 8,212 |
|
|
| 6,770 |
|
Total |
| $ | 6,086 |
|
| $ | (125 | ) |
| $ | 17,076 |
|
| $ | 13,831 |
|
| $ | 5,908 |
|
| $ | 5,466 |
|
| $ | 11,461 |
|
| $ | 10,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
(1) Includes the reversal of $6,509 of previously recognized compensation expense in the three and nine months ended October 31, 2017, related to 476,611 PSU’s that are not expected to vest as the achievement of the related performance targets is not probable. |
| |||||||||||||||||||||||||||||||
|
|
Share-based awards granted and the weighted-average fair value of such awards for the ninesix months ended OctoberJuly 31, 20182019 was as follows:
|
| Nine Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| October 31, 2018 |
|
| July 31, 2019 |
| ||||||||||
|
|
|
|
|
| Weighted- |
|
|
|
|
|
| Weighted- |
| ||
|
| Awards |
|
| Average Fair |
|
| Awards |
|
| Average Fair |
| ||||
|
| Granted |
|
| Value |
|
| Granted |
|
| Value |
| ||||
Stock Options |
|
| 140,000 |
|
| $ | 17.12 |
|
|
| 160,000 |
|
| $ | 8.67 |
|
Stock Appreciation Rights |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
Performance Stock Units |
|
| 100,000 |
|
| $ | 34.76 |
|
|
| 140,000 |
|
| $ | 30.19 |
|
Restricted Stock Units |
|
| 555,000 |
|
| $ | 36.52 |
|
|
| 855,000 |
|
| $ | 30.02 |
|
Total |
|
| 795,000 |
|
|
|
|
|
|
| 1,155,000 |
|
|
|
|
|
During the ninesix months ended OctoberJuly 31, 2018, 430,0002019, 40,000 stock options were exercised, 197,600 SAR’s were exercised, 465,192139,999 PSU’s vested and 212,500388,990 RSU’s vested.
The total unrecognized compensation cost related to outstanding share-based awards and the weighted-average period in which the cost is expected to be recognized as of OctoberJuly 31, 20182019 was as follows:
|
| October 31, 2018 |
|
| July 31, 2019 |
| ||||||||||
|
| Unrecognized |
|
| Weighted- |
|
| Unrecognized |
|
| Weighted- |
| ||||
|
| Compensation |
|
| Average |
|
| Compensation |
|
| Average |
| ||||
|
| Cost |
|
| Years |
|
| Cost |
|
| Years |
| ||||
Stock Options |
| $ | 1,425 |
|
|
| 0.6 |
|
| $ | 1,171 |
|
|
| 0.8 |
|
Stock Appreciation Rights |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Performance Stock Units |
|
| 8,377 |
|
|
| 1.8 |
|
|
| 6,794 |
|
|
| 2.1 |
|
Restricted Stock Units |
|
| 22,727 |
|
|
| 2.2 |
|
|
| 33,436 |
|
|
| 2.3 |
|
Total |
| $ | 32,529 |
|
|
|
|
|
| $ | 41,401 |
|
|
|
|
|
9. Shareholders’ Equity
Share repurchase activity under the Company’s share repurchase programs was as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| October 31, |
|
| October 31, |
|
| July 31, |
|
| July 31, |
| ||||||||||||||||||||
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
Number of common shares repurchased and subsequently retired |
|
| 1,500,000 |
|
|
| 3,083,201 |
|
|
| 1,500,000 |
|
|
| 8,092,906 |
|
|
| 5,637,369 |
|
|
| — |
|
|
| 8,068,196 |
|
|
| — |
|
Total cost |
| $ | 57,512 |
|
| $ | 66,533 |
|
| $ | 57,512 |
|
| $ | 157,044 |
|
| $ | 146,180 |
|
| $ | — |
|
| $ | 217,422 |
|
| $ | — |
|
Average cost per share, including commissions |
| $ | 38.34 |
|
| $ | 21.58 |
|
| $ | 38.34 |
|
| $ | 19.41 |
|
| $ | 25.93 |
|
| $ | — |
|
| $ | 26.95 |
|
| $ | — |
|
On February 23, 2015,August 22, 2017, the Company’s Board of Directors authorized the repurchase of 20,000,000 common shares under a share repurchase program; all shares were repurchased by the end of August 2017.program. On August 22, 2017,June 4, 2019, the Company’s Board of Directors authorized the repurchase of an additional 20,000,000 common shares under a new share repurchase program,program. As of which 16,402,153July 31, 2019, 26,333,957 common shares were remaining as of October 31, 2018.under the programs.
During the ninesix months ended OctoberJuly 31, 2018,2019, the Company acquired and subsequently retired 252,619178,064 common shares at a total cost of $10,187$5,429 from employees to meet minimum statutory tax withholding requirements. During the ninesix months ended OctoberJuly 31, 2017,2018, the Company acquired and subsequently retired 92,404158,018 common shares at a total cost of $2,180$5,924 from employees to meet minimum statutory tax withholding requirements.
10. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss
The following tables present the changes in “Accumulated other comprehensive loss,” by component, net of tax, for the three and ninesix months ended OctoberJuly 31, 20182019 and 2017:2018:
|
| Three Months Ended October 31, 2018 |
|
| Nine Months Ended October 31, 2018 |
|
| Three Months Ended July 31, 2019 |
|
| Six Months Ended July 31, 2019 |
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
| ||||
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
| ||||||||
|
| Currency |
|
| Available-for- |
|
|
|
|
|
| Currency |
|
| Available-for- |
|
|
|
|
|
| Currency |
|
| Available-for- |
|
|
|
|
|
| Currency |
|
| Available-for- |
|
|
|
|
| ||||||||
|
| Translation |
|
| Sale Securities |
|
| Total |
|
| Translation |
|
| Sale Securities |
|
| Total |
|
| Translation |
|
| Sale Securities |
|
| Total |
|
| Translation |
|
| Sale Securities |
|
| Total |
| ||||||||||||
Balance at beginning of period |
| $ | (26,190 | ) |
| $ | (411 | ) |
| $ | (26,601 | ) |
| $ | (10,340 | ) |
| $ | (311 | ) |
| $ | (10,651 | ) |
| $ | (30,725 | ) |
| $ | 8 |
|
| $ | (30,717 | ) |
| $ | (26,925 | ) |
| $ | (178 | ) |
| $ | (27,103 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (5,358 | ) |
|
| (131 | ) |
|
| (5,489 | ) |
|
| (21,208 | ) |
|
| (218 | ) |
|
| (21,426 | ) |
|
| (6,771 | ) |
|
| 182 |
|
|
| (6,589 | ) |
|
| (10,571 | ) |
|
| 361 |
|
|
| (10,210 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
|
| — |
|
|
| (16 | ) |
|
| (16 | ) |
|
| — |
|
|
| 19 |
|
|
| 19 |
|
|
| — |
|
|
| 26 |
|
|
| 26 |
|
Net current-period other comprehensive income (loss) |
|
| (5,358 | ) |
|
| (134 | ) |
|
| (5,492 | ) |
|
| (21,208 | ) |
|
| (234 | ) |
|
| (21,442 | ) |
|
| (6,771 | ) |
|
| 201 |
|
|
| (6,570 | ) |
|
| (10,571 | ) |
|
| 387 |
|
|
| (10,184 | ) |
Balance at end of period |
| $ | (31,548 | ) |
| $ | (545 | ) |
| $ | (32,093 | ) |
| $ | (31,548 | ) |
| $ | (545 | ) |
| $ | (32,093 | ) |
| $ | (37,496 | ) |
| $ | 209 |
|
| $ | (37,287 | ) |
| $ | (37,496 | ) |
| $ | 209 |
|
| $ | (37,287 | ) |
|
| Three Months Ended October 31, 2017 |
|
| Nine Months Ended October 31, 2017 |
|
| Three Months Ended July 31, 2018 |
|
| Six Months Ended July 31, 2018 |
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
| ||||
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
| ||||||||
|
| Currency |
|
| Available-for- |
|
|
|
|
|
| Currency |
|
| Available-for- |
|
|
|
|
|
| Currency |
|
| Available-for- |
|
|
|
|
|
| Currency |
|
| Available-for- |
|
|
|
|
| ||||||||
|
| Translation |
|
| Sale Securities |
|
| Total |
|
| Translation |
|
| Sale Securities |
|
| Total |
|
| Translation |
|
| Sale Securities |
|
| Total |
|
| Translation |
|
| Sale Securities |
|
| Total |
| ||||||||||||
Balance at beginning of period |
| $ | (23,282 | ) |
| $ | (61 | ) |
| $ | (23,343 | ) |
| $ | (34,012 | ) |
| $ | (57 | ) |
| $ | (34,069 | ) |
| $ | (18,309 | ) |
| $ | (404 | ) |
| $ | (18,713 | ) |
| $ | (10,340 | ) |
| $ | (311 | ) |
| $ | (10,651 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (1,388 | ) |
|
| (11 | ) |
|
| (1,399 | ) |
|
| 9,342 |
|
|
| (6 | ) |
|
| 9,336 |
|
|
| (7,881 | ) |
|
| (7 | ) |
|
| (7,888 | ) |
|
| (15,850 | ) |
|
| (87 | ) |
|
| (15,937 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
| — |
|
|
| (2 | ) |
|
| (2 | ) |
|
| — |
|
|
| (11 | ) |
|
| (11 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (13 | ) |
|
| (13 | ) |
Net current-period other comprehensive income (loss) |
|
| (1,388 | ) |
|
| (13 | ) |
|
| (1,401 | ) |
|
| 9,342 |
|
|
| (17 | ) |
|
| 9,325 |
|
|
| (7,881 | ) |
|
| (7 | ) |
|
| (7,888 | ) |
|
| (15,850 | ) |
|
| (100 | ) |
|
| (15,950 | ) |
Balance at end of period |
| $ | (24,670 | ) |
| $ | (74 | ) |
| $ | (24,744 | ) |
| $ | (24,670 | ) |
| $ | (74 | ) |
| $ | (24,744 | ) |
| $ | (26,190 | ) |
| $ | (411 | ) |
| $ | (26,601 | ) |
| $ | (26,190 | ) |
| $ | (411 | ) |
| $ | (26,601 | ) |
All unrealized gains and losses on available-for-sale securities reclassified from accumulated other comprehensive loss were recorded in “Other income, (expense), net” in the Condensed Consolidated Statements of Income.
11. Net Income per Common Share
The following is a reconciliation of the weighted-average common shares outstanding used for the computation of basic and diluted net income per common share:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| October 31, |
|
| October 31, |
|
| July 31, |
|
| July 31, |
| ||||||||||||||||||||
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
Basic weighted-average common shares outstanding |
|
| 108,778,483 |
|
|
| 109,667,224 |
|
|
| 108,702,575 |
|
|
| 113,113,597 |
|
|
| 99,095,562 |
|
|
| 108,831,399 |
|
|
| 101,722,244 |
|
|
| 108,663,990 |
|
Effect of dilutive options, stock appreciation rights, performance stock units and restricted stock units |
|
| 1,484,396 |
|
|
| 433,030 |
|
|
| 1,446,530 |
|
|
| 318,770 |
|
|
| 506,903 |
|
|
| 1,602,441 |
|
|
| 704,796 |
|
|
| 1,427,596 |
|
Diluted weighted-average shares outstanding |
|
| 110,262,879 |
|
|
| 110,100,254 |
|
|
| 110,149,105 |
|
|
| 113,432,367 |
|
|
| 99,602,465 |
|
|
| 110,433,840 |
|
|
| 102,427,040 |
|
|
| 110,091,586 |
|
For the three months ended OctoberJuly 31, 20182019 and 2017,2018, awards to purchase 420,000 common shares ranging in price from $28.47 to $46.42 and 240,000 common shares ranging in price from $46.02 to $46.42, and 319,883 common shares ranging in price from $28.10 to $46.02, respectively, were excluded from the calculation of diluted net income per common share because the impact would be anti-dilutive.For the ninesix months ended OctoberJuly 31, 20182019 and 2017,2018, awards to purchase 249,167400,000 common shares ranging in price from $28.47 to $46.42 and 253,750 common shares ranging in price from $37.02 to $46.42, and 1,016,733 common shares ranging in price from $25.60 to $46.02, respectively, were excluded from the calculation of diluted net income per common share because the impact would be anti-dilutive.
Excluded from the calculation of diluted net income per common share as of OctoberJuly 31, 2019 and 2018 were 780,264 and 2017 were 742,855 and 2,610,2951,451,382 performance-based equity awards, respectively, because they did not meet the required performance criteria.
12. Commitments and Contingencies
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, results of operations or cash flows.
The Company offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands. The Company operates two3 reportable segments—“Retail”segments – “Retail,” “Wholesale” and “Wholesale.“Subscription.”
The Company’s Retail segment consists of the “Anthropologie,” “Bhldn,” “Free People,” “Terrain” and “Urban Outfitters” brands and the Food and Beverage division. The Anthropologie, Bhldn and Terrain brands make up the “Anthropologie Group.” As of October 31, 2018, there were 248 Urban Outfitters stores, 228 Anthropologie Group stores, 134 Free People stores, 13 restaurants under the Food and Beverage division and three Urban Outfitters franchisee-owned stores. Each of Urban Outfitters, the Anthropologie Group and Free People, including their Company-owned and franchisee-owned stores and digital channels, and the restaurants operated under the Company’s Food and Beverage division, are considered an operating segment. Net sales from the Retail segment accounted for approximately 90.3% and 90.6% of total consolidated net sales for the three and nine months ended October 31, 2018, respectively. Net sales from the Retail segment accounted for approximately 90.6% of total consolidated net sales for each of the three and nine months ended October 31, 2017. The remaining net sales are derived from the Company’s Wholesale segment which consists of the Free People, Anthropologie and Urban Outfitters brands that sell through approximately 2,100 department and specialty stores worldwide, digital businesses and the Company’s Retail segment. The Wholesale segment primarily designs, develops and markets young women’s contemporary casual apparel, intimates, FP Movement activewear and shoes under the Free People brand, home goods including gifts, tabletop and textiles under the Anthropologie brand and the BDG apparel collection under the Urban Outfitters brand. The Anthropologie wholesale division was established in the third quarter of fiscal 2018 and the Urban Outfitters wholesale division was established in the third quarter of fiscal 2019.
The Company has aggregated its brands into the Retail segment based upon their shared 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’s Retail segment omni-channel strategy enhances its customers’ brand experience by providing a seamless approach to the customer shopping experience. All available Company-owned Retail segment shopping channels are fully integrated, including stores, websites, mobile applications, catalogs and customer contact centers.
The Company’s Wholesale segment consists of the Free People, Anthropologie and Urban Outfitters brands. The Wholesale segment sells through department and specialty stores worldwide, digital businesses and the Retail segment. The Urban Outfitters wholesale division was established in the third quarter of fiscal 2019.
The Subscription segment, consisting of the “Nuuly” brand, is a monthly women’s apparel subscription rental service that launched on July 30, 2019. Expenses classified as “General corporate expenses” in the prior fiscal year have been reclassified to the Subscription segment as a result of the establishment of the Subscription segment in the first quarter of fiscal 2020. Property and equipment related to the Subscription segment have also been reclassified from the Retail segment.
The Company evaluates the performance of the segmentseach segment based on the net sales and pre-tax income from operations (excluding intercompany charges) of the segment. The Company accounts for intersegment sales and transfers as if the sales and transfers were made to third parties making similar volume purchases. Corporate expenses include expenses incurred and directed by the corporate office that are not allocated to segments. The principal identifiable assets for each reporting segment are inventory and property and equipment.
Other assets are comprised primarily of general corporate assets, which principally consist of cash and cash equivalents, marketable securities, deferred taxes and prepaid expenses, which are typically not allocated to the Company’s segments. The Company accounts for intersegment sales and transfers as if the sales and transfers were made to third parties making similar volume purchases.
The Company’s omni-channel strategy enhances its customers’ brand experience by providing a seamless approach to the customer shopping experience. All available shopping channels are fully integrated, including stores, websites, mobile applications, catalogs and customer contact centers. The Company’s investments in areas such as marketing campaigns and technology advancements are designed to generate demand for the omni-channel and not the separate store or digital channels. Store sales are primarily fulfilled from that store’s inventory, but may also be shipped from any of the Company’s fulfillment centers or from a different store location if an item is not available at the original store. We also allow customers to view in-store inventory from our websites and mobile applications. Digital orders are primarily shipped to the Company’s customers through its fulfillment centers, but may also be shipped from any store, or a combination of fulfillment centers and stores depending on the availability of a particular item. In addition, customers can pick up digital orders and return certain merchandise purchased through digital channels at retail locations. As the Company’s customers continue to shop across multiple channels, the Company has adapted its approach towards meeting this demand. Due to the availability of like product in a variety of shopping channels, the Company sources these products utilizing single stock keeping units based on the omni-channel demand rather than the demand of the separate channels. These and other technological capabilities allow the Company to better serve its customers and help it to complete a sale that otherwise may not have occurred due to out-of-stock positions. We manage and analyze our performance based on a single omni-channel rather than separate channels and believe that the omni-channel results present the most meaningful and appropriate measure of our performance.
The accounting policies of the reportable segments are the same as the policies described in Note 2, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2018.2019. Both the Retail and Wholesale segments are highly diversified. NoNaN one customer constitutes more than 10% of the Company’s total consolidated net sales. A summary of the information about the Company’s operations by segment is as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| October 31, |
|
| October 31, |
|
| July 31, |
|
| July 31, |
| ||||||||||||||||||||
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail operations |
| $ | 878,869 |
|
| $ | 808,546 |
|
| $ | 2,556,460 |
|
| $ | 2,289,526 |
|
| $ | 878,693 |
|
| $ | 902,027 |
|
| $ | 1,661,256 |
|
| $ | 1,677,591 |
|
Wholesale operations |
|
| 97,732 |
|
|
| 88,663 |
|
|
| 273,966 |
|
|
| 245,866 |
|
|
| 86,153 |
|
|
| 93,293 |
|
|
| 170,518 |
|
|
| 176,234 |
|
Intersegment elimination |
|
| (3,068 | ) |
|
| (4,435 | ) |
|
| (8,751 | ) |
|
| (8,497 | ) |
|
| (2,517 | ) |
|
| (2,866 | ) |
|
| (5,032 | ) |
|
| (5,683 | ) |
Total net sales |
| $ | 973,533 |
|
| $ | 892,774 |
|
| $ | 2,821,675 |
|
| $ | 2,526,895 |
|
| $ | 962,329 |
|
| $ | 992,454 |
|
| $ | 1,826,742 |
|
| $ | 1,848,142 |
|
Income from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail operations |
| $ | 88,538 |
|
| $ | 61,667 |
|
| $ | 246,833 |
|
| $ | 150,575 |
|
| $ | 78,997 |
|
| $ | 106,423 |
|
| $ | 113,691 |
|
| $ | 158,295 |
|
Wholesale operations |
|
| 19,150 |
|
|
| 20,866 |
|
|
| 53,770 |
|
|
| 57,373 |
|
|
| 15,354 |
|
|
| 19,815 |
|
|
| 32,115 |
|
|
| 34,620 |
|
Subscription operations |
|
| (3,536 | ) |
|
| (550 | ) |
|
| (5,637 | ) |
|
| (550 | ) | ||||||||||||||||
Intersegment elimination |
|
| 216 |
|
|
| 61 |
|
|
| 298 |
|
|
| 91 |
|
|
| 312 |
|
|
| 48 |
|
|
| 249 |
|
|
| 82 |
|
Total segment operating income |
|
| 107,904 |
|
|
| 82,594 |
|
|
| 300,901 |
|
|
| 208,039 |
|
|
| 91,127 |
|
|
| 125,736 |
|
|
| 140,418 |
|
|
| 192,447 |
|
General corporate expenses |
|
| (11,547 | ) |
|
| (9,706 | ) |
|
| (33,796 | ) |
|
| (38,935 | ) |
|
| (13,066 | ) |
|
| (8,884 | ) |
|
| (22,337 | ) |
|
| (21,699 | ) |
Total income from operations |
| $ | 96,357 |
|
| $ | 72,888 |
|
| $ | 267,105 |
|
| $ | 169,104 |
|
| $ | 78,061 |
|
| $ | 116,852 |
|
| $ | 118,081 |
|
| $ | 170,748 |
|
|
| October 31, |
|
| January 31, |
|
| October 31, |
|
| July 31, |
|
| January 31, |
|
| July 31, |
| ||||||
|
| 2018 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
| ||||||
Inventory |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail operations |
| $ | 413,102 |
|
| $ | 300,493 |
|
| $ | 403,631 |
|
| $ | 376,050 |
|
| $ | 328,783 |
|
| $ | 328,551 |
|
Wholesale operations |
|
| 38,557 |
|
|
| 50,902 |
|
|
| 46,326 |
|
|
| 64,037 |
|
|
| 41,724 |
|
|
| 47,106 |
|
Total inventory |
| $ | 451,659 |
|
| $ | 351,395 |
|
| $ | 449,957 |
|
| $ | 440,087 |
|
| $ | 370,507 |
|
| $ | 375,657 |
|
Property and equipment, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail operations |
| $ | 806,452 |
|
| $ | 811,128 |
|
| $ | 826,296 |
|
| $ | 841,013 |
|
| $ | 791,648 |
|
| $ | 804,625 |
|
Wholesale operations |
|
| 2,431 |
|
|
| 2,640 |
|
|
| 2,810 |
|
|
| 2,637 |
|
|
| 2,389 |
|
|
| 2,459 |
|
Subscription operations |
|
| 23,784 |
|
|
| 1,992 |
|
|
| — |
| ||||||||||||
Total property and equipment, net |
| $ | 808,883 |
|
| $ | 813,768 |
|
| $ | 829,106 |
|
| $ | 867,434 |
|
| $ | 796,029 |
|
| $ | 807,084 |
|
The following tables summarize net sales and percentage of net sales from contracts with customers by merchandise category:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| October 31, |
|
| October 31, |
|
| July 31, |
|
| July 31, |
| ||||||||||||||||||||
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apparel (1) |
| $ | 663,995 |
|
| $ | 615,143 |
|
| $ | 1,954,130 |
|
| $ | 1,734,619 |
|
| $ | 642,914 |
|
| $ | 690,447 |
|
| $ | 1,231,640 |
|
| $ | 1,290,135 |
|
Home (2) |
|
| 136,483 |
|
|
| 126,655 |
|
|
| 386,093 |
|
|
| 367,835 |
|
|
| 144,962 |
|
|
| 135,262 |
|
|
| 269,510 |
|
|
| 249,610 |
|
Accessories (3) |
|
| 124,966 |
|
|
| 108,199 |
|
|
| 342,076 |
|
|
| 298,141 |
|
|
| 116,613 |
|
|
| 118,335 |
|
|
| 216,881 |
|
|
| 217,110 |
|
Other (4) |
|
| 48,089 |
|
|
| 42,777 |
|
|
| 139,376 |
|
|
| 126,300 |
|
|
| 57,840 |
|
|
| 48,410 |
|
|
| 108,711 |
|
|
| 91,287 |
|
Total net sales |
| $ | 973,533 |
|
| $ | 892,774 |
|
| $ | 2,821,675 |
|
| $ | 2,526,895 |
|
| $ | 962,329 |
|
| $ | 992,454 |
|
| $ | 1,826,742 |
|
| $ | 1,848,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a percentage of net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apparel (1) |
|
| 68 | % |
|
| 69 | % |
|
| 69 | % |
|
| 69 | % |
|
| 67 | % |
|
| 70 | % |
|
| 67 | % |
|
| 70 | % |
Home (2) |
|
| 14 | % |
|
| 14 | % |
|
| 14 | % |
|
| 14 | % |
|
| 15 | % |
|
| 13 | % |
|
| 15 | % |
|
| 13 | % |
Accessories (3) |
|
| 13 | % |
|
| 12 | % |
|
| 12 | % |
|
| 12 | % |
|
| 12 | % |
|
| 12 | % |
|
| 12 | % |
|
| 12 | % |
Other (4) |
|
| 5 | % |
|
| 5 | % |
|
| 5 | % |
|
| 5 | % |
|
| 6 | % |
|
| 5 | % |
|
| 6 | % |
|
| 5 | % |
Total net sales |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Apparel includes intimates and activewear | (1) Apparel includes intimates and activewear |
| (1) Apparel includes intimates and activewear |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
(2) Home includes home furnishings, electronics, gifts and decorative items | (2) Home includes home furnishings, electronics, gifts and decorative items |
| (2) Home includes home furnishings, electronics, gifts and decorative items |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
(3) Accessories includes footwear, jewelry and handbags | (3) Accessories includes footwear, jewelry and handbags |
| (3) Accessories includes footwear, jewelry and handbags |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
(4) Other includes beauty, shipping and handling revenues and the Food and Beverage division | (4) Other includes beauty, shipping and handling revenues and the Food and Beverage division |
| (4) Other includes beauty, shipping and handling revenues and the Food and Beverage division |
|
Apparel, Home, and Accessories are sold through both the Retail and Wholesale segments. Revenue recognized from the Other category is primarily attributable to the Retail segment.
The Company has foreign operations primarily in Europe and Canada. Revenues and long-lived assets, based upon the Company’s domestic and foreign operations, are as follows:
|
| October 31, |
|
| January 31, |
|
| October 31, |
|
| July 31, |
|
| January 31, |
|
| July 31, |
| ||||||
|
| 2018 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
| ||||||
Property and equipment, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic operations |
| $ | 734,622 |
|
| $ | 720,890 |
|
| $ | 735,731 |
|
| $ | 774,378 |
|
| $ | 723,400 |
|
| $ | 730,024 |
|
Foreign operations |
|
| 74,261 |
|
|
| 92,878 |
|
|
| 93,375 |
|
|
| 93,056 |
|
|
| 72,629 |
|
|
| 77,060 |
|
Total property and equipment, net |
| $ | 808,883 |
|
| $ | 813,768 |
|
| $ | 829,106 |
|
| $ | 867,434 |
|
| $ | 796,029 |
|
| $ | 807,084 |
|
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| October 31, |
|
| October 31, |
|
| July 31, |
|
| July 31, |
| ||||||||||||||||||||
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic operations |
| $ | 854,347 |
|
| $ | 779,790 |
|
| $ | 2,467,015 |
|
| $ | 2,222,589 |
|
| $ | 840,316 |
|
| $ | 865,517 |
|
| $ | 1,603,405 |
|
| $ | 1,612,668 |
|
Foreign operations |
|
| 119,186 |
|
|
| 112,984 |
|
|
| 354,660 |
|
|
| 304,306 |
|
|
| 122,013 |
|
|
| 126,937 |
|
|
| 223,337 |
|
|
| 235,474 |
|
Total net sales |
| $ | 973,533 |
|
| $ | 892,774 |
|
| $ | 2,821,675 |
|
| $ | 2,526,895 |
|
| $ | 962,329 |
|
| $ | 992,454 |
|
| $ | 1,826,742 |
|
| $ | 1,848,142 |
|
Certain matters contained in this filing with the United States Securities and Exchange Commission (“SEC”) may contain forward-looking statements and are being made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. When used in this Quarterly Report on Form 10-Q, the words “project,” “believe,” “plan,” “will,” “anticipate,” “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Any one, or all, of the following factors could cause actual financial results to differ materially from those financial results mentioned in the forward-looking statements: the difficulty in predicting and responding to shifts in fashion trends, changes in the level of competitive pricing and promotional activity and other industry factors, overall economic and market conditions and worldwide political events and the resultant impact on consumer spending patterns, the effects of the implementation of the United Kingdom's referendum to withdraw membership from the European Union (commonly referred to as “Brexit”), including currency fluctuations, economic conditions, and legal or regulatory changes, any effects of war, terrorism and civil unrest, natural disasters or severe or unseasonable weather conditions, increases in labor costs, increases in raw material costs, availability of suitable retail space for expansion, timing of store openings, risks associated with international expansion, seasonal fluctuations in gross sales, the departure of one or more key senior executives, import risks, changes to U.S. and foreign trade policies, including the enactment of tariffs, border adjustment taxes or increases in duties or quotas, the closing or disruption of, or any damage to, any of our distribution centers, our ability to protect our intellectual property rights, risks associated with digital sales, our ability to maintain and expand our digital sales channels, response to new store concepts, our ability to integrate acquisitions, failure of our manufacturers and third-party vendors to comply with our social compliance program, changes in our effective income tax rate, the impact of the U.S. Tax Cuts and Jobs Act, changes in accounting standards and subjective assumptions, regulatory changes and legal matters and other risks identified in our filings with the SEC, including those set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 31, 2018,2019, filed on April 2, 2018.1, 2019. 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 the “Company,” “we,” “us” or “our” refer to Urban Outfitters, Inc., together with its subsidiaries.
Overview
We operate twounder three reportable segments: a leading lifestyle specialtysegments – Retail, segmentWholesale and a Wholesale segment.Subscription. Our Retail segment consists of our Anthropologie, Bhldn, Free People, Terrain and Urban Outfitters brands and our Food and Beverage division. Our Retail segment consumer products and services are sold directly to our customers through our stores, websites, mobile applications, catalogs and customer contact centers and franchised or third-party operated stores and digital businesses. The Wholesale segment consists of our Free People, Anthropologie and Urban Outfitters brands that sell through department and specialty stores worldwide, digital businesses and our Retail segment. The Wholesale segment primarily designs, develops and markets young women’s contemporary casual apparel, intimates, FP Movement activewear and shoes underhome goods. Our Subscription segment consists of the Free PeopleNuuly brand, home goods including gifts, tabletop and textiles under the Anthropologie brand and the BDGwhich is a monthly women’s apparel collection under the Urban Outfitters brand.subscription rental service that launched on July 30, 2019.
Our fiscal year ends on January 31. All references to our fiscal years refer to the fiscal years ended on January 31 in those years. For example, our fiscal year 20192020 will end on January 31, 2019.2020.
Retail Segment
Our Retail segment omni-channel strategy enhances our customers’ brand experience by providing a seamless approach to the customer shopping experience. All available Company-owned Retail segment shopping channels are fully integrated, including stores, websites, mobile applications, catalogs and customer contact centers. Our investments in areas such as marketing campaigns and technology advancements are designed to generate demand for the Retail segment omni-channel and not the separate store or digital channels. Store sales are primarily fulfilled from that store’s inventory, but may also be shipped from any of our fulfillment centers or from a different store location if an item is not available at the original store. We also allow customers to view in-store inventory from our websites and mobile applications. Digital orders are primarily
shipped to our customers through our fulfillment centers, but may also be shipped from any store, or a combination of fulfillment centers and stores depending on the availability of particular items. Digital orders may also be picked up at a store location, and customers may also return certain merchandise purchased through digital channels at store locations. As our customers continue to shop across multiple channels, we have adapted our approach towards meeting this demand. Due to the availability of like product in a variety of shopping channels, we source these products utilizing single stock keeping units based on the omni-channel demand rather than the demand of the separate channels. These and other technological capabilities allow us to better serve our customers and help us complete sales that otherwise may not have occurred due to out-of-stock positions. We manage and analyze our performance based on a single Retail segment omni-channel rather than separate channels and believe that the Retail segment omni-channel results present the most meaningful and appropriate measure of our performance.
Our comparable Retail segment net sales data is equal to the sum of our comparable store and comparable digital channel net sales. A store is considered to be comparable if it has been open at least 12 full months, unless it was materially expanded or remodeled within that year or was not otherwise operating at its full capacity within that year. A digital channel is considered to be comparable if it has been operational for at least 12 full months. Sales from stores and digital channels that do not fall within the definition of comparable store or channel are considered to be non-comparable. Franchise net sales and the effects of foreign currency translation are also considered non-comparable.
We monitor customer traffic, average unit selling price, transactions and average units per transaction at our stores, and we monitor customer sessions, average order value, and conversion rates and average units per transaction on our websites and mobile applications. We believe that changes in any of these metrics may be caused by a response to our brands’ fashion offerings, our marketing and digital marketing campaigns, circulation of our catalogs and an overall growth in brand recognition.
Urban Outfitters targets young adults aged 18 to 28 through a unique merchandise mix, compelling store environment, websites and mobile applications through a product offering that includes women’s and men’s fashion apparel, activewear, intimates, footwear, accessories, home goods, electronics and beauty. A large portion of our merchandise is exclusive to Urban Outfitters, consisting of an assortment of productproducts designed internally and designed in collaboration with third-party brands. Urban Outfitters stores are in street locations in large metropolitan areas and select university communities, specialty centers and enclosed malls that accommodate our customers’ propensity not only to shop, but also to congregate with their peers. Urban Outfitters operates websites and mobile applications in North America and Europe that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in its stores, offers a catalog in Europe offering select merchandise, most of which is also available in its stores, sells merchandise through franchisee-owned stores in Israel, and partners with a third-party digital marketplacebusinesses to offer a limited selection of merchandise, which is available in Asia.globally. Urban Outfitters’ North American and European Retail segment net sales accounted for approximately 30.2%29.0% and 8.1%7.7% of consolidated net sales, respectively, for the ninesix months ended OctoberJuly 31, 2018,2019, compared to 30.7%29.8% and 7.4%8.2%, respectively, for the comparable period in fiscal 2018.2019.
The Anthropologie Group consists of the Anthropologie, Bhldn and Terrain brands. Merchandise at the Anthropologie brand is tailored to sophisticated and contemporary women aged 28 to 45. ProductThe product assortment includes women’s casual apparel, accessories, intimates, shoes, home furnishings, a diverse array of gifts and decorative items and beauty and wellness. The Bhldn brand emphasizes every element that contributes to a wedding. The Bhldn brand offers a curated collection of heirloom quality wedding gowns, bridesmaid frocks, party dresses, assorted jewelry, headpieces, footwear, lingerie and decorations. The Terrain brand is designed to appeal to women and men interested in a creative and sophisticated outdoor living and gardening experience. Merchandise includes lifestyle home, garden and outdoor living products, antiques, live plants, flowers, wellness products and accessories. In addition to individual brand stores, we operate expanded format stores that include multiple Anthropologie Group brands, that allowwhich allows us to present an expanded assortment of products in certain categories. Merchandise includes lifestyle home, garden and outdoor living products, antiques, live plants, flowers, wellness products and accessories. Anthropologie Group stores are located in specialty centers, upscale street locations and enclosed malls. The Anthropologie Group operates websites and mobile applications in North America and Europe that capture the spirit of its brands by offering a similar yet broader selection of merchandise as found in its stores, offers catalogs in North America and Europe that market select merchandise, most of which is also available in Anthropologie brand stores, sells merchandise through franchisee-owned stores in Israel, and partners with a third-party digital marketplacebusinesses to offer a limited selection of merchandise, which is available in Asia.globally. The Anthropologie Group’s North American and European Retail segment net sales accounted for approximately 38.4%39.2% and 1.6% of consolidated net sales, respectively, for the ninesix months ended OctoberJuly 31, 2018,2019, compared to 39.0%38.6% and 1.6%1.7%, respectively, for the comparable period in fiscal 2018.2019.
Free People focuses its product offering on private label merchandise targeted to young contemporary women aged 25 to 30 and provides a unique merchandise mix of casual women’s apparel, intimates, FP Movement activewear, shoes, accessories, home products, gifts and beauty and wellness. Free People stores are located in enclosed malls, upscale street locations and specialty centers. Free People operates websites and mobile applications in North America, Europe and Asia that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in its stores, as well as substantially all of the Free People wholesale offerings. Free People also offers a catalog that markets select merchandise, most of which is also available in our Free People stores, sells
merchandise through franchisee-owned stores in Israel, and partners with third-party digital marketplacesbusinesses to offer a limited selection of merchandise, which is available in Asia.globally. We plan to open additional Free People stores in Europe that will allow us to expand the presence of the brand internationally. Free People’s North American Retail segment net sales accounted for approximately 11.7%12.6% of consolidated net sales for the ninesix months ended OctoberJuly 31, 2018,2019, compared to approximately 11.2%11.9% for the comparable period in fiscal 2018.2019. Free People opened its first European retail stores in the fourth quarter of fiscal 2019. European Retail segment net sales accounted for less than 1.0% of consolidated net sales for the six months ended July 31, 2019.
The Food and Beverage division focuses on a dining experience that provides excellence in food, beverage and service. Three new restaurants were opened in the third quarter of fiscal 2019. The Food and Beverage division net sales accounted for less than 1.0% of consolidated net sales for the ninesix months ended OctoberJuly 31, 20182019 and the comparable period in fiscal 2018.2019.
Store data for the ninesix months ended OctoberJuly 31, 20182019 was as follows:
|
| January 31, |
|
| Stores |
|
| Stores |
|
| October 31, |
|
| January 31, |
|
| Stores |
|
| Stores |
|
| July 31, |
| ||||||||
|
| 2018 |
|
| Opened |
|
| Closed |
|
| 2018 |
|
| 2019 |
|
| Opened |
|
| Closed |
|
| 2019 |
| ||||||||
Urban Outfitters |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
| 180 |
|
|
| 1 |
|
|
| — |
|
|
| 181 |
|
|
| 178 |
|
|
| — |
|
|
| — |
|
|
| 178 |
|
Canada |
|
| 18 |
|
|
| — |
|
|
| — |
|
|
| 18 |
|
|
| 17 |
|
|
| — |
|
|
| — |
|
|
| 17 |
|
Europe |
|
| 47 |
|
|
| 3 |
|
|
| (1 | ) |
|
| 49 |
|
|
| 50 |
|
|
| 1 |
|
|
| — |
|
|
| 51 |
|
Urban Outfitters Global Total |
|
| 245 |
|
|
| 4 |
|
|
| (1 | ) |
|
| 248 |
|
|
| 245 |
|
|
| 1 |
|
|
| — |
|
|
| 246 |
|
Anthropologie Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
| 204 |
|
|
| 3 |
|
|
| (2 | ) |
|
| 205 |
|
|
| 204 |
|
|
| — |
|
|
| (1 | ) |
|
| 203 |
|
Canada |
|
| 12 |
|
|
| — |
|
|
| — |
|
|
| 12 |
|
|
| 12 |
|
|
| — |
|
|
| (1 | ) |
|
| 11 |
|
Europe |
|
| 10 |
|
|
| 1 |
|
|
| — |
|
|
| 11 |
|
|
| 11 |
|
|
| 3 |
|
|
| — |
|
|
| 14 |
|
Anthropologie Group Global Total |
|
| 226 |
|
|
| 4 |
|
|
| (2 | ) |
|
| 228 |
|
|
| 227 |
|
|
| 3 |
|
|
| (2 | ) |
|
| 228 |
|
Free People |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
| 126 |
|
|
| 3 |
|
|
| (1 | ) |
|
| 128 |
|
|
| 127 |
|
|
| 2 |
|
|
| (1 | ) |
|
| 128 |
|
Canada |
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| 6 |
|
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| 6 |
|
Europe |
|
| 2 |
|
|
| 1 |
|
|
| — |
|
|
| 3 |
| ||||||||||||||||
Free People Global Total |
|
| 132 |
|
|
| 3 |
|
|
| (1 | ) |
|
| 134 |
|
|
| 135 |
|
|
| 3 |
|
|
| (1 | ) |
|
| 137 |
|
Food and Beverage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
| 10 |
|
|
| 3 |
|
|
| — |
|
|
| 13 |
|
|
| 13 |
|
|
| — |
|
|
| (2 | ) |
|
| 11 |
|
Food and Beverage Total |
|
| 10 |
|
|
| 3 |
|
|
| — |
|
|
| 13 |
|
|
| 13 |
|
|
| — |
|
|
| (2 | ) |
|
| 11 |
|
Total Company-Owned Stores |
|
| 613 |
|
|
| 14 |
|
|
| (4 | ) |
|
| 623 |
|
|
| 620 |
|
|
| 7 |
|
|
| (5 | ) |
|
| 622 |
|
Franchisee-Owned Stores (1) |
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| 3 |
|
|
| 5 |
|
|
| 1 |
|
|
| — |
|
|
| 6 |
|
Total URBN |
|
| 613 |
|
|
| 17 |
|
|
| (4 | ) |
|
| 626 |
|
|
| 625 |
|
|
| 8 |
|
|
| (5 | ) |
|
| 628 |
|
| (1) | Franchisee-owned stores are located in Israel. |
Selling square footage by brand as of OctoberJuly 31, 20182019 and October 31, 20172018 was as follows:
|
| October 31, |
|
| October 31, |
|
|
|
|
|
| July 31, |
|
| July 31, |
|
|
|
|
| ||||
|
| 2018 |
|
| 2017 |
|
| Change |
|
| 2019 |
|
| 2018 |
|
| Change |
| ||||||
Selling square footage (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Urban Outfitters |
|
| 2,222 |
|
|
| 2,202 |
|
|
| 0.9 | % |
|
| 2,203 |
|
|
| 2,208 |
|
|
| -0.2 | % |
Anthropologie Group |
|
| 1,794 |
|
|
| 1,733 |
|
|
| 3.5 | % |
|
| 1,782 |
|
|
| 1,750 |
|
|
| 1.8 | % |
Free People |
|
| 297 |
|
|
| 287 |
|
|
| 3.5 | % |
|
| 306 |
|
|
| 298 |
|
|
| 2.7 | % |
Total URBN (1) |
|
| 4,313 |
|
|
| 4,222 |
|
|
| 2.2 | % |
|
| 4,291 |
|
|
| 4,256 |
|
|
| 0.8 | % |
| (1) | Food and Beverage restaurants and franchisee-owned stores are not included in selling square footage. |
We plan to open approximately 18 new Company-owned stores during fiscal 2019, including five Urban Outfitters stores, four Anthropologie Group stores, six Free People stores and three Food and Beverage restaurants. We plan to close approximately 12 Company-owned stores during fiscal 2019, including five Urban Outfitters stores, four Anthropologie Group stores and three Free People stores, all due to lease expirations. We plan to open four franchisee-owned stores during fiscal 2019, including three Urban Outfitters franchisee-owned stores and one Anthropologie franchisee-owned store. Within the United States and Canada, we are at or close to our desired maximum store count for the Urban Outfitters, Anthropologie and Free People brands. We plan for future store growth for all three brands to come from expansion internationally, which may include opening stores in new and existing markets or entering into additional franchise or joint venture agreements oragreements. We plan for future digital channel growth to come from expansion domestically and internationally, including enhancing our presence in third-party digital marketplaces, includingsuch as Tmall in China and through our franchise partners. The Company is currently operatesparty to a franchise agreement for franchise locations in Israel and in the third quarter of fiscal 2019 signed a second franchise agreement to open stores in other Middle Eastern countries in fiscal 2020.
Projected openings and closings for fiscal 2020 are as follows:
|
| January 31, |
|
| Projected |
|
| Projected |
|
| January 31, |
| ||||
|
| 2019 |
|
| Openings |
|
| Closings |
|
| 2020 |
| ||||
Urban Outfitters |
|
| 245 |
|
|
| 8 |
|
|
| (4 | ) |
|
| 249 |
|
Anthropologie Group |
|
| 227 |
|
|
| 8 |
|
|
| (7 | ) |
|
| 228 |
|
Free People |
|
| 135 |
|
|
| 10 |
|
|
| (1 | ) |
|
| 144 |
|
Food and Beverage |
|
| 13 |
|
|
| — |
|
|
| (2 | ) |
|
| 11 |
|
Total Company-Owned Stores |
|
| 620 |
|
|
| 26 |
|
|
| (14 | ) |
|
| 632 |
|
Franchisee-Owned Stores |
|
| 5 |
|
|
| 2 |
|
|
| — |
|
|
| 7 |
|
Total URBN |
|
| 625 |
|
|
| 28 |
|
|
| (14 | ) |
|
| 639 |
|
Wholesale Segment
Our Wholesale segment consists of the Free People, Anthropologie and Urban Outfitters brands that sell through approximately 2,1002,200 department and specialty stores worldwide, third-party digital businesses and our Retail segment. The Wholesale segment primarily designs, develops and markets young women’s contemporary casual apparel, intimates, FP Movement activewear and shoes under the Free People brand, home goods including gifts, tabletop and textiles under the Anthropologie brand and the BDG apparel collection under the Urban Outfitters brand. The Anthropologie wholesale division was established in the third quarter of fiscal 2018 and the Urban Outfitters wholesale division was established in the third quarter of fiscal 2019. Our Wholesale segment net sales accounted for approximately 9.4%9.1% of consolidated net sales for eachthe six months ended July 31, 2019, compared to 9.2% for the comparable period in fiscal 2019.
Subscription Segment
Our Subscription segment consists of the nine months ended October 31, 2018Nuuly brand, which is a monthly women’s apparel subscription rental service that launched on July 30, 2019. For a monthly fee, Nuuly subscribers canselect from a wide selection of the Company’s own brands, third-party labels and October 31, 2017.one-of-a-kind vintage pieces for rent via a custom-built, digital platform. Subscribers select their styles each month, wear them as often as they like, then swap into new styles the following month, infusing freshness and variety into their wardrobes. Subscribers are also able to purchase the product being rented.
Critical Accounting Policies and Estimates
Our Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States. These generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses during the reporting period.
Our senior management has reviewed the critical accounting policies and estimates with the Audit Committee of our Board of Directors. Our significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the Notes to our Consolidated Financial Statements for the fiscal year ended January 31, 2018,2019, which are included in our Annual Report on Form 10-K filed with the SEC on April 2, 2018.1, 2019. Critical accounting policies are those that are most important to the portrayal of our financial condition, results of operations and cash flows and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. If actual results were to differ significantly from estimates made, the reported results could be materially affected. We are not currently aware of any reasonably likely events or circumstances that would cause our actual results to be materially different from our estimates. We adopted the new accounting standards related to revenue recognition and intra-entity asset transfersleases on February 1, 2018,2019, which changed certain accounting policies (see Note 2, “Recent Accounting Pronouncements,” of
the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q). Other than the adoption of the new accounting standards, there have been no significant changes to our critical accounting policies during the ninesix months ended OctoberJuly 31, 2018.2019.
Results of Operations
As a Percentage of Net Sales
The following table sets forth, for the periods indicated, the percentage of our net sales represented by certain income statement data and the change in certain income statement data from period to period. This table should be read in conjunction with the discussion that follows:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Month Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| October 31, |
|
| October 31, |
|
| July 31, |
|
| July 31, |
| ||||||||||||||||||||
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
Net sales |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
Cost of sales |
|
| 65.3 |
|
|
| 66.6 |
|
|
| 65.5 |
|
|
| 67.0 |
|
|
| 67.2 |
|
|
| 64.1 |
|
|
| 68.0 |
|
|
| 65.6 |
|
Gross profit |
|
| 34.7 |
|
|
| 33.4 |
|
|
| 34.5 |
|
|
| 33.0 |
|
|
| 32.8 |
|
|
| 35.9 |
|
|
| 32.0 |
|
|
| 34.4 |
|
Selling, general and administrative expenses |
|
| 24.8 |
|
|
| 25.2 |
|
|
| 25.0 |
|
|
| 26.3 |
|
|
| 24.7 |
|
|
| 24.1 |
|
|
| 25.5 |
|
|
| 25.2 |
|
Income from operations |
|
| 9.9 |
|
|
| 8.2 |
|
|
| 9.5 |
|
|
| 6.7 |
|
|
| 8.1 |
|
|
| 11.8 |
|
|
| 6.5 |
|
|
| 9.2 |
|
Other income (expense), net |
|
| 0.1 |
|
| (0.1) |
|
|
| 0.1 |
|
|
| 0.0 |
| |||||||||||||||||
Other income, net |
|
| 0.4 |
|
|
| 0.1 |
|
|
| 0.3 |
|
|
| 0.1 |
| ||||||||||||||||
Income before income taxes |
|
| 10.0 |
|
|
| 8.1 |
|
|
| 9.6 |
|
|
| 6.7 |
|
|
| 8.5 |
|
|
| 11.9 |
|
|
| 6.8 |
|
|
| 9.3 |
|
Income tax expense |
|
| 2.0 |
|
|
| 3.0 |
|
|
| 2.1 |
|
|
| 2.5 |
|
|
| 2.2 |
|
|
| 2.5 |
|
|
| 1.7 |
|
|
| 2.0 |
|
Net income |
|
| 8.0 | % |
|
| 5.1 | % |
|
| 7.5 | % |
|
| 4.2 | % |
|
| 6.3 | % |
|
| 9.4 | % |
|
| 5.1 | % |
|
| 7.3 | % |
Three Months Ended OctoberJuly 31, 20182019 Compared To Three Months Ended OctoberJuly 31, 20172018
Net sales in the thirdsecond quarter of fiscal 20192020 were $973.5$962.3 million, compared to $892.8$992.5 million in the thirdsecond quarter of fiscal 2018.2019. The $80.7$30.2 million increasedecrease was attributable to a $70.3$23.3 million, or 8.7%2.6%, increasedecrease in Retail segment net sales and a $10.4$6.9 million, or 12.4%7.5%, increasedecrease in our Wholesale segment net sales. Retail segment net sales for the thirdsecond quarter of fiscal 20192020 accounted for 90.3%91.3% of total net sales compared to 90.6%90.9% of total net sales in the thirdsecond quarter of fiscal 2018.2019.
The increasedecrease in our Retail segment net sales during the thirdsecond quarter of fiscal 20192020 was due to an increasea decrease of $59.9$25.7 million, or 7.7%3.0%, in Retail segment comparable net sales, which includes our digital channel, andpartially offset by an increase of $10.4$2.4 million in non-comparable net sales, including the impact of foreign currency translation and new store net sales. Retail segment comparable net sales increased 12.3%5.6% at Free People 7.7%and decreased 3.3% at the Anthropologie Group and 6.5%5.3% at
Urban Outfitters. The increasedecrease in Retail segment comparable net sales was driven by continuednegative comparable store net sales, partially offset by growth in the digital channelchannel. Retail segment comparable net sales decreased in both North America and positiveEurope. Negative comparable store net sales.sales resulted from a decrease in transactions, average unit selling price and traffic, partially offset by an increase in units per transaction. The digital channel net sales increase was driven by increasesan increase in sessions and conversion rate, while units per transaction and average order value sessions and conversion rate. Positive comparable store net sales resulted from increases in average unit selling price and units per transaction, partially offset by a decrease in transactions. Store traffic for the quarter decreased. The increase in net sales attributable to non-comparable sales during the three months ended October 31, 2018 was primarily due to the net impact of opening 2021 new Company-owned stores and restaurants and closing nine 15 Company-ownedstores and restaurants since the prior comparable period. Thus far duringperiod, partially offset by the fourth quarterimpact of fiscal 2019, comparable Retail segment net sales are mid single-digit positive.foreign currency translation.
The increasedecrease in Wholesale segment net sales in the thirdsecond quarter of fiscal 2020, as compared to the second quarter of fiscal 2019, was primarily due to a 9.8% decrease for the Free People brand, as compareda result of lower sales to North American department stores. This decrease was partially offset by an increase of $1.0 million in Anthropologie Home sales and $0.9 million of Urban Outfitters BDG sales. The Urban Outfitters wholesale division was launched in the third quarter of fiscal 2018, was due to an increase of 8.4% for the Free People brand, primarily resulting from an increase in domestic sales to department stores, specialty stores and digital businesses. These increases resulted from growth in several categories, including women’s apparel, intimates and FP Movement activewear, as well as from the recently-launched Anthropologie home goods wholesale business and the launch of the Urban Outfitters BDG apparel collection wholesale business.2019.
Gross profit percentage for the thirdsecond quarter of fiscal 2019 increased2020 decreased to 34.7%32.8% of net sales, from 33.4%35.9% of net sales in the comparable quarter in fiscal 2018.2019. Gross profit increaseddecreased to $337.7$315.9 million in the second quarter of fiscal 2020 from $355.8 million in the second quarter of fiscal 2019. The decrease in gross profit percentage was driven by higher markdowns, deleverage in delivery and logistics expenses and store occupancy deleverage. The higher markdowns were largely driven by underperforming women’s apparel at the Anthropologie and Urban Outfitters brands. The deleverage in delivery and logistics expenses was primarily due to the increase in penetration of the digital channel. The deleverage in store occupancy was due to negative store net sales. The Company expects that its gross profit percentage will decline in the third quarter of fiscal
2020 compared to fiscal 2019 as a result of higher markdowns and deleverage in delivery and logistics expenses, as well as from $297.7 million in the third quarterlaunch of fiscal 2018. The increase in gross profit percentage was primarily driven by lower markdowns at all three brandsNuuly and leverage in store occupancy cost duethe transition to increases in Retail segment comparable net sales. managing furniture and nonsortable distribution from a third-party logistics provider to an internal operation.
Total inventory at OctoberJuly 31, 2019 as compared to July 31, 2018, increased by $1.7$64.4 million, or 0.4%17.2%, to $451.7 million from $450.0 million at October 31, 2017.$440.1 million. Comparable Retail segment inventory was flat.increased 4.9% at cost, with the remainder of the increase in Retail segment inventory primarily related to an increase in inventory in transit. Wholesale segment inventory increased 35.9%.
Selling, general and administrative expenses decreased by 0.5%, to $237.8 million, in the second quarter of fiscal 2020, compared to $239.0 million in the second quarter of fiscal 2019. Selling, general and administrative expenses as a percentage of net sales decreased duringincreased in the thirdsecond quarter of fiscal 20192020 to 24.8%24.7% of net sales, compared to 25.2%24.1% of net sales for the thirdsecond quarter of fiscal 2018. This2019. The percentage decreaseincrease was primarily driven by the net sales growth. Selling, general and administrative expenses increased by $16.5 million, or 7.3%, to $241.3 million in the third quarter of fiscal 2019, compared to the third quarter of fiscal 2018. The dollar growth in selling, general and administrative expenses was primarily due to increased direct selling and marketing expenses to support and driveour digital sales growth as well as the increase in Retail segment net sales and higher bonus and share-based compensation expense.launch of Nuuly.
Income from operations increaseddecreased to 9.9%8.1% of net sales, or $96.4$78.1 million, for the thirdsecond quarter of fiscal 20192020 compared to 8.2%11.8% of net sales, or $72.9$116.9 million, for the thirdsecond quarter of fiscal 2018.2019.
Our effective tax rate for the thirdsecond quarter of fiscal 20192020 was 20.6%26.0% of income before income taxes compared to 37.4%21.7% of income before income taxes in the thirdsecond quarter of fiscal 2018.2019. The decreaseincrease in the effective tax rate was primarily due to the lower federal statutory rate resulting fromratio of foreign taxable profits to global taxable profits and the U.S. Tax Cuts and Jobs Act and theprior year favorable impact of share-based award activity and certain other discrete items.equity activity.
NineSix Months Ended OctoberJuly 31, 20182019 Compared To NineSix Months Ended OctoberJuly 31, 20172018
Net sales for the ninesix months ended OctoberJuly 31, 20182019 were $2.82$1.83 billion, compared to $2.53$1.85 billion in the comparable period of fiscal 2018.2019. The $294.8$21.4 million increasedecrease was attributable to a $266.9$16.3 million, or 11.7%1.0%, increasedecrease in Retail segment net sales and a $27.9$5.1 million, or 11.7%3.0%, increasedecrease in Wholesale segment net sales. Retail segment net sales for the ninesix months ended OctoberJuly 31, 20182019 accounted for 90.6%90.9% of total net sales compared to 90.6%90.8% of total net sales in the ninesix months ended OctoberJuly 31, 2017.2018.
The increasedecrease in our Retail segment net sales during the first ninesix months of fiscal 20192020 was due to an increasea decrease of $225.1$19.8 million, or 10.2%1.2%, in Retail segment comparable net sales, which includes our digital channel, andpartially offset by an increase of $41.8$3.5 million in non-comparable net sales, including the impact of foreign currency translation and new store net sales. Retail segment comparable net sales increased 14.7%3.9% at Free People 9.7% at Urban Outfitters and 9.6%decreased 1.2% at the Anthropologie Group.Group and 2.9% at Urban Outfitters. The increasedecrease in Retail segment comparable net sales was driven by continuednegative comparable store net sales, partially offset by growth in the digital channelchannel. Retail segment comparable net sales decreased in both North America and positiveEurope. Negative comparable store net sales.sales resulted from a decrease in transactions, average unit selling price and traffic, partially offset by an increase in units per transaction. The digital channel net sales increase was driven by increasesan increase in sessions and conversion rate, while units per transaction and average order value sessions and conversion rate. Positive comparable store net sales resulted from increased average unit selling price and units per transaction, partially offset by a decrease in transactions. Store traffic for the first nine months of fiscal 2019 was flat.decreased. The increase in net sales attributable to non-comparable sales during the nine months ended October 31, 2018 was primarily due to the net impact of opening 32 25new Company-owned stores and restaurants and closing 15 16Company-ownedstores and restaurants since the prior comparable period.period, partially offset by the impact of foreign currency translation.
The increasedecrease in Wholesale segment net sales in the first ninesix months of fiscal 2019,2020, as compared to the first ninesix months of fiscal 2018,2019, was due to an increase of 9.0%a 4.8% decrease for the Free People brand, primarily resulting fromas a result of lower sales to North American department stores. This decrease was partially offset by an increase of $1.0 million in domesticAnthropologie Home sales to department stores, specialty stores and digital businesses. These increases resulted from growth$2.1 million in several categories, including women’s apparel, intimates and FP Movement activewear, as well as from the recently-launched Anthropologie home goods wholesale business and the launch of the Urban Outfitters BDG apparel collectionsales. The Urban Outfitters wholesale business.division was launched in the third quarter of fiscal 2019.
Gross profit percentage for the first ninesix months of fiscal 2019 increased2020 decreased to 34.5%32.0% of net sales, from 33.0%34.4% of net sales in the comparable period in fiscal 2018.2019. Gross profit increaseddecreased to $974.2$584.9 million for the first ninesix months of fiscal 20192020 from $834.9$636.5 million in the comparable period in fiscal 2018.2019. The increasedecrease in gross profit percentage was primarily driven by lowerhigher markdowns, deleverage in delivery and logistics expenses and store occupancy deleverage. The higher markdowns were largely driven by underperforming women’s apparel at all three brandsthe Anthropologie and leverageUrban Outfitters brands. The deleverage in delivery and logistics expenses was primarily due to the increase in penetration of the digital channel. The deleverage in store occupancy costwas due to increases in Retail segment comparablenegative store net sales.
Selling, general and administrative expenses increased by $1.1 million, or 0.2%, in the first six months of fiscal 2020, compared to the first six months of fiscal 2019. Selling, general and administrative expenses as a percentage of net sales decreased duringincreased in the first ninesix months of fiscal 20192020 to 25.0%25.5% of net sales, compared to 26.3%25.2% of net sales for the first ninesix months of fiscal 2018. This2019. The percentage decreaseincrease was primarily driven by the net sales growth, continued savings associated with the fiscal 2018 store reorganization project and the nonrecurring store reorganization expenses incurred in the prior year. Selling, general and administrative expenses increased by $41.3 million, or 6.2%, to $707.1 million in the first nine months of fiscal 2019, compared to the first nine months of fiscal 2018. The dollar growth in selling, general and administrative expenses was primarily due to increased direct selling and marketing expenses to support and driveour digital sales growth as well as the increase in Retail segment net sales and higher bonus and share-based compensation expense.launch of Nuuly.
Income from operations increaseddecreased to 9.5%6.5% of net sales, or $267.1$118.1 million, for the first ninesix months of fiscal 20192020 compared to 6.7%9.2% of net sales, or $169.1$170.7 million, for the first ninesix months of fiscal 2018.2019.
Our effective tax rate for the first ninesix months of fiscal 20192020 was 21.7%25.2% of income before income taxes compared to 37.2%22.3% of income before income taxes in the first ninesix months of fiscal 2018.2019. The decreaseincrease in the effective tax rate was primarily due to the lower federal statutory rate resulting fromratio of foreign taxable profits to global taxable profits and the U.S. Tax Cuts and Jobs Act and theprior year favorable impact of share-based award activity and certain other discrete items.equity activity.
Liquidity and Capital Resources
Cash, cash equivalents and marketable securities were $602.4$412.3 million as of OctoberJuly 31, 2018,2019, as compared to $506.0$694.8 million as of January 31, 20182019 and $369.2$649.4 million as of OctoberJuly 31, 2017.2018. During the first ninesix months of fiscal 2019,2020, we generated $270.2$61.3 million in cash from operations, and invested $90.0$116.5 million in property and equipment.equipment and repurchased $217.4 million common shares. Our working capital was $793.8$374.3 million at OctoberJuly 31, 20182019 compared to $618.5$816.1 million at January 31, 20182019 and $544.2$771.8 million at OctoberJuly 31, 2017.2018. Working capital as of July 31, 2019 was negatively impacted by $209.1 million for the current portion of operating lease liabilities due to the February 1, 2019 adoption of an accounting standards update that amended the accounting standards for lease accounting (see Note 2, “Recent Accounting Pronouncements,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further discussion). Working capital was also negatively impacted by the use of cash and cash equivalents and marketable securities used to repurchase our common shares in fiscal 2019 and the first six months of fiscal 2020 and fund our capital projects.
During the last two years, we have satisfied our cash requirements primarily through our cash flow from operating activities. Our primary uses of cash have been to repurchase our common shares, open new stores, purchase inventory, fund store operations and expand our home offices and fulfillment centers. We have also continued to invest in our omni-channel capabilities and technology.
Cash Flows from Operating Activities
Cash provided by operating activities during the first ninesix months of fiscal 2019 increased2020 decreased by $100.6$157.5 million to $270.2$61.3 million from $169.6$218.8 million in the first ninesix months of fiscal 2018.2019. For both periods, our major source of cash from operations was merchandise sales and our primary outflow of cash from operations was for the payment of operational costs. The period over period increasedecrease in cash flows from operations was primarily due to compensation-related disbursements, higher inventory levels and lower net income.
Cash Flows from Investing Activities
Cash used in investing activities during the first ninesix months of fiscal 2019 increased2020 decreased by $130.7$63.3 million to $159.0$31.1 million from $28.3$94.4 million in the first ninesix months of fiscal 2018.2019. Cash used in investing activities in both periods primarily related to purchases of marketable securities and property and equipment, partially offset by the sales and maturities of marketable securities. Net liquidations of our marketable securities portfolio in the first six months of fiscal 2020 were used primarily to fund repurchases of our common shares and purchases of property and equipment. Cash paid for property and equipment in the first ninesix months of fiscal 2020 and 2019 and 2018 was $90.0$116.5 million and $63.3$55.6 million, respectively, which was primarily used to construct new fulfillment centers, including the Nuuly fulfillment center, in the first six months of fiscal 2020 and expand our store base.base in fiscal 2019.
Cash Flows from Financing Activities
Cash used in financing activities during the first ninesix months of fiscal 2019 decreased by $105.12020 was a cash outflow of $221.9 million compared to $54.1 million from $159.2a cash inflow of $7.1 million in the first ninesix months of fiscal 2018.2019. Cash used in financing activities in the first ninesix months of fiscal 2019 and 20182020 primarily related to $57.5 million and $157.0 million, respectively, of repurchases of our common shares under our share repurchase program.programs. Cash provided by financing activities in the first six months of fiscal 2019 related to proceeds from the exercise of stock options, partially offset by share repurchases related to taxes for share-based awards.
See Note 6, “Debt,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding the Company’s debt.
Capital and Operating Expenditures
During fiscal 2019,2020, we plan to repurchase our common shares, construct andnew fulfillment centers, open approximately 1826 new Company-owned retail locations, expand or relocate certain existing retail locations, upgrade our systems, improve our capabilities in the digital channel, invest in omni-channel marketing, expandnew products, markets and brands (including the launch of the apparel subscription rental service Nuuly), open our fulfillment capabilities andnew European home office, purchase inventory for our Retailnew and Wholesaleexisting operating segments at appropriate levels appropriate to maintain our planned sales growth, upgrade our systems, improve and repurchase common shares.expand our digital capabilities and invest in omni-channel marketing. We believe that our new brand initiatives, new store openings, merchandise expansion programs, international growth opportunities and our marketing, social media, website and mobile initiatives are significant contributors to our Retail segment sales growth. During fiscal 2019,2020, we plan to continue our investment in these initiatives for all brands. We anticipate our capital expenditures during fiscal 20192020 to be approximately $120$250 million, alla significant portion of which will be to support new fulfillment and distribution centers in Bristol, Pennsylvania, Indiana, Pennsylvania and Europe. All fiscal 2020 capital expenditures are expected to be financed by cash flow from operating activities. We believe that our new store investments have the potential to generate positive cash flow within a year. We may also enter into one or more acquisitions or transactions related to the expansion of our brand offerings, including additional franchise and joint venture agreements. In the third quarter of fiscal 2019, we signed a second franchise agreement to open stores in Middle Eastern countries in fiscal 2020. We believe that our existing cash and cash equivalents, availability under our current credit facilities and future cash flows provided by operations will be sufficient to fund these initiatives.
Share Repurchases
See Note 9, “Shareholders’ Equity,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding the Company’s share repurchases.
Off-Balance Sheet Arrangements
As of and for the ninesix months ended OctoberJuly 31, 2018, except for operating leases entered into in the normal course of business,2019, we were not party to any material off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.
Other Matters
See Note 2, “Recent Accounting Pronouncements,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a description of recently adopted and issued accounting pronouncements.
There have been no material changes to our quantitative or qualitative disclosures found in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2018.
2019.
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed by us in our Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported on a timely basis and that such information is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate, to allow timely decisions regarding the required disclosure. As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of our management, including the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the design and operation of these disclosure controls and
procedures. Based on that evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures were effective.
During the six months ended July 31, 2019, we implemented changes to our controls as part of the adoption of the accounting standards update that amended the existing accounting standards for lease accounting. These changes included new processes to evaluate and account for leases. There have beenwere no other changes in our internal controls over financial reporting during the quartersix months ended OctoberJuly 31, 20182019 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
OTHER INFORMATION
We are party to various legal proceedings arising from normal business activities. Management believes that the ultimate resolution of these matters will not have a material adverse effect on our financial position, results of operations or cash flows.
There have been no material changes in our risk factors since January 31, 2018.2019. Please refer to our Annual Report on Form 10-K for the fiscal year ended January 31, 2018,2019, filed with the SEC on April 2, 2018,1, 2019, for our risk factors.
Issuer Purchase of Equity Securities
A summary of the repurchase activity under the Company’s share repurchase programprograms for the quarter ended OctoberJuly 31, 20182019 is as follows:
Period |
| Total Number of Shares Purchased (1) |
|
| Average Price Paid Per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2) |
| ||||
August 1, 2018 through August 31, 2018 |
|
|
|
|
| $ | — |
|
|
| — |
|
|
| — |
|
September 1, 2018 through September 30, 2018 |
|
|
|
|
| $ | — |
|
|
| — |
|
|
| — |
|
October 1, 2018 through October 31, 2018 |
|
| 1,500,000 |
|
| $ | 38.34 |
|
|
| 1,500,000 |
|
|
| 16,402,153 |
|
Total Fiscal 2019 Third Quarter |
|
| 1,500,000 |
|
|
|
|
|
|
| 1,500,000 |
|
|
| 16,402,153 |
|
Period |
| Total Number of Shares Purchased (1) |
|
| Average Price Paid per share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2) |
| ||||
May 1, 2019 through May 31, 2019 |
|
| 5,637,369 |
|
| $ | 25.93 |
|
|
| 5,637,369 |
|
|
| 6,333,957 |
|
June 1, 2019 through June 30, 2019 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 26,333,957 |
|
July 1, 2019 through July 31, 2019 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 26,333,957 |
|
Total Fiscal 2020 Second Quarter |
|
| 5,637,369 |
|
|
|
|
|
|
| 5,637,369 |
|
|
| 26,333,957 |
|
(1) | In addition to the shares repurchased under the share repurchase program, for the quarter ended |
(2) | On August 22, 2017, the Company’s Board of Directors authorized the repurchase of 20,000,000 shares under a share repurchase program. On June 4, 2019, the Company’s Board of Directors authorized the repurchase of 20,000,000 shares under a new share repurchase program. |
Exhibit Number |
| Description
|
|
|
|
3.1 |
| |
|
|
|
3.2 |
| |
|
|
|
3.3 |
| |
|
|
|
3.4 |
| |
|
|
|
31.1* |
| Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer. |
|
|
|
31.2* |
| Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer. |
|
|
|
32.1** |
| Section 1350 Certification of the Principal Executive Officer. |
|
|
|
32.2** |
| Section 1350 Certification of the Principal Financial Officer. |
|
|
|
101.INS* |
| Inline XBRL Instance Document. |
|
|
|
101.SCH* |
| Inline XBRL Taxonomy Extension Schema. |
|
|
|
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase. |
|
|
|
101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase. |
|
|
|
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase. |
|
|
|
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase. |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* | Filed herewith |
** | Furnished herewith |
Attached as Exhibits 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the three and ninesix months ended OctoberJuly 31, 2018,2019, filed with the Securities and Exchange Commission on December 10, 2018,September 9, 2019, formatted in inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Income; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated StatementStatements of Shareholders’ Equity; (v) the Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements.
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. | |
|
|
|
|
Date: | By: |
| /s/ RICHARD A. HAYNE |
|
|
| Richard A. Hayne |
|
|
| Chief Executive Officer |
|
| URBAN OUTFITTERS, INC. | |
|
|
|
|
Date: | By: |
| /s/ FRANCIS J. CONFORTI |
|
|
| Francis J. Conforti |
|
|
| Chief Financial Officer |
3031