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 October 31, 20202021
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—97,786,38197,883,862 shares outstanding on December 3, 2020.7, 2021.
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. |
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| 6 | |
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| 7 | |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. | 32 | |
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Item 4. | 32 | |
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PART II OTHER INFORMATION | ||
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Item 1. |
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Item 1A. |
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Item |
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Item 5. | 33 | |
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Item 6. |
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PART I
FINANCIAL INFORMATION
Item 1. | Financial Statements |
URBAN OUTFITTERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
(unaudited)
|
| October 31, |
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| January 31, |
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| October 31, |
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| October 31, |
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| January 31, |
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| October 31, |
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| 2020 |
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| 2020 |
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| 2019 |
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| 2021 |
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| 2021 |
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| 2020 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
| $ | 624,945 |
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| $ | 221,839 |
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| $ | 167,070 |
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| $ | 236,354 |
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| $ | 395,635 |
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| $ | 624,945 |
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Marketable securities |
|
| 2 |
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| 211,453 |
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| 170,697 |
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| 188,375 |
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| 174,695 |
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| 2 |
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Accounts receivable, net of allowance for doubtful accounts of $3,098, $880 and $1,084, respectively |
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| 87,187 |
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| 88,288 |
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| 99,971 |
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Accounts receivable, net of allowance for doubtful accounts of $1,313, $4,028 and $3,098, respectively |
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| 114,208 |
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| 89,952 |
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| 87,187 |
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Inventory |
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| 489,234 |
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| 409,534 |
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| 531,565 |
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| 627,103 |
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| 389,618 |
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| 489,234 |
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Prepaid expenses and other current assets |
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| 170,193 |
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| 122,282 |
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| 143,710 |
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| 203,213 |
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| 173,432 |
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| 170,193 |
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Total current assets |
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| 1,371,561 |
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| 1,053,396 |
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| 1,113,013 |
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| 1,369,253 |
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| 1,223,332 |
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| 1,371,561 |
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Property and equipment, net |
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| 930,564 |
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| 890,032 |
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| 890,538 |
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| 1,088,287 |
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| 967,422 |
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| 930,564 |
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Operating lease right-of-use assets |
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| 1,101,495 |
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| 1,170,531 |
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| 1,119,280 |
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| 1,030,776 |
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| 1,114,762 |
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| 1,101,495 |
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Marketable securities |
|
| 9,350 |
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| 97,096 |
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| 83,121 |
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| 269,780 |
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| 123,662 |
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| 9,350 |
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Deferred income taxes and other assets |
|
| 117,705 |
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| 104,578 |
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| 114,641 |
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| 132,510 |
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| 117,167 |
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| 117,705 |
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Total Assets |
| $ | 3,530,675 |
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| $ | 3,315,633 |
|
| $ | 3,320,593 |
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| $ | 3,890,606 |
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| $ | 3,546,345 |
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| $ | 3,530,675 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
| $ | 349,793 |
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| $ | 167,871 |
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| $ | 232,901 |
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| $ | 315,481 |
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| $ | 237,386 |
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| $ | 349,793 |
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Current portion of operating lease liabilities |
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| 255,122 |
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| 221,593 |
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| 213,911 |
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| 240,074 |
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| 254,703 |
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| 255,122 |
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Accrued expenses, accrued compensation and other current liabilities |
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| 341,983 |
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| 249,306 |
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| 264,240 |
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| 493,446 |
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| 414,043 |
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| 341,983 |
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Total current liabilities |
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| 946,898 |
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| 638,770 |
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| 711,052 |
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| 1,049,001 |
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| 906,132 |
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| 946,898 |
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Non-current portion of operating lease liabilities |
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| 1,069,434 |
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| 1,137,495 |
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| 1,119,340 |
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| 986,026 |
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| 1,074,009 |
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| 1,069,434 |
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Long-term debt |
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| — |
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| — |
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| — |
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| — |
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| — |
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| — |
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Deferred rent and other liabilities |
|
| 83,024 |
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| 84,013 |
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| 60,348 |
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| 108,848 |
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| 88,846 |
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| 83,024 |
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Total Liabilities |
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| 2,099,356 |
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| 1,860,278 |
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| 1,890,740 |
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| 2,143,875 |
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| 2,068,987 |
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| 2,099,356 |
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Commitments and contingencies (see Note 12) |
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Shareholders’ equity: |
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Preferred shares; $.0001 par value, 10,000,000 shares authorized, NaN issued |
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| — |
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| — |
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| — |
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| — |
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| — |
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| — |
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Common shares; $.0001 par value, 200,000,000 shares authorized, 97,786,381, 97,976,815 and 97,975,343 shares issued and outstanding, respectively |
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| 10 |
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| 10 |
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| 10 |
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Common shares; $.0001 par value, 200,000,000 shares authorized, 97,863,862, 97,815,985 and 97,786,381 shares issued and outstanding, respectively |
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| 10 |
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| 10 |
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| 10 |
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Additional paid-in-capital |
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| 15,669 |
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| 9,477 |
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| 5,201 |
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| 18,671 |
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| 19,360 |
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| 15,669 |
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Retained earnings |
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| 1,446,534 |
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| 1,473,872 |
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| 1,454,333 |
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| 1,744,772 |
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| 1,475,108 |
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| 1,446,534 |
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Accumulated other comprehensive loss |
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| (30,894 | ) |
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| (28,004 | ) |
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| (29,691 | ) |
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| (16,722 | ) |
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| (17,120 | ) |
|
| (30,894 | ) |
Total Shareholders’ Equity |
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| 1,431,319 |
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| 1,455,355 |
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| 1,429,853 |
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| 1,746,731 |
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| 1,477,358 |
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| 1,431,319 |
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Total Liabilities and Shareholders’ Equity |
| $ | 3,530,675 |
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| $ | 3,315,633 |
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| $ | 3,320,593 |
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| $ | 3,890,606 |
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| $ | 3,546,345 |
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| $ | 3,530,675 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
URBAN OUTFITTERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except share and per share data)
(unaudited)
|
| Three Months Ended |
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| Nine Months Ended |
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| Three Months Ended |
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| Nine Months Ended |
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| October 31, |
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| October 31, |
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| October 31, |
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| October 31, |
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| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
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| 2021 |
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| 2020 |
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| 2021 |
|
| 2020 |
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Net sales |
| $ | 969,607 |
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| $ | 987,469 |
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| $ | 2,361,356 |
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| $ | 2,814,211 |
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| $ | 1,131,424 |
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| $ | 969,607 |
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| $ | 3,216,564 |
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| $ | 2,361,356 |
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Cost of sales (excluding store impairment) |
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| 646,666 |
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| 666,367 |
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| 1,774,006 |
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| 1,908,178 |
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| 740,686 |
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| 646,666 |
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| 2,089,910 |
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| 1,774,006 |
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Store impairment |
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| — |
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| — |
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| 14,528 |
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| — |
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| — |
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| — |
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| — |
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| 14,528 |
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Gross profit |
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| 322,941 |
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| 321,102 |
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| 572,822 |
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| 906,033 |
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| 390,738 |
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| 322,941 |
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| 1,126,654 |
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| 572,822 |
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Selling, general and administrative expenses |
|
| 224,433 |
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| 245,833 |
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| 603,630 |
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| 712,683 |
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| 274,836 |
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| 224,433 |
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| 771,396 |
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| 603,630 |
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Income (loss) from operations |
|
| 98,508 |
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| 75,269 |
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| (30,808 | ) |
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| 193,350 |
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| 115,902 |
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| 98,508 |
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| 355,258 |
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|
| (30,808 | ) |
Other (loss) income, net |
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| (890 | ) |
|
| 576 |
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| (1,261 | ) |
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| 6,754 |
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Other loss, net |
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| (551 | ) |
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| (890 | ) |
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| (2,503 | ) |
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| (1,261 | ) | ||||||||||||||||
Income (loss) before income taxes |
|
| 97,618 |
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| 75,845 |
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| (32,069 | ) |
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| 200,104 |
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| 115,351 |
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| 97,618 |
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| 352,755 |
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|
| (32,069 | ) |
Income tax expense (benefit) |
|
| 20,914 |
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| 20,193 |
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| (4,731 | ) |
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| 51,547 |
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| 26,496 |
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| 20,914 |
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| 83,091 |
|
|
| (4,731 | ) |
Net income (loss) |
| $ | 76,704 |
|
| $ | 55,652 |
|
| $ | (27,338 | ) |
| $ | 148,557 |
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| $ | 88,855 |
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| $ | 76,704 |
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| $ | 269,664 |
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| $ | (27,338 | ) |
Net income (loss) per common share: |
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Basic |
| $ | 0.78 |
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| $ | 0.57 |
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| $ | (0.28 | ) |
| $ | 1.48 |
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| $ | 0.90 |
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| $ | 0.78 |
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| $ | 2.75 |
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| $ | (0.28 | ) |
Diluted |
| $ | 0.78 |
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| $ | 0.56 |
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| $ | (0.28 | ) |
| $ | 1.47 |
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| $ | 0.89 |
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| $ | 0.78 |
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| $ | 2.71 |
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| $ | (0.28 | ) |
Weighted-average common shares outstanding: |
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Basic |
|
| 97,784,661 |
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|
| 97,972,864 |
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|
| 97,823,948 |
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|
| 100,458,726 |
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|
| 98,202,399 |
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|
| 97,784,661 |
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|
| 98,209,796 |
|
|
| 97,823,948 |
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Diluted |
|
| 98,583,032 |
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|
| 98,628,169 |
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|
| 97,823,948 |
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|
| 101,147,025 |
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|
| 99,415,838 |
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|
| 98,583,032 |
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|
| 99,447,551 |
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|
| 97,823,948 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
URBAN OUTFITTERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in thousands)
(unaudited)
|
| Three Months Ended |
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| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
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|
| October 31, |
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| October 31, |
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| October 31, |
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| October 31, |
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|
| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
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| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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Net income (loss) |
| $ | 76,704 |
|
| $ | 55,652 |
|
| $ | (27,338 | ) |
| $ | 148,557 |
|
| $ | 88,855 |
|
| $ | 76,704 |
|
| $ | 269,664 |
|
| $ | (27,338 | ) |
Other comprehensive (loss) income: |
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Other comprehensive income (loss): |
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Foreign currency translation |
|
| (1,693 | ) |
|
| 7,420 |
|
|
| (2,545 | ) |
|
| (3,151 | ) |
|
| (2,605 | ) |
|
| (1,693 | ) |
|
| 1,423 |
|
|
| (2,545 | ) |
Change in unrealized gains (losses) on marketable securities, net of tax |
|
| 2 |
|
|
| 176 |
|
|
| (345 | ) |
|
| 563 |
|
|
| (1,029 | ) |
|
| 2 |
|
|
| (1,025 | ) |
|
| (345 | ) |
Total other comprehensive (loss) income |
|
| (1,691 | ) |
|
| 7,596 |
|
|
| (2,890 | ) |
|
| (2,588 | ) | ||||||||||||||||
Total other comprehensive income (loss) |
|
| (3,634 | ) |
|
| (1,691 | ) |
|
| 398 |
|
|
| (2,890 | ) | ||||||||||||||||
Comprehensive income (loss) |
| $ | 75,013 |
|
| $ | 63,248 |
|
| $ | (30,228 | ) |
| $ | 145,969 |
|
| $ | 85,221 |
|
| $ | 75,013 |
|
| $ | 270,062 |
|
| $ | (30,228 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
URBAN OUTFITTERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(amounts in thousands, except share data)
(unaudited)
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| Accumulated |
|
|
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| |
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| Common Shares |
|
| Additional |
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| Other |
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| Number of |
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| Par |
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| Paid-in |
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| Retained |
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| Comprehensive |
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| |||||
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| Shares |
|
| Value |
|
| Capital |
|
| Earnings |
|
| Loss |
|
| Total |
| ||||||
Balances as of July 31, 2021 |
|
| 98,357,090 |
|
| $ | 10 |
|
| $ | 26,581 |
|
| $ | 1,655,917 |
|
| $ | (13,088 | ) |
| $ | 1,669,420 |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 88,855 |
|
|
| (3,634 | ) |
|
| 85,221 |
|
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 7,100 |
|
|
| — |
|
|
| — |
|
|
| 7,100 |
|
Share-based awards |
|
| 9,998 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Share repurchases |
|
| (503,226 | ) |
|
| — |
|
|
| (15,010 | ) |
|
| — |
|
|
| — |
|
|
| (15,010 | ) |
Balances as of October 31, 2021 |
|
| 97,863,862 |
|
| $ | 10 |
|
| $ | 18,671 |
|
| $ | 1,744,772 |
|
| $ | (16,722 | ) |
| $ | 1,746,731 |
|
|
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|
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| Accumulated |
|
|
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| |
|
| Common Shares |
|
| Additional |
|
|
|
|
|
| Other |
|
|
|
|
| |||||||
|
| Number of |
|
| Par |
|
| Paid-in |
|
| Retained |
|
| Comprehensive |
|
|
|
|
| |||||
|
| Shares |
|
| Value |
|
| Capital |
|
| Earnings |
|
| Loss |
|
| Total |
| ||||||
Balances as of July 31, 2020 |
|
| 97,779,586 |
|
| $ | 10 |
|
| $ | 9,956 |
|
| $ | 1,369,830 |
|
| $ | (29,203 | ) |
| $ | 1,350,593 |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 76,704 |
|
|
| (1,691 | ) |
|
| 75,013 |
|
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 5,773 |
|
|
| — |
|
|
| — |
|
|
| 5,773 |
|
Share-based awards |
|
| 10,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Share repurchases |
|
| (3,205 | ) |
|
| — |
|
|
| (60 | ) |
|
| — |
|
|
| — |
|
|
| (60 | ) |
Balances as of October 31, 2020 |
|
| 97,786,381 |
|
| $ | 10 |
|
| $ | 15,669 |
|
| $ | 1,446,534 |
|
| $ | (30,894 | ) |
| $ | 1,431,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |
|
| Common Shares |
|
| Additional |
|
|
|
|
|
| Other |
|
|
|
|
| |||||||
|
| Number of |
|
| Par |
|
| Paid-in |
|
| Retained |
|
| Comprehensive |
|
|
|
|
| |||||
|
| Shares |
|
| Value |
|
| Capital |
|
| Earnings |
|
| Loss |
|
| Total |
| ||||||
Balances as of July 31, 2019 |
|
| 97,965,012 |
|
| $ | 10 |
|
| $ | — |
|
| $ | 1,398,681 |
|
| $ | (37,287 | ) |
| $ | 1,361,404 |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 55,652 |
|
|
| 7,596 |
|
|
| 63,248 |
|
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 5,346 |
|
|
| — |
|
|
| — |
|
|
| 5,346 |
|
Share-based awards |
|
| 16,669 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Share repurchases |
|
| (6,338 | ) |
|
| — |
|
|
| (145 | ) |
|
| — |
|
|
| — |
|
|
| (145 | ) |
Balances as of October 31, 2019 |
|
| 97,975,343 |
|
| $ | 10 |
|
| $ | 5,201 |
|
| $ | 1,454,333 |
|
| $ | (29,691 | ) |
| $ | 1,429,853 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
URBAN OUTFITTERS, INC.
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, 2021 |
|
| 97,815,985 |
|
| $ | 10 |
|
| $ | 19,360 |
|
| $ | 1,475,108 |
|
| $ | (17,120 | ) |
| $ | 1,477,358 |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 269,664 |
|
|
| 398 |
|
|
| 270,062 |
|
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 19,068 |
|
|
| — |
|
|
| — |
|
|
| 19,068 |
|
Share-based awards |
|
| 773,634 |
|
|
| — |
|
|
| 2,815 |
|
|
| — |
|
|
| — |
|
|
| 2,815 |
|
Share repurchases |
|
| (725,757 | ) |
|
| — |
|
|
| (22,572 | ) |
|
| — |
|
|
| — |
|
|
| (22,572 | ) |
Balances as of October 31, 2021 |
|
| 97,863,862 |
|
| $ | 10 |
|
| $ | 18,671 |
|
| $ | 1,744,772 |
|
| $ | (16,722 | ) |
| $ | 1,746,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |
|
| Common Shares |
|
| Additional |
|
|
|
|
|
| Other |
|
|
|
|
| |||||||
|
| Number of |
|
| Par |
|
| Paid-in |
|
| Retained |
|
| Comprehensive |
|
|
|
|
| |||||
|
| Shares |
|
| Value |
|
| Capital |
|
| Earnings |
|
| Loss |
|
| Total |
| ||||||
Balances as of January 31, 2020 |
|
| 97,976,815 |
|
| $ | 10 |
|
| $ | 9,477 |
|
| $ | 1,473,872 |
|
| $ | (28,004 | ) |
| $ | 1,455,355 |
|
Comprehensive (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,338 | ) |
|
| (2,890 | ) |
|
| (30,228 | ) |
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 17,030 |
|
|
| — |
|
|
| — |
|
|
| 17,030 |
|
Share-based awards |
|
| 450,508 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Share repurchases |
|
| (640,942 | ) |
|
| — |
|
|
| (10,838 | ) |
|
| — |
|
|
| — |
|
|
| (10,838 | ) |
Balances as of October 31, 2020 |
|
| 97,786,381 |
|
| $ | 10 |
|
| $ | 15,669 |
|
| $ | 1,446,534 |
|
| $ | (30,894 | ) |
| $ | 1,431,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 148,557 |
|
|
| (2,588 | ) |
|
| 145,969 |
|
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 16,807 |
|
|
| — |
|
|
| — |
|
|
| 16,807 |
|
Share-based awards |
|
| 585,658 |
|
|
| — |
|
|
| 974 |
|
|
| — |
|
|
| — |
|
|
| 974 |
|
Share repurchases |
|
| (8,252,598 | ) |
|
| (1 | ) |
|
| (12,580 | ) |
|
| (210,414 | ) |
|
| — |
|
|
| (222,995 | ) |
Balances as of October 31, 2019 |
|
| 97,975,343 |
|
| $ | 10 |
|
| $ | 5,201 |
|
| $ | 1,454,333 |
|
| $ | (29,691 | ) |
| $ | 1,429,853 |
|
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)
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| October 31, |
|
| October 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
| $ | (27,338 | ) |
| $ | 148,557 |
| ||||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Net income (loss) |
| $ | 269,664 |
|
| $ | (27,338 | ) | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization |
|
| 78,308 |
|
|
| 83,617 |
|
|
| 77,985 |
|
|
| 78,308 |
|
Non-cash lease expense |
|
| 147,198 |
|
|
| 142,210 |
|
|
| 144,347 |
|
|
| 147,198 |
|
(Benefit) provision for deferred income taxes |
|
| (15,293 | ) |
|
| 211 |
| ||||||||
Benefit for deferred income taxes |
|
| (5,086 | ) |
|
| (15,293 | ) | ||||||||
Share-based compensation expense |
|
| 17,030 |
|
|
| 16,807 |
|
|
| 19,068 |
|
|
| 17,030 |
|
Store impairment |
|
| 14,528 |
|
|
| — |
|
|
| — |
|
|
| 14,528 |
|
Loss on disposition of property and equipment, net |
|
| 706 |
|
|
| 819 |
|
|
| 193 |
|
|
| 706 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
| 1,137 |
|
|
| (19,550 | ) |
|
| (24,387 | ) |
|
| 1,137 |
|
Inventory |
|
| (79,462 | ) |
|
| (161,255 | ) |
|
| (238,094 | ) |
|
| (79,462 | ) |
Prepaid expenses and other assets |
|
| (35,403 | ) |
|
| (37,228 | ) |
|
| (10,087 | ) |
|
| (35,403 | ) |
Payables, accrued expenses and other liabilities |
|
| 235,618 |
|
|
| 100,534 |
|
|
| 161,251 |
|
|
| 235,618 |
|
Operating lease liabilities |
|
| (122,360 | ) |
|
| (153,320 | ) |
|
| (172,575 | ) |
|
| (122,360 | ) |
Net cash provided by operating activities |
|
| 214,669 |
|
|
| 121,402 |
|
|
| 222,279 |
|
|
| 214,669 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for property and equipment |
|
| (89,153 | ) |
|
| (171,121 | ) |
|
| (159,008 | ) |
|
| (89,153 | ) |
Cash paid for marketable securities |
|
| (93,945 | ) |
|
| (299,322 | ) |
|
| (442,249 | ) |
|
| (93,945 | ) |
Sales and maturities of marketable securities |
|
| 384,999 |
|
|
| 382,629 |
|
|
| 237,879 |
|
|
| 384,999 |
|
Net cash provided by (used in) investing activities |
|
| 201,901 |
|
|
| (87,814 | ) | ||||||||
Net cash (used in) provided by investing activities |
|
| (363,378 | ) |
|
| 201,901 |
| ||||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under debt |
|
| 220,000 |
|
|
| — |
|
|
| — |
|
|
| 220,000 |
|
Repayments of debt |
|
| (220,000 | ) |
|
| — |
|
|
| — |
|
|
| (220,000 | ) |
Proceeds from the exercise of stock options |
|
| — |
|
|
| 974 |
|
|
| 2,815 |
|
|
| — |
|
Share repurchases related to share repurchase program |
|
| (7,036 | ) |
|
| (217,421 | ) |
|
| (14,888 | ) |
|
| (7,036 | ) |
Share repurchases related to taxes for share-based awards |
|
| (3,802 | ) |
|
| (5,574 | ) |
|
| (7,684 | ) |
|
| (3,802 | ) |
Net cash used in financing activities |
|
| (10,838 | ) |
|
| (222,021 | ) |
|
| (19,757 | ) |
|
| (10,838 | ) |
Effect of exchange rate changes on cash and cash equivalents |
|
| (2,626 | ) |
|
| (2,757 | ) |
|
| 1,575 |
|
|
| (2,626 | ) |
Increase (decrease) in cash and cash equivalents |
|
| 403,106 |
|
|
| (191,190 | ) | ||||||||
(Decrease) increase in cash and cash equivalents |
|
| (159,281 | ) |
|
| 403,106 |
| ||||||||
Cash and cash equivalents at beginning of period |
|
| 221,839 |
|
|
| 358,260 |
|
|
| 395,635 |
|
|
| 221,839 |
|
Cash and cash equivalents at end of period |
| $ | 624,945 |
|
| $ | 167,070 |
|
| $ | 236,354 |
|
| $ | 624,945 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
| $ | 11,549 |
|
| $ | 56,910 |
|
| $ | 81,747 |
|
| $ | 11,549 |
|
Non-cash investing activities—Accrued capital expenditures |
| $ | 54,137 |
|
| $ | 14,769 |
|
| $ | 75,206 |
|
| $ | 54,137 |
|
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, 2020,2021, filed with the United States Securities and Exchange Commission on March 31, 2020.April 1, 2021.
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 nine months ended October 31, 20202021 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 20212022 will end on January 31, 2021.2022.
Historically and for the nine months ended October 31, 2021, the Company has calculated its provision for income taxes during its interim reporting periods by applying an estimate of the annual effective tax rate for the full year "ordinary" income or loss for the respective reporting period. For the nine months ended October 31, 2020, and commencing inhowever, the second quarter of fiscal 2021, the Company has computed its provision for income taxes under the discrete method which allowsallowed the Company to calculate its tax provision based upon the actual effective tax rate for the year-to-date. The discrete method was determined to be an appropriate method for estimating itsthe tax provision for the nine months ended October 31, 2020, as it providesprovided a reliable estimate as opposed to changes in estimated "ordinary" income or loss which would have resulted in significant fluctuations when estimating the annual effective tax rate.
Recent Accounting Pronouncements
The Company has considered all new accounting standards updates issued by the Financial Accounting Standards Board (“FASB”) and has concluded that there are no recent accounting standard updates that will have a material impact on its consolidated financial statements and related disclosures.
2. Impact of the Coronavirus Pandemic
Impact on Fiscal 2021
On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19)(“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide, causing public health officials to recommend precautions to mitigate the spread of the virus, including warning against congregating in heavily populated areas, such as malls and shopping centers.worldwide. On March 14, 2020, the Company announced that it temporarily closed all stores, globally; however, the Company continued to fulfill digital orders from its stores where permitted by local authorities.offices and showrooms globally. The Company’s distribution and fulfillment centers remained open to support the digital business and the Wholesale segment operations but have donedid so with additional safety procedures and enhanced cleaning measures in place to protect the health of employees. The Company closed its offices and showrooms globally with the exception of location dependent employees. All other corporate and showroom employees areworked remotely.
On April 25, 2020, the Company began reopening stores in select states and countries in accordance with local government guidelines, and as of July 31, 2020, substantially all of the Company’s stores had reopened. Where opening was permitted, the Company followed newly established health protocols, provided personal protective equipment to its employees, and implemented social distancing working remotely.practices. Additionally, the Company implemented occupancy limits, reduced operating hours, and instituted new cleaning regimens. As a result, the
Company incurred incremental costs for personal protective equipment and additional payroll and other costs associated with implementing these health protocols in its stores, distribution and fulfillment centers, and corporate offices. During the fourth quarter of fiscal 2021, certain store operations were again impacted by an additional round of temporary store closures and occupancy restrictions, primarily in Europe and Canada.
As a result of the COVID-19 pandemic, certain governments implemented programs (some of which expired in fiscal 2021) to encourage companies to retain and pay employees that were unable to work or were limited in the work they could perform in light of closures or a significant decline in sales. The coronavirusCompany qualified for certain of these programs during the second quarter and through the remainder of fiscal 2021 and recorded the benefit as an offset to selling, general and administrative expenses or to store occupancy expenses in cost of sales based on the nature of the related expenses offset by such programs.
In response to the COVID-19 pandemic, continuesthe Company took many measures to materiallyprotect its financial position and increase financial flexibility. For details of all such material measures taken during fiscal 2021, refer to the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed with the SEC on April 1, 2021. See Note 6, “Debt,” for discussion of the Company’s borrowings and subsequent repayments under its Amended Credit Facility during fiscal 2021.
As a result of the COVID-19 pandemic, during fiscal 2021, the Company recorded certain additional reserves, including inventory obsolescence reserves and an allowance for doubtful accounts for Wholesale segment customer accounts receivable, and non-cash charges, primarily store impairment charges. For further discussion of such reserves and non-cash charges for the first nine months of fiscal 2021 and the full year impact on fiscal 2021, see the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2020, filed with the SEC on December 10, 2020, and the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021.
Impact on Fiscal 2022
The COVID-19 pandemic continued to negatively impact the Company’s store operations during the first nine months of fiscal 2022 due to reduced store traffic as closures and occupancy restrictions continued primarily in Europe and Canada. During the second quarter of fiscal 2022, all remaining COVID-19 related store closures in Europe and Canada expired, although some capacity restrictions continued in certain European and Canadian stores. The COVID-19 pandemic and general unfavorable macro-economic conditions have disrupted the Company’s global supply chain in fiscal 2022, leading to COVID-19 related factory closures and continued port congestions, which have resulted in inventory receipt delays and an increase in inbound freight costs. The Company made a strategic decision to bring certain product categories in earlier in the third quarter of fiscal 2022 in an attempt to minimize the impact of such disruptions on customer demand.
The Company continued to qualify for certain government assistance programs that partially offset related expenses in locations impacted by closures during fiscal 2022. As of the end of the second quarter of fiscal 2022, however, the programs either expired or the Company no longer qualified for such programs in the United States and globally,Canada, and as of the end of the third quarter of fiscal 2022, the Company no longer qualified for the majority of such programs in Europe. The Company recorded the benefit of the government assistance programs as an offset to selling, general and administrative expenses or store occupancy expenses in cost of sales based on the nature of the related expenses offset by such programs.
Impact on Future Operations
The COVID-19 pandemic continues to impact the Company’s operations and related government and private sector responsive actions have and willcould continue to affect its business operations. Because itThe Company is impossiblealso experiencing COVID-19 supply chain disruptions resulting in inventory receipt delays. In addition to predictCOVID-19, the effectCompany expects that our operations will continue to be influenced by general economic inflationary conditions, including wage inflation, increased merchandise sourcing costs and ultimate impacthigher inbound transportation costs. The Company cannot reasonably estimate the duration and severity of the coronavirusCOVID-19 pandemic, which has had and may continue to have a material impact on its business. As a result, current
financial information may not be necessarily indicative of future operating results and the Company’s plans as described below may change.
In response to the coronavirus pandemic, the Company has taken many additional measures to protect its financial position and increase financial flexibility during this challenging time period. Those include:
|
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|
|
As a result of the coronavirus pandemic, during the nine months ended October 31, 2020, the Company recorded certain additional reserves and non-cash charges. The Company assessed the value of its inventory in the Retail and Wholesale segments and recorded an increase in inventory obsolescence reserves during the three months ended April 30, 2020. As a result of disciplined inventory control and better than planned product performance, during the second and third quarters of fiscal 2021, the Company decreased a portion of its inventory obsolescence reserves. During the three months ended April 30, 2020, the Company recorded an increase in allowance for doubtful accounts for Wholesale segment customer accounts receivables as a result of the significant disruption and uncertainty in the wholesale macro environment. During the second and third quarters of fiscal 2021, the Company reduced the allowance for doubtful accounts due to the collection of certain outstanding accounts receivables. Finally, during the three months ended April 30, 2020, the Company determined that certain long-lived assets at the Company’s retail locations were unable to recover their carrying value primarily due toaddress the impact of the mandated store closures and anticipated reduced store net sales during the remainder of fiscal 2021 as a result of the coronavirus pandemic. These assets were written down to their fair value resulting in impairment charges across 39 retail locations. There were 0 store impairment charges during the second and third quarters of fiscal 2021. The following is a summary of net charges recorded during fiscal 2021:
|
| Three Months Ended |
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||
|
| April 30, 2020 |
|
| July 31, 2020 |
|
| October 31, 2020 |
|
| October 31, 2020 |
| ||||
Inventory obsolescence reserves |
| $ | 43,327 |
|
| $ | (21,673 | ) |
| $ | (5,730 | ) |
| $ | 15,924 |
|
Allowance for doubtful accounts |
|
| 5,800 |
|
|
| (2,200 | ) |
|
| (1,000 | ) |
|
| 2,600 |
|
Store impairment |
|
| 14,528 |
|
|
| — |
|
|
| — |
|
|
| 14,528 |
|
As a result of the global coronavirusCOVID-19 pandemic governments in the United States, United Kingdom (“U.K.”), Canada and various other jurisdictions implemented programs to encourage companies to retain and pay employees that are unable to work or are limited in the work that they can perform in light of closures or a significant decline in sales. As such, the Company qualified for certain of these programs, which partially offset related expenses. Themay change.
Company recorded the cumulative benefit of the programs implemented by the United States and Canada in selling, general and administrative expenses during the second and third quarters of fiscal 2021. The Company continued to pay all employees through at least April 1, 2020. On March 31, 2020, the Company announced it furloughed a substantial number of store, wholesale and home office employees beginning April 1, 2020. The furlough period continued through July 31, 2020, with some furloughs resulting in layoffs as of the same date. Impacted employees continued to receive enrolled benefits during the furlough period. Benefits related to the programs implemented by the U.K. and other European countries were recorded as an offset to store occupancy expenses in cost of sales during the three months ended October 31, 2020.
Beginning April 25, 2020, the Company started to reopen stores in select states and countries in accordance with local government guidelines. As of July 31, 2020, substantially all of the Company’s stores had reopened and remained open as of October 31, 2020. As a result of the COVID-19 pandemic, the Company’s store operations continue to be impacted by temporary store closures, primarily in Europe and Canada, and reduced customer traffic in reopened store locations globally due in part to local government guidelines that have imposed certain operating restrictions, including capacity limits. The Company cannot reasonably estimate the duration and severity of this pandemic, which has had and may continue to have a material impact on our business.
3. Revenue from Contracts with Customers
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 the Company’s Wholesale segment customers and franchisees. For the nine month period ended October 31, 2021, the opening and closing balances of contract receivables, net of allowance for doubtful accounts, was $89,952 and $114,208, respectively. For the nine month period ended October 31, 2020, the opening and closing balances of contract receivables, net of allowance for doubtful accounts, werewas $88,288 and $87,187, respectively. For the nine month period ended October 31, 2019, the opening and closing balances of contract receivables, net of allowance for doubtful accounts, were $80,461 and $99,971, respectively. During the three monthsmonth period ended October 31, 2020, the Company reduced the allowance for doubtful accounts by $1,000 due to the collection of certain outstanding receivable balances for Wholesale segment customer accounts, resulting in a net increase in the allowance for doubtful accounts of $2,600 for the nine months ended October 31, 2020.During the remainder of fiscal 2021 and the first quarter of fiscal 2022, the Company continued to reduce the allowance for doubtful accounts due to the collection of certain outstanding accounts receivables. 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 nine month period ended October 31, 2021, the opening and closing balances of contract liabilities were $61,986 and $62,476, respectively. For the nine month period ended October 31, 2020, the opening and closing balances of contract liabilities were $52,926 and $49,359, respectively. For the nine month period ended October 31, 2019, the opening and closing balances of contract liabilities were $49,747 and $39,515, respectively. Contract liabilities are included in “Accrued expenses, accrued compensation and other current liabilities” in the Condensed Consolidated Balance Sheets. During the nine month period ended October 31, 2020,2021, the Company recognized $23,557$25,734 of revenue that was included in the contract liability balance at the beginning of the period. During the nine month period ended October 31, 2019,2020, the Company recognized $27,416$23,557 of revenue that was included in the contract liability balance at the beginning of the period.
4. Marketable Securities
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 October 31, 2020,2021, January 31, 20202021 and October 31, 20192020 were as follows:
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||
|
| Cost |
|
| Gains |
|
| (Losses) |
|
| Value |
| ||||
As of October 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
| $ | 2 |
|
| $ | — |
|
| $ | — |
|
| $ | 2 |
|
|
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
Long-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds, held in rabbi trust |
|
| 9,393 |
|
|
| 17 |
|
|
| (144 | ) |
|
| 9,266 |
|
Municipal and pre-refunded municipal bonds |
|
| 53 |
|
|
| 1 |
|
|
| — |
|
|
| 54 |
|
Corporate bonds |
|
| 30 |
|
|
| — |
|
|
| — |
|
|
| 30 |
|
|
|
| 9,476 |
|
|
| 18 |
|
|
| (144 | ) |
|
| 9,350 |
|
|
| $ | 9,478 |
|
| $ | 18 |
|
| $ | (144 | ) |
| $ | 9,352 |
|
As of January 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal and pre-refunded municipal bonds |
| $ | 38,617 |
|
| $ | 20 |
|
| $ | (11 | ) |
| $ | 38,626 |
|
Corporate bonds |
|
| 166,790 |
|
|
| 318 |
|
|
| (26 | ) |
|
| 167,082 |
|
Certificates of deposit |
|
| 2,593 |
|
|
| — |
|
|
| — |
|
|
| 2,593 |
|
Federal government agencies |
|
| 1,152 |
|
|
| 3 |
|
|
| — |
|
|
| 1,155 |
|
Commercial paper |
|
| 1,997 |
|
|
| — |
|
|
| — |
|
|
| 1,997 |
|
|
|
| 211,149 |
|
|
| 341 |
|
|
| (37 | ) |
|
| 211,453 |
|
Long-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds, held in rabbi trust |
|
| 8,448 |
|
|
| 36 |
|
|
| (55 | ) |
|
| 8,429 |
|
Municipal and pre-refunded municipal bonds |
|
| 30,340 |
|
|
| 35 |
|
|
| (17 | ) |
|
| 30,358 |
|
Corporate bonds |
|
| 47,352 |
|
|
| 205 |
|
|
| (40 | ) |
|
| 47,517 |
|
Certificates of deposit |
|
| 3,867 |
|
|
| — |
|
|
| — |
|
|
| 3,867 |
|
Federal government agencies |
|
| 6,926 |
|
|
| 1 |
|
|
| (2 | ) |
|
| 6,925 |
|
|
|
| 96,933 |
|
|
| 277 |
|
|
| (114 | ) |
|
| 97,096 |
|
|
| $ | 308,082 |
|
| $ | 618 |
|
| $ | (151 | ) |
| $ | 308,549 |
|
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||||||
|
| Cost |
|
| Gains |
|
| (Losses) |
|
| Value |
|
| Cost |
|
| Gains |
|
| (Losses) |
|
| Value |
| ||||||||
As of October 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of October 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Short-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
| $ | 53,744 |
|
| $ | 3 |
|
| $ | (71 | ) |
| $ | 53,676 |
| ||||||||||||||||
Municipal and pre-refunded municipal bonds |
| $ | 39,256 |
|
| $ | 38 |
|
| $ | (14 | ) |
| $ | 39,280 |
|
|
| 114,818 |
|
|
| 9 |
|
|
| (73 | ) |
|
| 114,754 |
|
Corporate bonds |
|
| 125,040 |
|
|
| 310 |
|
|
| (12 | ) |
|
| 125,338 |
| ||||||||||||||||
Federal government agencies |
|
| 1,622 |
|
|
| 4 |
|
|
| — |
|
|
| 1,626 |
| ||||||||||||||||
Certificates of deposit |
|
| 2,466 |
|
|
| — |
|
|
| — |
|
|
| 2,466 |
| ||||||||||||||||
Treasury bills |
|
| 16,849 |
|
|
| — |
|
|
| (3 | ) |
|
| 16,846 |
| ||||||||||||||||
Commercial paper |
|
| 1,987 |
|
|
| — |
|
|
| — |
|
|
| 1,987 |
|
|
| 3,099 |
|
|
| — |
|
|
| — |
|
|
| 3,099 |
|
|
|
| 170,371 |
|
|
| 352 |
|
|
| (26 | ) |
|
| 170,697 |
|
|
| 188,510 |
|
|
| 12 |
|
|
| (147 | ) |
|
| 188,375 |
|
Long-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
| 174,884 |
|
|
| 1 |
|
|
| (1,125 | ) |
| $ | 173,760 |
| ||||||||||||||||
Municipal and pre-refunded municipal bonds |
|
| 78,955 |
|
|
| 8 |
|
|
| (362 | ) |
|
| 78,601 |
| ||||||||||||||||
Treasury bills |
|
| 4,748 |
|
|
| — |
|
|
| (7 | ) |
|
| 4,741 |
| ||||||||||||||||
Mutual funds, held in rabbi trust |
|
| 7,661 |
|
|
| 144 |
|
|
| (1 | ) |
|
| 7,804 |
|
|
| 11,540 |
|
|
| 542 |
|
|
| (1 | ) |
|
| 12,081 |
|
Municipal and pre-refunded municipal bonds |
|
| 20,795 |
|
|
| 13 |
|
|
| (35 | ) |
|
| 20,773 |
| ||||||||||||||||
Corporate bonds |
|
| 45,556 |
|
|
| 270 |
|
|
| (26 | ) |
|
| 45,800 |
| ||||||||||||||||
Federal government agencies |
|
| 6,365 |
|
|
| — |
|
|
| (15 | ) |
|
| 6,350 |
|
|
| 350 |
|
|
| — |
|
|
| (2 | ) |
|
| 348 |
|
Certificates of deposit |
|
| 2,394 |
|
|
| — |
|
|
| — |
|
|
| 2,394 |
|
|
| 249 |
|
|
| — |
|
|
| — |
|
|
| 249 |
|
|
|
| 82,771 |
|
|
| 427 |
|
|
| (77 | ) |
|
| 83,121 |
|
|
| 270,726 |
|
|
| 551 |
|
|
| (1,497 | ) |
|
| 269,780 |
|
|
| $ | 253,142 |
|
| $ | 779 |
|
| $ | (103 | ) |
| $ | 253,818 |
|
| $ | 459,236 |
|
| $ | 563 |
|
| $ | (1,644 | ) |
| $ | 458,155 |
|
As of January 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Short-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Corporate bonds |
| $ | 38,695 |
|
| $ | 1 |
|
| $ | (48 | ) |
| $ | 38,648 |
| ||||||||||||||||
Municipal and pre-refunded municipal bonds |
|
| 127,097 |
|
|
| 11 |
|
|
| (53 | ) |
|
| 127,055 |
| ||||||||||||||||
Commercial paper |
|
| 8,992 |
|
|
| — |
|
|
| — |
|
|
| 8,992 |
| ||||||||||||||||
|
|
| 174,784 |
|
|
| 12 |
|
|
| (101 | ) |
|
| 174,695 |
| ||||||||||||||||
Long-term Investments: |
|
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Corporate bonds |
|
| 59,890 |
|
|
| 3 |
|
|
| (129 | ) |
|
| 59,764 |
| ||||||||||||||||
Municipal and pre-refunded municipal bonds |
|
| 53,134 |
|
|
| 17 |
|
|
| (46 | ) |
|
| 53,105 |
| ||||||||||||||||
Mutual funds, held in rabbi trust |
|
| 10,827 |
|
|
| 20 |
|
|
| (54 | ) |
|
| 10,793 |
| ||||||||||||||||
|
|
| 123,851 |
|
|
| 40 |
|
|
| (229 | ) |
|
| 123,662 |
| ||||||||||||||||
|
| $ | 298,635 |
|
| $ | 52 |
|
| $ | (330 | ) |
| $ | 298,357 |
| ||||||||||||||||
As of October 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Short-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Corporate bonds |
| $ | 2 |
|
| $ | — |
|
| $ | — |
|
| $ | 2 |
| ||||||||||||||||
|
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| 2 |
| ||||||||||||||||
Long-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Corporate bonds |
|
| 30 |
|
|
| — |
|
|
| — |
|
|
| 30 |
| ||||||||||||||||
Municipal and pre-refunded municipal bonds |
|
| 53 |
|
|
| 1 |
|
|
| — |
|
|
| 54 |
| ||||||||||||||||
Mutual funds, held in rabbi trust |
|
| 9,393 |
|
|
| 17 |
|
|
| (144 | ) |
|
| 9,266 |
| ||||||||||||||||
|
|
| 9,476 |
|
|
| 18 |
|
|
| (144 | ) |
|
| 9,350 |
| ||||||||||||||||
|
| $ | 9,478 |
|
| $ | 18 |
|
| $ | (144 | ) |
| $ | 9,352 |
| ||||||||||||||||
Proceeds from the sales and maturities of available-for-sale securities were $384,999$237,879 and $382,629$384,999 for the nine months ended October 31, 2021 and 2020, and 2019, respectively. Net liquidations of the Company’sThe Company initially liquidated its marketable securities portfolio in the nine months ended October 31, 2020, were primarily to preserve financial flexibility and maintain liquidity in response to the coronavirus pandemic.COVID-19 pandemic, but reinvested in a marketable securities portfolio by January 31, 2021. The Company included in “Other (loss) income,loss, net,” in the Condensed Consolidated Statements of Operations, a net realized gain of $1$9 and a net realized loss of $419$13 for the three and nine months ended October 31, 2020,2021, respectively,
and a net realized gainsgain of $6$1 and $32a net realized loss of $419 for the three and nine months ended October 31, 2019,2020, respectively. Amortization of discounts and premiums, net, resulted in a reduction of “Other (loss) income,loss, net” of $201$1,804 and $818$4,540 for the three and nine months ended October 31, 2020,2021, respectively, and $156$201 and $427$818 for the three and nine months ended October 31, 2019,2020, 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 (loss) income,loss, net” in the Condensed Consolidated Statements of Operations.
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 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. |
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, 2020 |
|
| October 31, 2021 |
| ||||||||||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
| $ | — |
|
| $ | 227,436 |
|
| $ | — |
|
| $ | 227,436 |
| ||||||||||||||||
Municipal and pre-refunded municipal bonds |
|
| — |
|
|
| 193,355 |
|
|
| — |
|
|
| 193,355 |
| ||||||||||||||||
Treasury bills |
|
| 21,587 |
|
|
| — |
|
|
| — |
|
|
| 21,587 |
| ||||||||||||||||
Mutual funds, held in rabbi trust |
| $ | 9,266 |
|
| $ | — |
|
| $ | — |
|
| $ | 9,266 |
|
|
| 12,081 |
|
|
| — |
|
|
| — |
|
|
| 12,081 |
|
Municipal and pre-refunded municipal bonds |
|
| 54 |
|
|
| — |
|
|
| — |
|
|
| 54 |
| ||||||||||||||||
Corporate bonds |
|
| 32 |
|
|
| — |
|
|
| — |
|
|
| 32 |
| ||||||||||||||||
Commercial paper |
|
| — |
|
|
| 3,099 |
|
|
| — |
|
|
| 3,099 |
| ||||||||||||||||
Federal government agencies |
|
| 348 |
|
|
| — |
|
|
| — |
|
|
| 348 |
| ||||||||||||||||
Certificates of deposit |
|
| — |
|
|
| 249 |
|
|
| — |
|
|
| 249 |
| ||||||||||||||||
|
| $ | 9,352 |
|
| $ | — |
|
| $ | — |
|
| $ | 9,352 |
|
| $ | 34,016 |
|
| $ | 424,139 |
|
| $ | — |
|
| $ | 458,155 |
|
|
| Marketable Securities Fair Value as of |
|
| Marketable Securities Fair Value as of |
| ||||||||||||||||||||||||||
|
| January 31, 2020 |
|
| January 31, 2021 |
| ||||||||||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
| $ | — |
|
| $ | 98,412 |
|
| $ | — |
|
| $ | 98,412 |
| ||||||||||||||||
Municipal and pre-refunded municipal bonds |
|
| — |
|
|
| 180,160 |
|
|
| — |
|
|
| 180,160 |
| ||||||||||||||||
Mutual funds, held in rabbi trust |
| $ | 8,429 |
|
| $ | — |
|
| $ | — |
|
| $ | 8,429 |
|
|
| 10,793 |
|
|
| — |
|
|
| — |
|
|
| 10,793 |
|
Municipal and pre-refunded municipal bonds |
|
| — |
|
|
| 68,984 |
|
|
| — |
|
|
| 68,984 |
| ||||||||||||||||
Corporate bonds |
|
| 214,599 |
|
|
| — |
|
|
| — |
|
|
| 214,599 |
| ||||||||||||||||
Federal government agencies |
|
| 8,080 |
|
|
| — |
|
|
| — |
|
|
| 8,080 |
| ||||||||||||||||
Certificates of deposit |
|
| — |
|
|
| 6,460 |
|
|
| — |
|
|
| 6,460 |
| ||||||||||||||||
Commercial paper |
|
| — |
|
|
| 1,997 |
|
|
| — |
|
|
| 1,997 |
|
|
| — |
|
|
| 8,992 |
|
|
| — |
|
|
| 8,992 |
|
|
| $ | 231,108 |
|
| $ | 77,441 |
|
| $ | — |
|
| $ | 308,549 |
|
| $ | 10,793 |
|
| $ | 287,564 |
|
| $ | — |
|
| $ | 298,357 |
|
|
| Marketable Securities Fair Value as of |
|
| Marketable Securities Fair Value as of |
| ||||||||||||||||||||||||||
|
| October 31, 2019 |
|
| October 31, 2020 |
| ||||||||||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
| $ | 32 |
|
| $ | — |
| �� | $ | — |
|
| $ | 32 |
| ||||||||||||||||
Municipal and pre-refunded municipal bonds |
|
| 54 |
|
|
| — |
|
|
| — |
|
|
| 54 |
| ||||||||||||||||
Mutual funds, held in rabbi trust |
| $ | 7,804 |
|
| $ | — |
|
| $ | — |
|
| $ | 7,804 |
|
|
| 9,266 |
|
|
| — |
|
|
| — |
|
|
| 9,266 |
|
Municipal and pre-refunded municipal bonds |
|
| — |
|
|
| 60,053 |
|
|
| — |
|
|
| 60,053 |
| ||||||||||||||||
Corporate bonds |
|
| 171,138 |
|
|
| — |
|
|
| — |
|
|
| 171,138 |
| ||||||||||||||||
Federal government agencies |
|
| 7,976 |
|
|
| — |
|
|
| — |
|
|
| 7,976 |
| ||||||||||||||||
Certificates of deposit |
|
| — |
|
|
| 4,860 |
|
|
| — |
|
|
| 4,860 |
| ||||||||||||||||
Commercial paper |
|
| — |
|
|
| 1,987 |
|
|
| — |
|
|
| 1,987 |
| ||||||||||||||||
|
| $ | 186,918 |
|
| $ | 66,900 |
|
| $ | — |
|
| $ | 253,818 |
|
|
| 9,352 |
|
|
| — |
|
|
| — |
|
|
| 9,352 |
|
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 October 31, 2020,2021, January 31, 20202021 and October 31, 2019.2020.
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 October 31, 2020,2021, January 31, 20202021 and October 31, 2019,2020, 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. The fair value of debt approximates its carrying value as it is all variable rate debt.
Non-financial assets
The Company’s non-financial assets, primarily consisting of property and equipment and 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.recoverable.
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. During the three months ended April 30,October 31, 2020, impairment charges were 0, however, during the nine months ended October 31, 2020, the Company determined that certain long-lived assets at the Company’s retail locations were unable to recover their carrying value primarily due to the impact of the mandated store closures and anticipated reduced store net sales during the remainder of fiscal 2021 as a result of the coronavirusCOVID-19 pandemic. These assets were written down to their fair value, resulting in impairment charges of $14,528 across 39 retail locations, with a carrying value after impairment of $96,523 related to the right-of-use assets. During the three months ended July 31, 2020 and October 31, 2020, impairment charges were 0. During the three and nine months ended October 31, 2019, impairment charges were 0.assets.
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. Currently, there has not been a replacement reference rate identified for LIBOR in 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 ofOctober 31, 2020,2021, the Company had $0 in borrowings under the Amended Credit Facility. The Company had borrowed $220,000 during the three months ended April 30, 2020first quarter of fiscal 2021 in order to preserve financial flexibility and maintain liquidity and flexibility in response to the coronavirusCOVID-19 pandemic. The Company repaid $100,000 during the three months ended July 31, 2020 and repaid the remaining $120,000 outstanding during the three months ended October 31, 2020. As of the month ended May 31, 2020, the availability under the Amended Credit Agreement had been reduced to a level that triggered measurement of the Company’s Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio covenant to be measured. Due to the net loss of the Company in fiscal 2021, the Fixed Charge Coverage Ratio was not met and theas of May 31, 2020. The Company obtained a waiver effective through September 15, 2020 to cure the technical default. As of October 31, 2020,2021, the Company was in compliance with the terms of the Amended Credit Agreement. The Company expects to remain in compliance with all terms, including other covenants, of the Amended Credit Agreement. Agreement. Outstanding stand-by letters of credit, which reduce the funds available under the Amended Credit Facility, were $13,284.$13,336. Interest expense for the Amended Credit Facility for the nine months ended October 31, 2021 and October 31, 2020, was $783 and $2,455, respectively, which was included in “Other (loss) income,loss, net,” in the Condensed Consolidated Statements of Operations.
Additionally, the Company has borrowing agreements with 2 separate financial institutions under which the Company may borrow 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 October 31, 2020, the Company had outstanding trade letters of credit of $43,593.
7. Leases
The Company has operating leases for stores, distribution and fulfillment centers, corporate offices and equipment. The Company subleases certain properties to third parties.
Total operating lease costs were $66,903 and $203,405 during the three and nine months ended October 31, 2021, respectively, and $69,048 and $206,241 during the three and nine months ended October 31, 2020, respectively,respectively. Total variable lease costs were $28,908 and $68,915 and $202,990$77,589 during the three and nine months ended October 31, 2019, respectively. Total variable lease costs were2021, respectively, and $19,285 and $70,879 during the three and nine months ended October 31, 2020, respectively, and $30,613 and $95,044 during the three and nine months ended October 31, 2019, respectively. Short-term lease costs and sublease income were not material during the three and nine months ended October 31, 20202021 and October 31, 2019.2020.
The following is a schedule by year of the maturities of operating lease liabilities with original terms in excess of one year, as of October 31, 2020:
2021:
|
| Operating |
|
| Operating |
| ||
|
| Leases |
|
| Leases |
| ||
Fiscal Year |
|
|
|
|
|
|
|
|
2021 (excluding the nine months ended October 31, 2020) |
| $ | 116,825 |
| ||||
2022 |
|
| 287,685 |
| ||||
2022 (excluding the nine months ended October 31, 2021) |
| $ | 91,017 |
| ||||
2023 |
|
| 253,955 |
|
|
| 283,850 |
|
2024 |
|
| 224,325 |
|
|
| 252,096 |
|
2025 |
|
| 187,002 |
|
|
| 214,094 |
|
2026 |
|
| 180,827 |
| ||||
Thereafter |
|
| 632,421 |
|
|
| 471,282 |
|
Total undiscounted future minimum lease payments |
|
| 1,702,213 |
|
|
| 1,493,166 |
|
Less imputed interest |
|
| (377,657 | ) |
|
| (267,066 | ) |
Total discounted future minimum lease payments |
| $ | 1,324,556 |
|
| $ | 1,226,100 |
|
|
|
|
|
|
|
|
|
|
As of October 31, 2020,2021, the Company had commitments of approximately $8,813$7,916 not included in the amounts above related to 56 executed but not yet commenced store leases.
In response to the coronavirusCOVID-19 pandemic and mandated store closures, the Company withheld certain minimum lease payments due to landlords. The amountamounts withheld at October 31, 2021 and 2020 waswere included in “Current portion of operating lease liabilities” in the Condensed Consolidated Balance Sheets.
During the first nine months of fiscalended October 31, 2021, the Company received rent concessions for a number of our stores and continue to negotiate for additional rent concessions at various other store locations. To the extent the rent concessions do not result in a substantial increase in total payments in the existing lease, the Company has accounted for such rent concessions as negative variable rent. To the extent the rent concessions do result in a substantial increase in total payments in the existing lease, the Company has accounted for such rent concessions as a lease modification. Rent concessions recorded by the Company for the nine months ended October 31, 2020,in fiscal 2022 and 2021 as either negative variable rent or lease modifications have not had a material impact on the Company’s Condensed Consolidated Financial Statements.
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 Black-Scholes model was used to estimate the fair value of stock options. The fair value of PSU’s and RSU’s is equal to the stock price on the date of the grant. Share-based compensation expense included in “Selling, general and administrative expenses” in the Condensed Consolidated Statements of Operations, for the three and nine months ended October 31, 20202021 and 2019,2020, was as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| October 31, |
|
| October 31, |
|
| October 31, |
|
| October 31, |
| ||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Stock Options |
| $ | — |
|
| $ | 349 |
|
| $ | 471 |
|
| $ | 1,387 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 471 |
|
Performance Stock Units |
|
| 799 |
|
|
| 1,049 |
|
|
| 1,843 |
|
|
| 3,260 |
|
|
| 1,070 |
|
|
| 799 |
|
|
| 2,996 |
|
|
| 1,843 |
|
Restricted Stock Units |
|
| 4,974 |
|
|
| 3,948 |
|
|
| 14,716 |
|
|
| 12,160 |
|
|
| 6,030 |
|
|
| 4,974 |
|
|
| 16,072 |
|
|
| 14,716 |
|
Total |
| $ | 5,773 |
|
| $ | 5,346 |
|
| $ | 17,030 |
|
| $ | 16,807 |
|
| $ | 7,100 |
|
| $ | 5,773 |
|
| $ | 19,068 |
|
| $ | 17,030 |
|
|
|
Share-based awards granted and the weighted-average fair value of such awards for the nine months ended October 31, 20202021 was as follows:
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| October 31, 2020 |
|
| October 31, 2021 |
| ||||||||||
|
|
|
|
|
| Weighted- |
|
|
|
|
|
| Weighted- |
| ||
|
| Awards |
|
| Average Fair |
|
| Awards |
|
| Average Fair |
| ||||
|
| Granted |
|
| Value |
|
| Granted |
|
| Value |
| ||||
Stock Options |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
Performance Stock Units |
|
| 154,000 |
|
| $ | 25.84 |
|
|
| 213,750 |
|
| $ | 38.15 |
|
Restricted Stock Units |
|
| 898,100 |
|
| $ | 25.29 |
|
|
| 1,053,750 |
|
| $ | 37.39 |
|
Total |
|
| 1,052,100 |
|
|
|
|
|
|
| 1,267,500 |
|
|
|
|
|
During the nine months ended October 31, 2020, 113,3312021, 100,000 stock options were exercised, 70,001 PSU’s vested and 337,177603,633 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 October 31, 20202021 was as follows:
|
| October 31, 2020 |
|
| October 31, 2021 |
| ||||||||||
|
| Unrecognized |
|
| Weighted- |
|
| Unrecognized |
|
| Weighted- |
| ||||
|
| Compensation |
|
| Average |
|
| Compensation |
|
| Average |
| ||||
|
| Cost |
|
| Years |
|
| Cost |
|
| Years |
| ||||
Stock Options |
| $ | — |
|
|
| — |
|
| $ | — |
|
|
| — |
|
Performance Stock Units |
|
| 4,056 |
|
|
| 2.1 |
|
|
| 7,741 |
|
|
| 2.3 |
|
Restricted Stock Units |
|
| 28,788 |
|
|
| 2.0 |
|
|
| 40,066 |
|
|
| 2.2 |
|
Total |
| $ | 32,844 |
|
|
|
|
|
| $ | 47,807 |
|
|
|
|
|
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 |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| October 31, |
|
| October 31, |
|
| October 31, |
|
| October 31, |
| ||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Number of common shares repurchased and subsequently retired |
|
| — |
|
|
| — |
|
|
| 482,003 |
|
|
| 8,068,196 |
|
|
| 500,000 |
|
|
| — |
|
|
| 500,000 |
|
|
| 482,003 |
|
Total cost |
| $ | — |
|
| $ | — |
|
| $ | 7,036 |
|
| $ | 217,421 |
|
| $ | 14,888 |
|
| $ | — |
|
| $ | 14,888 |
|
| $ | 7,036 |
|
Average cost per share, including commissions |
| $ | — |
|
| $ | — |
|
| $ | 14.60 |
|
| $ | 26.95 |
|
| $ | 29.78 |
|
| $ | — |
|
| $ | 29.78 |
|
| $ | 14.60 |
|
The shares repurchased during the nine months ended October 31, 2020, were prior to the known spread of the coronavirusCOVID-19 pandemic in the United States, which forced the Company to close its stores for an extended period of time. The Company temporarily suspended all share repurchase activity under the programs during fiscal 2021.
On August 22, 2017, the Company’s Board of Directors authorized the repurchase of 20,000,000 common shares under a share repurchase program. On June 4, 2019, the Company’s Board of Directors authorized the repurchase of an additional 20,000,000 common shares under a share repurchase program. While, asAs of October 31, 2020, 25,851,9542021, 25,351,954 common shares were remaining under the programs,programs.
During the nine months ended October 31, 2021, the Company has temporarily suspended all share repurchase activity under the programs.
acquired and subsequently retired 225,757 common shares at a total cost of $7,684 from employees to meet minimum statutory tax withholding requirements. During the nine months ended October 31, 2020, the Company acquired and subsequently retired 158,939 common shares at a total cost of $3,802 from employees to meet minimum statutory tax withholding requirements. During the nine months ended October 31, 2019, the Company acquired and subsequently retired 184,402 common shares at a total cost of $5,574 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 nine months ended October 31, 20202021 and 2019:2020:
|
| Three Months Ended October 31, 2021 |
|
| Nine Months Ended October 31, 2021 |
| ||||||||||||||||||
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
| ||
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
| ||||
|
| Currency |
|
| Available-for- |
|
|
|
|
|
| Currency |
|
| Available-for- |
|
|
|
|
| ||||
|
| Translation |
|
| Sale Securities |
|
| Total |
|
| Translation |
|
| Sale Securities |
|
| Total |
| ||||||
Balance at beginning of period |
| $ | (12,922 | ) |
| $ | (166 | ) |
| $ | (13,088 | ) |
| $ | (16,950 | ) |
| $ | (170 | ) |
| $ | (17,120 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (2,605 | ) |
|
| (1,038 | ) |
|
| (3,643 | ) |
|
| 1,423 |
|
|
| (1,038 | ) |
|
| 385 |
|
Amounts reclassified from accumulated other comprehensive income (loss) |
|
| — |
|
|
| 9 |
|
|
| 9 |
|
|
| — |
|
|
| 13 |
|
|
| 13 |
|
Net current-period other comprehensive income (loss) |
|
| (2,605 | ) |
|
| (1,029 | ) |
|
| (3,634 | ) |
|
| 1,423 |
|
|
| (1,025 | ) |
|
| 398 |
|
Balance at end of period |
| $ | (15,527 | ) |
| $ | (1,195 | ) |
| $ | (16,722 | ) |
| $ | (15,527 | ) |
| $ | (1,195 | ) |
| $ | (16,722 | ) |
|
| Three Months Ended October 31, 2020 |
|
| Nine Months Ended October 31, 2020 |
| ||||||||||||||||||
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
| ||
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
| ||||
|
| Currency |
|
| Available-for- |
|
|
|
|
|
| Currency |
|
| Available-for- |
|
|
|
|
| ||||
|
| Translation |
|
| Sale Securities |
|
| Total |
|
| Translation |
|
| Sale Securities |
|
| Total |
| ||||||
Balance at beginning of period |
| $ | (29,180 | ) |
| $ | (23 | ) |
| $ | (29,203 | ) |
| $ | (28,328 | ) |
| $ | 324 |
|
| $ | (28,004 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (1,693 | ) |
|
| 1 |
|
|
| (1,692 | ) |
|
| (2,545 | ) |
|
| 74 |
|
|
| (2,471 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
| — |
|
|
| 1 |
|
|
| 1 |
|
|
| — |
|
|
| (419 | ) |
|
| (419 | ) |
Net current-period other comprehensive income (loss) |
|
| (1,693 | ) |
|
| 2 |
|
|
| (1,691 | ) |
|
| (2,545 | ) |
|
| (345 | ) |
|
| (2,890 | ) |
Balance at end of period |
| $ | (30,873 | ) |
| $ | (21 | ) |
| $ | (30,894 | ) |
| $ | (30,873 | ) |
| $ | (21 | ) |
| $ | (30,894 | ) |
|
| Three Months Ended October 31, 2019 |
|
| Nine Months Ended October 31, 2019 |
| ||||||||||||||||||
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
| ||
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
| ||||
|
| Currency |
|
| Available-for- |
|
|
|
|
|
| Currency |
|
| Available-for- |
|
|
|
|
| ||||
|
| Translation |
|
| Sale Securities |
|
| Total |
|
| Translation |
|
| Sale Securities |
|
| Total |
| ||||||
Balance at beginning of period |
| $ | (37,496 | ) |
| $ | 209 |
|
| $ | (37,287 | ) |
| $ | (26,925 | ) |
| $ | (178 | ) |
| $ | (27,103 | ) |
Other comprehensive income (loss) before reclassifications |
|
| 7,420 |
|
|
| 170 |
|
|
| 7,590 |
|
|
| (3,151 | ) |
|
| 531 |
|
|
| (2,620 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
| — |
|
|
| 6 |
|
|
| 6 |
|
|
| — |
|
|
| 32 |
|
|
| 32 |
|
Net current-period other comprehensive income (loss) |
|
| 7,420 |
|
|
| 176 |
|
|
| 7,596 |
|
|
| (3,151 | ) |
|
| 563 |
|
|
| (2,588 | ) |
Balance at end of period |
| $ | (30,076 | ) |
| $ | 385 |
|
| $ | (29,691 | ) |
| $ | (30,076 | ) |
| $ | 385 |
|
| $ | (29,691 | ) |
All unrealized gains and losses on available-for-sale securities reclassified from accumulated other comprehensive loss were recorded in “Other (loss) income,loss, net” in the Condensed Consolidated Statements of Operations.
11. Net Income (Loss) 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 (loss) per common share:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| October 31, |
|
| October 31, |
|
| October 31, |
|
| October 31, |
| ||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Basic weighted-average common shares outstanding |
|
| 97,784,661 |
|
|
| 97,972,864 |
|
|
| 97,823,948 |
|
|
| 100,458,726 |
|
|
| 98,202,399 |
|
|
| 97,784,661 |
|
|
| 98,209,796 |
|
|
| 97,823,948 |
|
Effect of dilutive options, performance stock units and restricted stock units |
|
| 798,371 |
|
|
| 655,305 |
|
|
| — |
|
|
| 688,299 |
| ||||||||||||||||
Effect of dilutive options, stock appreciation rights, performance stock units and restricted stock units |
|
| 1,213,439 |
|
|
| 798,371 |
|
|
| 1,237,755 |
|
|
| — |
| ||||||||||||||||
Diluted weighted-average shares outstanding |
|
| 98,583,032 |
|
|
| 98,628,169 |
|
|
| 97,823,948 |
|
|
| 101,147,025 |
|
|
| 99,415,838 |
|
|
| 98,583,032 |
|
|
| 99,447,551 |
|
|
| 97,823,948 |
|
For the three months ended October 31, 20202021 and 2019,2020, awards to purchase 160,000 common shares ranging in price from$38.09 to $46.42 and 460,000 common shares ranging in price from $23.74 to $46.42 and 415,000 common shares ranging in price from $28.47 to $46.42, respectively, were excluded from the calculation of diluted net income per common share because the impact would be anti-dilutive.
For the nine months ended October 31, 2021, awards to purchase 173,333 common shares ranging in price from $35.85 to $46.42 were excluded from the calculation of diluted net income per common share because the impact would be anti-dilutive. As a result of the net loss for the nine months ended October 31, 2020, all share-based awards have beenwere excluded from the calculation of diluted loss per share and therefore there was no difference in the weighted average number of common shares for basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive. For nine months ended October 31, 2019, awards to purchase 405,000 common shares ranging in price from $28.47 to $46.42 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 October 31, 2021 and October 31, 2020, were 30,001 and 2019, were 271,501 and 370,633 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.
13. Segment Reporting
The Company offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands. The Company operates 3 reportable segments – “Retail,” “Wholesale” and “Subscription.“Nuuly.”
The Company’s Retail segment consists of the Anthropologie, Bhldn, Free People, FP Movement, Terrain, Urban Outfitters and Menus & Venues brands. 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,retail locations, websites, mobile applications, catalogs and customer contact centers.
The Company’s Wholesale segment consists of the Free People, FP Movement and Urban Outfitters brands. The Wholesale segment sells through department and specialty stores worldwide, digital businesses and the Retail segment. The Anthropologie brand exited the wholesale business in the third quarter of fiscal 2021.
The Nuuly segment, formerly known as the Subscription segment, consists of the Nuuly brand, which offers Rent and Thrift. Nuuly Rent is a monthly women’s apparel subscription rental service that launched on July 30, 2019. Nuuly Thrift, which launched on October 12, 2021, is a resale marketplace where users can buy and sell women’s, men’s and kids’ clothes, shoes and accessories from any brands.
The Company evaluates the performance of each 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 the Retail and Wholesale segments are inventory and property and equipment. The principal identifiable assets for the SubscriptionNuuly segment are rental product and property and equipment.
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, 2020.2021. All of the Company’s segments are highly diversified. NaN 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 |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| October 31, |
|
| October 31, |
|
| October 31, |
|
| October 31, |
| ||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail operations |
| $ | 895,608 |
|
| $ | 897,130 |
|
| $ | 2,214,311 |
|
| $ | 2,558,386 |
|
| $ | 1,043,905 |
|
| $ | 895,608 |
|
| $ | 2,990,413 |
|
| $ | 2,214,311 |
|
Wholesale operations |
|
| 71,118 |
|
|
| 93,311 |
|
|
| 146,707 |
|
|
| 263,829 |
|
|
| 79,549 |
|
|
| 71,118 |
|
|
| 208,112 |
|
|
| 146,707 |
|
Subscription operations |
|
| 6,742 |
|
|
| 2,032 |
|
|
| 17,684 |
|
|
| 2,032 |
| ||||||||||||||||
Nuuly operations |
|
| 12,688 |
|
|
| 6,742 |
|
|
| 30,447 |
|
|
| 17,684 |
| ||||||||||||||||
Intersegment elimination |
|
| (3,861 | ) |
|
| (5,004 | ) |
|
| (17,346 | ) |
|
| (10,036 | ) |
|
| (4,718 | ) |
|
| (3,861 | ) |
|
| (12,408 | ) |
|
| (17,346 | ) |
Total net sales |
| $ | 969,607 |
|
| $ | 987,469 |
|
| $ | 2,361,356 |
|
| $ | 2,814,211 |
|
| $ | 1,131,424 |
|
| $ | 969,607 |
|
| $ | 3,216,564 |
|
| $ | 2,361,356 |
|
Income (loss) from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail operations |
| $ | 101,969 |
|
| $ | 83,687 |
|
| $ | 24,873 |
|
| $ | 197,378 |
|
| $ | 126,615 |
|
| $ | 101,969 |
|
| $ | 377,489 |
|
| $ | 24,873 |
|
Wholesale operations |
|
| 14,947 |
|
|
| 10,204 |
|
|
| (16,520 | ) |
|
| 42,319 |
|
|
| 10,098 |
|
|
| 14,947 |
|
|
| 33,377 |
|
|
| (16,520 | ) |
Subscription operations |
|
| (4,004 | ) |
|
| (6,320 | ) |
|
| (14,579 | ) |
|
| (11,957 | ) | ||||||||||||||||
Nuuly operations |
|
| (4,900 | ) |
|
| (4,004 | ) |
|
| (11,800 | ) |
|
| (14,579 | ) | ||||||||||||||||
Intersegment elimination |
|
| 116 |
|
|
| 300 |
|
|
| (378 | ) |
|
| 549 |
|
|
| 850 |
|
|
| 116 |
|
|
| 1,195 |
|
|
| (378 | ) |
Total segment operating income (loss) |
|
| 113,028 |
|
|
| 87,871 |
|
|
| (6,604 | ) |
|
| 228,289 |
|
|
| 132,663 |
|
|
| 113,028 |
|
|
| 400,261 |
|
|
| (6,604 | ) |
General corporate expenses |
|
| (14,520 | ) |
|
| (12,602 | ) |
|
| (24,204 | ) |
|
| (34,939 | ) |
|
| (16,761 | ) |
|
| (14,520 | ) |
|
| (45,003 | ) |
|
| (24,204 | ) |
Total income (loss) from operations |
| $ | 98,508 |
|
| $ | 75,269 |
|
| $ | (30,808 | ) |
| $ | 193,350 |
|
| $ | 115,902 |
|
| $ | 98,508 |
|
| $ | 355,258 |
|
| $ | (30,808 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
(1) General corporate expenses during the nine months ended October 31, 2020 benefitted from the recognition of coronavirus related government relief packages. |
| |||||||||||||||||||||||||||||||
|
| October 31, |
|
| January 31, |
|
| October 31, |
| |||
|
| 2020 |
|
| 2020 |
|
| 2019 |
| |||
Inventory |
|
|
|
|
|
|
|
|
|
|
|
|
Retail operations |
| $ | 450,312 |
|
| $ | 347,837 |
|
| $ | 468,810 |
|
Wholesale operations |
|
| 38,922 |
|
|
| 61,697 |
|
|
| 62,755 |
|
Total inventory |
| $ | 489,234 |
|
| $ | 409,534 |
|
| $ | 531,565 |
|
Rental product, net (1) |
|
|
|
|
|
|
|
|
|
|
|
|
Subscription operations |
| $ | 14,053 |
|
| $ | 16,447 |
|
| $ | 10,865 |
|
Total rental product, net |
| $ | 14,053 |
|
| $ | 16,447 |
|
| $ | 10,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Rental product, net is included in "Deferred income taxes and other assets" in the Condensed Consolidated Balance Sheets. |
| |||||||||||
(1) | General corporate expenses during the nine months ended October 31, 2020 benefitted from the recognition of COVID-19 related government relief packages in the nine months ended October 31, 2020. |
Property and equipment, net |
|
|
|
|
|
|
|
|
|
|
|
|
Retail operations |
| $ | 901,817 |
|
| $ | 859,918 |
|
| $ | 863,234 |
|
Wholesale operations |
|
| 2,212 |
|
|
| 2,577 |
|
|
| 2,496 |
|
Subscription operations |
|
| 26,535 |
|
|
| 27,537 |
|
|
| 24,808 |
|
Total property and equipment, net |
| $ | 930,564 |
|
| $ | 890,032 |
|
| $ | 890,538 |
|
|
| October 31, |
|
| January 31, |
|
| October 31, |
| |||
|
| 2021 |
|
| 2021 |
|
| 2020 |
| |||
Inventory |
|
|
|
|
|
|
|
|
|
|
|
|
Retail operations |
| $ | 582,711 |
|
| $ | 348,797 |
|
| $ | 450,312 |
|
Wholesale operations |
|
| 44,392 |
|
|
| 40,821 |
|
|
| 38,922 |
|
Total inventory |
| $ | 627,103 |
|
| $ | 389,618 |
|
| $ | 489,234 |
|
Rental product, net (1) |
|
|
|
|
|
|
|
|
|
|
|
|
Nuuly operations |
| $ | 22,203 |
|
| $ | 11,857 |
|
| $ | 14,053 |
|
Total rental product, net |
| $ | 22,203 |
|
| $ | 11,857 |
|
| $ | 14,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Rental product, net is included in "Deferred income taxes and other assets" in the Condensed Consolidated Balance Sheets. |
| |||||||||||
Property and equipment, net |
|
|
|
|
|
|
|
|
|
|
|
|
Retail operations |
| $ | 1,056,282 |
|
| $ | 938,020 |
|
| $ | 901,817 |
|
Wholesale operations |
|
| 1,593 |
|
|
| 2,096 |
|
|
| 2,212 |
|
Nuuly operations |
|
| 30,412 |
|
|
| 27,306 |
|
|
| 26,535 |
|
Total property and equipment, net |
| $ | 1,088,287 |
|
| $ | 967,422 |
|
| $ | 930,564 |
|
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 |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| October 31, |
|
| October 31, |
|
| October 31, |
|
| October 31, |
| ||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apparel (1) |
| $ | 622,776 |
|
| $ | 671,142 |
|
| $ | 1,501,053 |
|
| $ | 1,902,782 |
|
| $ | 749,789 |
|
| $ | 622,776 |
|
| $ | 2,135,503 |
|
| $ | 1,501,053 |
|
Home (2) |
|
| 189,527 |
|
|
| 146,249 |
|
|
| 455,947 |
|
|
| 415,759 |
|
|
| 192,312 |
|
|
| 189,527 |
|
|
| 553,996 |
|
|
| 455,947 |
|
Accessories (3) |
|
| 116,417 |
|
|
| 124,760 |
|
|
| 276,361 |
|
|
| 341,641 |
|
|
| 132,541 |
|
|
| 116,417 |
|
|
| 369,815 |
|
|
| 276,361 |
|
Other (4) |
|
| 40,887 |
|
|
| 45,318 |
|
|
| 127,995 |
|
|
| 154,029 |
|
|
| 56,782 |
|
|
| 40,887 |
|
|
| 157,250 |
|
|
| 127,995 |
|
Total net sales |
| $ | 969,607 |
|
| $ | 987,469 |
|
| $ | 2,361,356 |
|
| $ | 2,814,211 |
|
| $ | 1,131,424 |
|
| $ | 969,607 |
|
| $ | 3,216,564 |
|
| $ | 2,361,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a percentage of net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apparel (1) |
|
| 64 | % |
|
| 68 | % |
|
| 64 | % |
|
| 68 | % |
|
| 66 | % |
|
| 64 | % |
|
| 66 | % |
|
| 64 | % |
Home (2) |
|
| 20 | % |
|
| 15 | % |
|
| 19 | % |
|
| 15 | % |
|
| 17 | % |
|
| 20 | % |
|
| 17 | % |
|
| 19 | % |
Accessories (3) |
|
| 12 | % |
|
| 13 | % |
|
| 12 | % |
|
| 12 | % |
|
| 12 | % |
|
| 12 | % |
|
| 12 | % |
|
| 12 | % |
Other (4) |
|
| 4 | % |
|
| 4 | % |
|
| 5 | % |
|
| 5 | % |
|
| 5 | % |
|
| 4 | % |
|
| 5 | % |
|
| 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, the Menus & Venues brand and the Subscription segment |
| |||||||||||||||||||||||||||||||
(4) Other includes beauty, shipping and handling, the Menus & Venues brand and the Nuuly segment | (4) Other includes beauty, shipping and handling, the Menus & Venues brand and the Nuuly segment |
| ||||||||||||||||||||||||||||||
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, |
|
| October 31, |
|
| January 31, |
|
| October 31, |
| ||||||
|
| 2020 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2021 |
|
| 2020 |
| ||||||
Property and equipment, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic operations |
| $ | 747,273 |
|
| $ | 763,411 |
|
| $ | 779,018 |
|
| $ | 894,106 |
|
| $ | 768,440 |
|
| $ | 747,273 |
|
Foreign operations |
|
| 183,291 |
|
|
| 126,621 |
|
|
| 111,520 |
|
|
| 194,181 |
|
|
| 198,982 |
|
|
| 183,291 |
|
Total property and equipment, net |
| $ | 930,564 |
|
| $ | 890,032 |
|
| $ | 890,538 |
|
| $ | 1,088,287 |
|
| $ | 967,422 |
|
| $ | 930,564 |
|
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| October 31, |
|
| October 31, |
|
| October 31, |
|
| October 31, |
| ||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic operations |
| $ | 847,898 |
|
| $ | 865,586 |
|
| $ | 2,081,151 |
|
| $ | 2,468,991 |
|
| $ | 974,511 |
|
| $ | 847,898 |
|
| $ | 2,799,886 |
|
| $ | 2,081,151 |
|
Foreign operations |
|
| 121,709 |
|
|
| 121,883 |
|
|
| 280,205 |
|
|
| 345,220 |
|
|
| 156,913 |
|
|
| 121,709 |
|
|
| 416,678 |
|
|
| 280,205 |
|
Total net sales |
| $ | 969,607 |
|
| $ | 987,469 |
|
| $ | 2,361,356 |
|
| $ | 2,814,211 |
|
| $ | 1,131,424 |
|
| $ | 969,607 |
|
| $ | 3,216,564 |
|
| $ | 2,361,356 |
|
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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 impacts of public health crises such as the coronavirus (COVID-19) pandemic, overall economic and market conditions and worldwide political events and the resultant impact on consumer spending patterns, 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'sKingdom’s withdrawal from membership in 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, severe or unseasonable weather conditions (including as a result of climate change) or public health crises, 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, response to new concepts, our ability to integrate acquisitions, risks associated with digital sales, our ability to maintain and expand our digital sales channels, any material disruptions or security breaches with respect to our technology systems, the departure of one or more key senior executives, import risks (including any shortage of transportation capacities or delays at ports), changes to U.S. and foreign trade policies including(including the enactment of tariffs, border adjustment taxes or increases in duties or quotas,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, any material disruptions or security breaches with respect to our technology systems, failure of our manufacturers and third-party vendors to comply with our social compliance program, risks related to environmental, social and governance activities, changes in our effective income tax rate, (including the uncertainties associated with the U.S. Tax Cuts and Jobs Act), changes in accounting standards and subjective assumptions, regulatory changes and legal matters and other risks identified in our filings with the SEC, including those set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 31, 2020,2021, filed on March 31, 2020.April 1, 2021. 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 under three reportable segments – Retail, Wholesale and Subscription.Nuuly. Our Retail segment consists of our Anthropologie, Bhldn, Free People, FP Movement, Terrain, Urban Outfitters and Menus & Venues brands. Our Retail segment consumer products and services are sold directly to our customers through our stores,retail locations, 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, FP Movement 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 apparel, intimates and activewear. Our Nuuly segment, formerly known as the Subscription segment, consists of the Nuuly brand, which offers Rent and Thrift. Nuuly Rent is a monthly women’s apparel subscription rental service that launched on July 30, 2019. Nuuly Thrift, which launched on October 12, 2021, is a resale marketplace where users can buy and sell women’s, men’s and kids’ clothes, shoes and accessories from any brands.
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 20212022 will end on January 31, 2021.2022, our fiscal year 2021 ended on January 31, 2021 and our fiscal year 2020 ended on January 31, 2020.
Impact of the Coronavirus Pandemic
Impact on Fiscal 2021
On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19)(“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide, causing public health officials to recommend precautions to mitigate the spread of the virus, including warning against congregating in heavily populated areas, such as malls and shopping centers.worldwide. On March 14, 2020, the Company announced that it temporarily closed all stores, globally; however, the Company continued to fulfill digital orders from its stores where permitted by local authorities.offices and showrooms globally. The Company’s distribution and fulfillment centers remained open to support the digital business and the Wholesale segment operations but have donedid so with additional safety procedures and
enhanced cleaning measures in place to protect the health of employees. The Company closed its offices and showrooms globally with the exception of location dependent employees. All other corporate and showroom employees areworked remotely.
On April 25, 2020, the Company began reopening stores in select states and countries in accordance with local government guidelines, and as of July 31, 2020, substantially all of the Company’s stores had reopened. Where opening was permitted, the Company followed newly established health protocols, provided personal protective equipment to its employees, and implemented social distancing working remotely.practices. Additionally, the Company implemented occupancy limits, reduced operating hours, and instituted new cleaning regimens. As a result, the Company incurred incremental costs for personal protective equipment and additional payroll and other costs associated with implementing these health protocols in its stores, distribution and fulfillment centers, and corporate offices. During the fourth quarter of fiscal 2021, certain store operations were again impacted by an additional round of temporary store closures and occupancy restrictions, primarily in Europe and Canada.
As a result of the COVID-19 pandemic, certain governments implemented programs (some of which expired in fiscal 2021) to encourage companies to retain and pay employees that were unable to work or were limited in the work they could perform in light of closures or a significant decline in sales. The coronavirusCompany qualified for certain of these programs during the second quarter and through the remainder of fiscal 2021 and recorded the benefit as an offset to selling, general and administrative expenses or to store occupancy expenses in cost of sales based on the nature of the related expenses offset by such programs.
In response to the COVID-19 pandemic, the Company took measures to protect its financial position and increase financial flexibility. For details of all such material measures taken during fiscal 2021, refer to our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed with the SEC on April 1, 2021. See Note 6, “Debt,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for discussion of the Company’s borrowings and subsequent repayments under its Amended Credit Facility during fiscal 2021.
As a result of the COVID-19 pandemic, during fiscal 2021, the Company recorded certain additional reserves, including inventory obsolescence reserves and an allowance for doubtful accounts for Wholesale segment customer accounts receivable, and non-cash charges, primarily store impairment charges. For further discussion of such reserves and non-cash charges for the first nine months of fiscal 2021 and the full year impact on fiscal 2021, see the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2020, filed with the SEC on December 10, 2020, and the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021.
Impact on Fiscal 2022
The COVID-19 pandemic continued to negatively impact the Company’s store operations during the first nine months of fiscal 2022 due to reduced store traffic as closures and occupancy restrictions continued primarily in Europe and Canada. During the second quarter of fiscal 2022, all remaining COVID-19 related store closures in Europe and Canada expired, although some capacity restrictions continued in certain European and Canadian stores. The COVID-19 pandemic and general unfavorable macro-economic conditions have disrupted the Company’s global supply chain in fiscal 2022, leading to COVID-19 related factory closures and continued port congestions, which have resulted in inventory receipt delays and an increase in inbound freight costs. The Company made a strategic decision to bring certain product categories in earlier in the third quarter of fiscal 2022 in an attempt to minimize the impact of such disruptions on customer demand.
The Company continued to qualify for certain government assistance programs that partially offset related expenses in locations impacted by closures during fiscal 2022. As of the end of the second quarter of fiscal 2022, however, the programs either expired or the Company no longer qualified for such programs in the United States
and Canada, and as of the end of the third quarter of fiscal 2022, the Company no longer qualified for the majority of such programs in Europe. The Company recorded the benefit of the government assistance programs as an offset to selling, general and administrative expenses or store occupancy expenses in cost of sales based on the nature of the related expenses offset by such programs.
Impact on Future Operations
The COVID-19 pandemic continues to materially impact the Company’s operations in the United States and globally, and related government and private sector responsive actions have and willcould continue to affect its business operations. Because itThe Company is impossiblealso experiencing COVID-19 supply chain disruptions resulting in inventory receipt delays. In addition to predictCOVID-19, the effectCompany expects that our operations will continue to be influenced by general economic inflationary conditions, including wage inflation, increased merchandise sourcing costs and ultimate impacthigher inbound transportation costs. The Company cannot reasonably estimate the duration and severity of the coronavirusCOVID-19 pandemic, which has had and may continue to have a material impact on its business. As a result, current financial information may not be necessarily indicative of future operating results and the Company’s plans as described below may change.
In response to the coronavirus pandemic, the Company has taken many additional measures to protect its financial position and increase financial flexibility during this challenging time period. Those include:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of the coronavirus pandemic, during the nine months ended October 31, 2020, the Company recorded certain additional reserves and non-cash charges. The Company assessed the value of its inventory in the Retail and Wholesale segments and recorded an increase in inventory obsolescence reserves during the three months ended April 30, 2020. As a result of disciplined inventory control and better than planned product performance, during the second and third quarters of fiscal 2021, the Company decreased a portion of its inventory obsolescence reserves. During the three months ended April 30, 2020, the Company recorded an increase in allowance for doubtful accounts for Wholesale segment customer accounts receivables as a result of the significant disruption and uncertainty in the wholesale macro environment. During the second and third quarters of fiscal 2021, the Company reduced the allowance for doubtful accounts due to the collection of certain outstanding accounts receivables. Finally, during the three months ended April 30, 2020, the Company determined that certain long-lived assets at the Company’s retail locations were unable to recover their carrying value primarily due toaddress the impact of the mandated store closures and anticipated reduced store net sales during the remainder of fiscal 2021 as a result of the coronavirus pandemic. These assets were written down to their fair value resulting in impairment charges across 39 retail locations. There were no store impairment charges during the second and third quarters of fiscal 2021.
The following is a summary of net charges recorded during fiscal 2021:
$ in thousands |
| Three Months Ended |
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||
|
| April 30, 2020 |
|
| July 31, 2020 |
|
| October 31, 2020 |
|
| October 31, 2020 |
| ||||
Inventory obsolescence reserves |
| $ | 43,327 |
|
| $ | (21,673 | ) |
| $ | (5,730 | ) |
| $ | 15,924 |
|
Allowance for doubtful accounts |
|
| 5,800 |
|
|
| (2,200 | ) |
|
| (1,000 | ) |
|
| 2,600 |
|
Store impairment |
|
| 14,528 |
|
|
| — |
|
|
| — |
|
|
| 14,528 |
|
As a result of the global coronavirus pandemic, governments in the United States, United Kingdom (“U.K.”), Canada and various other jurisdictions implemented programs to encourage companies to retain and pay employees that are unable to work or are limited in the work that they can perform in light of closures or a significant decline in sales. As such, the Company qualified for certain of these programs, which partially offset related expenses. The Company recorded the cumulative benefit of the programs implemented by the United States and Canada in selling, general and administrative expenses during the second and third quarters of fiscal 2021. The Company continued to pay all employees through at least April 1, 2020. On March 31, 2020, the Company announced it furloughed a substantial number of store, wholesale and home office employees beginning April 1, 2020. The furlough period continued through July 31, 2020, with some furloughs resulting in layoffs as of the same date. Impacted employees continued to receive enrolled benefits during the furlough period. Benefits related to the programs implemented by the U.K. and other European countries were recorded as an offset to store occupancy expenses in cost of sales during the three months ended October 31, 2020.
Beginning April 25, 2020, the Company started to reopen stores in select states and countries in accordance with local government guidelines. As of July 31, 2020, substantially all of the Company’s stores had reopened and remained open as of October 31, 2020. As a result of the COVID-19 pandemic our store operations continue to be impacted by temporary store closures, primarily in Europe and Canada, and reduced customer traffic in reopened store locations globally due in part to local government guidelines that have imposed certain operating restrictions, including capacity limits. The Company cannot reasonably estimate the duration and severity of this pandemic, which has had and may continue to have a material impact on our business.
As we have reopened stores, we have followed newly established health protocols, provided personal protective equipment to our employees, and implemented social distancing working practices. Additionally, we are implementing occupancy limits, reducing operating hours, and instituting new cleaning regimens, including enhanced cleaning of high-touch surfaces throughout the day and making hand sanitizer available to our customers and employees. As a result, the Company is planning on incurring incremental costs going forward for personal protective equipment and additional payroll and supply costs associated with social distancing protocols and cleaning regimens we are putting in place in our stores, distribution and fulfillment centers, and offices. As of October 31, 2020, the Company has not changed its remote work arrangements for its corporate employees.change.
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,retail locations, 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. 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 due to store specific closures from events such as damage from fire, flood and natural weather events. The Company did not remove stores that were closed or operating for an extended period of time at a reduced capacity due to the coronavirusCOVID-19 pandemic from the comparable stores net sales calculations. 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 Retail segment metrics including customer traffic, andconversion rates, average units per transaction at our stores and on our websites and mobile applications. We additionally monitorapplications and average unit selling price at our stores and average order value and conversion rates 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 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 and a product offering that includes women’s and men’s fashion apparel, activewear, intimates, footwear, accessories, home goods, electronics and beauty. A large portion of our merchandise is exclusive to Urban Outfitters, consisting ofsuch as an assortment of products designed internally and designedor 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, Europe and EuropeAsia that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in its stores, sells merchandise through a franchisee-owned storestores in the United Arab Emirates, and partners with third-party digital businesses to offer a limited selection of merchandise, which is available globally. Urban Outfitters’ North American and European Retail segment net sales accounted for approximately 31.7% and 8.2% of consolidated net sales, respectively, for the nine months ended October 31, 2020, compared to 29.4% and 7.7%, respectively, for the comparable period in fiscal 2020. Asian Retail segment net sales accounted for less than 1.0%28.1% of consolidated net sales for the nine months ended October 31, 2020 and2021, compared to approximately 31.7% for the comparable period in fiscal 2020.2021. European and Asian Retail segment net sales accounted for 9.0% of consolidated net sales for the nine months ended October 31, 2021, compared to approximately 8.6% for the comparable period in fiscal 2021.
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. The 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,head pieces, 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, the Anthropologie Group operates expanded format stores that include multiple Anthropologie Group brands, which allows for the presentation of an expanded assortment of products in certain categories. Anthropologie Group stores are located in specialty centers, upscale street locations and enclosed malls. The Anthropologie Group operates websites and mobile applications in North America and Europe that capture the spirit of its brands by offering a similar yet broader selection of merchandise as found in its stores, offers catalogsa catalog in North America and Europe that marketmarkets select merchandise, most of which is also available in Anthropologie brand stores, sells merchandise through a franchisee-owned store in Israel,the United Arab Emirates, and partners with third-party digital businesses to offer a limited selection of merchandise, which is available globally. The Anthropologie Group’s North American and European Retail segment net sales accounted for approximately 35.9% and 1.6% of consolidated net sales, respectively, for the nine months ended October 31, 2020, compared to 38.9% and 1.6%, respectively, for the comparable period in fiscal 2020. Asian Retail segment net sales accounted for less than 1.0%36.6% of consolidated net sales for the nine months ended October 31, 2020 and2021, compared to approximately 35.9% for the comparable period in fiscal 2020.2021. European and Asian Retail segment net sales accounted for 1.8% of consolidated net sales for the nine months ended October 31, 2021, compared to approximately 1.7% for the comparable period in fiscal 2021.
The Free People Group consists of the Free People and FP Movement brands. The Free People brand 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. The FP Movement brand offers performance-ready activewear, beyond-the-gym staples and wellness essentials. Free People Group stores are located in enclosed malls, upscale street locations and specialty centers. We opened one FP Movement store during the three months ended October 31, 2020 and expect to open additional stores in fiscal 2021 and thereafter to further capitalize on the growth opportunity and unique position that FP Movement has in the fitness and wellness space.The Free People Group 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 and FP Movement wholesale offerings. The Free People Group also offers a catalogcatalogs that marketsmarket select merchandise, most of
which is also available in our Free People and FP Movement stores, and partners with third-party digital businesses to offer a limited selection of merchandise, which is available globally. The Free People’sPeople Group’s North American Retail segment net sales accounted for approximately 15.0%16.4% of consolidated net sales for the nine months ended October 31, 2020,2021, compared to approximately 12.5%15.0% for the comparable period in fiscal 2020.2021. European and Asian Retail segment net sales each accounted for less than 1.0% of consolidated net sales for the nine months ended October 31, 20202021, and the comparable period in fiscal 2020.2021.
The Menus & Venues brand focuses on a dining experience that provides excellence in food, beverage and service. The Menus & Venues brand net sales accounted for less than 1.0% of consolidated net sales for the nine months ended October 31, 20202021, and the comparable period in fiscal 2020.2021.
Net sales from the Retail segment accounted for approximately 93.8%93.0% of consolidated net sales for the nine months ended October 31, 2020,2021, compared to 90.9%93.8% for the comparable period in fiscal 2020.2021.
Store data for the nine months ended October 31, 20202021 was as follows:
|
| January 31, |
|
| Stores |
|
| Stores |
|
| October 31, |
|
| January 31, |
|
| Stores |
|
| Stores |
|
| October 31, |
| ||||||||
|
| 2020 |
|
| Opened |
|
| Closed |
|
| 2020 |
|
| 2021 |
|
| Opened |
|
| Closed |
|
| 2021 |
| ||||||||
Urban Outfitters |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
| 177 |
|
|
| 4 |
|
|
| (4 | ) |
|
| 177 |
|
|
| 174 |
|
|
| 11 |
|
|
| (2 | ) |
|
| 183 |
|
Canada |
|
| 17 |
|
|
| — |
|
|
| — |
|
|
| 17 |
|
|
| 17 |
|
|
| 1 |
|
|
| — |
|
|
| 18 |
|
Europe |
|
| 54 |
|
|
| 2 |
|
|
| — |
|
|
| 56 |
|
|
| 56 |
|
|
| 3 |
|
|
| — |
|
|
| 59 |
|
Urban Outfitters Global Total |
|
| 248 |
|
|
| 6 |
|
|
| (4 | ) |
|
| 250 |
|
|
| 247 |
|
|
| 15 |
|
|
| (2 | ) |
|
| 260 |
|
Anthropologie Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
| 200 |
|
|
| 1 |
|
|
| — |
|
|
| 201 |
|
|
| 204 |
|
|
| 6 |
|
|
| (3 | ) |
|
| 207 |
|
Canada |
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| 11 |
|
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| 11 |
|
Europe |
|
| 20 |
|
|
| 2 |
|
|
| — |
|
|
| 22 |
|
|
| 22 |
|
|
| 2 |
|
|
| — |
|
|
| 24 |
|
Anthropologie Group Global Total |
|
| 231 |
|
|
| 3 |
|
|
| — |
|
|
| 234 |
|
|
| 237 |
|
|
| 8 |
|
|
| (3 | ) |
|
| 242 |
|
Free People |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
United States |
|
| 134 |
|
|
| 3 |
|
|
| (1 | ) |
|
| 136 |
| ||||||||||||||||
Free People Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
United States (1) |
|
| 138 |
|
|
| 22 |
|
|
| (1 | ) |
|
| 159 |
| ||||||||||||||||
Canada |
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| 6 |
|
|
| 6 |
|
|
| — |
|
|
| (1 | ) |
|
| 5 |
|
Europe |
|
| 4 |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| 5 |
|
|
| 1 |
|
|
| — |
|
|
| 6 |
|
Free People Global Total |
|
| 144 |
|
|
| 3 |
|
|
| (1 | ) |
|
| 146 |
| ||||||||||||||||
Free People Group Global Total |
|
| 149 |
|
|
| 23 |
|
|
| (2 | ) |
|
| 170 |
| ||||||||||||||||
Menus & Venues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| 11 |
|
|
| 11 |
|
|
| — |
|
|
| (2 | ) |
|
| 9 |
|
Menus & Venues Total |
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| 11 |
|
|
| 11 |
|
|
| — |
|
|
| (2 | ) |
|
| 9 |
|
Total Company-Owned Stores |
|
| 634 |
|
|
| 12 |
|
|
| (5 | ) |
|
| 641 |
|
|
| 644 |
|
|
| 46 |
|
|
| (9 | ) |
|
| 681 |
|
Franchisee-Owned Stores |
|
| 7 |
|
|
| — |
|
|
| (5 | ) |
|
| 2 |
|
|
| 1 |
|
|
| 2 |
|
|
| — |
|
|
| 3 |
|
Total URBN |
|
| 641 |
|
|
| 12 |
|
|
| (10 | ) |
|
| 643 |
|
|
| 645 |
|
|
| 48 |
|
|
| (9 | ) |
|
| 684 |
|
| (1) |
|
(2) | Franchisee-owned stores are located in the United Arab Emirates. |
Selling square footage by brand as of October 31, 20202021 and 20192020 was as follows:
|
| October 31, |
|
| October 31, |
|
|
|
|
|
| October 31, |
|
| October 31, |
|
|
|
|
| ||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||
Selling square footage (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Urban Outfitters |
|
| 2,227 |
|
|
| 2,223 |
|
|
| 0.2 | % |
|
| 2,270 |
|
|
| 2,227 |
|
|
| 1.9 | % |
Anthropologie Group |
|
| 1,795 |
|
|
| 1,790 |
|
|
| 0.3 | % |
|
| 1,838 |
|
|
| 1,795 |
|
|
| 2.4 | % |
Free People |
|
| 327 |
|
|
| 322 |
|
|
| 1.4 | % | ||||||||||||
Free People Group (1) |
|
| 362 |
|
|
| 327 |
|
|
| 10.7 | % | ||||||||||||
Total URBN |
|
| 4,349 |
|
|
| 4,335 |
|
|
| 0.3 | % |
|
| 4,470 |
|
|
| 4,349 |
|
|
| 2.8 | % |
| (1) | Selling square footage for FP Movement was 18 and 1, as of October 31, 2021 and 2020, respectively. |
(2) | Menus & Venues restaurants and franchisee-owned stores are not included in selling square footage. |
We plan for future store growth for all three brands to come from expansion domestically and internationally, which may include opening stores (including standalone FP Movement stores) in new and existing markets or entering into additional franchise or joint venture agreements. We plan for future digital channel growth to come from expansion domestically and internationally.
Projected openings and closings for fiscal 20212022 are as follows:
|
| January 31, |
|
| Projected |
|
| Projected |
|
| January 31, |
|
| January 31, |
|
| Projected |
|
| Projected |
|
| January 31, |
| ||||||||
|
| 2020 |
|
| Openings |
|
| Closings |
|
| 2021 |
|
| 2021 |
|
| Openings |
|
| Closings |
|
| 2022 |
| ||||||||
Urban Outfitters |
|
| 248 |
|
|
| 8 |
|
|
| (9 | ) |
|
| 247 |
|
|
| 247 |
|
|
| 17 |
|
|
| (4 | ) |
|
| 260 |
|
Anthropologie Group |
|
| 231 |
|
|
| 7 |
|
|
| (1 | ) |
|
| 237 |
|
|
| 237 |
|
|
| 9 |
|
|
| (9 | ) |
|
| 237 |
|
Free People |
|
| 144 |
|
|
| 6 |
|
|
| (1 | ) |
|
| 149 |
| ||||||||||||||||
Free People Group (1) |
|
| 149 |
|
|
| 29 |
|
|
| (6 | ) |
|
| 172 |
| ||||||||||||||||
Menus & Venues |
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| 11 |
|
|
| 11 |
|
|
| 1 |
|
|
| (2 | ) |
|
| 10 |
|
Total Company-Owned Stores |
|
| 634 |
|
|
| 21 |
|
|
| (11 | ) |
|
| 644 |
|
|
| 644 |
|
|
| 56 |
|
|
| (21 | ) |
|
| 679 |
|
Franchisee-Owned Stores |
|
| 7 |
|
|
| — |
|
|
| (6 | ) |
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
|
| — |
|
|
| 3 |
|
Total URBN |
|
| 641 |
|
|
| 21 |
|
|
| (17 | ) |
|
| 645 |
|
|
| 645 |
|
|
| 58 |
|
|
| (21 | ) |
|
| 682 |
|
(1) | Includes 16FP Movement projected store openings. |
Wholesale Segment
Our Wholesale segment consists of the Free People, FP Movement and Urban Outfitters brands that sell through approximately 2,300 department and specialty stores worldwide, third-party digital businesses and our Retail segment. The Wholesale segment primarily designs, develops and markets young women’s contemporary casual apparel, intimates, FP Movement activewear and shoes under the Free People brand and the BDG and other own brand apparel collectioncollections under the Urban Outfitters brand. The Anthropologie brand exited the wholesale business in the third quarter of fiscal 2021. Our Wholesale segment net sales accounted for approximately 5.5%6.1% of consolidated net sales for the nine months ended October 31, 2020,2021, compared to 9.0%5.5% for the comparable period in fiscal 2020.2021.
SubscriptionNuuly Segment
Our Nuuly segment, formerly known as the Subscription segment, consists of the Nuuly brand, which offers Rent and Thrift. Nuuly Rent is a monthly women’s apparel subscription rental service that launched on July 30, 2019. For a monthly fee, Nuuly subscribers can select rental product from a wide selection of the Company’s own brands, third-party labels and one-of-a-kind vintage pieces via a custom-built, digital platform. Subscribers select their products each month, wear them as often as they like and then swap into new products the following month. Subscribers are also able to purchase the rented product. Nuuly Thrift, which launched on October 12, 2021, is a resale marketplace where users can buy and sell women’s, men’s and kids’ clothes, shoes and accessories from any brands. By selling on Nuuly Thrift, one can transfer their earnings to their bank account or convert them to a gift card with a bonus to be used at any of the Company’s brands. The Company earns a commission based on sales made in the marketplace. Our SubscriptionNuuly segment net sales accounted for less than 1.0% of consolidated net sales for the nine months ended October 31, 20202021, and the comparable period in fiscal 2020.2021.
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, 2020,2021, which are included in our Annual Report on Form 10-K filed with the SEC on March 31, 2020.April 1, 2021. 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. Other than the impact of the coronavirus pandemic on our inventory obsolescence reserves in the Retail and Wholesale segments, the allowance for doubtful accounts on our Wholesale segment accounts receivable and the obsolescence reserves on our Subscription segment rental product, 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. There have been no significant changes to our critical accounting policies during the nine months ended October 31, 2020.2021.
Results of Operations
As a Percentage of Net Sales
Because of the material impact COVID-19 had on our business operations in fiscal 2021, including mandated store closures, the following financial highlights have been provided as a comparison of fiscal 2022 results to fiscal 2020. Management views the comparison of fiscal 2022 results to fiscal 2020 as a meaningful measurement of the Company’s business performance.
• | Total net sales increased 14.6% over the third quarter of fiscal 2020 and increased 14.3% over the first nine months of fiscal 2020, reaching the highest net sales in dollars for the respective periods. Both increases were driven by an increase in comparable Retail segment net sales, partially offset by a decline in Wholesale segment net sales. |
• | Gross profit rate improved to 34.5% for the third quarter of fiscal 2022 and 35.0% for the first nine months of fiscal 2022, compared to 32.5% for the third quarter of fiscal 2020 and 32.2% for the first nine months of fiscal 2020. The improvement in both periods was primarily driven by the lowest merchandise markdown rates for the respective periods and improved leverage in store occupancy expense due to the increased penetration of the digital channel in Retail segment net sales, partially offset by an increase in delivery and logistics expenses and lower initial merchandise markups resulting from higher inbound transportation expenses. |
• | As of October 31, 2021, total inventory increased by $95.5 million, or 18.0%, compared to total inventory as of October 31, 2019, primarily due to the increase in net sales and a strategic decision to bring certain product categories in earlier to protect against ongoing supply chain disruptions and delays. |
• | Selling, general and administrative expenses expressed as a percentage of sales decreased to 24.3% for the third quarter of fiscal 2022 and 24.0% for the first nine months of fiscal 2022, compared to 24.9% for the third quarter of fiscal 2020 and 25.3% for the first nine months of fiscal 2020. The leverage was primarily related to disciplined store payroll management and overall expense control, partially offset by deleverage in digital marketing and creative expenses to drive overall customer growth and strong digital sales. |
• | Income from operations expressed as a percentage of net sales improved to 10.2% for the third quarter of fiscal 2022 and 11.0% for the first nine months of fiscal 2022, compared to 7.6% for the third quarter of fiscal 2020 and 6.9% for the first nine months of fiscal 2020. |
The tables below set forth, for the periods indicated, the results of operations and the percentage of our net sales represented by certain statement of operations data. The tables should be read in conjunction with the discussions that follow. As a result of the coronavirusCOVID-19 pandemic, all of our stores were closed for a portion of the first half of fiscal 2021 (see further details under Impact of the Coronavirus Pandemic above). In addition to lost revenues, we incurred expenses that were not commensurate with the current level of sales. As a result, comparisons of expense ratios and year-over-year trends were impacted in a meaningful way.
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 |
|
| ||||||||||||
|
| October 31, |
|
|
| October 31, |
|
| ||||||||||||
|
| 2020 |
|
|
| 2019 |
|
|
| 2020 |
|
|
| 2019 |
|
| ||||
Net sales |
|
| 100.0 |
| % |
|
| 100.0 |
| % |
|
| 100.0 |
| % |
|
| 100.0 |
| % |
Cost of sales (excluding store impairment) |
|
| 66.7 |
|
|
|
| 67.5 |
|
|
|
| 75.1 |
|
|
|
| 67.8 |
|
|
Store impairment |
|
| — |
|
|
|
| — |
|
|
|
| 0.6 |
|
|
|
| — |
|
|
Gross profit |
|
| 33.3 |
|
|
|
| 32.5 |
|
|
|
| 24.3 |
|
|
|
| 32.2 |
|
|
Selling, general and administrative expenses |
|
| 23.1 |
|
|
|
| 24.9 |
|
|
|
| 25.6 |
|
|
|
| 25.3 |
|
|
Income (loss) from operations |
|
| 10.2 |
|
|
|
| 7.6 |
|
|
|
| (1.3 | ) |
|
|
| 6.9 |
|
|
Other (loss) income, net |
|
| (0.1 | ) |
|
|
| 0.1 |
|
|
|
| (0.1 | ) |
|
|
| 0.2 |
|
|
Income (loss) before income taxes |
|
| 10.1 |
|
|
|
| 7.7 |
|
|
|
| (1.4 | ) |
|
|
| 7.1 |
|
|
Income tax expense (benefit) |
|
| 2.2 |
|
|
|
| 2.1 |
|
|
|
| (0.2 | ) |
|
|
| 1.8 |
|
|
Net income (loss) |
|
| 7.9 |
| % |
|
| 5.6 |
| % |
|
| (1.2 | ) | % |
|
| 5.3 |
| % |
Three Months Ended October 31, 2021 (Fiscal 2022) Compared To
Three Months Ended October 31, 2020 Compared To Three Months Ended October 31, 2019(Fiscal 2021)
(amounts in millions) | Three Months Ended | ||||||||||||||||
| October 31, | ||||||||||||||||
| 2021 |
| 2020 | ||||||||||||||
Net sales | $ | 1,131.4 |
|
|
| 100.0 |
| % |
| $ | 969.6 |
|
|
| 100.0 |
| % |
Cost of sales |
| 740.7 |
|
| 65.5 |
|
|
|
| 646.7 |
|
|
| 66.7 |
|
| |
Gross profit |
| 390.7 |
|
|
| 34.5 |
|
|
|
| 322.9 |
|
|
| 33.3 |
|
|
Selling, general and administrative expenses |
| 274.8 |
|
| 24.3 |
|
|
|
| 224.4 |
|
|
| 23.1 |
|
| |
Income from operations |
| 115.9 |
|
|
| 10.2 |
|
|
|
| 98.5 |
|
|
| 10.2 |
|
|
Other loss, net |
| (0.5 | ) |
| (0.0) |
|
|
|
| (0.9 | ) |
| (0.1) |
|
| ||
Income before income taxes |
| 115.4 |
|
|
| 10.2 |
|
|
|
| 97.6 |
|
|
| 10.1 |
|
|
Income tax expense |
| 26.5 |
|
| 2.3 |
|
|
|
| 20.9 |
|
|
| 2.2 |
|
| |
Net income | $ | 88.9 |
|
|
| 7.9 |
| % |
| $ | 76.7 |
|
|
| 7.9 |
| % |
Net sales infor the third quarter of fiscal 20212022 were $969.6$1,131.4 million, compared to $987.5$969.6 million in the third quarter of fiscal 2020.2021. The $17.9$161.8 million decreaseincrease was attributable to a $21.1$148.3 million, or 23.8%16.6%, decreaseincrease in Retail segment net sales, a $7.6 million, or 11.3%, increase in Wholesale segment net sales and a $1.5 million, or 0.2%, decrease in Retail segment net sales, partially offset an increase in SubscriptionNuuly segment net sales of $4.7$5.9 million. Retail segment net sales for the third quarter of fiscal 20212022 accounted for 92.4%92.3% of total net sales compared to 90.9%92.4% of total net sales in the third quarter of fiscal 2020.2021.
The decreaseincrease in our Retail segment net sales during the third quarter of fiscal 20212022 was due to a decrease of $4.0 million in Retail segment comparable net sales, partially offset by an increase of $2.5 million in non-comparable net sales, including the net impact of store openings and closings since the prior comparable period and
the impact of foreign currency translation. Retail segment comparable net sales increased 17.3% at Free People and 3.7% at Urban Outfitters and decreased 9.3% at the Anthropologie Group. Retail segment comparable net sales declined 1% eachin both North America and Europe and were offset by an increase in Asia. Retail segment comparable net sales were flat as a result of negative comparable store net sales driven by lower store productivity and reduced store traffic as a result of the coronavirus pandemic, offset by double-digit growth in the digital channel. Negative comparable store net sales resulted from a decrease in store traffic, transactions and average unit selling price, while units per transaction increased. The digital channel net sales increase was driven by an increase in conversion rate and sessions, while average order value and units per transaction decreased. The decrease in non-comparable net sales was primarily due to lower store productivity and reduced store traffic as a result of the coronavirus pandemic at the 31 new Company-owned stores and restaurants opened and 12 Company-owned stores and restaurants closed since the prior comparable period.
The decrease in Wholesale segment net sales in the third quarter of fiscal 2021, as compared to the third quarter of fiscal 2020, was primarily due to a 23.0% decrease in sales for the Free People brand, due to most of the brand’s wholesale partners having reduced customer demand during the quarter. The segment decrease was also due to a decrease of $4.5 million in Anthropologie Home sales due to the brand’s exit of the wholesale business in the third quarter of fiscal 2021, partially offset by an increase of $2.4 million in Urban Outfitters BDG sales.
Gross profit percentage for the third quarter of fiscal 2021 increased to 33.3% of net sales, from 32.5% of net sales in the comparable quarter in fiscal 2020. Gross profit increased to $322.9 million in the third quarter of fiscal 2021 from $321.1 million in the third quarter of fiscal 2020. The increase in gross profit percentage in the third quarter was due in part to historically low merchandise markdown rates in the Retail segment. The historically low Retail segment markdown rate was driven by improvement at all three brands, led primarily by the Urban Outfitters and Free People brands. The Wholesale segment also had improved merchandise margins due to lower discounts and allowances. Additionally, gross profit improved as a result of the benefits associated with negotiated rent concessions with landlords and European government assistance programs. These improvements were partially offset by an increase in delivery and logistics expense primarily due to the penetration of the digital channel.
Total inventory at October 31, 2020 as compared to October 31, 2019, decreased by $42.3$124.2 million, or 8.0%, to $489.2 million. The decrease in total inventory was primarily due to an 11% decrease in comparable Retail segment inventory at cost.
Selling, general and administrative expenses decreased by 8.7%, to $224.4 million, in the third quarter of fiscal 2021, compared to $245.8 million in the third quarter of fiscal 2020. Selling, general and administrative expenses as a percentage of net sales decreased in the third quarter of fiscal 2021 to 23.1% of net sales, compared to 24.9% of net sales for the third quarter of fiscal 2020. The leverage and decrease in selling, general and administrative expenses for the three months ended October 31, 2020, was primarily related to disciplined store payroll management and overall expense control measures. Digital marketing expenses grew during the quarter to support strong digital channel sales and customer growth.
Income from operations was 10.2% of net sales, or $98.5 million, for the third quarter of fiscal 2021 compared to 7.6% of net sales, or $75.3 million, for the third quarter of fiscal 2020.
Our effective tax rate for the third quarter of fiscal 2021 was 21.4% compared to 26.6% in the third quarter of fiscal 2020. The change in effective tax rate for the three months ended October 31, 2020 was primarily driven by the year-to-date operating loss compared to operating income in the prior year period.
Nine Months Ended October 31, 2020 Compared To Nine Months Ended October 31, 2019
Net sales for the nine months ended October 31, 2020 were $2.36 billion, compared to $2.81 billion in the comparable period of fiscal 2020. The $452.9 million decrease was attributable to a $344.1 million, or 13.4%, decrease in Retail segment net sales and a $124.4 million, or 49.0%, decrease in Wholesale segment net sales, partially offset by an increase in Subscription segment net sales of $15.6 million. Retail segment net sales for the nine months ended October 31, 2020 accounted for 93.8% of total net sales compared to 90.9% of total net sales in the nine months ended October 31, 2019.
The decrease in our Retail segment net sales during the first nine months of fiscal 2021 was due to a decrease of $315.6 million, or 12.8%14.1%, in Retail segment comparable net sales, and a decreasean increase of $28.5$24.1 million in non-comparable net sales, including the net impact of store openings and closings since the prior comparable period and the impact of foreign currency translation. Retail segment comparable net sales increased 4.8%32.1% at the Free People and decreased 8.3% at Urban Outfitters and 21.6%Group, 19.2% at the Anthropologie Group.Group and 2.3% at Urban Outfitters. Retail segment comparable net sales decreasedincreased in both North America, Europe and Europe.Asia. The decreaseincrease in Retail segment comparable net sales was driven by negativedouble-digit growth in retail store sales, partially offset by a low single-digit decline in digital channel sales. Retail segment comparable net sales for the three months ended October 31, 2020 were impacted by lower retail store sales due to reduced store traffic and lower store productivity in reopened store locations and significant growth in our digital channel. As a result, for the three months ended October 31, 2020 the relative proportion of sales attributable to store and digital channels changed significantly. Positive comparable store net sales due to mandated store closures as a result of the coronavirus pandemic and lower store productivity once opened, partially offset by double-digit growth in the digital channel. Negative comparable store net salesthird quarter of fiscal 2022 resulted from a decreasean increase in store traffic, transactions and average unit sellingretail price, while units per transaction increased.and conversion rate declined. The digital channel net sales increasedecline was driven by a decrease in sessions, units per transaction and conversion rate, partially offset by an increase in conversion rate and sessions, while average order value and units per transaction decreased.value. The decreaseincrease in non-comparable net sales during the third quarter of fiscal 2022 was primarily due to net new store openings and a recovery from the negative impact of the COVID-19 pandemic in the third quarter of fiscal 2021, which resulted in reduced store closurestraffic and lower store productivity as a result ofin the coronavirus pandemic at the 3861 new Company-owned stores and restaurants opened and 1715 Company-owned stores and restaurants closed since the prior comparable period. The benefit from foreign currency translation in the third quarter of fiscal 2022 also contributed to the increase in non-comparable net sales.
The decreaseincrease in Wholesale segment net sales in the first nine monthsthird quarter of fiscal 2021,2022, as compared to the first nine monthsthird quarter of fiscal 2020,2021, was primarily due to a 49.3% decrease$5.6 million, or 8.8%, increase in sales for the Free People brand,Group, due to mosta significant number of the brand’s wholesale partners having a meaningful portion ofhad their businesses closednegatively impacted by the COVID-19 pandemic during the nine month period and lower customer demand once reopened.third quarter of fiscal 2021. The segment decreaseincrease was also due to a decreasean increase of $7.8$1.8 million in Anthropologie HomeUrban Outfitters wholesale sales.
Gross profit percentage for the third quarter of fiscal 2022 increased to 34.5% of net sales, due to the brand’s exitfrom 33.3% of the wholesale businessnet sales in the third quarter of fiscal 2021 and2021. Gross profit increased to $390.7 million for the impactthird quarter of the coronavirus pandemic on the brand’s wholesale partners’ operations, partially offset by an increase of $2.5fiscal 2022 from $322.9 million in Urban Outfitters BDG sales.
Gross profit percentage for the first nine monthsthird quarter of fiscal 2021 decreased2021. The increase in gross profit rate was primarily due to 24.3% of net sales, from 32.2% ofrecord low third quarter merchandise markdown rates in the Retail segment and a leverage in store occupancy expense
primarily due to the increase in store net sales in the comparable period in fiscal 2020. Gross profit decreased to $572.8 million for the first nine months of fiscal 2021 from $906.0 million in the comparable period in fiscal 2020. The decrease in gross profit percentagecurrent year quarter. All three brands achieved record low third quarter merchandise markdown rates. This was primarily drivenpartially offset by an increase in delivery and logistics expenselower initial merchandise markups primarily due to penetration of the digital channel, followed by store occupancy expense rate deleverage. The deleverage in store occupancy expense was due to lower store net sales as a result of mandated store closures as well as lower store traffic once reopened due to the COVID-19 pandemic. Additionally, during the nine months ended October 31, 2020, the Company recorded a $15.9 million year-over-year increase in inventory obsolescence reserves and a $14.5 million store impairment charge.higher inbound transportation expenses.
Selling, general and administrative expenses decreasedincreased by $109.1$50.4 million, or 15.3%22.5%, to $603.6$274.8 million in the first nine monthsthird quarter of fiscal 2021,2022, compared to the first nine monthsthird quarter of fiscal 2020.2021. Selling, general and administrative expenses as a percentage of net sales increased in the third quarter of fiscal 2022 to 24.3% of net sales, compared to 23.1% of net sales for the third quarter of fiscal 2021. The increase in selling, general and administrative expenses was primarily related to direct selling expenses and digital marketing expenses to support the increase in net sales and higher incentive-based compensation due to the impacts of COVID-19 on the prior year period. The deleverage in selling, general and administrative expenses for the three months ended October 31, 2021, is primarily due to increased direct selling expenses to support the increased penetration of store net sales.
Income from operations was 10.2% of net sales, or $115.9 million, for the third quarter of fiscal 2022 compared to 10.2% of net sales, or $98.5 million, for the third quarter of fiscal 2021. The improvement in gross profit rate was offset by the deleverage in selling, general and administrative expenses.
Our effective tax rate for the third quarter of fiscal 2022 was 23.0% compared to 21.4% in the third quarter of fiscal 2021. The change in effective tax rate for the three months ended October 31, 2021, was primarily driven by the year-to-date operating income compared to operating loss in the prior year period.
Nine Months Ended October 31, 2021 (Fiscal 2022) Compared To
Nine Months Ended October 31, 2020 (Fiscal 2021)
(amounts in millions) | Nine Months Ended | ||||||||||||||||
| October 31, | ||||||||||||||||
| 2021 |
| 2020 | ||||||||||||||
Net sales | $ | 3,216.6 |
|
|
| 100.0 |
| % |
| $ | 2,361.4 |
|
|
| 100.0 |
| % |
Cost of sales (excluding store impairment) |
| 2,089.9 |
|
|
| 65.0 |
|
|
|
| 1,774.1 |
|
|
| 75.1 |
|
|
Store impairment |
| — |
|
|
| — |
|
|
|
| 14.5 |
|
|
| 0.6 |
|
|
Gross profit |
| 1,126.7 |
|
|
| 35.0 |
|
|
|
| 572.8 |
|
|
| 24.3 |
|
|
Selling, general and administrative expenses |
| 771.4 |
|
|
| 24.0 |
|
|
|
| 603.6 |
|
|
| 25.6 |
|
|
Income (loss) from operations |
| 355.3 |
|
|
| 11.0 |
|
|
|
| (30.8 | ) |
|
| (1.3 | ) |
|
Other loss, net |
| (2.5 | ) |
| (0.0) |
|
|
|
| (1.3 | ) |
|
| (0.1 | ) |
| |
Income (loss) before income taxes |
| 352.8 |
|
|
| 11.0 |
|
|
|
| (32.1 | ) |
|
| (1.4 | ) |
|
Income tax expense (benefit) |
| 83.1 |
|
| 2.6 |
|
|
|
| (4.8 | ) |
|
| (0.2 | ) |
| |
Net income (loss) | $ | 269.7 |
|
|
| 8.4 |
| % |
| $ | (27.3 | ) |
|
| (1.2 | ) | % |
Net sales for the nine months ended October 31, 2021, were $3.22 billion, compared to $2.36 billion in the comparable period of fiscal 2021. The $855.2 million increase was attributable to a $776.1 million, or 35.0%, increase in Retail segment net sales and a $66.3 million, or 51.3%, increase in Wholesale segment net sales and an increase in Nuuly segment net sales of $12.8 million. Retail segment net sales for the nine months ended October 31, 2021, accounted for 93.0% of total net sales compared to 93.8% of total net sales in the nine months ended October 31, 2020.
The increase in our Retail segment net sales during the first nine months of fiscal 2022 was due to an increase of $700.1 million, or 32.1%, in Retail segment comparable net sales, and an increase of $76.0 million in non-comparable net sales, including the net impact of store openings and closings since the prior comparable period and the impact of foreign currency translation. Retail segment comparable net sales increased 44.5% at Free People Group, 37.8% at the Anthropologie Group and 21.3% at Urban Outfitters. The increase in Retail segment comparable net sales for the nine months ended October 31, 2021 was driven by high double-digit growth in retail store sales and high single-digit growth in digital channel sales. Retail segment comparable net sales for the nine months ended October 31, 2020, were significantly impacted by lower retail store sales due to store closures and
reduced store traffic in reopened locations and significant growth in our digital channel. As a result, for the nine months ended October 31, 2020 the relative proportion of sales attributable to store and digital channels changed significantly. Positive comparable store net sales for the nine months ended October 31, 2021 resulted from an increase in store traffic, transactions and average unit retail, while units per transaction and conversion rate declined. The digital channel net sales increase was driven by an increase in average order value, while sessions and units per transaction decreased and conversion rate was flat. The increase in non-comparable net sales for the nine months ended October 31, 2021 was primarily due to store closures and lower store productivity as a result of the COVID-19 pandemic at the 66 new Company-owned stores opened and 19 Company-owned stores and restaurants closed since the prior comparable period. The benefit from foreign currency translation in the first nine months of fiscal 2022 also contributed to the increase in non-comparable net sales.
The increase in Wholesale segment net sales in the first nine months of fiscal 2022, as compared to the first nine months of fiscal 2021, was primarily due to 25.6%a $56.3 million, or 45.9%, increase in sales for the Free People Group brand, due to a significant number of the brand’s wholesale partners having had a meaningful portion of their businesses negatively impacted by the COVID-19 pandemic during fiscal 2021. The segment increase was also due to an increase of $10.6 million in Urban Outfitters wholesale sales.
Gross profit percentage for the first nine months of fiscal 2022 increased to 35.0% of net sales, from 24.3% of net sales in the comparable period in fiscal 2021. Gross profit increased to $1,126.7 million for the first nine months of fiscal 2022 from $572.8 million in the comparable period in fiscal 2021. The increase in gross profit rate was due to the significant negative impact of COVID-19 related store closures on the Company’s Retail segment and its partners in the Wholesale segment in the prior year period. Additionally, during the prior year period, the Company recorded a $14.5 million store impairment charge and a meaningful increase in inventory obsolescence reserves due to the impact the store closures had on the aging of the Company’s inventory. Finally, all three brands achieved record low first nine-month period merchandise markdown rates during the nine months ended October 31, 2021, further contributing to the improvement in the current period.
Selling, general and administrative expenses increased by $167.8 million, or 27.8%, to $771.4 million in the first nine months of fiscal 2022, compared to the first nine months of fiscal 2021. Selling, general and administrative expenses as a percentage of net sales decreased in the first nine months of fiscal 2022 to 24.0% of net sales, compared to 25.3%25.6% of net sales for the first nine months of fiscal 2020.2021. The deleverageincrease in selling, general and administrative expenses was primarily driven by anrelated to increased direct selling and digital marketing expenses in the current year to support the increase in digital marketingnet sales, higher incentive-based compensation due to the impacts of COVID-19 on the prior year period and other expensesthe benefit of COVID-19 related government relief packages recorded in order to support strong digital channel sales and customer growth partially offset by disciplined store payroll management and other expense control measures.the prior year period. The decreaseleverage in selling, general and administrative expenses for the nine months ended October 31, 2020,2021, was primarily due to disciplinedthe increase in retail store payroll management, overall expense control measuressales, as store operations for the nine months ended October 31, 2020, were significantly impacted by store closures and the benefit of COVID-19 related government relief packages.reduced store traffic in reopened locations.
LossIncome from operations was 11.0% of net sales, or $355.3 million, for the first nine months of fiscal 2022 compared to a loss from operations of 1.3% of net sales, or $30.8 million, for the first nine months of fiscal 2021 compared to income from operations of 6.9% of net sales, or $193.4 million, for the first nine months of fiscal 2020.2021.
Our effective tax rate for the first nine months of fiscal 20212022 was an expense of 23.6% compared to a benefit of 14.8% compared to an expense of 25.8% in the first nine months of fiscal 2020. 2021.
Liquidity and Capital Resources
The changefollowing tables set forth certain balance sheet and cash flow data for the periods indicated. These tables should be read in the effective tax rate forconjunction with the nine months endeddiscussion that follows:
(amounts in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| October 31, |
|
| January 31, |
|
| October 31, |
| |||
|
| 2021 |
|
| 2021 |
|
| 2020 |
| |||
Cash, cash equivalents and marketable securities |
| $ | 694.5 |
|
| $ | 694.0 |
|
| $ | 634.3 |
|
Working capital |
|
| 320.3 |
|
|
| 317.2 |
|
|
| 424.7 |
|
|
| Nine Months Ended |
| |||||
|
| October 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Net cash provided by operating activities |
| $ | 222.3 |
|
| $ | 214.7 |
|
Net cash (used in) provided by investing activities |
|
| (363.4 | ) |
|
| 201.9 |
|
Net cash used in financing activities |
|
| (19.8 | ) |
|
| (10.8 | ) |
The decrease in working capital as of October 31, 2021, as compared to October 31, 2020, was primarily driven by the year-to-date operating loss compareddue to operating incomehigher accrued incentive-based compensation due to stronger results in the prior year period.
Liquidity and Capital Resources
Cash, cash equivalents and marketable securities were $634.3 million as of October 31, 2020,fiscal 2022 as compared to $530.4 million as of January 31, 2020 and $420.9 million as of October 31, 2019. During the first nine months of fiscal 2021 we generated $214.7 million in cash from operations, invested $89.2 million in property and equipment and repurchased $7.0 millionthe timing of common shares under our share repurchase programs. The shares repurchaseddisbursements.
during the first nine months of fiscal 2021 were prior to the known spread of the coronavirus pandemic in the United States, which forced the Company to close its stores for an extended period of time. Additionally, during the first nine months of fiscal 2021, we had borrowings of $220.0 million under our Amended Credit Facility to further protect our cash reserves and subsequently repaid the entire $220.0 million by October 31, 2020. Our working capital was $424.7 million at October 31, 2020 compared to $414.6 million at January 31, 2020 and $402.0 million at October 31, 2019.
During the last two years, we have satisfied our cash requirements primarily through our cash flow from operating activities and additionally inactivities. Additionally, during the first nine monthsquarter of fiscal 2021, throughand in response to the COVID-19 pandemic, we borrowed $220.0 million under our borrowings.Amended Credit Facility to further protect our cash reserves. We subsequently repaid the entire $220.0 million during the second and third quarters of fiscal 2021. Our primary uses of cash have been to fund business operations, purchase inventory, expand our home offices and fulfillment centers and open new stores and repurchase our common shares.stores.
Cash Flows from Operating Activities
Cash flows from operating activities during the first nine months of fiscal 2021 was a cash inflow of $214.7 million compared to $121.4 million in the first nine months of fiscal 2020. For both periods, ourOur 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 increaseDuring fiscal 2021, store closures and lower store productivity, as a result of the COVID-19 pandemic, resulted in lower cash flows from operations was primarily due to an increaseprovided by operating activities and in accounts payable and accrued expenses, accrued compensation and other current liabilities due to timing of payments, in addition to decreased inventory levels, partially offset by lower merchandise salesthe net loss incurred in the first nine months of fiscal 2021 as a result of store closures and lower store productivity caused by the coronavirus pandemic.2021. Although the Company’s stores were closed for a part of the first six months of fiscal 2021, the Company continued to incur various store operational costs such as employee costs and costs for a large portion of its regional and store management teams despite store closures and reduced salesemployees. The increased cash from operations during the coronavirus pandemic.first nine months of fiscal 2022 was partially offset by the increase in inventory in fiscal 2022 to support the increase in net sales and a strategic decision to bring certain product categories in earlier to protect against ongoing supply chain disruptions and delays.
Cash Flows from Investing Activities
Cash flows fromused in investing activities during the first nine months of fiscal 2021 was a cash inflow of $201.9 million compared to a cash outflow of $87.8 million in the first nine months of fiscal 2020.2022 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 nine months of fiscal 2021 were primarily to preserve financial flexibility and maintain liquidity in response to the coronavirus pandemic. Cash usedCOVID-19 pandemic and were reinvested in investing activities in fiscal 2020 primarily related to purchases ofa marketable securities and property and equipment, partially offset byportfolio in the sales and maturitiesfourth quarter of marketable securities.fiscal 2021. Cash paid for property and equipment in the first nine months of fiscal 2022 and 2021 and 2020 was $89.2$159.0 million and $171.1$89.2 million, respectively, which was primarily used to expand our fulfillment center network in both periods. See Capital and Operating Expenditures for further discussion of the Company’s plans to reduce planned capital expenditures for the remainder of fiscal 2021 in response to the coronavirus pandemic.
Cash Flows from Financing Activities
Cash flows from financing activities during the first nine months of fiscal 2021 was a cash outflow of $10.8 million compared to a cash outflow of $222.0 million in the first nine months of fiscal 2020. Cash used in financing activities in the first nine months of fiscal 2022 and 2021 primarily related to $7.0 million of repurchases of our common shares under our share repurchase program.programs and from employees to meet minimum statutory withholding requirements. The shares repurchased during the first nine months ofshare repurchases in fiscal 2021 under our share repurchase programs were prior to the known spread of the coronavirus pandemic in the United States, which forced the Company to close its stores for an extended period of time. The Company has since temporarily suspended share repurchase activity under its programs.COVID-19 pandemic. Additionally, during the first nine months of fiscal 2021, we had borrowings of $220.0 million and subsequent repayments of $220.0 million under our Amended Credit Facility. Cash usedFacility in financing activitiesorder to preserve financial flexibility and maintain liquidity and flexibility in response to the COVID-19 pandemic. The borrowings were subsequently repaid in the first nine monthssecond and third quarters of fiscal 2020 primarily related to $217.4 million of repurchases of our common shares under our share repurchase program.2021.
Credit Facilities
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
With the additional measures in place noted above under ImpactDuring fiscal 2022, we finalized setup of the Coronavirus Pandemic, during fiscal 2021, we plan to complete construction of amaterial handling equipment at our new omni-channel fulfillment center in Europe, with the remaining material handling equipment to be purchased and installed during fiscal 2021 for full operation in fiscal 2022, startUnited Kingdom, we are continuing construction on a new omni-channel fulfillment center in the United States,Kansas City, Kansas, we plan to open approximately 2156 new Company-owned retail locations, expand or relocate certain existing retail locations, invest in new products, markets and brands, purchase inventory for our operating segments at levels appropriate to maintain our planned sales, upgrade our systems, improve and expand our digital capabilities and invest in omni-channel marketing when appropriate andappropriate. We may also repurchase common shares. 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. During fiscal 2022, we plan to continue our investment in these initiatives for all brands. We anticipate our capital expenditures during fiscal 2022 to be approximately $285 million, a portion of which will be to support new and expanded fulfillment and distribution centers. All fiscal 20212022 capital expenditures are expected to be financed by cash flow from operating activities and existing cash and cash equivalents. We believe that our new store investments generally have the potential to generate positive cash flow within a year; however, the impact of the coronavirusCOVID-19 pandemic may result in a slightly longer timeframe. 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. 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 nine months ended October 31, 2020, 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 1, “Basis of Presentation,” 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 recent accounting pronouncements.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
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, 2020.2021.
Item 4. | Controls and Procedures |
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.
There have been no changes in our internal controls over financial reporting during the fiscal quarterthree months ended October 31, 20202021 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II
OTHER INFORMATION
Item 1. | Legal Proceedings |
We are party to various legal proceedings arising from normal business activities. Management believes that the ultimate resolution of these matters will not have a material adverse effect on our financial position, results of operations or cash flows.
Item 1A. | Risk Factors |
“Item 1A, Risk Factors”There have been no material changes in our risk factors since January 31, 2021. Please refer to our Annual Report on Form 10-K for the fiscal year ended January 31, 2020,2021, filed with the SEC on March 31, 2020, includes a discussion ofApril 1, 2021, for our risk factors. The information presented below updates, and should be read in conjunction with, the risk factors disclosed in our Annual Report on Form 10-K. The effects of the events and circumstances described in the following risk factor may have the additional effect of heightening many of the other risks noted in our Annual Report on Form 10-K. Otherwise, except as presented below, there have been no material changes to our risk factors disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with the SEC on March 31, 2020.
The coronavirus pandemic has and will continue to materially and adversely affect our business operations globally.
The coronavirus pandemic continues to materially impact the Company’s operations in the United States and globally, and related government and private sector responsive actions have and will continue to adversely affect its business operations. On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide, causing public health officials to recommend precautions to mitigate the spread of the virus, including warning against congregating in heavily populated areas, such as malls and shopping centers. On March 14, 2020, the Company announced that it temporarily closed all stores globally. As of July 31, 2020, substantially all of the Company’s stores reopened and remained open as of October 31, 2020. As a result of the COVID-19 pandemic, our store operations continue to be impacted by temporary store closures, primarily in Europe and Canada, and reduced customer traffic in reopened store locations globally due in part to local government guidelines that have imposed certain operating restrictions, including capacity limits. The Company is also following newly established health protocols, providing personal protective equipment to our employees, and implementing social distancing working practices as required by local authorities. The Company’s distribution and fulfillment centers remained open to support the digital business and the Wholesale segment operations, but have done so with additional safety procedures and enhanced cleaning to protect the health of the employees. The Company closed its offices and showrooms globally with the exception of location dependent employees. All other corporate and showroom employees are working remotely.
The extent of the impact of the coronavirus pandemic on our business, consolidated results of operations, consolidated financial position and consolidated cash flows, including any potential impairment or other fair value adjustments, will depend largely on future developments, including the duration and spread of the outbreak and occurrence of additional waves of infections in the U.S. and globally, the related impact on consumer confidence and spending, potential future government restrictions on retail operations and the willingness of customers to visit malls and shopping centers, the willingness of employees to staff our stores and fulfillment centers, and when, or if, we will be able to resume normal operations, all of which are highly uncertain and cannot be predicted. Additionally, we may need to cease or significantly limit our operations again if subsequent outbreaks occur, either more broadly or within our stores. Nevertheless, the coronavirus pandemic presents significant uncertainty and risk with respect to our business, financial performance and condition, operating results, liquidity and cash flows.
Item |
|
AsIssuer Purchase of May 31, 2020, we were in defaultEquity Securities
A summary of the Fixed Charge Coverage Ratio financial covenantrepurchase activity under our Amended Credit Agreement. the Company’s share repurchase programs for the quarter ended October 31, 2021 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, 2021 through August 31, 2021 |
|
| — |
|
| $ | — |
|
|
| — |
|
|
| 25,851,954 |
|
September 1, 2021 through September 30, 2021 |
|
| 178,040 |
|
| $ | 29.88 |
|
|
| 178,040 |
|
|
| 25,673,914 |
|
October 1, 2021 through October 31, 2021 |
|
| 321,960 |
|
| $ | 29.72 |
|
|
| 321,960 |
|
|
| 25,351,954 |
|
Total Fiscal 2022 Third Quarter |
|
| 500,000 |
|
|
|
|
|
|
| 500,000 |
|
|
| 25,351,954 |
|
(1) | In addition to the shares repurchased under the share repurchase program, for the quarter ended October 31, 2021, the Company acquired and subsequently retired 3,226 common shares from employees to meet minimum statutory tax withholding requirements. These shares do not reduce the number of shares that may yet be purchased under our publicly announced share repurchase programs. |
(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 an additional 20,000,000 shares under a share repurchase program. |
Item 5. Other Information
On August 13, 2020, we obtainedDecember 7, 2021, the Board of Directors (the “Board”) of the Company increased the size of the Board from ten to eleven members and, upon the recommendation of the Nominating and Governance Committee, elected Kelly Campbell to serve as a waiverdirector. Ms. Campbell will immediately begin serving for this default effective through September 15, 2020. On September 16, 2020, we repaida term that expires at the remaining $120.0 million outstanding2022 Annual Meeting of Shareholders of the Company. The Board determined that Ms. Campbell is an independent director under our Amended Creditthe listing standards of the NASDAQ Global Select Market.
In connection with her electionand service on the Board, Ms. Campbell will receive the same cash compensation from and after December 7, 2021 as all other non-employee directors of the Company, as disclosed in the Company’s definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on April 1, 2021.
There is no arrangement or understanding between Ms. Campbell and any other persons pursuant to which Ms. Campbell was selected as a director. There are no family relationships between Ms. Campbell and any director
Agreement. Asor executive officer of October 31, 2020, the Company had $0 in borrowings and was in compliance withno transactions involving Ms. Campbell that would require disclosure under Item 404(a) of Regulation S-K.
Reference is made to the terms ofpress release issued by the Amended Credit Agreement. The Company expects to remain in compliance with all terms, including other covenants, of the Amended Credit Agreement.on December 9, 2021 for further information.
Item 6. | Exhibits |
Exhibit Number |
| Description
|
|
|
|
3.1 |
| |
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3.2 |
| |
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3.3 |
| |
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|
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 nine months ended October 31, 2020,2021, filed with the Securities and Exchange Commission on December 10, 2020,2021, 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 Statements of Shareholders’ Equity; (v) the Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements.
SIGNATURES
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: December 10, | By: |
| /s/ RICHARD A. HAYNE |
|
|
| Richard A. Hayne |
|
|
| Chief Executive Officer |
|
| URBAN OUTFITTERS, INC. | |
|
|
|
|
Date: December 10, | By: |
| /s/ MELANIEM |
|
|
| Melanie Marein-Efron |
|
|
| Chief Financial Officer |
37
36