Q3 2020 Earnings Call
Good day, ladies and gentlemen, and welcome to the urban Outfitters Inc. third quarter fiscal 2020 earnings call. At this time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your touched.
Tone telephone.
As a reminder, this conference call is being recorded I'd now like to introduce well not Nicola director of Investor Relations Ms. Niccolo you may begin.
Good afternoon, and welcome to the you RBN third quarter fiscal 2020 conference call.
Earlier this afternoon the company issued a press release aligning the financial and operating result for the three and nine month period, ending October 31st 2019.
Following discussions may include forward looking statements.
Please note that actual results may differ materially from those statements additional information concerning factors that could cause actual results to differ materially from projected result is contained in the company's filings with the securities and Exchange Commission.
Today's call you'll hear from Hillary Super Global President Anthropologie Group, Frank and 40, Chief Financial Officer, you RBN and Richard Hayne, Chief Executive Officer, you are being.
Following that we'll be pleased to address your question for more detailed commentary on a quarterly performance and the text of today's conference call. Please refer to our Investor Relations website at Www Dot you are being dot com.
I'll now turn the call over to Hillary.
Thank you own a and good afternoon everyone.
I will begin with a review of our third quarter results followed by early insight into holiday selling and then give an update on some of our longer term strategic initiatives.
Anthropologie group delivered a positive 4% retail segment comp driven by positive comps and women's apparel and continued strength in both accessories and home.
Higher full price comps, coupled with fewer category promotion and disciplined expense management resulted in a solid quarter for the brand on both the top and bottom line.
As discussed earlier this year, we fell short in our casual product offer in the spring season.
However, I'm pleased to report that we corrected this issue and our customer has responded well to our fall assortment [laughter] full price comps have been positive across the majority of apparel classifications, and we were able to achieve this with fewer category promotions in the core.
This trend began in August with strong performance of casual bottoms, which we featured in our journey [laughter] buoyed further by exceptional dress performance and the balance of the period.
Accessories continued to outperform delivering its ninth consecutive quarter of positive comps.
Category also delivered a positive corner with standout performance in tabletop and home fragrance, where we delivered notable product innovation.
Anthropologie hasn't passionate loyal customer base and her response to our offering was particularly strong this quarter. We enjoyed growth in total customer counts for the quarter, driven by new and reactivated customers healthy growth in our reactivated customer segments demonstrated that she has noticed improvements that we have made to the assortment.
Improved marketing helped to drive double digit growth and digital demand and an increase in new customers.
We set holiday early this year and initial reads are very promising, particularly in apparel and gift, which become a higher percentage of our business in fourth quarter and apparel. The party Assortments featured in our November Journal is performing well and within home true holiday product is off to a very good start we plan to transition.
Earlier this year and are optimistic that a new fashion point of view will provide a call to action. During a time that is typically alone and the shopping season.
That being said Q4 is typically the most unpredictable time at the here and with the shorten selling season. This year there is some inherent uncertainty.
Turning to Anthropologie long term strategic growth initiatives. We believe we have an opportunity to expand our own brand business based on continued customer feedback on sales results.
Going forward, we're organizing teams and allocating resources to build the maybe he'll CRO and by Anthropologie labels into full lifestyle brands into market them. Accordingly. These efforts should result in increased and own brand penetration.
We exceeded our expectations with the launch of a pause in March and we believe it has a meaningful opportunity for growth.
70% plus sales come from existing customers.
There are customers, who previously could not fully participate in our brand with the addition of plus they have become happier higher value customers, increasing their sounds like 30%.
The new customers, we have acquired through eighth Clos are also high value and high frequency shoppers with an average it'll be that exceeds the brand average we have focused marketing efforts going forward on acquiring new customers and continuing our growth in this segment.
Home decor also continues to be a key growth opportunity for the brand. This quarter, we expanded our offering to include small spaces in bath, both of which are off to a strong start our customers at the forefront of everything we do and in October we successfully opened furniture distribution center, which will support and improved customer experience.
Yes, and sales growth for years to comp.
Global expansion continues to be a key growth initiatives for the brand we opened three stores in the quarter two in Paris, and one in Belfast and expect to open an additional five stores in the fourth quarter well you performance in the current quarter was challenging this was largely driven by our high concentration of UK stores and specifically.
By weakness in our central London stores, which we believed to have been negatively impacted by the political headwinds of Brexit.
In closing I feel the Anthropologie has tremendous opportunity for growth. The teams are working more creatively and collaboratively than ever before they are using technology and speed to enable that creativity and as a result, they were able to change the trajectory of the business very quickly.
I'd like to thank Mag, the Anthropologie leadership team and our entire Anthropologie family for the hard work dedication and commitment to our creative culture. It's an exciting time to be a part of the Anthropologie, Brad I will now turn the call over to Frac.
[noise]. Thank you Hillary.
As we entered the fourth quarter of fiscal year 2020, and may be helpful. For you to consider the following.
Howard you RDM comp sales has started out the fourth quarter positive.
Based on the quarter to date performance. We believe are you RBN retail segment comp sales could register low single digit positive for the fourth quarter.
Now moving on to gross profit margin.
We believe you RBN gross margin rate for the fourth quarter could deleveraged by approximately 200 basis points.
The decrease in gross profit rate could be due to the following.
First a higher retail segment markdown rate, primarily due to elevated inventory levels and underperforming product at the urban Outfitters brand.
Second lower margins and our wholesale segment due to higher discounts in department stores and high inventory levels.
[noise] next higher logistics expenses due in part to the increased penetration of the digital channel as well as the increased labor expenses due to the competitive market for employment in the U.S.
Lastly, the operation of our subscription business news.
Based on our current sales performance and financial plan, we believe total SDMA could grow by approximately 6% for the quarter.
The growth in SDMA could primarily relate to digital marketing investments to support our digital channel sales growth in our retail segment.
Total retail segment Sina is expected to grow at approximately 3%.
The remaining SDMA growth could relate to our new business initiatives, including newly China expansion and the European facilities expansion.
Our annual effective tax rate is planned to be approximately 25% for the fourth quarter.
Capital expenditures for the fiscal year, our plan to $250 million.
The spend and increase to the prior year is primarily related to investments in additional and expanded distribution facilities.
The opening of new stores, and our new European home office.
As a reminder, the foregoing does not constitute a forecast, but it's simply a reflection of our current views the company's disclaims any obligation to update forward looking statements.
Now it is my pleasure to turn the call over to decaying are you RBN Chief Executive Officer.
Thank you Frank and good afternoon, everyone.
Today I'll speak briefly to our third quarter results and provide some commentary on current business trends before turning the call over to your questions.
I begin with our third quarter performance.
As previously mentioned by Hillary the Anthropologie brand delivered strong top and bottom line performance.
North American customers purchase more regular priced apparel accessories and home products, which resulted in higher you are.
This combined with increases in sessions and conversion to drive double digit gains in digital sales and positive 4% brand comp.
The Anthropologie pay plus line women's apparel continues to exceed sales expectations and how should feel those comps as well.
Quarterly expenses were tightly controlled they decreased year over year on both a dollar in rate basis.
Andy in comp inventory land and slightly higher than planned but the team is comfortable with current levels and doesn't see a high risk to fourth quarter margins.
In some Q3 execution and through with support.
Congratulations to Hillary make in the entire Anthropologie team.
I'm excited by the momentum the brands achieved heading into the holiday season.
Speaking of excitement.
Free people brand continues to impress.
Third quarter retail segment results crushed it.
Seeding, even the brands own superior performance in the first half of the year.
Given by particularly robust digital demand retail segment comps junk biod, 9%.
Like Anthropologie free people experience strength.
Cost.
Nearly all apparel classes with outsized performance from FP movement, the Companys Activewear brand.
Offsetting some of the excitement wasn't they typically weak quarter for the wholesale segment.
Issues with our Department store partners led to a 7%.
And third quarter revenues, even though specialty brick pure play digital and international customer groups, all delivered double digit sales gains.
Fourth quarter sales to department stores may be softer this year versus last as well.
However, we are confident that current wholesale performance does not reflect that channels potential and believe it can return to growth next year.
Overall, the free people brand is executing at an exceptionally high level excellent fashion content and superior marketing have combined to create a brand strongly resonating with its customers and driving full price sales.
I extend my thanks to Sheila make and the free people team for a job well done.
Well, both Anthropologie and free people delivered nicely positive retail segment growth.
Comps at the urban brand were disappointingly flat through the quarter registering mines, one in North America, and plus three in Europe .
Poor sales in Metro stores, especially in New York and weaker than planned digital results cause North American comps the soccer.
The apparel offering in North America did improve versus the prior two quarters, but was still.
Not compelling enough to offset difficult comparisons from the prior year.
Better product results came from accessories beauty and home products.
But before urban can post outstanding results like last year, the apparel offering will need to be closer to the fashion Bulls eye.
In Europe positive comps were driven by better reaction to their apparel offering strengthen accessories beauty and home categories and stronger digital sales.
On both sides of the Atlantic markdown rates increased against record lows in prior year.
Given urbans higher than planned ending inventory in the third quarter.
Q4 rates will likely increase even though both geographies we're planning for continued sales improvement.
My Thanks go to Trish Meg and the urban teams for their hard work and see strive to improve upon last year's record results.
Going forward into the first half of next year.
Parents become substantially easier.
Now, let me turn your attention to our analysis of the retail environment and current business trends.
As we entered the holiday season and based on what we observed in the third quarter [noise].
The North American consumers seems to be in excellent shape.
The economy is strong jobs are plentiful and the consumer sentiment remains high.
She is willing to spend when offered compelling products and the value is right.
We see plenty of fashion newness in all product categories, we sell.
Apparel remains in the early stage of the silhouette change and there are certainly enough new fashion to drive positive comps.
We expect her to spend more this holiday than in years past and like always should be looking for value in convenience. In addition to compelling products.
In keeping with the spending thesis total you RBN retail segment comp sales for November are currently mid single digit positive.
Importantly, all three brands are showing increases.
Word of caution however, the big upcoming events Black Friday in cyber Monday have an outsized effect on total quarterly comparisons and those results are yet to be ready.
In addition, the shorten time between Thanksgiving and Christmas this year could negatively impact overall sales [noise].
Nevertheless, we are delighted with the current strengthen our business and leave all three brands could deliver positive comps in Q4.
Finally, a word about our newest brand newly.
Newly as our subscription rental business for apparel that launched at the beginning of the third quarter.
Im pleased to report that the number of subscribers required by quarters and beat plan and puts the brand on track to meet a subscriber goals for the year.
Even more importantly customer satisfaction and feedback has been overwhelmingly positive.
Obviously, it's early days, but we remain excited about and committed to growing this disruptive model and bringing more newness to our subscribers clauson at lower cost and with less waste.
Congratulations today than the newly team on a very successful initial quarter.
In closing.
Thank all brand leaders there are teams and our 24000 associates worldwide for their hard work dedication and creativity.
I also recognize and thank our many partners around the world and finally I. Thank our shareholders for their continued support.
That concludes my prepared remarks, thank you and now for your questions.
If you have a question at this time, please press star one Touchtone telephone if your question has been answered.
So from the Q.
Okay.
Your questions to one for color.
Next question comes from Kimberly Greenberger with Morgan Stanley . Your line is open.
Okay, great. Thank you so much viguerie comprehensive.
And I appreciate <expletive> , particularly the comments that you made on the urban Outfitters Division I'm wondering it sounds like the European product is being received better than the U.S. product. So is there some sort of cross pollination that that can happen and as you look forward what.
Your expectation for the timeline for that urban U.S. product to get.
Back on track, let's say closer to the the Bulls eye.
Hi, Kimberly stress and I'm happy to answer your question, Yes, there's the product sharing and is already happening and have been happening for the past few years when I look at that results from Q4, all geographies softness, particularly in women's apparel that was pretty on par with each other where.
You team really had outsized growth within the men's area. Both geographies were really strong at home accessories and beauty. So that was really women's apparel, which was pretty good.
As we look forward.
I'm pleased with where we're sitting currently for Q4, but as I alluded to now rolling in day 19 of the quarter.
So a lot is yet to be written.
I do feel really optimistic about spraying Meg and I are saying you know the teams creating took feels really good.
I think I'd be cautious for Q4 happy where we sit now Q1.
So really great again up against easier comparisons and if you remember you know we are up against record year.
For last year, and Kimberly I'd like to add that we've made a large design change that would start to be an effect.
Spring so it with a woman at some of the company for some time and moved into urban him or really quite happy with what she has been able to design and.
During the team along so.
Hope for what we're seeing in the spring products.
Kimberly in case, you Didnt know that was made Todd.
Yeah.
Your next question comes from Adrian.
Your line is open.
Good afternoon nice to have been Anthropologie.
Tricia I was wondering if you can help us out with sort of this the branded versus private label component have we seen the peak in sort of the retro brand kinda that retro chic movement and are we moving more toward private label is there anything that you can glean from and throws stabilization flash recovery and are free people's to bring out.
Her to you out and then on terrorists. Frank can you just give us an update last number we had was 25% going down though so just wondering how you're thinking about that as we get closer to the December 15th day. Thank you.
Hey, Adrian it's an uptake the first that question.
As you know and as I said before on this call brands are really an important part of urban Outfitters history, an urban outfitters DNA from a volume standpoint, however, the national brands do have a greater impact on the men side versus the women side.
Women.
The majority of the penetration, it's not it's not really significant from the top standpoint.
But that being said like Anthropologie. Unlike free people at urban we are making a far more deliberate effort to market and also to develop our internal brands.
Such as BTG denim and are seeing really great traction on on our yes, Ron label out of Europe , which were not going to carry North America and you know from third party brand standpoint, we'll continue to chase emerging brands.
Well as national brands, where we see the trend and as you know you know our customers very trying to focus is always interested in the new and the next.
That's our job.
That.
Adrian This is Frank.
Sit here next Barbara Rozsas, who runs our sourcing organization she's actually telling me it looks like we're going to exit the year, probably little bit south of 25% of owned brand penetration in China. So that's impressive job.
Again.
In reduction from where we were last the last year.
Your next question comes from Paul.
With Citi Research your line is open.
Hey, Thanks, guys can you talk about the level of inventory and wholesale and when we should see that come down also on the 9% increase in retail inventory how much of that was due to earlier receipts related the tariff and then <expletive> I just wanted to circle back in the just on.
On your update on where we are in the fashion cycle today, maybe talk about the rate of change compared to what you've seen historically, what you may have expected for this fashion cycle and where are you on each of the brands relative to that fashion Bulls eye. Thanks.
Okay.
Paul This is Frank I'll take the inventory piece first and then certainly let <expletive> answer the fashion question. So I believe you started with wholesale.
So yes wholesale is elevated higher than where we would like it to be right now.
Primarily relates to free people, where we obviously did not anticipate negative sales in there in the third quarter and we are anticipating.
Essentially be negative in the fourth quarter as well.
That had a negative impact on Q3 margin. We believe it will have a negative impact on Q4 could have a negative impact on Q4 margin as well I think will be through a lion share a bit by the end of the fourth quarter, but probably not all of it but by the end of it by the end of the fourth quarter, but obviously, we'll we'll we'll have an update for you want me talk at the end of the year as it relates to reach.
Tell segment, which was up 9%, we discussed last quarter that we anticipated inventory outpacing sales at the end of Q3.
We did bring in certain received early to protect deliveries against the important holiday period, while tariff war and Brexit uncertainty persists did we did do that in total I would say, there's a couple of hundred basis points.
Incremental comp inventory that is due to early receipts that we strategically brought in.
To protect holiday sales.
I would say while inventory is elevated there that 9%. Please keep in mind. Our agings are very clean are over 90 day bucket at all three brands is in better shape than it was a year ago. So again that majority of the 9%. His current inventory that was brought in its not older inventory that we're carrying going.
Forward.
I would also say that this is a point in time for US as you know I think for the last four years, our inventory comp has lagged our sales comp and we've lowered our weeks of supply.
This is a point in time for us and we would anticipate exiting the fourth quarter and entering next year with our retail segment comp inventories are much closer to inline with our sales comp.
Okay.
Paul This is <expletive> talking.
In terms of the fashion cycle.
I think that we are still very early stages of what I would call a classic silhouette ships.
It's sort of in version that was were from big over a book to go over big.
Such that started with a bottoms.
And now its morphing not only with bottoms, but in the tops and both of those categories are selling briskly.
I think all of our brands.
If I recall correctly goes all the brands.
[noise] hikes this favorable fashion climates Alas.
At least several more years I've never seen.
So let's shift.
Go for less than let's say six years, and it's about a year and have two years old right now so I think we're in good shape.
From an overall fashion perspective its.
I just have to say that it's a very very good time in America in North America, and there's plenty of newness and.
The news should be driving positive comps.
Your next question comes from Mark Altschwager with Robert Baird. Your line is open.
Thank you good evening, thanks for taking my question.
Frank as you unpack that down 200 basis point gross margin expectation for Q4 do you expect the pressure in retail to moderate versus what you reported in Q2 is it seems like the retail numbers getting slightly better but the wholesale pressures offsetting the progress is that fair or how are you thinking about the.
The puts and takes there and then separately newly sounds like a softer great start just any early learnings you can share on the customers response to and engagement with that platform and any thoughts on how to think about the potential revenue contribution over the next year. So thank you.
Mark This is Frank I think right now is as we're looking at the fourth quarter. You know if if we do come in at low single digit comp. We do believe the margin could look similar to the adds it to the third quarter as far as the make up.
The deleverage being driven by higher markdown rates due to elevated inventories and underperforming product primarily the urban outfitters brands right now.
Lower wholesale segment margins due to increased discounts and North American department stores as well as a the elevated inventory levels requiring more clearance could clearance business sales that we discussed about earlier and then lastly logistics deleverage part of that is due to increased penetration of the digital channel I would say another piece of that is also do.
Due to increased labor rates right now in order to meet peak staffing level requirements at our facilities kind of during this this all important holiday season from.
Black Friday through a bike riding through cyber Monday.
And you have Mark Hi, this is Dave.
Turning to the newly question.
So far.
The learnings have really been all quite positive.
The.
The most important thing is that we've learned the customers really pretty darn excited about the program, we're getting really positive feedback about the the offer the.
Assortment.
The.
Really the overall experience the shopping experience the on boarding experience.
Generally.
Almost overwhelmingly positive feedback so far.
We're also learning a lot about this operation I think the.
The most exciting learning is generally that overall the operation as we expected it's a function and as we expect this work is generally what we're seeing so operationally, we're shipping orders were or signing up customers were laundering products.
Product and cycling through the program overall it feels like.
No the expectation that we set out early on going into the program has basically been that from an operation standpoint, and from a customer feedback standpoint, so very positive [noise].
Your next question comes from Matthew Boss with Jpmorgan. Your line is open.
Great. Thanks, Frank maybe on the expense front any flexibility and your fourth quarter dollar build and just any puts and takes larger picture as we think about the SGN a line next year and beyond.
So for the for the fourth quarter right now we are anticipating a SNA being up roughly 6% the breakout on that would be marketing investments driving that topline retail segment growth and that would account for right now based on our plan is probably about half of that 6%.
The remaining piece relative.
Would relate to our new initiative investments in newly the China expansion as well as our European home office I would tell you there might be a little bit of flexibility in there, but probably probably not a not a ton and hopefully.
Topline growth will continue and we'll be able to continue to fund marketing to support that to support that growth as it relates to as it relates to next year budget season actually kicks off for me.
Just after the Turkey day, a 30 day holiday.
And you know we've got a lot of moving pieces and a lot of initiatives here. So I'll have an update for you next time, we aren't next time, we talk but right now it's a little too early to talk about a SDMA margin expectations for next year.
Okay.
Your next question comes from Janet Kloppenburg.
Okay Research your line is open.
[noise], Thank you and congratulations on the progress at at Anthropologie and the good results at free people urban Outfitters, Tricia I wondered if you could talk a little bit about the identified issues and merchandising the challenges and if you if you.
If you have them identified and if you think you can resolve them in in the near term or if it's going to take awhile.
And if the exit rate on the you know a comp is has improved as we've moved in the exit rate at at three Q and the fourth quarter to date comp has improved there because overall company comps have been pools and just lastly on the wholesale outlook.
Hi, I'm just wondering you know as you look at spring order books Frank.
Do we have comfort that the business will flatten out and Baptists markdown reconciliations will moderate or how do you want us to be thinking about that thanks. So much.
Yes, it's Trish insurances like.
Hi in terms of identifying issued 100% we have identified issues, we have a web.
Apparel brand.
I won't get into the specifics by category.
But.
Meg and I've been tirelessly working with the team.
Now that being said if you look at that progress we have from Q2 two Q3.
That 12 weeks, it's been pretty exceptional however, not enough.
Push to positive comp, but awfully close in North America business and you know to Dick's point. We just are slightly left of all day. So that's what we've been working on it. The team is really isolated to that category again, when I look at some of the other categories that are very important to Q4 like tech and media at home.
He and women's accessories, those completely outpaced total comp.
Both Q2 as well as Q3, and we can we continue to see progress in those areas in Q4, that's exciting because those areas over penetrated in Q4. So again sitting here on the 19th of November I, certainly don't want to be too confident about the women's apparel.
Changes in one will start to see the as we said Megan I feel great about spraying and we're chasing everything that we can you know one or speed model JC attributes in women's apparel on brand that are working.
Jana this is <expletive> talking concerning wholesale.
If we look at a point in time that is a say right now.
Our Q4 bookings are essentially flat to last year.
So I don't know that.
We will come in flat.
It's a lot to last year number at the end of the quarter, but I can't tell you that the free people offering at our wholesale partners is performing very well, so I would suspect that.
We will be either much closer to flat flat or just slightly above.
And I'm really can't talk too much about Q1 yet.
So I can do that later on.
Your next question comes from Lorraine Hutchinson with Bank of America. Your line is open.
Thanks, Frank I was just hoping that you could help us reconcile some of the commentary around urban.
Urban brands sounds very positive low levels of aged inventory positive quarter to date comps. So how do you think about that with the gross margin guidance down 200 basis points is that.
Are you still needing to be very promotional to move that product or do you just simply have too many new receipts coming in for the fourth quarter.
So right now in women's apparel, we although it we've progressed from where we were in the second quarter. We are still remaining very promotional in order to move that product and I think thats why both Trish and Meg talked about the excitement for spring and to see a kind of more meaningful meaningful shift and turn there.
Right now we are having to drive that topline comp in women's apparel and total brand comp in obviously women's apparel is the biggest piece there via via promotions and Mark Downs, which is what's what's reflected in our margin guidance.
And have you been able to pull back on promotions and markdowns at the Anthropologie brand.
[noise] Hillary yes, we have we actually pulled away from several promotions in the third quarter in apparel and.
Sir.
Oh.
Okay.
Your next question comes from Kate Fitzsimmons with RBC capital markets. Your line is open.
Yes, hi, Thank you for taking my questions.
Hillary My question you know what would you see us opportunities, we head into the fourth quarter and no looking to 2020 any trends that are getting new excited for the Anthropologie brand as we lap last year's execution issues.
Certainly seems like Theres, some optimism around the plus offering there and then secondly, how should we think about owned to penetration today at the brand and just where you could see going over time as you put a greater emphasis on your own internal internal brands and then finally, Frank just any initial reads on capex into next year that would be helpful. Thank you.
Sure I'll start off so I'm really excited about December I, just walked through our total fore sight last week and we have incremental delivery first week of December write off for Black Friday, along with a journal and I think the fashion is spot on and very much in line with some of the trends we're seeing the current business.
I'm feeling really great about that.
And then in spring and into early summer I have been really really impressed with what I've seen the team is really clicking and I've seen some of the best presentations I've seen last three years. So.
I'm really optimistic in terms of owned brand penetration, we generally hover around the 50% Mark and I think you will see meaningful improvement next year.
Up to around 60% I think we will build to deliver next year.
And regarding Capex is also tied into tied into our budget process I don't have a fight on number yet for for next year.
Your next question comes from.
With the retail tracker your line is open.
Everyone Best of luck for holiday, if I forget the end of the question.
Just wanted to dig a little bit more into urban customer are you finding that she's coming into the store in coming on line and she had shifted her spend I think you talked about beauty selling and some of the other segments. So she is still coming there, but she hadn't been finding what she wanted or has traffic has a consumer kind of walked away at all and.
Just back on the inventory question I was curious is the men's inventory also as heavy or is it much more focused on the women's inventory.
Hey, Marty.
Thank you as an issue and overall conversion has been these results for it's more about our average transaction generally when women install that's really where we see yet so that's a fall diagnosed there and in terms Oh I'm sorry, the second part of your question with men.
Okay, and then sorry inventory that we are we feel that meant inventory levels are more in line.
It's our women.
[noise].
Your next question comes from.
Telsey with Telsey Advisory Group your line is open.
Good afternoon, everyone. As you think about the digital business compared to the retail stores business was there any difference in terms by brand in terms of average transaction or what was selling online versus in the stores and how do you see that digital penetration changing its move forward. This holiday season compared to last year. Thank you.
Yeah.
Okay Dana.
The digital versus retail once again like I I've lost track of how many quarters is now.
The digital outperformed the retail segment.
And the penetration went up a couple of hundred basis points and we expect that to continue of course into the fourth quarters matter of fact fourth quarter almost always is the highest level of visual.
Yes.
There were a couple of meaningful differences by brands.
This was the first the first quarter that I can remember that.
The urban brand did not achieve a double digit.
Digital improvements on a comp basis.
The other two brands did again I would put that on board of.
Will that we've been talking about.
Up until this point.
And I think that for the fourth quarter, we'll probably see similar pattern.
That would be my guess.
So I think that nothing has really changed when the product is compelling when they see is decent value and it's a product that they want the buying it and they're buying it online or binding scores.
Having said that there are differences between what sells online what sells in stores.
In stores you tend to sell things that are slightly less fashion forward and maybe a little bit harder for somebody to imagine what that would look like them.
Well it would look like on them.
Of course, when you're dealing with the direct business.
They can see very clearly because there's a lot of imagery to supported what it's going to look like on them. So some of the more fashionable items.
Tens is doing better online so that would be the differences.
Your next question comes from Ike Boruchow with Wells Fargo. Your line is open.
Hi, Thanks, taking my question Frank I wanted to ask a follow up to a question that you mentioned earlier, so it sounds like the wholesale inventory at the into Fourq.
We'll be cleaner, but still maybe a little heavier than you'd like pending holiday I guess my question is what's the thought process around the ending potential ending inventory levels.
Urban outfitters.
You can hit your topline plan and then maybe how does that inform the timing of stabilize and potentially stabilizing.
Foundry.
Yes, we would expect urban as well as or are there a retail segment brands the inventory to be much closer to in line with with their sales comp as we exit the fourth quarter and enter into the enter into the spring selling season. So that's consistent for urban as it is variants are in free people going forward.
And our last question comes from.
Westcott Rochette with Evercore ISI your line is open.
Thanks, guys appreciate the question.
A few years ago you'd given.
Outlook of how you thought.
Urban Outfitters would evolve over time, and you're going to skew significantly towards international obviously digital has been has been picking up significantly.
As you view the landscape today, where do you see international going is that something you still want to accelerate push and international and explore the opportunity there and maybe between Europe and Asia, how you're looking at those two different regions. Thanks.
Todd This is <expletive> I'll take that question because I think it applies for all the brands.
We do see international is being a.
A very legitimate opportunity for us to expand.
To that end we are we have just finished.
Having a move of all of our offices that were in different parts of London.
Into one built in East London.
And.
Expanded facilities for the office folks we're also in the process right now.
Constructing and putting equipment in for a much expanded.
Distribution and.
The film et cetera.
North of London, and we believe that will allow us to.
At least triple our volume in Europe .
And all the brands are anticipate.
Expanding both their retail footprint that is open more stores in Europe and expand their direct to consumer business in Europe .
In Asia, we have hired.
Does and so and change.
Folks to.
Launch the brand the urban brand.
In China and to that end we.
Have launched on T Mall classic side now that it's taken a little bit longer than we anticipated there's a lot of.
Bureaucratic issues to be dealt with and as a result, we weren't able to put as much product up on site as we had wanted to.
But the Andean resolved his we were flat to the prior year in terms of.
The very important double 11 day sales so we expect to continue to.
In large what we're going in Asia in China.
With the potential there also opening a couple of stores.
And the launch of free people brand and that will happen in the next year.
Yes.
I will now turn the call back over to Mr., Richard Hayne for closing comments.
Hey, Thank you very much for joining the call and we look forward to.
Speaking with you I believe in early January when we will give.
The results of November December .
Okay.
This concludes today's conference call you may now disconnect.
Hi.