Q3 2023 Urban Outfitters Inc Earnings Call
Good day and thank you for standing by welcome to the Urban Outfitters, Inc. Third quarter fiscal 23 earnings call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one one on your telephone.
As a reminder, this conference is being recorded.
I would now like to hand, the conference over to you speak up once a day O&M Mcmullen executive director of Investor Relations Ma'am you may begin.
Good afternoon, and welcome to the <unk> third quarter fiscal 2023 conference call.
Earlier this afternoon the company issued a press release outlining the financial and operating results for the nine and three months period, ending October 31 2022.
The 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 results is contained in the company's filings with the securities and Exchange Commission.
On today's call, you'll hear from Richard Hayne, Chief Executive Officer.
<unk> co president and CFO , and Melanie Marine upfront Chief Financial Officer.
Following that we will be pleased to address your questions for more detailed commentary on our quarterly performance and the text of today's conference call. Please refer to our Investor Relations website at Www Dot <unk> Dot Com I will now turn the call over to <expletive>.
Thank you Ana and good afternoon, everyone.
Today I'll begin the call with some brief remarks regarding our third quarter results.
To make a few observations concerning the consumer and the macro environment.
I will then turn the call over to Frank and Melanie who will provide more brand details along with our thoughts about future performance.
Overall third quarter business performed in line with our expectations.
As discussed on the August call.
<unk> delivered 4% total revenue growth in the quarter against a strong third quarter last year.
Retail segment comp sales also grew by 4%.
<unk> <unk> and <unk>.
Were the principal drivers of positive comps.
Newly also contributed to total revenue growth with an exceptional quarter that delivered revenues of 178% above the prior year.
Auto sales gains from the retail segment of newly were partially offset by our wholesale revenue decline of 3% and a 200 basis point adjustment to total revenues due to currency exchange rates.
On our August call, we noted a bifurcation in our customer shopping behavior with brands offering higher price points and serving a more affluent customer posting better results.
Anthropologie free people FP movement, and newly brands, all have customers, who have been able and willing to spend despite the inflationary environment.
In the third quarter of the customers of each of these brands drove strong demand.
To date in November we have seen a slight softening in demand.
We attribute this to the unusually strong built in demand during early November last year, when many shoppers felt supply chain problems would lead to empty shelves during the traditional holiday periods and thus made purchases early.
Overall sales in November are on track to achieve our Q4 goal of delivering a total company comp in the low single digits.
Not all of our brands however, its urban affluent customer urban outfitters customers are younger with less discretionary income and accumulated assets and the current elevated inflation around necessities like rent food and energy has had a greater impact on them.
These customers are transacting less often and when they do shop. They are looking for a deal.
The UO brand in North America began the quarter with heavy inventory leftover from the bullwhip effect brought on by Covid induced supply chain issues.
The brand is working through this excess inventory and is planning to be much cleaner by the end of Q4.
The brand also faces some operational issues like product over assortment.
In Europe , the Euro brand performed much better.
<unk> from extra strong store traffic positive AUR and excellent marketing efforts.
Urban Europe , Anthropologie and free people all drove strong full price sales in Q3.
If the current macroeconomic situation doesn't deteriorate further.
We believe the customer bifurcation will continue at least through the holiday season.
As a result, we believe the Anthropologie and free people brands could continue to post nicely positive results, while the urban brand might continue to underperform.
Looking forward to Q1 next year, the health of the economy remains highly uncertain.
Assuming we avoid a major recession.
We believe there are several reasons for us to be optimistic.
Supply chain costs have dropped precipitously over the last six months and our speed to market capabilities are almost back to FY 'twenty levels.
These improvements combined with other actions, we launched to build margins like reducing our choice count.
Eliminating many smaller buys and placing deeper buys of alpha product should result in favorable IMU compared to last year.
We also remain committed to entering the spring selling season, with leaner inventories, which would give us the opportunity to deliver lower markdown rates, especially at the urban Outfitters brand.
Lastly, and maybe most importantly, we believe strong fashion trends remain in place for all of our brands.
Finally, I am pleased to report.
That response to newly our apparel rental business continue to excel in Q3 on.
On a quarter over quarter basis active subscribers grew by 37%.
Surpassing the 100000 sub milestone in early October and now posting in excess of 120000 active subs.
<unk> subscriber growth is allowing the brand to leverage expenses and make solid progress toward profitability.
We look forward to sell already new lease first quarterly profit sometime in FY 'twenty four.
With that I will now turn the call over to Frank to provide more detail on our third quarter performance by brand.
Thank you <expletive> and good afternoon, everyone I.
I will begin my commentary discussing our total company third quarter results versus the prior comparable quarter, followed by some more detailed notes by brand.
Total company sales grew by 4% to a third quarter record of $1 2 billion.
Driven by a total retail segment comp increase of 4% and a newly segment sales increase of $23 million.
These increases were partially offset by a 3% decline in wholesale segment sales and foreign currency translation that reduced sales by approximately 200 basis points.
The growth in retail segment comp sales was driven by a mid single digit digital channel comp sales increase and a low single digit positive store comp.
<unk> robust increase in sales was due to a significant increase in subscribers from the prior year.
Wholesale segment sales decline was due to a decrease at free people.
Although sales were positive operating profits declined in the quarter.
The decline in operating profit was largely due to increased markdowns during the quarter.
Mark Downs were higher than last year because of the markdown rates last year at all brands were exceptionally low and because each brand had excess inventory in certain categories.
Although each brand's markdown rate increased versus the low prior year rate.
When compared with FY 'twenty this.
Performance differed.
The urban Outfitters brand markdown rate increase the most significantly versus fiscal 'twenty.
Due to elevated inventory levels amidst an execution in a highly promotional environment.
The free people brand recorded only a slight increase in markdown rate versus FY 'twenty and the Anthropologie brand delivered a strong improvement in their markdown rate.
I will discuss more on each brand performance later in my commentary.
Total inventory increased 19% versus the prior year.
This represents a 25 point reduction from the year over year increase of 44% in the second quarter.
Each brand has worked hard to improve its inventory to sales alignment and we believe inventory will show a further reduction by the end of Q4.
The 19% third quarter inventory increase is due mostly to higher inventory costs earlier receipts than originally planned and excess slower selling product in certain categories.
The urban Outfitters brand in North America has the most inventory to clear and we will continue to deploy incremental markdowns throughout the holiday season to improve their inventory to sales relationship.
We are working towards our inventory position being in line with sales performance by the end of the fiscal year.
In Q3, the IMU variance to last year was slightly positive.
As the quarter progressed, we began to see the benefits of lower inbound transportation expenses are more reliable sourcing and supply chain network and the impact of internal initiatives.
As a result, we currently believe that <unk> could be nicely favorable in the fourth quarter compared to the prior year.
We also believe there is still much more opportunity for further improvement in fiscal 'twenty four and beyond.
I will now provide more details by brand starting with the Anthropologie group.
The Anthropologie team delivered an impressive 13% retail segment comp in Q3.
This increase was driven by double digit positive store and digital comps.
By category.
Errol.
<unk> and accessories delivered positive comps in the quarter.
The brand delivered nicely positive comps in each month during the quarter.
When compared to fiscal 'twenty Q3 comps remain mostly consistent with the first and second quarter results.
Fourth quarter comparisons against last year continue to get more difficult, but we believe the brand comp sales versus fiscal 'twenty could remain consistent.
This would produce retail segment comps in the mid to high single digit range for Q4.
The Anthropologie consumer remains optimistic and is choosing fashion newness that is versatile across multiple parts of her lifestyle.
Whether it's going out or returning to the office.
They are responding well to more dressed up categories like dresses pants jackets and shoes with heels.
The brand distorted into these trends as they have seen customer interest waned in more casual fashion.
Anthropologie intentionally brought holiday receipts in earlier to cater to the customer's desire to dress up and celebrate all occasions in their life.
This is true for both apparel and home.
Home categories that lean into decorating for guests and entertaining are outperforming other items in the home assortment.
The team's execution of the brand strategy to target a slightly younger customer under the age of 40 is gaining traction.
Marketing and creative teams worked collaboratively to create and deliver incredibly compelling campaigns that has successfully attracted new younger customers.
New customers in the quarter increased by an impressive 24%.
We remain optimistic about the brands performance for the holiday season.
Now I will call your attention to the free people group.
Once again, the free people team produced a strong quarter with retail segment comp achieving an 8% gain versus last year.
Retail segment comp was driven by double digit growth in the digital channel while store comps were flat.
Retail segment comp sales by month were fairly consistent in the quarter.
During the quarter the brand achieved growth across all major categories with particular strength in accessories apparel and FP movement.
The FTE movement brand delivered another outstanding quarter, delivering 28% retail segment growth on top of a very strong multiyear comparisons.
New and existing free people movement stores continue to exceed expectations, which bodes well for continued growth of the brand.
Early holiday trends remain positive for the free people group and we believe the brand's retail segment performance could look similar in Q4 to the third quarter.
The free people wholesale segment delivered a 4% decrease during the third quarter driven by weakness in department store accounts, partially offset by strength in specialty account partners.
We believe the wholesale segment sales will decline in the fourth quarter and into next year as our Department store partners are planning future orders more conservatively.
Additionally, <unk>.
Free people wholesale inventory levels remain higher than we would like and we are planning on meaningfully reducing our inventory through closeout channels.
<unk> increase in closeout sales with significantly weigh on wholesale profit rate in the fourth quarter.
Now moving on to the urban Outfitters brand, which delivered a negative 9% retail segment comp in Q3.
You always negative comp was the result of disappointing performance in North America due to double digit negative store and digital comp sales.
We believe the macro environment in North America is having an outsized impact on the urban outfitters customer.
This customer shopping behaviors have changed due to reduced discretionary income.
They are shopping less frequently and when they do visit they are converting at a lower rate.
While we know the macro environment for the urban customer may remain challenging for some period. We also know we can execute better.
We believe our product distortion presentation inventory management and marketing all have room for improvement.
Lastly, as noted inventory levels in North America are higher than we would like as a result, the brand in North America will need to be more promotional to clear through excess inventory in Q4.
In contrast, Europe Europe continues to perform remarkably well delivering a 13% retail segment comp for the quarter.
Customer traffic was exceptionally strong in stores inventory levels are in a better position than Q2, and we believe the brand is gaining market share.
Reg price and total sales comps were positive for the quarter in all major categories.
We believe <unk> can continue to deliver positive retail segment comps in the fourth quarter. Although we do note that the macro environment is getting more difficult due to record levels of inflation.
As we look at Q4 for the urban Outfitters brand, if North America performance remains consistent with Q3 and with the increased inflation potentially negatively impacting the EU consumer.
Global Urban Outfitters brand could deliver results below Q3's results.
I will now turn the call over to Melanie our Chief Financial Officer.
Thank you Frank and good afternoon, everyone.
I'll discuss our thoughts on the fourth quarter and full fiscal year 'twenty three financial performance.
Based on current sales plans, we believe our U RBN retail segment comp sales could register low single digit positive for the fourth quarter.
Growth in the retail and newly segments is likely to be partially offset by lower sales in our wholesale segment.
Additionally, similar to the third quarter, we believe foreign exchange could negatively impact total sales growth by approximately 200 basis points. Together. This would result in total company sales growth in the low single digit range.
Moving on to gross profit margin based on our current sales plan, we believe that fourth quarter gross profit margins could decline by approximately 50 basis points compared to the prior year.
We believe merchandise margins could be flat in the fourth quarter.
The favorability in IMU due in part to lower supply chain costs versus prior year could be offset by higher markdowns needed to reduce inventory levels, particularly at the urban Outfitters brand.
Higher carrier rates, primarily resulting from higher fuel and peak surcharges in last year could deleverage delivery expense and contribute to a decline in fourth quarter gross profit margin rates.
Moving to SG&A, we believe SG&A growth for the fourth quarter will increase at a similar rate as our sales growth of low single digit range.
Inventory has remained elevated for the past year due to higher inventory costs, resulting.
From increased inbound freight cross planned earlier receipts to protect sales against the volatile supply chain and excess slower selling product in certain categories.
Based on our current sales plans and receipt expectations, we believe that our inventory growth versus prior year will end the quarter in line with sales performance at the fourth quarter.
We are currently planning our effective tax rate to be approximately 25% for the fourth quarter and 28% for the full year fiscal 'twenty three.
Capital expenditures for the fiscal year are planned at approximately $225 million. The spending is primarily related to providing increased distribution and fulfillment capacity and new store openings.
Lastly, we are planning to open 10, new stores in the quarter, while closing 11 stores, our new store number includes four new free people movement stores this quarter.
As a reminder, the foregoing does not constitute a forecast but is simply a reflection of our current views.
The company disclaims any obligation to update forward looking statements.
Now I am pleased to turn the call back to Dan.
Thank you Frank and Melanie that concludes our prepared remarks.
Our brand creative and shared service leaders.
I also thank our 23000 associates worldwide for their hard work dedication and amazing creativity.
Our many partners around the world further extra effort and helping us overcome the numerous supply chain disruptions, we faced over the past two years.
Finally, I, thank our shareholders for their continued interest and support.
I will now turn the call over for your questions.
Thank you.
As a reminder, ladies and gentlemen to ask a question you will need to press star one on your telephone.
Star one on your telephone to ask the question.
We ask that you limit yourself to one question. Please.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of.
Kimberly Green.
With Morgan Stanley .
Okay, great. Thank you so much.
Really appreciate you taking the question Jack.
Wanted to step back from the third and fourth quarter ups and downs and just take a glimpse into next year.
You've had.
I'm just interested to hear how you think about.
The Anthropologie and free people divisions, both having had just such an excellent year this year.
How do you how does the team go about.
Wrapping not next year and.
On the other side of that coin in into 2023, our opportunities it would seem at the urban Outfitters Division.
You could maybe talk about.
You're just big picture outlook for urban as we look into next year and.
Do you see opportunity topline margin bottom line.
What do you think the biggest opportunities are for that brand next year. Thank you.
Sure Kimberly Thank you very much for the question.
Should I take questions.
FY 'twenty four I think will be a very different year.
Then the 23.
Just add a couple of times on our prepared.
Statements FY 2020.
Sales were largely driven by increases in.
AUR and <unk>.
Were negatively impacted by.
During the whole year, almost all of the year for FY 'twenty four I think that both the anthro and free people.
Brands will have to rely more on getting new customers and increase in the number of transactions we have.
Because I think the <unk> NDA.
You are will be largely static I'm not suggesting there won't be any increase in snow probably will be.
Given the inflation environment.
Now I think quite quickly.
And our industry some deflation around.
The supply chain.
I don't think theres going to be a lot of.
Room to increase prices dramatically.
So we are going to be.
Spending more money on marketing.
New customers and we will hopefully convert those customers.
In greater numbers than we did this year.
You are right.
<unk> brand has significant opportunities.
I think that we have.
A couple of mistakes.
I think that we probably raised our prices a little more than we should have I think the customer is telling us pretty loud and clear that she doesn't like that.
And she's buying more when we offer our promotions.
That's a mistake on our part but I also think.
As a result.
The macro climate.
With that particular customer group.
A little bit more challenged economically.
Inflation is really hurting them quite a bit.
So I think we will.
Offer prices that are a little bit sharper.
At urban Outfitters in FY 'twenty four.
Go back to the whole notion of.
What we call <unk>.
Hi, Lo Assortments, where we.
Sharp price points with opening price points.
But also offer more elevated prices.
Items that clearly have value.
I think that.
I can go on and on and on probably much longer.
Anybody on the call with life, but.
I think I gave you.
On that line.
Thank you.
And I apologize Thats Kimberly greenberger. Thank you.
Please standby for our next question.
Our next question comes from the line of Lorraine Hutchinson with Bank of America. Your line is open.
Thank you.
Follow up on the answer to Kimberly's question around the olefin AUR can you just quantify where that is versus pre pandemic levels and if you have strategies to reduce that without necessarily reducing your gross margin.
Yes.
Lorraine I believe I don't have the exact number in front of me, but I believe the urban.
Brand in North Americas.
About 5%.
That's pretty close as they say close enough for government work.
And I think that it wasn't necessarily.
Yes.
We didn't raise prices according to our plan.
Again to say the opening price points.
So, but it was more I don't want to say across the board, but it was many more items than we probably should have done so I think that.
When we planned for FY 'twenty four.
We will plan.
Not up much in any other categories, but.
Bringing some prices down.
Versus what we are doing right now.
This is Bryan just to sort of add to the timber.
Really in the range of questions as it relates to as it relates to next year and some of that.
Positive that we have going honestly to all three brands, what we've talked about.
Thank you.
The third quarter, and an improving trend and we believe in Jackson positive item in the fourth quarter and that is due in part to significant improvements in the cost as well as speeds.
Fly chain and that should continue to be a nice tailwind. We're hoping it should continue to be a nice tailwind into next year secondarily I just wanted to talk about the markdown rates.
We're adjusting our inventory.
And getting that to be more in line with sales and believing inventories in Halloween bag sales next year driving a faster turn.
Lower weeks of supply.
Again do include an improved supply chain that in and of itself should help our markdown rate.
One part is Marcia and obviously the difficulty there is having any fashion right and the other is just dealing with excess inventory and knock on wood, we've made significant improvement in our inventory position in the second quarter. A third we think we're going to make notable improvements in third quarter to fourth enter into that.
Fiscal 2012 year.
Leaner inventory and hopefully then have less reliance on having to mark down.
Some excess inventory so both of those things I think should be positive not just for the urban outfitters brand, but for all of Europe .
Into next year.
And Lorraine and Kimberly both.
Yes.
An update on the AUR.
Prior year.
You are in an urban was actually up almost 20%. So when you think of a compounding effect of 5%, which might not seem like a lot but when.
5% on top of the 20% I think.
It's more than than the customer.
Can afford and more than they want.
Thank you.
Please standby for our next question.
Our next question comes from the line of Adrienne <unk> with Barclays. Your line is open.
Yes. Thank you very much my question is on inventory.
<unk>.
I guess when we look forward.
And it is for retail and for wholesale and try to separate the two of them plus a retail specifically when we look forward into Q1, ending inventory up about 32% in Q4 Q2.
About 44% how much of that was in transit.
And that in transit portion is a double digit your inventory on the balance sheet should go down double digit, but not impact your ability to comp is that a fair assessment and then I just wanted to follow up on wholesale.
Yes.
And I guess just to <unk>.
Step back from the pieces are in transit and complement this year and what wasn't here I think I think the crux of your question is could we managed to a negative inventory next year and drive positive sales.
Sorry.
In both retail segment.
And wholesale certainly to the first half of the year I think you are.
I think our inventory could be negative and still drive possible.
Sales in both channels as well.
We did have some excess inventory in certain categories and classes at each of the brands.
Yes.
But I'd be careful here.
Well I believe what Jeff said is absolutely correct.
We could have negative inventory and still have pauses.
We have to be also very concerned and aware of.
The AUR or the retail.
Versus the units.
As anybody that's been in this business for a while knows.
You need a certain number of units in the stores some stores looking for so.
The merchants.
Our merchants are doing not only in.
Cost with retail are now having to look very closely and units.
Okay, and then I guess my that was my follow up was the Doug.
So mall traffic you expect mall traffic to be <unk>.
Negative flat.
And and conversion to be higher I'm, just trying to figure out is AUR is effectively flat ish units are flattish.
Or down so.
What's the what's the backfill and the conversion of the traffic virtual football has to go up right.
I think when we look at traffic we looked at it in total.
Whatever channel the customer wants to shop is what we're happy to serve the consumer right, whether it's whether it's digital or stores, we want to drive traffic to our business and that that always has been and always will be.
Yes, I think about the momentum that both anthropologie and free people have in that new acquisition net new customers.
Right now as we enter into holiday and then into next year, we feel like there's good momentum that they have there to continue to drive increased interest transactions as we as we look forward next year.
Former customer basis, obviously, <unk> taken a different macro environment and a different.
The level of execution right now.
Certainly, we believe that with cleaner inventory and some of the brand is doing right now that there is opportunity for that next year. So.
AUR and may not be.
As big of a tailwind as it was this year.
The growing customer base.
Our job to continue to drive traffic.
Our stores.
It is how we're thinking about driving that driving positive growth next year.
Yes.
That point I think that.
You can take a look at both the Anthropologie and free people brands and see the difference.
Yeah.
The quality brand excellent store traffic.
You put up nice store comps as a result.
Whereas the free people.
Basically flat.
Traffic in the stores.
Flat.
Store comps however.
Growth.
8%.
Amps.
And all through the digital so.
It's a little I don't think that were.
Necessarily I don't think we necessarily need.
Store traffic in the malls to go up in order to drive nice comps.
If it happens.
And it happens because we're executing better.
Wow Thats great.
I don't think it's unnecessary.
Functions.
Thank you.
Please standby for our next question.
Our next question comes from the line of Matthew Boss with JP Morgan Your line is open.
Great. Thanks.
Nick could you just elaborate on current selling trends that youre seeing in November your overall view of consumer spending this holiday season, and then Frank on the expense front could you just elaborate on the investments that you cited next year to drive sales or how best to think about SG&A dollar growth maybe relative to sales next year.
Hi, Matt.
Pleased to do that.
Look at the quarter to date performance.
Brian .
Retail segment comps for Anthropologie.
Our currently high single digit positive.
For free people there.
<unk> digit positive just on the cost.
Hi.
And for urban Outfitters.
Double digit negative.
When you put all these together.
The retail segment comp in November is currently running.
Strong low single digit positive comp.
This is <unk>.
This includes what we believe.
And with so.
We did see in the first.
10 days or so of November .
Slightly softer sales I think the number of people reported that and we saw it as well.
We're we're attributing it to.
The prior year strength.
When we saw an awful lot of customers shopping early.
Because of the media.
There won't be any Christmas Im sure Theres not enough inventory.
And so everybody.
Seem to purchase their holiday gifts in the first couple of weeks.
We don't think it'll be like that this year, we believe that.
The consumer is quite aware of the facts.
There is plenty of inventory out there and what they're doing is waiting for big promotional events that normally occur.
On Black Friday, and cyber Monday in order to make their purchases.
To support that we see record amount.
Product being put in cards.
Probably waiting for this coming Friday and Saturday.
Next Monday.
No.
We think that overall the holiday is likely there'll be more promotional than last year.
But it's not going to be I don't believe it will be.
Total blood Bath it'll be.
More based on.
The type of stores and the customers that goes towards the survey.
Hi, Matt. This is Melanie just wanted to take your question about next year's investment right.
Right now we're currently in the middle of our budget process for next year. So we're still finalizing plans and I can't give you a number quite yet, but I will say that we've worked really hard to manage SG&A growth expense closer to sales next year.
So stay tuned.
March.
Thank you.
Please standby for our next question.
Our next question comes from the line of <unk> with Citi. Your line is open.
Hey, Thanks, guys. Just a couple of quick follow ups November or slowdown that you saw I was curious if that was even across all three brands and then sorry, if I missed it in the discussion of inventory, but did you say how youre managing your mix in the first half of next year.
Then last just curious if you can give us any sense of mall versus off mall suburban versus urban performance this quarter.
Sure Paul.
The November slowdown we did observe it.
All three brands.
I would say, but I want to emphasize it was a slight slight slowdown.
And detectable, but slight.
And we have.
That has since passed and our sales right now are performing very nicely.
As far as.
Next year's units, if I was saying.
No.
Merchants and our business have to be very aware of and concerned about.
When there is this kind of increase.
In retail prices.
Don't buy to those retail prices solely.
Let's take a look at.
The units that are available.
Because.
The size of our stores, even though we are opening smaller stores across the board than we did three or four or five years ago.
We still have to fill those stores.
Customers are very sensitive to.
How Phil for a store is in terms of number of units. So that's one of the parts of the equation that is not to say that we can't do more business with fewer units and fewer retail dollars.
Just to say that that is.
A factor that we have some pension interest consideration.
Thank you.
Please standby for our next question.
Our next question comes from the line of Dana Telsey with Telsey Group. Your line is open.
Good evening, everyone, Hi Tech as you think about the channel performance the difference between stores and digital how would you highlight.
Highlight each by brand and then it seemed like intimates with software and some of the different brands does that the casual cozy in favor of the occasion dressing or any way you would frame. It in terms of the difference in performance by brands. Thank you.
Sure Danielle I'll do my best but I'm going to rely on.
The brand groups.
Under the table.
Thanks Curt.
Correct.
As far as channel differences are concerned in the.
U S ecology brand they were very similar actually.
Comps were double digit in both channels. So that was good and I say that.
When you look at it by category.
What they what they classify as.
Intimates or loungewear.
Was a little softer.
Their apparel, but that was largely because.
They they deemphasize that.
In this this year because they're going out in quotes apparel was doing so incredibly well so they did that on purpose.
Look at the free people business.
The as I said I think earlier, the digital business outperformed the store business.
And there I think intimates did very well.
Our Internet business has consistently improved every quarter coming off of how to react to the customer from allowance perspective into a more fashion perspective.
Well, that's what that's what I would consider very well.
Thank you and actually in the urban Outfitters.
Brand.
<unk>.
Both channels performed similar in that they were both down but in that particular case mix was their best category.
So I don't know what youre going to draw from all of us.
I don't think its I don't think there is a consistent theme there.
Thank you.
Please standby for our next question.
Our next question comes from the line of Janet Kloppenburg with JK are your line is open.
Hi, Hi, everybody.
And congratulations on the continued nice results.
I just had a couple of questions.
Urban outfitters deck. It seems like you've got the inventory plan in place and the pricing strategy.
Evolving what I was wondering about is.
How you feel about.
A turn in the business from a merchandising execution standpoint, when will the assortments be positioned the way.
The team thinks that they should be.
Win.
When might we see an inflection there.
And and how you're thinking about an inflection there and then we've seen some.
Softness in the upper end furniture business and I know anthropologie had been tracking pretty nicely at least through the third quarter. Maybe you could talk about your outlook there that would help a lot. Thanks so much.
Sure Kevin again I'll.
I'll take a shot.
Briefly and then ask Krishna.
Talk about it because he is much closer than I.
In general the.
Furniture business as Anthropologie is doing quite well.
Now.
They are.
A little bit more promotional than they were last year, but I will say little.
Other than that.
The sales are quite strong.
With urban Outfitters.
Look at the merchandising.
I assume you are talking about both in store and online.
Online we're interested in.
Redoing our website.
And renovating that.
That would.
I think you have a whole new look to what we're doing and I hope we get to that.
By mid year.
After that.
As far as the store is concerned.
We have plenty of things that we're planning to do in the store too.
Rob more attention to.
We think the alpha.
Better items.
And Thats done with inventory and also done with just.
Taking out some of the <unk>.
Styles, so theres fewer styles available and the ones that are available.
More depth behind us.
So I think I think you will see changes in that.
Should start early in the season.
And Kevin I would add on that Anthropologie home business I think.
Nice double digit demand in Q2, and then by high single digit demand and Brent price demand as well as some promotional living as we head into Black Friday.
But we're also getting the benefit I think that shorter transit times.
And then lastly backwards its pretty significantly.
Trends remained consistent and our net is doing quite well as we now are shipping out and shortening our time.
Mike.
Yeah.
I think I.
I can answer absolutely urban Outfitters group the speed to market.
Going to be a key to urban continued success to react to customers.
Trend evolution.
Kind of what they want and the customers and urban.
Right.
Being able to keep up with them going into the spring season, I think we will see a big change.
Did you say.
Thank you.
Please standby for our next question.
Our next question comes from the line of Jay sole with UBS. Your line is open.
Great. Thank you so much take would it be possible to elaborate on what youre seeing in the denim category right now.
Sure I can elaborate on it.
Most of the year.
Glenn has been.
Downtrend and some from the prior years.
And we think the.
That will continue into the fourth quarter. However, I think we're all pretty excited about where that might go next year.
And.
And so.
I hope.
That we will have a comp a positive.
Comp in the denim category.
<unk> year.
That's an urban outfitters and Anthropologie they've seen.
Using numbers and their denim.
By going into I guess, what you'd call a little bit Dressier, it's Adam.
And.
Our denim business is extremely strong.
And free people denim business.
Nothing but go up for the last.
Four years five years.
So we're very pleased with that.
Thank you.
Please standby.
Our next question.
Our final question comes from the line of Marni Marni Shapiro the retail tracker. Your line is open.
Thank you guys and congratulations on just in case I forget best of luck with the holiday.
Wanted to dig a little bit more into urban feel like everyone's picking on them, but I wanted to understand.
The customer is obviously under pressure she is coming in less frequently to the store and the site you're watching her buying promotions, but I'm curious is she buying fashion there.
Entering Q1 and Q2, there was not much of what I would say I guess, the right fashion the fashion I see her going for.
And ending Q3, there is more than there was a quarter ago or two quarters ago, and even walking there. This week. It looked the front of store looked very different obviously still inventory to clear.
But feel very different.
Guess I'm asking it in a way how do you know that it's the economy pressuring the customer and not the assortment fresh and the customer is she buying with passionate pulp price ratio, even holding back there.
Okay money how are you.
Talk to you.
I will then.
Pass it over to Sheila.
A question and answer.
Thank you.
But we see with the urban customer is.
We believe that it's tough.
Top macro environment for that.
They certainly have less disposable income.
Parcenary income to spend.
Certainly less than the prior year win.
The government gave them a lot of money. So that's one thing but.
But we see them pulling back more than you would expect.
If that were the only been going on so I'm led to believe that is partially our assortment and how we are.
How we are presenting that assortment.
We do see that.
Customer responding to fashion items and they seem to be responding very strongly to those fashion items I would say the problem. We're having is there are not enough of them that could be our problem or that can just be a macro carnival miles.
She doesn't need that much so.
This is a question there.
We ask ourselves on a daily or at least a weekly basis, if not daily.
Is it is it the price architecture is the assortment or is it a macro issue and I guess every time, we talk about it.
Yes.
We come down is it's probably a combination of the three.
And it would be very difficult for me to even hazard a guess.
Which of those three is most important.
Sure do you have any.
Tim you want to add to it.
Obviously, we take the merchants take that assortment as the most controllable aspects of our business and became.
100% on an assortment issue, even now I believe it's not 100%.
Definitely more of that she is reacting to fashion.
Embellishment inspire calling a very nice way, we wish we owned more.
There's definitely key highlights within our bottoms assortment that feels very strong.
We just have to as we go in.
<unk> opportunity because I think as the urban change it changes trends more quickly than not you have the ability to react that much stronger.
We are studying some warm storage with some fresh ideas in December so hopefully we'll have an indication of.
Some fences for change and that will help them actions, Joe it sounds like a job from.
Q1 next year.
Okay, I think that that can't.
Clues.
Call I wish you all a wonderful wonderful Thanksgiving and look forward to speaking with you in a few months and that includes Kimberly greenberger.
That other folks.
So thank you very much and have a nice Thanksgiving.
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