Q2 2025 Urban Outfitters Inc Earnings Call

August 21, 2024

second quarter fiscal 25 earnings call. At this time all participants are in a listen-only mode.

Operator: 2nd quarter, Fiscal 25 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded.

Speaker Change: good day ladies and gentlemen and welcome to the urban outfitters inkc second quarter fiscal twenty five earnings call at this time all participants aren in a listenoma later we will conduct a question and-answer session and instructions will follow at that time

Speaker Change: Later we will conduct a question-and-answer session and instructions will follow at that time.

Speaker Change: As a reminder this conference call is being recorded.

Speaker Change: I would now like to introduce Oona McCullough, Executive Director of

Oona Mccullough: I would now like to introduce Oona McCullough, Executive Director of Investor Relations. Miss McCullough, you may begin.

Oona McCall: as a reminder this conference call is being recorded i would now like to introduce ona maccoa executive director of investor relations miss mccallll you may begin

Oona McCall: Investor Relations.

Oona Mccullough: Good afternoon and welcome to the URBN 2nd quarter, fiscal 2025 conference call.

Oona McCall: Ms. McCullough, you may begin.

Speaker Change: good afternoon and welcome to the urbn second quarter fiscal two thousand and twenty five conference call earlier this afternoon the company issued a press release outlining the financial and operating results for the three and six month period end ing july thirty first two thousand and twenty four

Speaker Change: Good afternoon and welcome to the URBN second quarter fiscal 2025 conference, call. Earlier this afternoon the company issued a press release outlining the financial and operating results for the three and six month period ending July 31st 2024.

Oona Mccullough: Earlier this afternoon, the company issued a press release outlining the financial and operating results for the three and six month periods ending July 31, 2024. The following discussions may include four 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.

Speaker Change: 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.

Speaker Change: 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

Speaker Change: On today's call you'll hear from Richard Hayne, CEO URBN, Frank Conforti, Co-President and COO URBN, Tricia Smith, Global CEO Anthropology Group, Shea Jensen, President Urban, Outfitters North America, and Melanie Marein-Efron, CFO from URBN.

Oona Mccullough: On today's call, you'll hear from Richard Hayne, CEO, URBN; Frank Komporti, Co-President and COO, URBN; Trisha Smith, Global CEO, Anthropology Group; Shea Jensen, President, Urban Outfitters North America; and Melanie Marein Efron, CFO from URBN. Following that, we will be pleased to address your questions.

Richard Hayne: ontoday's call you'll hear from richard haane ceo you rbn

Speaker Change: frank can boty co president and co u rbn tricia smith global ceeo anthropology group

Speaker Change: Following that we will be pleased to address your questions.

Speaker Change: shade jensnson president urban outputters north america and melany marine effron c f fo from u r b n

Oona Mccullough: 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.urbn.com.

Speaker Change: 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.urbn.com.

Frank: 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 ourinbest relations website at w that yourb com i will now turn the call over frankck

Frank: I will now turn the call over to Frank.

Frank Komporti: I will now turn the call over to Frank. Thank you, Ona, and good afternoon, everyone. Today, I will discuss our total company's 2nd quarter results versus the prior year, followed by some more detailed notes by brand. I will also provide some commentary on our current trends and the macro environment. Overall, the teens delivered an exceptional quarter, which was nicely ahead of our plans as discussed on the first quarter call. Total URBN sales grew by 6% to a Q2 record of $1.4 billion, and four of our five brands continued to perform remarkably well, posting record 2nd quarter sales and profits.

Frank: Thank you Oona and good afternoon everyone.

Frank: Today I will discuss our total company second quarter results versus the prior year followed by some more detailed notes by brand.

Speaker Change: thank you ona and good afternoon everyone

Frank: today i will discuss our total company's second quarter results versus the prior year followed by some more detailed notes by brand i will also provide some commentary on our current trends and the macro environment

Frank: I will also provide some commentary on our current trends and the macro environment.

Frank: Overall the teams delivered an exceptional quarter which was nicely ahead of our plans as discussed on the first quarter call. Total URBN sales grew by 6% to a Q2 record of 1.4 billion dollars and four of our five brands continue to perform remarkably well posting record second quarter sales and profits. Our sales growth was driven in part by a retail segment comp of 2%. Anthropology and Free People produced a high single-digit positive retail segment comp which more than offset the high single-digit retail segment comp decline at Urban Outfitters.

Speaker Change: overall the team's delivered an exceptional quarter which was nicely ahead of our plans as discussed on the first quarter call

Speaker Change: total urbn sales grew by six percent to a q two record of one point four billion dollars and four of our five brands continueed to perform remarkably well posting record second quarter sales and profits

Frank Komporti: Our sales growth was driven in part by a retail segment comp of 2%. Anthropology and Free People produced a high single digit positive retail segment comp, which more than offset the high single digit retail segment comp decline at Urban Outfitters. Newly also delivered robust double-digit revenue growth due to a 55% increase in average active subscribers versus the prior year. Additionally, the wholesale segment increased revenue by 15% driven by a healthy increase in regular price sales at Free People.

Speaker Change: our sales growth was driven in part by a retail segment compp of two percent

Speaker Change: anthropology and free people produce a high single-digit positive retail segment comp which more than offset the high single digit retail segment comp decline at urban aidors

Speaker Change: Newly also delivered robust double-digit revenue growth due to a 55% increase in average active subscribers versus the prior year.

Speaker Change: newly also delivered robust double-digit revenue growth due to a fifty-five percent increase in average active subscribers versus the prior year

Speaker Change: Additionally the wholesale segment increased revenue by 15% driven by a healthy increase in regular price sales at Free People.

Speaker Change: additionally the wholesale segment increased revenue by fifteen percent driven by a healthy increase in regular price sales at free people

Speaker Change: Now moving on to gross profit. URBN gross profit dollars increased 8% to 493 million dollars while gross profit rate improved by 68 basis points to 36.5%. The improvement in gross profit rate was primarily due to increased initial merchandise margins driven by strong execution of cross-functional brand initiatives in the retail, wholesale, and newly segment. These improvements were partially offset by a higher markdown rate at Urban Outfitters, as the brand used incremental discounts to move through excess inventory.

Frank Komporti: Now moving on to gross profit. URBN gross profit dollars increased 8% to $493 million, while gross profit rate improved by 68 basis points to 36.5%. The improvement in gross profit rate was primarily due to increased initial merchandise margins driven by strong execution of cross functional brand initiatives in the retail, wholesale, and newly second. These improvements were partially offset by a higher markdown rate at Urban Outfitters, as the brand used incremental discounts to move through excess inventory.

Speaker Change: now moving on to gross profit

Speaker Change: yourb n gross profit dollars increased eight percent to four hundred ninety three million dollars while gross profit rate improved by sixty eight basis points to thirty six point five percent

Speaker Change: the improvement in gross profit rate was primarily due to increased initial merchandise margins driven by strong execution of cross-functional brand initiatives in the retail wholesale and newly segments

Speaker Change: these improvements were partially offset by a higher mark down rate at urban apeterss as the brand used incremental discounts to move through excess inventory

Frank Komporti: Now moving on to SG&A expenses. For the quarter, SGNA increased 8% versus a prior comparable quarter and delivered by 32 basis points. The delivery was primarily due to the Urban Outfitters brand not being able to reduce SG&A at the same rate as their sales decline. While we did reduce our SGNA spending at the Urban Outfitters brand in Q2, we did not believe it was prudent to reduce expenses at the same rate of sales. The increase in total company SGNA expense dollars was largely due to increased marketing spend supporting the solid sales growth at Anthropology, Free People, FD Movement, and newly brands.

Speaker Change: Now moving on to SG&A expenses. For the quarter, SG&A increased 8% versus a prior comparable quarter and deleveraged, by 32 basis points. The deleverage was primarily due to the Urban Outfitters brand not being able to reduce, SG&A at the same rate as their sales declined.

Speaker Change: now moving on to sgna expenses

Speaker Change: for the quarter sga increased eight percent versus a prior comparable quarter and deleveraged by thirty-two basis points

Operator: 2nd quarter, fiscal 25 earnings call. At this time, all participants are in a listen only mode. Later we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded.

Speaker Change: the deleverage was primarily due to the urban afterwards brand not being able to reduce sdnaa at the same rate as our sales decline

Speaker Change: While we did reduce our SG&A spending at the Urban Outfitters brand in Q2, we did not believe, it was prudent to reduce expenses at the same rate of sales.

Speaker Change: while we did reduce our sna spending at the urban aidors brand in q two we did not believe it was prudent to reduce expenses at same rate of sales

Oona Mccullough: I would now like to introduce Oona McCullough, Executive Director of Investor Relations. Miss McCullough, you may begin. Good afternoon and welcome to the URBN 2nd quarter, fiscal 2025 conference call. Earlier this afternoon, the company issued a press release outlining the financial and operating results for the three and six month period ending July 31, 2024. The following discussions may include four 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.

Speaker Change: The increase in total company SG&A expense dollars was largely due to increased marketing, spend supporting the solid sales growth at Anthropologie, Free People, FP Movement, and, Newly Brands. Anthropologie and Free People Brands marketing efforts helped to drive double-digit traffic, gains to the store and digital channels, while Newly's marketing campaigns helped to produce over 50% active subscriber growth.

Speaker Change: the increase in total company sda expense dollars was largely due to increased marketing spend supporting the solid sales growth at anthropology free people fp movement and newly brands

Frank Komporti: Anthropology and Free People brands' marketing efforts helped to drive double-digit traffic gains to the store and digital channels, while newly marketing campaigns helped to produce over 50% active subscriber growth.

Speaker Change: anthropology and free people brands marketing efforts helped to drive double-digit traffic gains to the store and digital channels while newlylease marketing campaigns helped to produce over fifty percent active subscriber growth

Frank Komporti: Total URBN operating income increased 10% versus last year to $145 million, with operating profit rate improving 36 basis points to 10.7%. Net income increased 13% to $117 million, or $1.24 per diluted share.

Speaker Change: Total URBN operating income increased 10% versus last year to $145 million, with operating, profit rate improving 36 basis points to 10.7%.

Speaker Change: total urbn operating income increased ten percent versus last year to one hundred and forty-five million dollars with operating profit rate improving thirty-six basis points to ten point seven percent

Speaker Change: Limited income increased 13% to $117 million, or $1.24 per diluted share.

Oona Mccullough: On today's call, you'll hear from Richard Hayne, CEO, URBN, Frank Komporti, Co-President, and COO, URBN, Trisha Smith, Global CEO, Anthropology Group, Shea Jensen, President, Urban Outfitters North America, and Melanie Marein Efron, CFO from URBN. Following that, we will be pleased to address your questions.

Speaker Change: net income increased thirteen percent to one hundred and seventeen million dollars or one dollar in twenty-four cents per diluted share

Frank Komporti: I will now provide more details by brand, starting with Free People. The Free People team produced an outstanding quarter with global Free People Group sales increasing 10%. The double digit increase in sales was driven by an impressive 7% retail segment comp and an 18% increase in wholesale segment revenues. The 7% retail segment comp gain was on top of the incredible 27% retail segment comp from last year. The sales comp was driven by a similar comp in both the digital and store channels. During the quarter, the Free People brand achieved positive sales growth across apparel, accessories, and movement.

Speaker Change: I will now provide more details by brand, starting with Free People.

Speaker Change: The Free People team produced an outstanding quarter, with global Free People group sales, increasing 10%. The double-digit increase in sales was driven by an impressive 7% retail segment comp and, an 18% increase in wholesale segment revenues.

Speaker Change: i will now provide more details by brand starting with three people

Speaker Change: the free people team produce an outstanding quarter with global free people group sales increasing ten percent

Speaker Change: the double-digit increase in sales was driven by an impressive seven percent retail segment comp and an eighteen percent increase in wholesale segment revenues

Speaker Change: The 7% retail segment comp gain was on top of the incredible 27% retail segment comp, from last year.

Speaker Change: the seven percent retail segment comp gain was on top of the incredible twenty-seven percent retail segment comp from last year

Oona Mccullough: 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.URBN.com.

Frank Komporti: I will now turn the call over to Frank. Thank you, Ona, and good afternoon everyone. Today, I will discuss our total company's 2nd quarter results versus the prior year followed by some more detailed notes by brand. I will also provide some commentary on our current trends and the macro environment. Overall, the teens delivered an exceptional quarter, which was nicely ahead of our plans as discussed on the first quarter call. Total URBN sales grew by 6% to a Q2 record of $1.4 billion, and four of our five brands continued to perform remarkably well, posting record, 2nd quarter sales, and profits.

Speaker Change: The sales comp was driven by a similar comp in both the digital and store channels. During the quarter, the Free People brand achieved positive sales growth across apparel, accessories, and movement.

Speaker Change: the sales compp was driven by a similar comp in both the digital and store channels

Speaker Change: during the quarter the free people brand achieved positive sales growth across apparel accessories and movement

Frank Komporti: The FP movement brand delivered 18% total growth, driven by a 6% retail segment comp, new store growth, and over 60% wholesale segment growth. Congratulations to the Free People team on delivering another strong quarter, even while up against last year's exceptional second quarter performance. Customer response to the brand's fault trends has been positive, and the brand continues to gain market share. We believe the brand could deliver a low to mid single digit positive retail segment comp in the third quarter. The free people wholesale segment sales increased 18% during the quarter, driven by full price sales gains in department and specialty stores, partially offset by an intentional decline in sales to close out channel.

Speaker Change: The FP Movement brand delivered 18% total growth, driven by a 6% retail segment comp, new store growth, and over 60% wholesale segment growth.

Speaker Change: the fp movement brand delivered eighteen percent total growth driven by six percent retail segment comp new store growth and over sixty percent wholesale segment growth

Speaker Change: Congratulations to the Free People team on delivering another strong quarter, even while, up against last year's exceptional second quarter performance.

Speaker Change: congratulations to the free people team on delivering another strong quarter even while up against last year's exceptional second quarter performance

Speaker Change: Customer response to the brand's fall trends has been positive, and the brand continues, to gain market share.

Frank Komporti: Our sales growth was driven in part by a retail segment comp of 2%, Anthropology and Free People produced a high single digit positive retail segment comp, which more than offset the high single digit retail segment comp decline at Urban Outfitters. Newly also delivered robust double digit revenue growth due to a 55% increase in average active subscribers versus the prior year. Additionally, the wholesale segment increased revenue by 15% driven by a healthy increase in regular price sales at Free People.

Speaker Change: customer response to the brand' fallult trends has been positive and the brand continues to gain market share we believe the brand could deliver a low to mid-single-digit positive retail segment comp in the third quarter

Speaker Change: We believe the brand could deliver a low- to mid-single-digit positive retail segment, comp in the third quarter.

Speaker Change: The Free People wholesale segment sales increased 18% during the quarter, driven by full-price, sales gains in department and specialty stores, partially offset by an intentional decline in sales to the closeout channel.

Speaker Change: the free people wholesale segment sales increased eighteen percent during the quarter driven by full price sales gains in department and specialty stores partially offset by an intentional decline in sales to the close out channel

Frank Komporti: The FP movement brand led the way with strong sales growth in the quarter. Segment profitability improved significantly from the prior year when the brand had elevated close out channel sales to reduce aging process. We believe the wholesale segment could continue to deliver double-digit sales growth and improve profitability versus last year in the third quarter.

Speaker Change: The FP Movement brand led the way with strong sales growth in the quarter.

Speaker Change: the fp movement brand led the way with strong sales growth in the quarter

Frank Komporti: Now moving on to gross profit. URBN gross profit dollars increased 8% to $493 million while gross profit rate improved by 68 basis points to 36.5%. The improvement in gross profit rate was primarily due to increased initial merchandise margins driven by strong execution of cross functional brand initiatives in the retail, wholesale, and newly second. These improvements were partially offset by a higher markdown rate at Urban Outfitters as the brand used incremental discounts to move through excess inventory.

Speaker Change: segment profitability improved significantly from the prior year when the brand had elevated close out channel sales to reduce aging products

Speaker Change: We believe the wholesale segment could continue to deliver double-digit sales growth and improve profitability versus last year in the third quarter.

Speaker Change: we believe the wholesale segment could continue to deliver double-digit sales growth and improve profitability versus last year in the third quarter

Speaker Change: Now moving on to the Urban Outfitters brand.

Frank Komporti: Now moving on to the Urban Outfitters brand. Urban Outfitters recorded a 9% retail segment comp decline in the quarter. This was largely in line with our expectations when we spoke with you in May, with both North America and Europe showing slight improvement from their Q1 performance, driven in part by a higher promotions. Uo's negative comp was the result of disappointing performance in both North America and Europe. Global retail segment comp declined in both the digital and store channels. As noted on the last call, both the home and women's accessories categories are showing positive trends. Both categories recorded double-digit positive regular price comps, driving nicely positive maintained margin dollar and rate improvements.

Speaker Change: now moving on to the urban afters' brand

Speaker Change: Urban Outfitters recorded a 9% retail segment comp decline in the quarter. This was largely in line with our expectations when we spoke with you in May, with both North America and Europe showing slight improvement from their Q1 performance, driven in part by higher promotions. UO's negative comp was a result of disappointing performance in both North America and Europe. Global retail segment comp declined in both the digital and store channels.

Speaker Change: urban aidters recorded a nine percent retail segment comp decline in the quarter this was largely in line with our expectations when we spoke with you in may with both north america and europe showing slight improvement from their q one performance driven in part by higher promotions

Frank Komporti: Now moving on to SGNA expenses. For the quarter, SGNA increased 8% versus a prior comparable quarter and delivered by 32 basis points. The delivery was primarily due to the Urban Outfitters brand not being able to reduce SGNA at the same rate as their sales decline. While we did reduce our SGNA spending at the Urban Outfitters brand in Q2, we did not believe it was prudent to reduce expenses at the same rate of sales.

Speaker Change: u's negative comp was a result of disappointing performance in both north america and europe

Speaker Change: global retail segment comp declined in both the digital and store channels

Speaker Change: As noted on the last call, both the home and women's accessories categories are showing positive trends. Both categories recorded double-digit positive regular price comps, driving nicely positive maintained margin dollar and rate improvements.

Speaker Change: as noted on the last call both the home and women's accessories categories are showing positive trends

Speaker Change: both categories recorded double-digit positive regular price comps

Speaker Change: All other category sales comps declined in the quarter.

Frank Komporti: All other category sales comps declined in the quarter.

Speaker Change: driving nicely positive maintained margin dollar and rate improvements

Frank Komporti: The increase in total company SGNA expense dollars was largely due to increased marketing spend supporting the solid sales growth at anthropology, free people, FD movement, and newly brands. Anthropology and free people brands marketing efforts helped to drive double digit traffic gains to the store and digital channels, while newly marketing campaigns helped to produce over 50% active subscriber growth. Total URBN operating income increased 10% versus last year to $145 million with operating profit rate improving 36 basis points to 10.7%.

Speaker Change: As you know, new leadership joined the brand in North America earlier this year, and Shea Jensen, the president of UO North America, will speak later to the go-forward brand strategy in North America.

Frank Komporti: As you know, new leadership joined the brand in North America earlier this year, and Jay Jensen, the president of Uo North America, will speak later to the Go Forward brand strategy in North America.

Speaker Change: all the other category sales comps declined in the quarter

Sha Jensson: as you know new leadership joined the brand in north america earlier this year and sha jensson the president of u north america will speak later to the go-forward brand strategy in north america

Frank Komporti: Finally, I will touch on the newly business, which delivered another exceptional quarter, newly added over 25,000 average active subscribers versus the first quarter, ending the quarter with over 250,000 average active subscribers for the full quarter. The solid growth in average subscribers led, in part, to a 63% increase in brand revenue. As we have noted, historically, newly experiences the most significant growth in subscribers during the seasonally strong first and third quarters. A strong start in August votes well for the newly brand to continue to deliver healthy revenue growth in the third quarter. The strong revenue growth in the second quarter led to expense rate leverage in almost every expense lied item and resulted in a record operating profit of $5.3 million and a 5.9% operating margin for the brand.

Sha Jensson: Finally, I will touch on the Nuuly business, which delivered another exceptional quarter. Nuuly added over 25,000 average active subscribers versus the first quarter, ending the quarter with over 250,000 average active subscribers for the full quarter. The solid growth in average subscribers led in part to a 63% increase in brand revenue. As we have noted, historically Nuuly experiences the most significant growth in subscribers during the seasonally strong first and third quarters.

Sha Jensson: finally i will touch on the newly business which delivered another exceptional quarter

Speaker Change: norly added over twenty-five thousand average active subscribers versus the first quarter ending the quarter with over two hundred and fifty thousand average active subscribers for the full quarter

Speaker Change: the solid growth in average subscribers led in park to a sixty - three percent increase in brand revenue

Frank Komporti: Net income increased 13% to $117 million or $1.24 per diluted share.

Speaker Change: as we have noted historically newly experiences the most significant growth in subscribers during the seasonally strong first and third quarters

Speaker Change: A strong start in August bodes well for the Nuuly brand to continue to deliver healthy revenue growth in the third quarter. The strong revenue growth in the second quarter led to expense rate leverage in almost every expense light item and resulted in a record operating profit of $5.3 million and a 5.9% operating margin for the brand. We believe this level of profitability could continue in the back half of the year, which would make Nuuly profitable on a full-year basis this year.

Frank Komporti: I will now provide more details by brand starting with free people. The free people team produced an outstanding quarter with global free people group sales increasing 10%. The double digit increase in sales was driven by an impressive 7% retail segment comp and an 18% increase in wholesale segment revenues. The 7% retail segment comp gain was on top of the incredible 27% retail segment comp from last year. The sales comp was driven by a similar comp in both the digital and store channels.

Speaker Change: a strong start in august bodes well for the newly brand to continue to deliver healthy revenue growth in the third quarter

Speaker Change: the strong revenue growth in the second quarter led to expense rate leverage in almost every expense light item and resulted in a record operating profit of five point three million dollars and a five point nine percent operating margin for the brand

Frank Komporti: We believe this level of profitability could continue in the back half of the year, which would make newly profitable on a full year basis this year. Congratulations to the newly team on an exceptional quarter.

Speaker Change: we believe this level of profitability could continue in the back half of the year which would make newly profitable on a full year basis this year

Speaker Change: Congratulations to the Nuuly team on an exceptional quarter.

Speaker Change: Now on to more recent trends and the macro environment. Towards the end of July and into August, we have observed a slight deceleration in retail segment sales compared to the second quarter run rate.

Frank Komporti: Now on to more recent trends in the macro environment. Toward the end of July and into August, we have observed a slight acceleration in retail segment sales compared to the second quarter run rate. While consumer traffic has remained consistent, overall purchasing activity has shown some softening. New product launches continue to resonate well, though customers appear to be exercising more discretion in their buying decisions. Given the recency of these trends, we are approaching our third quarter plans with measured caution. There are likely various macroeconomic factors influencing consumer behavior at this time, making it difficult to pinpoint specific causes.

Speaker Change: congratulations to the newly team on an exceptional quarter

Frank Komporti: During the quarter, the free people brand achieved positive sales growth across apparel, accessories, and movement. The FP movement brand delivered 18% total growth, driven by a 6% retail segment comp, new store growth, and over 60% wholesale segment growth.

Speaker Change: now on to more recent trends and the macro environment

Speaker Change: toward the end of july and into august we have observed a slight deacceleration in retail segment sales compared to the second quarter run rate

Speaker Change: While consumer traffic has remained consistent, overall purchasing activity has shown some softening.

Speaker Change: while consumer traffic has remained consistent overall purchasing activity has shown some softening

Speaker Change: New product launches continue to resonate well, though customers appear to be exercising more discretion in their buying decisions.

Frank Komporti: Congratulations to the free people team on delivering another strong quarter even while up against last year's exceptional second quarter performance. Customer response to the brand's fault trends has been positive and the brand continues to gain market share. We believe the brand could deliver a low to mid single digit positive retail segment comp in the third quarter. The free people wholesale segment sales increased 18% during the quarter driven by full price sales gains in department and specialty stores, partially offset by an intentional decline in sales to close out channel.

Speaker Change: new product launches continue to resonate well though customers appear to be exercising more discretion in their buying decisions

Speaker Change: Given the recency of these trends, we are approaching our third quarter plans with measured caution.

Speaker Change: There are likely various macroeconomic factors influencing consumer behavior at this time, making it difficult to pinpoint specific causes.

Speaker Change: given the recy of these trends we are approaching our third quarter plans with measured caution

Speaker Change: there are likely various macroeconomic factors influencing consumer behavior at this time making it difficult to pinpoint specific causes however it is evident that the consumer sentiment has often recently and the duration of this trend remains uncertain

Speaker Change: However, it is evident that the consumer sentiment has softened recently, and the duration of this trend remains uncertain. During this time of uncertainty, we believe it is prudent to keep inventory levels lean and manage expenses appropriately, and that is exactly what we plan to do.

Frank Komporti: However, it is evident that the consumer sentiment has often recently, and the duration of this trend remains uncertain. During this time of uncertainty, we believe it is prudent to keep inventory levels lean and manage expenses appropriately, and that is exactly what we plan to do. Despite a deep celebration and trend, total company sales remain positive, and we believe retail segment comps could grow in the low single-digit range for the third quarter. Positive retail segment comps, combined with robust revenue growth from newly and double digit growth in the wholesale segment, could result in a mid single digit increase in total Q3 URBN sales.

Speaker Change: during this time of uncertainty we believe it is prudent to keep inventory levels lean and manage expenses appropriately and that is exactly what we plan to do

Speaker Change: Despite a deceleration in trend, total company sales remain positive and we believe retail segment comps could grow in the low single-digit range for the third quarter. Positive retail segment comps combined with robust revenue growth from newly and double-digit growth in the wholesale segment could result in a mid-single-digit increase in total Q3 URBN sales.

Frank Komporti: The FP movement brand led the way with strong sales growth in the quarter. Segment profitability improved significantly from the prior year when the brand had elevated close out channel sales to reduce aging process. We believe the wholesale segment could continue to deliver double digit sales growth and improve profitability versus last year in the third quarter.

Speaker Change: despite a deacceleration and trend total company sales remain positive and we believe retail segment comps could grow in the low single -digit range for the third quarter

Speaker Change: positive retail segment comps combined with robust revenue growth from newly and double-digit growth in the wholesale segment could result in a mid-single-digit increase in total q three urbn sales

Tricia Smith: I will now turn the call over to Tricia Smith, Global CEO of the Anthropology Group, to provide details on their brand's second quarter performance, as well as a strategic update. Thank you, Frank, and good afternoon, everyone. I'm delighted to have the opportunity to speak to you again about the Anthropology Group's Strategic Growth Initiative and our continued top line and bottom line growth in Q2. This quarter marks our 14th consecutive quarter of growth. We delivered a 7% retail segment comp with similar results in the store and digital channels. Our Women's apparel and accessory business continues to lead our growth with a double digit comp increase driven by our own brand penetration increasing several hundred basis points.

Speaker Change: I will now turn the call over to Tricia Smith, Global CEO of the Anthropologie Group, to provide details on their brand's second quarter performance as well as a strategic update.

Speaker Change: i will now turn the call over to pattricious smith global ceo of the anthropology group to provide details on their brands second quarter performance as well as a strategic update

Speaker Change: Thank you, Frank, and good afternoon, everyone.

Pattricious Smith: thank you frank and good afternoon everyone i'm delighted to have the opportunity to speak to you again about the anthropology groups strategic growth initiatives and our continued top line and bottom line growth in q two

Frank Komporti: Uo's negative comp was the result of disappointing performance in both North America and Europe. Global retail segment comp declined in both the digital and store channels.

Pattricious Smith: I'm delighted to have the opportunity to speak to you again about the Anthropologie Group's Strategic Growth Initiative and our continued top-line and bottom-line growth in Q2. This quarter marks our 14th consecutive quarter of growth. We delivered a 7% retail segment comp with similar results in the store and digital channels.

Pattricious Smith: this quarter marks our fourteenth consecutive quarter of growth we delivered a seven percent retail segment comp with similar results in the store and digital channels

Pattricious Smith: Our women's apparel and accessory business continues to lead our growth with a double-digit comp increase driven by our own brand penetration increasing several hundred basis points.

Frank Komporti: As noted on the last call, both the home and women's accessories categories are showing positive trends. Both categories recorded double digit positive regular price comps driving nicely positive maintained margin dollar and rate improvements. All other category sales comps declined in the quarter.

Pattricious Smith: our women's apparel in accessory business continues to lead our growth with a double-digit comppeent increase driven by our own brand penetration increasing several hundred basis points

Pattricious Smith: In our home business, we're seeing signs of improvement with our trend shifting up to low single-digit negative comps.

Tricia Smith: And our home business, we're seeing signs of improvement with our trend shifting up to low single-digit negative comps. We're particularly proud that our top line growth is complemented by even greater growth and profit. The brand delivered record second quarter operating income, up 32%, supported by IAMU growth, continued mark down efficiency, and operational improvements. This marks our 7th consecutive quarter of double-digit operating income growth. As the quarter progressed, we saw slight acceleration in July that continued into August and were anticipating low to mid single-digit comp increases in the third quarter. We anticipate that we will be more promotional in Q3 than we were last year to ensure that our inventory is more aligned to the current sales trends as we enter Q4.

Pattricious Smith: in our home business we're seeing signs of improvement with our trend shifting up to low single-digit negative comps

Pattricious Smith: We're particularly proud that our top-line growth is complemented by even greater growth in profit.

Pattricious Smith: we're particularly proud that our top line growth is complemented by even greater growth in profit the brand delivered record second quarter operating income up thirty two percent supported by iu growth continued mark down efficiency and operational improvements

Frank Komporti: As you know, new leadership joined the brand in North America earlier this year and Jay Jensen, the president of Uo North America, will speak later to the Go Forward brand strategy in North America. Finally, I will touch on the newly business which delivered another exceptional quarter, newly added over 25,000 average active subscribers versus the first quarter, ending the quarter with over 250,000 average active subscribers for the full quarter. The solid growth in average subscribers led in part to a 63% increase in brand revenue.

Pattricious Smith: The brand delivered record second-quarter operating income of 32% supported by IMU growth, continued markdown efficiency, and operational improvements. This marks our seventh consecutive quarter of double-digit operating income growth.

Pattricious Smith: As the quarter progressed, we saw a slight deceleration in July that continued into August, and we're anticipating low to mid-single-digit comp increases in the third quarter. We anticipate that we will be more promotional in Q3 than we were last year to ensure that our inventory is more aligned to the current sales trends as we enter Q4.

Pattricious Smith: this marks our seventh consecutive quarter of double-digit operating income growth

Pattricious Smith: as the quarter progressed we saw a slight deceleration in july that continued into august and wewere anticipating low to mid-single-digit compp increases in the third quarter

Pattricious Smith: we anticipate that we will be more promotional in q three than we were last year to ensure that our inventory is more aligned to the current cells trends as we enter q four

Frank Komporti: As we have noted, historically, newly experiences the most significant growth in subscribers during the seasonally strong first and third quarters. A strong start in August votes well for the newly brand to continue to deliver healthy revenue growth in the third quarter. The strong revenue growth in the second quarter led to expense rate leverage in almost every expense lied item and resulted in a record operating profit of $5.3 million and a 5.9% operating margin for the brand. We believe this level of profitability could continue in the back half of the year which would make newly profitable on a full year basis this year.

Pattricious Smith: Now shifting to our longer-term strategy.

Tricia Smith: Now shifting to our longer term strategy. Over the last two years, our team has elevated product and creative, grown our customer base, and enhanced our selling environments. We are transforming our business to continue to support the expansive growth that we've experienced. Since I shared our strategic priorities with you last summer, we've exceeded the goals we set for ourselves and evolved our priorities. Our North Star remains the same, and we continue to identify new opportunities for growth, taking us from 1.6 billion in FY20 pre-COVID to last year's 2.2 billion and looking ahead toward our $3 billion ambition.

Pattricious Smith: Over the last two years, our team has elevated product and creative, grown our customer base, and enhanced our selling environment.

Pattricious Smith: now shifting to our longer-term strategy

Speaker Change: over the last two years our team has elevated product and creives grown our customer base and enhanced our selling environments

Speaker Change: We are transforming our business to continue to support the expansive growth that we've experienced. Since I shared our strategic priorities with you last summer, we've exceeded the goals we set for ourselves and evolved our priorities.

Speaker Change: we are transforming our business to continue to support the expansive growth that we've experienced

Speaker Change: since i shared our strategic priorities with you last summer we've exceed the goals we set for ourselves and inolved our priorities

Speaker Change: Our North Star remains the same, and we continue to identify new opportunities for growth, taking us from $1.6 billion in FY20 pre-COVID to last year's $2.2 billion and looking ahead toward our $3 billion ambition.

Speaker Change: our north star remains the same and we continue to identify new opportunities for growth taking us from one point six billion in f y twenty precovid to last year's two point two billion and looking ahead toward our three billion dollar ambition

Speaker Change: We've adopted an accelerated growth mindset founded on our rapid test-and-learn methodology across the business. We're testing, reacting, and amplifying successes.

Tricia Smith: We've adopted an accelerated growth mindset founded on a rapid test and learned methodology across the business. We're testing, reacting, and amplifying successes. In our women's business three years ago, when seeking to modernize our product, we started with what we're the most famous for. We accelerated dresses and built our denim and shoe assortment. Additionally, we strengthened our apparel loan brands, increasing their contribution to nearly 70% of the business. Phil Crow, our lifestyle denim brand, has grown at a rate outpacing our top line since last year, and made a customer favorite is our most profitable own brand and has seen strong double-digit growth over a year.

Frank Komporti: Congratulations to the newly team on an exceptional quarter. Now on to more recent trends in the macro environment. Toward the end of July and into August, we have observed a slight acceleration in retail segment sales compared to the second quarter run rate. While consumer traffic has remained consistent, overall purchasing activity has shown some softening. New product launches continue to resonate well, though customers appear to be exercising more discretion in their buying decisions.

Speaker Change: we have adopted an accelerated growth mindset founded on a rapid test im learned methodology across the business

Speaker Change: In our women's business, three years ago, when seeking to modernize our product, we started with what we're the most famous for. We accelerated dresses and built our denim and shoe assortment.

Speaker Change: we're testing reacting and amplifying successes

Speaker Change: in our women's business three years ago when seeking to modernize our product we started with what we're the most famous for we accelerate addresses and built our gentlemen sho assortment

Speaker Change: Additionally, we strengthened our apparel loan brands, increasing their contribution to nearly 70% of the business.

Speaker Change: additionally we strengthened our apparealleloan brands increasing their contribution to nearly seventy percent of the business

Speaker Change: Pilkrow, our lifestyle denim brand, has grown at a rate outpacing our top line since last year. And Maeve, a customer favorite, is our most profitable own brand and has seen strong double-digit growth year over year. Looking forward, we see opportunity for further growth by expanding the end-use offering of our products to serve our customers' full lifestyle through three new concepts.

Frank Komporti: Given the recency of these trends, we are approaching our third quarter plans with measured caution. There are likely various macro economic factors influencing consumer behavior at this time, making it difficult to pinpoint specific causes. However, it is evident that the consumer sentiment has often recently and the duration of this trend remains uncertain. During this time of uncertainty, we believe it is prudent to keep inventory levels lean and manage expenses appropriately and that is exactly what we plan to do.

Phill Crow: phill crow our lifestyle de brand has grown at a rate outpacing our top line since last year and made a customer favorite is our most profitable own brand and has seen strong double-digit growth year over-year

Tricia Smith: Looking forward, we see opportunity for further growth by expanding the end-use offering of our products to serve our customers' full lifestyle through three new concepts. We're building our active and land-revisness on our own brand, Daily Practice, offering a year-round a start of sleeper and intimate than all stores, and a vacation lifestyle capsule in select locations seasonally and online year-round. These own brand collections are supplemented with market brands who have authority within the space. Six months ago, we tested doubling the store square footage of these concepts, and the test resulted in improved overall store performance, with test stores outpacing control stores in the growth of the total women's category as well as the Daily Practice collection. Given the success of that test, we've rolled out the expansion to 50 locations.

Phill Crow: looking forward we see opportunity for further growth by expanding the and use offering of our products to sort of our customers fulllix le through three new concepts

Phill Crow: We're building our active and loungewear business under our own brand, Daily Practice, offering a year-round assortment of sleeper and intimates in all stores, and a vacation lifestyle capsule in select locations seasonally and online year-round.

Phill Crow: we're building our active and landound of business on our own brand daily practice offering a year-round partment of sleeper andintimates in all stores and avacation lifestyle capsule and select locations seasonally and online year round

Frank Komporti: Despite a deep celebration and trend, total company sales remain positive, and we believe retail segment comps could grow in the low single digit range for the third quarter. Positive retail segment comps, combined with robust revenue growth from newly and double digit growth in the wholesale segment, could result in a mid single digit increase in total Q3 URBN sales.

Phill Crow: These own brand collections are supplemented with market brands who have authority within the space. Six months ago, we tested doubling the store square footage of these concepts, and the test resulted in improved overall store performance with test stores outpacing control stores in the growth of the total women's category as well as the Daily Practice collection. And given the success of that test, we've rolled out the expansion to 50 locations.

Phill Crow: these own brand collections are supplemented with parkket brands who have authority within the space

Phill Crow: six months ago we tested doubling the store sgrriotage of these concepts and the test resulted in improved overall store performance with test stores outpacing control stores in the growth of the total women's category as well as the daily practice collection

Phill Crow: and given the success of that test we've rolled out the expansion to fifty locations

Tricia Smith: In our home business, we're well-positioning categories that resonate with customers around entertaining and refreshing their home decor. For example, our Q2 Home Accessories business, which includes categories such as Home Fragrance and TableTop, has grown five single digits year over year. We spent the last 18 months laying the foundation for more profitable growth in the home category. In the home business, as you know, product profitability has impacted significantly by factors under the NINBU, and we've engineered operational efficiencies upon which we can more profitably grow our business. We are applying our rapid testing approach in anthropology home, taking strategic risks, and feeling newness.

Phill Crow: In our home business, we're well-positioned in categories that resonate with customers around entertaining and refreshing their home decor. For example, our Q2 home accessories business, which includes categories such as home fragrance and tabletop, has grown five single digits year over year.

Phill Crow: to

Speaker Change: in our home business we're well positioned in categories that resonate with customers around entertaining and refreshing their home decorre for example our q two home accessories business which includes categories such as home fragrance at table top has grown high single digits year-over-year

Tricia Smith: This quarter marks our 14th consecutive quarter of growth. We delivered a 7% retail segment comp with similar results in the store and digital channels. Our Women's Apparel and Accessory Business continues to lead our growth with a double digit comp increase driven by our own brand penetration increasing several hundred basis points. And our home business, we're seeing signs of improvement with our trend shifting up to low single digit negative comps. We're particularly proud that our top line growth is complemented by even greater growth and profit.

Speaker Change: we spent the last eighteen months layingin the foundation for more profitable growth in the home category

Speaker Change: We've spent the last 18 months laying the foundation for more profitable growth in the home category. In the home business, as you know, product profitability is impacted significantly by factors other than IMU, and we've engineered operational efficiencies upon which we can more profitably grow our business.

Speaker Change: in the home business as you know product profitability has impacted significantly by factors other than i am w and we've enginered operational efficiencies upon which we can more profitably or our business

Speaker Change: We are applying our rapid testing approach in Anthropologie Home, taking strategic risks, and fueling newness. Our customers are responding to our products and our inspirational creative assets, and at the same time, appealing to and helping us speak to more customers.

Speaker Change: we are applying our rapid testing approach anounan ropology home taking strategic risks and fueling ness

Tricia Smith: Our customers are responding to our products and our inspirational creative assets, and at the same time appealing to and helping us speak to more customers. Since FY20, through the end of last year, we have grown our customer base by an additional 1 million customers, up 30%. Of this, our new customer was the fastest growing segment at plus 52%, while we have also seen double-digit growth in retained customers. In addition, our sales per customer has grown over 20%. In addition to growing our total customer base and their value, we have simultaneously welcomed a younger demographic to our brand, especially in our women's division, where we've seen a two-year reduction in the average age of our new customers in the last year.

Speaker Change: our customers are responding to our products and our inspirational creative assets and at the same time appealing to and helping us speak to more customers

Speaker Change: Since FY20, through the end of last year, we have grown our customer base by an additional 1 million customers, up 30%. Of this, our new customer was the fastest-growing segment at plus 52%, while we have also seen double-digit growth in retained customers. In addition, our sales per customer has grown over 20%.

Tricia Smith: The brand delivered record second quarter operating income, up 32% supported by IAMU growth, continued mark down efficiency and operational improvements. This marks our 7th consecutive quarter of double digit operating income growth. As the quarter progressed, we saw slight acceleration in July that continued into August and were anticipating low to mid single digit comp increases in the third quarter. We anticipate that we will be more promotional in Q3 than we were last year to ensure that our inventory is more aligned to the current sales trends as we enter Q4.

Speaker Change: since fy twenty through the end of last year we have grown our customer basase by an additional one million customers up thirty percent

Speaker Change: of this our new customer with the fastest growing segment at plus fifty-two percent while we have also seen double-digit robed in retained customers

Speaker Change: In addition to growing our total customer base and their value, we have simultaneously welcomed a younger demographic to our brand, especially in our women's division, where we've seen a two-year reduction in the average age of our new customers in the last year.

Speaker Change: in addition our sales per customer has grown over twenty percent

Speaker Change: in addition to growing our total customer base and their value we have simultaneously welcomed the younger demographic to our brand especially in our women's division where we've seen a two-yearreduction the average age of our new customers in the last year

Speaker Change: Furthermore, we're speaking to our customers as omni-channel customers, not just retail or digital. Our omni-channel customers spend four times what single-channel customers spend, contributing to the consistent growth we see across both channels.

Tricia Smith: Furthermore, we're speaking to our customers as omnichannel customers, but not just retail or digital. Our omnichannel customers spend four times what civil channel customers spend, contributing to the consistent growth we see across both channels. We're investing in all channels and points of customer contact to enhance the selling experience in digital in-stores and in our call centers. We are adding stores at a more rapid rate than we have in a decade. Since FY20, our four-wall profitability has grown over 900 basis points, while our same-store sales have increased almost 20%. Our plan to grow the anthropology fleet to 270 stores globally is well underway.

Speaker Change: furthermore 're speaking to our customers as omn-ichchannel customers not just retailer digital our our omny channel customers spend four times with fu channel customer spend contributing to the consistent growth we see across both channels

Speaker Change: We're investing in all channels and points of customer contact to enhance the excelling experience in digital, in stores, and in our call centers.

Speaker Change: we're investing at all channels and points of customer contact to enhance the excelling experience in digital in-stores and in our call centers

Speaker Change: We are adding stores at a more rapid rate than we have in a decade.

Speaker Change: Since FY20, our four-wall profitability has grown over 900 basis points, while our same-store sales have increased almost 20%.

Speaker Change: we are adding stores at a more rapid rate than we have ina decade

Speaker Change: since fy twenty our four wall profitability has grown over nine hundred basis points while our same-store sales have increased almost twenty percent

Speaker Change: Our plan to grow the anthropology fleet to 270 stores globally is well underway.

Tricia Smith: We've adopted an accelerated growth mindset founded on a rapid test and learned methodology across the business. We're testing, reacting, and amplifying successes. In our women's business three years ago when seeking to modernize our product, we started with what we're the most famous for. We accelerated dresses and built our denim and shoe assortment. Additionally, we strengthened our apparel loan brands increasing their contribution to nearly 70% of the business. Phil Crow, our lifestyle denim brand, has grown at a rate outpacing our top line since last year, and made a customer favorite is our most profitable own brand and has seen strong double-digit growth over a year.

Speaker Change: our plan to grow the azthropology fleet to two hundred and seventy stores globally as well underway

Speaker Change: Having acquired 1 million new customers, we're leveraging omni-channel data to position our stores where we know we have customers, particularly as customers are migrating to different geographies and markets, and we're honored with the welcome reception we've received in those communities.

Tricia Smith: Having acquired 1 million new customers, we're leveraging omnichannel data to position our stores where we know we have customers, particularly as customers are migrating to different geographies and markets, and we're honored with the welcome reception we've received in those communities. As we open stores, new markets along with strong new store sales, we also see significant increases in digital.

Speaker Change: having acquired one million new customers were leverag being ommy-ichannel data to position our stores where we know we have customers particularly as customers are migrating to different geographies and markets and we' honored with the welcome reception we received in those communities

Speaker Change: As we open stores in new markets, along with strong new-store sales, we also see significant increases in digital sales.

Speaker Change: as we open stores new markets along with strong new re sales we also see significant increases in digital demand for onthe approach is about creating a consistent and outstanding experience across channel

Speaker Change: Thank you, Tricia.

Tricia Smith: to demand. For our omniproaches about creating a consistent and outstanding experience across channels. We are proud of our transformation and proud of the exceptional team delivering our results.

Frankie: we are coud of our transformation i'm proud of the exceptional team delivering our results i'm confident in our continued growth on our past to become a three billion brand and i look forward to provide you with more updates in the future i'll now turn the call back to frankke

Tricia Smith: I'm confident in our continued growth on our path to become a 3 billion brand, and I look forward to providing you with more updates in the future.

Frank Komporti: I'll now turn the call back to Frank. Thank you, Tricia. Congratulations on the incredible performance and exciting strategic update.

Frankie: Congratulations on the incredible performance and exciting strategic update.

Frankke: thank you chica congratulations on the incredible performance in exciting strategic update

Shea Jensen: Next up is Shea Jensen, Urban Outfitters North American president. She will be speaking to the U.O. North America's updated brand review and strategic plan.

Frankke: Next up is Shea Jensen, Urban Outfitters North American President. She will be speaking to the UO North America's updated brand review and strategic plan.

Sha Jensen: next up is sha jensen urban after's north american president she will be speaking to the euo north america's updated brand review and strategic plan

Shea Jensen: Thank you, Frank, and good afternoon, everyone. I'm pleased to share an update on the Urban Outfitters brand, North America. Over the past few years, Urban Outfitters North America has faced significant challenges in both top and bottom line performance. And over the past six months, with new leadership in place, the team has conducted an extensive review of the brand. We've assessed our market position, customer health, product assortments, marketing, including our creative perspective, our selling channel touch points, and our talent. What we have learned is that while there is a great deal of opportunity for improvement, the brand is not fundamentally broken.

Sha Jensen: Thank you, Frank, and good afternoon, everyone.

Sha Jensen: I'm pleased to share an update on the Urban Outfitters brand, North America. Over the past few years, Urban Outfitters North America has faced significant challenges, in both top and bottom line performance. And over the past six months, with new leadership in place, the team has conducted an extensive, review of the brand. We've assessed our market position, customer health, product assortments, marketing, including, our creative perspective, our selling channel touchpoints, and our talent.

Sha Jensen: thank you frank and good afternoon everyonei'm pleased to share an update on the urban outfidters brand north america

Speaker Change: over the past few years urban outfitters north america has faced significant challenges in both top and bottom line performance

Tricia Smith: Six months ago, we tested doubling the store square footage of these concepts, and the test resulted in improved overall store performance with test stores outpacing control stores in the growth of the total women's category as well as the Daily Practice collection, and given the success of that test, we've rolled out the expansion to 50 locations. In our home business, we're well-positioning categories that resonate with customers around entertaining and refreshing their home decor.

Speaker Change: and over the past six months with new leadership in place the team has conducted an extensive review of the brand we've assessed our market position customer health product assortments marketing including our creative perspective our selling channel touch points and our talent

Speaker Change: What we have learned is that while there is a great deal of opportunity for improvement, the brand is not fundamentally broken. We believe the erosion in sales and profits is due to a combination of a lack of focus, and clarity on our customer in a dynamic and changing market and poor execution in the absence of a wholly dedicated leadership team. We are confident that with the right team in place and the right approach, Urban Outfitters, can rebuild our customer base, restore profitability, and restate our position as one of the most beloved brands for young customers.

Speaker Change: what we have learned is that while there is a great deal of opportunity for improvement the brand is not fundamentally broken

Shea Jensen: We believe that the erosion in sales and profits is due to a combination of a lack of focus and clarity on our customer in the dynamic and changing market, and poor execution in the absence of a wholly dedicated leadership team. We are confident that with the right team in place and the right approach, Urban Outfitters can rebuild our customer base, restore profitability, and restate our position as one of the most beloved brands for young customers. Our segment has seen rapid and seismic shifts as the generational passage from millennials to Gen Z has occurred amidst a global pandemic.

Tricia Smith: For example, our Q2 Home Accessories business, which includes categories such as Home Fragrance and TableTop, has grown five single digits year over year. We spent the last 18 months laying the foundation for more profitable growth in the home category. In the home business, as you know, product profitability has impacted significantly by factors under the NINBU, and we've engineered operational efficiencies upon which we can more profitably grow our business. We are applying our rapid testing approach in anthropology home, taking strategic risks, and feeling newness. Our customers are responding to our products and our inspirational creative assets, and at the same time appealing to and helping us speak to more customers.

Speaker Change: we believe the erosion and sales and profits is due to a combination of a lack of focus and clarity on our customer in the dynamic and changing market and poor execution in the absence of a holy dedicated leadership team

Speaker Change: we are confident that with the right team in place and the right approach urban outfitters can rebuild our customer base restore profitability and restate our position as one of the most beloved brands for young customers

Speaker Change: Our segment has seen rapid and seismic shifts as the generational passage from millennials, to Gen Z has occurred amidst a global pandemic.

Speaker Change: our segment has seen rapid and seismicxshifts as the generational passage from millennials to genz has occurred amidst the global plant pandemic

Shea Jensen: As these shifts occurred and a new generation began coming of age, we lost focus on our customer, and we lost track of how to win with them in today's dynamic retail environment. As a result, our customer funnel eroded as we did not acquire enough new customers, and our retention rates declined as well. Additionally, the lack of clarity and focus on customers impacted our product strategies, our marketing strategies, and our channel experience across our touch points. In the short term, our focus has been on stabilizing our business. We have strengthened our leadership team, adding subject matter expertise across all critical functions, corrected our inventory levels so that we are entering the second half of this year with clean inventory and new fresh product, and perhaps most importantly, work to gain a solid understanding of young customers today through extensive customer research, both qualitative and quantitative.

Speaker Change: As these shifts occurred and a new generation began coming of age, we lost focus on our, customer and we lost track of how to win with them in today's dynamic retail environment. As a result, our customer funnel eroded as we did not acquire enough new customers and, our retention rates declined as well. Additionally, the lack of clarity and focus on customers impacted our product strategies, our marketing strategies, and our channel experience across our touch points.

Speaker Change: as these ships occurred and a new generation began coming of age we lost focus on our customer and we lost track of how to win with them in today's dynamic retail environment

Tricia Smith: Since FY20, through the end of last year, we have grown our customer base by an additional 1 million customers, up 30%. Of this, our new customer was the fastest growing segment at plus 52%, while we have also seen double-digit growth in retained customers. In addition, our sales per customer has grown over 20%. In addition to growing our total customer base and their value, we have simultaneously welcomed a younger demographic to our brand, especially in our women's division, where we've seen a two-year reduction in the average age of our new customers in the last year.

Speaker Change: as a result our customer funnel eroded as we did not acquire enough new customers and our retention rates declined as well

Speaker Change: additionally the lack of clarity and focus on customers impacted our product strategies our marketing strategies and our channel experience across our touch points

Speaker Change: In the short term, our focus has been on stabilizing our business. We have strengthened our leadership team, adding subject matter expertise across all, critical functions, corrected our inventory levels so that we are entering the second half of this year with clean inventory and new fresh product, and perhaps most importantly, work to gain a solid understanding of young customers today through extensive customer research, both qualitative and quantitative.

Speaker Change: in the short term our focus has been on stabilizing our business

Speaker Change: we have strengthened our leadership team adding subject matter expertise across all critical functions

Speaker Change: corrected our inventory levels so that we are enteringin the second half of this year with clean inventory and new fresh product and perhaps most importantly work to gain a solid understanding of young customers today through extensive customer research both qualitative and quantitative

Shea Jensen: These insights will guide our paths forward and help shape our strategy.

Speaker Change: These insights will guide our path forward and help shape our strategy.

Shea Jensen: Looking ahead, we have established five pillars to recover the brand and return to growth. Our ambition is to become the definitive brand for young adults. The five pillars of brand recovery that we have identified are, first, we have defined and will consistently focus on our target customer. Second, with a clear and united understanding of who our customers are, we will rebuild our customer base by investing in marketing strategies that meet young customers where they are and build affinity with our brand. Third, we will evolve our product offer to be more relevant to a broader range of target customers.

Speaker Change: Looking ahead, we have established five pillars to recover the brand and return to growth.

Speaker Change: these insights will guide our path forward and help shape our strategy

Speaker Change: looking ahead we have established five pillars to recover the brand and return to growth

Speaker Change: Our ambition is to become the definitive brand for young adults. The five pillars of brand recovery that we have identified are, first, we have defined, and will consistently focus on our target customer. Second, with a clear and united understanding of who our customers are, we will rebuild, our customer base by investing in marketing strategies that meet young customers where they are and build affinity with our brand.

Tricia Smith: We are adding stores at a more rapid rate than we have in a decade. Since FY20, our four-wall profitability has grown over 900 basis points, while our same-store sales have increased almost 20%. Our plan to grow the anthropology fleet to 270 stores globally is well underway. Having acquired 1 million new customers, we're leveraging omnichannel data to position our stores where we know we have customers particularly as customers are migrating to different geographies and markets, and we're honored with the welcome reception we've received in those communities. As we open stores new markets along with strong new store sales, we also see significant increases in digital, to demand. For our omniproaches about creating a consistent and outstanding experience across channels.

Speaker Change: our ambition is to become the definitive brand for young adults

Speaker Change: the five pillars of brand recovery that we have identified our first

Speaker Change: we have defined and will consistently focus on our target customer second with a clear and united understanding of who our customers are we will rebuild our customer base by investing in marketing strategies that meet young customers where they are and build affinity with our brand

Speaker Change: Third, we will evolve our product offer to be more relevant to a broader range of target, customers.

Speaker Change: third we will evolve our product offer to be more relevant to a broader range of target customers

Speaker Change: Fourth, we will maintain focus on disciplined inventory investments, ensuring our investments, drive improved full-price sell-through and meet the demand of our customers.

Shea Jensen: Fourth, we will maintain focus on disciplined inventory investments, ensuring our investments drive improved full-price sell-through and meet the demand of our customers. And finally, we will adapt our touch points to be more relevant for Gen Z consumers.

Speaker Change: forth we will maintain focus on disciplined inventory investments ensuring our investments drive improved full price sell-through and meet the demand of our customers

Speaker Change: And finally, we will adapt our touchpoints to be more relevant for Gen Z consumers.

Tricia Smith: We are proud of our transformation and proud of the exceptional team delivering our results. I'm confident in our continued growth on our path to become a 3 billion brand and I look forward to providing you with more updates in the future.

Speaker Change: and finally we will adapt our touch points to be more relevant for ggenz consumers

Shea Jensen: Our first step was to gain a firm understanding of Gen Z consumers. Today, the Gen Z consumer is significantly different than the millennial generation before them, from size, ethnicity, taste, and occasions to how they view and interact with the world. We have traditionally targeted an aspirational 22-year-old customer living in major metropolitan cities. Our new customer segmentation broadens our target and aligns customers across three segments: younger suburban pre-college customers, a college-aged student, and an older post-college customer. We welcome and want to serve today's population of young customers across more prices and sizes, more categories and occasions, and across more aesthetics and sensibilities in both urban and suburban areas.

Speaker Change: Our first step was to gain a firm understanding of Gen Z consumers. Today, the Gen Z consumer is significantly different than the millennial generation before, them, from size, ethnicity, tastes, and occasions to how they view and interact with the world.

Speaker Change: our first step was to gain a firm understanding of genzy consumers

Speaker Change: today the gendy consumer is significantly different than the millennial generation before them from size ethnicity tastes and occasions to how they view and interact with the world

Frank Komporti: I'll now turn the call back to Frank. Thank you, Tricia.

Frank Komporti: Congratulations on the incredible performance and exciting strategic update.

Speaker Change: We have traditionally targeted an aspirational 22-year-old customer living in major metropolitan, cities. Our new customer segmentation broadens our target and aligns customers across three segments, younger suburban pre-college customers, a college-age student, and an older post-college customer. We welcome and want to serve today's population of young customers across more prices and, sizes, more categories and occasions, and across more aesthetics and sensibilities in both urban and suburban areas.

Shea Jensen: Next up is Shea Jensen, Urban Outfitters North American President. She will be speaking to the U.O. North America's updated brand review and strategic plan.

Speaker Change: we have traditionally targeted an aspirational twenty-two year-old customer living in major metroolten cities

Shea Jensen: Thank you, Frank, and good afternoon everyone. I'm pleased to share an update on the Urban Outfitters brand, North America. Over the past few years, Urban Outfitters North America has faced significant challenges in both top and bottom line performance. And over the past six months with new leadership in place, the team has conducted an extensive review of the brand. We've assessed our market position, customer health, product assortments, marketing, including our creative perspective, our selling channel touch points, and our talent.

Speaker Change: our new customer segmentation broadenens our target and aligns customers across three segments younger suburban pre-college customers a college age student and an older post college customer

Speaker Change: we welcome and want to serve today's population of young customers across more prices and sizes more categories and occasions and across more aesthetics and sensibilities in both urban and suburban areas

Shea Jensen: This includes pivoting from our traditionally alternative sensibility to offering a more upbeat and welcoming perspective across our assortment and our touch points. With this in mind, our goal is to welcome more people into our brand. We will rebuild our customer base by refreshing our brand identity, clarifying our mission, vision, and values, evolving our creative expressions across our touch points, and repositioning Urban Outfitters to be a more welcoming and relevant brand for young customers today. Additionally, we are already actively strengthening our presence across social media platforms and reallocating our marketing investments to prioritize the acquisition of new customers.

Speaker Change: This includes pivoting from our traditionally alternative sensibility to offering a more, upbeat and welcoming perspective across our assortment and our touchpoints.

Speaker Change: this includes pivoting from our traditionally alternative sensibility to offering a more upbeat and welcoming perspective across our assortment and our touch points

Shea Jensen: What we have learned is that while there is a great deal of opportunity for improvement, the brand is not fundamentally broken. We believe the erosion in sales and profits is due to a combination of a lack of focus and clarity on our customer in the dynamic and changing market and poor execution in the absence of a wholly dedicated leadership team. We are confident that with the right team in place and the right approach, Urban Outfitters can rebuild our customer base, restore profitability, and restate our position as one of the most beloved brands for young customers.

Speaker Change: With this in mind, our goal is to welcome more people into our brand. We will rebuild our customer base by refreshing our brand identity, clarifying our mission, vision and values, evolving our creative expressions across our touchpoints, and repositioning urban outfitters to be a more welcoming and relevant brand for young customers today. Additionally, we are already actively strengthening our presence across social media platforms, and reallocating our marketing investments to prioritize the acquisition of new customers.

Speaker Change: with this in mind our goal is to welcome more people into our brand we will rebuild our customer base by refreshing our brand identity clarifying our mission vision and values

Speaker Change: evolving our creative expressions across our touch points and repositioning urban outfidters to be a more welcoming and relevant brand for young customers today

Speaker Change: additionally we are already actively strengthening our presence across social media platforms and reallocating our marketing investments to prioritize the acquisition of new customers

Shea Jensen: We believe that our approach will yield healthier levels of organic traffic and high customer acquisition rates to continuously fuel our customer funnel.

Speaker Change: We believe that our approach will yield healthier levels of organic traffic and high customer, acquisition rates to continuously fuel our customer funnel.

Speaker Change: we believe that our approach will yield healthier levels of organic traffic and high customer acquisition rates to continuously fuel our customer funnel

Shea Jensen: Our segment has seen rapid and seismic shifts as the generational passage from millennials to Gen Z has occurred amidst a global pandemic. As these shifts occurred and a new generation began coming of age, we lost focus on our customer and we lost track of how to win with them in today's dynamic retail environment. As a result, our customer funnel eroded as we did not acquire enough new customers and our retention rates declined as well.

Speaker Change: Next, we will evolve our product offer to serve a broader range of customers. We believe our product assortment has unintentionally become too narrow in price, occasion, and, sensibility and needs broader appeal. With insights driving our path forward, we will increase the penetration of opening price, points, as well as ensure we offer the best price-value combination on every item we sell.

Shea Jensen: Next, we will evolve our product offer to serve a broader range of customers. We believe our product assortment has unintentionally become too narrow in price, occasion, and sensibility and needs broader appeal. With insights driving our paths forward, we will increase the penetration of opening price points, as well as ensure we offer the best price-value combination on every item we sell. We will broaden our category range and ensure we are meeting the lifestyle and occasion needs of our target customers. We do not believe this means an increase in total skews, but rather a more accurate representation of the right products across the total assortment.

Speaker Change: next we will evolve our product offer to serve a broader range of customers

Shea Jensen: Additionally, the lack of clarity and focus on customers impacted our product strategies, our marketing strategies, and our channel experience across our touch points. In the short term, our focus has been on stabilizing our business. We have strengthened our leadership team, adding subject matter expertise across all critical functions, corrected our inventory levels so that we are entering the second half of this year with clean inventory and new fresh product and perhaps most importantly work to gain a solid understanding of young customers today through extensive customer research, both qualitative and quantitative. These insights will guide our paths forward and help shape our strategy.

Speaker Change: we believe our product assortment has unintentionally become too narrow in price occasion and sensibility and neededs broader appeal

Speaker Change: with insights driving our path forward we will increase the penetration of opening price points as well as ensure we offer the best price value combination on every item we sellwe will broaden our category range and ensure we are meeting the lifestyle and occasion needs of our target customers

Speaker Change: We will broaden our category range and ensure we are meeting the lifestyle and occasion, needs of our target customers.

Speaker Change: We do not believe this means an increase in total SKUs, but rather a more accurate, representation of the right products across the total assortment.

Speaker Change: we do not believe this means an increase in total sskwes but rather a more accurate representation of the right products across the total assortment

Speaker Change: This does include better accuracy in allocation of sizes and improving the productivity of, the total offering through assortment planning and allocation that is rooted in our customer strategy.

Shea Jensen: This does include better accuracy and allocation of sizes and improving the productivity of the total offering through assortment planning and allocation that is rooted in our customer strategy. We plan to introduce new categories such as that leisure, distort into the categories we've heard matter to our customers such as denim and lounge, and amplify the categories where we uniquely differentiate such as gifting and beauty. We are also excited to rebuild our brand of assortment through partnerships with aspirational, influential, and credible national brands that matter to young customers today. We anticipate our customer focused product strategies will deliver a higher penetration of full-price sales and full-price sales growth, and a reduced dependency on promotionality.

Speaker Change: this does include better accuracy and allocation of sizes and improving the productivity of the total offering through assortment planning and allocation that is rooted in our customer strategy

Speaker Change: We plan to introduce new categories, such as athleisure, distort into the categories, we've heard matter to our customers, such as denim and lounge, and amplify the categories where we uniquely differentiate, such as gifting and beauty.

Speaker Change: we plan to introduce new categories such as that leisure disstartt into the categories we've heard matter to our customers such as denon and lounge and amplify the categories where we uniquely differentiate such as gifting and beauty

Speaker Change: We are also excited to rebuild our branded assortment through partnerships with aspirational, influential, and credible national brands that matter to young customers today.

Speaker Change: we are also excited to rebuild our branded assortment to partnerships with aspirational influential and credible national brands that matter to young customers today

Speaker Change: We anticipate our customer-focused product strategies will deliver a higher penetration of full-price sales and full-price sales growth and a reduced dependency on promotionality.

Speaker Change: we anticipate our customer focus product strategies will deliver a higher penetration of full price sales and full price sales growth and a reduced dependency on promotionality

Speaker Change: We know sentiment and style can move fast with young customers, and in order to leverage the incredible scale of the URBN sourcing and speed-to-market capabilities, we need to maintain inventory discipline and better align our sales to inventory levels.

Shea Jensen: We know sentiment and style can move fast with young customers, and in order to leverage the incredible scale of the URBN sourcing and speed to market capabilities. We need to maintain inventory discipline and better align our sales to inventory levels. By utilizing more data-driven planning and allocation capabilities, we will reduce our markdowns, work to restore profitability, and position our teams to fuel growth by making decisions closer to our customers. As we enter the second half of this year with clean inventory, we expect our turns to improve on a regular cadence.

Speaker Change: we no sentiment and style can move fast with the young customers and in order to leverage the incredible scale of the urbn sourcing and speed to market capabilities we need to maintain inventory discipline and better align our sales to inventory levels

Shea Jensen: Third, we will evolve our product offer to be more relevant to a broader range of target customers. Fourth, we will maintain focus on disciplined inventory investments, ensuring our investments drive improve full price sell through and meet the demand of our customers. And finally, we will adapt our touch points to be more relevant for Gen Z consumers. Our first step was to gain a firm understanding of Gen Z consumers. Today, the Gen Z consumer is significantly different than the millennial generation before them, from size, ethnicity, taste, and occasions to how they view and interact with the world.

Speaker Change: By utilizing more data-driven planning and allocation capabilities, we will reduce our markdowns, work to restore profitability, and position our teams to fuel growth by making decisions closer to our customers.

Speaker Change: by utilizing more data-driven planning and allocation capabilities we will reduce our markdowns work to restoreour profitability and position our teams to fuel growth by making decisions closer to our customers

Speaker Change: As we enter the second half of this year with clean inventory, we expect our turns to improve on a regular cadence.

Speaker Change: as we enter the second half of this year with clean inventory we expect our turns to improve on our regular cadence

Speaker Change: Finally, we heard from our customers that a combination of social, digital, and in-real-life or physical shopping are equally important components of the shopping experience. Gen Z's coming-of-age experience began during a global pandemic, and the idea of connecting a shopping experience through the discovery of social media, the convenience of digital shopping, and the connection that can be made in physical retail is table stakes.

Shea Jensen: Finally, we heard from our customers that a combination of social, digital, and in real life or physical shopping are equally important components of the shopping experience. Gen Z's coming-of-age experience began during a global pandemic, and the idea of connecting a shopping experience through the discovery of social media, the convenience of digital shopping, and the connection that can be made in physical retail is table stakes. We are advantaged with our retail footprint and on the channel capabilities. We will work to optimize our footprint to ensure our locations are positioned near our target demographic and ensure we better align the sides of our stores with our new vision for physical and retail and the store experience.

Speaker Change: finally we heard from our customers that a combination of social digital and in real life or physical shopping our equally important components of the shopping experience

Gendy: gendy's coming of age experience began during a global pandemic and the idea of connecting a shopping experience through the discovery of social media the convenience of digital shopping and the connection that can be made and physical retail is tablestakes

Shea Jensen: We have traditionally targeted an aspirational 22-year-old customer living in major metropolitan cities. Our new customer segmentation broadens our target and aligns customers across three segments, younger suburban pre-college customers, a college-aged student, and an older post-college customer. We welcome and want to serve today's population of young customers across more prices and sizes, more categories and occasions, and across more aesthetics and sensibilities in both urban and suburban areas. This includes pivoting from our traditionally alternative sensibility to offering a more upbeat and welcoming perspective across our assortment and our touch points.

Gendy: We are advantaged with our retail footprint and omni-channel capabilities. We will work to optimize our footprint to ensure our locations are positioned near our target demographic and ensure we better align the size of our stores with our new vision for physical and retail and the store experience. We believe we have an opportunity to close some store locations where population shifts have occurred, to relocate some stores to be more adjacent to our target customers, but also to better align the size of our stores with our future needs.

Speaker Change: we are advantaged with our retail footprint and omni channel capabilities we will work to optimize our footprint to ensure our locations our positioned near our target demographic and ensure we better align the siidze of our stores with our new vision for physical and retail and the store experience

Shea Jensen: We believe we have an opportunity to close some store locations where population shifts have occurred to relocate some stores to be more adjacent to our target customers, but also to better align the sides of our stores with our future needs. At the same time, we will work actively to optimize our stores through improved assortment strategies and localization.

Speaker Change: we believe we have an opportunity to close some store locations where populationships have occurred to relocate some stores to be more adjacent to our target customers but also to better align the size of our stores with our future needs

Speaker Change: At the same time, we will work actively to optimize our stores through improved assortment strategies and localization.

Shea Jensen: With this in mind, our goal is to welcome more people into our brand. We will rebuild our customer base by refreshing our brand identity, clarifying our mission, vision and values, evolving our creative expressions across our touch points, and repositioning urban outfitters to be a more welcoming and relevant brand for young customers today. Additionally, we are already actively strengthening our presence across social media platforms and reallocating our marketing investments to prioritize the acquisition of new customers. We believe that our approach will yield healthier levels of organic traffic and high customer acquisition rates to continuously fuel our customer funnel.

Speaker Change: at the same time we will work actively to optimize our stores through improved assortment strategies and localization

Speaker Change: Finally, digital channels are where young customers live their lives. Our team is doubling down our engagement on social platforms and working to ensure our digital experience evolves to be an extension of that digital experience through more user-generated content, improved creative, and social features.

Shea Jensen: Finally, digital channels are where young customers live their lives. Our team is doubling down on our engagement on social platforms and working to ensure our digital experience evolves to be an extension of that digital experience through more user generated content, improved creative, and social features. Omni-channel customers are our most valuable customers, spending more than three times other customers. With an adapted channel experience, we expect our customer engagement and retention will grow, and ultimately, our percentage of Omni-channel customers will increase.

Speaker Change: finally digital channels are where young customers live their lives

Speaker Change: our team is doubling down our engagement on social platforms and working to ensure our digital experience evolves to be an extension of that digital experience through more user-generated content improved creative and social features

Speaker Change: Omni-channel customers are our most valuable customers, spending more than three times other customers. With an adapted channel experience, we expect our customer engagement and retention will grow, and ultimately our percentage of omni-channel customers will increase.

Speaker Change: omnichchnel customers are most valuable customers spending more than three times other customers

Speaker Change: with an adapted channel experience we expect our customer engagement and retention will grow and ultimately our percentage of omiichchannel customers will increase

Speaker Change: Despite our current challenges, we are optimistic about the steps we are taking to revitalize Urban Outfitters North America. In the short term, we are looking to see sequential top-line improvement with a building penetration of full-price sales, which should drive stronger bottom-line improvement.

Shea Jensen: Next, we will evolve our product offer to serve a broader range of customers. We believe our product assortment has unintentionally become too narrow in price, occasion, and sensibility and needs broader appeal. With insights driving our paths forward, we will increase the penetration of opening price points, as well as ensure we offer the best price value combination on every item we sell. We will broaden our category range and ensure we are meeting the lifestyle and occasion needs of our target customers.

Shea Jensen: Despite our current challenges, we are optimistic about the steps we are taking to revitalize Urban Outfitters North America. In the short term, we are looking to see sequential top line improvement with a building penetration of full-price sales, which should drive stronger bottom line improvement. As we pivot our marketing strategies, we expect a build of our customer funnel will at the same time we are working to evolve our product assortment and see full-price sales grow. We recognize this may take time to fully materialize, but we are committed to rebuilding our customer base and restoring profitability. The road ahead involves focused execution on our five recovery pillars.

Speaker Change: despite our current challenges we are optimistic about the steps we are taking to revitalize urban outfitters north america in the short term we are looking to see sequential top line improvement with a building penetration of full price sales which should drive stronger bottom line improvement

Speaker Change: As we pivot our marketing strategies, we expect a build of our customer funnel, while at the same time, we are working to evolve our product assortment and see full-price sales grow. We recognize this may take time to fully materialize, but we are committed to rebuilding our customer base and restoring profitability.

Speaker Change: as we pivot our marketing strategies we expect a build of our customer funnel will at the same time we are working to evolve our product assortment and see full price sales grow

Shea Jensen: We do not believe this means an increase in total skews, but rather a more accurate representation of the right products across the total assortment. This does include better accuracy and allocation of sizes and improving the productivity of the total offering through assortment planning and allocation that is rooted in our customer strategy. We plan to introduce new categories such as that leisure, distort into the categories we've heard matter to our customers such as denim and lounge, and amplify the categories where we uniquely differentiate such as gifting and beauty.

Speaker Change: we recognize this may take time to fully materialize but we are committed to rebuilding our customer base and restoring profitability

Speaker Change: The road ahead involves focused execution on our five recovery pillars.

Speaker Change: With a solid leadership team in place, we are optimistic about our strategy, the path ahead, and our ambition to become the definitive brand for young adults.

Shea Jensen: With a solid leadership team in place, we're optimistic about our strategy, the path ahead, and our ambition to become the definitive brand for young adults.

Speaker Change: the road ahead involved focused execution on our five recovery pillars with a solid leadership team in place we're optimistic about our strategy the path ahead and our ambition to become the definitive brand for young adultts

Speaker Change: I'll now turn the call over to Melanie.

Melanie Marein: I'll now turn the call over to Melanie. Thank you, Shea. Now I will discuss our thoughts on the third quarter financial performance and fiscal year FY25 performance. As Frank mentioned, we have seen a slight deceleration in trends recently, but our total company sales remain positive. Right now, we believe that third quarter total company sales growth could be mid-single digits. Sales growth in Q3 could result from low single-digit growth and retail segment comp, and low teen growth in the wholesale segment. In addition, we believe the newly segment sales growth could be mid-double digits.

Speaker Change: Thank you, Shea.

Speaker Change: Now I will discuss our thoughts on the third quarter financial performance and fiscal year, FY25 performance. As Frank mentioned, we have seen a slight deceleration in trends recently, but our total, company sales remain positive.

Speaker Change: i'll now turn the call over tomeloony

Meloony: thank you she now i will discuss our thoughts in the third quarter financial performance and fiscal year fy twenty five performance

Shea Jensen: We are also excited to rebuild our brand of assortment through partnerships with aspirational, influential, and credible national brands that matter to young customers today. We anticipate our customer focused product strategies will deliver a higher penetration of full-price sales and full-price sales growth and a reduced dependency on promotionality. We know sentiment and style can move fast with young customers and in order to leverage the incredible scale of the URBN sourcing and speed to market capabilities.

Meloony: as frank mentioned we have seen a slight deceleration in trends recent

Meloony: Right now, we believe that third quarter total company sales growth could be mid-single digits. Sales growth in Q3 could result from low single-digit growth in retail segment comp, and low teen growth in the wholesale segment.

Meloony: but our total company sales remain positive

Meloony: right now we believe that third quarter total company sales growth could be mid-single digits

Meloony: sales growth in q three could result from low single-digit growth in retail segment comp and low team growth in the wholesale segment

Meloony: In addition, we believe that newly segment sales growth could be mid-double digits.

Speaker Change: in addition we believe the newly segment sales growth could be mid-double digits

Melanie Marein: Now on to growth profit margin. We believe URBN's growth margin rate for the third quarter could decline by approximately 100 basis points compared to the prior year third quarter. The reduction in growth profit margin could be primarily due to higher markdowns, as our third quarter received plans were ordered prior to the recent deceleration. As a result, we will need to add incremental promotional activity and markdowns in the quarter to clear through inventory as we enter the fourth quarter. We continue to believe that URBN can deliver our full-year plan of approximately 50 to 100 basis points of growth margin improvement compared to the prior year.

Speaker Change: Now on to gross profit margin. We believe URBN's gross margin rate for the third quarter could decline by approximately, 100 basis points compared to the prior year third quarter. The reduction in gross profit margin could be primarily due to higher markdowns as our, third quarter receipt plans were ordered prior to the recent deceleration. As a result, we will need to add incremental promotional activity and markdowns in the, quarter to clear through inventory as we enter the fourth quarter.

Shea Jensen: We need to maintain inventory discipline and better align our sales to inventory levels. By utilizing more data-driven planning and allocation capabilities, we will reduce our markdowns, work to restore profitability and position our teams to fuel growth by making decisions closer to our customers. As we enter the second half of this year with clean inventory, we expect our turns to improve on a regular cadence.

Speaker Change: now on to gross profit margin

Speaker Change: we believe you r b n's gross margin rate for the third quarter could decline by approximately one hundred basis points compared to the prior year third quarter

Speaker Change: the reduction in gross profit margin could be primarily due to higher markdowns as our third quarter received plans were ordered prior to the recent deceleration

Speaker Change: as a result we will need to add incremental promotional activity and markdowns in the quarter to clear through inventory as we enter the fourth quarter

Speaker Change: We continue to believe that URBN can deliver our full year plan of approximately 50 to, 100 basis points of gross margin improvement compared to the prior year.

Speaker Change: we continue to believe that yourbn can deliver our full year plan of approximately fifty to one hundred basis points of growth margin improvement compared to the prior year

Melanie Marein: Now, moving on to SG&A expense. Based on our current sales performance and plan, we believe SG&A growth for the third quarter will increase in the mid-single digits. Our plan growth in SGNA could be primarily driven by higher marketing expense to support growth in customers and sales at Anthropology, Free People, FP Movement, and Newly. As always, if sales performance fluctuates, we maintain a certain level of variable SG&A spending that we can adjust up and down depending on how our business is performing.

Speaker Change: Now moving on to SG&A expense. Based on our current sales performance and plan, we believe SG&A growth for the third, quarter will increase in the mid-single digits. Our plan growth in SG&A could be primarily driven by higher marketing expense to support, growth in customers and sales at Anthropologie, Free People, FP Movement, and Nuuly.

Speaker Change: now moving on to sgna expense

Speaker Change: based on our current sales performance and plan we believe s gnaa growth for the third quarter will increase in the mid-single digits

Shea Jensen: We are advantaged with our retail footprint and on the channel capabilities. We will work to optimize our footprint to ensure our locations are positioned near our target demographic and ensure we better align the sides of our stores with our new vision for physical and retail and the store experience. We believe we have an opportunity to close some store locations where population shifts have occurred to relocate some stores to be more adjacent to our target customers, but also to better align the sides of our stores with our future needs. At the same time, we will work actively to optimize our stores through improved assortment strategies and localization.

Speaker Change: our plan growth in sgna could be primarily driven by higher marketing expense

Speaker Change: to support growth in customers and sales at anthropology free people fp movement and newly as always is sales performance fluctuates we maintain a certain level of variable as gna spending that we can adjust up and down depending on how our business is performing

Speaker Change: As always, if sales performance fluctuates, we maintain a certain level of variable SG&A, spending that we can adjust up and down depending on how our business is performing.

Melanie Marein: We are currently planning our effective tax rate to be approximately 24.25% for the third quarter and 24% for the full year. Now, moving on to inventory, we believe that inventory levels in the third quarter could grow at a rate similar to sales growth.

Speaker Change: We are currently planning our effective tax rate to be approximately 24.25% for the third, quarter and 24% for the full year. Now moving on to inventory, we believe that inventory levels in the third quarter could, grow at a rate similar to sales growth.

Speaker Change: we are currently planning our effective tax rate to be approximately twenty-four point two five percent for the third quarter and twenty-four percent for the full year

Speaker Change: now moving on to inventory we believe that inventory levels in the third quarter could grow at a rate similar to sales growth

Shea Jensen: Finally, digital channels are where young customers live their lives. Our team is doubling down our engagement on social platforms and working to ensure our digital experience evolves to be an extension of that digital experience through more user generated content, improved creative and social features. Omni-channel customers are our most valuable customers, spending more than three times other customers. With an adapted channel experience, we expect our customer engagement and retention will grow, and ultimately our percentage of Omni-channel customers will increase.

Melanie Marein: Capital expenditures for the fiscal year are planned at approximately $210 million. The FY25 capital project spend is broken down as follows. Approximately 50% is related to retail store expansion and support. Approximately 25% is related to logistics capacity investments, including the newly rental fulfillment center in Raymore, Missouri, which we opened in the first quarter, and the remaining 25% would be our normal capital investment supporting IT, home office, and logistics operations.

Speaker Change: Capital expenditures for the fiscal year are planned at approximately $210 million. The FY25 capital project spend is broken down as follows. Approximately 50% is related to retail store expansion and support. Approximately 25% is related to logistics capacity investments, including the Nuuly, Rental Fulfillment Center in Raymoor, Missouri, which we opened in the first quarter, and the remaining 25% would be our normal capital investments supporting IT, home office, and logistics operations.

Speaker Change: capital expenditures for the fiscal year are planted approximately two hundred ten million dollars

Speaker Change: the fy twenty-five capital projects spen is broken down as follows

Speaker Change: approximately fifty percent is related to retail torck expansion and support

Speaker Change: approximately twenty-five percent is related to logistics capacity investments including the newly rental fulfillment center in rayor missouri which we opened in the first quarter and the remaining twenty-five percent would be our normal capital investments supporting it home office and logistics operations

Speaker Change: Lastly, we'll be opening approximately 57 new stores and closing approximately 25 stores. Our net new store growth is being driven by growth in FP Movement, Free People, and Anthropologie, stores. During FY25, we plan on opening 25 FP Movement stores, 12 Free People stores, and 13 Anthropologie, stores.

Melanie Marein: Lastly, we'll be opening approximately 57 new stores and closing approximately 25 stores. Our net new store growth is being driven by growth in FP movement, Free People, and Anthropology stores. During FY25, we plan on opening 25 FP Movement stores, 12 Free People stores, and 13 Anthropology stores.

Shea Jensen: Despite our current challenges, we are optimistic about the steps we are taking to revitalize urban outfiters North America. In the short term, we are looking to see sequential top line improvement with a building penetration of full-price sales, which should drive stronger bottom line improvement. As we pivot our marketing strategies, we expect a build of our customer funnel will at the same time we are working to evolve our product assortment and see full-price sales grow. We recognize this may take time to fully materialize, but we are committed to rebuilding our customer base and restoring profitability. The road ahead involves focused execution on our five recovery pillars.

Speaker Change: lastly we'll be opening approximately fifty-seven new stores and closing approximately twenty-five stores

Speaker Change: our net news storeour growth is being driven by growth in fp movement free people and anthropology stores

Speaker Change: during fy twenty-five we plan on opening twenty-five fp movement stores twelve free people stores and thirteen anthropology stores

Melanie Marein: As a reminder, the foregoing does not constitute a forecast, but is simply a reflection of our current. Reviews. The company disclaims any obligation to update forward-looking statements.

Speaker Change: as a reminder the foregoing does not constitute a forecast but is simply a reflection of our current views

Speaker Change: As a reminder, the foregoing does not constitute a forecast, but is simply a reflection of, our current budget.

Speaker Change: The company disclaims any obligation to update forward-looking statements.

Richard Hayne: Now, I am pleased to turn the call to Dick for closing remarks. Thank you, Mel, and thank you to our brand leaders, Tricia, Sheila, Shea, and Dave, and in Europe, Emma and Matt. They and their teams produced outstanding second quarter results. As Frank shared earlier, four of our five brands delivered record second quarter sales and profits. And the Urban Brand, as Shea just discussed, has fashioned its strategy to win on a go-forward basis. Most importantly, the Urban Brand now has a strong team in place to deliver on that strategy. Turning to the current business climate, on our last conference call, I stated that the customer mood in Q1 was enthusiastic, rather than the mood of the year earlier, which was exuberant.

Speaker Change: Now I am pleased to turn the call to Dick for closing remarks.

Speaker Change: the company disclaims any obligation to update forward-looking statements

dip: now i am pleased to turn the call to dip for closing remarks

dip: Thank you, Mel, and thank you to our brand leaders, Tricia, Sheila, Shea, and Dave, and, in Europe, Emma and Matt. They and their teams produced outstanding second quarter results.

Shea Jensen: With a solid leadership team in place, we're optimistic about our strategy, the path ahead, and our ambition to become the definitive brand for young adults.

Speaker Change: thank you melll and thank you to our brand leaders tricia shila sha and dave and in europe m n matt

Melanie Marein Efron: I'll now turn the call over to Melanie. Thank you, Shea. Now I will discuss our thoughts on the third quarter financial performance and fiscal year FY25 performance. As Frank mentioned, we have seen a slight deceleration in trends recently, but our total company sales remain positive. Right now, we believe that third quarter total company sales growth could be mid-single digits. Sales growth in Q3 could result from low single-digit growth and retail segment comp and low teen growth in the wholesale segment. In addition, we believe the newly segment sales growth could be mid-double digits.

Speaker Change: As Frank shared earlier, four of our five brands delivered record second quarter sales, and profits, and the Urban brand, as Shea just discussed, has fashioned its strategy to win on a go-forward basis.

Speaker Change: day and their teams reduced outstanding second quarter results

Speaker Change: as frank shared earlier four of our five brands delivered record second quarter sales and profits

Speaker Change: and the urban brand as she just disgsed has fashioned strategy to win on a go-forward basis

Speaker Change: Most importantly, the Urban brand now has a strong team in place to deliver on that, strategy.

Speaker Change: most importantly the urban brand now has a strong team in place to deliver on that strategy

Speaker Change: Turning to the current business climate, on our last conference call, I stated that the, customer mood in Q1 was enthusiastic rather than the mood a year earlier, which was exuberant. I believe this is still an accurate description for Q2. Traffic in our stores remains strong, and online sessions remain double-digit positive, at three of our four retail brands. Fall products are selling briskly, with customers choosing the newest fashion, yet all our retail, brands registered a slight sales slowdown in mid-July that continues in August.

Speaker Change: turning to the current business climate on our last conference call i stated that the customer mood in q one was enthusiastic rather than the mood a year earlier which was exuberant

Richard Hayne: I believe this is still an accurate description for Q2. Traffic in our stores remains strong, and online sessions remain double-digit positive at three of our four retail brands. Fall products are selling briskly, with customers choosing the newest fashion. Yet all our retail brands registered a slight sales slowdown in mid-July that continues in August. So what's different? You may recall, I also said on the May call that consumer purchases were becoming slightly more considered than the previous year. With a slowdown starting in mid-July, purchases became even more considered. Conversion dropped slightly, and price became a bigger factor, with AOV dipping slightly as well.

Melanie Marein Efron: Now on to growth profit margin. We believe URBN's growth margin rate for the third quarter could decline by approximately 100 basis points compared to the prior year third quarter. The reduction in growth profit margin could be primarily due to higher markdowns as our third quarter received plans were ordered prior to the recent deceleration. As a result, we will need to add incremental promotional activity and markdowns in the quarter to clear through inventory as we enter the fourth quarter. We continue to believe that URBN can deliver our full-year plan of approximately 50 to 100 basis points of growth margin improvement compared to the prior year.

Speaker Change: i believe this is still aninaccurate description for q two

Speaker Change: traffic in our stores remain strong and online sessions remain double-digit positive at three of our four retail brands

Speaker Change: fall products are selling brisky with customers choosing the newest fashion

Speaker Change: yet all our retail brands registered a slight sales slowdown in midjuly that continues in august

Speaker Change: So what's different?

Speaker Change: You may recall I also said on the May call that consumer purchases were becoming slightly, more considered than the previous year. With the slowdown starting in mid-July, purchases became even more considered. Production dropped slightly, and price became a bigger factor, with AOV dipping slightly, as well. Total transactions continued to grow, but the customer, on average, spent a little less, on each purchase.

Speaker Change: so what's different

Speaker Change: you may recall i also said on the may call that consumer purchases were becoming slightly more considered than the previous year

Melanie Marein Efron: Now, moving on to SGNA expense. Based on our current sales performance and plan, we believe SGNA growth for the third quarter will increase in the mid-single digits. Our plan growth in SGNA could be primarily driven by higher marketing expense to support growth in customers and sales at anthropology, free people, FP movement, and newly. As always, if sales performance fluctuates, we maintain a certain level of variable SGNA spending that we can adjust up and down depending on how our business is performing.

Speaker Change: with a slowdown starting in midjuly purchases became even more considered

Speaker Change: conversion dropped slightly

Speaker Change: and price became a bigger factor with alv dipping slightly

Richard Hayne: Total transactions continued to grow, but the customer on average spent a little less on each purchase. We believe this suggests a return to pre-COVID behavior, when our comp sales expectations were typically lower, and customers were more selective. We expect this will become the new reality, and as Frank discussed, will necessitate even stronger inventory and expense control. Our brand and shared service teams understand the new environment, and are prepared to meet that challenge.

Speaker Change: as well

Speaker Change: total transactions continue to grow but the customer on average spent a little less on each purchase

Speaker Change: We believe this suggests a return to pre-COVID behavior, when our comp sales expectations, were typically lower and customers were more selective.

Speaker Change: we believe this suggests a return to precovid behavior when our comp sales expectations were typically lower and customers were more selective

Speaker Change: We expect this will become the new reality and, as Frank discussed, will necessitate, even stronger inventory and expense control.

Frank: we expect this will become the new reality and is frank discussed will necessitate even stronger inventory and expense control

Melanie Marein Efron: We are currently planning our effective tax rate to be approximately 24.25% for the third quarter and 24% for the full year. Now, moving on to inventory, we believe that inventory levels in the third quarter could grow at a rate similar to sales growth.

Frank: Our brand and shared service teams understand the new environment and are prepared to meet, that challenge.

Frank: our brand sured service teams understand the new environment and are prepared to meet that challenge

Frank: Finally, a word about our youngest brand newly.

Richard Hayne: Finally, a word about our youngest brand, Newly. The brand celebrated its fifth birthday in the second quarter, and commemorated by delivering another quarter the strong year-over-year double-digit gains in average active subscribers and revenue. They also posted record profits and became the number one fashion rental business in the US. Happy birthday, Newly. Congratulations on your success.

Frank: The brand celebrated its fifth birthday in the second quarter and commemorated it by, delivering another quarter of strong year-over-year double-digit gains in average active subscribers and revenue. They also posted record profits and became the number one fashion rental business in, the U.S.

Frank: finally a word about our youngest brand newly

Melanie Marein Efron: Capital expenditures for the fiscal year are planned at approximately $210 million. The FY25 capital project spend is broken down as follows. Approximately 50% is related to retail store expansion and support. Approximately 25% is related to logistics capacity investments, including the newly rental fulfillment center in Raymore, Missouri, which we opened in the first quarter, and the remaining 25% would be our normal capital investment supporting IT, home office, and logistics operations.

Speaker Change: the brand celebrated its fifth birthday in the second quarter and commemorated it by delivering another quarter the strong year-over-year double-digit gains in average actve subscribers and revenue

Speaker Change: they also posted record profits and became the number one fashioned rental business in the u s happy birthday newly congratulations on your success

Speaker Change: Happy birthday, newly.

Speaker Change: Congratulations on your success.

Richard Hayne: That concludes our prepared remarks. I wish to thank our co-presidents, the brand, design, and shared service leaders and their teams, and our 28,000 associates worldwide for their excellent work. Our outstanding Q2 results flow directly from your creativity, drive, and resilience. So, thank you. Thanks also to our many partners around the world. We appreciate the significant contributions you make to our success. And finally, thanks to our shareholders for your continued support.

Speaker Change: That concludes our prepared remarks.

Speaker Change: I wish to thank our co-presidents, the brand design and shared service leaders, and their, teams and our 28,000 associates worldwide for their excellent work.

Speaker Change: that concludes our prepared remarks i wish to thank our co presidents the brand designed and shared service leaders and their teams and are twenty eight thousand associates worldwide for their excellent work

Melanie Marein Efron: Lastly, we'll be opening approximately 57 new stores and closing approximately 25 stores. Our net new store growth is being driven by growth in FP movement, free people, and anthropology stores. During FY25, we plan on opening 25 FP movement stores, 12 free people stores, and 13 anthropology stores.

Speaker Change: Our outstanding Q2 results flow directly from your creativity, drive, and resilience.

Speaker Change: our outstanding q two results flow directly from your creativity drive in resilience

Speaker Change: So, thank you.

Speaker Change: Thanks also to our many partners around the world.

Speaker Change: We appreciate the significant contributions you make to our success.

Speaker Change: so thank you

Speaker Change: thanks also to our many partners around the world we appreciate the significant contributions you make to our success

Speaker Change: And finally, thanks to our shareholders for your continued support.

Melanie Marein Efron: As a reminder, the foregoing does not constitute a forecast, but is simply a reflection of our current. Reviews. The company disclaims any obligation to update forward-looking statements.

Operator: I now turn the call over for your questions. Thank you. If you have a question at this time, please press star 11 on your touchtone telephone and wait for your name to be announced. If your question has been answered or you wish to remove yourself from the queue, please press star 11 again. Please limit your questions to one per caller. One moment while we compile the Q&A roster.

Speaker Change: I now turn the call over for your questions.

Speaker Change: and finally thanks to our shareholders for your continued support i now turn the call over for your questions

Speaker Change: Thank you.

Speaker Change: If you have a question at this time, please press star 1-1 on your touchtone telephone, and wait for your name to be announced.

Speaker Change: thank you if you have a question at this time please press star one one on your touch tone telephone and wait for your name to be announced

Richard Hayne: Now, I am pleased to turn the call to Dick for closing remarks. Thank you, Mel and thank you to our brand leaders, Tricia, Sheila, Shea, and Dave and in Europe, Emma and Matt. They and their teams produced outstanding second quarter results. As Frank shared earlier, four of our five brands delivered record second quarter sales and profits. And the Urban Brand, as Shea just discussed, has fashioned its strategy to win on a go-forward basis.

Speaker Change: If your question has been answered or you wish to remove yourself from the queue, please, press star 1-1 again.

Speaker Change: Please limit your questions to one per caller.

Speaker Change: One moment while we compile the Q&A roster.

Lorraine Hutchinson: And our first question will come from the line of Lorraine Hutchinson with Bank of America. Your line is open. Thank you. Good afternoon.

Speaker Change: And our first question will come from the line of Lorraine Hutchinson with Bank of America.

Speaker Change: and our first question will come from the line of lauren hutchinson with bank of america your line is open

Speaker Change: Your line is open.

Speaker Change: Thank you.

Speaker Change: Good afternoon.

Speaker Change: Can you comment on how comfortable you are with the level and content of UO inventory, entering the second half?

Jay Jensen: Can you comment on how comfortable you are with the level and content of your inventory entering the second half, and then separately can you also walk us through the drivers of the fourth quarter course margin recovery assumed in guidance.

Lauren Hutchinson: thank you good afternoon comments on how comfortable you are with a level and content of eo inventory entering the second half and then separately can you also walk us through the drivers of the fourth quarterof course margin recovery assumed in guidance

Lauren Hutchinson: And then separately, can you also walk us through the drivers of the fourth quarter, gross margin recovery assumed in guidance?

Richard Hayne: Most importantly, the Urban Brand now has a strong team in place to deliver on that strategy. Turning to the current business climate, on our last conference call, I stated that the customer mood in Q1 was enthusiastic, rather than the mood of year earlier, which was exuberant. I believe this is still an accurate description for Q2. Traffic in our stores remains strong, and online sessions remain double-digit positive at three of our four retail brands.

Lauren Hutchinson: Hi, Lorraine.

Lauren Hutchinson: It's Shea.

Jay Jensen: Hi Lorraine, it's Jay. I can take that. We feel really great, as you heard, and prepared remarks were confident that our inventory is clean. Inventory levels are much more aligned with sales. And really that's the primary driver of the margin recovery.

Lauren Hutchinson: I can take that.

Lauren Hutchinson: We feel really great, as you heard in the prepared remarks.

Speaker Change: i remain a cha can take that we feel really great as you heard and the prepared remarks were confident that our inventory is clean inventory levels are much more align with sales and really that's the primary driver of the margin recovery

Speaker Change: We're confident that our inventory is clean. Inventory levels are much more aligned with sales. And really, that's the primary driver of the margin recovery.

Jay Jensen: And Lorraine as it relates to our fourth quarter for you are the end. It will really be driven by two things: the gross cross profit margin improvement opportunity. One I am you which we've got a very strong and comfortable component line of sight to, and second is the significant opportunity and mark down improvement of the urban operators brand. And I think Sheila Shay and team have done a great job at aligning their inventory now much closer with sales, and they had significantly higher mark down rates than what we would normally run in the fourth quarter last year, so that there is meaningful opportunity for us for that brand and to help you are the end drive improved mark down rates in the fourth quarter, driving improved gross profit margin in the fourth quarter.

Speaker Change: And Lorraine, as it relates to our fourth quarter for URBN, it will really be driven, by two things, the gross profit margin improvement opportunity.

Lraine: and lraine as a lsu our fourth quarter for for urbn

Richard Hayne: Fall products are selling briskly, with customers choosing the newest fashion. Yet all our retail brands registered a slight sales slowdown in mid-July that continues in August. So what's different? You may recall, I also said on the May call, that consumer purchases were becoming slightly more considered than the previous year. With a slowdown starting in mid-July, purchases became even more considered. Conversion dropped slightly, and price became a bigger factor with AOV dipping slightly, as well.

Speaker Change: will really be driven by two things the gross gross profit margin improvement opportunity one iu which we've got very strong andcomfortable competent line of sight two

Speaker Change: One IMU, which we've got a very strong and comfortable, competent line of sight to.

Speaker Change: And second is the significant opportunity in markdown improvement at the Urban Outfitters, brand.

Speaker Change: and second is the significant opportunity markdown improvement at the uran aers brand

Speaker Change: I think Sheila, Shea, and team have done a great job at aligning their inventory now, much closer with sales.

Sheila: i think shake sheila sha team th done a great job at aligning their inventory now much closer was failed

Sheila: And they had significantly higher markdown rates than what we would normally run in the, fourth quarter last year, so that there is meaningful opportunity for us for that brand and to help URBN drive improved markdown rates in the fourth quarter, driving improved gross profit margin in the fourth quarter.

Sheila: and they had significantly higher mark downradates from what we would normally run in the fourth quarter last year so that there is a meaningful opportunity for us for that brand and to help you rb n drive improved proved marketdownrates in the fourth quarter driving improved gross profit marin in the th quarter

Adrienne Yih: Thank you. One moment for our next question. And that will come from the line of Adrian E. with Barclays; your line is open. Great. Thank you very much. My question is around kind of the your your higher and consumer and sort of kind of their resistance or price resistance.

Sheila: Thank you.

Sheila: One moment for our next question.

Sheila: And that will come from the line of Adrienne Yee with Barclays.

Speaker Change: thank you one moment for our next question

Speaker Change: Your line is open.

Speaker Change: Great.

Speaker Change: Thank you very much.

Speaker Change: and that will come from the line of adriande with barkeleways your line is open

Speaker Change: My question is around kind of the, your higher end consumer and sort of kind of their resistance, or price resistance.

adriande: great thank you very much so my question is around partred the

Speaker Change: your her and consumer and sort of kind of their resistance or price resistance can you either dick or frank or melony can you talk about kind of your initial retails across the three brands where they are relative to two thousand and nineteen

Dick Hayne: Can you either Dick or Frank or Melanie can you talk about kind of your initial retails across the three brands where they are relative to 2019. And I guess like does this does the increasing commotionality at answer in particular. Does that mean that you are sensing that there's any need to readjust kind of initial retail prices. Thank you.

Speaker Change: Can you either Dick or Frank or Melanie, can you talk about kind of your initial retails, across the three brands, where they are relative to 2019?

Speaker Change: And I guess like, does this, does the increasing promotionality at Anthra in particular, does, that mean that, are you sensing that there's any need to readjust kind of initial retail prices?

Richard Hayne: Finally, a word about our youngest brand newly. The brand celebrated its fifth birthday in the second quarter, and commemorated by delivering another quarter the strong year over year double-digit gains in average active subscribers and revenue. They also posted record profits and became the number one fashion rental business in the US. Happy birthday, newly. Congratulations on your success.

Speaker Change: and i guess like did this the increasing promotionality at ansthor in particular does that mean that

Speaker Change: are you somethinging that there's any need to readjust kind of initial retail prices thank you

Speaker Change: Okay, Adrienne, I'll start with that, but then ask Tricia to talk about Anthropologie, a little bit more specifically, although I'll mention Anthropologie in my answer.

Dick Hayne: Okay, I'll start with that, then ask Trisha to talk about anthropology a little bit more specifically, although I'll mention anthropology in my answer when I talk about the consumer, our customer. Decreasing the AOV, meaning the amount of money they spend per transaction. A lot of that is occurring because it's both the anthropology of free people brands, and now offering them an alternative product to purchase. In the anthropology brand, Tricia talked about daily practice and off hours, and that is somewhat less expensive than their other apparel options. And that customer, the anthropologist customer, is choosing those lower priced items, which is driving the overall AUR and AOV down slightly.

Speaker Change: okay re know i'll start with that that thenhas tricia to talk about anthropology a little bit more specifically although i'll mention anthropology in my answer when i talk about

Speaker Change: When I talk about the consumer, our customer, Decreasing the AOV, meaning the amount of money they spend per transaction, an awful lot of that is occurring because at both the Anthropologie and Free People brands, they're now offering them an alternative product to purchase.

Speaker Change: the consumer are our customer

Speaker Change: decreasing the aov meaning amount of money they spent turd transaction

Speaker Change: a lot a lot of that is occurring

Speaker Change: because of both the antipology of free people brands and now offering them an alternative product to purchase

Speaker Change: In the Anthropologie brand, Tricia talked about daily practice and off hours, and that, is somewhat less expensive than their other apparel options.

Richard Hayne: And finally, thanks to our shareholders for your continued support.

Tricia: in the ology brand trisia talked about bonly practice and all hours and that is somewhat less expensive than there other apparel options and

Tricia: And that customer, the Anthropologie customer, is choosing those lower-priced items, which, is driving the overall AUR and AOV down slightly.

Tricia: that customer the antthpologlogy customer is

Speaker Change: choosing those lower priced items which is driving the o overall ar and aov down slightly

Tricia Smith: Same thing is happening to free people because of FP movement is doing so well. It's a higher penetration of the total. And FP movement is slightly less expensive than the rest of their apparel. So I think that it's not really a problem. It's just, it's showing up in the overall comps.

Speaker Change: Same thing is happening at Free People, because FP Movement is doing so well, it's a higher, penetration of the total. And FP Movement is slightly less expensive than the rest of their apparel.

Speaker Change: thesame thing is happening at free people because of fp movement

Lorraine Hutchinson: And our first question will come from the line of Lorraine Hutchinson with Bank of America. Your line is open. Thank you.

Speaker Change: is doing so well it's a higher penetration of the total and fp movement is slightly less expensive

Lorraine Hutchinson: Good afternoon. Can you comment on how comfortable you are with the level and content of you inventory entering the second half and then separately can you also walk us through the drivers of the fourth quarter course margin recovery assumed in guidance. Hi Lorraine, it's Jay. I can take that. We feel really great as you heard and prepared remarks were confident that our inventory is clean. Inventory levels are much more aligned with sales.

Speaker Change: So I think that it's not really a problem, it's just, it's showing up in the overall, comps.

Speaker Change: than the rest of their apparel so i think that it's not really a

Speaker Change: it's not really a problem it's just it's showing up in the overall comps

Speaker Change: Tricia, do you want to expand on that?

Tricia Smith: Tricia, do you want to expand on that? Sure. I think when you look at our average unit retail received, Adrian, from now through, back through FY19, in total, that AUR is not that much higher to Dick's point around the additional categories that we've introduced into the mix. So our prices in total, in terms of the receipts that we've brought in, like low single, mid single digits, I would say, our average unit sales are up tremendously, and that's really come from the return to a full-price business. So the mix of our price points in total is not that different, but we will continue to drive a full-price business, which we have been doing for the last several years.

Speaker Change: Sure.

Speaker Change: I think when you look at our average unit retail received, Adrian, from now through, back through FY19, in total, that AUR is not that much higher, to Dick's point around the additional categories that we've introduced into the mix.

Speaker Change: tr should you want to expand on the sure i think when you look at our

Adrian: average unit retail received adrian from now through back through fy ' nineteen

Lorraine Hutchinson: And really that's the primary driver of the margin recovery. And Lorraine as it relates to our fourth quarter for you are the end. It will really be driven by two things, the gross cross profit margin improvement opportunity. One I am you which we've got a very strong and comfortable component line of sight to and second is the significant opportunity and mark down improvement of the urban operators brand. And I think Sheila Shay and team have done a great job at aligning their inventory now much closer with sales and they had significantly higher mark down rates than what we would normally run in the fourth quarter last year so that there is meaningful opportunity for us for that brand and to help you are the end drive improved mark down rates in the fourth quarter driving improved gross profit margin in the fourth quarter.

Adrian: in total that that a you r s is not that much higher to dx point around the additional categories that we've beenintroduced into the mix so our prices and total in terms of the receipts that we' brought in

Adrian: So our prices in total, in terms of the receipts that we've brought in, like mid-single digits, I would say, our average unit sales are up tremendously, and that's really come from the return to a full-price business.

Speaker Change: like low low single white midsingle digits i would say our average unit sales up tremendously and that's surereally come from the return to a full price business so that the mix of our price points in total it is not that different but we will continue to drive a full price business which which we have been done doing for the last several years

Speaker Change: So the mix of our price points in total is not that different, but we will continue to, drive a full-price business, which we have been doing for the last several years.

Operator: Thank you.

Speaker Change: Thank you.

Matthew Boss: One moment for our next question. And that will come from the line of Matthew Boss with JP Morgan. Your line is open. Great. Thanks.

Speaker Change: One moment for our next question.

Speaker Change: yeah

Speaker Change: And that will come from the line of Matthew Boss with J.P. Morgan.

Speaker Change: thank you one moment for our next question

Speaker Change: Your line is open.

Speaker Change: and that will come from the line of matthew boss with jp morgan your line is open

Speaker Change: Great.

Speaker Change: Thanks.

Speaker Change: So, Dick, could you elaborate a bit just on demand trends that you're seeing in August, at Anthro and Free People, and also just speak to initial customer response to Back to School at the Urban Outfitters brand?

Dick Hayne: So, Dick, could you elaborate a bit just on demand trends that you're seeing in August at Anthro and Free People, and also just speak to initial customer response to back to school at the Urban Outfitters brand? Okay.

Matthew Boss: great thanks so dick could you elaborate a bit just on demand trends that you're seeing in augguest that anthrow and f people and also just speak to initial customer response to back to school at the urban alfitters' brand

Adrienne Yih: Thank you one moment for our next question. And that will come from the line of Adrian E with Barclays your line is open. Great. Thank you very much. My question is around kind of the your your higher and consumer and sort of kind of their resistance or price resistance. Can you either dick or Frank or Melanie can you talk about kind of your initial retails across the three brands where they are relative to 2019. And I guess like does this does the increasing commotionality at answer in particular. Does that mean that are you are you sensing that there's any need to readjust kind of initial retail prices. Thank you.

Matthew Boss: Okay.

Matthew Boss: I will let Shane talk about Urban Outfitters.

Shea Jensen: I will let Shane talk about Urban Outfitters' customer demand overall. So at all of our retail brands, the accelerator is slightly in mid July, and we're seeing that continue into August. The lower demand rate feels like it's a return to pre-COVID levels, and away from what I would consider a supercharged demand over the last few years. Now, our investment in brand marketing over the past few years in three of our retail brands was elevated, and it's now paying dividends. Those brands grew their customer base considerably, and so now store traffic and online traffic remain strong, and that's driving total transactions.

Speaker Change: ok he will let shan talk about urbano thaters customer demand and overall so at all of our retail brands the accelerated slightly in midjuly and we're seeing that continue into august

Speaker Change: Customer demand overall, so at all of our retail brands, deaccelerated slightly in mid-July, and we're seeing that continue into August.

Speaker Change: The lower demand rate feels like it's a return to pre-COVID levels and away from what I would, consider a supercharged demand over the last few years.

Speaker Change: the the lower demand rate

Speaker Change: feels like it's a return to precoded levels and away from what i would consider a supercharge demand over the last few years

Speaker Change: Now, our investment in brand marketing over the past few years in three of our retail, brands was elevated and is now paying dividends. Those brands grow their customer base considerably, and so now store traffic and online traffic, remain strong, and that's driving total transactions.

Speaker Change: now our investment in brand marketing over the past few years in three of our retail brands

Speaker Change: was elevated and it's now paying dividend

Richard Hayne: Okay, I'll start with that then ask Trisha to talk about anthropology a little bit more specifically, although I'll mention anthropology in my answer when I talk about the consumer are our customer. Decreasing the AOV, meaning the amount of money they spend per transaction. A lot of that is occurring because it's both the anthropology of free people brands, and now offering them an alternative product to purchase. In the anthropology brand, Tricia talked about daily practice and off hours, and that is somewhat less expensive than their other apparel options.

Speaker Change: those grant brands grow their customer base considerably

Speaker Change: and so now store traffic and online traffic remains strong and that's driving total transactions

Dick Hayne: So, with customers becoming more selective in their purchases or buying slightly less expensive items, the extra transactions are more than offsetting the slight dip in AOV and driving those positive comps.

Speaker Change: So with customers becoming more selective in their purchases or buying slightly less, expensive items, the extra transactions are more than offsetting the slight dip in AOV and driving those positive comps.

Speaker Change: so with customers becoming more selective in their purchases or buying slightly less expensive items

Speaker Change: the extra transactions are more than offsetting the slight dip in aov and driving those positive cops

Shea Jensen: So you want to talk about extra school? Yeah, it's Jay. I would say that what we're seeing is not dissimilar to what Dick covered for the overall URBN status. However, I think in some of the areas that we have been able to impact with some of our initial work, we are seeing some positive momentum. So areas like women's accessories and home, and even across our denim categories, which is obviously a very strong category for vectoring. School, and that brings us some optimism against our path forward. But I, but I think generally it's in line with what Dick said.

Speaker Change: So you want to talk about Back to School?

Speaker Change: Yeah, it's Shea.

Speaker Change: I would say that what we're seeing is not dissimilar to what Dick covered for the overall, URBN status.

Speaker Change: so you want to talk about ch of school it's chaing i would say that

Speaker Change: what we're seeing is not similar to what dick covered for the overall

Speaker Change: However, I think in some of the areas that we have been able to impact with some of our, initial work, we are seeing some positive momentum, so areas like women's accessories and home and even across our denim categories, which is obviously a very strong category for Back to School, and that brings us some optimism against our path forward, but I think generally it's in line with what Dick said.

Speaker Change: erobeingan

Speaker Change: Thank you.

Speaker Change: status however i think in some of the areas that we have been able to impact with some of our initial work we are seeing some positive momentum so areas like

Speaker Change: women accessories and home and even across our denm categories which is obviously a very strong category for back school and that brings us some optimism against our path forward but i but i think generally it's in line with what pick said

Richard Hayne: And that customer, the anthropologist customer, is choosing those lower priced items, which is driving the overall AUR and AOV down slightly. Same thing is happening to free people because of FP movement is doing so well. It's a higher penetration of the total. And FP movement is slightly less expensive than the rest of their apparel. So I think that it's not really a problem. It's just it's showing up in the overall comps.

Operator: Thank you.

Paul Lejuice: One moment for our next question. And that will come from the line of Paul Lejuice with City. Your line is open. Hey, thanks, guys. I know you said that you felt decent about inventory of the Urban Athlete's brand, but I'm curious.

Speaker Change: One moment for our next question.

Momo: thank you moment for next question

Momo: And that will come from the line of Paul Lejuice with Citi.

Momo: Your line is open.

Momo: Hey.

paul ladayjice: and that will come from the line of paul ladayjice with city your line is open

paul ladayjice: Thanks, guys.

paul ladayjice: I know you said that you felt decent about inventory of the Urban Outfitters brand, but, I'm curious, Shea, do you think the product and the store aesthetic is where you want it to be to justify kicking up marketing investment at this point, or is that going to take some time?

paul ladayjice: they thank guys i know you said that you felt decent about inventory of the overan apper brand but i'm curious

Shea Jensen: Shay, do you think the product and the store aesthetic is where you want it to be to justify kicking up marketing investment at this point? Or is that going to take some time? Just curious when we might see those picked up marketing investments? And then also curious to get your view on what is the right size of the urban athlete's store and the right mix of mall versus off-mall. Thanks. Yeah, thanks for the question. You know, I, I, I hate to hesitate on timing. You know, having been here for six months. The first step was really to get the right team in place and to build the strategy, which I think we feel really confident about.

Speaker Change: shahave you think the product in the store aesthetic

Speaker Change: is where you wantedit to be to justify

Tricia Smith: Tricia, do you want to expand on that? Sure. I think when you look at our average unit retail received Adrian from now through, back through FY19, in total, that AUR is not that much higher to Dick's point around the additional categories that we've introduced into the mix. So our prices in total, in terms of the receipts that we've brought in, like low single, mid single digits, I would say, our average unit sales are up tremendously, and that's really come from the return to a full price business. So the mix of our price points in total is not that different, but we will continue to drive a full price business, which we have been doing for the last several years.

Speaker Change: Just curious when we might see those picked up marketing investments, and then also curious, to get your view on what is the right size of the Urban Outfitters store and the right mix of mall versus off-mall.

Speaker Change: kicking up marketing investment at this point is that going to take some time just curious when we might see those

Operator: Thank you.

Matthew Boss: One moment for our next question.

Speaker Change: those picked up marketing investment and then also c to get your view on what is the right size of the urban aper store and the right mix of small verse offm

Speaker Change: Thanks.

Speaker Change: Yeah.

Speaker Change: Thanks for the question.

Speaker Change: You know, I hate to hesitate on timing, you know, having been here for six months, the, first step was really to get the right team in place and to build the strategy, which, I think we feel really confident about.

Speaker Change: yeah thanks for the question you know i

Speaker Change: i hate to hesitate on timing you know having been here for six months the first step was really to get the right team in place and to build the strategy which

Shea Jensen: You know, these things don't happen in a certain sequence or order from the marketing perspective. We're really trying to learn as much as we can and try different things. The initial step that we have taken that we feel great about is really accelerating our presence and engagement on social media. And, and we, we are seeing some initial results there. There's obviously a lot of work to do in terms of, you know, bringing more relevant touch points to life across our stores from the experience. And of course, in the product category, we have lead times that we're working with.

Speaker Change: You know, these things don't happen in a certain sequence or order.

Speaker Change: i think we feel really confident about these things don't happen in a certain sequence or order

Speaker Change: From the marketing perspective, we're really trying to learn as much as we can and try, different things. The initial step that we have taken that we feel great about is really accelerating our, presence and engagement on social media, and we are seeing some initial results there.

Speaker Change: from the marketing perspective we're really trying to learn as much as we can and try different things

Speaker Change: the initial step that we have taken that we feel great about is really accelerating our presence and engagement on social media and we are seeing some initial results there there's obviously a lot of work to do in terms of

Speaker Change: There's obviously a lot of work to do in terms of, you know, bringing more relevant touch, points to life across our stores from the experience and, of course, in the product category, and we have lead times that we're working with.

Matthew Boss: And that will come from the line of Matthew Boss with JP Morgan. Your line is open. Great. Thanks.

Speaker Change: bring more relevant touchints to life across our stores from the experience and of course in the product category and we have leadtimes that we're working with

Speaker Change: So, you know, I hate to comment on specific timing of the sort, but what I can comment, on is that we feel optimistic about our plan, and we're getting to work.

Shea Jensen: So I, you know, I hate to comment on specific timing of the sort, but what I can comment on is that we feel optimistic about our plan. And we're getting to work.

Richard Hayne: So Dick, could you elaborate a bit just on demand trends that you're seeing in August at Anthro and free people, and also just speak to initial customer response to back to school at the Urban Outfitters brand? Okay. I will let Shane talk about Urban Outfitters customer demand overall. So at all of our retail brands, the accelerator is slightly in mid July, and we're seeing that continue into August. The lower demand rate feels like it's a return to pre-COVID levels, and away from what I would consider a supercharged demand over the last few years.

Speaker Change: so i hate to common on specific timing at the sort but what i can comment on is that we feel optimistic about our planand we're getting to work that's really our next step

Speaker Change: That's really our next step.

Shea Jensen: That's really our next step in terms of store size. Yes, we do feel like our average store size is too big. As I said, we think we need to be roughly in the six to eight thousand square feet. And we're higher than that. And so, you know, we have a number of leases that are coming up in the next few years, and we'll be able to take a look at each one to make sure one we have the right location and two we optimize for the right space and size.

Speaker Change: In terms of store size, yes, we do feel like our average store's size is too big, as I, said. We need to be roughly in the 6,000 to 8,000 square feet, and we're higher than that.

Speaker Change: in terms of store size yes we do feel like our average stores size is

Speaker Change: too big as i said we think we need to be roughly in the six to eight thousand square feet

Speaker Change: So, you know, we have a number of leases that are coming up in the next few years, and we'll, be able to take a look at each one to make sure, one, we have the right location, and, two, we optimize for the right space and size.

Speaker Change: and we're higher than that and so you know we have a number of leases that are coming up in the next few years and we'll be able to take a look at each one to make sure one we have the right location and two we optimize for the right space asi

Speaker Change: And one moment for our next question.

Alex Straton: And one moment for our next question.

Alex Straton: And that will come from the line of Alex Straton with Morgan Stanley. Your line is open. Perfect. I have a couple one just related to the Urban Outfitters business with the de-leveraged you're seeing there on the challenging sales trends.

Speaker Change: and one moment for our next question

Richard Hayne: Now, our investment in brand marketing over the past few years in three of our retail brands was elevated, and it's now paying dividends. Those brands grew their customer base considerably and so now store traffic and online traffic remain strong and that's driving total transactions. So with customers becoming more selective in their purchases or buying slightly less expensive items, the extra transactions are more than offsetting the slight dip in AOV and driving those positive comps.

Alex Stratton: and that will come from the line of alex stratton with morgan anley your line is open

Alex Stratton: perfect i have a couple one just related to the urban out but business with the deleverage you're seeing there on on the challenging sales trends are are there any plans to reduce the fixed cost base so or would you may be consider a smaller overall store footprint just wondering if that's

Frank Komporti: Are there any plans to reduce the fixed cost base, or would you maybe consider a smaller overall store footprint? Just wondering if that's potentially in the strategy. And then maybe for Frank just on the higher markdowns you're assuming for the third quarter. Is that a cross the brands, or is it concentrated at a specific banner?

Frank: potentially in the strategy and then maybe for frank just on the higher mark down you're assuming for the third quarter is that a cross the brands or is it concentrated a specific banner think lot

Frank Komporti: Thank you a lot.

Frank Komporti: I can take the higher markdowns first. So right now, I think we put into plan based on the, you know, slight slowdown that we've seen higher markdowns across all brands because we have seen the slight slowdown across all brands. What I would say right now is, you know, we're hoping that that's a conservative plan.

Frank: i can take the higher mark downs first so

Shea Jensen: So you want to talk about extra school? Yeah, it's Jay. I would say that what we're seeing is not dissimilar to what Dick covered for the overall URBN status. However, I think in some of the areas that we have been able to impact with some of our initial work, we are seeing some positive momentum. So areas like women's accessories and home and even across our denim categories, which is obviously a very strong category for vectoring. School and that brings us some optimism against our path forward, but I, but I think generally it's in line with what Dick said.

Frank: right now i think we put into plan

Operator: Thank you.

Paul Lejuice: One moment for our next question.

Speaker Change: based on the sflight flowdown that we've seen higher mark downs across all brands because we have team flights slowdown across all brands

Frank Komporti: Things are definitely very choppy right now. And we're hoping the, you know, the guidance of the plan for 100 basis points. We're going to decline on a year over your basis. It is a conservative conservative plan, but it is across all three brands in order to keep inventory where we need it to be coming into how it is.

Speaker Change: what i would say right now is we're hop that that's a conservative plplan things are definitely very choppy right now and we're hoping the guidance to the plan for one hundred basis point decline on a year over-year basis

Speaker Change: is it is a conservative of conservative plan but it is across all three brands in order to keep inventory where we needed to be coming into coming in holiday

Frank Komporti: Alex, this is the fucking. As Shade said, for the next three years, over 50% of the urban stores in North America will be up for renewal. Our decision to renew, will renew, relocate, downsides, or clothes will be made on a case-by-case basis based on the economics. Over the last seven years, most of the stores we've opened are currently, for a while, profitable. Now, those stores tend to be smaller than our average and tend to be in locations outside of the large, large major cities. So that sort of gives you a hint of how we're thinking about it, but again, it will depend on the economics of each store on a case-by-case basis.

Speaker Change: allike this is talking as shehad took on the set for the next three years over fifty percent of the urban stores and north america will be up for renewal

Shea Jensen: And that will come from the line of Paul Lejuice with city. Your line is open. Hey, thanks guys. I know you said that you felt decent about inventory of the urban athlete's brand, but I'm curious. Shay, do you think the product and the store aesthetic is where you want it to be to justify kicking up marketing investment at this point? Or is that going to take some time just curious when we might see those those picked up marketing investments? And then also curious to get your view on what is the right size of the urban athlete's store and the right mix of mall versus off mall. Thanks. Yeah, thanks for the question.

Speaker Change: our decision to renew will renew relocate down size or closed will be made on a case by case basis based on the economics

Speaker Change: over the last seven years

Speaker Change: most of the stores we' opened are currently fora while profitable

Speaker Change: now those stores tend to be smaller than our average and tend to be in locations outside of the large large major cities

Speaker Change: so that's sort of gives you a end of how we're thinking about it but again it will depend on the economics of each store on a case by case bace

Mark Altschwager: And one moment for our next question.

Shea Jensen: You know, I, I, I hate to hesitate on timing. You know, having been here for six months. The first step was really to get the right team in place and to build the strategy, which I think we feel really confident about. You know, these things don't happen in a certain sequence or order from the marketing perspective. We're really trying to learn as much as we can and, and try different things. The initial step that we have taken that we feel great about is, is really accelerating our presence and engagement on social media.

Mark Altschwager: And that will come from the line of Mark. All swagger with bear. Your line is open. Good afternoon. Thanks for taking my question. Another one on you appreciate all the detail here on the plan. I mean, it does sound like a major repositioning, and these things take time. So just how should we think about kind of short medium term sales and margin guide post as you execute on these changes. And I mean, is it your expectation that the brand can return to sales growth in fiscal 26, or just any more detail on how you're thinking about that path would be great.

Speaker Change: in one moment for our next question

Speaker Change: And that will come from the line of Alex, Straton with Morgan Stanley.

mark alswagger: and that will come from the line of mark alswagger with bear your line is open

mark alswagger: good afternoon andthanks for for taking my question just another one you appreciate all the detail here on the plan i mean it doesn' not like a major repositioning and these things take time so just how should we think about kind of short medium term sales and margin guides post as you execute on these changes and i mean is that is your expectation that the brand can return to sales growth in fiscal twenty six or justanymore detail thinking about that that pth would be great thank you

Shea Jensen: And, and we, we are seeing some initial results there. There's obviously a lot of work to do in terms of, you know, bringing more relevant touch points to life across our stores from the experience. And of course, in the product category, and we have lead times that we're working with. So I, you know, I hate to comment on specific timing of the sort, but what I can comment on is that we feel optimistic about our plan. And we're getting to work.

Frank Komporti: Thank you.

Frank Komporti: Before I ask Shay to answer that, I will say that we're not going to put time limits or projections on any of this. Our idea is to get working, get things moving in the right direction, and then let that take care of itself.

Speaker Change: before i asked shade to answer that i will say that we're not going to put time of

Speaker Change: limits or projections on any of this

Speaker Change: our idea is to again get working get things moving in the right direction and then let that take care of itself

Shea Jensen: That's really our next step in terms of store size. Yes, we do feel like our average stores size is, is too big, as I said, we think we need to be roughly in the six to eight thousand square feet. And we're higher than that. And so, you know, we have a number of leases that are coming up in the next few years and we'll be able to take a look at each one to make sure one we have the right location and two we optimize for the right space and size.

Shea Jensen: Shay, do you want to say anything else about it?

Speaker Change: sayayyou want to say everyanything else about it okay

Dana Telsey: One moment for our next question. And that will come from the line of Dana Telsey with Telsey Advisory Group. Your line is open. Hi, good afternoon, everyone.

Speaker Change: one moment for our next question

Speaker Change: Your line is open.

Dana Telsey: and that will come from the line of dana telsesi with tessithe advisory group your line is open

Dana Telsey: Perfect.

Dana Telsey: I have a couple.

Melanie Marein: As you think about the inventory levels given the current self-sockening, Melanie and Frank, how do you think about what should the right inventory level rate be as we look to the third and the fourth quarter? And then with both the anthrop business and the urban business, with the anthrop business, the customer coming down an age and obviously adjusting the urban business, how do you think of the marketing spend on each business and where it should be? And is your own brand versus third-party brand? Is that shifting for each business too, and what the margin profile would look like?

Dana Telsey: high good afternoon everyone as you think about the inventory levels given the current sales softening

Alex Straton: And one moment for our next question. And that will come from the line of Alex Straton with Morgan Stanley.

Dana Telsey: mely frank how do you think about what should the right inventory level rate b as we look to the third in the fourth quarter and then with both the anthther business and the urban business with the anthor business the customer coming down an age and obviously adjusting the urban business

Alex Straton: Your line is open. Perfect. I have a couple one just related to the Urban Outfitters business with the de-leveraged you're seeing there on the challenging sales trends.

Speaker Change: how do you think of the marketing spend on each business and where it should be and is your own brand versus third party brands is that shifting for each business too and what the margin profile would look like thank you

Alex Straton: Are there any plans to reduce the fixed cost base or would you maybe consider a smaller overall store footprint? Just wondering if that's potentially in the strategy. And then maybe for Frank just on the higher markdowns you're assuming for the third quarter. Is that a cross the brands or is it concentrated at a specific banner? Thank you a lot.

Melanie Marein: Thank you. Oh, that's a lot.

Speaker Change: One just related to the Urban Outfitters business, just with the deleverage you're seeing there on the challenging sales, trends.

Melanie Marein: Starting with inventory. Thank you for your question, Dana. So we feel good about the inventory of exiting Q2 by segment, or inventory below sales growth, with retail segment content, inventory. We have one on constale growth of two. And similarly, our whole sale, our inventory level is just 3% on sale growth of 15. Now, looking forward, we are planning Q4 more conservatively, but in Q3, our receipt plans were based on the trends of earlier Q2. So, given the recent trend acceleration, we may have to add incremental promotions that mark down. And our growth margin guidance, which I provided earlier, reflects that in the 100-point reduction in growth margin.

Speaker Change: Are there any plans to reduce the fixed cost base, or would you maybe consider a smaller overall store footprint?

Speaker Change #100: a what was very good ok ' starting with inventory thank you for your questionction data so we feel good about the inventories exiting q two by seedgment orinventori below sales group

Melanie Marein Efron: I can take the higher markdowns first. So right now, I think we put into plan based on the, you know, slight slowdown that we've seen higher markdowns across all brands because we have seen the slight slowdown across all brands. What I would say right now is, you know, we're hoping that that's a conservative plan. Things are definitely very choppy right now. And we're hoping the, you know, the guidance of the plan for 100 basis points.

Speaker Change #100: with retail ayment compinvenortoryy gaap one on compste growth up to and similly a wholesale our inventory vel or up just three percent offco for the fifteen now looking forward we are

Speaker Change #100: Just wondering if that's potentially in the strategy.

Speaker Change #100: And then maybe for Frank, just on the higher markdowns you're assuming for the third quarter, is that across, the brands, or is it concentrated at a specific banner?

Speaker Change #100: planning q four more conservatively but in q three our received pl were based on the trends of earlier q two so given the recent trend acceleration we may have to add incremental promot of the markdown

Speaker Change #100: Thanks a lot.

Speaker Change #100: I can take the higher markdowns first.

Melanie Marein Efron: We're going to decline on a year over your basis. It is a conservative conservative plan, but it is across all three brands in order to keep inventory where we need it to be coming into coming into how it is.

Speaker Change #100: and our gross margin guidance which i provided earlier reflects that in the hundred points reduction in growth margin

Melanie Marein: So for fourth quarter, we have lowered our buy plans in order to count through the slate current flowdown. And we're planning inventory more conservatively for the fourth quarter, obviously targeting inventory below sales growth in the fourth quarter.

Speaker Change #100: So right now, I think we put in the plan based on the slight slowdown that we've seen higher markdowns across all brands, because we have seen the slight slowdown across all brands.

Speaker Change #100: so for fourth quarter we have lowered our by plans in order to account for the slate current flowdown and re planning inventory more conservatively for the fourth quarter ob iously targeting inventory low sales growth of the

Speaker Change #100: What I would say right now is, you know, we're hoping that that's a conservative plan.

Speaker Change #100: Things, are definitely very choppy right now.

Richard Hayne: Alex, this is the fucking. As Shade said, for the next three years, over 50% of the urban stores in North America will be up for renewal. Our decision to renew will renew relocate downsides or clothes will be made on a case by case basis based on the economics. Over the last seven years, most of the stores we've opened are currently for a while profitable. Now, those stores tend to be smaller than our average and tend to be in locations outside of the large large major cities. So that sort of gives you a hint of how we're thinking about it, but again, it will depend on the economics of each store on a case by case basis.

Speaker Change #100: And we're hoping that, you know, the guidance or the plan for 100 basis point decline on a year-over-year basis is a conservative plan.

Mark Altschwager: And one moment for our next question.

Speaker Change #100: But it is across all three brands in order to keep inventory where we need it to be coming into holiday.

Speaker Change #100: Alex, this is Dick Faulking.

Tricia Smith: Jane, Trisha, you want to talk about anthropology's marketing? Yeah. And I think when we talk about acquiring new customers at Anthropology and attracting a new, younger customer, we tend to think of really attracting a millennial-aged customer. So we think of the target customer under the age of 40, and then obviously look at the balance of our retained customers. And both of those are growing nicely. When we're aging down, it really is coming from that under 40 segment targeted a little bit differently than we've historically targeted our existing customer anthropology, responding very well to some of the strategies that we've implemented on targeting them, where they are.

Speaker Change #100: As Shay said, over the next three years, over 50% of the, urban stores in North America will be up for renewal. Our decision to renew will renew, relocate, downsize, or close will be made on a case-by-case basis based on the economics.

Speaker Change #100: So that sort of gives you a hint of how we're thinking about it.

Speaker Change #100: Over the last seven years, most of the stores we've opened are currently four-wall profitable. Now, those stores tend to be smaller than our average and tend to be in locations outside of, the large, large major cities.

Speaker Change #100: where

Speaker Change #100: But again, it will depend on the economics of each store on a case-by-case basis.

Speaker Change #101: trition you talked about anthropologies marketing yes

Speaker Change #102: and i think when we talk about acquiring new customerers anropology and attracting a new younger customer we tend to think of

Speaker Change #102: um

Speaker Change #102: arereally attracting no illennial ageed customers so we think of the target customer under the age of forty and then obviously look at this the balance of our retained customers and both of those are growing nicely when we're

Speaker Change #102: aging down it really is coming from that under forty segment

Speaker Change #103: targeted a little bit differently that we've historically targeted our existing customer an ropology

Speaker Change #103: responding very well to some of the

Mark Altschwager: And that will come from the line of Mark all swagger with bear your line is open. Good afternoon. Thanks for taking my question. Another one on you appreciate all the detail here on the plan. I mean, it does sound like a major repositioning and these things take time. So just how should we think about kind of short medium term sales and margin guide post as you execute on these changes. And I mean, is it is your expectation that the brand can return to sales growth in fiscal 26 or just any more detail on how you're thinking about that that path would be great. Thank you.

Tricia Smith: And so, while the total growth of customers over 40 is outpacing that of those under 40, we're excited that we're still retaining all of our customer segments and feel like we're thoughtfully looking at attracting a new, younger customer for anthropology. Dana, just to let you and the rest of the folks on the line know, when you talk about the younger customer, it is true that we are attracting a younger customer for anthropology, but the overall average age of the customer anthropology is only down a few years from what it was two years ago. So it isn't changed anywhere near as precipitously as some people might think.

Speaker Change #103: strategies that we've implemented on targeting them where they where they are

Speaker Change #103: and so while the total growth of customers over under forty is outpacing that of those over forty were excited that we're still retaining all of our customer segments and feel like we'rewe're thoughtfully looking at attracting a younger customer fran ropologlogy

Speaker Change #103: dana just just to let you in the rest of the focus on the line no

Speaker Change #104: when talk about the younger customer it is true that we are attracting a younger customer for anthropology but the overall average age of the customer and anthropology is only down a few years

Richard Hayne: Before I ask Shay to answer that, I will say that we're not going to put time of limits or projections on any of this. Our idea is to get working, get things moving in the right direction and then let that take care of itself. Shay, do you want to say anything else about it?

Speaker Change #104: from what it was two years ago so it isn't changed anywhere near as percpitiously as some people might think

Speaker Change #104: And one moment for our next question.

Operator: One moment for our next question.

Operator: And one moment for our next question.

Marni Shapiro: That will come from the line of Marni Shapiro with the retail tracker. Your line is open. Hey guys, thanks so much for taking my question. I have one quick follow-up on the slow down. You're saying, I'm curious if you're seeing any regional differences. And if you're seeing, we're seeing a trend out there where actually physically seeing it, but we're hearing about a trend about, you know, people are just buying closer to need. And so the lows between the seasons are bigger lows, and then they wait to buy whether it's for holiday or back to school.

Speaker Change #105: and one moment for our next question

Speaker Change #105: And that will come from the line of Mark Altshwager with Bayer.

marney shapiro: that will come from the line of marney shapiro with the real chit retail tracker your line is open

marney shapiro: Your line is open.

marney shapiro: hey guys thank so much you're taking my question

marney shapiro: Good afternoon.

marney shapiro: Thanks for taking my question.

Speaker Change #107: i ve won just quick follow upon theslow ' sayingi'm curious ifyou're seeing any regional differences and if you're seeing we're seeing a trend out there are physically seeing it but we're hearing about a trend you know people just buying closer to need and so the lovess between the seasons are

Dana Telsey: And that will come from the line of Dana Telsey with Telsey Advisory Group. Your line is open. Hi, good afternoon, everyone.

Melanie Marein Efron: As you think about the inventory levels given the current self-sockening, Melanie and Frank, how do you think about what should the right inventory level rate be as we look to the third and the fourth quarter? And then with both the anthrop business and the urban business, with the anthrop business, the customer coming down an age and obviously adjusting the urban business, how do you think of the marketing spend on each business and where it should be? And is your own brand versus third party brand? Is that shifting for each business too and what the margin profile would look like? Thank you.

Marni Shapiro: Some curious if you're seeing those trends. And I just have one follow-up on three people after that if you don't mind. No mind.

Speaker Change #108: their bigger loless and then theywait to buy whether it's a holiday or backto school some curious if you're seeing those trends and i just have one follow-up on free people after that if you don't mind

Marni Shapiro: I guess, Marni, I would say that we haven't seen a lot of differences by region or geography. So, you know, certainly one of the first things that we checked, hoping that we could see something that might eat us in some direction. I had not really considered what you just said, which is more time in between seasons. I do think oftentimes, as you know, because you were in the business for a number of years, when you have a very, very hot summer early, like we did on the East Coast at least, oftentimes later in the summer, people get a little bored with summer.

Speaker Change #109: no mind i guess mar i would say that we haven't seen a lot of differences by region or geography so you know certainly one of the first things is that we checked

Speaker Change #110: hoping that we can see something that my jus in some direction i had not really considered what you just said which is more time in between seasons i do think

Melanie Marein Efron: Oh, that's a lot. Starting with inventory. Thank you for your question, Dana. So we feel good about the inventory of exiting Q2 by segment, or inventory below sales growth, with retail segment content, inventory, we have one on constale growth of two. And similarly, our whole sale, our inventory level is just 3% on sale growth of 15. Now, looking forward, we are planning Q4 more conservatively, but in Q3, our receipt plans were based on the trends of earlier Q2.

Speaker Change #111: oftentimes as as you know because you were in the business a number of ch when you have a very very hot summer early like we you did on the east coast at least

Speaker Change #112: ofenttalks later in the summer people get a little board with summer may i say and our anxious or fld to come so i don't know if that has any impact at all but

Dick Hayne: So I don't know if that has any impact at all, but you know, that's just another idea. But we don't really have any definitive reason to believe, other than a potentially slightly strapped consumer, or I don't want to say strapped, overextended consumer. Why, why the consumer might be slowing down? Yeah, to me, it's when the consumers being careful; they wait to buy something to maybe a couple of streets to see what else is out there before they commit. I think I'm a tighter while while it makes a little bit of commitment. But, but before you go to the free people question, it would also be I might wait a couple of weeks to see if there are any more promotions.

Melanie Marein Efron: So given the recent trend acceleration, we may have to add incremental promotions that mark down. And our growth margin guidance, which I provided earlier, reflects that in the 100-point reduction in growth margin. So for fourth quarter, we have lowered our buy plans in order to count through the slate current flowdown. And we're planning inventory more conservatively for the fourth quarter, obviously targeting inventory below sales growth in the fourth quarter.

Speaker Change #112: that's just another idea but we don't we don't really have any definitive reason to believe other than a potentially

Speaker Change #112: um

Speaker Change #113: slightly strapped consumer or i don't they strapped overextended consumer why why the consumer might be slowing down

Tricia Smith: Jane, Trisha, you want to talk about anthropology's marketing? Yeah. And I think when we talk about acquiring new customers at anthropology and attracting a new younger customer, we tend to think of really attracting a millennial aged customers. So we think of the target customer under the age of 40, and then obviously look at the balance of our retained customers. And both of those are growing nicely. When we're aging down, it really is coming from that under 40 segment targeted a little bit differently than we've historically targeted our existing customer anthropology, responding very well to some of the strategies that we've implemented on targeting them, where they are.

Speaker Change #114: to me it's when the consumerers being careful they wait to buy something to maybe couple weeks to see what else is out there before they commit and i thinki'm a tighter rolem while it least a little bit of commitment fobic but c

Speaker Change #114: and also before you go to the free peopleak mission should also be i might wait a couple of wewayses see of there anymore

Dick Hayne: Yeah, exactly.

Dick Hayne: What's the success of free people and free people movement? Are you seeing the success also in Europe and its free people movement in Europe, and what are plans to either bring it there or open more free people stores there. Okay, I can answer that actually are free people European business, which includes the UK, France, and Netherlands, currently is actually outpacing in Q2 our North America business substantially, and going into Q3, the acceleration has picked up tremendously. So I think this last year has been about focusing on creating profitability in our stores, which we have gaining a new customer, which we see we very much have.

Speaker Change #114: promotions

Speaker Change #115: yeah exactly with the success ive threeree people and f people movement are you seeing the success also in europe and it's three people movement in europe and water are plans to either bring it there or open more fe people stores there

Speaker Change #116: okay i can answer that actually are free people european business which includes the u k france and netherlands currently

Tricia Smith: And so while the total growth of customers over under 40 is outpacing that of those over 40, we're excited that we're still retaining all of our customer segments and feel like we're thoughtfully looking at attracting a new younger customer for anthropology. Dana, just to let you and the rest of the folks on the line know, when you talk about the younger customer, it is true that we are attracting a younger customer for anthropology, but the overall average age of the customer anthropology is only down a few years from what it was two years ago. So it isn't changed anywhere near as precipitously as some people might think.

Speaker Change #117: is actually outpacing in q two our north america business substantially

Speaker Change #117: and going two three the acceleration has picked up tremendously

Speaker Change #117: so i think this last year has been about focusing on creating profitability in our stores which we have gaining a new customer which we see we very much have so you will see more european stores for free people

Tricia Smith: So you will see more European stores for Free People. We do have a long-term plan to grow F.P. movement as well in Europe, but free people is the priority of growth in the next couple of years.

Speaker Change #117: we do have the long-term plan to grow fp movement as well in europe but f people is the priority of growth in the next couple of years

Tricia Smith: And Marni, if I could, I'm going to ask Tricia to talk about anthropology in Europe because it's doing quite well also. Yeah, thank you. Hi, Marni. Thank you, Marni. Thank you. I'm telling really good about the growth of the business and the profit levels that we've reached in that business and feel confident that we'll continue to see that.

Speaker Change #118: and money if i could i'm going to ask tricition and talk about anthropology in europe because it's doing quite well also

Tricia Smith: And one moment for our next question. That will come from the line of Marni Shapiro with the retail tracker. Your line is open. Hey guys, thanks so much for taking my question. I have one quick follow up on the slow down. You're saying, I'm curious if you're seeing any regional differences. And if you're seeing, we're seeing a trend out there where actually physically seeing it, but we're hearing about a trend about, you know, people are just buying closer to need.

ournening: yes thank you hi ournening you know our our anthropology eu business i would say for the last three consecutive quarters

Speaker Change #120: has seen a tremendous improvement and really i think that's come from the alignment of our strategic priorities are really global strategic priorities and as we've accelerated even ggrowwn the women's business

Speaker Change #120: in north america that's that followed suit

Tricia Smith: And so the lows between the seasons are bigger lows, and then they wait to buy whether it's for holiday or back to school. Some curious if you're seeing those trends. And I just have one follow up on three people after that if you don't mind. No mind. I guess Marni, I would say that we haven't seen a lot of differences by region or geography. So, you know, certainly one of the first things that we checked, hoping that we could see something that might eat us in some direction.

Speaker Change #120: with our business in the eu so no specific plans yet to expand our retail footprint in europe but we're feeling really good about the growth of the business and the profit levels that we've reached in that business and feel confident that we'll continue to see that

Janet Kloppenburg: One moment for our next question. And that will come from the line of Janet Kloppenburg with JJK Research. Your line is open.

Speaker Change #120: Another one on UO, appreciate all the detail, here on the plan.

Speaker Change #121: one momentitadbar our next question

Speaker Change #121: I mean, it does sound like a major repositioning and, you know, these things take time.

janet cpenberg: and that will come from the line of janet cpenberg with jk research your line is open

Shea Jensen: Hi, everybody. Just a couple of quick questions. Shae at Urban Outfitters. I know you've been doing a lot of research on your customer, et cetera. And I'm wondering what your pricing research is indicating. And what direction I'll take your pricing as we go forward.

janet cpenberg: high everybody just a couple of quick questions share at urban outputors

Tricia Smith: I had not really considered what you just said, which is more time in between seasons. I do think oftentimes, as you know, because you were in the business for a number of years, when you have a very, very hot summer early, like we did on the east coast at least, oftentimes later in the summer, people get a little board with summer. So I don't know if that has any impact at all, but you know, that's just another idea.

janet cpenberg: i know you've been doing on a lot of research on new customer it head and i'm wondering what your pricing research is indicating and in what direction i'will take your pricing as we go forward

Melanie Marein: And for Marni, should we expect inventory to be aligned with sales trends by the end of the third quarter.

Melony: and for melony should we expect inventories to be

Melony: So just how should we think about kind of short, medium-term sales and margin guide posts as you execute on these changes?

Dick Hayne: And just lastly for Dick, you know, as AOV and spending might be slowing and, you know, with a more cautious consumer, how does that make you feel about your marketing spend for the total company. And, you know, would you consider going back to levels that were closer to 2019? Thank you.

Melony: align with sales trends by the end of the third quarter

Dick: and just lastly for dick

Speaker Change #126: as aob and

Dick: spending might be slowing and

Tricia Smith: But we don't really have any definitive reason to believe other than a potentially slightly strapped consumer or I don't want to say strapped overextended consumer. Why why the consumer might be slowing down? Yeah, to me, it's when the consumers being careful, they wait to buy something to maybe a couple of streets to see what else is out there before they commit. I think I'm a tighter while while it makes a little bit of commitment.

Speaker Change #127: with a more cautious consumer how does that make you feel about your marketing spend for the total company and would you consider going back to levels that will closer to two thousand and nineteen thank you

Speaker Change #127: I mean, is it your expectation that the brand can return to sales growth in fiscal 26?

Dick Hayne: I'll start, Janet, because I have a very quick answer to you. The answer is yes, because just what we were just discussing this. So it's something that we haven't agreed on totally yet.

Speaker Change #127: Or just any more detail on how you're thinking about that path would be great.

Endit: i'll start endit because i have a very quick answer you the answer is yes because guess what we were just discussing this so

Shea Jensen: But I do think that that's an element that is out there that is open for discussion. I can jump in, Janet, on its chase. Yes, we've done a lot of research, and we heard very clearly that customers perceive us as expensive. So they believe that our prices are higher than they need to be. We are attacking that full force, and we've made the commitment to offer the best price value for every item we sell. And that also includes expanding our range of accessible or opening price points. So we're tackling that, you know, pretty quickly. I would also say that price is a very dynamic subject.

Speaker Change #129: it's something that we haven't agreed on totally yet but i do think that that's an element that is out there that is open for discussion

Speaker Change #129: Thank you.

Tricia Smith: But, but before you go to the free people question, it would also be I might wait a couple of weeks to see if there are any more promotions. Yeah, exactly. What's the success of free people and free people movement? Are you seeing the success also in Europe and it's free people movement in Europe and what are plans to either bring it there or open more fee people stores there. Okay, I can answer that actually are free people European business, which includes the UK France and Netherlands currently is actually outpacing in Q2 are North America business substantially and going into Q3, the acceleration has picked up tremendously.

Speaker Change #129: Before I ask Shae to answer that, I will say that we're not going to put time limits or projections on any of this.

janet cpenberg: i can jump in janet on a cha

janet cpenberg: yes we've done a lot of research and we heard very clearly that customers perceive us as expensive so they believe that our prices

janet cpenberg: are higher than they need to be we are attacking that full forece and we've made

janet cpenberg: the commitment to offer the best price value for every item we sell and that also includes expanding our range of accessible our opening price points

janet cpenberg: so we're tackling that you know you know pretty quickly i would also say that price is a very dynamic subject it changes rapidly and ultimately our goal is to really price things right across the market and be as competitive as possible

Shea Jensen: It changes rapidly, and ultimately our goal is to really price things right across the market and be as competitive as possible. Thank you.

Tricia Smith: So I think this last year has been about focusing on creating profitability in our stores, which we have gaining a new customer which we see we very much have. So you will see more European stores for free people.

janet cpenberg: seven

Speaker Change #130: no i'm not is the second part of your question and it yes we are our targeting q three inventory levels to be in line with bila

Operator: And we do have time for one last question.

Speaker Change #131: thank you and we do have time for one last question

Tricia Smith: We do have a long-term plan to grow F.P, movement as well in Europe, but free people is the priority of growth in the next couple of years.

Ike Boruchow: And that will come from the line of Ike Boruchow with Wells Fargo; your line is open. Hey, everyone. Thanks for squeezing me in. Just maybe Frank Romellani just on the gross margin. I'm trying to make sure I understand the trajectory. You guys know, you've been very clear about, you know, you overbought based on the sales trend. And you know, there's some obviously there's some extra markdowns in the third quarter. Gross margins down a hundred. But to maintain the year, at least on my math, that implies gross margins are going to reflect pretty meaningfully back positive, up around a hundred basis points by 4Q.

Speaker Change #131: i

Sabir Ilie: and that will come from the line as ibir ile with well farg your line is open

Speaker Change #133: hey everyone not thanks for squeez

Tricia Smith: And Marni, if I could, I'm going to ask Tricia to talk about anthropology in Europe because it's doing quite well also. Yeah, thank you.

Speaker Change #134: this maybe frcr mealy just on the gross margin i'm trying to makesure understand

Speaker Change #135: the trajectory you guys made very clear about overbought based onof the sales trend and there's some obvly ' some extra markdowns in the third quarter gross margins down one hundred but to maintain the year at least on line math that that implies gross margins are are going to reflect pretty meaningfullyed back

Tricia Smith: Hi, Marni. [inaudible] I'm telling really good about the growth of the business and the profit levels that we've reached in that business and feel confident that we'll continue to see that. One moment for our next question.

Melanie Marein: I guess I'm just trying to make sure I understand: is there a one-time reversal that happened in 4Q last year, or are you expecting to be back to clean and growing again by 4Q? I'm just not sure I understand the quick inflection you guys. That looks like it's baked into the plan.

Speaker Change #136: positive up or around one hundred basis points by four q iguess i'm just ing to make surei understand is there were there one time reversal that happened four q last year are you expecting to

Speaker Change #137: be back to clean and growing again by four q and i'm not sureing understand the quick andinflectioning the guardys that looks like it's faaked into the plan

Richard Hayne: I just want to, before Frank answers the question specifically, I just want to clarify for everyone we did not overbuy; we bought to a trend that was in existence when we had to order the product. And that trend changed fairly abruptly at the very end of the season. And that's why we now are caught with a little bit of extra inventory.

Speaker Change #138: i just want to before frank answers to the questions specifically i just want to clarify for everyone we did not overbuy we bought to a trend that wewith in existence when we had to order the product

Janet Kloppenburg: And that will come from the line of Janet Kloppenburg with JJK Research. Your line is open. Hi, everybody. Just a couple of quick questions. Shae at Urban Outfitters. I know you've been doing a lot of research on your customer, et cetera. And I'm wondering what your pricing research is indicating. And what direction I'll take your pricing as we go forward. And for Marni, should we expect inventory to be aligned with sales trends by the end of the third quarter.

Speaker Change #139: and that trend changed fairly abruptly at the very end of the season and that's why we now are caught with a little bit of extra inventory

Frank Komporti: Frank? Yeah. And so, you know, obviously we grew both profit margin in Q1 and in Q2, both times beating our plan. You are correct. You know, we are committed to the 50 to 100 basis point improvement for the full year, which would imply over a hundred basis points opportunity in the fourth quarter. It is not due to a one-time reversal. It is due to the urban afters brand opportunity to significantly improve their markdown rate. Now that their inventory is much more in line with sales and will continue to be so, managing that business on, you know, a tighter weeks of supply.

Speaker Change #139: stcrank

Speaker Change #140: yes so you know obviously we grew gross profit margin in q one and in q two both times beating our plan you are correct you know we are committed to the fifty to hundred based point improvement for the full year which would imply over aone hundred basis point opportunity in the fourth quarter is not due to a one time reproal it is due to the urban after brand

Speaker Change #140: opportunity to significantly improve their mark ry now that their inventory is much more in line with sales and will continue to be so managing that business on you know a tighter weeks of supply and you know just just much much more efficiently than where we were heading into the heading into the fourth quarter of last year but but you are correct that that will that would imply andthat'swhat we are planning for is greater than one hundred basis points improvement in the fourth quarter hitting that still full year plan of fifty hundred basase to growp ofit margin improvement

Frank Komporti: And that, you know, just much, much more efficiently than where we were heading into the heading into the fourth quarter last year. But you are correct that that will, that would imply, and that's what we are planning for, is greater than a hundred basis points improvement in the fourth quarter. We are hitting that still full year plan of 50 to 100 basis points of growth profit margin improvement.

Janet Kloppenburg: And just lastly for Dick, you know, as AOV and spending might be slowing and, you know, with a more cautious consumer, how does that make you feel about your marketing spend for the total company. And, you know, would you consider going back to levels that were closer to 2019?

Operator: Thank you. Okay. I think that that does it.

Operator: Thank you very much for joining us. And we hope to see you back in a few months.

Speaker Change #141: thank you okay i think that that does it thank you very much for joining us and we hope see you back in a few months

Richard Hayne: Thank you. I'll start, Janet, because I have a very quick answer to you. The answer is yes, because just what we were just discussing this. So it's something that we haven't agreed on totally yet. But I do think that that's an element that is out there that is open for discussion. I can jump in, Janet, on its chase. Yes, we've done a lot of research and we heard very clearly that customers perceive us as expensive.

Operator: This concludes today's program. Thank you all for participating. You may now disconnect.

Speaker Change #142: this concludes today's program thank you all for participating you may now disconnect

Richard Hayne: So they believe that our prices are higher than they need to be. We are attacking that full force and we've made the commitment to offer the best price value for every item we sell. And that also includes expanding our range of accessible or opening price points. So we're tackling that, you know, pretty quickly. I would also say that price is a very dynamic subject. It changes rapidly and ultimately our goal is to really price things right across the market and be as competitive as possible.

Shea Jensen: Thank you.

Operator: And we do have time for one last question.

Operator: Thank you.

Ike Boruchow: And that will come from the line of Ike Boruchow with Wells Fargo, your line is open. Hey, everyone. Thanks for squeezing me in. Just maybe Frank Romellani just on the gross margin. I'm trying to make sure I understand the trajectory. You guys know, you've been very clear about, you know, you overbought based on the sales trend. And you know, there's some obviously there's some extra markdowns in the third quarter. Gross margins down a hundred.

Ike Boruchow: But to maintain the year, at least on my math that that implies gross margins are going to reflect pretty meaningfully back positive up around a hundred basis points by 4Q. I guess I'm just trying to make sure I understand is there a one time reversal that happened in 4Q last year or are you expecting to be back to clean and growing again by 4Q. I'm just not sure I understand the quick inflection you guys.

Ike Boruchow: That looks like it's baked into the plan. I just want to before Frank answers the question specifically, I just want to clarify for everyone we did not over by we bought to a trend that was in existence when we had to order the product. And that trend changed fairly abruptly at the very end of the season. And that's why we now are caught with a little bit of extra inventory.

Richard Hayne: Frank? Yeah. And so, you know, obviously we grew both profit margin in Q1 and in Q2 both times beating our plan. You are correct. You know, we are committed to the 50 to 100 basis point improvement for the full year, which would imply over a hundred basis points opportunity in the fourth quarter. It is not due to a one time reversal. It is due to the urban afters brand opportunity to significantly improve their markdown rate.

Richard Hayne: Now that their inventory is much more in line with sales and will continue to be so managing that business on, you know, a tighter weeks of supply. And that, you know, just much, much more efficiently than where we were heading into the heading into the fourth quarter last year. But you are correct that that will that would imply and that's what we are planning for is greater than a hundred basis points improvement in the fourth quarter. We are hitting that still full year plan of 50 to 100 basis points of growth profit margin improvement.

Shea Jensen: Shea Jensen, . .

Speaker Change #142: why

Speaker Change #142: Our idea is to get working, get things moving in the right direction, and then let that take care of itself.

Good day, ladies and gentlemen, and welcome to the Urban Outfitters Inc.

2nd quarter, fiscal 25 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded.

Speaker Change #143: good day ladies and gentlemen and welcome to the urban outfitters inkc second quarter fiscal twenty- five earnings call at this time ' participants aren in a listen ona later we will conduct a question-and-answer session and instructions will follow at that time

Speaker Change #143: Shae, you want to say anything else about it?

I would now like to introduce Oona McCullough, Executive Director of Investor Relations. Ms. McCullough, you may begin.

Speaker Change #144: as a reminder this conference call is being recorded

Speaker Change #144: Okay.

Oona McCall: i would now like to introduce ona maccoa executive director of investor relations m mccallll you may begin

Good afternoon, and welcome to the URBN 2nd quarter, fiscal 2025 conference call.

Oona McCall: One moment for our next question.

Oona McCall: And that will come from the line of Dana Telsey with Telsey Advisory Group.

Earlier this afternoon, the company issued a press release outlining the financial and operating results for the three and six month periods ending July 31, 2024. The following discussions may include four 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 Haynes, CEO, URBN; Frank Komporti, Co-President and COO, URBN; Trisha Smith, Global CEO, Anthropology Group; Shea Jensen, President, Urban Outfitters North America; and Melanie Moraine Efron, CFO from URBN. Following that, we will be pleased to address your questions.

Oona McCall: Your line is open.

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.urbn.com.

Oona McCall: Hi.

I will now turn the call over to Frank. Thank you, Ona, and good afternoon, everyone. Today, I will discuss our total company's 2nd quarter results versus a prior year, followed by some more detailed notes by Brandt. I will also provide some commentary on our current trends and the macro environment. Overall, the teens delivered an exceptional quarter, which was nicely ahead of our plans as discussed on the first quarter call. Total URBN sales grew by 6% to a Q2 record of $1.4 billion, and four of our five brands continue to perform remarkably well. Our sales growth was driven in part by a retail segment comp of 2%. Anthropology and Free People produce a high single digit positive retail segment comp, which more than offset the high single digit retail segment comp decline at Urban Outfitters.

Oona McCall: Good afternoon, everyone.

Oona McCall: As you think about the inventory levels given the current sales softening, Melanie and Frank, how do you think about what should the right inventory level rate be as we look to the third and the fourth quarter?

Oona McCall: And then with both the anthro business and the urban business, with the anthro business, the customer coming down in age and obviously adjusting the urban business, how do you think of the marketing spend on each business and where it should be?

Oona McCall: And is your own brand versus third-party brand, is that shifting for each business too and, what the margin profile would look like?

Oona McCall: Thank you.

Oona McCall: That's a lot.

Oona McCall: Go ahead.

Oona McCall: Okay.

Newly also delivered robust double-digit revenue growth due to a 55% increase in average active subscribers versus the prior year. Additionally, the wholesale segment increased revenue by 15%, driven by a healthy increase in regular price sales at Free People.

Oona McCall: Starting with inventory.

Oona McCall: Thank you for your question, Dana. So we feel good about the inventories exiting Q2 by segment or inventories below sales growth, with retail segment comp inventory down one, on comp sales growth up two, and similarly at wholesale, our inventory levels are up just 3% on sales growth at 15.

Oona McCall: Now looking forward, we are planning Q4 more conservatively, but in Q3, our receipt plans, were based on the trends of earlier Q2. So given the recent trend acceleration, we may have to add incremental promotions and, markdowns and our gross margin guidance, which I provided earlier, reflects that in the hundred points reduction in gross margin. So for fourth quarter, we have lowered our buy plans in order to account for the slight, current slowdown, and we're planning inventory more conservatively for the fourth quarter, obviously targeting inventory below sales growth in the fourth quarter.

Now moving on to gross profit. URBN gross profit dollars increased 8% to $493 million, while gross profit rate improved by 68 basis points to 36.5%. The improvement in gross profit rate was primarily due to increased initial merchandise margins driven by strong execution of cross-functional brand initiatives in the retail, wholesale, and newly segments. These improvements were partially offset by a higher markdown rate at Urban Outfitters, as the brand used incremental discounts to move through excess inventory.

Oona McCall: Okay.

Oona McCall: Tricia, do you want to talk about Anthropologie's marketing?

Now moving on to SG&A expenses. For the quarter, SGNA increased 8% versus a prior comparable quarter and delivered by 32 basis points. The delivery was primarily due to the Urban Outfitters brand not being able to reduce SG&A at the same rate as their sales decline. While we did reduce our SG&A spending at the Urban Outfitters brand in Q2, we did not believe it was prudent to reduce expenses at the same rate of sales. The increase in total company SGNA expense dollars was largely due to increased marketing spend supporting the solid sales growth at Anthropology, Free People, FD Movement, and newly brands.

Oona McCall: Yes.

Oona McCall: Dana, I think when we talk about acquiring new customers at Anthropologie and attracting, a new, younger customer, we tend to think of really attracting a millennial-aged customer.

Oona McCall: So we think of the target customer under the age of 40 and then obviously look at the, balance of our retained customers, and both of those are growing nicely.

Melanie Marein Efron: Thank you.

Oona McCall: When we're aging down, it really is coming from that under 40 segment targeted a little, bit differently than we've historically targeted our existing customer to Anthropologie, responding very well to some of the strategies that we've implemented on targeting them where they are.

Operator: Okay. I think that that does it. Thank you very much for joining us. And we hope to see you back in a few months.

Oona McCall: So while the total growth of customers under 40 is outpacing that of those over 40, we're, excited that we're still retaining all of our customer segments and feel like we're thoughtfully looking at attracting a new, younger customer for Anthropologie.

Anthropology and Free People brands' marketing efforts helped to drive double-digit traffic gains to the store and digital channels, while newly marketing campaigns helped to produce over 50% active subscriber growth. Total URBN operating income increased 10% versus last year to $145 million, with operating profit rate improving 36 basis points to 10.7%. Net income increased 13% to $117 million, or $1.24 per diluted share.

Operator: This concludes today's program. Thank you all for participating.

Operator: You may now disconnect. Thank you.

Oona McCall: Dana, just to let you and the rest of the folks on the line know, when you talk about, the younger customer, it is true that we are attracting a younger customer for Anthropologie, but the overall average age of the customer at Anthropologie is only down a few years from what it was two years ago.

Oona McCall: So it isn't changed anywhere near as precipitously as some people might think.

Oona McCall: And one moment for our next question.

Oona McCall: That will come from the line of Marni Shapiro with, the Realtek Retail Tracker.

Shea Jensen: Shea Jensen, . . Good day, ladies and gentlemen, and welcome to the Urban Outfitters Inc.

Oona McCall: Your line is open.

I will now provide more details by brand, starting with Free People. The Free People team produced an outstanding quarter with global Free People group sales increasing 10%. The double digit increase in sales was driven by an impressive 7% retail segment comp and an 18% increase in wholesale segment revenue. The 7% retail segment comp gained was on top of the incredible 27% retail segment comp from last year. The sales comp was driven by a similar comp in both the digital and store channels. During the quarter, the Free People brand achieved positive sales growth across apparel, accessories, and movement.

Oona McCall: Hey guys, thanks so much for taking my question.

Oona McCall: I have one just quick follow-up on this slowdown you're seeing.

Oona McCall: I'm curious if you're seeing any, regional differences and if you're seeing, we're seeing a trend out there or we're actually physically seeing it but we're hearing about a trend about, you know, people are just buying closer to need and so the lulls between the seasons are, they're bigger lulls and then they wait to buy whether it's for holiday or back to school.

2nd quarter, fiscal 25 earnings call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded.

I would now like to introduce Oona McCullough, Executive Director of Investor Relations. Ms. McCullough, you may begin. Good afternoon, and welcome to the URBN 2nd quarter, fiscal 2025 conference call. Earlier this afternoon, the company issued a press release outlining the financial and operating results for the three and six month period ending July 31, 2024. The following discussions may include four 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 Haynes, CEO, URBN, Frank Komporti, Co-President, and COO, URBN, Trisha Smith, Global CEO, Anthropology Group, Shea Jensen, President, Urban Outfitters North America, and Melanie Moraine Efron, CFO from URBN. 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.URBN.com.

Oona McCall: So I'm curious if you're seeing those trends and I just have one follow-up on free people after that if you don't mind.

I will now turn the call over to Frank. Thank you, Ona, and good afternoon, everyone. Today, I will discuss our total company's 2nd quarter results versus a prior year followed by some more detailed notes by Brandt.

The FP movement brand delivered 18% total growth, driven by a 6% retail segment comp, new store growth, and over 60% wholesale segment growth. Congratulations to the Free People team on delivering another strong quarter, even while up against last year's exceptional second quarter performance. Customer response to the brand's fall trends has been positive, and the brand continues to gain market share. We believe the brand could deliver a low to mid single digit positive retail segment comp in the third quarter. The free people wholesale segment sales increased 18% during the quarter, driven by full price sales gains in department and specialty stores, partially offset by an intentional decline in sales to close out channel.

I will also provide some commentary on our current trends and the macro environment Overall, the teens delivered an exceptional quarter, which was nicely ahead of our plans as discussed on the first quarter call. Total URBN sales grew by 6% to a Q2 record of $1.4 billion and four of our five brands continue to perform remarkably well. Our sales growth was driven in part by a retail segment comp of 2%, anthropology and free people produce a high single digit positive retail segment comp which more than offset the high single digit retail segment comp decline at Urban Outfitters.

Newly also delivered robust double digit revenue growth due to a 55% increase in average active subscribers versus the prior year. Additionally, the wholesale segment increased revenue by 15% driven by a healthy increase in regular price sales at free people.

The FP movement brand led the way with strong sales growth in the quarter. Segment profitability improved significantly from the prior year when the brand had elevated closeout channel sales to reduce aging products. We believe the wholesale segment could continue to deliver double-digit sales growth and improve profitability versus last year in the third quarter.

Now moving on to gross profit. URBN gross profit dollars increased 8% to $493 million while gross profit rate improved by 68 basis points to 36.5%. The improvement in gross profit rate was primarily due to increased initial merchandise margins driven by strong execution of cross functional brand initiatives in the retail, wholesale and newly segments. These improvements were partially offset by a higher markdown rate at Urban Outfitters as the brand used incremental discounts to move through excess inventory.

Now moving on to the Urban Outfitters brand. Urban Outfitters recorded a 9% retail segment comp decline in the quarter. This was largely in line with our expectations when we spoke with you in May, with both North America and Europe showing slight improvement from their Q1 performance, driven in part by higher promotions. U.O.'s negative comp was the result of disappointing performance in both North America and Europe. Global retail segment comp declined in both the digital and store channels. As noted on the last call, both the home and women's accessories categories are showing positive trends. Both categories recorded double-digit positive regular price comps, driving nicely positive maintained margin dollar and rate improvements.

Oona McCall: Don't mind.

Oona McCall: I guess, Marni, I would say that we haven't seen a lot of differences by region or geography.

Oona McCall: So, you know, certainly one of the first things that we checked, hoping that we could see something that might lead us in some direction.

Oona McCall: I had not really considered what you just said, which is more time in between seasons.

Oona McCall: I do think oftentimes, as you know, because you were in the business for a number of years, when you have a very, very hot summer early, like we did on the East Coast at least, oftentimes later in the summer people get a little bored with summer, may I say, and are anxious for fall to come.

Oona McCall: So I don't know if that has any impact at all but, you know, that's just another idea.

Now moving on to SGNA expenses. For the quarter SGNA increased 8% versus a prior comparable quarter and delivered by 32 basis points. The delivery was primarily due to the Urban Outfitters brand not being able to reduce SGNA at the same rate as their sales decline. While we did reduce our SGNA spending at the Urban Outfitters brand in Q2, we did not believe it was prudent to reduce expenses at the same rate of sales.

All other category sales comps declined in the quarter.

The increase in total company SGNA expense dollars was largely due to increased marketing spend supporting the solid sales growth at anthropology, free people, FD movement, and newly brands. Anthropology and free people brands marketing efforts helped to drive double digit traffic gains to the store and digital channels, while newly marketing campaigns helped to produce over 50% active subscriber growth. Total URBN operating income increased 10% versus last year to $145 million with operating profit rate improving 36 basis points to 10.7%.

As you know, new leadership joined the brand in North America earlier this year, and Shay Jensen, the president of U.O. North America will speak later to the Go Forward brand strategy in North America.

Finally, I will touch on the newly business, which delivered another exceptional quarter. Newly added over 25,000 average active subscribers versus the first quarter, ending the quarter with over 250,000 average active subscribers for the full quarter. The solid growth in average subscribers led in part to a 63% increase in brand revenue. As we have noted, historically, newly experiences the most significant growth in subscribers during the seasonally strong first and third quarters. A strong start in August owed well for the newly brand to continue to deliver healthy revenue growth in the third quarter. The strong revenue growth in the second quarter led to expense rate leverage in almost every expense line-dynam and resulted in a record operating profit of $5.3 million and a 5.9% operating margin for the brand.

Net income increased 13% to $117 million or $1.24 per diluted share.

I will now provide more details by brand starting with free people. The free people team produced an outstanding quarter with global free people group sales increasing 10%. The double digit increase in sales was driven by an impressive 7% retail segment comp and an 18% increase in wholesale segment revenue. The 7% retail segment comp gained was on top of the incredible 27% retail segment comp from last year. The sales comp was driven by a similar comp in both the digital and store channels.

We believe this level of profitability could continue in the back half of the year, which would make newly profitable on a full-year basis this year. Congratulations to the newly team on an exceptional quarter.

Now on to more recent trends in the macro environment. Towards the end of July and into August, we have observed a slight deep acceleration in retail segment sales compared to the second quarter run rate. While consumer traffic has remained consistent, overall purchasing activity has shown some softening. New product launches continue to resonate well, though customers appear to be exercising more discretion in their buying decisions. Given the recency of these trends, we are approaching our third quarter plans with measured caution. There are likely various macroeconomic factors influencing consumer behavior at this time, making it difficult to pinpoint specific causes.

During the quarter, the free people brand achieved positive sales growth across apparel, accessories and movement. The FP movement brand delivered 18% total growth, driven by a 6% retail segment comp, new store growth and over 60% wholesale segment growth.

Oona McCall: But we don't really have any definitive reason to believe other than a potentially slightly strapped consumer, or I don't want to say strapped, overextended consumer, why the consumer might be slowing down.

Oona McCall: Yeah, to me, it's when the consumer is being careful, they wait to buy something to maybe, a couple extra weeks to see what else is out there before they commit.

Oona McCall: I think I'm a tighter wallet while it makes them a little bit of commitment phobic.

Oona McCall: Before you go to the free people question, it would also be, I might wait a couple of weeks, to see if there are any more promotions.

Congratulations to the free people team on delivering another strong quarter even while up against last year's exceptional second quarter performance. Customer response to the brand's fall trends has been positive and the brand continues to gain market share. We believe the brand could deliver a low to mid single digit positive retail segment comp in the third quarter. The free people wholesale segment sales increased 18% during the quarter driven by full price sales gains in department and specialty stores, partially offset by an intentional decline in sales to close out channel.

Oona McCall: Yeah, exactly.

However, it is evident that the consumer sentiment has often recently, and the duration of this trend remains uncertain. During this time of uncertainty, we believe it is prudent to keep inventory levels lean and manage expenses appropriately, and that is exactly what we plan to do. Despite a deep acceleration and trend, total company sales remain positive, and we believe retail segment comps could grow in the low single-digit range for the third quarter. Positive retail segment comps, combined with robust revenue growth from newly and double-digit growth in the wholesale segment, could result in a mid-single-digit increase in total Q3 URBN sales.

The FP movement brand led the way with strong sales growth in the quarter. Segment profitability improved significantly from the prior year when the brand had elevated close out channel sales to reduce aging products. We believe the wholesale segment could continue to deliver double digit sales growth and improve profitability versus last year in the third quarter.

I will now turn the call over to Trisha Smith, Global CEO of the Anthropology Group, to provide details on their brand's second quarter performance, as well as a strategic update. Thank you, Frank, and good afternoon, everyone. I'm delighted to have the opportunity to speak to you again about the Anthropology Group Strategic Growth Initiative and our continued top line and bottom line growth in Q2.

Oona McCall: With the success of free people and free people movement, are you seeing the success also in Europe, and it's free people movement in Europe, and what are plans to either bring it there or open more free people stores there?

Oona McCall: Okay, I can answer that.

Oona McCall: Actually, our free people European business, which includes the UK, France, and Netherlands currently, is actually outpacing in Q2 our North America business substantially.

This quarter marks our 14th consecutive quarter of growth. We delivered a 7% retail segment comp with similar results in the store and digital channels. Our women's apparel and accessory business continues to lead our growth with a double-digit comp increase driven by our own brand penetration increasing several hundred basis points. And our home business were seen signs of improvement, with our trend shifting up to low single-digit negative comps. We're particularly proud that our top line growth is complemented by even greater growth and profit. The brand delivered record second-quarter operating income, up 32%, supported by IMU growth, continued mark-down efficiency, and operational improvements.

As noted on the last call, both the home and women's accessories categories are showing positive trends. Both categories recorded double digit positive regular price comps driving nicely positive maintained margin dollar and rate improvements. All other category sales comps declined in the quarter.

As you know, new leadership joined the brand in North America earlier this year and Shay Jensen, the president of U.O.

North America will speak later to the Go Forward brand strategy in North America.

This marks our 7th consecutive quarter of double-digit operating income growth. As the quarter progressed, we saw slight acceleration in July that continued into August and were anticipating low to mid-single-digit comp increases in the third quarter. We anticipate that we will be more promotional in Q3 than we were last year to ensure that our inventory is more aligned to the current self-trends as we...

Finally, I will touch on the newly business which delivered another exceptional quarter. Newly added over 25,000 average active subscribers versus the first quarter, ending the quarter with over 250,000 average active subscribers for the full quarter. The solid growth in average subscribers led in part to a 63% increase in brand revenue. As we have noted, historically newly experiences the most significant growth in subscribers during the seasonally strong first and third quarters. A strong start in August owed well for the newly brand to continue to deliver healthy revenue growth in the third quarter.

Oona McCall: And going into Q3, acceleration has picked up tremendously.

Oona McCall: So I think this last year has been about focusing on creating profitability in our stores, which we have, gaining a new customer, which we very much have.

RQ-4.

Now shifting to our longer term strategy. Over the last two years, our team has elevated product and creative, grown our customer base, and enhanced our selling environments. We are transforming our business to continue to support the expansive growth that we've experienced. Since I shared our strategic priorities with you last summer, we've exceeded the goals we set for ourselves and evolved our priorities. Our North Star remains the same, and we continue to identify new opportunities for growth, taking us from $1.6 billion in FY20 pre-COVID to last year's $2.2 billion and looking ahead toward our $3 billion ambition.

Oona McCall: So you will see more European stores for free people.

The strong revenue growth in the second quarter led to expense rate leverage in almost every expense lie-dynam and resulted in a record operating profit of $5.3 million and a 5.9% operating margin for the brand. We believe this level of profitability could continue in the back half of the year which would make newly profitable on a full-year basis this year.

Oona McCall: We do have a long-term plan to grow FP movement as well in Europe, but free, people is the priority of growth in the next couple years.

Oona McCall: And Marni, if I could, I'm gonna ask Tricia to talk about anthropology in Europe because it's, doing quite well also.

Oona McCall: Yeah, thank you.

Oona McCall: Hi Marni.

Oona McCall: You know, our anthropology EU business I would say for the last three consecutive quarters has seen a tremendous improvement and really I think that's come from the alignment of our strategic priorities are really global strategic priorities and as we've accelerated and grown the women's business in North America that's followed suit with our business in the EU.

Oona McCall: So no specific plans yet to expand our retail footprint in Europe, but we're feeling really good about the growth of the business and the profit levels that we've reached in that business and feel confident that we'll continue to see that.

We've adopted an accelerated growth mindset founded on a rapid test and learned methodology across the business. We're testing, reacting, and amplifying successes. In our women's business three years ago, when we came to modernize our product, we started with what we're the most famous for. We accelerated dresses and built our denim and shoe assortment. Additionally, we strengthened our apparel loan brands, increasing their contribution to nearly 70% of the business. Pill Crow, our lifestyle denim brand, has grown at a rate outpacing our top line since last year and made a customer favorite. It is our most profitable own brand and has seen strong double-digit growth year over year.

Oona McCall: One moment for our next question.

Congratulations to the newly team on an exceptional quarter.

Oona McCall: And that will come from the line of Janet Kloppenburg with JJK, Research.

Oona McCall: Your line is open.

Oona McCall: Hi everybody.

Oona McCall: Just a couple of quick questions.

Given the recency of these trends, we are approaching our third quarter plans with measured caution. There are likely various macroeconomic factors influencing consumer behavior at this time, making it difficult to pinpoint specific causes. However, it is evident that the consumer sentiment has often recently, and the duration of this trend remains uncertain.

Looking forward, we see opportunity for further growth by expanding the end-use offering of our products to serve our customers' full lifestyle through three new concepts. We're building our active and lounge business on our own brand Daily Practice, offering a year-round discernment of sleeper and intimate and all stores, and a vacation lifestyle capsule in select locations seasonally and online year-round. These own brand collections are supplemented with market brands who have authority within the space. Six months ago, we tested doubling the store square footage of these concepts, and the test resulted in improved overall store performance, with test stores outpacing control stores in the growth of the total women's category as well as the daily practice collection.

During this time of uncertainty, we believe it is prudent to keep inventory levels lean and manage expenses appropriately, and that is exactly what we plan to do. Despite a deep acceleration and trend, total company sales remain positive, and we believe retail segment comps could grow in the low single-digit range for the third quarter. Positive retail segment comps, combined with robust revenue growth from newly and double-digit growth in the wholesale segment, could result in a mid-single-digit increase in total Q3 URBN sales.

And given the success of that test, we've rolled out the expansion to 50 locations. In our home business, we're well-positioning categories that resonate with customers around entertaining and refreshing their home decor. For example, our Q2 home accessories business, which includes categories such as home fragrance and tabletop, has grown high single digits year over year. We spent the last 18 months laying the foundation for more profitable growth in the home category. In the home business, as you know, product profitability has impacted significantly by factors other than IMU, and we've engineered operational efficiencies upon which we can more profitably grow our business.

This quarter marks our 14th consecutive quarter of growth. We delivered a 7% retail segment comp with similar results in the store and digital channels. Our women's apparel and accessory business continues to lead our growth with a double-digit comp increase driven by our own brand penetration increasing several hundred basis points. And our home business were seen signs of improvement with our trend shifting up to low single-digit negative comps. We're particularly proud that our top line growth is complemented by even greater growth and profit.

We are applying our rapid testing approach in anthropology home, taking strategic risks and fueling units. Our customers are responding to our products and our inspirational creative assets, and at the same time appealing to and helping us speak to more customers. Since FY20, through the end of last year, we have grown our customer base by an additional 1 million customers, up 30%. Of this, our new customer was the fastest growing segment at plus 52%. While we have also seen double-digit growth in retained customers. In addition, our sales per customer has grown over 20%. In addition to growing our total customer base and their value, we have simultaneously welcomed a younger demographic to our brand, especially in our women's division, where we've seen a two-year reduction in the average age of our new customers in the last year.

The brand delivered record second-quarter operating income, up 32% supported by IMU growth, continued mark-down efficiency and operational improvements. This marks our 7th consecutive quarter of double-digit operating income growth. As the quarter progressed, we saw slight acceleration in July that continued into August and were anticipating low to mid-single-digit comp increases in the third quarter. We anticipate that we will be more promotional in Q3 than we were last year to ensure that our inventory is more aligned to the current self-trends as we...

RQ-4. Now shifting to our longer term strategy. Over the last two years our team has elevated product and creative, grown our customer base, and enhanced our selling environments. We are transforming our business to continue to support the expansive growth that we've experienced. Since I shared our strategic priorities with you last summer, we've exceeded the goals we set for ourselves and evolved our priorities. Our North Star remains the same, and we continue to identify new opportunities for growth, taking us from $1.6 billion in FY20 pre-COVID to last year's $2.2 billion and looking ahead toward our $3 billion ambition.

Furthermore, we're speaking to our customers as omnichannel customers, not just retailer digital. Our omnichannel customers spend four times what little channel customers spend, contributing to the consistent growth we see across both channels. We're investing in all channels and points of customer contact to enhance the selling experience in digital, in stores, and in our call centers. We are adding stores at a more rapid rate than we have in a decade. Since FY20, our four-wall profitability has grown over 900 basis points, while our same-store sales have increased almost 20%. Our plan to grow the anthropology fleet to 270 stores globally is well underway.

We've adopted an accelerated growth mindset founded on a rapid test and learned methodology across the business. We're testing, reacting, and amplifying successes. In our women's business three years ago when we came to modernize our product, we started with what we're the most famous for. We accelerated dresses and built our denim and shoe assortment. Additionally, we strengthened our apparel loan brands increasing their contribution to nearly 70% of the business. Pill Crow, our lifestyle denim brand, has grown at a rate outpacing our top line since last year and made a customer favorite is our most profitable own brand and has seen strong double-digit growth year over year.

Having acquired 1 million new customers, we're leveraging omnichannel data to position our stores where we know we have customers, particularly as customers are migrating to different geographies and markets, and we're honored with the welcome reception we've received in those communities. As we open stores, new markets along with strong new store sales, we also see significant increases in digital demand. For our omnichannel approach is about creating a consistent and outstanding experience across channels.

We are proud of our transformation, and I'm proud of the exceptional team delivering our results.

I'm confident in our continued growth on our path to become a three billion brand, and I look forward to providing you with more updates in the future.

I'll now turn the call back to Frank. Thank you, Trisha. Congratulations on the incredible performance and exciting strategic update.

Looking forward we see opportunity for further growth by expanding the end-use offering of our products to serve our customers' full lifestyle through three new concepts. We're building our active and lounge business on our own brand daily practice, offering a year-round discernment of sleeper and intimate and all stores, and a vacation lifestyle capsule in select locations seasonally and online year-round. These own brand collections are supplemented with market brands who have authority within the space.

Next up is Shae Jensen, Urban Outfitters North American president. She will be speaking to the U.O. North America's updated brand review and strategic plan.

Thank you, Frank, and good afternoon, everyone. I'm pleased to share an update on the Urban Outfitters brand, North America. Over the past few years, Urban Outfitters North America has faced significant challenges in both top and bottom line performance. Over the past six months, with new leadership in place, the team has conducted an extensive review of the brand. We've assessed our market position, customer health, product disappointments, marketing, including our creative perspective, our selling channel touch points, and our talent. What we have learned is that while there is a great deal of opportunity for improvement, the brand is not fundamentally broken.

Oona McCall: Shay at Urban Outfitters, I know you've been doing a lot of research on your, customer, etc., and I'm wondering what your pricing research is indicating and in what direction that will take your pricing as we go forward.

Six months ago, we tested doubling the store square footage of these concepts, and the test resulted in improved overall store performance with test stores outpacing control stores in the growth of the total women's category as well as the daily practice collection. And given the success of that test, we've rolled out the expansion to 50 locations. In our home business, we're well-positioning categories that resonate with customers around entertaining and refreshing their home decor.

Oona McCall: And for Melanie, should we expect inventories to be aligned with sales trends by the end of the third quarter?

Oona McCall: And just lastly for Dick, you know, as AOV and spending might be slowing and, you know, with a more cautious consumer, how does that make you feel about your marketing spend for the total company?

Oona McCall: And, you know, would you consider going back to levels that were closer to 2019?

We believe the erosion and sales and profits is due to a combination of a lack of focus and clarity on our customer in the dynamic and changing market and poor execution in the absence of a wholly dedicated leadership team. We are confident that with the right team in place and the right approach, Urban Outfitters can rebuild our customer base, restore profitability, and restate our position as one of the most beloved brands for young customers. Our segment has seen rapid and seismic shifts as the generational passage from millennials to Gen Z has occurred amidst the global pandemic.

For example, our Q2 home accessories business, which includes categories such as home fragrance and tabletop, has grown high single digits year over year. We spent the last 18 months laying the foundation for more profitable growth in the home category. In the home business, as you know, product profitability has impacted significantly by factors other than IMU, and we've engineered operational efficiencies upon which we can more profitably grow our business. We are applying our rapid testing approach in anthropology home, taking strategic risks and fueling units.

Oona McCall: Thank you.

Oona McCall: I'll start Janet because I have a very quick answer for you.

Oona McCall: The answer is yes because guess, what?

Our customers are responding to our products and our inspirational creative assets and at the same time appealing to and helping us speak to more customers. Since FY20, through the end of last year, we have grown our customer base by an additional 1 million customers, up 30%. Of this, our new customer was the fastest growing segment at plus 52%. While we have also seen double-digit growth in retained customers, in addition, our sales per customer has grown over 20%.

As these shifts occurred and a new generation began coming of age, we lost focus on our customers. and we lost track of how to win with them in today's dynamic retail environment. As a result, our customer funnel eroded as we did not acquire enough new customers, and our retention rates declined as well. Additionally, the lack of clarity and focus on customers impacted our product strategies, our marketing strategies, and our channel experience across our touch points. In the short term, our focus has been on stabilizing our business. We have strengthened our leadership team, adding subject matter expertise across all critical functions, corrected our inventory level so that we are entering the second half of this year with clean inventory and new, fresh product, and perhaps most importantly, work to gain a solid understanding of young customers today through extensive customer research, both qualitative and quantitative.

Oona McCall: We were just discussing this.

In addition to growing our total customer base and their value, we have simultaneously welcomed a younger demographic to our brand, especially in our women's division where we've seen a two-year reduction in the average age of our new customers in the last year. Furthermore, we're speaking to our customers as omnichannel customers, not just retailer digital. Our omnichannel customers spend four times what little channel customers spend contributing to the consistent growth we see across both channels.

These insights will guide our path forward and help shape our strategy.

We're investing in all channels and points of customer contact to enhance the selling experience in digital in stores and in our call centers. We are adding stores at a more rapid rate than we have in a decade. Since FY20, our four-wall profitability has grown over 900 basis points, while our same-store sales have increased almost 20%. Our plan to grow the anthropology fleet to 270 stores globally is well underway. Having acquired 1 million new customers, we're leveraging omnichannel data to position our stores where we know we have customers particularly as customers are migrating to different geographies and markets, and we're honored with the welcome reception we've received in those communities. As we open stores new markets along with strong new store sales, we also see significant increases in digital demand. For our omnichannel approach is about creating a consistent and outstanding experience across channels.

Looking ahead, we have established five pillars to recover the brand and return to growth. Our ambition is to become the definitive brand for young adults. The five pillars of brand recovery that we have identified are, first, we have defined and will consistently focus on our target customer. Second, with a clear and united understanding of who our customers are, we will rebuild our customer base by investing in marketing strategies that meet young customers where they are and build affinity with our brand. Third, we will evolve our product offer to be more relevant to a broader range of target customers.

Oona McCall: So it's something that we haven't agreed on totally yet, but I do think that that's an element that is out there that is open for discussion.

Oona McCall: I can jump in, Janet.

Oona McCall: It's Shay.

Oona McCall: Yes, we've done a lot of research and we heard very clearly that customers perceive us as expensive, so they believe that our prices are higher than they need to be.

Fourth, we will maintain focus on disciplined inventory investments, ensuring our investments drive improved full-price sell-through and meet the demand of our customers. And finally, we will adapt our touch points to be more relevant for Gen Z consumers. Our first step was to gain a firm understanding of Gen Z consumers. Today, the Gen Z consumer is significantly different than the millennial generation before them, from size, ethnicity, taste, and occasions to how they view and interact with the world. We have traditionally targeted an aspirational 22-year-old customer living in major metropolitan cities. Our new customer segmentation broadens our target and aligns customers across three segments: younger suburban pre-college customers, a college age student, and an older post college customer.

We are proud of our transformation and I'm proud of the exceptional team delivering our results. I'm confident in our continued growth on our path to become a three billion brand and I look forward to providing you with more updates in the future.

I'll now turn the call back to Frank. Thank you, Trisha.

Congratulations on the incredible performance and exciting strategic update.

Next up is Shae Jensen, Urban Outfitters North American President. She will be speaking to the U.O. North America's updated brand review and strategic plan.

Thank you, Frank, and good afternoon everyone. I'm pleased to share an update on the Urban Outfitters brand, North America. Over the past few years, Urban Outfitters North America has faced significant challenges in both top and bottom line performance. Over the past six months, with new leadership in place, the team has conducted an extensive review of the brand. We've assessed our market position, customer health, product disappointments, marketing, including our creative perspective, our selling channel touch points, and our talent.

We welcome and want to serve today's population of young customers across more prices and sizes, more categories and occasions, and across more aesthetics and sensibilities in both urban and suburban areas. This includes pivoting from our traditionally alternative sensibility to offering a more upbeat and welcoming perspective across our assortment and our touch points. With this in mind, our goal is to welcome more people into our brand. We will rebuild our customer base by refreshing our brand identity, clarifying our mission, vision and values, evolving our creative expressions across our touch points, and repositioning Urban Outfitters to be a more welcoming and relevant brand for young customers today.

Oona McCall: We are attacking that full force and we've made the commitment to offer the best price value for every item we sell and that also includes expanding our range of accessible or opening price points.

What we have learned is that while there is a great deal of opportunity for improvement, the brand is not fundamentally broken. We believe the erosion and sales and profits is due to a combination of a lack of focus and clarity on our customer in the dynamic and changing market and poor execution in the absence of a wholly dedicated leadership team. We are confident that with the right team in place and the right approach, Urban Outfitters can rebuild our customer base, restore profitability, and restate our position as one of the most beloved brands for young customers.

Oona McCall: So we're tackling that, you know, you know, pretty quickly.

Oona McCall: I would also say that price is a very dynamic subject.

Oona McCall: It changes rapidly and ultimately our goal is to really price things right across the market and be as competitive as possible.

Additionally, we are already actively strengthening our presence across social media platforms and reallocating our marketing investments to prioritize the acquisition of new customers. Customers. We believe that our approach will yield healthier levels of organic traffic and high customer acquisition rates to continuously fuel our customer funnel.

Our segment has seen rapid and seismic shifts as the generational passage from millennials to Gen Z has occurred amidst the global pandemic. As these shifts occurred and a new generation began coming of age, we lost focus on our customers, and we lost track of how to win with them in today's dynamic retail environment. As a result, our customer funnel eroded as we did not acquire enough new customers and our retention rates declined as well.

Next, we will evolve our product offer to serve a broader range of customers. We believe our product assortment has unintentionally become too narrow in price occasion and sensibility and needs broader appeal. With insight driving our past forward, we will increase the penetration of opening price points as well as ensure we offer the best price-value combination on every item we sell. We will broaden our category range and ensure we are meeting the lifestyle and occasion needs of our target customers. We do not believe this means an increase in total skews but rather a more accurate representation of the right products across the total assortment.

Additionally, the lack of clarity and focus on customers impacted our product strategies, our marketing strategies and our channel experience across our touch points. In the short term, our focus has been on stabilizing our business. We have strengthened our leadership team adding subject matter expertise across all critical functions, corrected our inventory level so that we are entering the second half of this year with clean inventory and new fresh product, and perhaps most importantly work to gain a solid understanding of young customers today through extensive customer research, both qualitative and quantitative. These insights will guide our path forward and help shape our strategy.

This does include better accuracy and allocation of sizes and improving the productivity of the total offering through assortment planning and allocation that is rooted in our customer strategy. We plan to introduce new categories such as that leisure, distort into the categories we've heard matter to our customers such as denim and lounge, and amplify the categories where we uniquely differentiate such as gifting and beauty. We are also excited to rebuild our brand of assortment through partnerships with aspirational, influential, and credible national brands that matter to young customers today. We anticipate our customer focused product strategies will deliver a higher penetration of full-price sales and full-price sales growth, and a reduced dependency on promotionality.

We know sentiment and style can move fast with young customers, and in order to leverage the incredible scale of the URBN sourcing and speed to market capabilities. We need to maintain inventory discipline and better align our sales to inventory levels. By utilizing more data-driven planning and allocation capabilities, we will reduce our markdowns, work to restore profitability, and position our teams to fuel growth by making decisions closer to our customers. As we enter the second half of this year with clean inventory, we expect our turns to improve on a regular cadence.

Third, we will evolve our product offer to be more relevant to a broader range of target customers. Fourth, we will maintain focus on disciplined inventory investments, ensuring our investments drive improve full price sell through and meet the demand of our customers. And finally, we will adapt our touch points to be more relevant for Gen Z consumers. Our first step was to gain a firm understanding of Gen Z consumers. Today, the Gen Z consumer is significantly different than the millennial generation before them, from size, ethnicity, taste and occasions to how they view and interact with the world.

Finally, we heard from our customers that a combination of social, digital, and in-real-life or physical shopping are equally important components of the shopping experience. Gen Z's coming-of-age experience began during a global pandemic, and the idea of connecting a shopping experience through the discovery of social media to the convenience of digital shopping and the connection that can be made in physical retail is table stakes. We are advantaged with our retail footprint and on the channel capabilities. We will work to optimize our footprint to ensure our locations are positioned near our target demographic and ensure we better align the sides of our stores with our new vision for physical and retail and the store experience.

We have traditionally targeted an aspirational 22 year old customer living in major metropolitan cities. Our new customer segmentation broadens our target and aligns customers across three segments, younger suburban pre-college customers, a college age student, and an older post college customer. We welcome and want to serve today's population of young customers across more prices and sizes, more categories and occasions, and across more aesthetics and sensibilities in both urban and suburban areas. This includes pivoting from our traditionally alternative sensibility to offering a more upbeat and welcoming perspective across our assortment and our touch points.

We believe we have an opportunity to close some store locations where population shifts have occurred to relocate some stores to be more adjacent to our target customers, but also to better align the sides of our stores with our future needs. At the same time, we will work actively to optimize our stores through improved assortment strategies and localization. Finally, digital channels are where young customers live their lives. Our team is doubling down on our engagement on social platforms and working to ensure our digital experience evolves to be an extension of that digital experience through more user-generated content, improved creative, and social features.

With this in mind, our goal is to welcome more people into our brand. We will rebuild our customer base by refreshing our brand identity, clarifying our mission, vision and values, evolving our creative expressions across our touch points, and repositioning urban outfitters to be a more welcoming and relevant brand for young customers today. Additionally, we are already actively strengthening our presence across social media platforms and reallocating our marketing investments to prioritize the acquisition of new customers.

Omni-channel customers are our most valuable customers, spending more than three times other customers. With an adapted channel experience, we expect our customer engagement and retention will grow, and ultimately our percentage of Omni-channel customers will increase.

Customers. We believe that our approach will yield healthier levels of organic traffic and high customer acquisition rates to continuously fuel our customer funnel. Next, we will evolve our product offer to serve a broader range of customers. We believe our product assortment has unintentionally become too narrow in price occasion and sensibility and needs broader appeal. With insight driving our past forward, we will increase the penetration of opening price points as well as ensure we offer the best price value combination on every item we sell.

Despite our current challenges, we are optimistic about the steps we are taking to revitalize Urban Outfitters North America. In the short term, we are looking to see sequential top-line improvement with a building penetration of full-price sales, which should drive stronger bottom-line improvement. As we pivot our marketing strategies, we expect a build of our customer funnel will at the same time we are working to evolve our product disortment and see full-price sales grow. We recognize this may take time to fully materialize, but we are committed to rebuilding our customer base and restoring profitability. The road ahead involves focused execution on our five recovery pillars.

We will broaden our category range and ensure we are meeting the lifestyle and occasion needs of our target customers. We do not believe this means an increase in total skews but rather a more accurate representation of the right products across the total assortment. This does include better accuracy and allocation of sizes and improving the productivity of the total offering through assortment planning and allocation that is rooted in our customer strategy. We plan to introduce new categories such as that leisure, distort into the categories we've heard matter to our customers such as denim and lounge and amplify the categories where we uniquely differentiate such as gifting and beauty.

With a solid leadership team in place, we're optimistic about our strategy, the path ahead, and our ambition to become the definitive brand for young adults.

I'll now turn the call over to Melanie. Thank you, Shay.

Oona McCall: Yes, we are targeting Q3 inventory levels to be in line with Belfast.

Now I will discuss our thoughts on the third quarter financial performance and fiscal year FY25 performance. As Frank mentioned, we have seen a slight deceleration in trends recently, but our total company sales remain positive. Right now, we believe that third quarter total company sales growth could be mid-single digits. Sales growth in Q3 could result from low single-digit growth and retail segment comp and low teen growth in the wholesale segment. In addition, we believe a newly segment sales growth could be mid-devil digits.

Oona McCall: Thank you.

We are also excited to rebuild our brand of assortment through partnerships with aspirational, influential and credible national brands that matter to young customers today. We anticipate our customer focused product strategies will deliver a higher penetration of full-price sales and full-price sales growth and a reduced dependency on promotionality. We know sentiment and style can move fast with young customers and in order to leverage the incredible scale of the URBN sourcing and speed to market capabilities.

Oona McCall: And we do have time for one last question.

Oona McCall: And that will come from the line of Ike Boruchow with Wells Fargo.

Oona McCall: Your line is open.

Now on to growth profit margin. We believe URBN's growth margin rate for the third quarter could decline by approximately 100 basis points compared to the prior year's third quarter. The reduction in growth profit margin could be primarily due to higher markdowns, as our third quarter received plans were ordered prior to the recent deceleration. As a result, we will need to add incremental promotional activity and markdowns in the quarter to clear through inventory as we enter the fourth quarter. We continue to believe that URBN can deliver our full-year plan of approximately 50 to 100 basis points of growth margin improvement compared to the prior year.

Oona McCall: Hey, everyone.

We need to maintain inventory discipline and better align our sales to inventory levels. By utilizing more data-driven planning and allocation capabilities, we will reduce our markdowns, work to restore profitability and position our teams to fuel growth by making decisions closer to our customers. As we enter the second half of this year with clean inventory, we expect our turns to improve on a regular cadence.

Finally, we heard from our customers that a combination of social, digital and in-real life or physical shopping are equally important components of the shopping experience. Gen Z's coming-of-age experience began during a global pandemic and the idea of connecting a shopping experience through the discovery of social media to convenience of digital shopping and the connection that can be made in physical retail is table stakes. We are advantaged with our retail footprint and on the channel capabilities.

Now moving on to SG&A expense. Based on our current sales performance and plan, we believe SG&A growth for the third quarter will increase in the mid-single digits. Our plan growth in SGNA could be primarily driven by higher marketing expense to support growth in customers and sales at Anthropology, Free People, SP Movement, and Newly. As always, if sales performance fluctuates, we maintain a certain level of variable SG&A spending that we can adjust up and down depending on how our business is performing.

We will work to optimize our footprint to ensure our locations are positioned near our target demographic and ensure we better align the sides of our stores with our new vision for physical and retail and the store experience. We believe we have an opportunity to close some store locations where population shifts have occurred to relocate some stores to be more adjacent to our target customers, but also to better align the sides of our stores with our future needs.

We are currently planning our effective tax rate to be approximately 24.25% for the third quarter and 24% for the full year. Now, moving on to inventory, we believe that inventory levels in the third quarter could grow at a rate similar to sales growth. Approximately 50% is related to retail store expansion and support. Approximately 25% is related to logistics capacity investments, including the newly rental fulfillment center in Raymore, Missouri, which we opened in the first quarter. And the remaining 25% would be our normal capital investments supporting IT, home office, and logistics operations.

At the same time, we will work actively to optimize our stores through improved assortment strategies and localization. Finally, digital channels are where young customers live their lives. Our team is doubling down our engagement on social platforms and working to ensure our digital experience evolves to be an extension of that digital experience through more user-generated content, improved creative and social features. Omni-channel customers are our most valuable customers, spending more than three times other customers. With an adapted channel experience, we expect our customer engagement and retention will grow and ultimately our percentage of Omni-channel customers will increase.

Lastly, we'll be opening approximately 57 new stores and closing approximately 25 stores. Our net new store growth is being driven by growth in F.P. movement, free people, and anthropology stores. During FY 25, we plan on opening 25 F.P. movement stores, 12 Free People stores, and 13 Anthropology stores.

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.

Oona McCall: Thanks for squeezing me in.

Now, I am pleased to turn the call to Dick for closing remarks. Thank you, Mel, and thank you to our brand leaders, Trisha, Sheila, Shay, and Dave, and in Europe, Emma and Matt. They and their teams produced outstanding second quarter results. As Frank shared earlier, four of our five brands delivered record second quarter sales and profits, and the urban brand, as Shay just discussed, has fashioned strategy to win on a go forward basis. Most importantly, the urban brand now has a strong team in place to deliver on that strategy. Turning to the current business climate, on our last conference call, I stated that the customer mood in Q1 was enthusiastic, rather than the mood a year earlier, which was exuberant.

The road ahead involves focused execution on our five recovery pillars. With a solid leadership team in place, we're optimistic about our strategy, the path ahead, and our ambition to become the definitive brand for young adults.

Oona McCall: Just maybe Frank or Melanie, just on the gross margin, I'm trying to make sure I understand, the trajectory.

I'll now turn the call over to Melanie. Thank you, Shay.

Oona McCall: You guys, you know, you're being very clear about, you know, you overbought based on the, sales trend.

Oona McCall: And, you know, there's some, obviously, there's some extra markdowns in the third quarter, gross margins down 100.

Oona McCall: But to maintain the year, at least on my math, that implies gross margins are going to inflect, pretty meaningfully back positive up around 100 basis points by 4Q.

I believe this is still an accurate description for Q2. Traffic in our stores remain strong, and online sessions remain double-digit positive at three of our four retail brands. Fall products are selling briskly, with customers choosing the newest fashion; yet all our retail brands registered a slight sales slowdown in mid July that continues in August.

Oona McCall: I guess I'm just trying to make sure I understand, is there a one-time reversal that happened, in 4Q last year, or are you expecting to be back to clean and growing again by 4Q?

Now on to growth profit margin. We believe URBN's growth margin rate for the third quarter could decline by approximately 100 basis points compared to the prior year third quarter. The reduction in growth profit margin could be primarily due to higher markdowns as our third quarter received plans were ordered prior to the recent deceleration. As a result, we will need to add incremental promotional activity and markdowns in the quarter to clear through inventory as we enter the fourth quarter.

Oona McCall: I'm just not sure I understand the quick inflection, you guys.

Oona McCall: That looks like it's baked into the plan.

Oona McCall: I just want to, before Frank answers the question specifically, I just want to clarify for everyone, we did not overbuy. We bought to a trend that was in existence when we had to order the product, and that, trend changed fairly abruptly at the very end of the season. And that's why we now are caught with a little bit of extra inventory.

Oona McCall: Frank?

So what's different? You may recall, I also said on the May call that consumer purchases were becoming slightly more considered than the previous year. With the slowdown starting in mid July, purchases became even more considered. Conversion dropped slightly, and price became a bigger factor, with AOV dipping slightly as well. Total transactions continue to grow, but the customer on average spent a little less on each purchase. We believe this suggests a return to pre-COVID behavior, when our comp sales expectations were typically lower and customers were more selective. We expect this will become the new reality, and as Frank discussed, will necessitate even stronger inventory and expense control.

Oona McCall: Yeah.

We continue to believe that URBN can deliver our full-year plan of approximately 50 to 100 basis points of growth margin improvement compared to the prior year.

Now moving on to SGNA expense. Based on our current sales performance and plan, we believe SGNA growth for the third quarter will increase in the mid-single digits. Our plan growth in SGNA could be primarily driven by higher marketing expense to support growth in customers and sales at anthropology, free people, SP movement, and newly. As always, if sales performance fluctuates, we maintain a certain level of variable SGNA spending that we can adjust up and down depending on how our business is performing.

Our brand and shared service teams understand the new environment and are prepared to meet that challenge.

Oona McCall: And so, you know, obviously, we grew gross profit margin in Q1 and in Q2, both times, beating our plan.

Oona McCall: You are correct.

Oona McCall: We are committed to the 50 to 100 basis point improvement for the full year, which would, imply over 100 basis points opportunity in the fourth quarter.

Finally, a word about our youngest brand, Newly. The brand celebrated its fifth birthday in the second quarter and commemorated it by delivering another quarter, the strong year-over-year double-digit gains in average active subscribers and revenue. They also posted record profits and became the number one fashion rental business in the US. Happy birthday, Newly. Congratulations on your success.

That concludes our prepared remarks. I wish to thank our co-presidents, the brand design and shared service leaders and their teams, and our 28,000 associates worldwide for their excellent work. Our outstanding Q2 results flow directly from your creativity, drive, and resilience. So thank you. Thanks also to our many partners around the world. We appreciate the significant contributions you make to our success. And finally, thanks to our shareholders for your continued support.

Lastly, we'll be opening approximately 57 new stores and closing approximately 25 stores. Our net new store growth is being driven by growth in F.P, movement, free people, and anthropology stores. During FY 25, we plan on opening 25 F.P, movement stores, 12 free people stores, and 13 anthropology stores.

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.

I now turn the call over for your questions. Thank you. If you have a question at this time, please press star 11 on your touchtone telephone and wait for your name to be announced. If your question has been answered or you wish to remove yourself from the queue, please press star 11 again.

Please limit your questions to one per caller. One moment while we compile the Q&A roster.

And our first question will come from the line of Lorraine Hutchinson with Bank of America. Your line is open. Thank you. Good afternoon.

Can you comment on how comfortable you are with the level and content that you will inventory entering the second half, and then separately can you also walk us through the drivers of the fourth quarter of course margin recovery assumed in guidance.

Most importantly, the urban brand now has a strong team in place to deliver on that strategy. Turning to the current business climate, on our last conference call, I stated that the customer mood in Q1 was enthusiastic, rather than the mood a year earlier, which was exuberant. I believe this is still an accurate description for Q2 traffic in our stores remain strong and online sessions remain double digit positive at three of our four retail brands.

Hi Lorraine. It's Jay. I can take that.

We feel really great as you heard, and your prepared remarks were confident that our inventory is clean. Inventory levels are much more aligned with sales, and really that's the primary driver of the margin recovery. And Lorraine as it relates to our fourth quarter for you are the end. It would really be driven by two things: the gross profit margin improvement opportunity, one I knew, which we've got a very strong and comfortable component line of sight to; and second, is the significant opportunity and mark down improvement of the urban operators brand.

Fall products are selling briskly with customers choosing the newest fashion, yet all our retail brands registered a slight sales slowdown in mid July that continues in August. So what's different? You may recall, I also said on the May call, that consumer purchases were becoming slightly more considered than the previous year. With the slowdown starting in mid July, purchases became even more considered. Conversion dropped slightly and price became a bigger factor with AOV dipping slightly as well.

Oona McCall: It is not due to a one-time reversal. It is due to the Urban Outdoors brand opportunity to significantly improve their markdown rate, now that their inventory is much more in line with sales and will continue to be so, managing that business on, you know, tighter weeks of supply and, you know, just much, much more efficiently than where we were heading into the fourth quarter last year.

I think she'll a shame team up on a great job at aligning their inventory now much closer with sales and they had significantly higher mark down rates than what we would normally run in the fourth quarter last year so that there is meaningful opportunity for us for that brand and to help you are being drive improved to improve mark down rates in the fourth quarter driving improved gross profit margin in the fourth quarter.

Oona McCall: But you are correct.

Total transactions continue to grow, but the customer on average spent a little less on each purchase. We believe this suggests a return to pre-COVID behavior, when our comp sales expectations were typically lower and customers were more selective. We expect this will become the new reality and as Frank discussed, will necessitate even stronger inventory and expense control. Our brand and shared service teams understand the new environment and are prepared to meet that challenge.

Thank you. One moment for our next question. And that will come from the line of Adrienne Yih with Barclays. Your line is open. Great, thank you very much. So my question is around, kind of the, your, your higher end consumer and sort of kind of their resistance or price resistance.

Oona McCall: That would imply, and that's what we are planning for, is greater than 100 basis points improvement, in the fourth quarter, hitting that still full-year plan of 50 to 100 basis points of gross profit margin improvement.

Can you, either Dick or Frank or Melanie, can you talk about kind of your initial retails across the three brands where they are relative to 2019? And, and I guess like, does this, does the increasing commotionality at Anthro in particular? Does that mean that, are you sensing that there's any need to readjust kind of initial retail prices?

Finally, a word about our youngest brand newly. The brand celebrated its fifth birthday in the second quarter and commemorated it by delivering another quarter, the strong year over year double digit gains in average active subscribers and revenue. They also posted record profits and became the number one fashion rental business in the US. Happy birthday, newly. Congratulations on your success.

Thank you.

Oona McCall: Thank you.

Okay, Adrienne, I'll start with that, then ask Tricia to talk about anthropology a little bit more specifically, although I'll mention anthropology in my answer. When I talk about the consumer, our customer decreasing the AOV, meaning the amount of money they spend per transaction. I'll not a lot of that is occurring because it's both the anthropology and the fee, fee people. Brands are now offering them an alternative product to purchase.

That concludes our prepared remarks. I wish to thank our co-presidents, the brand design and shared service leaders and their teams and our 28,000 associates worldwide for their excellent work. Our outstanding Q2 results flow directly from your creativity, drive and resilience. So thank you. Thanks also to our many partners around the world. We appreciate the significant contributions you make to our success. And finally, thanks to our shareholders for your continued support.

In the anthropology brand, Tricia talked about the early practice and off hours. And that is somewhat less expensive than their other apparel options. And the, that customer, the anthropologist customer, is choosing those lower priced items, which is driving the overall AUR and AOV down slightly. Same thing is happening to free people because of FP movement is doing so well. It's a higher penetration of the total. And FP movement is slightly less expensive than the rest of their apparel. So I think that it's not really a, it's not really a problem. It's just, it's showing up in the overall comps.

And our first question will come from the line of Lorraine Hutchinson with Bank of America. Your line is open. Thank you.

Good afternoon. Can you comment on how comfortable you are with the level and content that you will inventory entering the second half and then separately can you also walk us through the drivers of the fourth quarter of course margin recovery assumed in guidance. Hi Lorraine. It's Jay. I can take that. We feel really great as you heard and you prepared remarks were confident that our inventory is clean inventory levels are much more aligned with sales and really that's the primary driver of the margin recovery.

Tricia, do you want to expand on it? Sure, I think when you look at our average unit retail received, Adrian, from now through back through FY19, in total that AUR is not that much higher to Dixpoint around the additional categories that we've introduced into the mix. So our prices in total, in terms of the receipts that we've brought in, like low single, like mid single digits, I would say, our average unit sales are up tremendously, and that's really come from the return to a full price business. So that the mix of our price points in total is not that different, but we will continue to drive a full-price business, which we have been doing for the last.

And Lorraine as it relates to our fourth quarter for you are the end. It would really be driven by two things the gross profit margin improvement opportunity one I knew which we've got a very strong and comfortable component line of sight to and second is the significant opportunity and mark down improvement of the urban operators brand. I think she'll a shame team up on a great job at aligning their inventory now much closer with sales and they had significantly higher mark down rates than what we would normally run in the fourth quarter last year so that there is meaningful opportunity for us for that brand and to help you are being drive improved to improve mark down rates in the fourth quarter driving improved gross profit margin in the fourth quarter. Thank you. One moment for our next question.

Oona McCall: Okay.

Thank you. One moment for our next question. And that will come from the line of Matthew Boss with JP Morgan. Your line is open. Great. Thanks.

Oona McCall: I think that does it.

So, Dick, could you elaborate a bit just on demand trends that you're seeing in August that Anthro and Free People and also just speak to initial customer response to back to school at the Urban Outfitters brand? Okay.

And that will come from the line of Adrienne Yih with Barclays. Your line is open. Great, thank you very much. So my question is around, kind of the, your, your higher end consumer and sort of kind of their resistance or price resistance. Can you, either Dick or Frank or Melanie, can you talk about kind of your initial retails across the three brands where they are relative to 2019? And, and I guess like, does this, does the increasing commotionality at Anthro in particular?

I will let Shea talk about Urban Outfitters' customer demand overall. So, at all of our retail brands, the accelerator is slightly in mid-July and we're seeing that continue into August. The lower demand rate feels like it's a return to pre-COVID levels and away from what I would consider a supercharged demand. And over the last few years. Now, our investment in brand marketing over the past few years in three of our retail brands was elevated and is now paying dividends. Those brand brands grow their customer base considerably. And so now store traffic and online traffic remains strong, and that's driving total transactions.

Does that mean that, are you sensing that there's any need to readjust kind of initial retail prices? Thank you. Okay, Adrienne, I'll start with that then ask Tricia to talk about anthropology a little bit more specifically, although I'll mention anthropology in my answer. When I talk about the consumer, our, our customer decreasing the AOV, meaning the amount of money they spend per transaction. I'll not a lot of that is occurring because it's both the anthropology and the fee, fee people brands are now offering them an alternative product to purchase.

So, you want to talk about Back to School? Yeah, is Shea. I would say that what we're seeing is not dissimilar to what Dick covered for the overall URBN status. However, I think in some of the areas that we have been able to impact with some of our initial work, we are seeing some positive momentum. So areas like women's accessories and home, and even across our denim categories, which is obviously a very strong category for back to school. And that brings us some optimism against our path forward, but I think generally it's in line with what Dick said.

Oona McCall: Thank you very much for joining us, and we hope to see you back in a few months.

Thank you. One moment for our next question. And that will come from the line of Paul Lejuice with City. Your line is open. Hey, thanks, guys. I know you said that you felt decent about inventory of the Urban Apples brand, but I'm curious.

Oona McCall: This concludes today's program.

Oona McCall: Thank you all for participating.

Shea, if you think the product and the store aesthetic is where you want it to be to justify kicking up marketing investment at this point, or is that going to take some time? And just curious when we might see those picked up marketing investments, and then also curious to get your view on what is the right size of the Urban Apples store and the right mix of mall versus off mall. Thanks. Yeah. Thanks for the question.

So I think that it's not really a, it's not really a problem. It's just, it's showing up in the overall comps. Tricia, do you want to expand on it? Sure, I think when you look at our our average unit retail received Adrian from now through, back through FY19, in total that AUR is not that much higher to Dixpoint around the additional categories that we've introduced into the mix. So our prices in total in terms of the receipts that we've brought in like low single, like mid single digits, I would say, our average unit sales are up tremendously, and that's really come from the return to a full price business.

You know, I, I, I hate to hesitate on timing, you know, having been here for six months. The first step was really to get the right team in place and to build the strategy, which I think we feel really confident about. You know, these things don't happen in a certain sequence or order from the marketing perspective. We're really trying to learn as much as we can and try different things. The initial step that we have taken that we feel great about is really accelerating our presence and engagement on social media. And we, we are seeing some initial results there.

So that the mix of our price points in total is not that different, but we will continue to drive a full price business, which, which we have been doing for the last.

There's obviously a lot of work to do in terms of, you know, bringing more relevant touch points to life across our stores from the experience and, of course, in the product category. And we have lead times that we're working with. So I, you know, I hate to comment on specific timing of the sort, but what I can comment on is that we feel optimistic about our plan. And we're getting to work. That's really our next step.

Thank you.

One moment for our next question.

And that will come from the line of Matthew Boss with JP Morgan. Your line is open. Great. Thanks. So, Dick, could you elaborate a bit just on demand trends that you're seeing in August that Anthro and free people and also just speak to initial customer response to back to school at the Urban Outfitters brand? Okay. I will let Shea talk about Urban Outfitters customer demand overall. So, at all of our retail brands, the accelerator is slightly in mid-July and we're seeing that continue in to August.

In terms of store size, yes, we do feel like our average store size is too big. As I said, we think we need to be roughly in the six to eight thousand square feet. And we're, we're higher than that. And so, you know, we have a number of leases that are coming up in the next few years, and we'll be able to take a look at each one. And to make sure one, we have the right location and two, we optimize for the right space and side.

The lower demand rate feels like it's a return to pre-COVID levels and away from what I would consider a supercharged demand. And over the last few years. Now, our investment in brand marketing over the past few years in three of our retail brands was elevated and is now paying dividends. Those brand brands grow their customer base considerably. And so now store traffic and online traffic remains strong and that's driving total transactions.

Oona McCall: You may now disconnect.

And one moment for our next question. And that will come from the line of Alex Stratton with Morgan Stanley. Your line is open. Perfect. I have a couple. One just related to the Urban Outfitters business with the delivery you're seeing there on the challenging sales trends.

Are there any plans to reduce the fixed cost base, or would you maybe consider a smaller overall store footprint? Just wondering if that's potentially in the strategy.

And then maybe for Frank just on the higher markdowns you're assuming for the third quarter. Is that a cross the brands, or is it concentrated a specific banner? Thank you.

So, with customers becoming more selective in their purchases or buying slightly less expensive items, the extra transactions are more than offsetting the slight dip in AOV and driving those positive comps. So, you want to talk about back to school? Yeah, Is Shea. I would say that what we're seeing is not dissimilar to what Dick covered for the overall URBN status. However, I think in some of the areas that we have been able to impact with some of our initial work, we are seeing some positive momentum.

I can take the higher markdowns first. So right now, I think we put in the plan based on the, you know, slight slowdown that we've seen, higher markdowns across all brands because we have seen the slight slowdown across all brands.

What I would say right now is, you know, we're hoping that that's a conservative plan. Things are definitely very choppy right now. And we're hoping that, you know, the guidance or the plan for a 100 basis point decline on a year-over-year basis is a conservative, conservative plan. But it is across all three brands in order to keep inventory where we needed to be coming into Hollywood.

So areas like women's accessories and home and even across our denim categories, which is obviously a very strong category for back to school. And that brings us some optimism against our path forward, but I but I think generally it's in line with what Dick said. Thank you. One moment for our next question.

Alex, this is faking. As Shade said, over the next three years, over 50% of the urban stores in North America will be up for renewal. Our decision to renew, relocate, downsides, or clothes will be made on a case-by-case basis based on the economics over the last seven years. Most of the stores we've opened are currently, for a while, profitable. Now those stores tend to be smaller than our average and tend to be in locations outside of the large, large major cities. So that sort of gives you a hint of how we're thinking about it. But again, it will depend on the economics of each store on a case-by-case basis.

And that will come from the line of Paul Lejuice with City. Your line is open. Hey, thanks, guys. I know you said that you felt decent about inventory of the Urban Apples brand, but I'm curious. Shea, if you think the product and the store aesthetic is where you want it to be to justify kicking up marketing investment at this point, or is that going to take some time? And just curious when we might see those those picked up marketing investments, and then also curious to get your view on what is the right size of the Urban Apples store and the right mix of mall versus off mall. Thanks. Yeah. Thanks for the question.

And one moment for our next question. And that will come from the line of Mark Altswager with there. Your line is open. Good afternoon. Thanks for taking my question. I just another one on you appreciate all the detail here on the plan. I mean, it does sound like a major repositioning, and these things take time.

You know, I, I, I hate to hesitate on timing, you know, having been here for six months. The first step was really to get the right team in place and to build the strategy, which I think we feel really confident about, you know, these things don't happen in a certain sequence or order from the marketing perspective. We're really trying to learn as much as we can and try different things. The initial step that we have taken that we feel great about is really accelerating our presence and engagement on social media.

Oona McCall: Marni Shapiro, Mark Altschwager, Mark Altschwager, Janet Kloppenburg, Paul Lejeuz, Oona McCullough, Richard Hayne, Adrienne Yih, Oona McCullough, David Hayne, Sheila Harrington, Azeez Hayne, Kelly Crago, Melanie Marein, Sheila Harrington, Azeez Hayne, Janet Kloppenburg, Sheila Harrington, Adrienne Yih, Janet Kloppenburg, David Hayne, Adrienne Yih, Sheila Harrington, Adrienne Yih, Sheila Harrington, Adrienne Yih, Janet Kloppenburg, Adrienne Yih, Janet Kloppenburg, Adrienne Yih, Janet Kloppenburg, Adrienne Yih, Janet Kloppenburg, Good day, ladies and gentlemen, and welcome to the Urban Outfitters, Inc, second quarter fiscal 25 earnings call.

Oona McCall: At this time, all participants are in a listen-only mode.

So just how should we think about kind of short medium term sales and margin guide post as you execute on these changes. And I mean, is it your expectation that the brand can return to sales growth in fiscal 26, or just any more detail on how you're thinking about that path would be great. Thank you.

And we, we are seeing some initial results there. There's obviously a lot of work to do in terms of, you know, bringing more relevant touch points to life across our stores from the experience and, of course, in the product category. And we have lead times that we're working with. So I, you know, I hate to comment on specific timing of the sort, but what I can comment on is that we feel optimistic about our plan. And we're getting to work. That's really our next step.

Oona McCall: Later, we will conduct a question-and-answer session, and instructions will follow at that time.

Before I ask Shay to answer that, I will say that we're not going to put time limits or projections on any of this. Our idea is to get get working, get things moving in the right direction, and then let that take care of itself.

Oona McCall: As a reminder, this conference call is being recorded.

Shay, do you want to say anything else about it?

In terms of store size, yes, we do feel like our average stores size is, is too big. As I said, we think we need to be roughly in the six to eight thousand square feet. And we're, we're higher than that. And so, you know, we have a number of leases that are coming up in the next few years and we'll be able to take a look at each one. And to make sure one, we have the right location and two, we optimize for the right space and side.

One moment for our next question. And that will come from the line of Dana Telsey with Telsey Advisory Group. Your line is open.

And one moment for our next question.

Hi, good afternoon, everyone. As you think about the inventory levels, given the current sales softening, Melanie and Frank, how do you think about what should the right inventory level rate be as we look to the third and the fourth quarter? And then with both the Anthor business and the Urban business, with the Anthor business, the customer coming down an age and obviously adjusting the Urban business. How do you think of the marketing spend on each business and where it should be? And is your own brand versus third-party brand? Is that shifting for each business too, and what the margin profile would look like?

Oona McCall: I would now like to introduce Oona McCullough, Executive Director of Investor Relations.

And that will come from the line of Alex Stratton with Morgan Stanley.

Your line is open. Perfect. I have a couple. One just related to the Urban Outfitters business with the delivery you're seeing there on the challenging sales trends.

Are there any plans to reduce the fixed cost base or would you maybe consider a smaller overall store footprint? Just wondering if that's potentially in the strategy.

Thank you.

That's a lot.

And then maybe for Frank just on the higher markdowns you're assuming for the third quarter. Is that a cross the brands or is it concentrated a specific banner?

Starting with the inventory, thank you for your question, Dana. So we feel good about the inventories exiting Q2 by Fedman, Urban Troids below sales growth with retail segment, Comp inventory to have one on Comp sales growth of two. And similarly, at wholesale, our inventory level is just three percent on comp sales growth of 15. Now, looking forward, we are planning Q4 more conservatively, but in Q3, our receipt plans were based on the trends of earlier Q2. So, given the recent trends acceleration, we may have to add incremental promotions that mark down. And our growth margin guidance, which I provided earlier, reflects that in the 100 points reduction in growth margin.

Oona McCall: Ms. McCullough, you may begin.

Thank you. I can take the higher markdowns first. So right now, I think we put in the plan based on the, you know, slight slowdown that we've seen higher markdowns across all brands because we have seen the slight slowdown across all brands. What I would say right now is, you know, we're hoping that that's a conservative plan. Things are definitely very choppy right now. And we're hoping that, you know, the guidance or the plan for 100 basis point decline on a year over your basis is a conservative conservative plan. But it is across all three brands in order to keep inventory where we needed to be coming into coming into Hollywood.

Oona McCall: Good afternoon, and welcome to the URBN, second quarter fiscal 2025 conference call. Earlier this afternoon, the company issued a press release, outlining the financial and operating results for the three- and six-month period ending July 31, 2024.

Oona McCall: 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.

So for fourth quarter, we have lowered our buy plans in order to account for the slate current flow down. And we're planning inventory more conservatively for the fourth quarter, obviously targeting inventory below sales growth of the fourth quarter.

Alex, this is faking. As Shade said, over the next three years, over 50% of the urban stores in North America will be up for renewal. Our decision to renew will renew relocate downsides or clothes will be made on a case by case basis based on the economics over the last seven years. Most of the stores we've opened are currently for a while profitable. Now those stores tend to be smaller than our average and tend to be in locations outside of the large large major cities. So that sort of gives you a hint of how we're thinking about it. But again, it will depend on the economics of each store on a case by case basis.

And one moment for our next question.

Jane, Trisha, do you want to talk about anthropology's marketing? Yeah. And I think when we talk about acquiring new customers at Anthropology and attracting a new, younger customer, we tend to think of really attracting new millennial-aged customers. So we think of the target customer under the age of 40. And then obviously look at the balance of our retained customers. And both of those are growing nicely. When we're aging down, it really is coming from that under 40 segment, targeted a little bit differently than we've historically targeted our existing customer dance apology, responding very well to some of the strategies that we've implemented on targeting them where they are.

Oona McCall: On today's call, you'll hear from Richard Haynes, CEO, URBN, Frank Conforti, Co-President and COO, URBN, Tricia Smith, Global CEO Anthropology Group, Shea Jensen, President, Urban Outfitters North America, and Melanie Moraine-Efron, CFO from URBN.

Oona McCall: Following that, we will be pleased to address your questions.

Oona McCall: 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.urbn.com.

Oona McCall: I will now turn the call over to Frank.

And so, while the total growth of customers over 40 is outpacing that of those under 40, we're excited that we're still retaining all of our customer segments and feel like we're thoughtfully looking at attracting a new, younger customer for anthropology. Dana, just to let you and the rest of the folks on the line know, when you talk about the younger customer, it is true that we are attracting a younger customer for Anthropology. But the overall average age of the customer dance apology is only down a few years from what it was two years ago.

And that will come from the line of Mark Altswager with there. Your line is open. Good afternoon. Thanks for taking my question. I just another one on you appreciate all the detail here on the plan. I mean, it does sound like a major repositioning and these things take time. So just how should we think about kind of short medium term sales and margin guide post as you execute on these changes.

Oona McCall: Thank you, Oona, and good afternoon, everyone.

Oona McCall: Today, I will discuss our total company's second quarter results, versus the prior year, followed by some more detailed notes by brand.

And I mean, is it is your expectation that the brand can return to sales growth in fiscal 26 or just any more detail on how you're thinking about that that path would be great. Thank you.

Before I ask Shay to answer that, I will say that we're not going to put time of limits or projections on any of this. Our idea is to get get working, get things moving in the right direction, and then let that take care of itself. Shay, you want to say anything else about it?

So it isn't changed anywhere near as precipitously as some people might think.

Oona McCall: I will also provide some commentary on our current trends and the macro, environment.

Oona McCall: Overall the teams delivered an exceptional quarter which was nicely ahead of our plans as discussed on the first quarter call.

One moment for our next question.

Oona McCall: Total URBN sales grew by 6% to a Q2 record of $1.4 billion and four of our five brands continued to perform remarkably well posting record second quarter sales and profits. Our sales growth was driven in part by a retail segment comp of 2%. Anthropologie and Free People produced a high single-digit positive retail segment comp which more than offset the high single-digit retail segment comp decline at Urban Outfitters.

Oona McCall: Newly also delivered robust double-digit revenue growth due to a 55% increase in average active subscribers versus the prior year.

And one moment for our next question. That will come from the line of Marni Shapiro with the Retail Tracker. Your line is open. Hey guys, thanks so much for taking my question. I want to quick follow up on the slow down you're saying. I'm curious if you're seeing any regional differences. And if you're seeing, we're seeing a trend out there where actually physically seeing it, but we're hearing about a trend about, you know, people just find closer to me. And so the lows between the seasons are the bigger lows, and then they wait to buy whether it's for holiday or back to school.

Oona McCall: Additionally the wholesale segment increased revenue by 15% driven by a healthy increase in regular price sales at Free People.

Oona McCall: Now moving on to gross profit. URBN gross profit dollars increased 8% to $493 million while gross profit rate improved by 68 basis points to 36.5%. The improvement in gross profit rate was primarily due to increased initial merchandise margins driven by strong execution of cross-functional brand initiatives in the retail, wholesale, and newly segments. These improvements were partially offset by a higher markdown rate at Urban, Outfitters as the brand used incremental discounts to move through excess inventory.

Oona McCall: Now moving on to SG&A expenses. For the quarter SG&A increased 8% versus a prior comparable quarter and deleveraged by 32 basis points. The, deleverage was primarily due to the Urban Outfitters brand not being able to reduce SG&A at the same rate as their sales declined.

Oona McCall: While we did reduce our SG&A spending at the Urban Outfitters brand in Q2, we did not believe it was, prudent to reduce expenses at the same rate of sales.

Oona McCall: The increase in total company SG&A expense dollars was largely due to increased marketing spend supporting the solid sales growth at Anthropologie, Free People, FB Movement, and Newly Brands. Anthropologie and Free People Brands marketing efforts helped to drive double-digit traffic gains to the store and digital channels while Newly's marketing campaigns helped to produce over 50% active subscriber, growth.

Oona McCall: Total URBN operating income increased 10% versus last year to 145 million dollars with operating profit rate improving 36 basis points to 10.7%. Net income increased 13% to 117 million dollars or $1.24 per, diluted share.

And that will come from the line of Dana Telsey with Telsey Advisory Group. Your line is open. Hi, good afternoon, everyone.

As you think about the inventory levels, given the current sales softening, Melanie and Frank, how do you think about what should the right inventory level rate be as we look to the third and the fourth quarter? And then with both the Anthor business and the Urban business, with the Anthor business, the customer coming down an age and obviously adjusting the Urban business. How do you think of the marketing spend on each business and where it should be?

So I'm curious if you're seeing those trends. And I just have one follow-up on three people after that, if you don't mind.

No mind. I guess, Marni, I would say that we haven't seen a lot of differences by region or geography. So, you know, certainly one of the first things that we checked, hoping that we could see something that might be this in some direction. I had not really considered what you just said, which is more time in between seasons. I do think oftentimes, as you, as you know, because you were in the business, the number of years, when you have a very, very hot summer early, like we did on the East Coast at least. Oftentimes, later in the summer, people get a little bored with summer, may I say, and are anxious for fall to come.

And is your own brand versus third party brand? Is that shifting for each business too and what the margin profile would look like? Thank you. That's a lot. Starting with the inventory, thank you for your question, Dana. So we feel good about the inventories exiting Q2 by Fedman, Urban Troids below sales growth with retail segment, Comp inventory to have one on Comp sales growth of two. And similarly, at wholesale, our inventory level is just three percent on Comp sales growth of 15.

Now, looking forward, we are planning Q4 more conservatively, but in Q3, our receipt plans were based on the trends of earlier Q2. So given the recent trends acceleration, we may have to add incremental promotions that mark down. And our growth margin guidance, which I provided earlier, reflects that in the 100 points reduction in growth margin. So for fourth quarter, we have lowered our buy plans in order to account for the slate current flow down. And we're planning inventory more conservatively for the fourth quarter, obviously targeting inventory below sales growth of the fourth quarter.

So I don't know if that has any impact at all, but you know, that's just another idea. But we don't really have any definitive reason to believe other than a potentially slightly strapped consumer, or I don't know if they're strapped overextended consumer. Why, why the consumer might be slowing down. Yeah, to me, it's when the consumer is being careful; they wait to buy something to maybe a couple of weeks to see what else is out there before they commit. I think I'm a tighter while, while it makes a little bit of commitment, but question. Before you go to the free people question, it would also be, I might wait a couple of weeks to see if there are any more promotions.

Jane, Trisha, do you want to talk about anthropology's marketing? Yeah. And I think when we talk about acquiring new customers at anthropology and attracting a new younger customer, we tend to think of really attracting new millennial aged customers. So we think of the target customer under the age of 40. And then obviously look at the balance of our retained customers. And both of those are growing nicely. When we're aging down, it really is coming from that under 40 segment, targeted a little bit differently than we've historically targeted our existing customer dance apology, responding very well to some of the strategies that we've implemented on targeting them where they are.

Yeah, exactly.

What's the success of free people and free people movement? Are you seeing the success also in Europe, and its free people movement in Europe, and what are plans to either bring it there or open more free people stores there. Okay, I can answer that actually are free people European business, which includes the UK, France and Netherlands currently, is actually outpacing and Q2 are North America business substantially and going into two, three, the acceleration has picked up tremendously. So I think this last year has been about focusing on creating profitability in our stores, which we have gaining a new customer, which we see we very much have.

Oona McCall: I will now provide more details by brand starting with Free People. The Free People team produced an outstanding quarter with global Free, People group sales increasing 10%. The double-digit increase in sales was driven by an impressive 7% retail segment comp and an 18% increase in wholesale segment revenue.

Oona McCall: The 7% Retail Segment Comp gain was on top of the incredible 27% Retail Segment Comp, from last year.

Oona McCall: The sales comp was driven by a similar comp in both the digital and store channels. During the quarter, the Free People brand achieved positive sales growth across apparel, accessories, and movement.

And so while the total growth of customers over under 40 is outpacing that of those over 40, we're excited that we're still retaining all of our customer segments and feel like we're thoughtfully looking at attracting a new younger customer for anthropology. Dana, just to let you and the rest of the folks on the line know, when you talk about the younger customer, it is true that we are attracting a younger customer for anthropology.

But the overall average age of the customer dance apology is only down a few years from what it was two years ago. So it isn't changed anywhere near as precipitously as some people might think. And one moment for our next question.

So you will see more European stores for Free People. We do have a long term plan to grow F.P. movement as well in Europe, but free people is the priority of growth in the next couple of years.

Oona McCall: The FP Movement brand delivered 18% total growth, driven by 6% Retail Segment Comp, new store growth, and over 60% Wholesale Segment Growth.

Oona McCall: Congratulations to the Free People team on delivering another strong quarter, even while, up against last year's exceptional second quarter performance.

Oona McCall: Customer response to the brand's fall trends has been positive, and the brand continues, to gain market share. We believe the brand could deliver a low- to mid-single-digit positive Retail Segment, Comp in the third quarter. The Free People Wholesale Segment Sales increased 18% during the quarter, driven by full-price, sales gains in department and specialty stores, partially offset by an intentional decline in sales to the closeout channel.

Oona McCall: The FP Movement brand led the way with strong sales growth in the quarter. Retail Segment Profitability improved significantly from the prior year when the brand had elevated, closeout channel sales to reduce aging products.

Oona McCall: We believe the Wholesale Segment could continue to deliver double-digit sales growth and improve, profitability versus last year in the third quarter.

And Marni, if I could, I'm going to ask Tricia to talk about anthropology in Europe because it's doing quite well also. Yeah, thank you. Hi, Marni. You know, our anthropology EU business, I would say, for the last three consecutive years. We've got five quarters has seen a tremendous improvement. And really, I think that's come from the alignment of our strategic priorities. They are really global strategic priorities. And as we've accelerated and grown the women's business in North America, that's followed suit with our business in the EU. So no specific plans yet to expand our retail footprint in Europe, but we're feeling really good about the growth of the business and the profit levels that we've reached in that business and feel confident that we'll continue to see that.

That will come from the line of Marni Shapiro with the retail tracker. Your line is open. Hey guys, thanks so much for taking my question. I want to quick follow up on the slow down you're saying I'm curious if you're seeing any regional differences. And if you're seeing, we're seeing a trend out there where actually physically seeing it, but we're hearing about a trend about, you know, people just find closer to me.

And so the lows between the seasons are the bigger lows, and then they wait to buy whether it's for holiday or back to school. So I'm curious if you're seeing those trends. And I just have one follow up on three people after that, if you don't mind. No mind.

One moment for our next question.

I guess, Marni, I would say that we haven't seen a lot of differences by region or geography. So, you know, certainly one of the first things that we checked, hoping that we could see something that might be this in some direction. I had not really considered what you just said, which is more time in between seasons. I do think oftentimes, as you, as you know, because you were in the business, the number of years, when you have a very, very hot summer early, like we did on the east coast at least.

Oona McCall: Now moving on to the Urban Outfitters brand.

Oona McCall: Urban Outfitters recorded a 9% Retail Segment Comp decline in the quarter. This was largely in line with our expectations when we spoke with you in May, with both North, America and Europe showing slight improvement from their Q1 performance, driven in part by higher promotions.

Oona McCall: UO's negative comp was a result of disappointing performance in both North America and Europe. Global Retail Segment Comp declined in both the digital and store channels.

And I'm wondering what your pricing research is indicating and what direction I'll take your pricing as we go forward.

Oona McCall: As noted on the last call, both the Home and Women's Accessories categories are showing, positive trends. Both categories recorded double-digit positive regular price comps, driving nicely positive, maintained margin dollar and rate improvements.

And for Melanie, should we expect inventory to be aligned with sales trends by the end of the third quarter.

Oftentimes later in the summer, people get a little bored with summer, may I say, and are anxious for fall to come. So I don't know if that has any impact at all, but you know, that's just another idea. But we don't really have any definitive reason to believe other than a potentially slightly strapped consumer, or I don't know if they strapped over extended consumer. Why, why the consumer might be slowing down.

And just lastly for Dick, you know, as AOV and spending might be slowing and, you know, with a more cautious consumer, how does that make you feel about your marketing spend and for the total company? And, you know, would you consider going back to levels that were closer to 2019?

Thank you. I'll start, Janet, because I have a very quick answer to you. The answer is yes, because guess what? We were just discussing this. So it's something that we haven't agreed on totally yet. But I do think that that's an element that is out there that is open for discussion.

Yeah, to me, it's when the consumer is being careful, they wait to buy something to maybe a couple of weeks to see what else is out there before they commit. I think I'm a tighter while, while it makes a little bit of commitment, but question. Before you go to the free people question, it would also be, I might wait a couple of weeks to see if there are any more promotions. Yeah, exactly.

I can jump in Janet on its chase. Yes, we've done a lot of research, and we heard very clearly that customers perceive us as expensive. So they believe that our prices are higher than they need to be. We are attacking that full force, and we've made the commitment to offer the best price value for every item we sell. And that also includes expanding our range of accessible or opening price points. So we're tackling that, you know, pretty quickly. I would also say that price is a very dynamic subject. It changes rapidly, and ultimately our goal is to really price things right across the market and be as competitive as possible.

What's the success of free people and free people movement? Are you seeing the success also in Europe, and it's free people movement in Europe and what are plans to either bring it there or open more free people stores there. Okay, I can answer that actually are free people European business, which includes the UK, France and Netherlands currently, is actually outpacing and Q2 are North America business substantially and going into two, three, the acceleration has picked up tremendously.

So I think this last year has been about focusing on creating profitability in our stores, which we have gaining a new customer, which we see we very much have. So you will see more European stores for free people. We do have a long term plan to grow F.P, movement as well in Europe, but free people is the priority of growth in the next couple of years.

Thank you.

And we do have time for one last question. And that will come from the line of Ike Boruchow, with Wells Fargo; your line is open. Hey, everyone, thanks for squeezing me in. Just maybe front from Melanie, just on the gross margin, I'm trying to make sure I understand the trajectory. You guys, you're doing very clear about, you know, you overbought based on the sales trend. And you know, there's some, obviously, there's some extra markdowns in the third quarter; gross margins down a hundred.

Oona McCall: All other category sales comps declined in the quarter.

Oona McCall: As you know, new leadership joined the brand in North America earlier this year, and Shea, Jensen, the President of UO North America, will speak later to the Go Forward brand strategy in North America.

Oona McCall: Finally, I will touch on the Nuuly business, which delivered another exceptional quarter. Nuuly added over 25,000 average active subscribers versus the first quarter, ending the quarter, with over 250,000 average active subscribers for the full quarter. The solid growth in average subscribers led in part to a 63% increase in brand revenue. As we have noted, historically Nuuly experiences the most significant growth in subscribers, during the seasonally strong first and third quarters.

Oona McCall: Now on to more recent trends and the macro environment.

Oona McCall: A strong start in August bodes well for the Nuuly brand to continue to deliver healthy, revenue growth in the third quarter.

Oona McCall: Towards the end of July and into August, we have observed a slight deceleration in retail segment, sales compared to the second quarter run rate.

Oona McCall: The strong revenue growth in the second quarter led to expense rate leverage in almost every expense, line item and resulted in a record operating profit of $5.3 million and a 5.9% operating margin for the brand.

Oona McCall: We believe this level of profitability could continue in the back half of the year which would make Newly profitable on a full-year basis this year. Congratulations to the Newly team on an exceptional quarter.

Oona McCall: While consumer traffic has remained consistent, overall purchasing activity has shown some softening.

So no specific plans yet to expand our retail footprint in Europe, but we're feeling really good about the growth of the business and the profit levels that we've reached in that business and feel confident that we'll continue to see that.

But to maintain the year, at least on my math, that implies gross margins are going to reflect pretty meaningfully back positive up around a hundred basis points by 4Q. I guess I'm just trying to make sure I understand, is there one time reversal that happened in 4Q last year, or are you expecting to be back to clean and growing again by 4Q? I'm just not sure I understand the quick inflection, you guys, that looks like it's baked into the plan.

One moment for our next question.

I just want to, before Frank answers the question specifically, I just want to clarify for everyone, we did not over buy; we bought to a trend that was in existence when we had to order the product, and that trend changed fairly abruptly at the very end of the season. And that's why we now are caught with a little bit of extra inventory.

Oona McCall: New product launches continue to resonate well, though customers appear to be exercising more discretion in their buying decisions.

Oona McCall: Given the recency of these trends, we are approaching our third quarter plans with measured caution.

Oona McCall: There are likely various macroeconomic factors influencing consumer behavior at this time, making it difficult to pinpoint specific causes. However, it is evident that the consumer sentiment has softened recently and the duration of this trend remains uncertain.

And that will come from the line of Janet Coppenberg with JJK Research. Your line is open. Hi, everybody. Just a couple of quick questions. I know you've been doing a lot of research on your customer, et cetera. And I'm wondering what your pricing research is indicating and what direction I'll take your pricing as we go forward. And for Melanie, should we expect inventory to be aligned with sales trends by the end of the third quarter.

Frank? Yeah. And so, you know, obviously, we grew gross profit margin in Q1 and in Q2, both times beating our plan; you are correct. You know, we are committed to the 50 to 100 basis point improvement for the full year, which would imply over a hundred basis points opportunity in the fourth quarter. It is not due to a one-time reversal; it is due to the Urban Outdoors brand opportunity to significantly improve their market rate. Now that their inventory is much more in line with sales, and we'll continue to be so, managing that business on, you know, a tighter week to supply, and you know, just much, much more efficiently than where we were heading into the fourth quarter last year.

Oona McCall: During this time of uncertainty, we believe it is prudent to keep inventory levels lean, and manage expenses appropriately, and that is exactly what we plan to do.

Oona McCall: Despite a deceleration in trend, total company sales remain positive, and we believe retail, segment comps could grow in the low single-digit range for the third quarter. Positive retail segment comps combined with robust revenue growth from Newly and double-digit growth in the wholesale segment could result in a mid-single-digit increase in total Q3 URBN sales.

Oona McCall: I will now turn the call over to Tricia Smith, Global CEO of the Anthropologie Group, to provide details on their brand's second quarter performance as well as a strategic update.

But you are correct; that would imply, and that's what we are planning for, is greater than a hundred basis points improvement in the fourth quarter, hitting that still full year plan of 50 to 100 basis points of gross profit margin improvement. Thank you.

Oona McCall: Thank you, Frank, and good afternoon, everyone.

Oona McCall: I'm delighted to have the opportunity to speak, to you again about the Anthropologie Group's strategic growth initiatives and our continued top-line and bottom-line growth in Q2.

Oona McCall: That concludes our prepared remarks.

Okay, I think that that does it. Thank you very much for joining us, and we hope to see you back in a few months.

Oona McCall: This quarter marks our 14th consecutive quarter of growth. We delivered a 7 percent retail segment comp with similar results in the store and digital channels. Our women's apparel and accessory business continues to lead our growth with a double-digit comp increase driven by our own brand penetration increasing several hundred basis points.

Oona McCall: I wish to thank our, co-presidents, the brand design and shared service leaders, and their teams, and our 28,000 associates worldwide for their excellent work.

Oona McCall: In our home business, we're seeing signs of improvement with our trend shifting up to low single-digit negative comps.

Oona McCall: Our outstanding Q2 results flow directly from your creativity, drive, and resilience, so thank you.

Oona McCall: We're particularly proud that our top-line growth is complemented by even greater growth and profit.

Oona McCall: Thanks also to our many partners around the world.

Oona McCall: Thank you very much.

Oona McCall: The brand delivered record second quarter operating income up 32 percent supported by IMU growth, continued markdown efficiency, and operational improvements. This marks our seventh consecutive quarter of double-digit operating income growth.

Oona McCall: We appreciate the significant contributions you make to our success.

Oona McCall: My question is around kind of the, your higher end consumer and sort of kind of their resistance or price resistance.

Oona McCall: As the quarter progressed, we saw a slight deceleration in July that continued into August, and we're anticipating low to mid single-digit comp increases in the third quarter. We anticipate that we will be more promotional in Q3 than we were last year, to ensure that our inventory is more aligned to the current sales trends as we enter Q3.

Oona McCall: And finally, thanks to our shareholders for your continued support.

Oona McCall: Can you, either Dick or Frank or Melanie, can you talk about kind of your initial retails across the three brands, where they are relative to 2019?

Oona McCall: Now, shifting to our longer-term strategy, over the last two years, our team has elevated, product and creative, grown our customer base, and enhanced our selling environment.

Oona McCall: I now turn the call over for your questions.

Oona McCall: Thank you very much for joining us.

Oona McCall: And I guess like does this, does the increase in promotionality at Anther in particular, does that mean that, are you sensing that there's any need to readjust kind of initial retail prices?

Oona McCall: We are transforming our business to continue to support the expansive growth that we've, experienced.

Oona McCall: Thank you.

Oona McCall: And we hope to see you back in a few months.

Oona McCall: Thank you.

Oona McCall: Since I shared our strategic priorities with you last summer, we've exceeded the goals, we set for ourselves and evolved our priorities.

Oona McCall: If you have a question at this time, please press star 11 on your touchtone telephone, and wait for your name to be announced.

I'll start Janet because I have a very quick answer to you. The answer is yes, because guess what? We were just discussing this. So it's something that we haven't agreed on totally yet. But I do think that that's an element that is out there that is open for discussion. I can jump in Janet on its chase. Yes, we've done a lot of research and we heard very clearly that customers perceive us as expensive.

Oona McCall: Okay, Adrienne.

Oona McCall: Our North Star remains the same, and we continue to identify new opportunities for growth, taking us from $1.6 billion in FY20, pre-COVID, to last year's $2.2 billion, and looking ahead toward our $3 billion ambition.

Oona McCall: If your question has been answered or you wish to remove yourself from the queue, please press star 11 again.

Oona McCall: I'll start with that, but then ask Tricia to talk about anthropology, a little bit more specifically, although I'll mention anthropology in my answer.

Oona McCall: We've adopted an accelerated growth mindset, founded on a rapid test-and-learn methodology, across the business, where testing, reacting, and amplifying successes.

Oona McCall: Please limit your questions to one per caller.

Oona McCall: When I talk about the consumer, our customer, decreasing the AOV, meaning the amount of money they spend per transaction, an awful lot of that is occurring because at both the anthropology and free people brands, we're now offering them an alternative product to purchase.

Oona McCall: In our women's business, three years ago, when seeking to modernize our product, we, started with what we're the most famous for. We accelerated dresses and built our denim and shoe assortment. Additionally, we strengthened our apparel loan brands, increasing their contribution, to nearly 70% of the business.

Oona McCall: One moment while we compile the Q&A roster.

This concludes today's program. Thank you all for participating.

Oona McCall: In the anthropology brand, Tricia talked about daily practice and off hours, and that is somewhat less expensive than their other apparel options.

Oona McCall: Pilkrow, our lifestyle denim brand, has grown at a rate outpacing our top line since last, year, and Maeve, a customer favorite, is our most profitable own brand and has seen strong double-digit growth year-over-year.

Oona McCall: And our first question will come from the line of Lorraine Hutchinson with Bank of America.

Oona McCall: This concludes today's program.

Oona McCall: And that customer, the anthropology customer is choosing those lower priced items, which is driving the overall AUR and AOV down slightly.

Oona McCall: Looking forward, we see opportunity for further growth by expanding the end-use offering of, our products to serve our customers' full lifestyle through three new concepts. We're building our active and loungewear business under our own brand, Daily Practice, offering, a year-round assortment of sleeper and intimates in all stores, and a vacation lifestyle capsule in select locations, seasonally and online, year-round.

Oona McCall: Your line is open.

Oona McCall: Same thing is happening in free people because of FP movement is doing so well, it's a higher penetration of the total.

Oona McCall: These own brand collections are supplemented with market brands who have authority within, the space. Six months ago, we tested doubling the store square footage of these concepts, and the, test resulted in improved overall store performance, with test stores outpacing control stores in the growth of the total women's category, as well as the Daily Practice collection. And given the success of that test, we've rolled out the expansion to 50 locations.

Oona McCall: LORRAINE HUTCHINSON.

Oona McCall: Thank you all for participating.

Oona McCall: And FP movement is slightly less expensive than the rest of their apparel.

Oona McCall: In our home business, we're well-positioned in categories that resonate with customers, around entertaining and refreshing their home decor.

Oona McCall: Thank you.

You may now disconnect.

Oona McCall: You may now disconnect.

Oona McCall: So I think that it's not really a problem, it's just it's showing up in the overall comps.

Oona McCall: For example, our Q2 home accessories business, which includes categories such as home fragrance, and tabletop, has grown five single digits year-over-year.

Oona McCall: Good afternoon.

Oona McCall: Tricia, do you want to expand on that?

Oona McCall: We spent the last 18 months laying the foundation for more profitable growth in the home category. In the home business, as you know, product profitability is impacted significantly by, factors other than IMU, and we've engineered operational efficiencies upon which we can more profitably grow our business.

Oona McCall: Can you comment on how comfortable you are with, the level and content of UO inventory entering the second half?

Oona McCall: Sure.

Oona McCall: We are applying our rapid testing approach in Anthropologie Home, taking strategic risks, and fueling newness. Our customers are responding to our products and our inspirational creative assets, and, at the same time, appealing to and helping us speak to more customers.

Oona McCall: And then separately, can you also walk us through the drivers of the fourth quarter gross margin recovery assumed in guidance?

Oona McCall: I think when you look at our average unit retail received, Adrian, from now back through FY19, in total that AUR is not that much higher, to Dick's point around the additional categories that we've introduced into the mix.

Oona McCall: Since FY20, through the end of last year, we have grown our customer base by an additional, 1 million customers, up 30%. Of this, our new customer was the fastest-growing segment, at plus 52%, while we have also seen, double-digit growth in retained customers. In addition, our sales per customer has grown over 20%.

Oona McCall: J. I can take that.

Oona McCall: So our prices in total in terms of the receipts that we've brought in, like mid single digits, I would say, our average unit sales are up tremendously and that's really come from the return to a full price business.

Oona McCall: In addition to growing our total customer base and their value, we have simultaneously welcomed a younger demographic to our brand, especially in our women's division, where we've seen a two-year reduction in the average age of our new customers in the last year.

Oona McCall: We feel really great, as you heard in the prepared remarks.

Oona McCall: So the mix of our price points in total is not that different, but we will continue to drive a full price business, which we have been doing for the last, Thank you.

Oona McCall: Furthermore, we're speaking to our customers as omni-channel customers, not just retail or digital. Our omni-channel customers spend four times what single-channel customers spend, contributing to the consistent growth we see across both channels.

Oona McCall: We're confident, that our inventory is clean. Inventory levels are much more aligned with sales. And really, that's the primary driver of the margin recovery.

Oona McCall: One moment for our next question.

Oona McCall: We're investing in all channels and points of customer contact to enhance the excelling experience in digital, in stores, and in our call centers.

Oona McCall: J.

Oona McCall: And that will come from the line of Matthew Boss with J.P. Morgan.

Oona McCall: Having acquired 1 million new customers, we're leveraging omni-channel data to position our stores where we know we have customers, particularly as customers are migrating to different geographies and markets, and we're honored with the welcome reception we've received in those communities.

Oona McCall: And Lorraine, as it relates to our fourth quarter for URBN, it would really be driven by, two things, the gross profit margin improvement opportunity.

Oona McCall: Your line is open.

Oona McCall: As we open stores in new markets, along with strong new-store sales, we also see significant increases in digital demand, for our omni approach is about creating a consistent and outstanding experience across channels.

Oona McCall: One, IMU, which we've got a very strong and comfortable, competent line of sight to.

Oona McCall: Great, thanks.

Oona McCall: We are proud of our transformation, and I'm proud of the exceptional team delivering our results.

Oona McCall: And second is the significant opportunity in markdown improvement at the Urban Outfitters brand.

Oona McCall: So, Dick, could you elaborate a bit just on demand trends that you're seeing in August at Anthro and Free People?

Oona McCall: I'm confident in our continued growth on our path to become a 3 billion brand, and I look forward to providing you with more updates in the future.

Oona McCall: I think Sheila, Shea, and team have done a great job at aligning their inventory now, much closer with sales.

Oona McCall: And also just speak to initial customer response to Back to School at the Urban Outfitters brand.

Oona McCall: I'll now turn the call back to Frank.

Oona McCall: And they had significantly higher markdown rates than what we would normally run in the fourth quarter last year, so that there is meaningful opportunity for us, for that brand, and to help URBN drive improved markdown rates in the fourth quarter, driving improved gross profit margin in the fourth quarter.

Oona McCall: Okay, I will let Shea talk about Urban Outfitters.

Oona McCall: Thank you, Tricia.

Oona McCall: Thank you.

Oona McCall: Customer demand overall, so at all of our retail brands, deaccelerated slightly in mid-July, and we're seeing that continue into August. The lower demand rate feels like it's a return to pre-COVID levels and away from what I would consider a supercharged demand over the last few years.

Oona McCall: Congratulations on the incredible performance and exciting strategic update.

Oona McCall: One moment for our next question.

Oona McCall: Now, our investment in brand marketing over the past few years in three of our retail brands was elevated and is now paying dividends. Those brands grew their customer base considerably, and so now store traffic and online traffic remains strong, and that's driving total transactions. So with customers becoming more selective in their purchases or buying slightly less expensive items, the extra transactions are more than offsetting the slight dip in AOV and driving those positive comps.

Oona McCall: Next up is Shea Jensen, Urban Outfitters North American President. She will be speaking to the UO North America's updated brand review and strategic plan. And over the past six months, with new leadership in place, the team has conducted an extensive review of the brand. We've assessed our market position, customer health, product assortments, marketing, including our creative perspective, our selling channel touch points, and our talent.

Oona McCall: And that will come from the line of Adrienne, Yih with Barclays.

Oona McCall: So you want to talk about Back to School?

Oona McCall: What we have learned is that while there is a great deal of opportunity for improvement, the brand is not fundamentally broken. We believe the erosion in sales and profits is due to a combination of a lack of focus and clarity on our customer in a dynamic and changing market and poor execution in the absence of a wholly dedicated leadership team. We are confident that with the right team in place and the right approach, Urban Outfitters can rebuild our customer base, restore profitability, and restate our position as one of the most beloved brands for young customers.

Oona McCall: Your line is open.

Oona McCall: Yeah, it's Shea.

Oona McCall: Our segment has seen rapid and seismic shifts as the generational passage from millennials to Gen Z has occurred amidst a global pandemic.

Oona McCall: Great.

Oona McCall: I would say that what we're seeing is not dissimilar to what Dick covered for the overall URBN status.

So they believe that our prices are higher than they need to be. We are attacking that full force and we've made the commitment to offer the best price value for every item we sell. And that also includes expanding our range of accessible or opening price points. So we're tackling that, you know, pretty quickly. I would also say that price is a very dynamic subject. It changes rapidly and ultimately our goal is to really price things right across the market and be as competitive as possible. Thank you.

Oona McCall: As these shifts occurred and a new generation began coming of age, we lost focus on our customers. We have strengthened our leadership team, adding subject matter expertise across all, critical functions, corrected our inventory levels so that we are entering the second half of this year with clean inventory and new fresh product, and perhaps most importantly, work to gain a solid understanding of young customers today through extensive customer research, both qualitative and quantitative. These insights will guide our path forward and help shape our strategy.

Oona McCall: However, I think in some of the areas that we have been able to impact with some of our initial work, we are seeing some positive momentum. So areas like women's accessories and home and even across our denim categories, which is obviously a very strong category for Back to School, and that brings us some optimism against our path forward, but I think generally it's in line with what Dick said.

Oona McCall: Looking ahead, we have established five pillars to recover the brand and return to growth.

Oona McCall: Thank you.

Oona McCall: Our ambition is to become the definitive brand for young adults. The five pillars of brand recovery that we have identified are, first, we have defined, and will consistently focus on our target customer. Second, with a clear and united understanding of who our customers are, we will rebuild, our customer base by investing in marketing strategies that meet young customers where they are and build affinity with our brand.

Oona McCall: One moment for our next question.

Oona McCall: Third, we will evolve our product offer to be more relevant to a broader range of target, customers.

Oona McCall: And that will come from the line of Paul Lejuice with Citi.

Oona McCall: Fourth, we will maintain focus on disciplined inventory investments, ensuring our investments, drive improved full-price sell-through and meet the demand of our customers.

Oona McCall: Your line is open.

Oona McCall: And finally, we will adapt our touch points to be more relevant for Gen Z consumers.

Oona McCall: Hey, thanks, guys.

Oona McCall: Our first step was to gain a firm understanding of Gen Z consumers. Today, the Gen Z consumer is significantly different than the millennial generation before, them, from size, ethnicity, tastes, and occasions to how they view and interact with the world.

And we do have time for one last question.

Oona McCall: I know you said that you felt decent about inventory of the Urban Outfitters brand, but I'm curious, Shea, do you think the product and the store aesthetic is where you want it to be to justify picking up marketing investment at this point, or is that going to take some time?

Oona McCall: We have traditionally targeted an aspirational 22-year-old customer living in major metropolitan, cities. Our new customer segmentation broadens our target and aligns customers across three segments, younger suburban pre-college customers, a college-age student, and an older post-college customer. We welcome and want to serve today's population of young customers across more prices and, sizes, more categories and occasions, and across more aesthetics and sensibilities in both urban and suburban areas. This includes pivoting from our traditionally alternative sensibility to offering a more, upbeat and welcoming perspective across our assortment and our touch points.

Oona McCall: Just curious when we might see those picked up marketing investments.

Oona McCall: With this in mind, our goal is to welcome more people into our brand.

Oona McCall: And then also curious to get your view on what is the right size of the Urban Outfitters store and the right mix of mall versus off-mall.

Oona McCall: We will rebuild our customer base by refreshing our brand identity, clarifying our mission, vision, and values, evolving our creative expressions across our touch points, and repositioning urban outfitters to be a more welcoming and relevant brand for young customers today. Additionally, we are already actively strengthening our presence across social media platforms, and reallocating our marketing investments to prioritize the acquisition of new customers. We believe that our approach will yield healthier levels of organic traffic and high customer acquisition rates to continuously fuel our customer funnel.

Oona McCall: Thanks.

Oona McCall: Next, we will evolve our product offer to serve a broader range of customers. We believe our product assortment has unintentionally become too narrow in price, occasion, and sensibility, and needs broader appeal. With insights driving our path forward, we will increase the penetration of opening price points, as well as ensure we offer the best price-value combination on every item we sell.

Oona McCall: Yeah, thanks for the question.

Oona McCall: We will broaden our category range and ensure we are meeting the lifestyle and occasion needs of our target customers.

Oona McCall: You know, I hate to hesitate on timing.

Oona McCall: We do not believe this means an increase in total SKUs, but rather a more accurate representation of the right products across the total assortment. This does include better accuracy in allocation of sizes and improving the productivity of the total offering through assortment planning and allocation that is rooted in our customer strategy.

Oona McCall: You know, having been here for six months, the first step was really to get the right team in place and to build the strategy, which I think we feel really confident about.

Oona McCall: We plan to introduce new categories, such as athleisure, distort into the categories we've heard matter to our customers, such as denim and lounge, and amplify the categories where we uniquely differentiate, such as gifting and beauty.

Oona McCall: And we are seeing some initial results there.

Oona McCall: We are also excited to rebuild our branded assortment through partnerships with aspirational, influential, and credible national brands that matter to young customers today.

Oona McCall: There's obviously a lot of work to do in terms of, you know, bringing more relevant touch points to life across our stores from the experience and, of course, in the product category.

Oona McCall: We anticipate our customer-focused product strategies will deliver a higher penetration of full-price sales and full-price sales growth and a reduced dependency on promotionality.

Oona McCall: And we have lead times that we're working with.

Oona McCall: We know sentiment and style can move fast with young customers, and in order to leverage the incredible scale of the URBN sourcing and speed-to-market capabilities, we need to maintain inventory discipline and better align our sales to inventory levels.

Oona McCall: So, you know, I hate to comment on specific timing of the sort, but what I can comment on is that we feel optimistic about our plan and we're getting to work.

Oona McCall: By utilizing more data-driven planning and allocation capabilities, we will reduce our markdowns, work to restore profitability, and position our teams to fuel growth by making decisions closer to our customers.

Oona McCall: That's really our next step.

Oona McCall: As we enter the second half of this year with clean inventory, we expect our turns to improve on a regular cadence.

Oona McCall: In terms of store size, yes, we do feel like our average store's size is too big, as I said. We think we need to be roughly in the 6,000 to 8,000 square feet, and we're higher than that.

Oona McCall: Finally, we heard from our customers that a combination of social, digital, and in real life or physical shopping are equally important components of the shopping experience.

Oona McCall: And so, you know, we have a number of leases that are coming up in the next few years, and we'll be able to take a look at each one to make sure, one, we have the right location, and two, we optimize for the right space and size.

Oona McCall: Gen Z's coming-of-age experience began during a global pandemic, and the idea of connecting a shopping experience through the discovery of social media to convenience of digital shopping and the connection that can be made in physical retail is table stakes.

Oona McCall: And one moment for our next question.

Oona McCall: We are advantaged with our retail footprint and omni-channel capabilities. We will work to optimize our footprint to ensure our locations are positioned near our target demographic and ensure we better align the size of our stores with our new vision for physical and retail and the store experience. We believe we have an opportunity to close some store locations where population shifts have occurred, to relocate some stores to be more adjacent to our target customers, but also to better align the size of our stores with our future needs.

Oona McCall: And that will come from the line of Alex, Straton with Morgan Stanley.

Oona McCall: At the same time, we will work actively to optimize our stores through improved assortment strategies and localization.

Oona McCall: Your line is open.

Oona McCall: Finally, digital channels are where young customers live their lives. Our team is doubling down our engagement on social platforms and working to ensure our digital experience evolves to be an extension of that digital experience through more user-generated content, improved creative, and social features.

Oona McCall: Perfect.

Oona McCall: Omnichannel customers are our most valuable customers, spending more than three times other customers. With an adapted channel experience, we expect our customer engagement and retention will grow, and ultimately, our percentage of omnichannel customers will increase.

Oona McCall: I have a couple.

Oona McCall: Despite our current challenges, we are optimistic about the steps we are taking to revitalize Urban Outfitters North America. In the short term, we are looking to see sequential top-line improvement with a building penetration of full-price sales, which should drive stronger bottom-line improvement.

Oona McCall: One just related to the Urban Outfitters business, just with the deleverage you're seeing there on the challenging sales, trends.

Oona McCall: As we pivot our marketing strategies, we expect a build of our customer funnel, while at the same time, we are working to evolve our product assortment and see full-price sales grow. We recognize this may take time to fully materialize, but we are committed to rebuilding our customer base and restoring profitability.

Oona McCall: Are there any plans to reduce the fixed cost base, or would you maybe consider a smaller overall store footprint?

Oona McCall: The road ahead involves focused execution on our five recovery pillars.

Oona McCall: Just wondering if that's potentially in the strategy.

Oona McCall: With a solid leadership team in place, we're optimistic about our strategy, the path ahead, and our ambition to become the definitive brand for young adults.

Oona McCall: And then maybe for Frank, just on the higher markdowns you're assuming for the third quarter, is that across, the brands, or is it concentrated at a specific banner?

Oona McCall: I'll now turn the call over to Melanie.

Oona McCall: Thanks a lot.

Oona McCall: Thank you, Shae.

Oona McCall: I can take the higher markdowns first.

Oona McCall: Now I will discuss our thoughts on the third quarter financial performance and fiscal year FY25 performance.

Oona McCall: So right now, I think we put in the plan based on the slight slowdown that we've seen higher markdowns across all brands, because we have seen the slight slowdown across all brands.

Oona McCall: As Frank mentioned, we have seen a slight deceleration in trends recently, but our total company sales remain positive. Right now, we believe that third quarter total company sales growth could be mid-single digits. Sales growth in Q3 could result from low single-digit growth in retail segment comp and low team growth in the wholesale segment.

Oona McCall: What I would say right now is, you know, we're hoping that that's a conservative plan.

Oona McCall: In addition, we believe that newly segment sales growth could be mid-double digits.

Oona McCall: Things, are definitely very choppy right now.

Oona McCall: Now on to gross profit margin. We believe URBN's gross margin rate for the third quarter could decline by approximately 100 basis points compared to the prior year third quarter. The reduction in gross profit margin could be primarily due to higher markdowns as our third quarter receipt plans were ordered prior to the recent deceleration. As a result, we will need to add incremental promotional activity and markdowns in the quarter to clear through inventory as we enter the fourth quarter.

Oona McCall: And we're hoping that, you know, the guidance or the plan for 100 basis point decline on a year-over-year basis is a conservative plan.

Oona McCall: We continue to believe that URBN can deliver our full year plan of approximately 50 to 100 basis points of gross margin improvement compared to the prior year.

Oona McCall: But it is across all three brands in order to keep inventory where we need it to be coming into holiday.

Oona McCall: Now, moving on to SG&A expense. Based on our current sales performance and plan, we believe SG&A growth for the third quarter will increase in the mid-single digits. Our plan growth in SG&A could be primarily driven by higher marketing expense to support growth in customers and sales at Anthropologie, Free People, FP Movement, and Newly.

Oona McCall: Alex, this is Dick Faulking.

Oona McCall: As always, if sales performance fluctuates, we maintain a certain level of variable SG&A spending that we can adjust up and down depending on how our business is performing. We are currently planning our effective tax rate to be approximately 24.25% for the third quarter and 24% for the full year.

Oona McCall: As Shay said, over the next three years, over 50% of the, urban stores in North America will be up for renewal. Our decision to renew will renew, relocate, downsize, or close will be made on a case-by-case basis based on the economics.

Oona McCall: Now, moving on to inventory, we believe that inventory levels in the third quarter could grow at a rate similar to sales growth.

Oona McCall: Over the last seven years, most of the stores we've opened are currently four-wall profitable. Now, those stores tend to be smaller than our average and tend to be in locations outside of, the large, large major cities.

Oona McCall: Capital expenditures for the fiscal year are planned at approximately $210 million. The FY25 capital project spend is broken down as follows. Approximately 50% is related to retail store expansion and support. Approximately 25% is related to logistics capacity investments, including the newly-rentaled Fulfillment Center in Raymoor, Missouri, which we opened in the first quarter.

Oona McCall: So that sort of gives you a hint of how we're thinking about it.

Oona McCall: And the remaining 25% would be our normal capital investments supporting IT, home office, and logistics operations.

Oona McCall: But again, it will depend on the economics of each store on a case-by-case basis.

Oona McCall: Lastly, we'll be opening approximately 57 new stores and closing approximately 25 stores. Our net new store growth is being driven by growth in FP Movement, Free People, and Anthropologie stores. During FY25, we plan on opening 25 FP Movement stores, 12 Free People stores, and 13 Anthropologie stores.

Oona McCall: And one moment for our next question.

Oona McCall: 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.

Oona McCall: And that will come from the line of Mark Altshwager with Baird.

Oona McCall: Now, I am pleased to turn the call to Dick for closing remarks.

Oona McCall: Your line is open.

Oona McCall: Thank you, Mel, and thank you to our brand leaders, Tricia, Sheila, Shea, and Dave, and in Europe, Emma and Matt. They and their teams produced outstanding second-quarter results.

Oona McCall: Good afternoon.

Oona McCall: As Frank shared earlier, four of our five brands delivered record second-quarter sales and profits.

Oona McCall: Thanks for taking my question.

Oona McCall: And the Urban brand, as Shea just discussed, has fashioned its strategy to win on a go-forward basis. Most importantly, the Urban brand now has a strong team in place to deliver on that strategy.

Oona McCall: Another one on UO, appreciate all the detail, here on the plan.

Oona McCall: Turning to the current business climate, on our last conference call, I stated that the customer mood in Q1 was enthusiastic rather than the mood a year earlier, which was exuberant. I believe this is still an accurate description for Q2. Traffic in our stores remains strong, and online sessions remain double-digit positive at three of our four retail brands.

Oona McCall: I mean, it does sound like a major repositioning and, you know, these things take time.

Oona McCall: Fall products are selling briskly, with customers choosing the newest fashion.

Oona McCall: So just how should we think about kind of short, medium-term sales and margin guideposts as you execute on these changes?

Oona McCall: Yet all our retail brands registered a slight sales slowdown in mid-July that continues in August.

Oona McCall: And I mean, is it your expectation that the brand can return to sales growth in fiscal 26?

Oona McCall: So what's different?

Oona McCall: Or just any more detail on how you're thinking about that path would be great.

Oona McCall: You may recall I also said on the May call that consumer purchases were becoming slightly more considered than the previous year. With the slowdown starting in mid-July, purchases became even more considered. Conversion dropped slightly, and price became a bigger factor with AOV dipping slightly as well. Total transactions continue to grow, but the customer on average spent a little less on each, purchase.

Oona McCall: Thank you.

Oona McCall: We believe this suggests a return to pre-COVID behavior when our comp sales expectations were typically lower and customers were more selective.

Oona McCall: Before I ask Shea to answer that, I will say that we're not going to put time limits or projections on any of this.

Oona McCall: We expect this will become the new reality, and as Frank discussed, will necessitate even stronger inventory and expense control.

Oona McCall: Our idea is to get working, get things moving in the right direction, and then let that take care of itself.

Oona McCall: Our brand and shared service teams understand the new environment and are prepared to meet that, challenge.

Oona McCall: Shea, you want to say anything else about it?

Oona McCall: Finally, a word about our youngest brand newly.

Oona McCall: Okay.

Oona McCall: The brand celebrated its fifth birthday in the second quarter and commemorated it by delivering another quarter of strong year-over-year double-digit gains in average active subscribers and revenue. They also posted record profits and became the number one fashion rental business in the U.S.

Oona McCall: One moment for our next question.

Oona McCall: Happy birthday, newly.

Oona McCall: And that will come from the line of Dana Telsey with Telsey Advisory Group.

Oona McCall: Congratulations on your success.

And that will come from the line of Ike Boruchow, with Wells Fargo, your line is open. Hey, everyone, thanks for squeezing me in. Just maybe front from Melanie, just on the gross margin, I'm trying to make sure I understand the trajectory. You guys, you're doing very clear about, you know, you overbought based on the sales trend. And you know, there's some, obviously, there's some extra markdowns in the third quarter, gross margins, down a hundred.

Oona McCall: Your line is open.

Oona McCall: Hi.

Oona McCall: Good afternoon, everyone.

Oona McCall: And is your own brand versus third-party brands, is that shifting for each business too and, what the margin profile would look like?

Oona McCall: Thank you.

Oona McCall: That's a lot.

Oona McCall: Go ahead.

Oona McCall: Okay.

But to maintain the year, at least on my math, that that implies gross margins are going to reflect pretty meaningfully back positive up around a hundred basis points by 4Q, I guess I'm just trying to make sure I understand, is there, is there one time reversal that happened in 4Q last year, or are you expecting to be back to clean and growing again by 4Q, I'm just not sure I understand the quick inflection, you guys, that looks like it's baked into the plan. I just want to, before Frank answers the question specifically, I just want to clarify for everyone, we did not over buy, we bought to a trend that was in existence when we had to order the product and that trend changed fairly abruptly at the very end of the season.

Oona McCall: Starting with inventory.

Oona McCall: Okay.

Oona McCall: Tricia, do you want to talk about Anthropologie's marketing?

Oona McCall: Yes.

Oona McCall: Dana, I think when we talk about acquiring new customers at Anthropologie and attracting, a new, younger customer, we tend to think of really attracting a millennial-aged customer.

Oona McCall: So we think of the target customer under the age of 40, and then obviously look at, the balance of our retained customers, and both of those are growing nicely.

Oona McCall: When we're aging down, it really is coming from that under-40 segment targeted a little, bit differently than we've historically targeted our existing customer to Anthropologie, responding very well to some of the strategies that we've implemented on targeting them where they are, and so while the total growth of customers under 40 is outpacing that of those over 40, we're excited that we're still retaining all of our customer segments and feel like we're thoughtfully looking at attracting a new, younger customer for Anthropologie.

Oona McCall: So it isn't changed anywhere near as precipitously as some people might think.

Oona McCall: And one moment for our next question.

Oona McCall: That will come from the line of Marni Shapiro with, the Realty Retail Tracker.

Oona McCall: Your line is open.

Oona McCall: Hey guys, thanks so much for taking my question.

Oona McCall: I have one quick follow-up on this slowdown you're seeing.

Oona McCall: I'm curious if you're seeing any regional differences and if you're seeing, we're seeing a trend out there, we're actually physically seeing it, but we're hearing about a trend about, you know, people are just buying closer to need and so the lulls between the seasons are, they're bigger lulls and then they wait to buy whether it's for holiday or back to school.

Oona McCall: So I'm curious if you're seeing those trends and I just have one follow-up on for you people after that if you don't mind.

Oona McCall: Don't mind?

Oona McCall: I guess, Marni, I would say that we haven't seen a lot of differences by region or geography.

Oona McCall: So, you know, certainly one of the first things that we checked, hoping that we could see something that might lead us in some direction.

Oona McCall: I had not really considered what you just said, which is more time in between seasons.

Oona McCall: I do think oftentimes, as you know, because you were in the business a number of years, when you, have a very, very hot summer early, like we did on the East Coast at least, oftentimes later in the summer people get a little bored with summer, may I say, and are anxious for fall to come.

Oona McCall: So I don't know if that has any impact at all.

Oona McCall: But, you know, that's just another idea.

Oona McCall: But we don't really have any definitive reason to believe other than a potentially slightly strapped consumer or I don't want to say strapped, overextended consumer, why the consumer might be slowing down.

Oona McCall: Yeah, to me, it's when the consumer is being careful, they wait to buy something to maybe a couple extra weeks to see what else is out there before they commit.

Oona McCall: I think I'm a tighter wallet while it makes them a little bit of commitment phobic.

Oona McCall: But before you go to the free people question, it would also be I might wait a couple of weeks to see if there are any more promotions.

Oona McCall: Yeah, exactly.

Oona McCall: With the success of free people and free people movement, are you seeing the success also in Europe?

Oona McCall: And it's free people movement in Europe?

Oona McCall: And what are plans to either bring it there or open more free people stores there?

Oona McCall: Okay, I can answer that.

Oona McCall: Actually, our free people European business, which includes the UK, France and Netherlands currently, is actually outpacing in Q2, our North America business substantially.

Oona McCall: And going into Q3, the acceleration has picked up tremendously.

Oona McCall: So I think this last year has been about focusing on creating profitability in our stores, which we have gaining a new customer, which we see we very much have.

Oona McCall: So you will see more European stores for free people.

Oona McCall: We do have a long-term plan to grow FP movement as well in Europe, but free, people is the priority of growth in the next couple years.

Oona McCall: And Marni, if I could, I'm going to ask Tricia to talk about anthropology in Europe because it's, doing quite well also.

Oona McCall: Yeah, thank you.

Oona McCall: Hi Marni.

Oona McCall: You know, our anthropology EU business, I would say for the last three consecutive quarters, has seen a, tremendous improvement and really I think that's come from the alignment of our strategic priorities are really global strategic priorities and as we've accelerated and grown the women's business in North America, that's followed suit with our business in the EU.

Oona McCall: One moment for our next question.

Oona McCall: And that will come from the line of Janet Kloppenburg with JJK, Research.

Oona McCall: Your line is open.

Oona McCall: Hi everybody.

Oona McCall: Just a couple of quick questions.

Oona McCall: And for Melanie, should we expect inventories to be aligned with sales trends by the end of the third quarter?

Oona McCall: And, you know, would you consider going back to levels that were closer to 2019?

Oona McCall: Thank you.

Oona McCall: I'll start Janet, because I have a very quick answer for you.

Oona McCall: The answer is yes, because guess, what?

Oona McCall: We were just discussing this.

Oona McCall: So it's something that we haven't agreed on totally yet, but I do think that that's an element that is out there that is open for discussion.

Oona McCall: I can jump in, Janet.

Oona McCall: It's Shay.

Oona McCall: Yes, we've done a lot of research and we heard very clearly that customers perceive us as expensive, so they believe that our prices are higher than they need to be.

Oona McCall: We are attacking that full force and we've made the commitment to offer the best price value for every item we sell, and that also includes expanding our range of accessible or opening price points.

Oona McCall: So we're tackling that, you know, you know, pretty quickly.

And that's why we now are caught with a little bit of extra inventory. Frank? Yeah. And so, you know, obviously, we grew gross profit margin in Q1 and in Q2, both times beating our plan, you are correct. You know, we are committed to the 50 to 100 basis point improvement for the full year, which would imply over a hundred basis points opportunity in the fourth quarter. It is not due to a one time reversal, it is due to the Urban Outdoors brand opportunity to significantly improve their market rate.

Oona McCall: I would also say that price is a very dynamic subject.

Oona McCall: It changes rapidly and ultimately our goal is to really price things right across the market and be as competitive as possible.

Oona McCall: Yes, we are targeting Q3 inventory levels to be in line with Belfast.

Oona McCall: Thank you.

Oona McCall: And we do have time for one last question.

Oona McCall: And that will come from the line of Ike Boruchow with Wells Fargo.

Oona McCall: Your line is open.

Oona McCall: Hey, everyone.

Oona McCall: Thanks for squeezing me in.

Oona McCall: Just maybe Frank or Melanie, just on the gross margin, I'm trying to make sure I understand, the trajectory.

Oona McCall: You guys, you know, you're being very clear about, you know, you overbought based on the, sales trend.

Oona McCall: And, you know, there's some, obviously, there's some extra markdowns in the third quarter, gross margins down 100.

Oona McCall: But to maintain the year, at least on my math, that implies gross margins are going to inflect, pretty meaningfully back positive up around 100 basis points by 4Q.

Oona McCall: I guess I'm just trying to make sure I understand, is there a one-time reversal that happened, in 4Q last year, or are you expecting to be back to clean and growing again by 4Q?

Oona McCall: I'm just not sure I understand the quick inflection, you guys.

Now that their inventory is much more in line with sales, and we'll continue to be so, managing that business on, you know, a tighter week to supply, and you know, just much, much more efficiently than where we were heading into the, heading into the fourth quarter last year. But you are correct, that would imply, and that's what we are planning for is greater than a hundred basis points improvement in the fourth quarter, hitting that still full year plan of 50 to 100 basis points of gross profit margin improvement. Thank you.

Oona McCall: That looks like it's baked into the plan.

Oona McCall: I just want to, before Frank answers the question specifically, I just want to clarify for everyone, we did not overbuy. We bought to a trend that was in existence when we had to order the product. And that trend changed fairly abruptly at the very end of the season. And that's why we now are caught with a little bit of extra inventory.

Oona McCall: Frank?

Oona McCall: Yeah.

Oona McCall: And so, you know, obviously, we grew gross profit margin in Q1 and in Q2, both times, beating our plan.

Oona McCall: You are correct.

Oona McCall: We are committed to the 50 to 100 basis point improvement for the full year, which would, imply over 100 basis points opportunity in the fourth quarter.

Oona McCall: But you are correct.

Oona McCall: Thank you.

Oona McCall: Okay.

Oona McCall: I think that does it.

Okay, I think that that does it. Thank you very much for joining us, and we hope to see you back in a few months. This concludes today's program. Thank you all for participating. You may now disconnect.

Q2 2025 Urban Outfitters Inc Earnings Call

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