Q4 2025 Urban Outfitters Inc Earnings Call
Speaker Change: Good afternoon, and welcome to the U R. B N fourth quarter fiscal 2025 conference call earlier. This afternoon. The company issued a press release outlining the financial and operating results for the three and 12 month period, ending January 31 2025.
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: For more detailed commentary on our quarterly performance.
Speaker Change: Today's conference call. Please refer to our Investor Relations website at Www Dot U R. P M Dot com.
I'll now turn the call over to <expletive>.
Speaker Change: Thank you Ana and good afternoon, everyone. We're pleased to announce record fourth quarter sales in full year profits, both of which surpassed our expectations.
Frank: Speaking of those results on today's call you will first hear from Frank <unk>, Our co president and COO.
Speaker Change: Frank.
Speaker Change: Brian <unk>, our CFO will talk about our current expectations for fiscal 2006.
Speaker Change: Then after my brief closing remarks, we will be pleased to address your questions.
Frank: I'll now turn the call over to Frank.
Frank: Thank you <expletive> and good afternoon, everyone.
Speaker Change: Today, I will discuss our total company fourth quarter results versus the prior year, followed by some more detailed notes by brand.
Speaker Change: Please note today I will be speaking to our financial results on an adjusted basis, which do not include prior year non core adjustments for asset impairments lease abandonments.
Speaker Change: Police have income tax reserves and a change in the revenue recognition method at NOLA.
Speaker Change: Each of these items is detailed in our press release as well as the Investor presentation that is posted to our <unk> Investor Relations website.
Speaker Change: Now onto our results.
Overall, the teams delivered another exceptional quarter.
Speaker Change: Our passing our plans as discussed during the third quarter conference call.
Speaker Change: Total European sales grew by 9%, reaching a Q4 record of $1 6 billion four of our five brands performed remarkably well posting record fourth quarter sales.
Speaker Change: Additionally, the urban Outfitters brand made significant progress in reducing the brands operating loss versus the prior year and improving their sales trends.
Speaker Change: European sales growth was partly driven by a 5% increase in the retail segment comp due to a high single digit DTC channel comp and a low single digit store comp.
Speaker Change: Anthropologie and free people achieved a high single digit positive retail segment comp slightly offset by a low single digit comp decline at the urban Outfitters brand.
Speaker Change: Newly delivered robust double digit revenue growth, thanks to a 53% increase in average active subscribers compared to the prior year.
Speaker Change: Additionally, the wholesale segment saw a 26% revenue increase driven by healthy rise in full price sales at free people.
Speaker Change: Now turning to gross profit.
Speaker Change: <unk> saw a 17% increase in gross profit dollars, reaching a record $528 million.
Speaker Change: The gross profit rate also improved nicely by over 200 basis points rising to 32, 3%.
Speaker Change: This is on top of a 290 basis point improvement in gross profit rate in the fourth quarter of last year.
Speaker Change: The current year as the increase was due to better gross margins across all segments.
Speaker Change: The improvement in the retail segment was primarily driven by a reduction in markdowns with urban outfitters, leading the way with significantly lower markdowns versus the prior year, followed by an improvement at Anthropologie.
Speaker Change: Additionally, the retail segment gross margin benefited from increases in initial margins at both Anthropologie and free people.
Speaker Change: In the fourth quarter SG&A increased by 9% leveraging by 18 basis points as a rate to sales.
The growth in SG&A dollars was primarily driven by increased marketing spend fueling sales growth for the Anthropologie free people FP movement and newly brands.
Speaker Change: The marketing efforts of Anthropologie free people and FP movement boosted traffic to both the store and digital channels, while new lease campaigns resulted in a healthy double digit growth in average active subscribers.
Speaker Change: Total you RBN operating income rose by 54% compared to last year, reaching $125 million, while the operating profit rate improved by over 220 basis points to seven 7%.
Speaker Change: Net income saw a 49% increase to $98 million or $1 <unk> per diluted share.
Speaker Change: I will now provide more details by brand starting with Anthropologie.
Speaker Change: The Anthropologie team delivered another exceptional quarter with an 8% retail segment comp and our ninth straight quarter of year on year double digit operating income growth.
Speaker Change: Positive comps were driven by double digit increase in the digital channel and a mid single digit increase in the store channel.
Speaker Change: All categories delivered positive regular price and total sales comps during the quarter with broad based strength across apparel categories.
Speaker Change: I know Tricia and team are also very proud to report that the Anthropologie home category posted its first positive regular price and total sales comp for the year.
Speaker Change: The Anthropologie team continues to execute on their strategic initiative of expanding the end use offering of products to serve their customers full lifestyle.
Speaker Change: In January Anthropologie launched <unk>, an exclusive in house resort wear label offering year round vacation ready styles, which can be found in select locations seasonally and online all year round.
Speaker Change: <unk> daily practice, and the brand's expanded assortment of intimates and lounge continue to experience outsized growth and we believe could be meaningful growth categories moving forward.
Speaker Change: Additionally, anthropologie continues to succeed on their goal of attracting new younger customers, while deepening engagement with existing ones.
Speaker Change: The brand continues to make strategic marketing investments supported by outstanding creative content, which drove positive increases in store and digital traffic as well as an 11% increase in total customers for the quarter.
Speaker Change: Impressive sales growth and healthy margin expansion, coupled with well managed expenses drove record operating profit dollars for the brand in the fourth quarter.
Speaker Change: Based on our current plans, we believe anthropologie could deliver a mid single digit positive retail segment comp for the first quarter and full year of fiscal 2006.
Speaker Change: Next the free people team produced another outstanding quarter with total retail and wholesale segment sales increasing 13%.
Speaker Change: The double digit increase in sales was driven by an 8% retail segment comp a 27% increase in free people wholesale segment revenues and a 194% increase in non comp sales driven by continued successful new store openings.
Speaker Change: The positive retail segment comp was driven by a low double digit DTC comp and a mid single digit store comp.
Speaker Change: During the quarter the free people brand achieved positive comp sales growth across all major categories.
Speaker Change: The FTE movement brand delivered robust total growth of 34% driven by a 19% retail segment comp.
Speaker Change: A 66% increase in FP movement store base, while the FP movement wholesale segment exploded in the quarter, achieving over 90% growth versus last year.
Speaker Change: Non comp sales growth was driven by 32 new stores.
Speaker Change: Evan free people and 25 FTE movement locations opened over the last 12 months.
Speaker Change: The brand continues to have outsized new opportunities driven in part by continued expansion in FP movement, which will open an additional 20 locations in fiscal 'twenty six based on our current plans. We believe the free people group could deliver a positive retail segment comp in the low to mid single digit range for the first quarter.
Speaker Change: And full year of fiscal 'twenty six.
Speaker Change: Free people wholesale revenues increased 27% during the quarter driven by full price sales gains in specialty and department stores.
Speaker Change: Free people wholesale profitability improved significantly from the prior year, when our brand utilized closeout channels sales to reduce aging products.
Speaker Change: We believe free people wholesale could deliver mid single digit growth for the full year, while the first quarter could exceed that growth for fiscal year 'twenty six.
Speaker Change: Now I'm moving on to the urban Outfitters brand.
Speaker Change: Urban Outfitters recorded a 3% decline in the retail segment comp for the quarter. This healthy improvement in the current year sales comp trend was driven by a high single digit positive comp in Europe offset by a high single digit negative comp in North America.
Speaker Change: In addition to the improved comp sales performance. We are pleased with the growth in the merchandise margin rate driven by significantly lower markdowns and an improvement in regular price selling.
Speaker Change: This led to a continued reduction in the brands operating loss compared to last year.
Speaker Change: In North America, the improved sales trend and meaningful maintained margin growth was due to positive regular price comps. This marks the first time that brand has delivered positive regular price comps in North America and over two years.
Speaker Change: Positive comps were the result of strong performance in key categories, such as home women's accessories, as well as denim and loungewear within women's apparel.
Speaker Change: Last year, the North American team focused on stabilizing the business realigning strategic priorities and right sizing inventories, which led to improved profitability in the third and fourth quarters of fiscal 'twenty five.
Speaker Change: As we start the new year. The team is pivoting to a renewed focus on growth.
Speaker Change: Beginning with regular price growth.
Speaker Change: Within women's apparel. The team is building upon the solid growth of denim and lounge, while applying learnings into other bottoms categories as well as introducing athleisure.
Speaker Change: We have full confidence in the brand team and their strategies. It is encouraging to see the progress they are making.
Speaker Change: Turning to urban Outfitters based in Europe, our European business delivered a positive high single digit comp driven by a double digit comp increase in the digital channel and a mid single digit comp increase in the store channel.
Speaker Change: During the quarter the brand drove positive comps across apparel home and accessories.
Speaker Change: Strong sales comp and improved maintain margins fueled a healthy increase in operating profit for the European team.
Speaker Change: Based on our current plans, we believe the global urban Outfitters brand could deliver at low single digit negative to flat comp for the first quarter and flat to low single digit positive comp for the full year fiscal 'twenty six.
Speaker Change: Finally, I will touch on the newly business, which delivered another exceptional quarter.
Speaker Change: We added over 20000 average active subscribers versus the third quarter ending the quarter with 300000 average active subscribers for the full quarter.
Speaker Change: Solid growth in average subscribers led in part to a 56% increase in brand revenue the strong revenue growth in the fourth quarter resulted in expense rate leverage in almost every expense line item, which helped deliver a record fourth quarter operating profit and another newly first.
Speaker Change: Its first full year of profitability.
Speaker Change: Newly recorded full year operating profit of $13 million and mid single digit operating profit rate for the year.
Speaker Change: As we've noted historically newly experiences the most significant growth in subscribers during the seasonally strong first and third quarters and already strong start in February bodes well for the newly brand to continue to deliver healthy revenue and profit growth in the first quarter and full year of fiscal 'twenty six.
Melanie: I will now turn the call over to Melanie.
Melanie: Thank you Frank and good afternoon, everyone on today's call I will discuss our thoughts on the first quarter and full year fiscal 'twenty six.
Melanie: The following forward looking statements reflect comparison to first quarter and full year fiscal 'twenty five results adjusted for certain one time items.
Melanie: As we begin FY 'twenty six we believe we could deliver mid single digit sales growth for the first quarter and full year.
Melanie: This growth could be driven by low single digit retail segment comps for the first quarter and full year driven by low to mid single digit positive retail segment comps at the free people brand and mid single digit positive retail segment comps at Anthropologie.
Melanie: We believe that the urban outfitters brands first quarter retail segment comp could be low single digit negative to flat comp with gradual improvement as the year progresses newly could deliver double digit revenue growth for the year driven primarily by continued subscriber growth.
Melanie: Finally, our wholesale segment is planned to achieve mid single digit growth for the year, while the first quarter could deliver low double digit revenue growth.
Melanie: Based on the current sales performance and plans, we believe our gross profit margins could improve by approximately 50 to 100 basis points versus last year for the first quarter and full year.
Melanie: FY 'twenty six.
Melanie: Increase in gross profit rate could be primarily due to lower merchandise markdowns at the urban Outfitters brand, followed by occupancy and delivery expense leverage.
Melanie: Based on our current sales performance and financial plan, we believe total growth in SG&A could grow in line with sales growth for the first quarter and year.
Melanie: The growth in SG&A dollars, primarily relates to higher marketing expense to drive growth in customers and sales as well as increased store labor costs related to new store openings and investment in technology support the needs of our business.
Melanie: As always if sales performance fluctuate, we maintain a certain level of variable SG&A spending that we can fluctuate up and down depending on how our business is performing.
Melanie: Our annual effective tax rate is planned to be approximately 24% for the year and 23% for the first quarter.
Melanie: Now moving on to inventory, we ended FY 'twenty five was slightly elevated inventory levels as we intentionally brought in product early to avoid the impact of a potential east coast Port strike in the coming year, we will continue to be focused on increasing our product turns.
Melanie: We believe that our inventory levels could grow at a rate at or below sales growth.
Melanie: For FY 'twenty six capital expenditures are planned at approximately $240 million. The FY 'twenty six capital project spend is broken down as follows approximately 50% is related to retail store expansion in support of <unk>.
Melanie: <unk>, 25% is related to supporting technology, and logistics investments and the remaining 25% is for home office expansion to support our growing businesses.
Melanie: We will be opening approximately 58, new stores and closing approximately 19 stores during fiscal year 'twenty six.
Melanie: Our net new store growth is primarily being driven by growth in FP movement free people and Anthropologie stores.
Melanie: In FY 'twenty six we plan on opening 20-F T movement stores 16 free people stores and 15 Anthropologie stores.
Melanie: Based on our current plans, we plan to repurchase shares to at least offset any dilution that may occur in FY 'twenty six of course share repurchase activity will be contingent on market conditions and board of director authorization.
Hayne: As a reminder, the foregoing does not constitute a forecast but is simply a reflection of our current views. The company disclaims any obligation to update forward looking statements now it is my pleasure to turn the call back to <expletive> Hayne, Chief Executive Officer of Europe yet.
Hayne: Thank you Melanie and congratulations to our team for an outstanding fourth quarter.
Hayne: Holiday season was exceptional with consumers year for fresh fashion and distinctive gifts.
Hayne: Our brand teams created well executed assortments captivating in store experiences and inspiring marketing campaigns customer.
Hayne: Customers respond and drove strong revenue gains across all our business segments.
Hayne: I will now discuss our performance for fiscal 'twenty.
Hayne: <unk> 25 versus prior year results.
Hayne: For the year, we delivered an impressive 8% revenue growth.
Hayne: Adding nearly $400 million to reach a record of $5 6 billion.
Hayne: At the same time, our gross profit margin grew by 122 basis points.
Hayne: Which drove a 22% increase in operating profit.
Hayne: This in turn lifted earnings by 26% to $4 <unk> per share.
Hayne: And easily made FY 'twenty five the most profitable year in <unk> history.
Hayne: Last year I described our customers mood as enthusiastic rather than exuberant.
Hayne: I believe this remains an accurate description today.
Hayne: Customer demand has remained remarkably consistent.
Hayne: They are hungry for the latest fashions and our designers and merchants continue to create product and assortments that please.
Hayne: In short, we're gaining new customers and increasing market share across all segments.
Hayne: For the retail segment this translates to more traffic to our stores and websites.
Hayne: FY 'twenty five web sessions grew by high single digits.
Hayne: For newly our subscription rental segment it means capturing more active subscribers.
Hayne: At year's end average active subscribers has increased by more than 50%.
Hayne: The wholesale segment added over 300, new accounts and total sales increased by 15% for the year.
Hayne: With the sales of spring products off to a good start in subscriber counts continuing to grow we are optimistic that fiscal 2006, we will produce even more record results.
Hayne: All brands are adding value to the total <unk> portfolio.
Hayne: Our two biggest brands Anthropologie and free people have shown consistent revenue growth and produce healthy mid teen operating profit margins.
Hayne: Newly and FP movement are two of the most exciting high growth concepts in the market today.
Hayne: Both are nicely profitable and both continue to expand brand awareness and demonstrate the potential to scale further.
Hayne: Lastly at the urban Outfitters brand has stabilized in North America and is showing recent improvement in profitability.
Hayne: The team is now focused on acquiring new customers and driving profitable full price sales.
Hayne: In Europe <unk> once again posted strong comp sales after a brief high ages in the first half of FY 'twenty five.
Hayne: I am excited by our entire portfolio of brands.
Hayne: See opportunity to drive solid revenue growth, while expanding margins in FY 'twenty six and beyond we are confident that European is poised for continued success.
Hayne: In closing I congratulate and thank our co presidents, making training our brand leaders Christmas Sheila and day their merchant creative and operating teams our shared service teams and our 28000 associates worldwide.
Hayne: Their collective efforts produced another record year in the thing.
Hayne: I also recognize and thank our many partners around the globe.
Hayne: Finally, I, thank our shareholders for their continued support.
Hayne: That concludes our prepared remarks, I'll now turn the call over for your questions.
Thank you if you have a question at this time. Please press star one one on your telephone and wait for your name to be announced towards the draw. Your question. Please press star one one again, please limit your questions to one per call.
Hayne: Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Lorraine Hutchinson from Bank of America.
Lorraine Hutchinson: Thank you good afternoon.
Speaker Change: You had set a goal to improve IMU by 500 basis points by the end of last year did.
Speaker Change: Did you hit that goal and what should we think about next for your opportunities around the <unk> line.
Speaker Change: Hi, Lorraine. This is Frank so as you mentioned, we just completed our final year of that initiative and so we feel great about the progress we made.
Speaker Change: Each brand supported by our sourcing and logistics teams delivered really meaningful <unk> growth over the past three years. We did fall just short of our goal, but we still are going to continue to work driving additional improvements in the coming years, and we still think that there's opportunity there.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Our next question comes from the line of Paul Lajoie from Citi.
Paul Lajoie: Hey, guys. Thanks.
Paul Lajoie: And then can you talk about the mix of branded product versus owned brand or private brand within the urban outfitters and anthro.
Paul Lajoie: Just curious where penetration is for each and what is the strategy going forward, whether just curious if we should expect any changes this year on that mix.
Speaker Change: Okay, Paul I'm going to ask Shay. Thanks.
Speaker Change: The urban side of the question and then pass it along the Tricia to talk about the Anthropologie.
Speaker Change: Yes, Hi, Paul Thanks.
Speaker Change: Another question.
Paul Lajoie: Cited about the brand growth that we're seeing in Q4 strength was actually outpaced total urban outfitters growth that didn't come through mostly non apparel brands just because of the lead times that we see in the apparel categories, but as we look to this year per your question growing national brands is apart.
Paul Lajoie: And our strategies, it's important to our customers and we're excited about Japan, we don't necessarily have a target in terms of penetration I think we're going to let the customer guide us, but we're excited about some of the big brands that we have lined up and we're excited about the progress we made in Q4.
Paul Lajoie: Hi, Paul This is tricia growing our own brand penetration Anthropologie has been a strategic growth driver for us for quite some time.
Tricia: 70% on brand penetration now in women's apparel and feel like there's continued growth opportunity. We're looking at the continued outsized growth that we've seen from our Pilbara Tucker our denim brand.
Tricia: Our number one brand on a customer favorite we've got significant growth plans for so I don't know that the penetration will increase.
Tricia: Remarkably more than it is currently because we still see opportunity to surround it with great market brands, but overall, it's continued to be a growth driver for us and we believe it will continue.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Matthew Boss from J P. Morgan.
Matthew Boss: Great. Thanks.
Speaker Change: <expletive> could you speak to any notable trends across categories that you see emerging this year and how you see your brand is positioned to capitalize and maybe just more near term. If you could elaborate on spring spring sales off to a good start maybe just looking through the weather.
Matthew Boss: Okay.
Matt: Matt I'll try to do that.
Matthew Boss: Fashion really.
Matthew Boss: One word for it and we're.
Matthew Boss: We're in a bottom cycle.
Matthew Boss: All of our brands are selling bottoms very briskly.
Matthew Boss: The bag here the better.
Matthew Boss: Now the four bottoms that are selling so well also require schlemmer tops and.
Matthew Boss: In order to.
Matthew Boss: Complete.
Matthew Boss: Little over Big silhouette.
Matthew Boss: So we are selling a number of tops.
Matthew Boss: But nowhere near as briskly as the bottoms.
Matthew Boss: Also performing for us our outerwear that shouldnt be a big surprise given our call has been in the northern.
Matthew Boss: Our claims.
Matthew Boss: Sneakers continue to dominate our shoe sales.
Matthew Boss: That's been going on now for a number of years I don't see any change.
Matthew Boss: On the horizon for that.
Matthew Boss: And then of course <unk>.
Matthew Boss: Movement in Anthropologie as Activewear concept of daily practice are both performing very well.
Matthew Boss: And Andrew as New resort concept called <unk> is also performing very well.
Matthew Boss: And finally as Frank mentioned.
Matthew Boss: Excluding furniture.
Matthew Boss: Home and gift categories at both Anthropologie and urban Outfitters are experiencing strong full price selling.
Matthew Boss: So that gives you an idea.
Matthew Boss: About the selling and I will just now repeat.
Matthew Boss: What Frank said, which is our plan for Q1 comps are to be in the low to mid single digit range.
Matthew Boss: And if I can do it by brand for.
Matthew Boss: For Anthropologie, we believe it'll be a mid single digit comp.
Matthew Boss: For free people are low to mid single digit comp.
Matthew Boss: And there I want to remind everyone.
Matthew Boss: Free people is up against a plus 17% comp from Q1 of last year and this is the most difficult quarter.
Matthew Boss: And then finally, we think there will be a flattish comp.
Speaker Change: For the urban brand it can be a little bit on the negative side, a little bit on the positive side, but it's too difficult.
Matthew Boss: Carl.
Speaker Change: We combined all of those in the retail segment.
Matthew Boss: With forecast for our wholesale and subscription segment.
Matthew Boss: We believe that total U RBN Q1 revenues.
Matthew Boss: Could increase in the mid to high single digit range very similar to where we were this.
Matthew Boss: <unk>.
<unk>.
Matthew Boss: Thank you.
Matthew Boss: One moment for our next question.
Speaker Change: Our next question comes from the line of Dana Telsey from Telsey Advisory group.
Dana Telsey: Hi, good afternoon, everyone with the improvement in the urban Outfitters Division Shay I think you gave out the five pillars of the transformation strategy, where are we on each one now and is there any shift in how you see it progressing as we go through the year and then just on the anthro business.
Dana Telsey: Customer profile is changing and obviously the new collection that just came out <unk>, what should we be expecting there in terms of product innovation moving through 25. Thank you.
Hi, Dana Thanks for the question.
Speaker Change: I think that we're making good progress we feel really proud about the pace that we're on.
Dana Telsey: We're excited to be.
Dana Telsey: During this new year.
Dana Telsey: Pillar, one and as you might remember was that we wanted to remain acutely focused on our customer and I think the team is doing a really nice job continuing to let the customer guide all of our decisions.
Dana Telsey: I don't think we'll ever be done evolving our product assortment with that in mind, but we made great progress you've heard that we had the first regular price sales comp in a few years and I think that came in both of our channel that feels really good we had nice comp increases at several of our categories, notably in Jan.
Dana Telsey: And lounge and accessories.
Dana Telsey: And in our gifting categories and that team that are really relevant time as we were in holidays and those categories are important customer as we turn the quarter into the new year, we have eyes on really building.
Dana Telsey: And sort of fortifying women's apparel more holistically and we're excited about that.
Dana Telsey: Marketing perspective in acquiring new customers. The team is very hard at work, particularly as we think about showcasing our evolved creative where the team has.
Dana Telsey: <unk> also accretive to be much more upbeat and more welcoming as we think about welcoming a much more broad audience into our brand hopefully you've had a chance to check it out we're very proud of it.
Dana Telsey: <unk> seen it out there in the wild and socially.
Dana Telsey: You may have seen us show up on a number of different platforms and the team has been working really to show up in unique ways, depending on the platform and that.
Dana Telsey: Really by way of not just posting but engaging in new forms and new mediums on those platforms really proud of the efforts in terms of.
Dana Telsey: Operating with more discipline as you've heard that we have.
Dana Telsey: Clean up our inventories and delivered really solid op, Inc improvement and.
Dana Telsey: Profit margins and that will continue as we enter into this next year.
Dana Telsey: The last pillar was evolving the channel experience and that's something that we're really trying to as we enter this year. So overall couldn't be more proud of the team's progress it is.
Dana Telsey: And it is going to take some time, but I think we're really proud of the pace and particularly as we think about turning the tide on regular price selling.
Dana Telsey: Tricia do you want to talk about salary Dana. Thanks for the question about salary and we couldn't be more thrilled about the results as you know we launched the brand in January at 120 stores.
Dana Telsey: <unk> our expertise expectations by.
Dana Telsey: Quite a bit our goal with <unk> was to have a strong differentiated point of view for resort, where for our customer and that spans cut.
Dana Telsey: Coverups.
Dana Telsey: Accessories shoes beauty products, and swim and kind of broad based across all categories are performing very well.
Dana Telsey: Also excited.
Dana Telsey: First at a very small edit of swimwear and a handful of stores.
Dana Telsey: And have seen quite a bit of success. There. So we'll go slowly in terms of what that assortment looks like so far.
Dana Telsey: Its performing well the customers responding really positively and really enjoying.
Dana Telsey: The ability to be able to shop kind of that broad based across all of those needs for resort wear and its been additives and nicely positive to this 120 stores that we've launched Celgene and so we'll see how many of the stores that can expand it to you on that overall, we're happy with the results so far.
Dana Telsey: Sure.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Mark Outswinger from Baird.
Mark Outswinger: Good afternoon, and congrats on the strong year.
Speaker Change: Thanks, I wanted to ask you I wanted to ask about just the real estate plans here I guess, just first on Anthropologie looks like Youre planning to really bring in new store growth.
Speaker Change: For the first time in a few years the brand that's nice momentum for a while so I guess the question is sort of why now in terms of ramping the store growth at anthro and just any detail you can share on.
Speaker Change: Unit economics, as we look to model that out and then Conversely, urban Outfitters, North America, you're guiding to a reduction there similar to what we saw last year just update us on the overall thoughts on where the size of that footprint will shake out and how that rationalization. This year.
Speaker Change: The brand level profitability. Thank you.
Speaker Change: Okay, Mark I'll call them the same two people button in the opposite order.
Speaker Change: If you want to start off sure Hi, Mark.
Speaker Change: We have.
Speaker Change: <unk> really been focusing on our store performance really for the last few years and that started with prioritizing our full price business, which allowed us to deliver nice growth in our store operating profit model as well as some topline comps as the teams have done really a fantastic job at looking at.
Speaker Change: Our store edit the product assortment that we put in and the size and the different stores that we support we had said a year ago. We believe that we can get to 270 stores globally with Anthropologie and with the 15 stores that we've announced now for.
Fiscal year 'twenty six.
Speaker Change: Nicely on our way there will be at about 250 stores or so.
Speaker Change: Kind of why now would be <unk>.
Speaker Change: Seen nice growth in the brand our teams have done a really nice job in getting to profitability.
Speaker Change: Some nice store operating profit.
Speaker Change: And we believe that we've got it.
Speaker Change: <unk> model and Formula that we feel like we can accelerate and expand and we're excited about it.
Speaker Change: Okay. Thank you sure you want to talk about urban yeah for us and you may have.
Speaker Change: You may recall that.
Speaker Change: Our real estate strategy right now is really about making sure that our locations division thats close to customers and overtime. We had really seen some population shifts of young young folks and so we either are closing stores, where we find ourselves not adjacent to customers and or we are overstated average.
Speaker Change: A store today is roughly 10000 and you think we should be more in the six to 8000 range and so we're closing stores either where the location is wrong or we need to right size the location, so youll see that.
Speaker Change: That roughly equates to the stores. This year. So ultimately we think that should equate to.
Speaker Change: An improvement in our productivity as well over the course of the next couple of years.
Mark Outswinger: Okay, and Mark you got it.
Mark Outswinger: Call and she'll talk about FP movement, because I wonder everybody get a full picture of the real estate.
Mark Outswinger: Okay. So yeah FP movement, we opened our first store just five years ago.
Mark Outswinger: We are ended this past year at just over 60 Standalone stores, we're really excited about what the stores are doing in terms of <unk>.
Mark Outswinger: <unk> in the brands to different consumers, we will open another 20 stores this year at least.
Mark Outswinger: And we think we're going to keep pace to that as long as it continues to be as profitable as they are.
Mark Outswinger: For the next foreseeable future. We think the brand has about 300 plus stores in it in North America.
Mark Outswinger:
Mark Outswinger: Great Yes.
Mark Outswinger: I just wanted to emphasize how good the store economics are.
Mark Outswinger: And.
Mark Outswinger: The fact that you can open them. This rapidly congratulations thank you.
Mark Outswinger: Okay next question.
Mark Outswinger: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of I will reach out from Wells Fargo.
Mark Outswinger: Hey.
Speaker Change: Congrats on the results guys two questions for me.
Mark Outswinger: Number one.
Speaker Change: The holiday comps you guys reported specifically at Anthro and free people in the reported comps there must have been some January slowdown it doesn't sound like anything at all is wrong because of the outlook you guys are giving but can you maybe just walk us through what's kind of transpired over the past month or so has been a lot of volatility in this space I would love to hear your perspective, and then if I can.
Speaker Change: Could you just is there any chance on the newly guide you can actually guide us a number of them active.
Speaker Change: Active subs that you are baking into your plan.
Speaker Change: Okay I'll take a shot at the first one.
Speaker Change: A lot of the.
Speaker Change: As you call it softening.
Speaker Change: Is not it's delayed.
Speaker Change: Demand and a lot of that delayed demand is because of weather.
Speaker Change: We've seen across all three brands.
Speaker Change: Stores in warmer weather markets are nicely.
Speaker Change: I mean nicely outperforming northern counterparts on a comp basis.
Speaker Change: This gives us a lot of confidence that our spring Assortments are are correct and they are being well received.
Speaker Change: So I think that almost all of that is due to <unk>.
Speaker Change: Whether there is some probably lag.
Speaker Change: People spending a little bit more money on.
Speaker Change: On the holiday time, and wanting them a bit of a breather and we've seen this I think for the last three or four years. So that's that may be a factor, but I think it's much more about weather.
Speaker Change: If you want to talk about newly.
Speaker Change: Yes sure. Thanks for the question.
Speaker Change: We.
Speaker Change: We are very excited about where the newly business is headed we see a lot of opportunity we've come through this.
Speaker Change: This past year.
Speaker Change: With well over $350 million in sales first.
Speaker Change: <unk> first profitable year.
Speaker Change: Over 50% growth.
Speaker Change: <unk>.
Speaker Change: As was mentioned in the commentary I have seen that trend continue into the first quarter and we've actually been very excited about the momentum that we've seen so far in February.
Speaker Change: So we're very bullish on the year and we're looking for.
Speaker Change: Some exciting growth this year as well we are.
Speaker Change: Have an internal goal, which I recognize will no longer be internal the minute I mentioned to you.
We have an internal goal to get this business to have a $1 billion. This year and that's what we're shooting for that's what the team has lined up for and we think it's an achievable goal.
Speaker Change: Something that we're very excited and proud of having done in five or six years of this business getting off the ground. So that's what we're shooting for and that's where we think we're headed.
Speaker Change: Okay.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Alex Stratton from Morgan Stanley.
Speaker Change: <unk>.
Alex Stratton: Thanks, So much just a couple from me maybe for Frank just can you walk me through the toggles that got you to that 50 to 100 basis points of gross margin expansion range.
Speaker Change: And then I'm not sure who mentioned.
Speaker Change: That anthro and free people were at I think are helping kind of mid teen operating margin levels. I'm. Just wondering you know is there a difference really between the two and then kind of how do you think about the profitability opportunity at those two banners going forward. Thanks a lot.
Speaker Change: Sure Alex Happy to take your question. So on gross profit margin as we said we feel like we can deliver 50 to 100 basis points for the first quarter and the full fiscal year that improvement could largely be driven by lower markdowns at urban outfitters theyre up against the higher rate from the prior year and higher than historical.
Speaker Change: Averages.
Speaker Change: Despite.
Speaker Change: Leveraging nice improvement over the previous two quarters, they still have a long way to go and a lot more to give there.
Speaker Change: Additionally, it's not just U O.
Speaker Change: As I said, although they remain the biggest opportunity there is opportunity for leverage in occupancy expenses, our stores continue to perform well that mix of having rental subscription segment.
Speaker Change: Which doesn't have store occupancy also benefits occupancy in that gross profit margin opportunity. We also have opportunities in delivery expense leveraging our existing rates and continuing just to be better about inventory placement, which also provides for opportunity around around delivery expense leverage.
Speaker Change: I don't think that there is a notable difference to be honest with you between free people and Anthropologie mid teens operating profit I think both of both of those brands would tell you that there is.
Speaker Change: Still some more margin opportunity, but to be honest with you that's not really what's baked into your <unk> growth and opportunity from an overall profit rate I think what's exciting about both of those brands as the topline growth opportunity. So they just continue to acquire customers at a really healthy rate as well as expand the share of wallet within the customers right.
Speaker Change: Heard from Trisha talking about <unk> and Derek Daily practice, you've heard from Sheila we're talking about.
Speaker Change: Three years, and we have a free and some of their other at some of their other category expansions and Youre able to see that and then expanding not just the share of wallet, but the additional customer growth. So I think their growth and their addition to our bottom line is going to be more about the topline growth and it will be margin margin opportunity. Although there is still some there but not nearly as much.
Speaker Change: Certainly.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of Marni Shapiro from the retail tracker.
Speaker Change: Guys congratulations.
Frank can you walk US you had you had mentioned a 10% operating margin can you walk us from today to there and I'm curious if that's all on shades head and also just a follow up to that Shay.
Speaker Change: I'm curious when urban's, good and you've had some really good products when urban's. Good your shopper is less concerned about price they're more interested in the right fashion. So as the customer has been price sensitive lately as you have seen improved product are you seeing a reversion back to that behavior that was more.
Speaker Change: Typical of the urban customer and any insight filling on the mens side and we've got that market. So boring right now, but any insight would be great.
Speaker Change: Marty Thanks for the question I'll start off.
Speaker Change: Jay have a minute there, yes getting to 10% is all about urban no I'm just kidding.
Speaker Change: Right.
Speaker Change: We're still targeting 10% operating profit right now honestly, we're very confident that we can achieve it we just delivered almost 100 basis points of improvement, reaching eight 6% this year and as we noted here today. We believe we can achieve another 50 to 100 basis points gross profit margin improvement in fiscal 2006, which gets us.
Speaker Change: That much closer.
Speaker Change: You said, you always certainly our biggest opportunity and it's great to see that stability and the turning starting to take hold there, but <unk> is not the only opportunity FTE movement, which is running at a mid to high teens operating profit margin and are growing at a rate faster than total <unk> could contribute nicely to our profit growth and rate expansion, especially when considering the.
Speaker Change: Long runway.
Speaker Change: Our growth at that brand has anthropologie delivered another record operating profit year on fiscal 'twenty, five and I know the anthro team believes that the brand can continue to deliver more and is planning to do so for years to come.
Speaker Change: <unk> just delivered their first year of operating profit big congratulations to Dave and the team for delivering that and you know as Dave just mentioned, reaching $500 million. This year is now I guess a public call.
Speaker Change: Continued.
Speaker Change: Given their continued growth and leverage opportunities with that topline growth.
Speaker Change: But theyre going to continue to build on this past year's performance from profit dollars and from rate growth and lastly, free people. It's been honestly one of the most consistent and profitable brands in our industry for over a decade now and continues to have growth opportunities in all sales channels through continued category expansion and customer acquisition. So I think what youre hearing.
Speaker Change: From US is we have a lot of different drivers across all of you are again that gives us a real opportunity to hit and run at 10% operating profit rate.
Speaker Change: I can tell you that this is definitely something that we have targeted and we talk about a ton as a leadership team.
Speaker Change: Okay.
Speaker Change: I'll take your question.
Speaker Change: First on price price is probably the most dynamic thing that we deal with and just to remind.
Speaker Change: You that our ambition is to.
Speaker Change: To price everything at the best price.
Speaker Change: Are you that we can and that's across a range of good better and best when we talk to customers. What we heard from them is that we were missing a more accessible price point and really that's what we have been hard at work addressing is so we have expanded our opening price point to be roughly 12% of our offer today, but.
Speaker Change: We also know that customers do turn to us for lower inspire a sort of that price point and we do have things across our assortment that are selling really well at that price point today. So I think just to be clear, we do want to offer that range, but the work we've done lately. It was really to meet the need we heard from customers in that more opening price point.
Speaker Change: As far as men I actually think that's one of the areas that we uniquely can differentiate in the market. Today. There is work to do in terms of the men's assortment I think we're really excited about getting to that point.
Speaker Change: Have not really conquered that yet I think it's something that we're looking to trying to but definitely think it's an area that we are uniquely positioned to differentiate in and really really excited to get there.
Marty: Yes, Marty I just wanted to emphasize.
Marty: I guess I'm a historian here the urban customer is always been one that is what we call high loss.
Marty: They want a price point that is low.
Marty: For the things that means an awful lot too.
Marty: And.
Marty: When we carried those kinds of products.
Marty: Price is not a it's not an issue.
Marty: Doesn't matter how much they cost you can find a way together.
Marty: So I think that that's what she is talking about and that's the kind of assortment.
Marty: Urban has the carry.
Marty: Thank you.
Marty: One moment for our next question.
Marty: Our next question comes from the line of Janet Kloppenburg from J J K Research associates.
Janet Kloppenburg: Hi, everybody and congratulations on a wonderful quarter and a great year.
Marty: Yes.
Marty: Couple of questions.
Marty: I have a million questions, but I'm only going to ask two.
Marty: Yeah.
Marty: But anyway.
Marty: Zero.
Marty: When you say that you expect kind of flattish comps.
Marty: You all in the first quarter.
Marty: And for the year.
Marty: I might be off on the first quarter.
Speaker Change: Are you, saying that Europe will be up and North America will be down but down less than it has been is that what youre, saying <expletive> and Bryan Jacky Lin. Okay. Go ahead, I wanted to come back to Frank anyway.
Speaker Change: Yes, so let's just answer that that's exactly what Mimi.
Speaker Change: We can't tell exactly how high up.
Speaker Change: The European business will be and we can't tell how much improvement.
Speaker Change: North America is going to get and Thats why its difficult for us.
Speaker Change: Unlike the other ones, where I said that might be made.
Speaker Change: Low to mid single digit comps, it's very difficult to say.
Speaker Change: Low singles up or down so that's what we mean.
Speaker Change: We are right on the cost.
Speaker Change: And I would.
Speaker Change: I had to place bets and boy I am getting ICEE look through them all.
Speaker Change: Looking down at the table I don't do it don't do it.
Speaker Change: I have a player like <unk>.
Speaker Change: Go ahead.
Speaker Change: Okay I won't change.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: They're making progress.
Speaker Change: And.
Speaker Change: And say I think there's.
Speaker Change: Look a lot better I have to Tayo I know the website too.
Speaker Change: The stores and see the storytelling is just significantly better than it's been in a long time.
Speaker Change: And then.
Speaker Change: Alright, my friend Frank.
Speaker Change: So, let's say that the U S business for free people get to be flat to up low single digits. The U S business.
Speaker Change: What does that mean about the profitability outlook for this year.
Speaker Change: At ICR, we talked about it not really going back to profitability rebounding until 'twenty six.
You guys call 27.
Speaker Change: Yep.
Speaker Change: I think just for everyone. I think you were talking about urban there.
Speaker Change: And yes.
Speaker Change: And as we talked about it we felt like for the year urban could be flat to low single digit comp positive and.
Speaker Change: As Jay talked about the pillars and sort of we talked about the stages of urban's improvement and we sort of talked about it as two stages one was recovering margin.
Speaker Change: Due to better inventory control and honestly, just better product better product assortment and you're starting to see that take hold now over the last two quarters and into the first quarter of this year, you're starting to see that margin recapture.
Speaker Change: But that's not going to be enough. The brand has to return to positive comps in order to leverage off on things like occupancy.
Speaker Change: As Shane mentioned, obviously, having the ability to transform our fleet into being more more productive and to a slightly smaller stores, we'll have improvement over time, but we know that we need to drive top line improvement to get there. So I think the brand has the opportunity to drive meaningful improvement this year, but we will not reach.
Speaker Change: Breakeven this year, that's going to be a longer term horizon.
Speaker Change: That will rely on not just the margin recapture which we believe we started and youre starting to see in the results, but it's going to take the topline sales to head comp positive, which we also believe that the brand has the opportunity to do this year as well.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: The last question will come from Simeon Siegel from BMO capital markets.
Simeon Siegel: Thanks, Hey, good afternoon, everyone nice end of the year.
Simeon Siegel: To follow up on the last two actually just interesting this year urban did drive the smallest revenues of your big three so maybe taking a step back how do you think about how large the urban outfitters revenues division should and could be over the mid to long term and then just frankly the margin expansion is great to see the confidence in the 10% is great to hear the mid to high teens for the brands great to hear.
Simeon Siegel: Just curious where you see that also.
Simeon Siegel: Company level EBITDA margin opportunity going thanks.
Simeon Siegel: Yes, okay.
Simeon Siegel: First up about the urban brand.
Simeon Siegel: There is no there is no way that the urban brand can't be 1% to $2 billion brand.
Simeon Siegel: And we will get there and just how long is that going to take so that gives you an idea.
Simeon Siegel: Can it be bigger than three people.
Simeon Siegel: I'll, let I'll, let the customers decide that.
Simeon Siegel: And I think a good example of that is in stores right. We're going through this time right now where we're transitioning to some.
Simeon Siegel: Smaller footprint stores, and we're transitioning to where some of that younger consumer has moved but we don't think the quantity of stores that we can have in North America is any different than it ever was.
Speaker Change: So there'll be a transition period here, where you see some of that going on and then Additionally, as <expletive> talked about one to 2 billion here.
Speaker Change: In North America, Europe continues to have a significant opportunity in that business.
It's probably largely penetrated from a store perspective in the U K, but it's still very well underpenetrated in Europe, and we've seen some really nice results there.
Speaker Change: And have made some investments there to continue to support.
Speaker Change: Growth in the European market. So I think you have to think about the size of that opportunity for that brand across that across both continents still really has meaningful growth opportunities ahead of it from a top and from a bottom line perspective.
Speaker Change: And so nobody gets misunderstand so does free people.
Speaker Change: Enormous opportunity in there.
Speaker Change: And our European stores are doing quite well and theyre profitable.
Speaker Change: So we're bullish on Europe, and we're bullish on both urban and free people.
Speaker Change: And so I mean I appreciate the question.
Speaker Change: I think what you're hinting at is could we get better than 10% and I think there's always that opportunity I think we've set that 10% margin goal as an opportunity for us, but as you know right with urban being challenged right now.
Speaker Change: You get to flat it would be meaningful you've already got free people and anthropologie operating in the mid teens I don't think we know what the ceiling is for newly but we've talked about we felt like it absolutely could get to at least 10%.
Speaker Change: When you add those things up yes, it's north of its north of that number I'm not going to give a time horizon or exactly what that number is but I think what you're hinting at is absolutely true I think that.
Speaker Change: That opportunity does that certainly presents itself and it's certainly something we're excited about.
Speaker Change: And that concludes our call and thank you all very much for participating and I certainly thank all the folks sitting around the table.
Speaker Change: And delivering a tremendously good.
Speaker Change: So thank you.
Speaker Change: Yes.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
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Speaker Change: Good day, ladies and gentlemen, and welcome to the Urban Outfitters, Inc. Fourth 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.
Speaker Change: Ask a question during the session you will need to press star one one on your telephone you will then hear an automated message Advisee. Your hand is rage to withdraw your question. Please press star one one again I would now like to introduce Oh, No Nicola executive director of Investor Relations.
Ms. Mccullough: MS. Mccullough you may begin.
Speaker Change: Good afternoon, and welcome to the U R. B N fourth quarter fiscal 2025 conference call earlier. This afternoon. The company issued a press release outlining the financial and operating results for the three and 12 month period, ending January 31 2025.
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: For more detailed commentary on our quarterly performance and the text of today's conference call. Please refer to our Investor Relations website at Www Dot you RBN Dot Com I will now turn the call over to <expletive>.
Speaker Change: Thank you Ana and good afternoon, everyone. We're pleased to announce record fourth quarter sales in full year profits, both of which surpassed our expectations.
Speaker Change: Speaking of those results on today's call you will first hear from Frank Conforti, Our co President and COO following Frank Melanie Brian <unk>, Our CFO will talk about our current expectations for fiscal 'twenty six.
Then after my brief closing remarks, we will be pleased to address your questions.
Speaker Change: I will now turn the call over to Frank.
Frank Conforti: Thank you <expletive> and good afternoon, everyone.
Frank Conforti: Today, I will discuss our total company fourth quarter results versus the prior year, followed by some more detailed notes by brand.
Frank Conforti: Please note today I'll be speaking to our financial results on an adjusted basis, which do not include prior year non core adjustments for asset impairments lease abandonments, a release of income tax reserves and a change in the revenue recognition method at NOLA.
Frank Conforti: Each of these items is detailed in our press release as well as the Investor presentation that is posted to our U RBN Investor Relations website.
Frank Conforti: Now onto our results.
Frank Conforti: Overall, the teams delivered another exceptional quarter, surpassing our plans as discussed during the third quarter conference call.
Frank Conforti: Total <unk> sales grew by 9%, reaching a Q4 record of $1 6 billion four of our five brands performed remarkably well posting record fourth quarter sales.
Frank Conforti: Additionally, the urban Outfitters brand made significant progress in reducing the brands operating loss versus the prior year and improving their sales trends.
Frank Conforti: European sales growth was partly driven by a 5% increase in the retail segment comp due to a high single digit DTC channel comp and a low single digit store comp.
Frank Conforti: Both anthropologie and free people achieved a high single digit positive retail segment comp slightly offset by a low single digit comp decline at the urban Outfitters brand.
Frank Conforti: Newly delivered robust double digit revenue growth, thanks to a 53% increase in average active subscribers compared to the prior year.
Frank Conforti: Additionally, the wholesale segment saw a 26% revenue increase driven by a healthy rise in full price sales at free people.
Frank Conforti: Now turning to gross profit.
Frank Conforti: European saw a 17% increase in gross profit dollars, reaching a record $528 million.
Frank Conforti: The gross profit rate also improved nicely by over 200 basis points rising to 32, 3%.
Frank Conforti: This is on top of a 290 basis point improvement in gross profit rate in the fourth quarter last year.
Frank Conforti: The current year's increase was due to better gross margins across all segments.
Frank Conforti: The improvement in the retail segment was primarily driven by a reduction in markdowns with urban outfitters, leading the way with significantly lower markdowns versus the prior year, followed by an improvement at Anthropologie.
Frank Conforti: Additionally, the retail segment gross margin benefited from increases in initial margins at both Anthropologie and free people.
Frank Conforti: In the fourth quarter SG&A increased by 9% leveraging by 18 basis points as a rate to sales.
Frank Conforti: The growth in SG&A dollars was primarily driven by increased marketing spend fueling sales growth for the Anthropologie free people FP movement and newly brands.
Frank Conforti: The marketing efforts of Anthropologie free people and FP movement boosted traffic to both the store and digital channels, while new lease campaigns resulted in a healthy double digit growth in average active subscribers.
Frank Conforti: Yeah.
Frank Conforti: Total U RBN operating income rose by 54% compared to last year, reaching $125 million, while the operating profit rate improved by over 220 basis points to seven 7%.
Frank Conforti: Net income saw a 49% increase to $98 million or $1.04 per diluted share.
Frank Conforti: I will now provide more details by brand starting with Anthropologie.