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Urban Outfitters Inc. Reports Operating Results (10-Q)

December 10, 2010 | About:
10qk

10qk

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Urban Outfitters Inc. (URBN) filed Quarterly Report for the period ended 2010-10-31.

Urban Outfitters Inc. has a market cap of $6.21 billion; its shares were traded at around $37.63 with a P/E ratio of 23.3 and P/S ratio of 3.1. Urban Outfitters Inc. had an annual average earning growth of 36% over the past 10 years. GuruFocus rated Urban Outfitters Inc. the business predictability rank of 4.5-star.URBN is in the portfolios of Columbia Wanger of Columbia Wanger Asset Management, Ron Baron of Baron Funds, Pioneer Investments, Steven Cohen of SAC Capital Advisors, Chuck Royce of Royce& Associates, Jeremy Grantham of GMO LLC, RS Investment Management, PRIMECAP Management.

Highlight of Business Operations:

As part of the process of preparing our condensed consolidated financial statements, we are required to estimate our income taxes in each of the tax jurisdictions in which we operate. This process involves estimating our actual current tax obligations together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences result in deferred tax assets and liabilities, which are included within our condensed consolidated balance sheet. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income. Actual results could differ from this assessment if adequate taxable income is not generated in future periods. Deferred tax assets as of October 31, 2010, January 31, 2010 and October 31, 2009 totaled $54.0 million, $43.6 million and $35.9 million, representing 3.1%, 2.7% and 2.3% of total assets, respectively.

Net sales for the third quarter of fiscal 2011 increased by $67.7 million, or 13.4%, to $573.6 million from $505.9 million in the third quarter of fiscal 2010. This increase was attributable to a $63.7 million, or 13.4%, increase in retail segment net sales in addition to a $4.0 million, or 13.1%, increase in wholesale segment net sales (excluding sales to our retail segment). Retail segment net sales for the third quarters of fiscal 2011 and fiscal 2010 accounted for 94.0% of total net sales. The growth in our retail segment net sales during the third quarter of fiscal 2011 was driven by a $35.8 million increase in new and non-comparable store net sales, a $25.9 million increase in direct-to-consumer net sales and a $ 2.0 million increase in comparable store net sales. Our total company comparable retail segment net sales increase of 5.8% was comprised of an increase of 4.9%, 4.8% and 29.2% at Urban Outfitters, Anthropologie and Free People respectively.

Gross profit percentage for the third quarter of fiscal 2011 decreased to 41.1% of net sales from 41.5% of net sales in the comparable period in fiscal 2010. The decrease in the percentage was primarily due to higher shipping costs associated with an increased penetration of international direct-to-consumer sales as well as the impact of pre-opening occupancy expense due to the timing of store openings. During the quarter, merchandise margins were flat compared to the prior year comparable period. Gross profit for the third quarter of fiscal 2011 increased by $25.9 million, or 12.3%, to $236.0 million from $210.1 million in the comparable quarter in fiscal 2010. This increase was primarily related to the increased sales volume. Total inventories at October 31, 2010 increased by $54.8 million, or 23.4%, to $289.3 million from $234.5 million as of October 31, 2009. The increase was primarily due to the addition of inventory to stock new retail stores. On a comparable retail segment basis, which includes our direct-to-consumer channel, inventories increased by 8.3% at cost as of October 31, 2010 compared to October 31, 2009.

Net sales for the nine months ended October 31, 2010 increased by $256.4 million, or 19.0%, to $1.61 billion from $1.35 billion in the comparable period of fiscal 2010. This increase was attributable to a $247.4 million, or 19.5%, increase in retail segment net sales in addition to a $9.0 million, or 11.2%, increase in wholesale segment net sales (excluding sales to our retail segment). Retail segment net sales for the nine months ended October 31, 2010 accounted for 94.4% of total net sales compared to 94.0% of net sales for the nine months ended October 31, 2009. The growth in our retail segment net sales during the nine months ended October 31, 2010 was driven by a $113.2 million increase in new and non-comparable store net sales, a $57.2 million increase in comparable store net sales and a $77.0 million increase in direct-to-consumer net sales. Our total company comparable retail segment net sales increase of 10.9% was comprised of an increase of 13.3%, 7.7%, and 25.9% at Anthropologie, Urban Outfitters and Free People, respectively.

Gross profit percentage for the nine months ended October 31, 2010 increased to 41.8% of net sales from 40.1% of net sales in the comparable period in fiscal 2010. The increase in percentage was primarily due to improved merchandise margins and leveraging of store occupancy expense driven by positive comparable store sales. Gross profit for the nine months ended October 31, 2010 increased by $131.1 million, or 24.3%, to $671.6 million from $540.5 million in the comparable quarter in fiscal 2010. This increase was primarily related to the increased sales volume.

Cash, cash equivalents and marketable securities were $689.8 million as of October 31, 2010, as compared to $745.0 million as of January 31, 2010 and $651.9 million as of October 31, 2009. Cash provided by operating activities increased by $31.2 million to $241.0 million for the nine months ended October 31, 2010. This increase in cash provided by operating activities was primarily due to an increase in net income which was partially offset by the use of cash in working capital during the nine months ended October 31, 2010. Cash provided by investing activities for the nine months ended October 31, 2010 was $36.4 million, of which the primary source was sales and maturities of marketable securities, partially offset by purchases of marketable securities and cash used to construct new stores. Cash used in financing activities for the nine months ended October 31, 2010 was $181.9 million, which primarily related to share repurchases during the period. Our working capital was $661.6 million at October 31, 2010 compared to $617.7 million at January 31, 2010 and $555.3 million at October 31, 2009. Changes in working capital primarily relate to the volume of cash, cash equivalents, marketable securities and inventories relative to inventory-related payables and store-related accruals.

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10qk
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