Urban Outfitters Inc. (URBN, Financial) reported better-than-expected earnings for the fourth quarter of fiscal 2015 resulting in a 2.6% rise in shares of the company to a high of $39.82 during after-hours trading following the results. While the fashion company’s 12% growth in revenues to $1.10 billion during Q4 2015 compared to the year-ago quarter is in line with consensus estimates, its reported diluted EPS of $0.60 per share, up from $0.59 per share a year ago, topped the consensus estimate of $0.58 per share. While the company’s shares stood at $39.51 at the end of the day’s trading, the Urban Outfitters stock is currently up 13% year-over year.
Positive sales trends across brands
Urban Outfitters reported net income of $80.2 million for the fourth quarter of FY2015 on the back of recovering sales in its Urban Outfitters brand after three consecutive quarters of declining sales and greater demand for the Free People clothing line. However, the figure was way below the prior-year quarter’s net income of $88.7 million. While net sales grew 6% at the company’s Comparable Retail division, net sales at its Wholesale division increased 21%. However, gross profit rate contracted 207 basis points compared to the prior-year quarter owing to reduced initial mark-ups on merchandise followed by higher discounts driven by underperformance at the Urban Outfitters brand and deleverage in store occupancy.
Brandwise, the fashion retailer’s Free People stores logged 24% growth in revenues to $152.6 million during the quarter while revenues from the Anthropologie stores stood at $413 million, up 8.9% year-over-year. Concurrently, the Urban Outfitters outlets reported a 10% increase in revenues to $438.4 million. While comparable-store sales surged 18% at the company’s Free People stores, the Anthropologie and Urban Outfitters stores logged comparable-store sales growth of 6% and 4% respectively.
Full-fiscal profits decline
For the full-fiscal 2015, Urban Outfitters, which competes with businesses such as Abercrombie & Fitch Co. (ANF, Financial) and The Gap Inc. (GPS, Financial) in the clothing and accessories retail market, reported overall sales growth of 8% compared to FY2014 to a record $3.3 billion. Net income declined 17.7% to $232.4 million resulting in diluted EPS of $1.68 a share compared to $1.89 a share for the year 2014. The company’s Comparable Retail division recorded a 2% growth in net sales, while net sales at its Wholesale division grew 27%. Gross profit rate shrank by 227 basis points compared to FY2014.
The company added a total of 38 new stores during fiscal 2015 including 11 Urban Outfitter outlets, 15 Anthropologie Group stores and 12 Free People outlets, while it shut down 3 Urban Outfitters stores owing to lease expirations.
Urban Outfitters also repurchased and retired 7.7 million common shares worth around $258 million during FY2015. The company management recently announced approval to repurchase a further 20 million shares in 2016.
Final thoughts
Although Urban Outfitters posted better-than-expected earnings for the fourth quarter, its net profit for the full fiscal 2015 dipped considerably. While experts foresee Urban Outfitters’ average annual earnings growing at the rate of around 13.62% over the next five years, the company administration itself did not announce its outlook for fiscal 2016. The company currently carries a "hold" guidance.
