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

June 08, 2010 | About:
10qk

10qk

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Urban Outfitters Inc. (URBN) filed Quarterly Report for the period ended 2010-04-30.

Urban Outfitters Inc. has a market cap of $6.09 billion; its shares were traded at around $36.08 with a P/E ratio of 25.6 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, Columbia Wanger of Columbia Wanger Asset Management, Chris Shumway of Shumway Capital Partners LLC, Ron Baron of Baron Funds, Pioneer Investments, Chuck Royce of Royce& Associates, Pioneer Investments, Jeremy Grantham of GMO LLC, Steven Cohen of SAC Capital Advisors, RS Investment Management.

Highlight of Business Operations:

Net sales for the first quarter of fiscal 2011 increased by $95.2 million or 24.7% to $480.0 million from $384.8 million in the first quarter of fiscal 2010. This increase was attributable to a $94.2 million, or 26.1%, increase in retail segment net sales in addition to a $1.0 million, or 4.0% increase in wholesale segment net sales, excluding inter-segment sales to our retail segment. Retail segment net sales for the first quarter of fiscal 2011 accounted for 94.8% of total net sales compared to 93.7% of net sales for the first quarter of fiscal 2010. The growth in our retail segment net sales during the first quarter of fiscal 2011 was driven by a $37.6 million increase in new and non-comparable store net sales, which includes an adjustment for $3.3 million of foreign currency translation, a $31.1 million increase in comparable store net sales and a $25.5 million increase in

Gross profit rate for the first quarter of fiscal 2011 increased to 41.8% of net sales from 37.2% of net sales in the comparable period in fiscal 2010. The increase in rate was primarily due to improvement in initial merchandise margins, a lower rate of merchandise markdowns and leveraging of store occupancy expenses driven by positive comparable store sales. Gross profit for the first quarter of fiscal 2011 increased by $57.5 million or 40.1% to $200.8 million from $143.3 million in the comparable quarter in fiscal 2010. This increase was primarily related to the increased sales volume. Total inventories at April 30, 2010 increased by $32.1 million or 16.9% to $222.0 million from $189.9 million as of April 30, 2009. The increase is 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 3.2% at cost and the number of units increased by 6.6%.

Cash, cash equivalents and marketable securities were $772.7 million as of April 30, 2010, as compared to $745.0 million as of January 31, 2010 and $559.8 million as of April 30, 2009. Cash provided by operating activities decreased by $17.8 million to $52.0 million for the three months ended April 30, 2010. This decrease in cash provided by operating activities was primarily due to changes in working capital accounts during the quarter which more than offset the increase in net income. Cash provided by investing activities for the three months ended April 30, 2010 was $37.7 million, as compared to $163.7 million of cash used in investing activities as of April 30, 2009. Cash provided by investing activities for the three months ended April 30, 2010 related to sales and maturities of marketable securities that were partially offset by purchases of marketable securities and cash

Cash paid for property and equipment for the three months ended April 30, 2010 and 2009 was $32.4 million and $32.3 million, respectively, and was primarily used to expand and support our store base. During fiscal 2011, we expect to open approximately 45 new stores, renovate certain existing stores, complete an expansion of our home office in Philadelphia, Pennsylvania, modestly increase our catalog circulation by approximately 3 million catalogs to approximately 40 million catalogs and purchase inventory for our stores, direct-to-consumer and wholesale businesses at levels appropriate to maintain our planned sales growth. We expect the level of capital expenditures during fiscal 2011 to approximate $130 million, which will be used primarily to expand our store base and our home office. We believe that our new store, catalog and inventory investments generally have the ability to generate positive operating cash flow within a year. During the second quarter of fiscal 2011, we expect to complete a 54,000 square foot expansion to our home office. The project will cost approximately $25 million.

On September 21, 2009, we amended our renewed and amended line of credit facility with Wachovia Bank, National Association (the Line). This amendment adds an additional borrower and adds certain additional guarantors. The Line is a three-year revolving credit facility with an accordion feature allowing an increase in available credit up to $100 million at our discretion. As of April 30, 2010, the credit limit under the Line was $60 million. Cash advances bear interest at LIBOR plus 0.50% to 1.60% based on our achievement of prescribed adjusted debt ratios. The Line subjects us to various restrictive covenants, including maintenance of certain financial ratios and covenants such as fixed charge coverage and adjusted debt. The covenants also include limitations on our capital expenditures, ability to repurchase shares and the payment of cash dividends. As of and during the three months ended April 30, 2010, there were no borrowings under the Line and we were in compliance with all covenants under the Line. Outstanding letters of credit and stand-by letters of credit under the Line totaled approximately $58.1 million as of April 30, 2010. The available credit, including the accordion feature under the Line totaled approximately $41.9 million as of April 30, 2010. We plan to renew the line during fiscal 2011 and expect the renewal to satisfy our letter of credit needs through at least fiscal 2011.

Less than 5% of our cash, cash equivalents and marketable securities are invested in A or better rated ARS that represent interests in municipal and student loan related collateralized debt obligations, all of which are guaranteed by either government agencies and/or insured by private insurance agencies up to 97% or greater of par value. Our ARS had a par value and fair value of $37.6 million and $33.5 million as of April 30, 2010 and January 31, 2010 and $44.0 million and $38.7 million as of April 30, 2009, respectively. As of April 30, 2010, all of the ARS we held failed to liquidate at auction due to lack of market demand. Liquidity for these ARS is typically provided by an auction process that resets the applicable interest rate at pre-determined intervals, usually 7, 28, 35 or 90 days. The principal associated with these failed auctions will not be available until a

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