Urban Outfitters 4Q14 Earnings Call Notes

Pretty solid increase in sales

“Total company sales for the quarter increased by 12% to a fourth quarter record of $1 billion. This was our first ever $1 billion quarter, a nice milestone to hit with all of our brands delivering positive Retail segment comp sales. The total sales increase was driven by a 6% Retail segment comp, a $46 million increase in non-comparable sales, including the opening of seven net new stores and a 21% jump in Wholesale sales”

Urban brand is in much better position

“the Urban brand is in a much better position versus this time last year, but while progress has been made, we are still a work in progress with much more to come. We believe the brand can begin to deliver markdown improvement in the first quarter, but much, if not all this improvement could be offset by unfavorable IMU, which we believe will not start to show meaningful improvement until the second quarter.”

We are not simply a brand. We are attracting an audience.

“We are not simply a brand selling products. We are attracting an audience that wants to be part of our culture through our product offering, music, photography, and other creative outlets.”

Making improvement with customer engagement

“Another area in which we are making solid improvement is within customer engagement. Our direct-to-consumer business continues to see strong top line sales growth. Our improved marketing and creative is clearly resonating with our core customer, evident not only in the top line direct sales numbers but also in the type of engagement we’re seeing within our social channels. It is becoming more and more common to see six figure likes on our Instagram posts, with followers growing significantly year-over-year on a monthly basis.’

Digital marketing group changes have paid dividends

“Nowhere within the Urban brand have the creative changes been more apparent and more impactful than in the digital marketing group. With the new team leading the way, what had been mostly juvenile pop graphics and sale messaging gave way to compelling photographic imagery and content designed to engage the customer and drive full price selling. This change, coupled with improved product, has delivered double digit sales gains in web and mobile full-price selling.”

Strong environment for consumer spending

“with relatively inexpensive energy prices, little to no inflation, and a strong U.S. dollar, we see a positive environment in the United States for consumer spending.”

You don’t have to race to the bottom on price when you have brand

As far as pricing is concerned, we don’t believe that that you have to raise to the bottom as you put it in pricing and decrease our prices. We think that when prices product around what the brand value proposition is and that value proposition is created by a number of things including those we said on the call, some of the direct-to-consumer marketing, the store experience, our association in the music world, and a number of other things that creates the value proposition.”

Create an emotional link to support a full price

“I’d direct your attention to, you can go into a Forever 21 and they have some stripe tops in there right aisle for under $11, and you could then go someplace else in the mall and find Michael Kors that has the similar top for $50, but they cost probably relatively the same to make, of course, probably a little bit more, but still it’s relatively the same. But, the Kors can get the $50, because of the value proposition. So our job as merchants is to create that emotional link with the customer and get the value proposition up and that will support a full price.”

Urban Outfitters 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Performance was sub-par

“Let me say at the outset that URBN’s overall performance in this year’s third quarter was subpar. Disappointing results at the company’s namesake brand, Urban Outfitters, deflated what otherwise would have been a powerful company performance.”

Very very few apparel retailers have shown strong results

“It is obvious that the environment surrounding apparel retailing over the past year has been challenging. Many brands have struggled. A few have delivered fair results, and very, very few have shown strength. We are pleased that two of our brands, Anthropologie and Free People, continue to be amongst the strongest performers in the market.’

September really bad bad October rebounded

“For some reason, which we can’t explain, September was a particularly poor month, but happily, October improved from the September level. Total comp store sales and transactions were down in both North America and Europe.”

Urban was the problem

“the Urban brand contributed far less to our overall profitability than we have come to expect, given its historic performance levels. Some of this shortfall I attribute to market conditions, some to the fashion cycle, but some is definitely a result of poor execution.’

Urban had a -7% comp

“Urban’s total retail segment comp sales decreased by 7% in the quarter.”

Our customer is back though

“The most positive sign, in my opinion, is that the Urban customer is back. She’s definitely online, and she’s buying, but she’s also coming back into the stores. Perhaps a little less regularly than in prior years, but unlike last year, our hip, young adult customer is shopping in the stores once again.”

We don’t really know why September was weak

“September seemed to be an anomaly. August was reasonably strong and then September, all brands had a problem, and then we saw a pickup in October. So we don’t know what caused it. I’m at a loss. If you have any suggestions, I’d love to hear it. But no, we don’t have any idea what caused it.”

Fast fashion as a supply chain, yes, as a price point, no

“You know, I know that there’s been a lot of discussion around fast fashion, and I think we’ve talked about this in the past. If you are talking about fast fashion as a supply chain discipline, then I think the answer is yes, it makes a difference, and we are in the process of adapting to that change. We have significantly decreased the number of weeks between when we start to put our fashion to bed and deliver it.

So I believe very much in fast fashion, but when you start talking about fast fashion as a price point, that’s where you lose me. We think that our customer is much more driven by style, fashion, and brand equity than they are by price point. And I think this is a split that is not as well-recognized in the investment community as it should be.’

We’ve seen good traction in November

“We’ve seen good traction as we’ve turned the corner into the month of November from October. Some of the healthier business we saw in the month of October has held up nicely for us as we’ve turned the corner, with fresh deliveries for holiday’

Urban Outfitters 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

“Total company sales for the quarter increased by 7% to a second quarter record of $811 million. This increase was driven by a $39 million increase in non-comparable store sales, opening nine new stores, and a 36% jump in Wholesale segment sales. Our Retail segment comp rate was flat for the quarter.”

10% comp decline at Urban Outfitters

“By brand, our Retail segment comp rate increased by 21% and 6% at Free People and Anthropologie Group, respectively, and declined 10% at Urban Outfitters”

194bps decline in GM

“Gross profit rate declined by 194 basis points to 37.4%. The decline in gross profit rate was primarily driven by underperformance at the Urban Outfitters brand resulting in lower merchandise margin related to poor performing product and store occupancy deleverage resulting from negative store comps at the brand.”

The plan to reinvigorate the Urban brand

“As you may recall, we said all teams and especially the product and creative teams were focused on getting the back-to-school product assortments right, reinvigorating the brand experience, and re-engaging the core 18-year-old to 28-year-old customer.

To do this, we outlined three major initiatives. First, elevate the product by offering better, more fashionable designs, improving product quality by using better fabrics and finishes, and gently raising our average retail prices.

Second, heighten the customer experience by improving the visual merchandising through better, more cohesive storytelling, and by creating more sophisticated and compelling imagery online and in stores.

The final initiative was the back away from what had become incessant promotional activity and stand for brand integrity and authenticity. I believe that Ted and Meg and their teams have executed upon all of these initiatives and the progress is starting to be seen in the assortments and the experience as we speak.”

Core customer not getting any older or younger

“Yeah, we are looking to grow internationally. That is one of our strategies. And the opportunity there is, obviously, a lot newer so we are looking to mainly partner and find new doors to enter. The domestic opportunity is clearly one where expanding categories is more of our target. So I think that the opportunity domestically is certainly to open more doors but also to expand categories”

Urban Outfitters 4Q13 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Big increase in days stores closed due to weather

“Comparing the last two Januaries, the number of store days across all brands in which stores were closed for a full or partial day, jumped from 13 to 312.”

Comps fell by 6% for the holiday

“total Urban brand retail comp sales for the holiday season dropped by 6%. Retail comp sales deteriorated further in January, due to weather and continued poor product execution.”

No fundamental change in the young adult market

“Now let me say, that I believe there are no fundamental structural changes in young adult market, other than the disruption caused by the internet and mobile technologies, both of which we have been discussing now for many years.”

Sales dependent on hits and misses

“Sales correlate directly with fashion hits and misses, and I believe the Urban brand has had fewer hits than normal. It’s that simple.”

Urban organization became too siloed

“Quite frankly, the Urban brand organization became too siloed, with too little communication across functional areas. The great creativity that has been the hallmark of our success became stifled. So we are restructuring, instituting new procedures and communication, elevating all creative functions to a more central role, and refocusing on our core 18 to 28 year old age group.”

Last quarter’s issues continue in this quarter

“the successes and challenges I had outlined above for the fourth quarter, have continued into the first quarter of fiscal 2015. The Free People and Anthropologie brands continue to perform nicely, but the weather is still far from normal, and the Urban brand is still underperforming. ”

Current quarter sales and margins will be pressured

“I believe that current quarter sales at the Urban brand will remain well below those achieved in the first quarter last year, and margins will likely be under considerable pressure.”

Going up against tough comps now too

” think one of the biggest differences between the fourth quarter and the first quarter is the opportunity for improvement at both Anthropologie and Free People, they are now up against more difficult comparisons than they were in the fourth quarter, as they are lapping even incrementally better business, so there is less opportunity for them to provide a little bit cover for where the Urban business is currently challenged. And we did see a deceleration in the Urban business in January and then also into February although it may be partially related to the weather.”

This was an issue of fashion, not something broader

“There are certainly many theories, sort of floating as to why many of the folks in the young adult market seem to be having difficulty. But I think if you look at the historic performance of many of those people having difficulty, you see them all clustered around that difficulty beginning somewhere in the late second to early third quarter of 2013; and that suggests to me very clearly, that it is the fashion issue, not a structural issue. I mean, its not as if fast fashion, all of a sudden it came into the market in September of 2013 and caused disruption. Its not as if some folks who might be out of work, just happen to expand in September of 2013.”

We have started to migrate lower in age and we need to reverse that

“I believe that over the last four or five years, the Urban brand has moved somewhat south, in terms of each group penetration. This is a lot of anecdotal information, as well as some statistical information that we received from our web shoppers, and so I don’t think this is a good place for us to be. We have always said that we want to be college and post college, in terms of the customer that we try to serve, and that’s an 18 to 28 year old customer. And to the degree that we get down into the 14 and 15 year old group, that is a group that wants a very different kind of product, and a very different price structure. So we do want to move to the 18 to 28. in order to do that, I am very convinced from years of experience, that that customer wants better products and wants higher quality; and so that’s the direction that we are going to go”

Not breaking out DTC channel

“I can tell you that, the direct-to-consumer channel is growing at a faster pace and the penetration is increasing. But we are not giving out the exact penetration anymore, because we just want ourselves internally, as well as externally, to be focused on pleasing the customer, and not focusing on one channel versus another.”

Shipping used to be an income positive proposition. No longer

“the only structural change within our DTC margins, is the difference between delivery expense, and if you go back seven, eight years ago, net delivery expense was actually income. And I think those days are essentially gone, as most brands are free over threshold or offer a fair amount of promotion throughout the course of the year. ”

DTC a little higher margin than retail

” the DTC business continues to be a slightly more profitable channel than where the store channel is, and we would expect that to continue for some time”

Faster replenishment of styles is key

“There is no question that faster replenishment is one of the keys to success today. When most people talk about fashion, they mean something different than supply chain. They talk about price points, and we believe that that fashion as a supply chain concept is correct, and we are trying to move towards that, slowly but surely, and we will get there.”

Urban Outfitters 3Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

“By brand, our Retail segment comp rates increased 30% at Free People and 13% at Anthropologie and decreased 1% at Urban Outfitters.”

“Due to what we believe could be an increasingly promotional holiday environment, we are planning inventory conservatively. This promotional environment could negatively impact our gross profit margins for the fourth quarter. ”

“While the third quarter proved to be a challenging moment in time for our brand, it was filled with learnings that are driving progress on the execution of our brand strategy. Our most significant challenge in the quarter came from North America. I attribute the shortfall in the North American market to missed fashioned calls, off-pitch marketing and poor creative execution. Magnifying these issues, without doubt, was the extreme promotional environment which exists in the young adult market today.”

“The foundation of our model is built on pleasing the customer through a differentiated creative experience combined with a compelling product offering. That offering must be eclectic, broad and of the moment. We have proven over many years to be experts at executing these 2 factors”

“Even though, as Ted said in his comments, the Urban brand fell short of their internal goals, all brands delivered record sales for the quarter, and the Anthropologie and Free People brands produced record merchandise margins as well.”

“we’re also very cautious because of the calendar shift. And we went back and did a little research and found the last time the calendar shifted was none other than 2008. And that year was not a very good year, but of course, there could have been many, many reasons for that, not the least of which was the financial collapse.”

“November, I didn’t — have not given any flavor about, and I almost hesitate to do it because of the change in calendar. You can well imagine the comps over this past weekend were not particularly strong in any of the brands, and that is because last year, it was the weekend before Thanksgiving holiday, which is usually a very strong weekend. And so I don’t want to give any flavor to November.”

“I will say that the categories that performed well in-store did perform well online, and there are some categories that are performing stronger online than in-store, just based on investment that’s been made and the way the strategies have been put together, specifically home. The decorative side of the home business, we built inventory into that to service that opportunity out of direct. And we are realizing most of our home opportunity in-store based on space through various categories of what we referred to as entertain.”

“We have always had to compete with — whether it was a business that was more highly penetrated in retail a few years ago, we’ve always had to compete with people in our age group that have been offering more aggressive promotional stance than our stance. We’re very much a believer in selling our product at regular price and creating an experience that differentiates and gives the customer a reason to come see us versus simply utilizing price to get them in the door. That remains our strategy.”

“I think in general we think that the best way to think about it is a combination of the 2. The stores are fine. As you probably know, the occupancy in Europe is higher than it is in the U.S. And while we don’t mind working for the landlord a little bit, we don’t want to work for him fully. So we would just assume — use some of the store fronts across Europe to help drive some of the direct business. So we will probably, in each of the brands, do a combination of both.”

“how do I think about promotional activity? I think it’s always been here. I think it’ll always be here, and it’s gotten probably more intense in my 40-some years of being in business. But it’s always been here…So we are happy that all of our competitors are here, and we’re not afraid to go head-to-head with them. If they want to promote, let them promote. I think in the final say, it’s not a particularly good strategy given the markets that we’re going after. My experience is most of the customers that we try to serve, they’ll not particularly like promotional activities.”

Urban Outfitters 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Marni, we have always seen the reverse effect, even going back to the days of catalog. It was not unusual back in the day in the late ’90s for Anthropologie to experience women coming into the Anthropologie store with certain pages turned down of product that they wanted and say, “I want this. Do you have this in my size?” So we have seen that happen consistently, and then the same exact thing is happening with the website. So the answer to your question is yes. But I think there is much more of a flow the other way where they’re going into stores and then going to web as opposed to the other way around.”

“So delivery expense is greater than delivery income. And certainly, we go back 5 years, that wasn’t the case, and the trend is pretty clear. Fast and free, I think, is the expression that’s been used a lot. And I think that, that is the trend and probably, we will realize that trend sooner than later. But when you think about the differential between direct-to-consumer and bricks and mortar and you consider the occupancy cost of bricks and mortar, you can afford to have quite a bit of shipping baked into every order and still come out ahead. And I think that’s where we are on the scale. So we intend to continue to press for at least fast, if not totally free. And we’re pretty convinced that in the next 3 to 5 years, it will be both fast and free. And we will absorb that cost as part of doing business, just like we’ve absorbed rent as part of doing business.”

“We are laughing around the table, Laura, because those trends often last for about, oh, 4 weeks, roughly [ph] . But in seriousness, I think that there’s been a lot of changes that David has done, positive changes that allow, structurally and personnel-wise, for us to more accurately predict what the fashion is going to be. And without being too flip about it, we absolutely want the fashion to change. If the fashion were not to change, we would be in big trouble. ”

“we continue to focus on who she is and ways that we can continue to outfit her and understand her better”