Urban Outfitters 2Q18 Earnings Call Notes

Richard Hayne – Chief Executive Officer

Performance far below expectations

“Thank you, Trish. Thank you, David and good afternoon everyone. Let me say at the outset that URBN’s overall second quarter performance fell far short of our expectations. A very slow start for the quarter led to disappointing results in Anthropologie and Urban Outfitters in North America. At the same time we saw excellent comp sales gains at both larger brands in Europe with the women’s apparel category particularly strong. In North America however, the underperformance was driven primarily by the women’s product. In addition, decreases in total comp store sales more than offset the positive sales delivered by the wholesale segment and the direct to consumer channel.”

Fashion/shoes sell a little better online

“I think in general what we can say is that we tend to sell fashion a little bit better online than in the stores, that’s just in general. But other than that, I don’t think there is any particular categories that did so extremely well. I guess you could say home, furniture, particularly in Anthropologie tends to sell online, but that’s largely because it’s not in stores. So, there are some categories that we don’t have represented in the stores as much. Shoes tend to sell a little bit better online than they do in stores, but I don’t think there is anything that we are doing this any different than what you see generally.”

It’s a hyper competitive environment

“I think we are in the time of hyper competition. People are out there trying to get market share. They are doing things that one typically wouldn’t do in a business. I guess, the elephant in the room there, you know who it is, is doing an awful lot of things without regards of the bottom line and is getting rewarded for it. And so there are an awful lot of other people trying to do the same thing. So yes, I think there is margin opportunity. I think we could get there, but I also am very, very aware of the hypercompetitive space that we are in.”

Trish Donnelly

We made some mistakes

Thank you, Frank and good afternoon everyone. This is the difficult quarter for the Urban Outfitters brands, it would be very easy to blame outside factors or disruptors, but frankly we made some mistakes and we own the results. I will spend the next few minutes talking to where we went wrong, what we learned and how we refine these learnings very quickly to get back to growth. And despite the negative 8 global comp, we did have some notable successes particularly in our international business that I will highlight at the end of my commentary. First what went wrong, at the end of last year the North America business started to see a slowdown in trends in our all important dress category which has previously been driving double digit comparable sales at high average unit retails and historically fast turns. Given the sudden softness in this category, we over-corrected in spring, planning the dress offering and the quantification down too dramatically. We focused too heavily on the separates trend, at the expense of dresses and our sales in separates didn’t make up for our loss in dresses. In addition, within separates, our product focus was too one-dimensional; it skewed too tomboy in sensibility and carried lower average unit retails. Although tomboy was definitely a trend in spring, we distorted its importance too much and the customer started to miss the well-balanced and the broader assortments we have been so successful at curating

Urban Outfitters 4Q16 Earnings Call Notes

Richard Hayne – CEO

Results disappointing and unusual

“Let me begin with a fourth quarter overview. I would characterize results during this year’s fourth quarter especially the holiday season as both disappointing and highly unusual. Total company comparable sales were flat for the quarter. But within the quarter two distinct periods appeared.”

Saw wide fluctuations in traffic

” Comps were up nicely in the month of November. All three brands enjoyed a fantastic start of the holiday season by driving double-digit comp sales gains on both Black Friday and Cyber Monday. Things were looking very good. Then came December, store traffic and overall demand in North America at all three brands evaporated for several weeks at the beginning of December. More normal demand returned only as Christmas and Hanukkah drew near. Demand remained normal immediately after the holidays but fell back again once the New Year began. I can’t recall having ever seen a quarter with such wild and wide fluctuations.”

Retailers face a lot of challenges

“Now let me say few words about the macro environment. Without that the retailers in general and URBN specifically face a number of challenges. The most obvious of which is disruption created by the digital revolution. Once again sales from the DTC channel grew much faster than the store channel. DTC session traffic is up strongly while store traffic is weak. The shift in consumer preference is both obvious and growing. Total company penetration of our direct channel across all brands increased by roughly 400 basis points during the holiday season. I predict within the next three years, total URBN retail segment sales by channel will be almost equal.”

Digital shopping is negatively impacting store margins

“This would be fine if the increase in DTC sales were wholly additive, but they’re not. Digital shopping is partially replacing store shopping and thus is negatively impacting store traffic and store generated sales. Flat to negative store ‘comps’ are causing occupancy deleverage and eroding four-wall margins.”

The bubble of this industry is deflating

“Add to that the fact that the U.S. market is oversaturated with retail space and far too much of that space is occupied by stores selling apparel. Retail square feet per capita in the United States is more than six times that of Europe or Japan. And this doesn’t count digital commerce. Our industry, not unlike the housing industry, saw too much square footage capacity added in the 90’s and early 2000’s. Thousands of new doors opened and rents soared; this created a bubble, and like housing, that bubble has now burst. We are seeing the results; doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate. Another consequence of overcapacity is discounting and endless promotions as retailers try to drive demand through lower prices. This causes AUR deflation and erodes merchandise margins.”

We’re investing in the most promising opportunities

“how does URBN, with our current portfolio of strong, omni-channel, lifestyle brands, adapt, grow and remain solidly profitable? The answer: we plan to do what any good portfolio manager would. Invest resources in the most promising opportunities, diversify to lower risk, and increase liquidity. Fortunately for us, we are already reasonably diversified. Three years ago, we set out to strengthen and grow our non-apparel categories and have done so with considerable success. We now see many additional opportunities to grow by channel, category and geography.”

Highest priority is digital

“Our highest priority is where we’ve had the most recent success, digital. Last year, we made many improvements to our capabilities in this channel. We developed a single platform for all brands. This enables URBN to be more scalable and efficient in developing and rolling out front end enhancements across all brands, both on mobile, and all websites. We have improved our functionality around check out, payments, search, inventory visibility, in store pick-up, ship to store, mobile capabilities and speed on all web platforms.”

Not abandoning stores, but investment is trending downward

“I certainly don’t want to give the impression that we are abandoning the store channel because we’re not. I envision our brick and mortar store fleet as an equal partner with the virtual store in the new omni-channel retail world. We will continue to invest in this channel, but relative to historic levels, store investment is trending downward. This is largely because both larger brands have now reached what we believe, and have always said, is full penetration in North America, a fleet between 200 to 250 stores. Furthermore, it makes little sense to enter into many new, long-term leases at this time when all signs indicate that a similar lease will be less expensive in the near future.”

Urban Outfitters 3Q17 Earnings Call Notes

Urban Outfitters’ (URBN) CEO Richard Hayne on Q3 2017 Results

Strength in digital channel offset weakness in brick and mortar

“Within the digital world, customers continued to migrate from desktop to mobile as preferred method of interaction. Mobile devices now account for almost 2/3 of total Company digital sessions. The strength in the digital channel more than offset the weakness in stores with total retail segment comp sales increasing by 1% in the third quarter. The disparity in channel results demonstrates that the consumers’ affinity for digital shopping continues to grow. Her expectations around functionality and service levels in this channel are also growing. This is why we continue to make significant investments in personnel and technology that will expand our online assortments, enhance and personalize the digital experience, give us more insight into customer preferences and permit us to deliver orders faster and more reliably. Improving our capabilities in the digital channel is one of our strategic priorities.”

Shift in fashion silhouette continues

“During the quarter, we also saw a shift in fashion silhouette, that I’ve alluded to on prior calls, begin to strengthen. This emerging trend which seems to have its roots in Europe, is not impacting all brands equally. Predictably, younger, more fashion-forward customers are adopting these new looks more readily. So in Q3, the Urban and Free People brands benefited from the shift while the Anthropologie brand did not. In the fashion industry, times of rapid change, like we see when silhouettes shift, offer the greatest opportunities but also pose the greatest risks. Now let me turn your attention to the Anthropologie brand where third quarter top-line results were very similar to Q2. ”

It can take 3-4 years for a fashion shift to take place

“I actually think that it was 2006, 2007 if I recall correctly, but you might be right. I think that we’re in another shift that is similar. It’s going to take awhile. Probably takes three to four years to actually get through and as I said, the ups and downs in that period can be reasonably severe. So I think that each of the brands has a different customer segment that will adapt to the shift at different times and at different levels.”

Frank Conforti

Expenses will leverage in DTC but that will deleverage expenses in stores

“This is Frank and you’re right. That dynamic on DTC has been going on for some time and I think as it continues to increase in penetration, you’ll continue to see delivery expense and logistics expense to leverage relative to the total of URBN. Where there’s an incremental offset though is relative to the increased penetration, you do see reduced — and leverage relative to store property, so as DTC increases, it does deleverage delivery expense and logistics expense but it does then provide for some offset opportunity in store property.”

David McCreight

Customer metrics are strong, just buying less apparel at a lower price

“customer metrics are super strong. She’s just buying less apparel and apparel at a lower price and, as that cycle turns back and you combine and then we come out of the apparel cycle in positive shape and you add to it the power of the other expanded categories, we think it could really become a very nice inflection point when you think about the strength of the in-store experience and then what we’re investing in in digital as well. ”

Urban Outfitters 2Q17 Earnings Call Notes

Urban Outfitters’ (URBN) CEO Richard Hayne on Q2 2017 Results

Little impact from the Brexit vote

“Urban’s European business also experienced strong comp gains with seemingly little impact on the business from the Brexit vote”

There’s an abundance of exciting fashion happening

“Over the past several years, the complaint lack of fashion has become common in the marketplace. I spoke to the subject on our conference call in March of this year. I actually said, I’m not predicting exactly want to change in fashion will occur, but that I saw more fashion excitement in spring than I’ve seen in quite a few years. I’ll repeat those comments again as we move into fall. Except I believe the change is now upon us and our customers are adapting to new looks and silhouettes as we speak. As in all such cycles some customers and brands adopt newness faster than others. But the fact is, there is currently an abundant of exciting fashion happening and this is very good for our brands for URBN and for our industry as a whole.”

Once a fashion trend starts not much changes it

“some brands and some customers adopt at different rate, but I think it’s particularly — the fashion changes particularly kind of Urban, but I think that the other brands have lots of fashion as well and to the degree they maybe a little slower and adopting it. I think that they well adopted, I mean this is the fashion change that’s happening and my experience is once it starts to happen, there is not much that stops it.”

Shouldn’t get too negative on stores, there are just too many

“I do believe that we shouldn’t get too negative on stores I think that there is no question, there are too many stores in North American and we start to see some of those stores going away, our competitors are closing stores at a reasonable rate and of course they were just the Macy’s announcement of closing stores. So I think that you will continue to see a lot of stores close and go away and I think that’s a positive thing for the industry and a positive thing for all the people including the ones that are closing the stores. But I don’t think it’s a problem with stores per say, I think the stores concepts are still valid, what I see happening overtime is just fewer stores but probably the store is larger and delivering more of a unique experience and which complements their direct consumer business and I think that that will be the winning combination.”

August relatively consistent to Q2

“Hey Simeon, I think from a macro level, from URBN level we think that the sales are going to relatively consistent or are relatively consistent August to date with the total Q2 results”

Trish Donnelly

Quoting social media growth trends

” Another area where we’re seeing tremendous customer growth and audience engagement is in social medial. Our Instagram followers exceeded the 5 million mark during the quarter, increasing 65% over the prior year and we’re now capturing over 200,000 new followers a month. In addition to our national Instagram accounts, our stores manage their local accounts, which accrued almost 700,000 followers and over 19 million likes in the quarter. Snapchat is important in our consumers’ life and we’re also seeing fast growth here with viewership increasing 25% month over month.”

David McCreight

inventory opportunities by being faster to market, using more predictive tools

“it’s true throughout the quarter there were opportunities for us to have different inventory levels that may have had impacted some of our apparel demand but mostly the inventory level opportunity was in how we distorted the products and the opportunities in learning and where the customers are moving more forward. As Dick alluded to earlier all of URBN will be focusing on how to be faster speed to market, use more predictive tools or resources and overtime lower inventories in total for the organization.”

We’re seeing some interesting movement in Denim

“Dick alluded to we had double-digit success in dresses. We too are excited about the fashion changes and think Anthropologie’s customer will adapt the fashion moves, in a different way and at a different pace than the other two brand customer sets, but we’re seeing some really interesting movement in Denim, woven continue to show some nice highlights and we’re seeing just a lot of interesting reads. That being said we’re expecting and anticipate it to continue to lag the performance of [indiscernible] categories for fall, holiday’s time period. But continue to learn each season.”

Seeing a lot of brands coming to us wanting to partner because they see credibility

“What we do see Neely is a lot of brands now coming to us and wanting to partner because they see the credibility that it has given some of our partners, so I think that yes we’ll continue to do this, we’ll continue to expand it. But we’ll extremely selective in who we’re doing with.”

Urban Outfitters FY 1Q17 Earnings Call Notes

Urban Outfitters’ (URBN) CEO Richard Hayne on Q1 2017 Results

Deflation is impacting apparel spend

“As for the apparel category, I believe she is still buying approximately the same number of items per year, but because of unit price deflation, her total annual spend on apparel is down on a year-over-year basis. This has been true for a number of years and it continued in the first quarter this year.”

Need to invest in more proprietary products

“we believe it is important for URBN to continue to invest in the following areas: larger assortments and a higher penetration of proprietary products in all categories, especially in the expanded ones; new and enhanced capabilities, including better marketing, to support the rapidly growing and changing direct-to-consumer channel;”

Our customer is in relatively good shape

“Obviously, the retail industry is going through a rather painful period of rationalization. Rarely have I read so many negative articles about our industry. Unlike much of what has been written, I don’t believe the consumer is the problem. I think our customer is in relatively good shape.”

America is overstored and overstocked

“The problem as I see it is more of a supply issue, especially in the apparel category. Simply put, America is over-stored and overstocked. We have approximately 10 times more retail space per capita than our European counterparts and more direct-to-consumer choices too.”

Companies have been trying to drive demand through promotions rather than product differentiation

“Rather than trying to differentiate their products and experiences, many retailers try to drive demand by offering constant and ever-larger price promotions that erode not just the bottomline, but brand equity as well. When that isn’t enough, companies start closing stores in an attempt to right-size their fleets.”

We think bricks are synergistic with clicks

“Our brands were early direct-to-consumer adopters. And while we continue to invest more in electronic shopping capabilities, we also strongly believe that bricks is synergistic with clicks, and that a well-conceived and executed store strategy is a powerful competitive advantage. Another advantage for URBN brands is that most of our offerings consist of unique products. This is increasingly important in the age of comparison shopping via the internet.”

Price deflation has been ongoing in retail for 25 years now

I think that I was talking about the industry, where there has been price deflation. And I think the price deflation is going on for probably 20 to 25 years now. Not exactly sure, I haven’t looked back at the statistics, but it’s long time and it’s ongoing.”

Green shoots in fashion

“The fashion trend, yes, I talked about a lot of, what I would call, green suits, early in spring. And I think the number of those green suits have proven to be correct. I see a lot of fashion excitement and newness out there. I think our Urban and Free People brands are the ones that typically get to those things quicker.”

David McCreight

Comp is lagging in May, I’d say it’s the weather’s fault

“And Lindsay, you wanted us to talk about a bit about May to date, and Ill do that. So far in May, our retail segment comp is lagging behind the first quarter trend, and I’m going to attribute that, as far as I can tell, to whether. If I had to say which weather, the three biggest reasons I’d say, weather, weather and weather. And then the follow-up reason to that might be the calendar.”

The weather has been really bad on the East coast

“I would direct you too the weather in the first week of May, we had six out of seven days of rain here in the Mid-Atlantic and temperatures were somewhere between 10 and 20 degrees below normal. The differential that we’re seeing between the comps on the West Coast where the weathers behave relatively normally and the East Coast where it’s been atrocious, is up to almost a 1,000 basis points, which is extremely unusual. So we believe that’s one sign.”

Urban Outfitters FY 4Q16 Earnings Call Notes

Richard A. Hayne – Chairman, President & Chief Executive Officer

Excessive markdowns began to subside last year

“Looking ahead, comparisons look favorable for the brand. Excessive markdowns began to subside last year as Q1 progressed. So as the brand begins to anniversary fewer promotions, I believe Urban comps could benefit from the regular price sales momentum that began in early FY16 and has continued to date.”

Fashion retailers had a difficult 2015

“Now, let me say a few words about the macro-environment. As all of you know, fashion retailers had a difficult 2015. The consumer’s appetite for fashion seemed to be inversely related to price. It’s relatively easy to list the many headwinds that might have caused such a phenomenon: anemic growth; stagnant household incomes; increased spending on non-discretionary items like healthcare, education, and shelter; increased competition from newer retailers, both traditional and online; stiff deflationary pressures; and continued competition from other trending categories like electronics and dining out.”

Apparel was the outlier because there hasn’t been a change in fashion to drive spend

“why then was apparel the outlier? To me, the answer is simple: fashion, or more accurately, the lack thereof. The last major fashion shift was ten years ago when the skinny bottom returned to popularity. Since then we’ve had all varieties of skinny: low-rise, high-rise, color, black, white and print; washed, sanded, sliced and destroyed; yoga and active; leggings, jeggings and stretch.

Today, the customer has a closet full of various skinny bottoms and she has many, many long tops and sweaters to go over them. Without a fashion need to drive her purchases, the customer can easily defer her apparel spend. Surely, a major fashion shift is the cure for the current apparel malaise. I am not predicting exactly when that change will come, but I am certain it will. Meanwhile, the good news is I see more fashion excitement this spring than I’ve seen in quite a few years.”

The death of the retail store has been greatly exaggerated

“To paraphrase Mark Twain, the death of the retail store has been greatly exaggerated. Granted, North America is over-stored and many retailer’s underperforming units will have to close, and it certainly is true that the role of the store in the digital age is changing, but I envision the brick and mortar store as an equal partner with the virtual store in this new omni-channel world. There’s no better proof of this than the current rush by most pure-play retailers to open their own retail stores.”

It’s pretty clear that fashion is going through a change right now

“As far as the fashion lull, I think it’s pretty clear that the fashion is going through a change right now, and I think it’s a fashion silhouette change. We’ve been with big over a little now for the better part of 10 years. And I think it’s nearing the end of its lifecycle. And when that happens, there is often a lot of staleness or slowness in the innovation in the fashion world. People lack sort of excitement and inspiration because a number of people are still with the old fashion as Meg talked about, some people are with the new fashion and some people just sort of check out altogether because they don’t know what to do. I think that that is always a predictable – what happens predicatively at the bottom of the cycle. As a new fashion is born and starts to catch on, there is a point at which the innovation starts to ramp up and there is tremendous amount of excitement that surrounds the newness.”

Francis John Conforti – Chief Financial Officer

Direct to consumer outperforming stores

“Within our retail segment comp, the direct-to-consumer channel continued to outperform stores, posting a double digit sales increase, driven by increases in sessions, and conversion rate, which more than offset a slight decrease in average order value. Negative comp store sales resulted from decreased transactions and average unit selling price, while units per transaction were flat. The negative transactions could have been affected by traffic, which was down at each of our brands’ comp stores during the quarter. “

Urban Outfitters 3Q15 Earnings Call Notes

Urban Outfitters’ (URBN) CEO Richard Hayne on Q3 2016 Results

October was weakest comp and trend has worsened in first half of November

“As noted above, October was the weakest sales comp in the third quarter and this negative trend has worsened into the first half of November. As of quarter to date, this negative trend is consistent across each of our brands and most prevalent in source.”

Consumers lack enthusiasm for apparel and accessories because of a lack of newness

“In general, sales of apparel and accessories have been slower, while home intimates, shoes, and beauty have been more robust. I believe our customers current lack of enthusiasm for the apparel and accessories categories. This is primarily due to a lack of fashion newness. We currently have a number of new fashion bright spots in our apparel offering. But whether or not these trends become more mainstream is uncertain. Having been in this situation before, my experience tells me the best course of action is to keep inventories lean, continue to expand and know that new trends will emerge soon”

Getting into the restaurant business?

“This morning we announced an agreement to acquire substantially all of the Vetri Family group of restaurants which includes its award-winning Pizzeria Vetri. Most recently Food and Wine Magazine named Pizzeria Vetri the best pizza restaurant in America.”

Our analysis is that the lower traffic is because of the lack of newness in fashion

“We have seen lower traffic as I said in my prepared remarks that you could hear them. We’ve had lower traffic throughout the quarter and traffic got a little bit worse in October. I think that from our analysis the primary thing driving is a lack of newness in fashion. I think the current fashion look is getting a little long in the tooth and I wouldn’t be surprised that we start to see some signs of it changing a little bit more radically than it have let’s say over the last four or five years. ”

We don’t think the lack of traffic is a precursor of a recession environment

“what we have seen outside of the apparel and accessory areas and why I don’t believe that it is the lack of traffic is let’s a precursor of recession area environment as we seen real strength in a number of our categories.”

Andrew Sohn Notes: URBN, CSIQ, GSI

Andrew Sohn, a junior at Columbia University, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Andrew has read this week.

 

 

 

Traffic down, prices are up

 

“Negative comp store sales, resulted from decreased transactions and units per transaction, partially offset by higher average unit selling prices.” –Urban Outfitters (URBN)

 

Not quite sure why

 

“our store sales have started out slower than what we planned and where we finished the second quarter. There are many factors that could be impacting our store performance and there is too little data at this time to draw any solid conclusions.” –Urban Outfitters (URBN)

 

Sales in Europe are strong

 

“We’ve seen particular strength in Europe, where our London team has doubled their business by improving operational execution and developing domestic relationships” –Urban Outfitters (URBN)

 

Mobile shopping still growing at incredible rate

 

“Meanwhile, the mobile migration we’ve been witnessing in the DTC channel has continued, with mobile devices now accounting for over 55% of our visitors and nearly 30% of our sales.“–Urban Outfitters (URBN)

 

Lots of in-store improvements coming

 

“In July, the team tested a prototype store with the new floor set and a number of category shop-in-shops…In addition to better category distortion, the brand is working to increase selling space in existing stores by shrinking the back-of-house, hold less back-stock in stores, create a supply chain that requires less time to flow new product into our distribution channels and integrate more digital capabilities into the store experience….At this time last year URBN unveiled its Vision 2020 strategy at our investor day conference. For those who attended you may recall our growth strategy was expand the number of products our brands offer, grow all of our distribution channels across all geographies and allow them to accommodate a larger product assortment, and improve operational capabilities and become more efficient.” –Urban Outfitters (URBN)

 

 

 

 

 

 

Lower store traffic an anomaly, maybe a result of weather?

“Now there are a number of categories that are working and working nicely, and I don’t think it’s significantly different than the categories that we’re working in a — toward the end of the second quarter, and so it sort of begs the question as why would the stores be down and not the direct business. And the only things we can come up with and the factors are the calendar shift where the Labor Day holiday is a week later this year and they have something to do with weather, because it’s so hot on the East and West Coast, maybe people are taking more time away and going on vacations, therefore shopping online rather than in stores.” –Urban Outfitters (URBN)

Solving inventory problems

 

“I might add that the inventory management at Urban has improved dramatically and one of the biggest problems the brand had over the last year and a half 18 months was poor inventory management. And we expect the inventories to continue to improve. The weeks of supply will continue to decrease slightly as we put more operational efficiencies into the mix and when that happens, we believe that we have an opportunity to decrease our markdowns even further.” –Urban Outfitters (URBN)

 

 

Yieldcos still the preferred way

 

“The YieldCo continues to be the preferred way to securitize our utility-scale solar portfolio in low risk OECD countries such as U.S., Canada, Japan and UK.” -Canadian Solar (CSIQ)

 

Today’s yields are down but still accretive

 

“At the yields of the YieldCos that serve OECD countries and have strong projects. Today’s yields are still value accretive. However, they’re not in a range you would hope to have robust YieldCo launched in it. If they remain elevated for long periods of time we do have alternatives, we believe that they are going to return to more of lower level and a more normal level within the next six months or so and that lines up with our timing.” -Canadian Solar (CSIQ)

Energy saving is profitable in China

 

“In fact, we believe that the more an organization moves upstream towards energy saving and environmental protection solutions, the higher would be its return on investments and sustainability.” -General Steel Holdings (GSI)

 

 

Repeat of how California environmental problems impacted companies

“The government now is fully aware of the impact from fossil-fuel pollution and is therefore putting more and more money and resources into environmental protection solutions. Actually this situation is not unique to China. And in fact back in the 1970 in Los Angeles, California also had air pollution problem due to excessive emission. This required California state government to require all the cars to install catalytic converters that employ the latest catalyst reduction or we call it SCR technology to substantially reduce NOx emission which subsequently improved the air quality.” -General Steel Holdings (GSI)

 

 

Still looking tough for steel

 

“The second quarter of 2015 has proven to be even tougher than the first quarter for the steel mills in China. China steel industry has entered into a new phase of retrenchment due to slowing infrastructure investment and a sluggish housing market. This is partially because the central government has shifted away from investment led growth to a consumption driven economy.” -General Steel Holdings (GSI)

 

Might get better though

 

“But in the near-term, we think that the challenge for the steel sector will likely linger. But we believe the dynamics in the second half won’t be as tough as the first half of the year.” -General Steel Holdings (GSI)

 

 

Urban Outfitters 2Q15 Earnings Call Notes

Store sales slow, dtc strong in August but too early to draw conclusions

“thus far in August, for all brands, our direct-to-consumer business has posted strong gains consistent with the second quarter, while our store sales have started out slower than what we planned and where we finished the second quarter. There are many factors that could be impacting our store performance and there is too little data at this time to draw any solid conclusions.’

Off their highs for anthropologie

“we are off our record highs, all-time record highs for Anthropologie and we believe that’s entirely due to a two primary factors in our core business. We clearly weren’t pleasing as well with our fashion and some of our initiatives around the speed the market”

Improved inventory management

“the inventory management at Urban has improved dramatically and one of the biggest problems the brand had over the last year and a half 18 months was poor inventory management. And we expect the inventories to continue to improve. The weeks of supply will continue to decrease slightly as we put more operational efficiencies into the mix and when that happens, we believe that we have an opportunity to decrease our markdowns even further.”

“Web as alpha” strategy

” we have built a very strong team that’s very new to the brand but showing really good drive and the whole idea of a larger format and “web-as-alpha” strategy is almost building new companies within there”

Big initiative to improve speed to market

“let me talk about speed to market that’s a subject about which I’m very passionate, everybody around the table is smiling. Yeah, I think we have an opportunity to bring product to market much faster than we do today. How we are going to do that? We are going to do that with number of factors.

One is read the trends quicker and react quicker to those trends, cut down the number of steps involved in going from design and the merchants to the production, and make all of the decisions along the way faster, that meaning adhere to a calendar that is set up.

And you would be surprised that the number of times that a decision has to be made and the person whose supposed to make the decision is either out of the — out of our offices, out of the country and maybe traveling for a few days, and that decision is one day can be a week off in production, so it’s that.”

Near sourcing is one way to accelerate production

And then finally, we are trying to accelerate the production by near sourcing, more production capabilities in the Americas and so when we combine all those things together, I’m convinced that we can take anywhere from six to eight weeks off of our normal turnaround time.’

Each larger brand has about 200-250 store capacity

“we said consistently Simeon, that the larger, the two larger brands currently, we think and have anywhere from 200 to 250 stores in North America, both of them are currently pushing 200, which would suggest that there are anywhere from none to 50 left.”

Urban Outfitters 1Q15 Earnings Call Notes

Our Q1 results were on us

We have read commentary about weather and port delays impacting performance, but our Q1 results are mostly the by-product of how we pleased her with our product and creative offers. Throughout the quarter, many areas showed solid to very strong growth; however, a few merchandise categories were not as well received and impacted the result, most notably dresses and accessories

We’re making changes

We have adjusted the team and the strategy and look for improvement in the back half of the year and continued expansion of accessories in the future.

Consumers still want to touch and feel product at brick and mortar

And while the digital experience is more important than ever, that does not mean we are resting on our previous success in stores. The largest part of consumer commerce still occurs in stores. Our customers still want to touch and feel our product, be inspired by our spaces and interact with our delightful associates. We know how important the store experience has been to shaping our brand, and we have a best-in-class experience that is compelling and very profitable

Things got better in May

It’s also important to realize that the Q1 shortfall in planned sales happened almost entirely in the last two weeks of April. This is when the Easter shift and the change in the catalog drop date combined to negatively impact sales more than anticipated. Newly received product and the catalog drop in early May have improved Anthropologie sales so far this month.

DTC channel will likely be half of our sales within a couple of years

Three years ago, I predicted that in five years the direct-to-consumer channel would account for half of URBN retail sales. That prediction was met with some skepticism. What we now see is that the trend toward greater DTC penetration is not just continuing but is actually accelerating. If my prediction is wrong, it’s only off by a year or two.

Slowing new store openings in favor of digital

we are accelerating our investments in virtual capabilities; we are slowing the number of new retail stores we open in the North American market. We have said consistently, that from a store location perspective, we believe both of our larger brands will be fully penetrated in the North American market when they each have 200 stores to 250 stores.

May of to stronger start

May is off to a very strong start. That being said, we believe – it’s hard to tell whether that is going to be more a result of the shift in marketing or the acceptance of the product offer.

Men may be migrating DTC faster

our information is, is that, the men seem to be migrating to direct to the consumer channel a little bit faster than the women and that’s not surprising because for many men it’s actually a chore to go shopping