Urban Outfitters 2Q18 Earnings Call Notes

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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