Dive Brief:
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Urban Outfitters beat expectations Wednesday, a rare success in a dismal earnings season for apparel retailers that sent shares up 10% in late trading. The retailer, whose brands include Anthropologie, BHLDN, Free People, Terrain, Urban Outfitters, and Vetri Family restaurants, reported a 1% rise in comparable store sales during the quarter, compared to a 0.5% decline expected, according to research firm Consensus Metrix.
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Total company net sales rose 3% year over year to $762.6 million in the quarter. Analysts surveyed by Thomson Reuters had projected $760.1 million in sales.
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Comparable sales in Urban Outfitters stores increased 2%, were flat at the Anthropologie Group, and decreased 2% at Free People.
Dive Insight:
Urban Outfitters has been stumbling of late, especially at its namesake stores, but in the first quarter shrugged off signs of flagging apparel sales seen elsewhere in the industry. Urban Outfitters managed to keep its margins up through fewer price markdowns, the company said, though its Free People brand, which had been lifting the retailer in recent quarters, saw more markdowns that hit profits there.
Perhaps the brands are figuring out a way to get around a problem vexing many apparel retailers these days: there’s no real reason for women to fill their closets with new clothes, which founder-CEO Richard Hayne said in March has been an on-going challenge.
“The last major fashion shift was 10 years ago when the skinny bottom returned to popularity,” he said. “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.”
“I’m not predicting exactly when that change will come, but I’m certain it will,” he also said.
On Thursday, Hayne said in a statement that the company is beginning to get a handle on that.
“These results were driven by more compelling product assortments, improved inventory management and stronger marketing," Hayne said.
The company also unveiled plans to supersize its Anthroplogie stores, with new locations that will clock in around 20,000 to 30,000 square feet and feature more home products, apparel, a petite shop, and in some, a dining experience. The new stores are in response to customer feedback, David McCreight, president of Urban Outfitters Inc. and CEO of Anthropologie, said in a conference call on Wednesday.
Customers "are shopping across multiple product categories, spending a longer time shopping in store, and traveling a greater distance to expanded locations," McCreight said. Given the longer browsing time, customers will most likely be more apt to make a purchase—and perhaps increase their order size.