Urban Outfitters Closes Q1 With Record $648 Million in Sales

5/29/2013
Urban Outfitters Group reported strong results for Q1 2013, with sales up 14 percent to $648 million, a first-quarter record for the retailer. Company executives indicate positive growth across all brands, including Anthropologie and Free People.

The company plans to open between 35 and 40 new stores worldwide in 2013, 16 of which will be Urban Outfitters shops, nine Anthropologie locations and 14 North American Free People stores.

The company saw web traffic increase by nearly 20 percent year over year, with a more than twofold rise in mobile sessions. "Better use of data analytics, personalization and segmentation contributed to new direct-to-consumer customer growth of 46 percent, and reactivated customers grew by 45 percent," said Richard Hayne, president and CEO, speaking with analysts.

Free People launched the socially-driven FP Me site in Q1, which encourages fans to post photos of themselves wearing the brand's apparel and accessories. In three months more than 10,000 pictures already have been posted.

The company is pushing for Free People to continue expanding internationally. The brand secured a European sales manager and leased a wholesale showroom in London, which is expected to open imminently. "Both actions should help increase wholesale sales and address the very low penetration of Free People product in the European market," Hayne said. Following its successful first pop-up shop in a Tokyo department store in the trendy Shibuya shopping district, Free People will continue its partnership with World Co. Ltd. to establish a Japanese direct-to-consumer business.

The retailer's 2012 pick, pack and ship initiative is beginning to bear fruit, bringing in roughly $9 million in additional business in the first quarter. "Most of [that product] would not have been shipped because it would have been out of stock in the distribution centers had we not had the ability to do pack and ship," Hayne said. "We can reduce overall inventory, and I would like to see that improvement somewhere around a 5 percent incremental improvement in fiscal year 2014 versus 2013."

Anthropologie's customers are increasingly becoming multichannel shoppers, according to brand CEO David McCreight. Much of that shift is attributable to the company's digital technology improvements, consumer comfort with shopping online, and the pick, pack and ship initiative, he added.

All of the retailer's brands carry a steadily increasing mix of web-exclusive products online, with Urban Outfitters leading the way at 50 percent. Managing returned web exclusives in stores was a problem that the company handled "poorly," but things are improving. "Now that we have a pick-and-pack initiative behind us, thanks to Calvin [Hollinger] and the IT group, we can take the returns that come to the stores and have products that they don't carry in the store and we can ship them out the next time they are ordered online," Hayne explained. "We're seeing a much cleaner store environment in terms of the onesie and twosie returns that we have seen in the past."

Urban Outfitters Group is working toward trimming lead times by 5 percent over the next three quarters. The company plans to accomplish this goal by purchasing raw materials up front and doing more "incremental development" to determine exactly what is needed before team leaders actually place orders, Hayne said. "The Free People brand particularly has begun using some regional design and product development facilities in Los Angeles and thinking of expanding that overseas," he said.

The retailer thinks of mobile not as a "singular" channel but two separate platforms: smartphone versus tablet. The retailer reported varying levels of engagement across brands and form factors. For example, Anthropologie shoppers who skew older and more affluent are more likely to shop on thier tablets. At Urban Outfitters, customers prefer to buy on their smartphones, although tablet activity is increasing, Hayne said.

To keep pace with consumer demand,  the company is launching a Free People mobile app later this year and plans improvement to its existing branded apps.
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