Urban Outfitters' Home-Office Hiring Grabs Lion's Share of CapEx

Improving inventory turnover and reducing time to market are Urban Outfitters' top priorities for fiscal year 2014, with CapEx spending budgeted between $190 million and $210 million. Much of those funds are earmarked for spending on new store openings as well as investments and hiring at headquarters, which could account for a greater share of CapEx than technology spending, said president and CEO Richard Hayne.
With a new omnichannel system in place that enables a single view of inventory across web and store channels, Hayne, speaking with analysts, said Urban Outfitters can significantly reduce not only its weeks of supply but also time from order placement to delivery. The retailer is pursuing supply chain, communication and brand design projects to further these goals, which Hayne said will improve both the customer experience and the company's financial strength.
Urban Outfitters is also expanding marketing programs, both in recruiting the right people to boost its segmentation, personalization and data analytics efforts, and in venturing into "soft marketing" initiatives such as the socially-driven FP Me website, which helps strengthen customer retention by encouraging users to upload photos of themselves -- more than 10,000 pictures posted to date -- wearing Free People brand merchandise.
While those investments are expected to drive significant incremental business to the direct channel, Hayne said the company continues to invest in bricks-and-mortar and improve the store experience. For example, by streamlining the in-store web returns process thanks to its pick-and-pack initiative, Urban Outfitters now can fulfill directly from store returned web exclusives. "We're seeing a much cleaner store environment in terms of the onesie and twosie returns that we have seen in the past," explained Hayne.
Urban Outfitters differentiates mobile activity by smartphone and tablet and has observed varying levels of engagement across brands and form factors, chiefly driven by age. Anthropologie shoppers, who skew slightly older and more affluent, prefer buying on their tablets; by contrast, Urban Outfitters customers conduct more transactions on their phones, though tablet purchasing is on the rise, said Hayne. With increased investments in mobile, the company plans to release a Free People app later in 2013 and update all of its branded apps as customers increasingly buy on their portable devices.  
Anthropologie is renewing its focus on the customer, reassessing who she is and what she wants, said David McCreight, the brand's CEO, with plans to expand the range of existing product categories and add new ones relevant to her interests.  The brand intends to capture new customers through continued geographic expansion and investments in the direct channel.
"We've been noticing a real shift to multichannel, where we've had a lot of single-channel buyers in either retail or direct, and now we're getting a lot of cross-channel shoppers," added McCreight. "We think that has a large part to do with the technology improvements online, the customer's comfort with shopping online and with the pick, pack and ship [initiative]."
Anthopologie also has plans in place to get sales of full-price and markdown merchandise more closely aligned with historical levels; to increase store productivity; and to improve merchandising design, McCreight said.
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