Urban Outfitters : URBN FY21 Q4 Results and Commentary

Urban Outfitters, Inc.

FY'21 Q4 RESULTS

Introduction

Urban Outfitters, Inc. "URBN" is providing fiscal 2021 fourth quarter commentary ahead of our earnings call scheduled for March 2nd at 5:30pm.

We remind you that any forward-looking statements made in this commentary are subject to our safe harbor statement found in our SEC filings.

Our fourth quarter earnings release and related financial information are available on our website,www.urbn.com.

Important Information Regarding

Non-GAAP Financial Measures

In addition to evaluating the financial condition and results of our operations in accordance with U.S. generally accepted accounting principles ("GAAP"), from time to time our management evaluates and analyzes results and any impact on the Company of certain events outside of normal, or "core," business and operations, by considering adjusted financial measures not prepared in accordance with GAAP. Examples of items that we consider non-core include store and goodwill impairment charges and income tax expense related to valuation allowances attributable to net losses of certain foreign operations. In order to improve the transparency of our disclosures, provide a meaningful presentation of results from our core business operations and improve period-over-period comparability, we have included certain adjusted financial measures that exclude the impact of these non-core business items.

We believe these adjusted financial measures are important indicators of our recurring results of operations because they exclude items that may not be indicative of, or are unrelated to, our underlying results of operations and provide a useful baseline for analyzing trends in our underlying business. Management uses adjusted financial measures for planning, forecasting and evaluating business and financial performance.

Non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the Company's financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the Company's financial position, results of operations or cash flows and should therefore be considered in assessing the Company's actual and future financial condition and performance. These adjusted financial measures are not consistent with GAAP and may not be calculated the same as similarly titled measures used by other companies.

Table of Contents

KeyFinancialHighlights ................................................................................ 5

SalesbySegment .......................................................................................... 6

SalesbyBrand ........................................................................................... 7-9

AdjustedGrossProfitbySegment ................................................................ 10

Selling,General&AdministrativeExpenses .................................................... 11

AdjustedOperatingIncomebySegment ....................................................... 12

IncomeStatement .................................................................................. 13-14

BalanceSheet .............................................................................................. 15

InventoryDetail ........................................................................................... 16

CapitalSpending ......................................................................................... 17

SharesOutstanding ..................................................................................... 18

GlobalStoreSummary ................................................................................. 19

GlobalStoreCount&SquareFootage .......................................................... 20

Key Financial Highlights

URBN Net Sales Change

-6.9% 3.6%Adjusted Gross Profit*(a) 26.7% 29.8%Selling, General and Admin. Expenses* 23.4% 24.1%Adjusted Incomefrom Operations* (a)Adjusted Earnings Per Diluted Share(a)

*expressed as a percent of net sales

(a) refer to adjustments on pages 13 and 14

3.3% 5.7%

URBN sales for the fourth quarter declined by 7% to $1.09 billion. The decrease in sales was due to a 7% decline in Retail segment sales and a 7% decline in Wholesale segment sales. Retail segment sales comp also declined 7%.

Adjusted gross profit dollars decreased by 17% to $290 million for the quarter, while gross profit rate decreased 314 bps to 26.7%. The decrease in adjusted gross profit rate was primarily due to the increase in delivery and logistics expenses due to the penetration of the digital channel as well as increased carrier surcharges. This was partially offset by lower merchandise markdowns in the Retail segment driven by the Urban Outfitters and Free People brands, benefits associated with negotiated rent concessions with landlords and European government assistance programs.

Selling general & administrative ('SG&A') expenses decreased by 10% to $254 million while SG&A as a % of sales leveraged by 69 bps to 23.4%. The leverage in SG&A as a rate to sales was primarily related to disciplined store payroll management and overall expense control. Digital marketing expenses grew during the quarter to support the strong digital sales and customer growth.

Adjusted operating income dollars decreased by 47% to $36 million while adjusted operating income rate declined by 245 bps to 3.3%. The decrease in dollars was due to the decline in sales and the adjusted gross profit rate in the quarter.

$ 0.30

$ 0.50

Adjusted net income for the quarter was $29 million or $0.30 per diluted share.

Sales by Segment

Total Sales

Retail Segment

Anthropologie Group

Free People

Urban Outfitters

Menus & Venues

$

%

$1,088.4

$ 1,169.6

$ (81.2) -7%

$ 1,013.8

431.4 155.1 424.3

$1,090.5 $(76.7) -7% 488.8 (57.4) -12%

146.0 448.9

• 9.1 6%

• (24.6) -5%

  3.0

  6.8

• (3.8) -56%

  Total Company or URBN sales for the fourth quarter decreased by 7% to $1.09 billion. URBN Retail segment sales decreased 7% to $1.01 billion. Retail segment sales decreased due to negative retail store net sales as stronger conversion rates could not offset the reduced store traffic caused by the coronavirus pandemic and related occupancy restrictions. Lower store net sales were partially offset by strong double-digit growth in digital channel sales due to strong session and conversion growth.

  Retail Segment By Geography

  North America

  Europe and ROW

  Wholesale Segment

  Anthropologie Group

  Free People

  Urban Outfitters

  894.5 119.3

  $

  • 67.9 $ - 64.2

  960.6 129.9

• (66.1) -7%

• (10.6) -8%

73.1 $ (5.2) -7%

2.3 69.8

• (2.3) -100%

• (5.6) -8%

  3.7

  1.0

• 2.7 269%

URBN Wholesale segment sales for the fourth quarter declined 7% to $68 million. The decline in sales was primarily due to most of our wholesale partners having reduced customer demand during the quarter.

Subscription Segment

$

6.7

6.0 $ 0.7 11%

Total Anthropologie Group brand sales decreased by 12% to $431 million.

$

%

Total Sales

Retail Segment

Sales by Geography

North America

Europe and ROW

Wholesale Segment

North America Europe and ROW

• $ 431.4

• $ 431.4

  $

  • $ 491.1

  • $ 488.8

• 411.4 20.0

• 465.5 23.3

• - $ 2.3

• $(59.7) -12%

• $(57.4) -12%

• (54.1) -12%

• (3.3) -14%

$ (2.3) -100%

- -

2.1 0.2

• (2.1) -100%

• (0.2) -100%

The decline in Anthropologie sales during the quarter primarily related to a 12% decline in Retail segment sales. The decline in Retail segment sales was driven by negative retail store net sales as stronger conversion rates could not offset the reduced store traffic caused by the coronavirus pandemic and related occupancy restrictions. Lower store net sales were partially offset by a strong double-digit increase in the digital channel due to strong session and conversion growth. By product category, home and Terrain led the way while apparel, accessories, beauty and BHLDN were negative.

Total SalesRetail Segment

Sales by Geography

North America Europe and ROW

Wholesale Segment

North America Europe and ROW

$

%

• $ 219.3

  • $ 215.8

• $ 155.1

  • $ 146.0

• 149.8

  5.3

$ 64.2

$

69.8 $ (5.6) -8%

• 141.1 4.9

62.0 2.2

66.2 3.6

• $ 3.5 2%

• $ 9.1 6%

  • 8.7 6%

  • 0.4 9%

• (4.2) -6%

• (1.4) -39%

Total Free People brand sales increased by 2% to $219 million for the quarter. This increase was due to an increase in Retail segment sales of 6%, which was partially offset by an 8% decline in Wholesale segment sales.

The growth in Retail segment sales was driven by strong double-digit digital channel growth due to strong session and conversion growth more than offsetting negative retail store net sales due to reduced store traffic. By product category, all categories delivered growth with movement delivering exceptional growth in the quarter followed by beauty, intimates, accessories and apparel.

Wholesale segment sales declined by 8% due to most of Free People's wholesale partners having reduced customer demand during the quarter.

Total Urban Outfitters brand sales decreased by 5% to $428 million for the quarter.

$

%

Total Sales

Retail Segment

Sales by Geography

North America

Europe and ROW

Wholesale Segment

North America Europe and ROW

• $ 428.0

  • $ 449.9

    • $(21.9) -5%

• $ 424.3

  • $ 448.9

    • $(24.6) -5%

• 330.3 94.0

• 347.2 101.7

• (16.9) -5%

• (7.7) -8%

$ 3.7

$ 1.0

$ 2.7 269%

2.6 1.1

0.7 0.3

• 1.9 268%

• 0.8 271%

The decrease in Urban Outfitters sales during the quarter was primarily driven by a 5% decrease in Retail segment sales. The decline in Retail segment sales was driven by negative retail store net sales as stronger conversion rates could not offset the reduced store traffic caused by the coronavirus pandemic and related occupancy restrictions. Lower store net sales were partially offset by a strong double-digit increase in the digital channel due to strong session and conversion growth. By product category, home led the way while most of the other product categories declined.

Adjusted Gross Profit by Segment

Adjusted Gross Profit*(a) $'s Adjusted Gross Profit*(a) %Gross Profit* $'s

Retail Segment Gross Profit $'s

• $ 289.1

• $ 290.1 26.7%

$ 275.9

Adjusted Gross Profit(a) $'s $ 276.9

Adjusted Gross Profit(a) %Wholesale Segment(b) Gross Profit $'s Gross Profit %

Subscription Segment Gross Profit $'s

$

%

• $ 333.8

  • $ (44.7) -13%

• $ 348.4 29.8%

• $ (58.3) -17%

  • $ 328.9

• $ (53.0) -16%

  • $ 343.5 31.5%

• $ (66.6) -19%

27.3%

Adjusted gross profit dollars decreased by 17% to $290 million for the quarter, while gross profit rate decreased 314 bps to 26.7%. The decrease in adjusted gross profit rate was primarily due to the increase in delivery and logistics expenses due to the penetration of the digital channel as well as increased carrier surcharges. This was partially offset by lower merchandise markdowns in the Retail segment driven by the Urban Outfitters and Free People brands, benefits associated with negotiated rent concessions with landlords and European government assistance programs.

$ 13.2

$ 7.1

$

• 6.1 86%

  19.4%

  9.7%

  Retail segment adjusted gross profit decreased 19% to $277 million while the Retail segment adjusted gross profit rate declined 419 bps to 27.3% for the quarter. The decrease in adjusted gross profit rate was primarily due to the increased penetration of the digital channel, carrier surcharges and increased expedited shipments, as well as a deleverage in store occupancy expense due to negative store net sales. These were partially offset by lower merchandise markdowns driven by the Urban Outfitters and Free People brands and benefits associated with negotiated rent concessions with landlords and European government assistance programs.

  $ 0.0

  $ (2.2)

  $

• 2.2 n/a

Wholesale segment gross profit increased 86% to $13 million while the Wholesale segment gross profit rate increased to 19.4%. The increase in gross profit dollars and gross profit rate was primarily due to lower markdown allowances given to department stores in North America, which more than offset the decline in sales.

*Cost of Sales includes initial mark-up, markdowns, store occupancy, delivery, freight and logistics expenses and merchant expenses

(a) Adjusted for store impairment charges of $1.0 million in the current quarter and $14.6 million in the prior quarter, all related to the Retail Segment. Refer to adjustments on pages 13 and 14 (b) Net of intersegment elimination

Subscription segment gross profit was flat for the quarter. We continue to leverage into our investments and work to achieve greater operating efficiency.

SG&A-Total Company

SG&A* $'s

$

%

$ 254.3

$ 281.3

$ (27.0)

-10%SG&A* %

23.4%

24.1%

*SG&A includes direct store controllable, creative and marketing, corporate overhead and credit and banking expenses

Selling general & administrative ('SG&A') expenses decreased by 10% to $254 million while SG&A as a % of sales leveraged by 69 bps to 23.4%. The leverage in SG&A as a rate to sales was primarily related to disciplined store payroll management and overall expense control. Digital marketing expenses grew during the quarter to support the strong digital sales and customer growth.

Adjusted Operating Income by Segment

Three Months Ended

January 31, 2021

Operating Income $'s

$ 34.8

Adjusted Operating Income(a) $'s $ 35.8

Adjusted Operating Income(a) %

Retail Segment Operating Income $'s

Adjusted Operating Income(a) $'s

3.3%

• $ 43.5

• $ 44.5

Adjusted Operating Income(a) % 4.4%Wholesale Segment(b)Operating Income (Loss) $'s Operating Income (Loss) %Subscription Segment Operating Loss $'s

January 31, 2020

• $ 38.6

  Variance

  $

  %

  • $ (3.8) -10%

• $ 67.1 5.7%

• $ (31.3) -47%

  • $ 59.2

• $ (15.7) -26%

  • $ 87.7 8.0%

• $ (43.2) -49%

  $ 6.2

  $ (0.3)

• $ 6.5 n/a

  9.2%

  Adjusted operating income dollars decreased by 47% to $36 million while adjusted operating income rate declined by 245 bps to 3.3%. The decrease in dollars was due to the decline in sales and the adjusted gross profit rate in the quarter.

  Retail segment adjusted operating income decreased by 49% or $43 million to $44 million for the quarter. The decrease in adjusted operating income was primarily due to lower adjusted gross profit margin.

  Wholesale segment operating income was $6 million compared to an operating loss of $0.3 million in the prior year. The increase in operating profit was due to the increase in gross profit dollars and overall expense control measures.

  -0.4%

  Subscription segment operating loss was $4 million for the quarter.

  $ (3.8)

  $ (7.7)

• $ 3.9 51%

  General corporate expenses decreased by $1 million for the quarter.

  General Corporate Expenses $'s

  $ 11.1

  $ 12.6

• $ (1.5) -11%

(a) Adjusted for store impairment charges of $1.0 million in the current quarter related to the Retail Segment. Adjusted for store and goodwill impairment charges of $14.6 million and $13.9 million, respectively, in the prior quarter, all related to the Retail Segment. Refer to adjustments on pages 13 and 14

(b) Net of intersegment elimination

(share count in millions) (unaudited)

($ in millions)

Net Sales

Cost of Sales

(excluding Store Impairment)

Store Impairment(a)

Gross Profit

Selling, General and Admin. Expenses

Income from Operations

Other Income, Net

Income Before Income Taxes

Income Tax Expense(b)

Net Income

Three Months Ended January 31, 2021

As Reported

% of Net Sales

• $1,088.4 100 %

Total Adjustments

Adjusted

% of Net Sales

$

798.3

289.1

-

$1,088.4

100 %

73.3

1.0

26.6

-

798.3

73.3

0.1

(1.0)

-

-

• 1.0 290.1 26.7

  254.3

  23.4

• - 254.3 23.4

  34.8

  3.2

• 1.0 35.8 3.3

  0.8

  0.1

• - 0.8 0.1

  35.6

  3.3

  1.0

• 36.6 3.4

  7.0

  0.7

  0.3

• 7.3 0.7

The adjusted effective tax rate for the fourth quarter was 20% compared to 28% in the prior year quarter. The change in the effective tax rate was primarily due to the ratio of foreign taxable losses to global taxable profits.

Adjusted net income was $29 million or $0.30 cents per diluted share for the fourth quarter.

$

28.6

2.6 %

$

0.7

$ 29.3

2.7 %

Diluted Share Count

EPS (Diluted)

99.1

$

0.29

• (a) Adjusted for store impairment charges related to 3 retail locations

• (b) Adjusted for income tax impact of the adjustments noted in (a)

99.1

$ 0.30

($ in millions)

Three Months Ended January 31, 2020

(share count in millions)

(unaudited)
As Reported	% of Net Sales
Net Sales	$ 1,169.6	100 %	$	-
Cost of Sales
(excluding Store Impairment)	821.2	70.2	-
Store Impairment(a)	14.6	1.3	(14.6)
Gross Profit	333.8	28.5	14.6
Selling, General and Admin. Expenses	281.3	24.1	-
Goodwill Impairment(b)	13.9	1.1	(13.9)
Income from Operations	38.6	3.3	28.5
Other Income, Net	1.0	0.1	-
Income Before Income Taxes	39.6	3.4	28.5
Income Tax Expense(c)	20.1	1.7	(1.1)
Net Income	$ 19.5	1.7 %	$	29.6
Diluted Share Count	98.9
EPS (Diluted)	$ 0.20

Total Adjustments	Adjusted	% of Net Sales
$ 1,169.6	100 %
821.2	70.2
-	-
348.4	29.8
281.3	24.1
-	-
67.1	5.7
1.0	0.1
68.1	5.8
19.0	1.6
4.2 %

$

49.1

98.9

$

0.50

• (a) Adjusted for store impairment charges related to 8 retail locations

• (b) Adjusted for goodwill impairment charge related to a previous Menus & Venues acquisition

• (c) Adjusted for: (i) the income tax expense related to valuation allowances attributable to net losses of certain foreign operations; and (ii) the income tax impact of the adjustments noted in (a) and (b)

Balance Sheet Summary

Assets

Cash and Cash Equivalents Marketable Securities Accounts Receivable, Net Inventory

Other Current Assets Total Current Assets

Property and Equipment, Net Operating Lease ROU Assets Marketable Securities

Other Assets

Total Assets

Liabilities and Shareholders' Equity Accounts Payable

Current Operating Lease Liabilities Other Current Liabilities

Total Current Liabilities

Non-Current Operating Lease Liabilities Long-Term Debt

Deferred Rent and Other Liabilities Total Liabilities

Total Shareholders' Equity

Total Liabilities and Shareholders' Equity

January 31, 2021

January 31, 2020

$

396

175 211

90 88

390 410

• $ 222

  172 122 1,223 1,053

  967 890 1,115 1,171

  124 97

  117 105

  $

  3,546

• $ 3,316

  $

  237

  255 222

  414 249

• $ 168

  906 639 1,074 1,137

  - 89

  - 85

  2,069 1,861 1,477 1,455

  $

  3,546

• $ 3,316

As of January 31, 2021, Inventory decreased 5% to $390 million driven by a 34% reduction in Wholesale segment inventory. Retail segment inventory was flat as a 5% decline in Retail segment comp inventory was offset by an increase in in-transit inventory due to global transportation delays.

As of January 31, 2021, cash and marketable securities totaled $694 million with $0 drawn down on our $350 million asset backed line of credit facility.

Inventory Data

January 31, 2021

January 31, 2020

Variance

$

%

URBN Inventory

• $ 389.6

  • $ 409.5

    $ (19.9)

    -5%

    Retail Segment by Brand

• $ 348.8

  • $ 347.8

    $

    • 1.0 flat

      Anthropologie Group

• 153.6

  • 160.7

    • (7.1) -4%

      Free People

• 59.9

  • 51.8

    • 8.1 15%

      Urban Outfitters

• 135.3

• 135.3

• 0.0 flat

Wholesale Segment by Brand

$ 40.8

$ 61.7

$ (20.9) -34%

Anthropologie Group

0.5

5.8

• (5.3) -91%

  Free People

  35.5

  53.6

• (18.1) -34%

  Urban Outfitters

  4.8

  2.3

• 2.5 114%

Subscription Segment Rental Product, Net*

*Rental Product, net of amortization, is included in Other Assets

$ 11.9

$ 16.4

$ (4.5) -28%

Capital Spending

Net Capex % of Net Sales

$ 250

Projected FY'22

5.5%Home OfficeFulfillmentTechnologyStores

FY'19

FY'20

FY'21

During the fourth quarter, capital expenditures were $70 million while depreciation & amortization was $25 million.

Shares Outstanding

($ in millions)

(share count in millions) (unaudited)

140 130 120 110 100 90

Q1 Q2 Q3 Q4

FY'16	FY'17	FY'18	FY'19	FY'20	FY'21
Shares Repurchased
Number of Shares	15	1.3	8.1	3.5	8.1	0.5
Total Cost	$ 465	$ 46	$ 157	$ 121	$ 217	$7

The Company did not repurchase any shares during the quarter. The Company has authorization to repurchase approximately 26 million additional shares remaining granted by the Board of Directors resolutions on August 22, 2017 and June 4, 2019. Our weighted average diluted share count for the quarter was 99.1 million shares.

Global Retail Stores Summary

YTD FY'21Projected FY'22

Projected

Anthropologie Group NA	211
Anthropologie Group EU	20
Total Anthropologie Group	231
Free People NA	140
Free People EU	4
Total Free People	144
Urban Outfitters NA	194
Urban Outfitters EU	54
Total Urban Outfitters	248
Menues & Venues	11
Total Company-Owned Stores	634
Franchisee-Owned Stores	7
Total URBN	641

Open as of	Open as of	Projected	Projected	Open as of
January 31, 2020	Openings	Closings	January 31, 2021	Openings	Closings	January 31, 2022
5	1	215	9	7	217
2	-	22	3	2	23
7	1	237	12	9	240
5	1	144	24	2	166
1	-	5	1	-	6
6	1	149	25	2	172
5	8	191	15	8	198
2	-	56	2	2	56
7	8	247	17	10	254
-	-	11	1	-	12
20	10	644	55	21	678
-	6	1	3	-	4
20	16	645	58	21	682
FY'21 Q4 RESULTS | 19

Global Store Count & Square Footage

(all data is as of the respective period ended) (Selling SF in thousands)

• FY'20 Q1 Store Count 228

  Q4 Store Count 231

  Q2 Store Count 228

  Q3 Store Count 231

  Selling SF 1,776

  Selling SF 1,782

  Selling SF 1,790

  Selling SF 1,782

• FY'21 Q1 Store Count 233

Q2 Store Count 233

Q3 Store Count 234

Q4 Store Count 237

Selling SF 1,795

Selling SF 1,815

Selling SF 1,793

Selling SF 1,793

*excludes franchisee-owned stores