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Urban Outfitters Inc URBN
Q1 2014 Earnings Call Transcript

Transcript Call Date 05/20/2013

Operator: Good day, ladies and gentlemen, and welcome to the Urban Outfitters Incorporated First Quarter Fiscal 2014 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. Please do not queue for the Q&A portion of this call until announced. Anyone doing so prematurely will be deleted from the queue. As a reminder, this conference call is being recorded.

I would now like to introduce Oona McCullough, Director of Investor Relations. Ms. McCullough you may begin.

Oona McCullough - Director, IR: Good afternoon, and welcome to the URBN first quarter fiscal 2014 conference call. Earlier this afternoon the Company issued a press release outlining the financial and operating results for the three-month period ending April 30, 2013.

The following discussions may include forward-looking statements. Please note that actual results may differ materially from those statements. Additional information concerning factors that could cause actual results to differ materially from projected results is contained in the Company's filings with the Securities and Exchange Commission.

We will begin today's call with Frank Conforti, our Chief Financial Officer who will provide financial highlights for the first quarter. David McCreight, CEO, Anthropologie Group, will provide a brief update on the Anthropologie brand. Richard Hayne, our Chief Executive Officer, will then comment on our broader strategic initiatives. Following that, we will be pleased to address your questions.

As usual, the text of today's conference call along with detailed management commentary will be posted to our corporate website at www.urbanoutfittersinc.com.

I'll now turn the call over to Frank.

Frank J. Conforti - CFO: Thank you, Oona, and good afternoon, everyone. I will start my prepared commentary discussing our fiscal year 2014 first quarter results versus the prior comparable quarter. Then I will share our thoughts concerning the remainder of the year.

Total Company sales for the quarter increased by 14% to a first quarter record of $648 million. This increase was driven by a strong retail segment comp rate of 9%, opening 7 new stores during the quarter, a $32 million increase in non-comparable sales and a 16% jump in wholesale segment sales. The 9% increase in retail segment comp sales was fueled by continued robust direct-to-consumer growth and a positive comp store sales. Direct-to-consumer growth was driven by an increase in visitors and improved conversion rate. Positive comp store sales resulted from increased transactions, partially offset by lower average unit selling prices while units per transaction were flat.

By brand, our retail segment comp rate was 44%, 8%, and 6% at Free People, Anthropologie, and Urban Outfitters respectively. Free People wholesale delivered another strong quarter as sales rose 16% to $36 million. These results came from double-digit sales growth to specialty stores and department stores.

Gross profit for the quarter increased by 18% to $239 million. The gross profit rate improved by 125 basis points to 36.8%. The improvement in gross profit rate was primarily due to a reduction in merchandise markdowns, mainly driven by improvements at the Anthropologie brand. We also improved our initial merchandise margins and leveraged store occupancy expenses. These gains were partially offset by deleveraging delivery expense primarily related to an increase in penetration of direct-to-consumer sales.

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