Last month it was time once again for Anthropologie’s parent company Urban Outfitters to hold its quarterly fiscal earnings call. Thanks to Seeking Alpha I’ve got the full transcript! What were the results for Anthropologie and its parent company last quarter? Read on to find out…
While the Urban Outfitters brand itself had a disastrous quarter, the company’s overall results were propped up by Anthropologie, Free People and Terrain. From the Press Release:
Urban Outfitters, Inc. (NASDAQ:URBN), a leading lifestyle specialty retail company operating under the Anthropologie, Bhldn, Free People, Terrain and Urban Outfitters brands, today announced net income of $37 million for the three months ended April 30, 2014. Earnings per diluted share were $0.26 for the three months ended April 30, 2014.
Total Company net sales for the first quarter of fiscal 2015 increased 6% over the same quarter last year to a record $686 million. Comparable Retail segment net sales, which include our comparable direct-to-consumer channel, were flat. Comparable Retail segment net sales increased 25% at Free People and 8% at the Anthropologie Group and decreased 12% at Urban Outfitters. Wholesale segment net sales increased 27% to 46% for the Free People brand. These results came from double-digit sales growth at department stores and specialty stores.
These results are eye-poppingly awesome. I’m thrilled to hear that Anthropologie had such a stellar quarter! I’m certainly loving many of the dresses this Spring & Summer, even if the tops are killing me. Surprising absolutely no one, the BHLDN brand has been folded into the Anthropologie Group for purposes of reporting. Did anyone besides us even know they were separate?
Anthropologie Group CEO David W. McCreight was given some well-deserved spotlight time on the call to discuss the quarter:
As Dick mentioned on the last earning’s call, this past year was one of strong progress in the organization and tremendous financial results for the Anthropologie Group. Although last year was not considered a particularly good one for specialty apparel, the brand’s continued resonance with the customer is a testament to the teams’ ability to please her with compelling product and creative story telling. And the quality of our revenue and operating earnings is evidence that we can deliver this unique experience very productively.
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While the weather this past quarter was not friendly to most fashion businesses, Anthropologie continued last year’s momentum by delivering a similarly strong performance in Q1. Our brand revenue grew 10%, with retail segment comps up 8% on top of last year’s 8% comp. More impressively, the quality of our growth remained sound with regular price retail segment comps up low double-digits.
Other indicators of the broad-based progress were seen by increased participation in our Anthro membership program, which grew 15% from last year, and our rapidly improving digital and social engagement metrics. The team’s efforts helped us to deliver a record quarter for sales and operating income dollars and set a new Q1 record for merchandise margin rates.
For the balance of this year, our plan is to build upon the recent accomplishments of the Anthropologie brand by investing in product and distribution expansion to drive future growth. We will continue to make strides in the appeal of our apparel offer and the strategic expansion of our home and accessories assortment.
Towards the end of 2014, you will see us test changes in our home decor, jewelry, shoes and bags offerings. But this year, we also plan to take further steps in building out the Anthropologie Group strategy. This past fall, we tested a shop-in-shop concept for both petites and BHLDN with a sample of Anthropologie stores and on Anthropologie.com.
The success of the BHLDN integration and introduction of the petite collection supports the strategy of building the Anthropologie Group with brand and category adjacencies around our core customers. Still in the learning stage, indications are that this is not only a terrific digital strategy, but delivers accretive financial results in our stores as well.
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We also have expansion opportunities in our stores. Our analysis suggests that we can add over 1 million square feet of space in North America and Europe alone. So we are bringing our stores to 15 new communities this year compared to nine last year.
While many other brands in Anthropologie’s realm are struggling, Anthro’s outperforming and that’s fantastic news! A healthy brand can take more design risks and hire top talent and as a shopper that’s the most you can hope for. It’s nice to hear that the Petites Shop and the recently-opened BHLDN shops within Anthropologie are doing well. In NYC I’ve visited the Upper East Side store twice in the last month to get wedding accessory items for some summer weddings I’ll be attending, and I noticed the new Petites shop in the Rockefeller Center Anthropologie yesterday. Their intimates have been amazing lately — really wonderful designs in the sleep sets especially. I eagerly await the Tall Shop.
But oh, that last paragraph. Hahahha. Ha. Ahaha. Over a million more feet of retail space in North America and Europe? Go home Anthropologie analyst, you’re drunk. When Urban Outfitters CEO Richard Hayne answered a question about expansion during the call, he seemed more interested in UK expansion for Anthropologie. So perhaps that square footage goes mostly to the UK and Europe, which would make sense. When I was in Paris in April for work my coworkers were swooning over my Anthro work dresses. (The only problem? Those dresses were from 2007 and 2008. Not exactly current stuff. But still in fabulous condition and timeless!) If anything I’d like to see Anthropologie slow down on the store expansion and keep smoothing out the bumps.
For example, I feel like in-store customer service has returned to form over the last two quarters. When the mobile inventory devices (POS) were first introduced I felt like the store employees were discombobulated and asked to do too much, with customer service suffering as a result. Now I feel like the stores are once again operating like well-oiled machines full of happy SAs who are ready to go above and beyond for customers like me. The phone customer service is still awful. With apologies to the talented reps I’m sure they have, too often I get connected to someone who has no idea what promotions are going on or how to do simple tasks like a store search. I know the policies better than they do.
And then there is the topic of online-only exclusives. In theory these make sense. Anthro wants to place a smaller inventory order yet make these items available to as many customers as possible. But with crazy shipping fees and inconsistent sizing it’s impossible to tell whether an online exclusive will fit correctly or not once it arrives. I would love to see a breakout of how online exclusives performed but that information is of course not publicly available.
Mr. McCreight also mentioned that the anthro loyalty program grew its membership by 15% in the last fiscal year. He did not, however, mention killing the free shipping portion of the birthday reward for anthro members. Were it possible to rescind membership to the program I have a feeling many unhappy Anthropologie lovers would do just that. Two 15% off days are a nice treat in addition to the birthday discount, but with shipping factored in the discount is much less generous unless you’re placing a large order. Anthropologie is one of the few brands that still charges shipping on online orders. They’ve been playing around with Free Shipping but at odd times so I’m not sure what kind of results they’re looking for. Free Shipping all the time sure would be nice.
With Urban Outfitters performing poorly, every single question on the call was about that brand. Zero for Anthropologie. So unfortunately there wasn’t much in the way of new insight to glean. Instead, I’ll ask you community, what would you like to see from Anthro this quarter?
I’d like to see:
– Free Shipping back with the Birthday Discount where it belongs
– Permanent Free Shipping on Anthropologie.com orders of $150+
– Free Shipping all the time on online exclusive items (and free return shipping too)
– Tops that are not boxy
– Some more thought put into work-friendly dresses, skirts and blouses
– An updated wishlist feature on Anthropologie.com
How about you?
Further reading:
Urban Outfitters Management Discusses Q1 2015 Results – Earnings Call Transcript — Seeking Alpha
