Urban Outfitters ((URBN)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Urban Outfitters, Inc. has reported a robust third quarter, marked by record revenue and net income, as highlighted during their recent earnings call. The company achieved these milestones despite facing challenges such as tariffs impacting gross margins and increased SG&A expenses. The overall sentiment was positive, driven by strong performances across various brands, particularly Urban Outfitters and Nuuly, which helped offset the aforementioned challenges.
Record Third-Quarter Revenue and Net Income
Urban Outfitters, Inc. announced a 12% increase in total revenues and a 13% rise in net income, both setting new records for the third quarter. The company’s total sales reached an impressive $1.5 billion, underscoring its strong financial performance during this period.
Positive Retail Segment Comps Across All Brands
All retail segment brands under Urban Outfitters delivered positive comparable sales, with four out of five brands achieving record third-quarter sales. The Urban brand, in particular, stood out with double-digit comps in both North America and Europe, showcasing its widespread appeal and market strength.
Nuuly’s Subscriber and Revenue Growth
Nuuly, Urban Outfitters’ subscription service, reported a remarkable 49% growth in revenue. This surge was driven by an increase in average active subscribers, which grew by 118,000 compared to the previous year, highlighting the brand’s successful expansion and customer acquisition strategies.
Gross Profit and Margins Improvement
The company saw its gross profit rise by 13% to a record $563 million, with a 31 basis points improvement in the gross profit rate to 36.8%. This improvement reflects Urban Outfitters’ effective cost management and pricing strategies, despite the negative impact of tariffs.
Anthropologie Group’s Strong Performance
The Anthropologie Group continued its impressive trajectory with an 8% increase in retail segment comparable sales, marking the nineteenth consecutive quarter of positive sales growth. This consistent performance underscores the brand’s strong market position and customer loyalty.
FP Movement Growth
FP Movement, another brand under Urban Outfitters, delivered strong growth of 18%, driven by a 4% increase in retail segment comps and a 29% rise in wholesale segment sales. This growth highlights the brand’s expanding footprint and appeal in the activewear market.
Urban Outfitters Europe Exceptional Growth
Urban Outfitters Europe recorded a 17% increase in retail segment comps, fueled by double-digit growth in both store and digital channels. This exceptional performance reflects the brand’s successful adaptation to diverse market conditions across Europe.
Tariff Impact on Gross Margin
The earnings call highlighted the negative impact of tariffs on the third-quarter gross margin rate, which was reduced by approximately 60 basis points. The company anticipates a further 75 basis points impact in the fourth quarter, indicating ongoing challenges in managing cost pressures.
Increased SG&A Expenses
Urban Outfitters reported a 14% increase in SG&A expenses, which deleveraged by 32 basis points. This rise was primarily driven by increased marketing spend, reflecting the company’s strategic investments in brand visibility and customer engagement.
Forward-Looking Guidance
Looking ahead, Urban Outfitters anticipates high single-digit sales growth for the fourth quarter, with expectations of gross profit margins improving by 25 to 50 basis points. However, tariffs are expected to continue impacting margins by 75 basis points. The company plans to open 69 new stores and close 17, with capital expenditures projected at $300 million for FY 2026.
In conclusion, Urban Outfitters, Inc. has demonstrated a strong financial performance in the third quarter, driven by record revenues and net income. Despite challenges such as tariffs and increased expenses, the company has shown resilience and strategic foresight, setting a positive tone for future growth. The earnings call reflects a company well-positioned to navigate market challenges and capitalize on growth opportunities across its diverse brand portfolio.