Urban Outfitters Readies New Chain

PHILADELPHIA-Net sales and earnings rose 22% and 24%, respectively, for Urban Outfitters Inc. during the second quarter ended July 31. Comp-store sales company-wide were up 5% in an uneven mix of performance among the three existing brands.

Comp-store sales at Anthropologie units, which had slipped earlier in the year, made a double-digit recovery to increase 14% this second quarter. Free People’s comps lifted 28%. Comps at Urban Outfitter, however, dropped 3%. Meanwhile, the company announced the name of a fourth brand concept, Terrain, which is being readied for launch in 2008.

While applauding the Anthropologie turnaround and positive results for Free People and direct sales, “we’re disappointed in Urban Outfitters North American retail sales,” said Glen Senk, newly appointed CEO, during a conference call. “It is a priority to bring it back to optimum performance. It’s an assortment issue, not a style issue,” he added, suggesting “there was not enough of an assortment to drive traffic.

Two new merchandising executives have been assigned to the brand, and Senk expressed confidence in correcting course, although he said it could take several quarters. Resetting Urban Outfitters’ direction is first among more than a half-dozen initiatives he announced during the call.

“Indications are that Anthropologie will continue to have healthy growth,” he said. An “Anthro” customer relationship management program has begun to roll out at these units and will expand to all of that brand’s locations this year.

Free People units are averaging more than $1,000 per sf in sales, according to Senk. The success “has led us to rethink expansion of that brand.” Next year, a “Freedom” sporty assortment will join the earlier lingerie assortment.

The company is on track to add 38 total new units this year. During second quarter one Anthropologie unit was opened, taking the total to 96; three Free People units were added, taking its total to 11, and one new Urban Outfitters’ store took the flagship brand’s total to 111.

No details regarding planned Terrain locations and store counts provided. It was previously described as inspired by the greenhouse, with added emphasis on home-related categories.

Other priorities include an integrated assortment planning effort and a “concept to market” initiative. The latter is a multi-year project that will cover every aspect of the supply chain, according to Senk.

Direct-to-consumer sales for the company rose 35% during the quarter, and Free People Wholesale sales increased 28%. In all, the locally based retailer’s net sales were $348.4 million for the quarter, and earnings for the period were $31.9 million.