Urban Outfitters Inc.

1809 Walnut Street

Philadelphia, PA 19103

(215) 564-2313

UNION CITY, Ca., August 20, 1996/FOOLWIRE/ --- Urban Outfitters released Q2 and 6-month results for 1996 this morning. Sales for both Q2 and the first six months were up 20% over the same periods last year.

SALES BY DIVISION

For the quarter, Urban Retail had sales of $25.942 million this year versus $22.631 last year. Anthropologie was $3.989 million Q2 this year versus $2.1 million last year. The wholesale division company was $5.967 in Q2 this year versus $5.150 last year. That totals $35.898 in sales for Q2 1996 versus $29.881 million in last year's Q2.

For the first 6 months, Urban Retail had sales of $49.714 million versus $41.783 million last year. Anthropologie was $6.292 million this year versus $3.893 million last year. The wholesale division company was $13.527 million versus $12.125 last year. For the first 6 months of 1996 that totals $69.533 million versus $57.801 million in the same period a year ago.

The company does not break numbers out by division other than for sales numbers.

P&L AND BALANCE SHEET HIGHLIGHTS

Gross profit margin increased 0.8% in Q2 and 0.5% in the first six months. The reasons for these increases related to the retail companies both of which enjoyed increased initial markups and lower markdowns for the periods. As it was in the first quarter, this was slightly offset by the wholesale division where they have a newer product line with a lower gross profit margin that had significant growth for the quarter and for the first six months. The combination of those against a lower growth rate on the other product lines (4 of them) and wholesale caused the margins there to be a little lower than what they were in the previous year. They don't really see a change in that until they go into next year from the perspective of the wholesale division.

Comps last year went from basically flat during the Spring and Summer to 6% in the Back-to-School period last year. They felt that their comps this year would go the opposite way, down from the double-digits into the single digits and that's basically what's happened. They expected that all along. The projection for Q3 and Q4 is for comps in the mid-single digits.

Wholesale bookings in Q3 are very strong and some of the Q2 shipments got shifted into Q3. The basic plan they had with the wholesale company is between 5-10% growth. They are running ahead of that even against those shipments. Right now the Fall line is considerably ahead of that plan. They expect all backlog bookings to be shipped in Q3. The shift relates to the differences between the wholesale calendar year versus the retail calendar year. The Fall bookings go from July 1st through the end of September and it is interrupted by their fiscal quarters which are reported based on retail quarters. The Fall bookings are ahead of both plan and last year. The quarter was ahead of last year in terms of shipments. But the backlog bookings will be shipped in Q3. So overall, Fall will be ahead.

The SG&A or operating expenses again showed a slight increase for Q2. When you compare that or get into the individual divisions, SG&A lines at all 3 companies actually went down as a percent of sales. But, because the Anthropologie division, which is the fastest growing in dollars and percentage, has a higher percent of SG&A than the others, when you put them together the total number goes up, whereas the individual members went down as a percent for the quarter. For the six month period SG&A decreased 0.4% as a total and, again, each one of the individual companies was leveraging against their sales, particularly Urban Retail with its high comps. Dollar increases relate almost entirely to store openings either at the end of last year opened the first half this year or those that related to Anthropologie which opened this year.

Operating profit grew 26% over the prior year during Q2 and 28% for the first 6 months. Non-operating or other income for the quarter was $232,000 versus $271,000 last year. The interest income was $375,000 this year versus $319,000 for the quarter last year. For the six month period, other income was $536,000 versus $572,000 last year and interest income was $750,000 versus $617,000 last year.

The net income was up 24% for Q2 and 26% for the six months and earnings per share were up 22% for the quarter and 25% for the first half.

STORE OPENINGS

They think that they will get two Urban Retail stores open by year end and more than likely both of them will be in the early 4th quarter, probably in November. The other two that were planned for this year are going to slip to next year and they have no announced dates yet for them.

Anthropologie stores have higher SG&A expenses related to them and therefore the earnings curve has not caught up to the Urban Retail stores. In addition to that the Anthropologie stores represent $100,000 more investment. In presentations they have used a 10% return on sales in the stores which converts over to somewhere in the mid-20s as it relates to a return over, for example, a 3-year period of time. As Anthropologie continues to grow the gross profit margin on that company should continue to improve as it hits critical mass and can negotiate its branded merchandise purchases and private label. They believe that Anthropologie will be close to the return Urban Retail has. The model they use for Anthropologie is that for the first year, generally, the new stores will show a loss. The Soho store and some of the others are not doing that, but that's only part of the total package. Looking at the total package, they think it is somewhere between 12 and 16 months after a new opening that the profit situation turns. Then if you look 3 years out, they think they should have a 10% return on average by store and then 26% for ROI.

The company was asked what the Soho Anthropologie store was annualizing out at and they responded that the store was planned to be the best of the Anthropologie stores and it is exceeding plan. Off the block, it was the best opening they have ever had of any store, Urban Retail or Anthropologie. It's continuing to look very favorable and they are very happy with it. The store is considerably ahead of the model they used and disclosed in terms of its sales and earnings. The model shows about $3.25 million, on average, for first year Anthropologie stores and the Soho store is well above that.

Next year, they think they will open 3 or 4 Urban Retail stores and around 5 Anthropologie stores.

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* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.

(c) Copyright 1996, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.

Transmitted: 8/20/96

Copyright 1996, The Motley Fool
All Rights Reserved. This material is for personal use only.
Republication and redissemination, including posting to news groups,
is expressly prohibited without the prior written consent of The Motley Fool.