Good news for Urban Outfitters shareholders, bad news for customers – the aggressive markdowns that the Philadelphia-based group has been using to draw shoppers through its doors could finally be abating.
The company behind Anthropologie, Free People and its eponymous brand, on Tuesday reported a bigger-than-expected rise in second-quarter sales and profit as it managed to avoid the kind of steep discounting that ate into its top and bottom lines during previous quarters.
Shares jumped 9.3 per cent in after-hours trading on the news.
Net sales for the three months to July 31 rose 2.7 per cent to $890.5m, and net income jumped by 15 per cent to $76.9m – ahead of expectations for $64.9m – as the company succeeded in maintaining its margins, with its gross profit rate up by 179 basis points.
The increase in gross profit rate for the six months ended July 31, 2016 was primarily driven by improvement in the Urban Outfitters and Anthropologie Group brands maintained margins, with both brands delivering lower merchandise markdowns compared to the prior year.
Sales in stores that have been opened at least a year – a key industry metric – also came in better than expected. They rose 1 per cent during the period, against Wall Street expectations for a 1.1 per cent decline.
However, a breakdown of the like-for-like figures underscores the challenges still facing Anthropologie, the group’s biggest brand by sales. Same-store sales for the division fell 3 per cent, and were only offset by the 5 per cent rise recorded in its Urban Outfitters stores.
Get alerts on Front page when a new story is published