Comparable retail segment net sales of the company, which include the comparable direct-to-consumer channel, decreased 4.9 per cent. By brand, comparable retail segment net sales increased 2.9 per cent at Free People, but decreased 4 per cent at the Anthropologie Group and 7.9 per cent at Urban Outfitters. The decline in comparable retail segment net sales was due to negative retail store sales, which was partially offset by continued sales growth in our direct-to-consumer channel. Wholesale segment net sales increased 10 per cent.
"While we are disappointed in our second quarter performance, we have a number of initiatives underway including: speed to customer, international growth, wholesale expansion and digital investments. We believe these initiatives combined with encouraging fashion apparel trends could lead to improved topline performance in future quarters,” said Richard A Hayne, chief executive officer, Urban Outfitters.
For the three and six months ended July 31, 2017, the gross profit rate decreased 440 basis points and 369 basis points versus the prior year’s comparable periods, respectively. The decline in gross profit rate for both periods was driven by higher markdowns due to underperforming women’s apparel and accessories product at Anthropologie and Urban Outfitters, deleverage in delivery and logistics expenses primarily due to the penetration of the direct-to-consumer channel and deleverage in initial merchandise mark-ups at the Anthropologie and Urban Outfitters brands due to a change in product mix, said the company in a press release.
As of July 31, 2017, total inventory decreased by $2 million, or 0.6 per cent, on a year-over-year basis. Comparable retail segment inventory decreased 4.6 per cent at cost, which was partially offset by inventory to stock non-comparable stores.
Selling, general and administrative (SGA) expenses decreased by $2.1 million, or 1 per cent, during the three months ended July 31, 2017, compared to the prior year’s comparable period primarily due to the net benefit of our store organisation project. For the three months ended July 31, 2017, SGA expenses, expressed as a percentage of net sales, deleveraged by 26 basis points when compared to the prior year’s comparable period primarily due to the negative comparative retail segment net sales and increased spending in digital marketing.
SGA expenses increased by $5.2 million, or 1.2 per cent, during the six months ended July 31, 2017, compared to the prior year’s comparable period primarily due to approximately $8.1 million, or 50 basis points, of nonrecurring expenses related to severance and fees associated with our store organisation project. For the six months ended July 31, 2017, SGA expenses, expressed as a percentage of net sales, deleveraged by 62 basis points when compared to the prior year’s comparable period primarily due to the nonrecurring expenses related to our store organisation project and the negative comparable retail segment net sales.
The company’s effective tax rate for the second quarter of fiscal 2018 was 35.1 per cent compared to 35.5 per cent in the prior year period. The effective tax rate for the first half of fiscal 2018 is 37.1 per cent compared to 36.7 per cent in the prior year period. The increase in the first half effective tax rate was due to the ratio of foreign taxable losses to global taxable profits in the first half and the prospective adoption of the new accounting standard related to share-based compensation.
Net income for the three and six months ended July 31, 2017, was $50 million and $62 million, respectively, and earnings per diluted share was $0.44 and $0.54, respectively.
On February 23, 2015, the company’s board of directors authorised the repurchase of 20 million common shares under a share repurchase programme. Under this authorisation, the company repurchased and subsequently retired 5 million common shares for approximately $91 million during the six months ended July 31, 2017. The company repurchased and subsequently retired 1.3 million common shares for approximately $46 million under this authorisation during the year ended January 31, 2017. As of July 31, 2017, 1 million common shares are remaining under this authorisation. (KD)
Fibre2Fashion News Desk – India
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