Urban Outfitters, Inc. surprised investors by exceeding expectations in its second-quarter earnings report, resulting in a notable increase in the company’s stock price. The Philadelphia-based fashion retailer announced earnings of $34.4 million, or $0.35 per diluted share, for the quarter, driven by robust sales growth in its digital channel.

Although Urban Outfitters experienced a decline in comparable retail segment sales during the second quarter, the figures were still impressive considering the current economic climate. In contrast, the company reported net income of $60.3 million, or $0.61 per diluted share, for the same period last year.

For the second quarter ending on July 31, 2020, Urban Outfitters recorded net sales of $803.3 million, representing a 16.5% decrease compared to the previous year. This decline can be attributed to temporary store closures and reduced productivity upon reopening. Nevertheless, the company managed to mitigate this decrease with significant double-digit growth in its digital channel.

Analysts had initially anticipated a loss of $0.40 per share on sales of $672 million for the second quarter, making the actual earnings a pleasant surprise. The positive results were primarily driven by the outstanding performance of the Free People brand, which observed an 11% rise in comparable retail segment net sales despite the challenges presented by the Covid-19 pandemic. On the other hand, the Urban Outfitters brand experienced an 8% decline in comparable retail segment sales, while Anthropologie Group faced a 25% decline. Overall, the company’s total retail segment sales fell by 14%, and the wholesale segment experienced a significant 51% decrease.

CEO Richard A. Hayne expressed his satisfaction with the company’s performance, emphasizing that all brands were profitable and well-prepared for the upcoming fall season. He highlighted the lean inventories and positive momentum as indicators that Urban Outfitters is well-positioned for further success.

Considering the first quarter of the year, Urban Outfitters reported a net loss of $104.0 million, or $1.06 per diluted share, for the six-month period ending July 31, 2020. This marked a substantial decline compared to net earnings of $92.9 million, or $0.91 per diluted share, during the same period last year. First-half sales also decreased by 24% year over year, totaling $1.39 billion compared to $1.83 billion.

Despite the challenges posed by the ongoing pandemic, Urban Outfitters remained committed to expanding its retail presence. In the first half of the fiscal year, the company opened five new retail locations while closing four. As of July, Urban Outfitters operates 624 company-owned stores across its three main brands in the U.S., Canada, and Europe, in addition to three franchisee-owned stores.

Looking ahead, Urban Outfitters has refrained from providing financial guidance for the third quarter or the remainder of the fiscal year. However, the company’s strong performance in its digital channel and lean inventories offer some optimism for the future.

Useful links for further reading:
1. Urban Outfitters Official Website
2. SEC Filings for Urban Outfitters