Urban Outfitters, the parent company of popular brands Anthropologie, Free People, and Urban Outfitters, has reported a significant decrease in its earnings for the fourth quarter. The company cites higher markdowns in its retail segment as the reason for this disappointing end to the year.

In the fourth quarter that ended on January 31, 2020, Urban Outfitters recorded a net income of $19.5 million, a significant drop from $86.4 million in the same period the previous year. Despite this decrease, the company achieved record sales of $1.17 billion in Q4 2020, representing a 3.6% increase compared to Q4 2018. This growth in sales was driven by strong performances from Free People and Anthropologie, which saw comparable sales increase by 9% and 6% respectively. However, the wholesale segment experienced a decline of 10%.

Although sales increased, the gross profit rate for Urban Outfitters decreased by 446 basis points during the quarter. This decrease was primarily attributed to higher markdowns in the retail segment, particularly at the Urban Outfitters and Anthropologie brands. Additionally, the group’s gross profit rate was negatively impacted by higher delivery and logistics expenses, as well as lower wholesale segment margins.

For the full fiscal year 2019, Urban Outfitters reported a total income of $168.1 million, compared to $298.0 million in the previous year. Earnings per diluted share also dropped from $2.72 to $1.67. Annual revenues, however, slightly increased from $3.95 billion in 2018 to $3.98 billion in 2019, with the retail segment experiencing a 1% growth and the wholesale segment declining by 6%. Comparable retail segment sales rose by 1%.

Throughout the year, Urban Outfitters opened 26 new retail locations across its various brands, while also closing 12 others. However, CEO Richard Hayne warned that the ongoing coronavirus outbreak is expected to disrupt the company’s production and increase landing costs. The company’s manufacturing facilities in China are currently operating at approximately 50% output due to the outbreak.

Following the announcement of its Q4 results, Urban Outfitters saw an 8% decline in its stock price during Wednesday trading. Despite the challenges faced, the company remains committed to seeking new factory relationships and utilizing expedited shipping methods to mitigate the impact of the coronavirus outbreak on its operations.

Useful links:
Urban Outfitters official website
Urban Outfitters outlines challenges ahead in earnings call