Urban Outfitters, Inc. (NASDAQ:URBN) Q4 2023 Earnings Conference Call February 28, 2023 5:15 PM ET

Company Participants

Oona McCullough - Executive Director, IR

Francis Conforti - COO & Co-President

Melanie Marein-Efron - CFO

Richard Hayne - Co-Founder, Chairman & CEO

Sheila Harrington - Global CEO Urban Outfitters Group & CEO, Free People Group

Tricia Smith - Global CEO, Anthropologie Group

Conference Call Participants

Lorraine Hutchinson - Bank of America Merrill Lynch

Adrienne Yih - Barclays Bank

Paul Lejuez - Citigroup

Alexandra Straton - Morgan Stanley

Matthew Boss - JPMorgan Chase & Co.

Marni Shapiro - The Retail Tracker

Jay Sole - UBS

Operator

Good day, ladies and gentlemen, and welcome to the Urban Outfitters, Inc. Fourth Quarter Fiscal '23 Earnings Call. [Operator Instructions].

I would now like to introduce Oona McCullough, Executive Director of Investor Relations. Ma'am, you may begin.

Oona McCullough

Good afternoon, and welcome to the URBN fourth quarter fiscal 2023 conference call.

Earlier this afternoon, the company issued a press release outlining the financial and operating results for the 3- and 12-month periods ending January 31, 2023. The following discussions may include forward-looking statements. Please note that actual results may differ materially from those statements. Additional information concerning factors that could cause actual results to differ materially from projected results is contained in the company's filings with the Securities and Exchange Commission.

On today's call, you will hear from Richard Hayne, Chief Executive Officer; Frank Conforti, Co-President and COO; and Melanie Marein-Efron, Chief Financial Officer. Following that, we will be pleased to address your questions. For more detailed commentary on our quarterly performance and the text of today's conference call, please refer to our Investor Relations website at www.urbn.com.

I will now turn the call over to Frank.

Francis Conforti

Thank you, Oona, and good afternoon, everyone.

Today, I will begin the call discussing our total company fourth quarter results versus the prior comparable quarter, followed by some more detailed notes by brand. I will then turn the call over to Melanie and then Dick, who will discuss our thoughts on our future performance in fiscal 2024.

Overall, the fourth quarter performed relatively in line with our thoughts as we discussed on the third quarter call. Total company sales grew by 4% to a fourth quarter record of $1.4 billion, driven by a total retail segment comp increase of 3% and a newly segment revenue increase of $25 million. These increases were partially offset by a 7% decline in wholesale segment sales and approximately 140 basis points of unfavorable foreign currency translation. The growth in Retail segment comp sales was driven by a mid-single-digit positive store comp and a low single-digit digital comp. Nuuly's robust increase in revenue was due to a significant increase in subscribers from the prior year. Wholesale segment sales decline was due to a decrease at Free People. Gross profit dollars increased 1% to $372 million while our gross profit rate decreased by 68 basis points to 26.9%. The decrease in gross profit rate was primarily driven by store impairment charges of $5 million or 39 basis points. As we had planned, IMU improved nicely in the quarter, primarily due to a lower inbound transportation costs. We believe we could continue to see improved IMU throughout fiscal '24 due to these lower costs as well as several of our IMU-related initiatives. Offsetting the improvement in IMU in the fourth quarter with higher markdowns, leading merchandise margins slightly negative. The increased markdown rate was primarily due to increased markdowns at Urban Outfitters followed by Free People.