Dive Brief:
- As it works to minimize the impact of changing tariff rates, Urban Outfitters Inc. reported first-quarter net sales across its portfolio rose 10.7% year over year to $1.3 billion, according to a Wednesday press release. The company’s net income jumped 75%, reaching a “record” $108.3 million, and comparable retail segment net sales jumped 4.8%.
- The company (which operates Urban Outfitters, Nuuly, Anthropologie and Free People) saw total inventory increase by $84.8 million, or 14.6%. The retailer opened a total of 13 new stores during the quarter, nine of which were under the Free People banner.
- Chief Financial Officer Melanie Marein-Efron noted that “the uncertainty around tariffs means we are likely to bring in fall product a bit earlier,” and that inventory growth in Q2 could exceed sales growth, according to a Wednesday earnings call.
Dive Insight:
For Urban Outfitters, though the volatility of U.S. trade policy makes predictions more difficult, the impact of tariffs seems fairly minimal at current rates.
“Although tariffs present a temporary headwind to our business, we are confident in our ability to manage through this environment and still achieve 50 to 100 basis points of gross margin improvement for Fiscal Year 2026,” co-President and Chief Operating Officer Frank Conforti said on the earnings call.
The company has no individual country that accounts for over 25% of its production, according to Conforti. China represents less than 5% of its countries of origin, while India, Vietnam, and Turkey are its largest.
Efforts to minimize the impact of tariffs have included term negotiations with vendors, adjusting the country of origin for products when possible and raising prices only in areas where management believes it won’t impact customer experience.
Marein-Efron shared that the company expects Q2 total company sales to increase in the high-single-digits, with retail comp sales potentially growing by mid-single-digits.
Analysts seemed mostly pleased with the retailer’s performance in the quarter, though some caution remains.
Urban Outfitters’ results “continue to impress,” Wells Fargo analysts led by Ike Boruchow said in a research note shared with Retail Dive. However, there is still some concern about the company’s “history of volatile execution,” and some are skeptical about how soon a turnaround will materialize for the Urban Outfitters brand.
Analysts from Jefferies added in a research note that while management has done a solid job at turning the brand’s comps positive, they continue to see risks at the banner since its North American performance remains a headwind.
The company has seen success with its apparel rental service Nuuly, revealing in February that it had its first profitable year with $13 million in operating income. In the latest quarter, Conforti said that Nuuly delivered 60% revenue growth and a 53% increase in average active subscribers.