Urban Outfitters: Growth-Minded Retailer Writes The Textbook In ...

Tag : Antique Reproduction Furniture

BY MARILYN MUCH
INVESTOR'S BUSINESS DAILY
Posted 7/29/2008
The Anthropologie store in mid-town Manhattan was filled withshoppers on this steamy morning.
They were checking out the store's wide array of clothes,accessories and home decor items.
Jennie Keown, for one, was about to buy a scented candle encased inglass.
Keown is impressed with the distinctive items she finds at theAnthropologie chain, which is run by Urban Outfitters . ( URBN )
"I like the unique line of products, which you can't find anywhereelse," said Keown, who's been an Anthropologie customer for fouryears.
Evidently, Keown isn't alone. On this particular day, Anthropologiecustomers had to line up to pay for their purchases.
And judging from Urban Outfitters' lofty results, the apparelretailer's namesake and Free People chains are also luring bigcrowds.
No Slowdown
As the chilly spending climate has cooled sales at many appareloutfits, Urban Outfitters has been sizzling. Sales have grown by atleast 16% for the last five quarters and earnings have climbed byat least 27%.
Why the strong showing? At the end of the day it's about product,says analyst Elizabeth Pierce of Roth Capital Partners.
"The product assortment is very differential and unexpected," shesaid. "It's not the same old, same old. They really think abouttheir customers' lifestyles and interests."
So a popular item like a tunic dress at an Anthropologie store mayhave more trim or embellishments than one you'd find at adepartment store.
Another big plus: Urban Outfitters' stores boast a unique shoppingexperience, says Pierce.
You find a mixture of categories on the shelves. At the New YorkAnthropologie store, one shelf features women's tops displayed nextto ceramic jewelry cases. Another displays a vase filled withflowers next to women's tops.
"They do great job of merchandising a lot of different things,"said Pierce.
Chief Financial Officer John Kyees says the store experience is asimportant as the merchandise. In difficult economic times, womentend to gravitate to stores with the best shopping experience.
"We really describe ourselves as an experiential retailer," hesaid. "We do things that make us different."
Keown, for one, says the ambiance at Anthropologie stores is morelike that of an antique shop than a regular retail store.
The company's three branches differ on a few fronts. Its namesakestores carry women's and men's clothes, accessories, apartmentwares and gifts. They cater to young adults age 18 to 30.
Its Anthropologie stores, aimed at women age 30 to 45, feature onlywomen's clothing. It carries more home products, from furniture tochandeliers, than the Urban Outfitters branch.
Its Free People stores carry only clothes and accessories for womenin their early 20s to early 30s.
Rather than take a cookie cutter approach to each branch, thecompany designs every store independently so it's geared to thelocal area, says Kyees.
Management makes sure merchandise is as distinctive as possible.
"Our customers can't think of buying something everyone else owns,"said Kyees. "They're eclectic and don't want to be like everyoneelse."
The company's stores carry lots of different styles, but they don'tcarry a lot of items in those styles, says Kyees. This way, there'sless duplication.
This approach differs from that of most of its rivals, says Kyees,which carry a narrow array of styles and a lot of units in eachstyle.
Armed with this strategy, Urban Outfitters enjoyed a strong firstquarter. Earnings surged 47% from a year earlier to 25 cents ashare. Sales rose 25% to $394.3 million. Combined same-store salesrose 10% from the prior year.
Anthropologie and Urban Outfitters stores saw a 10% gain insame-store sales, while Free People had a 19% gain.
During the quarter, the Urban Outfitters brand continued itscomeback from a tough stretch.
The brand's business began to fall off about 18 months ago. Overthe past year, the company made improvements to get it back ontrack.
It tightened up the chain's assortment to carry more styles andless items in each style. Other efforts include developing a morebalanced and eclectic lineup.
Even as the three branches show solid growth, management isplanting the seeds for the future with a new concept.
In April, the company opened its first Terrain garden center storein Concordville, Pa. The opening followed the February purchase ofJ. Franklin Styer Nurseries.
Terrain sells an array of indoor and tropical plants, gardenequipment, pots, furniture, and gifts. Plus, it offers landscapeand design services. The store also has a sit-down cafe.
The company targets the upscale baby boomer crowd with the newconcept. Kyees says that potentially it could have about 50 gardencenters around the U.S. He figures the 50 stores could generateabout $1 billion a year in sales.
Growth Plan
The opening comes as the company maps out a new growth plan.
Kyees says the three core concepts have about five years-or more ofgrowth.
The idea is to add a new concept well before these concepts run outof steam.
"This is another example in retail where management starts a newconcept long before it needs a new growth vehicle," said Pierce.
Still, she says it's too early to call Terrain a growth concept.Rather, it will take years to see how it fares.
Kyees says the company will probably announce a fifth concept inthe next year and have something open in the next 18 months.
Meanwhile, followers expect the company to continue to shine.Analysts polled by Thomson Reuters expect 2008 earnings this yearto climb 31% to $1.23 a share, then another 23% in 2009.
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