Urban Outfitters has achieved record sales in the second quarter, but the American fashion group paid a high price: profits halved in the process.
Subscription model grows
In the second quarter, Urban Outfitters broke some records as its net sales increased by 2.2 % to 1.18 billion dollars (1.2 billion euros). Online growth was in the low single digits, while shop sales remained steady. Growth was mainly driven by subsidiary brands Free People and Anthropologie, as comparable retail sales at the eponymous brand Urban Outfitters fell by 9 %.
The wholesale segment grew by 1 %, while the new second-hand service Nuuly also made its contribution. Nuuly is an interesting new service by Urban Outfitters: shoppers can rent clothes (from internal and external brands) and buy second-hand clothes via a subscription model on a monthly basis. However, the service is not yet available in Europe. Urban Outfitters is present in the Benelux with several shops, Free People and Anthropologie only have shops in Amsterdam.
The growth was at the expense of the company’s profits, which more than halved. Net profit in the second quarter amounted to 59 million dollars (60 million euros), compared to 127 million dollars a year earlier. Rising transport costs and higher wage costs were among the factors that affected the company. In addition, gross profit decreased because the group had to give higher discounts.
For the first half of the year, too, profits were only half of what they were a year earlier. By contrast, the fashion group recorded sales of 2.23 billion dollars (2.3 billion euros) in the first six months, an increase of 7.2 % compared to last year.