Urban Outfitters 2009 Annual Report Download - page 33

Fiscal 2008 Compared to Fiscal 2007
Net sales in fiscal 2008 increased by 23.1% to $1.51 billion, from $1.22 billion in the prior fiscal
year. The $283 million increase was primarily attributable to a $263 million or 22.8% increase, in
retail segment sales. Our wholesale segment contributed $20 million as Free People wholesale net
sales increased 27.3%, excluding sales to our retail segment. The growth in our retail segment sales
during fiscal 2008 was driven by an increase of $162 million or 42.8% in non-comparable and new
store net sales, an increase in direct-to-consumer net sales of $52 million or 33.8% and an increase to
comparable store net sales of $49 million or 5.5%. The increase in comparable store net sales was
comprised of 12.8% and 18.4% increases at Anthropologie and Free People, respectively which more
than offset a comparable store net sales decrease of 0.9% for fiscal year 2008 at Urban Outfitters.
The increase in net sales attributable to non-comparable and new stores was primarily the result
of opening 38 new stores in fiscal 2008 and 32 new stores in fiscal 2007 that were considered
non-comparable during fiscal 2008. Comparable store net sales increases were primarily the result of
increases in average unit sales prices and increases in transactions resulting from an increased response
to our merchandise offerings. These increases more than offset a slight decrease in the number of units
sold per transaction. Direct-to-consumer net sales increased over the prior year primarily due to
increased traffic to our web sites, improved customer response related to the circulation of
approximately 3.2 million additional catalogs, and improvements in the average order value. The
increase in Free People wholesale sales was driven by increased average unit sale prices and increased
transactions.
Gross profit rates in fiscal 2008 increased to 38.3% of net sales or $577 million from 36.9% of
net sales or $452 million in fiscal 2007. This improvement is primarily due to a lower rate of
merchandise markdowns and leveraging of our store occupancy expenses driven by the net increase in
comparable store net sales. Total inventories at January 31, 2008 increased by 11.4% to $172 million
from $154 million in the prior fiscal year. The increase primarily related to the acquisition of inventory
to stock new retail stores. On a comparable store basis, inventories decreased by 2.8% versus the prior
fiscal year.
Selling, general and administrative expenses during fiscal 2008 decreased to 23.3% of net sales
versus 23.5% of net sales for fiscal 2007. Rate reductions from controlling store support related
expenses driven by increases in comparable store net sales was the primary contributor and more than
offset non-comparable expenses to operate our new home office facility. Selling, general and
administrative expenses in fiscal 2008 increased to $352 million from $288 million in the prior fiscal
year. The increase primarily related to the operating expenses of new and non-comparable stores.
Income from operations increased to 15.0% of net sales or $225 million for fiscal 2008 compared
to 13.4% of net sales or $164 million for fiscal 2007.
Our annual effective income tax rate improved slightly to 31.6% of income for fiscal 2008
compared to 31.7% of income for fiscal 2007. These favorable rates are based upon a number of
factors including: certification for work performed on the development of our new offices that
qualified for certain one-time federal tax incentives; the execution of certain related reorganization
efforts in fiscal 2008 and 2007 as well as the relief of certain valuation allowances related to net
operating loss carry-forwards of our wholly owned foreign subsidiaries in fiscal 2007.
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