Urban Outfitters 2010 Annual Report Download - page 34

in direct-to-consumer net sales of $67 million or 32.4%, an increase to comparable store net sales of
$88 million or 7.8%. The increase in comparable store net sales was comprised of 3.4%, 4.1% and
11.9% increases at Anthropologie, Free People and Urban Outfitters, respectively.
The increase in net sales attributable to non-comparable and new stores was primarily the result
of opening 49 new stores in fiscal 2009 and 38 new stores in fiscal 2008 that were considered
non-comparable during fiscal 2009. 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 in fiscal year 2009 increased over the prior year
primarily due to increased traffic to our web sites, that more than offset minor decreases in conversion
rate and average order value. Circulation modestly increased by 688,000 catalogs or 1.7%. The
increase in Free People wholesale net sales was driven by increased average unit sale prices and
increased transactions.
Gross profit rates in fiscal 2009 increased to 38.9% of net sales or $713 million from 38.3% of
net sales or $577 million in fiscal 2008. This improvement is primarily due to leveraging of our store
occupancy expenses and improvements in our initial merchandise margins which are partially offset by
adjustments to record anticipated markdowns during the fourth quarter of fiscal 2009. Total
inventories at January 31, 2009 decreased by 1.3% to $170 million from $172 million in the prior
fiscal year. The decrease is primarily due to a 13% decrease in comparable store inventory which more
than offset additions to inventories for new and non-comparable stores.
Selling, general and administrative expenses during fiscal 2009 decreased to 22.6% of net sales
versus 23.3% of net sales for fiscal 2008. The rate reduction is primarily due to controlling selling and
store support related expenses in addition to lower corporate expenses resulting from non-recurring
legal fees incurred in the prior year. Selling, general and administrative expenses in fiscal 2009
increased to $414 million from $352 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 16.3% of net sales or $299 million for fiscal 2009 compared
to 15.0% of net sales or $225 million for fiscal 2008.
Our annual effective income tax rate increased to 35.6% of income for fiscal 2009 compared to
31.6% of income for fiscal 2008. The increase in this year’s tax rate is due to the prior year’s annual
effective tax rate being favorably impacted by the receipt of one-time federal tax incentives for work
performed on the development of our new home offices. See Note 8 “Income Taxes” in our
consolidated financial statements, included elsewhere in this report, for a reconciliation of the statutory
U.S. federal income tax rate to our effective tax rate.
Liquidity and Capital Resources
Cash, cash equivalents and marketable securities were $745 million as of January 31, 2010 as
compared to $521 million as of January 31, 2009 and $374 million as of January 31, 2008. The
increase in cash, cash equivalents and marketable securities during fiscal 2010 was primarily a result
of $325 million from cash provided by operating activities as compared to $252 million in fiscal 2009,
that primarily consists of net income and the add back of the non-cash items, depreciation and
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