Urban Outfitters 2011 Annual Report Download - page 35

Fiscal 2011 Compared to Fiscal 2010
Net sales in fiscal 2011 increased by 17.4% to $2.27 billion, from $1.94 billion in the prior fiscal
year. The $336 million increase was attributable to a $320 million or 17.5% increase, in retail segment
net sales and a $16 million or 15.6% increase in our wholesale segment net sales. The growth in our
retail segment net sales during fiscal 2011 was driven by increases of $161 million in non-comparable
and new store net sales, $110 million, or 34.0%, in direct-to-consumer net sales and $49 million, or
4%, in comparable store net sales. The increase in comparable retail segment net sales was comprised
of 9.8%, 6.9% and 26.7% increases at Anthropologie, Urban Outfitters and Free People respectively.
The increase in our wholesale segment net sales was due to a $15 million, or a 15.9% increase, at Free
People wholesale and a $1.0 million, or an 11.9% increase, at Leifsdottir wholesale.
The increase in net sales attributable to non-comparable and new stores was primarily the result
of opening 46 new stores in fiscal 2011 and 33 new stores in fiscal 2010 that were considered
non-comparable during fiscal 2011. Comparable store net sales increases were primarily the result of
an increase in the number of transactions and units sold per transaction, partially offset by a decrease
in the average unit sales prices. Direct-to-consumer net sales in fiscal year 2011 increased over the
prior year primarily due to increased traffic to our web sites combined with an increase in average
order value, which more than offset a decrease in conversion rate. Catalog circulation across all brands
increased by 2.8 million, or 7.7%. Thus far during the first quarter of fiscal 2012, comparable retail
segment net sales are low single-digit negative. The increase in Free People wholesale net sales was
driven by increases in transactions and average unit sale prices. Leifsdottir’s wholesale net sales
increase was a result of an increase in the number of transactions that more than offset a decrease in
average unit sale prices.
Gross profit rates in fiscal 2011 increased to 41.2% of net sales, or $937 million, from 40.6% of
net sales, or $786 million, in fiscal 2010. This increase was primarily due to improved merchandise
margins and leveraging of store occupancy expense driven by positive comparable store sales. Total
Company inventory increased 23.3% to $230 million from $186 million in the prior year. The increase
is primarily related to the acquisition of inventory to stock new stores and our direct-to-consumer
channel growth. Comparable retail segment inventory (which includes our direct-to-consumer channel)
grew 9.7%, while comparable store inventories increased 4.4%.
Selling, general and administrative expenses, as a percentage of net sales for fiscal 2011,
decreased to 23.0% of net sales versus 23.1% of net sales for fiscal 2010. The decrease in percentage
was primarily due to leveraging of direct store fixed and controllable costs driven by the positive retail
segment comparable sales. In fiscal 2011, selling, general and administrative expenses increased by
$75 million, to $522 million, from $447 million in the prior fiscal year. The dollar increase versus the
prior year is primarily related to the operating expenses of new and non-comparable stores.
Income from operations increased to 18.2% of net sales, or $414 million, for fiscal 2011
compared to 17.5% of net sales, or $339 million, for fiscal 2010.
Our annual effective income tax rate for January 31, 2011 decreased to 34.6% of income before
income taxes for fiscal 2011 compared to 36.2% of income before income taxes for fiscal 2010. This
decrease was due to the favorable mix of earnings in certain foreign jurisdictions and the federal
rehabilitation credit included in fiscal 2011. See Note 8 “Income Taxes” in our Notes to the
Consolidated Financial Statements, for a reconciliation of the statutory U.S. federal income tax rate to
33