Urban Outfitters (NASDAQ:URBN) reported record third-quarter fiscal 2024 results, with management highlighting broad-based strength across brands and geographies, accelerating subscriber growth at Nuuly, and continued progress on margin improvement despite tariff-related pressure.
Record Q3 results driven by comps and subscription growth
Chief Executive Officer Richard Hayne said total revenue rose 12% and net income increased 13%, with both setting new third-quarter records. He noted that “all brands produced positive comps across all geographies,” pointing to double-digit comparable sales at the Urban Outfitters brand in North America and Europe and “exceptional growth” in subscribers and revenue at Nuuly.
Margins: markdown benefits and occupancy leverage offset tariff pressure
Conforti said gross profit dollars increased 13% to a record $563 million, while gross margin improved 31 basis points to 36.8%. The quarter included a $2 million impairment charge, which he quantified as a 13-basis-point impact. The gross margin improvement was attributed primarily to lower markdowns at Urban Outfitters and Free People and occupancy leverage from higher sales, more than offsetting lower initial product margins tied to higher tariffs.
SG&A rose 14%, deleveraging 32 basis points, driven mainly by higher marketing spend aimed at increasing customer growth and transactions across brands, as well as supporting Nuuly subscriber growth. Operating income increased more than 12% to $144 million, and the operating profit rate was consistent with last year. Net income rose to a record $116 million, or $1.28 per diluted share.
Brand highlights: Urban Outfitters turnaround, Anthropologie consistency, and Nuuly scale
Free People posted 9% total revenue growth, including a 4% retail comp and 8% wholesale growth. Conforti said non-comp sales grew more than 200% due to new store openings over the past 12 months. The company is planning 43 new Free People-related stores for the year (18 Free People and 25 FP Movement). FP Movement grew 18% overall, including 29% wholesale growth and continued strength in performance-related products, which management said is supporting new customer acquisition.
Urban Outfitters delivered a 13% global retail comp, including 10% in North America and 17% in Europe. Management credited improvements in product and marketing, with strong regular-price sales and new customer growth. Women’s strength was anchored in denim, with support from pants, lounge, sweaters, and accessories. The company also cited progress in men’s apparel, including “double-digit regular price comps” in October. Conforti said the brand generated a low single-digit operating profit margin globally in the quarter, driven by strong improvement in Europe and a reduced operating loss in North America. Executives described efforts to broaden an assortment that had become “unintentionally niche,” leaning into customer demand for denim and lounge, particularly the BDG and Out From Under brands.
Anthropologie reported an 8% retail comp and 19 consecutive quarters of positive comparable sales, according to Anthropologie Group CEO Tricia Smith. She said the brand maintained “strong double-digit profit rates” supported by improved gross margins despite tariff headwinds. Smith highlighted strength across apparel, accessories, and weddings, alongside an acceleration in home. She said own-brand penetration reached a historical high, up more than 100 basis points year over year, with investments in Maeve, Celandine, Lyrebird, and Pilcrow. The company opened its first standalone Maeve boutique in Raleigh, North Carolina, and Smith said results exceeded expectations with a “high double-digit” beat to forecast and were accretive to regional demand. A second Maeve boutique is scheduled to open at the end of fiscal Q4 in Atlanta, with another location planned for fiscal Q1 2025.
Nuuly grew Q3 revenue 49% as subscriber momentum continued. Management said the company is investing in logistics and marketing, with a planned Kansas City expansion—adding storage capacity and sortation automation—on track. In Q&A, executives said Nuuly’s subscriber demographics have remained “relatively stable,” though they observed a slight shift to somewhat younger subscribers and a modest increase in new customers from the southern U.S. They also noted a higher rate of product sales to customers in the quarter, which carries a lower gross profit than subscription revenue.
Tariffs, pricing posture, and Q4 outlook
Conforti estimated tariffs reduced Q3 gross margin by about 60 basis points and projected a roughly 75-basis-point impact in Q4. He said the company still believes it can deliver about 100 basis points of gross margin improvement for the full fiscal year, supported by mitigation actions such as vendor negotiations, country-of-origin shifts, transportation changes, and pricing management. CFO Melanie Marein-Efron added that the company’s tariff assumptions reflected announced rates as of Nov. 24, including a 50% tariff rate on goods from India.
On pricing, Smith said the company has taken “small price increases” selectively where the value equation made sense and has seen “little to no price resistance.” Executives emphasized a continued commitment to protecting opening price points and said they expect “very little incremental” pricing beyond what was already implemented for fall and holiday, with Hayne adding that most price increases are likely “behind us.”
For Q4, Marein-Efron said the company is planning for high single-digit total sales growth, with retail comps expected to be up mid-single digits. By brand, the company’s planning assumptions include high single-digit retail comps at Urban Outfitters, mid-single-digit retail comps at Anthropologie, and low- to mid-single-digit retail comps at Free People, along with mid-double-digit revenue growth at Nuuly and mid-single-digit wholesale growth.
Gross margin in Q4 is expected to improve 25 to 50 basis points, with lower markdowns—particularly at Urban Outfitters—partially offset by lower initial merchandise margins from tariffs. SG&A is expected to grow roughly in line with sales, driven by higher marketing spend and increased labor associated with new stores. The company plans an effective tax rate of about 23.5% in Q4 and 22.5% for the full year.
Store growth and capital allocation
Marein-Efron said fiscal 2024 capital expenditures are planned at approximately $300 million, allocated roughly 45% to retail store expansion and support, 35% to technology and logistics, and 20% to home office expansion. The company expects to open about 69 stores and close about 17, with net new growth led by FP Movement, Free People, and Anthropologie. Specifically, the plan calls for 25 new FP Movement stores, 18 new Free People stores, and 16 new Anthropologie stores.
Heading into the holiday period, Hayne said November traffic and sales remained robust and retail comp sales were running slightly ahead of the company’s mid-single-digit Q4 comp plan. He said the holiday environment is expected to be “highly competitive and promotional,” and the company observed consumers waiting longer to purchase until promotions begin—behavior he characterized as closer to pre-COVID patterns. Management said early holiday events performed strongly and reiterated confidence in improved operating margins in Q4 versus last year.
About Urban Outfitters (NASDAQ:URBN)
Urban Outfitters, Inc is a global lifestyle retailer headquartered in Philadelphia, Pennsylvania. Established in 1970 by Richard Hayne, Scott Belair and Judy Wicks, the company began as a single store catering to college students in the city’s historic Old City neighborhood. Over the decades, Urban Outfitters has expanded its reach and diversified its portfolio to include multiple retail concepts addressing distinct customer segments.
The company operates through several well-known brands, each offering a curated selection of apparel, footwear, accessories and home goods.
