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Segment Reporting
 6 Months Ended
Jul. 31, 2015
Segment Reporting

11. Segment Reporting

The Company is a global retailer of lifestyle-oriented general merchandise with two reportable segments—“Retail” and “Wholesale.” The Company’s Retail segment consists of the aggregation of its five brands operating through 556 stores under the retail names “Urban Outfitters,” “Anthropologie,” “Free People,” “Terrain” and “Bhldn” and includes their direct-to-consumer channels. Each of the Company’s brands, which include the retail stores and direct-to-consumer channels, are considered an operating segment. Net sales from the Retail segment accounted for approximately 91.7% and 92.2% of total consolidated net sales for the three and six months ended July 31, 2015, respectively. Net sales from the Retail segment accounted for approximately 92.7% and 92.9% for the three and six months ended July 31, 2014, respectively. The remaining net sales are derived from the Company’s Wholesale segment that distributes apparel to its Retail segment and to approximately 1,600 better department and specialty retailers worldwide.

The Company has aggregated its brands into the Retail segment based upon their shared management, customer base and economic characteristics. Reporting in this format provides management with the financial information necessary to evaluate the success of the segments and the overall business. The Company evaluates the performance of the segments based on the net sales and pre-tax income from operations (excluding intercompany charges) of the segment. Corporate expenses include expenses incurred and directed by the corporate office that are not allocated to segments. The principal identifiable assets for each reporting segment are inventories and property and equipment. Other assets are comprised primarily of general corporate assets, which principally consist of cash and cash equivalents, marketable securities, deferred taxes and prepaid expenses, which are typically not allocated to the Company’s segments. The Company accounts for intersegment sales and transfers as if the sales and transfers were made to third parties making similar volume purchases.

The Company’s omni-channel strategy enhances its customers’ brand experience by providing a seamless approach to the customer shopping experience. The Company has substantially integrated all available shopping channels, including stores, websites (online and through mobile devices) and catalogs. The Company’s investments in areas such as marketing campaigns and technology advancements are designed to generate demand for the omni-channel and not the separate store or direct-to-consumer channels. Store sales are primarily fulfilled from that store’s inventory, but may also be shipped from any of the Company’s fulfillment centers or from a different store location if an item is not available at the original store. Direct-to-consumer orders are primarily shipped to the Company’s customers through its fulfillment centers, but may also be shipped from any store, or a combination of fulfillment centers and stores depending on the availability of a particular item. Direct-to-consumer orders may also be picked up at a store location. As the Company’s customers continue to shop across multiple channels, the Company has adapted its approach towards meeting this demand. Due to the availability of like product in a variety of shopping channels, the Company now sources these products utilizing single stock keeping units based on the omni-channel demand rather than the demand of the separate channels. These and other technological capabilities allow the Company to better serve its customers and help it to complete a sale that otherwise may not have occurred due to out-of-stock positions. As a result of changing customer behavior and the substantial integration of the operations of the Company’s store and direct-to-consumer channels, the Company manages and analyzes its performance based on a single omni-channel rather than separate channels and believes that the omni-channel results present the most meaningful and appropriate measure of the Company’s performance.

The accounting policies of the reportable segments are the same as the policies described in Note 2, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2015. Both the Retail and Wholesale segments are highly diversified. No one customer constitutes more than 10% of the Company’s total consolidated net sales. A summary of the information about the Company’s operations by segment is as follows:

 

     July 31,
2015		      January 31,
2015		      July 31,
2014		  

Inventories

         

Retail operations

    $ 339,870       $ 314,940       $ 329,450   

Wholesale operations

      44,534         43,297         32,578   
  

 

 

     

 

 

     

 

 

  

Total inventories

    $ 384,404       $ 358,237       $ 362,028   
  

 

 

     

 

 

     

 

 

  

Property and equipment, net

         

Retail operations

    $ 896,400       $ 885,200       $ 864,216   

Wholesale operations

      3,902         4,032         4,426   
  

 

 

     

 

 

     

 

 

  

Total property and equipment, net

    $ 900,302       $ 889,232       $ 868,642   
  

 

 

     

 

 

     

 

 

  

 

     Three Months Ended
July 31,		      Six Months Ended
July 31,		  
     2015      2014      2015      2014  

Net sales

            

Retail operations

    $ 795,740       $ 752,116       $ 1,480,749       $ 1,392,546   

Wholesale operations

      74,627         61,966         132,241         110,256   

Intersegment elimination

      (2,907 )       (2,829 )       (6,520 )       (5,239 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net sales

    $ 867,460       $ 811,253       $ 1,606,470       $ 1,497,563   
  

 

 

     

 

 

     

 

 

     

 

 

  

Income from operations

            

Retail operations

    $ 100,057       $ 100,130       $ 151,589       $ 160,779   

Wholesale operations

      17,720         15,175         28,088         25,166   

Intersegment elimination

      (253 )       (259 )       (606 )       (499 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Total segment operating income

      117,524         115,046         179,071         185,446   

General corporate expenses

      (13,773 )       (9,929 )       (22,266 )       (20,508 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Total income from operations

    $ 103,751       $ 105,117       $ 156,805       $ 164,938   
  

 

 

     

 

 

     

 

 

     

 

 

  

The Company has foreign operations in Europe and Canada. Revenues and long-lived assets, based upon the Company’s domestic and foreign operations, are as follows:

 

     July 31,
2015		      January 31,
2015		      July 31,
2014		  

Property and equipment, net

         

Domestic operations

    $ 760,042       $ 745,504       $ 712,987   

Foreign operations

      140,260         143,728         155,655   
  

 

 

     

 

 

     

 

 

  

Total property and equipment, net

    $ 900,302       $ 889,232       $ 868,642   
  

 

 

     

 

 

     

 

 

  

 

     Three Months Ended
July 31,		      Six Months Ended
July 31,		  
     2015      2014      2015      2014  

Net Sales

            

Domestic operations

    $ 756,487       $ 701,763       $ 1,406,205       $ 1,302,675   

Foreign operations

      110,973         109,490         200,265         194,888   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net sales

    $ 867,460       $ 811,253       $ 1,606,470       $ 1,497,563