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Segment Reporting
 9 Months Ended
Oct. 31, 2016
Segment Reporting

12. Segment Reporting

The Company is a portfolio of global consumer brands that offer lifestyle-oriented general merchandise and consumer products and services with two reportable segments—“Retail” and “Wholesale.” The Company’s Retail segment consists of the aggregation of its six brands operating under the names “Anthropologie,” “Bhldn,” “Free People,” “Terrain,” “Urban Outfitters” and “Vetri Family.” The Anthropologie, Bhldn, and Terrain brands make up the “Anthropologie Group.” As of October 31, 2016, there were 242 Urban Outfitters stores, 226 Anthropologie Group stores, 124 Free People stores and 12 restaurants. Urban Outfitters, the Anthropologie Group, and Free People, including their stores and direct-to-consumer channels, and restaurants are each considered an operating segment. Net sales from the Retail segment accounted for approximately 91.0% and 91.5% of total consolidated net sales for the three and nine months ended October 31, 2016, respectively. Net sales from the Retail segment accounted for approximately 92.8% and 92.4% of total consolidated net sales for the three and nine months ended October 31, 2015, respectively. The remaining net sales are derived from the Company’s Wholesale segment that distributes apparel and shoes to approximately 1,800 better department and specialty retailers worldwide and to the Retail segment.

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 inventory 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. All available shopping channels are fully integrated, including stores, websites, mobile applications, catalogs and customer contact centers. 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. Customers may also return certain merchandise purchased through direct-to-consumer channels at store locations. 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 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, 2016. 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:

 

     October 31,
2016		      January 31,
2016		      October 31,
2015		  

Inventory

         

Retail operations

    $ 415,923       $ 289,170       $ 391,771   

Wholesale operations

      37,903         41,053         49,779   
  

 

 

     

 

 

     

 

 

  

Total inventory

    $ 453,826       $ 330,223       $ 441,550   
  

 

 

     

 

 

     

 

 

  

Property and equipment, net

         

Retail operations

    $ 869,042       $ 859,277       $ 887,927   

Wholesale operations

      3,267         3,860         3,944   
  

 

 

     

 

 

     

 

 

  

Total property and equipment, net

    $ 872,309       $ 863,137       $ 891,871   
  

 

 

     

 

 

     

 

 

  

 

     Three Months Ended
October 31,		      Nine Months Ended
October 31,		  
     2016      2015      2016      2015  

Net sales

            

Retail operations

    $ 785,026       $ 765,525       $ 2,300,981       $ 2,246,275   

Wholesale operations

      81,552         62,170         222,712         194,410   

Intersegment elimination

      (4,087 )       (2,437 )       (8,057 )       (8,957 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net sales

    $ 862,491       $ 825,258       $ 2,515,636       $ 2,431,728   
  

 

 

     

 

 

     

 

 

     

 

 

  

Income from operations

            

Retail operations

    $ 67,981       $ 76,095       $ 234,022       $ 227,684   

Wholesale operations

      17,006         12,094         44,213         40,182   

Intersegment elimination

      (317 )       (203 )       (568 )       (809 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Total segment operating income

      84,670         87,986         277,667         267,057   

General corporate expenses

      (14,365 )       (7,661 )       (38,667 )       (29,927 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Total income from operations

    $ 70,305       $ 80,325       $ 239,000       $ 237,130   
  

 

 

     

 

 

     

 

 

     

 

 

  

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

 

     October 31,
2016		      January 31,
2016		      October 31,
2015		  

Property and equipment, net

         

Domestic operations

    $ 767,916       $ 742,171       $ 754,284   

Foreign operations

      104,393         120,966         137,587   
  

 

 

     

 

 

     

 

 

  

Total property and equipment, net

    $ 872,309       $ 863,137       $ 891,871   
  

 

 

     

 

 

     

 

 

  

 

     Three Months Ended
October 31,		      Nine Months Ended
October 31,		  
     2016      2015      2016      2015  

Net Sales

            

Domestic operations

    $ 760,074       $ 720,671       $ 2,211,925       $ 2,126,877   

Foreign operations

      102,417         104,587         303,711         304,851   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net sales

    $ 862,491       $ 825,258       $ 2,515,636       $ 2,431,728