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Segment Reporting
 12 Months Ended
Jan. 31, 2017
Segment Reporting

16. Segment Reporting

The Company offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands. The Company has 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 January 31, 2017, there were 242 Urban Outfitters stores, 225 Anthropologie Group stores, 127 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 91.9%, 92.4% and 93.2% of total consolidated net sales for the fiscal years ended January 31, 2017, 2016 and 2015, respectively. The remaining net sales are derived from the Company’s Wholesale segment that distributes apparel and shoes to approximately 1,900 better department and specialty retailers worldwide, third-party websites 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. Over the next several years we plan to continue to shift investment to the direct-to-consumer channel to align with changing customer preferences.

 

The accounting policies of the reportable segments are the same as the policies described in Note 2, “Summary of Significant Accounting Policies.” 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:

 

     Fiscal Year  
     2017     2016     2015  

Net sales

       

Retail operations

    $ 3,256,890     $ 3,184,955     $ 3,097,274  

Wholesale operations

      298,566       273,603       237,491  

Intersegment elimination

      (9,662 )      (13,424 )      (11,688 ) 
  

 

 

    

 

 

    

 

 

  

Total net sales

    $ 3,545,794     $ 3,445,134     $ 3,323,077  
  

 

 

    

 

 

    

 

 

  

Income from operations

       

Retail operations

    $ 325,666     $ 342,885     $ 354,326  

Wholesale operations

      58,169       54,444       55,403  

Intersegment elimination

      (614 )      (1,096 )      (1,079 ) 
  

 

 

    

 

 

    

 

 

  

Total segment operating income

      383,221       396,233       408,650  

General corporate expenses

      (44,694 )      (42,654 )      (43,265 ) 
  

 

 

    

 

 

    

 

 

  

Total income from operations

    $ 338,527     $ 353,579     $ 365,385  
  

 

 

    

 

 

    

 

 

  

Depreciation expense for property and equipment

       

Retail operations

    $ 132,150     $ 137,963     $ 130,383  

Wholesale operations

      980       918       1,031  
  

 

 

    

 

 

    

 

 

  

Total depreciation expense for property and equipment

    $ 133,130     $ 138,881     $ 131,414  
  

 

 

    

 

 

    

 

 

  

Inventory

       

Retail operations

    $ 301,519     $ 289,170    

Wholesale operations

      37,071       41,053    
  

 

 

    

 

 

    

Total inventory

    $ 338,590     $ 330,223    
  

 

 

    

 

 

    

Property and equipment, net

       

Retail operations

    $ 864,396     $ 859,277    

Wholesale operations

      3,390       3,860    
  

 

 

    

 

 

    

Total property and equipment, net

    $ 867,786     $ 863,137    
  

 

 

    

 

 

    

Cash paid for property and equipment

       

Retail operations

    $ 142,872     $ 134,627     $ 228,682  

Wholesale operations

      842       323       1,122  
  

 

 

    

 

 

    

 

 

  

Total cash paid for property and equipment

    $ 143,714     $ 134,950     $ 229,804  
  

 

 

    

 

 

    

 

 

  

 

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:

 

     Fiscal Year  
     2017      2016      2015  

Net Sales

         

Domestic operations

    $ 3,114,014      $ 3,005,595      $ 2,870,140  

Foreign operations

      431,780        439,539        452,937  
  

 

 

     

 

 

     

 

 

  

Total net sales

    $ 3,545,794      $ 3,445,134      $ 3,323,077  
  

 

 

     

 

 

     

 

 

  

Property and equipment, net

         

Domestic operations

    $ 766,419      $ 742,171     

Foreign operations

      101,367        120,966     
  

 

 

     

 

 

     

Total property and equipment, net

    $ 867,786      $ 863,137