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Segment Reporting
 3 Months Ended
Apr. 30, 2017
Segment Reporting

12. Segment Reporting

The Company offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands. The Company operates two reportable segments— “Retail” and “Wholesale.” The Company’s Retail segment consists of the “Anthropologie,” “Bhldn,” “Free People,” “Terrain” and “Urban Outfitters” brands and the Food and Beverage division. The Anthropologie, Bhldn and Terrain brands make up the “Anthropologie Group.” As of April 30, 2017, there were 242 Urban Outfitters stores, 225 Anthropologie Group stores, 130 Free People stores and 12 restaurants under the Food and Beverage division. 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 90.7% and 91.8% of total consolidated net sales for the three months ended April 30, 2017 and 2016, respectively. The remaining net sales are derived from the Company’s Wholesale segment that consists of the Free People wholesale division that primarily designs, develops and markets young women’s contemporary casual apparel, including intimates and activewear, and shoes sold through approximately 1,900 department and specialty stores worldwide, third-party websites and 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. The Company also allows customers to view in-store inventory from its websites and mobile applications. 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 sales 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 the Company plans 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,” 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, 2017. 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:

 

     April 30,
2017		      January 31,
2017		      April 30,
2016		  

Inventory

         

Retail operations

    $ 324,126      $ 301,519      $ 324,940  

Wholesale operations

      35,367        37,071        34,925  
  

 

 

     

 

 

     

 

 

  

Total inventory

    $ 359,493      $ 338,590      $ 359,865  
  

 

 

     

 

 

     

 

 

  

Property and equipment, net

         

Retail operations

    $ 847,926      $ 864,396      $ 867,813  

Wholesale operations

      3,333        3,390        3,691  
  

 

 

     

 

 

     

 

 

  

Total property and equipment, net

    $ 851,259      $ 867,786      $ 871,504  
  

 

 

     

 

 

     

 

 

  

 

     Three Months Ended
April 30,		  
     2017      2016  

Net sales

      

Retail operations

    $ 690,352      $ 700,193  

Wholesale operations

      72,949        64,488  

Intersegment elimination

      (2,111 )       (2,104 ) 
  

 

 

     

 

 

  

Total net sales

    $ 761,190      $ 762,577  
  

 

 

     

 

 

  

Income from operations

      

Retail operations

    $ 19,905      $ 50,799  

Wholesale operations

      16,269        9,811  

Intersegment elimination

      10        (171 ) 
  

 

 

     

 

 

  

Total segment operating income

      36,184        60,439  

General corporate expenses

      (15,148 )       (9,956 ) 
  

 

 

     

 

 

  

Total income from operations

    $ 21,036      $ 50,483  
  

 

 

     

 

 

  

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:

 

     April 30,
2017		      January 31,
2017		      April 30,
2016		  

Property and equipment, net

         

Domestic operations

    $ 754,965      $ 766,419      $ 749,072  

Foreign operations

      96,294        101,367        122,432  
  

 

 

     

 

 

     

 

 

  

Total property and equipment, net

    $ 851,259      $ 867,786      $ 871,504  
  

 

 

     

 

 

     

 

 

  

 

     Three Months Ended
April 30,		  
     2017      2016  

Net Sales

      

Domestic operations

    $ 677,953      $ 673,364  

Foreign operations

      83,237        89,213  
  

 

 

     

 

 

  

Total net sales

    $ 761,190      $ 762,577