10-Q 1 urbn-10q_20190430.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended April 30, 2019

OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 000-22754

Urban Outfitters, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Pennsylvania | 23-2003332
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.)
5000 South Broad Street, Philadelphia, PA | 19112-1495
(Address of Principal Executive Offices) | (Zip Code)

Registrant’s telephone number, including area code: (215) 454-5500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Shares, par value $.0001 per share |  | URBN |  | NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☒ | Accelerated filer | ☐
Non-accelerated filer | ☐ | Smaller reporting company | ☐
|  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common shares, $0.0001 par value—97,965,012 shares outstanding on June 4, 2019.

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

Item 1. | Financial Statements (unaudited) |
| Condensed Consolidated Balance Sheets as of April 30, 2019, January 31, 2019 and April 30, 2018 | 1
| Condensed Consolidated Statements of Income for the three months ended April 30, 2019 and 2018 | 2
| Condensed Consolidated Statements of Comprehensive Income for the three months ended April 30, 2019 and 2018 | 3
| Condensed Consolidated Statements of Shareholders’ Equity for the three months ended April 30, 2019 and 2018 | 4
| Condensed Consolidated Statements of Cash Flows for the three months ended April 30, 2019 and 2018 | 5
| Notes to Condensed Consolidated Financial Statements | 6
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 26
Item 4. | Controls and Procedures | 26
PART II OTHER INFORMATION
Item 1. | Legal Proceedings | 27
Item 1A. | Risk Factors | 27
Item 2. | Unregistered Sales of Equity Securities and the Use of Proceeds | 27
Item 6. | Exhibits | 28
| Signatures | 29

PART I

FINANCIAL INFORMATION

Item 1. | Financial Statements

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

(unaudited)

|  | April 30, |  |  | January 31, |  |  | April 30, |
|  | 2019 |  |  | 2019 |  |  | 2018 |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 291,199 |  |  | $ | 358,260 |  |  | $ | 313,713 |
Marketable securities |  |  | 229,163 |  |  |  | 279,232 |  |  |  | 166,367 |
Accounts receivable, net of allowance for doubtful accounts of $892, $1,499 and $1,895, respectively |  |  | 88,390 |  |  |  | 80,461 |  |  |  | 88,936 |
Inventory |  |  | 408,362 |  |  |  | 370,507 |  |  |  | 404,617 |
Prepaid expenses and other current assets |  |  | 122,183 |  |  |  | 114,296 |  |  |  | 123,505 |
Total current assets |  |  | 1,139,297 |  |  |  | 1,202,756 |  |  |  | 1,097,138 |
Property and equipment, net |  |  | 829,072 |  |  |  | 796,029 |  |  |  | 819,725 |
Operating lease right-of-use assets |  |  | 1,088,290 |  |  |  | — |  |  |  | — |
Marketable securities |  |  | 93,894 |  |  |  | 57,292 |  |  |  | 35,079 |
Deferred income taxes and other assets |  |  | 101,267 |  |  |  | 104,438 |  |  |  | 99,273 |
Total Assets |  | $ | 3,251,820 |  |  | $ | 2,160,515 |  |  | $ | 2,051,215 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  | $ | 174,258 |  |  | $ | 144,414 |  |  | $ | 158,870 |
Current portion of operating lease liabilities |  |  | 214,443 |  |  |  | — |  |  |  | — |
Accrued expenses, accrued compensation and other current liabilities |  |  | 259,478 |  |  |  | 242,230 |  |  |  | 256,221 |
Total current liabilities |  |  | 648,179 |  |  |  | 386,644 |  |  |  | 415,091 |
Non-current portion of operating lease liabilities |  |  | 1,092,180 |  |  |  | — |  |  |  | — |
Deferred rent and other liabilities |  |  | 63,490 |  |  |  | 284,773 |  |  |  | 289,709 |
Total Liabilities |  |  | 1,803,849 |  |  |  | 671,417 |  |  |  | 704,800 |
Commitments and contingencies (see Note 12) |  |  |  |  |  |  |  |  |  |  |  |
Shareholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |
Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued |  |  | — |  |  |  | — |  |  |  | — |
Common shares; $.0001 par value, 200,000,000 shares authorized, 103,599,364, 105,642,283 and 108,670,688 shares issued and outstanding, respectively |  |  | 10 |  |  |  | 11 |  |  |  | 11 |
Additional paid-in-capital |  |  | — |  |  |  | — |  |  |  | 6,434 |
Retained earnings |  |  | 1,478,678 |  |  |  | 1,516,190 |  |  |  | 1,358,683 |
Accumulated other comprehensive loss |  |  | (30,717 | ) |  |  | (27,103 | ) |  |  | (18,713 | )
Total Shareholders’ Equity |  |  | 1,447,971 |  |  |  | 1,489,098 |  |  |  | 1,346,415 |
Total Liabilities and Shareholders’ Equity |  | $ | 3,251,820 |  |  | $ | 2,160,515 |  |  | $ | 2,051,215 |

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except share and per share data)

(unaudited)

|  | Three Months Ended |
|  | April 30, |
|  | 2019 |  |  | 2018 |
Net sales |  | $ | 864,413 |  |  | $ | 855,688 |
Cost of sales |  |  | 595,357 |  |  |  | 575,028 |
Gross profit |  |  | 269,056 |  |  |  | 280,660 |
Selling, general and administrative expenses |  |  | 229,036 |  |  |  | 226,764 |
Income from operations |  |  | 40,020 |  |  |  | 53,896 |
Other income, net |  |  | 2,680 |  |  |  | 80 |
Income before income taxes |  |  | 42,700 |  |  |  | 53,976 |
Income tax expense |  |  | 10,115 |  |  |  | 12,716 |
Net income |  | $ | 32,585 |  |  | $ | 41,260 |
Net income per common share: |  |  |  |  |  |  |  |
Basic |  | $ | 0.31 |  |  | $ | 0.38 |
Diluted |  | $ | 0.31 |  |  | $ | 0.38 |
Weighted-average common shares outstanding: |  |  |  |  |  |  |  |
Basic |  |  | 104,437,460 |  |  |  | 108,490,926 |
Diluted |  |  | 105,340,148 |  |  |  | 109,743,677 |

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in thousands)

(unaudited)

|  | Three Months Ended |
|  | April 30, |
|  | 2019 |  |  | 2018 |
Net income |  | $ | 32,585 |  |  | $ | 41,260 |
Other comprehensive loss: |  |  |  |  |  |  |  |
Foreign currency translation |  |  | (3,800 | ) |  |  | (7,969 | )
Change in unrealized gains (losses) on marketable securities, net of tax |  |  | 186 |  |  |  | (93 | )
Total other comprehensive loss |  |  | (3,614 | ) |  |  | (8,062 | )
Comprehensive income |  | $ | 28,971 |  |  | $ | 33,198 |

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(amounts in thousands, except share data)

(unaudited)

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |
|  | Common Shares |  |  | Additional |  |  |  |  |  |  | Other |  |  |  |  |
|  | Number of |  |  | Par |  |  | Paid-in |  |  | Retained |  |  | Comprehensive |  |  |  |  |
|  | Shares |  |  | Value |  |  | Capital |  |  | Earnings |  |  | Loss |  |  | Total |
Balances as of January 31, 2019 |  |  | 105,642,283 |  |  | $ | 11 |  |  | $ | — |  |  | $ | 1,516,190 |  |  | $ | (27,103 | ) |  | $ | 1,489,098 |
Comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 32,585 |  |  |  | (3,614 | ) |  |  | 28,971 |
Share-based compensation |  |  | — |  |  |  | — |  |  |  | 5,553 |  |  |  | — |  |  |  | — |  |  |  | 5,553 |
Share-based awards |  |  | 563,989 |  |  |  | — |  |  |  | 974 |  |  |  | — |  |  |  | — |  |  |  | 974 |
Share repurchases |  |  | (2,606,908 | ) |  |  | (1 | ) |  |  | (6,527 | ) |  |  | (70,097 | ) |  |  | — |  |  |  | (76,625 | )
Balances as of April 30, 2019 |  |  | 103,599,364 |  |  | $ | 10 |  |  | $ | — |  |  | $ | 1,478,678 |  |  | $ | (30,717 | ) |  | $ | 1,447,971 |

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |
|  | Common Shares |  |  | Additional |  |  |  |  |  |  | Other |  |  |  |  |
|  | Number of |  |  | Par |  |  | Paid-in |  |  | Retained |  |  | Comprehensive |  |  |  |  |
|  | Shares |  |  | Value |  |  | Capital |  |  | Earnings |  |  | Loss |  |  | Total |
Balances as of January 31, 2018 |  |  | 108,248,568 |  |  | $ | 11 |  |  | $ | 684 |  |  | $ | 1,310,859 |  |  | $ | (10,651 | ) |  | $ | 1,300,903 |
Comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 41,260 |  |  |  | (8,062 | ) |  |  | 33,198 |
Share-based compensation |  |  | — |  |  |  | — |  |  |  | 5,524 |  |  |  | — |  |  |  | — |  |  |  | 5,524 |
Share-based awards |  |  | 560,430 |  |  |  | — |  |  |  | 5,273 |  |  |  | — |  |  |  | — |  |  |  | 5,273 |
Cumulative effect of change in accounting pronouncements |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 6,564 |  |  |  | — |  |  |  | 6,564 |
Share repurchases |  |  | (138,310 | ) |  |  | — |  |  |  | (5,047 | ) |  |  | — |  |  |  | — |  |  |  | (5,047 | )
Balances as of April 30, 2018 |  |  | 108,670,688 |  |  | $ | 11 |  |  | $ | 6,434 |  |  | $ | 1,358,683 |  |  | $ | (18,713 | ) |  | $ | 1,346,415 |

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

|  | April 30, |
|  | 2019 |  |  | 2018 |
Cash flows from operating activities: |  |  |  |  |  |  |  |
Net income |  | $ | 32,585 |  |  | $ | 41,260 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 27,809 |  |  |  | 30,464 |
ROU asset amortization |  |  | 46,626 |  |  |  | — |
Provision (benefit) for deferred income taxes |  |  | 4,163 |  |  |  | (7,166 | )
Share-based compensation expense |  |  | 5,553 |  |  |  | 5,524 |
Loss on disposition of property and equipment, net |  |  | 552 |  |  |  | 1,985 |
Changes in assets and liabilities: |  |  |  |  |  |  |  |
Receivables |  |  | (8,003 | ) |  |  | (12,194 | )
Inventory |  |  | (38,551 | ) |  |  | (54,379 | )
Prepaid expenses and other assets |  |  | (12,396 | ) |  |  | 1,599 |
Payables, accrued expenses, operating lease liabilities and other liabilities |  |  | (32,445 | ) |  |  | 47,022 |
Net cash provided by operating activities |  |  | 25,893 |  |  |  | 54,115 |
Cash flows from investing activities: |  |  |  |  |  |  |  |
Cash paid for property and equipment |  |  | (37,716 | ) |  |  | (24,634 | )
Cash paid for marketable securities |  |  | (129,896 | ) |  |  | (52,237 | )
Sales and maturities of marketable securities |  |  | 151,761 |  |  |  | 57,400 |
Net cash used in investing activities |  |  | (15,851 | ) |  |  | (19,471 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |
Proceeds from the exercise of stock options |  |  | 974 |  |  |  | 5,273 |
Share repurchases related to share repurchase program |  |  | (71,242 | ) |  |  | — |
Share repurchases related to taxes for share-based awards |  |  | (5,383 | ) |  |  | (5,047 | )
Net cash (used in) provided by financing activities |  |  | (75,651 | ) |  |  | 226 |
Effect of exchange rate changes on cash and cash equivalents |  |  | (1,452 | ) |  |  | (3,377 | )
(Decrease) increase in cash and cash equivalents |  |  | (67,061 | ) |  |  | 31,493 |
Cash and cash equivalents at beginning of period |  |  | 358,260 |  |  |  | 282,220 |
Cash and cash equivalents at end of period |  | $ | 291,199 |  |  | $ | 313,713 |
Supplemental cash flow information: |  |  |  |  |  |  |  |
Cash paid during the year for: |  |  |  |  |  |  |  |
Income taxes |  | $ | 3,030 |  |  | $ | 2,414 |
Non-cash investing activities—Accrued capital expenditures |  | $ | 31,761 |  |  | $ | 26,177 |

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

URBAN OUTFITTERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and per share data)

(unaudited)

1. Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed financial statements should be read in conjunction with Urban Outfitters, Inc.’s (the “Company’s”) Annual Report on Form 10-K for the fiscal year ended January 31, 2019, filed with the United States Securities and Exchange Commission on April 1, 2019.

The Company’s business experiences seasonal fluctuations in net sales and net income, with a more significant portion typically realized in the second half of each year predominantly due to the year-end holiday period. Historically, and consistent with the retail industry, this seasonality also impacts our working capital requirements, particularly with regard to inventory. Accordingly, the results of operations for the three months ended April 30, 2019 are not necessarily indicative of the results to be expected for the full year.

The Company’s fiscal year ends on January 31. All references in these notes to the Company’s fiscal years refer to the fiscal years ended on January 31 in those years. For example, the Company’s fiscal year 2020 will end on January 31, 2020.

2. Recent Accounting Pronouncements

Recently Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update that amends the existing accounting standards for lease accounting. This update requires lessees to recognize a right-of-use asset and lease liability for both operating and finance leases. The Company adopted the new guidance on February 1, 2019 using a modified retrospective approach at the beginning of the period of adoption. The Company elected the “package of three” practical expedients and did not reassess expired or existing leases as of the effective date. The Company also elected the practical expedient to not separate non-lease components from lease components as it pertains to real estate leases. Adoption on February 1, 2019 resulted in the recognition of approximately $1.3 billion of lease liabilities based on the present value of the remaining minimum rental payments using discount rates as of the effective date. Corresponding right-of-use assets of approximately $1.1 billion were recognized, with the offsetting balance representing a reduction in the previously recognized deferred rent balance. Adoption did not result in a material impact on the Company’s Consolidated Statements of Income or Consolidated Statements of Cash Flows.

Recently Issued

In June 2016, the FASB issued an accounting standards update that introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. This includes loan commitments, accounts receivable, trade receivables and certain off-balance sheet credit exposures. The guidance also modifies the impairment model for available-for-sale debt securities. The update will be effective for the Company on February 1, 2020 and early adoption is permitted. The Company has concluded that this update will not have a material impact on its consolidated financial statements and related disclosures.

6

3. Revenue from Contracts with Customers

Contract receivables occur when the Company satisfies all of its performance obligations under a contract and recognizes revenue prior to billing or receiving consideration from a customer for which it has an unconditional right to payment. Contract receivables arise from credit card transactions and sales to Wholesale segment customers and franchisees. For the three month period ended April 30, 2019, the opening and closing balance of contract receivables, net of allowance for doubtful accounts, was $80,461 and $88,390, respectively. For the three month period ended April 30, 2018, the opening and closing balance of contract receivables, net of allowance for doubtful accounts, was $76,962 and $88,936, respectively. Contract receivables are included in “Accounts receivable, net of allowance for doubtful accounts” in the Condensed Consolidated Balance Sheets.

Contract liabilities represent unearned revenue and result from the Company receiving consideration in a contract with a customer for which it has not satisfied all of its performance obligations. The Company’s contract liabilities result from customer deposits, customer loyalty programs and the issuance of gift cards. Gift cards are expected to be redeemed within two years of issuance, with the majority of redemptions occurring in the first year. For the three month period ended April 30, 2019, the opening and closing balances of contract liabilities were $49,747 and $43,187, respectively. For the three month period ended April 30, 2018, the opening and closing balances of contract liabilities were $56,637 and $34,543, respectively. Contract liabilities are included in “Accrued expenses, accrued compensation and other current liabilities” in the Condensed Consolidated Balance Sheets. During the three month period ended April 30, 2019, the Company recognized $15,289 of revenue that was included in the contract liability balance at the beginning of the period.

7

4. Marketable Securities

During all periods shown, marketable securities are classified as available-for-sale. The amortized cost, gross unrealized gains (losses) and fair value of available-for-sale securities by major security type and class of security as of April 30, 2019, January 31, 2019 and April 30, 2018 were as follows:

|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
|  | Cost |  |  | Gains |  |  | (Losses) |  |  | Value |
As of April 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate bonds |  | $ | 169,627 |  |  | $ | 72 |  |  | $ | (70 | ) |  | $ | 169,629 |
Municipal and pre-refunded municipal bonds |  |  | 52,131 |  |  |  | 23 |  |  |  | (6 | ) |  |  | 52,148 |
Federal government agencies |  |  | 2,735 |  |  |  | 4 |  |  |  | — |  |  |  | 2,739 |
Certificates of deposit |  |  | 1,650 |  |  |  | — |  |  |  | — |  |  |  | 1,650 |
Commercial paper |  |  | 2,997 |  |  |  | — |  |  |  | — |  |  |  | 2,997 |
|  |  | 229,140 |  |  |  | 99 |  |  |  | (76 | ) |  |  | 229,163 |
Long-term Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate bonds |  |  | 71,105 |  |  |  | 95 |  |  |  | (46 | ) |  |  | 71,154 |
Municipal and pre-refunded municipal bonds |  |  | 11,035 |  |  |  | 11 |  |  |  | (8 | ) |  |  | 11,038 |
Mutual funds, held in rabbi trust |  |  | 7,733 |  |  |  | 208 |  |  |  |  |  |  |  | 7,941 |
Federal government agencies |  |  | 2,351 |  |  |  | 7 |  |  |  | — |  |  |  | 2,358 |
Certificates of deposit |  |  | 1,403 |  |  |  | — |  |  |  | — |  |  |  | 1,403 |
|  |  | 93,627 |  |  |  | 321 |  |  |  | (54 | ) |  |  | 93,894 |
|  | $ | 322,767 |  |  | $ | 420 |  |  | $ | (130 | ) |  | $ | 323,057 |
As of January 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate bonds |  | $ | 227,287 |  |  | $ | 24 |  |  | $ | (214 | ) |  | $ | 227,097 |
Municipal and pre-refunded municipal bonds |  |  | 43,677 |  |  |  | 15 |  |  |  | (18 | ) |  |  | 43,674 |
Federal government agencies |  |  | 1,458 |  |  |  | — |  |  |  | — |  |  |  | 1,458 |
Certificates of deposit |  |  | 1,050 |  |  |  | — |  |  |  | — |  |  |  | 1,050 |
Commercial paper |  |  | 2,979 |  |  |  | — |  |  |  | — |  |  |  | 2,979 |
Treasury bills |  |  | 2,975 |  |  |  | — |  |  |  | (1 | ) |  |  | 2,974 |
|  |  | 279,426 |  |  |  | 39 |  |  |  | (233 | ) |  |  | 279,232 |
Long-term Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate bonds |  |  | 34,265 |  |  |  | 34 |  |  |  | (63 | ) |  |  | 34,236 |
Municipal and pre-refunded municipal bonds |  |  | 7,554 |  |  |  | 7 |  |  |  | (3 | ) |  |  | 7,558 |
Mutual funds, held in rabbi trust |  |  | 6,301 |  |  |  | 450 |  |  |  | — |  |  |  | 6,751 |
Federal government agencies |  |  | 6,603 |  |  |  | 2 |  |  |  | (1 | ) |  |  | 6,604 |
Certificates of deposit |  |  | 2,143 |  |  |  | — |  |  |  | — |  |  |  | 2,143 |
|  |  | 56,866 |  |  |  | 493 |  |  |  | (67 | ) |  |  | 57,292 |
|  | $ | 336,292 |  |  | $ | 532 |  |  | $ | (300 | ) |  | $ | 336,524 |

8

|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
|  | Cost |  |  | Gains |  |  | (Losses) |  |  | Value |
As of April 30, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate bonds |  | $ | 110,657 |  |  | $ | — |  |  | $ | (294 | ) |  | $ | 110,363 |
Municipal and pre-refunded municipal bonds |  |  | 54,659 |  |  |  | — |  |  |  | (47 | ) |  |  | 54,612 |
Certificates of deposit |  |  | 1,392 |  |  |  | — |  |  |  | — |  |  |  | 1,392 |
|  |  | 166,708 |  |  |  | — |  |  |  | (341 | ) |  |  | 166,367 |
Long-term Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate bonds |  |  | 18,137 |  |  |  | — |  |  |  | (212 | ) |  |  | 17,925 |
Municipal and pre-refunded municipal bonds |  |  | 7,873 |  |  |  | — |  |  |  | (30 | ) |  |  | 7,843 |
Mutual funds, held in rabbi trust |  |  | 6,453 |  |  |  | 33 |  |  |  | (3 | ) |  |  | 6,483 |
Certificates of deposit |  |  | 2,828 |  |  |  | — |  |  |  | — |  |  |  | 2,828 |
|  |  | 35,291 |  |  |  | 33 |  |  |  | (245 | ) |  |  | 35,079 |
|  | $ | 201,999 |  |  | $ | 33 |  |  | $ | (586 | ) |  | $ | 201,446 |

Proceeds from the sales and maturities of available-for-sale securities were $151,761 and $57,400 for the three months ended April 30, 2019 and 2018, respectively. The Company included in “Other income, net,” in the Condensed Consolidated Statements of Income, a net realized gain of $7 for the three months ended April 30, 2019, and a net realized loss of $13 for the three months ended April 30, 2018. Amortization of discounts and premiums, net, resulted in a reduction of “Other income, net” of $119 and $634 for the three months ended April 30, 2019 and 2018, respectively. Mutual funds represent assets held in an irrevocable rabbi trust for the Company’s Non-qualified Deferred Compensation Plan (“NQDC”). These assets are a source of funds to match the funding obligations to participants in the NQDC but are subject to the Company’s general creditors. The Company elected the fair value option for financial assets for the mutual funds held in the rabbi trust resulting in all unrealized gains and losses being recorded in “Other income, net” in the Condensed Consolidated Statements of Income.

5. Fair Value

The Company utilizes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach that relate to its financial assets and financial liabilities). The levels of the hierarchy are described as follows:

| • | Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.

| • | Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

| • | Level 3: Unobservable inputs that reflect the Company’s own assumptions.

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Management’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and liabilities and their placement within the fair value hierarchy. The Company’s financial assets that are accounted for at fair value on a recurring basis are presented in the tables below:

|  | Marketable Securities Fair Value as of |
|  | April 30, 2019 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate bonds |  | $ | 240,783 |  |  | $ | — |  |  | $ | — |  |  | $ | 240,783 |
Municipal and pre-refunded municipal bonds |  |  | — |  |  |  | 63,186 |  |  |  | — |  |  |  | 63,186 |
Mutual funds, held in rabbi trust |  |  | 7,941 |  |  |  | — |  |  |  | — |  |  |  | 7,941 |
Federal government agencies |  |  | 5,097 |  |  |  | — |  |  |  | — |  |  |  | 5,097 |
Certificates of deposit |  |  | — |  |  |  | 3,053 |  |  |  | — |  |  |  | 3,053 |
Commercial paper |  |  | — |  |  |  | 2,997 |  |  |  | — |  |  |  | 2,997 |
|  | $ | 253,821 |  |  | $ | 69,236 |  |  | $ | — |  |  | $ | 323,057 |

|  | Marketable Securities Fair Value as of |
|  | January 31, 2019 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate bonds |  | $ | 261,333 |  |  | $ | — |  |  | $ | — |  |  | $ | 261,333 |
Municipal and pre-refunded municipal bonds |  |  | — |  |  |  | 51,232 |  |  |  | — |  |  |  | 51,232 |
Mutual funds, held in rabbi trust |  |  | 6,751 |  |  |  | — |  |  |  | — |  |  |  | 6,751 |
Federal government agencies |  |  | 8,062 |  |  |  | — |  |  |  | — |  |  |  | 8,062 |
Certificates of deposit |  |  | — |  |  |  | 3,193 |  |  |  | — |  |  |  | 3,193 |
Commercial paper |  |  | — |  |  |  | 2,979 |  |  |  | — |  |  |  | 2,979 |
Treasury bills |  |  | 2,974 |  |  |  | — |  |  |  | — |  |  |  | 2,974 |
|  | $ | 279,120 |  |  | $ | 57,404 |  |  | $ | — |  |  | $ | 336,524 |

|  | Marketable Securities Fair Value as of |
|  | April 30, 2018 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate bonds |  | $ | 128,288 |  |  | $ | — |  |  | $ | — |  |  | $ | 128,288 |
Municipal and pre-refunded municipal bonds |  |  | — |  |  |  | 62,455 |  |  |  | — |  |  |  | 62,455 |
Mutual funds, held in rabbi trust |  |  | 6,483 |  |  |  | — |  |  |  | — |  |  |  | 6,483 |
Certificates of deposit |  |  | — |  |  |  | 4,220 |  |  |  | — |  |  |  | 4,220 |
|  | $ | 134,771 |  |  | $ | 66,675 |  |  | $ | — |  |  | $ | 201,446 |

Financial assets

Level 1 assets consist of financial instruments whose value has been based on inputs that use, as their basis, readily observable market data that are actively quoted and are validated through external sources, including third-party pricing services and brokers.

Level 2 assets consist of financial instruments whose value has been based on quoted prices for similar assets and liabilities in active markets as well as quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3 assets consist of financial instruments where there has been no active market. The Company held no Level 3 financial instruments as of April 30, 2019, January 31, 2019 and April 30, 2018.

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The fair value of cash and cash equivalents (Level 1) approximates carrying value since cash and cash equivalents consist of short-term highly liquid investments with maturities of less than three months at the time of purchase. As of April 30, 2019, Janua ry 31, 2019 and April 30, 2018, cash and cash equivalents included cash on hand, cash in banks, money market accounts and marketable securities with maturities of less than three months at the time of purchase.

Non-financial assets

The Company’s non-financial assets, primarily consisting of property and equipment and goodwill, are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable and, in the case of goodwill, an annual assessment is performed.

The fair value of property and equipment was determined using a discounted cash-flow model that utilized Level 3 inputs. The Company’s retail locations are reviewed for impairment at the retail location level, which is the lowest level at which individual cash flows can be identified. In calculating future cash flows, the Company makes estimates regarding future operating results based on its experience and knowledge of market factors in which the retail location is located. Goodwill has been assigned to reporting units for purposes of impairment testing. The Company evaluates goodwill to determine if the carrying value exceeds the fair value of the reporting unit. For the three months ended April 30, 2019 and 2018, impairment charges were zero.

6. Debt

On June 29, 2018, the Company and its domestic subsidiaries entered into an amended and restated credit agreement (the “Amended Credit Agreement”) that amended the Company’s asset-based revolving credit facility with certain lenders, including JPMorgan Chase Bank, N.A., as administrative agent, and J.P. Morgan Chase Bank, N.A. and Wells Fargo Bank, National Association, as joint lead arrangers and co-book managers.

The Amended Credit Agreement extended the maturity date of the senior secured revolving credit facility to June 2023 (the “Amended Credit Facility”). The Amended Credit Facility provides for loans and letters of credit up to $350,000, subject to a borrowing base that is comprised of the Company’s eligible accounts receivable and inventory. The Amended Credit Facility includes a swing-line sub-facility, a multicurrency sub-facility and the option to expand the facility by up to $150,000. The funds available under the Amended Credit Facility may be used for working capital and other general corporate purposes.

The Amended Credit Facility provides for interest on borrowings, at the Company’s option, at either (i) adjusted LIBOR, CDOR or EURIBOR plus an applicable margin ranging from 1.125% to 1.375%, or (ii) an adjusted ABR plus an applicable margin ranging from 0.125% to 0.375%, each such applicable margin depending on the level of availability under the Amended Credit Facility. Depending on the type of borrowing, interest on the Amended Credit Agreement is payable monthly, quarterly or at the end of the interest period. A commitment fee of 0.20% is payable quarterly on the unused portion of the Amended Credit Facility.

All obligations under the Amended Credit Facility are unconditionally guaranteed by the Company and certain of its U.S. subsidiaries. The obligations under the Amended Credit Facility are secured by a first-priority security interest in inventory, accounts receivable and certain other assets of the Company and certain of its U.S. subsidiaries. The obligations of URBN Canada Retail, Inc. are secured by a first-priority security interest in its inventory, accounts receivable and certain other assets. The Amended Credit Agreement contains customary representations and warranties, negative and affirmative covenants and provisions relating to events of default.

As of April 30, 2019, the Company was in compliance with all terms of the Amended Credit Agreement and borrowings under the Amended Credit Facility totaled $0. Outstanding stand-by letters of credit, which reduce the funds available under the Amended Credit Facility, were $13,603.

Additionally, the Company has borrowing agreements with two separate financial institutions under which the Company may borrow an aggregate of $130,000 for the purposes of trade letter of credit issuances. The availability of any future borrowings under the trade letter of credit facilities is subject to acceptance by the respective financial

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institutions. As of April 30, 2019, the Company had outstandin g trade letters of credit of $76,362 and available trade letters of credit of $53,638 under these facilities.

7. Leases

The Company has operating leases for stores, distribution and fulfillment centers, corporate offices and equipment. The Company subleases certain properties to third parties. The Company has elected not to record a lease liability and right-of-use asset for leases with original terms of 12 months or less. The Company has elected the practical expedient to not separate non-lease components from lease components as it pertains to real estate leases.

Store leases have remaining lease terms that range from less than one year up to 15 years, some of which contain options to extend the lease for one or two 5-year periods. Payments related to a renewal period are included in the lease liability and right-of-use asset only when the Company is reasonably certain that it will exercise the option to renew the lease for an extended period of time. Certain leases may contain variable lease payments such as rent based on a percentage of net sales. Variable lease payments may be subject to a breakpoint threshold of fixed rent. Variable lease payments, other than those that depend on an index or a rate, are not included in the measurement of the lease liability. The lease liability is calculated at the present value of certain future payments, discounted using the Company’s incremental borrowing rate which approximates the rate of interest the Company would pay to borrow an amount equal to the lease payments on a fully collateralized basis over a similar term. Significant judgment is used in determining the incremental borrowing rate.

Total operating lease costs and variable lease costs were $66,248 and $17,939, respectively, during the three months ended April 30, 2019. Short-term lease costs and sublease income were not material during the three months ended April 30, 2019.

Other information related to leases was as follows:

|  | Three Months Ended |
|  | April 30, 2019 |
Other information |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
Operating cash flows from operating leases |  | $ | 70,615 |
Right-of-use assets obtained in exchange for new operating lease liabilities |  | $ | 2,719 |
Weighted-average remaining lease term - operating leases |  | 7.4 years |
Weighted-average discount rate - operating leases |  |  | 6.5 | %

The following is a schedule by year of the maturities of operating lease liabilities with original terms in excess of one year, as of April 30, 2019:

|  | Operating |
|  | Leases |
Fiscal Year |  |  |  |
2020 (excluding the three months ended April 30, 2019) |  | $ | 223,251 |
2021 |  |  | 272,836 |
2022 |  |  | 238,298 |
2023 |  |  | 210,378 |
2024 |  |  | 176,982 |
Thereafter |  |  | 635,363 |
Total undiscounted future minimum lease payments |  |  | 1,757,108 |
Less imputed interest |  |  | (450,485 | )
Total discounted future minimum lease payments |  | $ | 1,306,623 |

As of April 30, 2019, the Company had commitments of approximately $56,890 not included in the amounts above related to nine executed but not yet commenced leases for stores and a fulfillment center.

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The following is a schedule by year of the future minimum lease payments for operating leases with original terms in excess of one year, as of January 31, 2019:

|  | Operating |
|  | Leases |
Fiscal Year |  |  |  |
2020 |  | $ | 294,527 |
2021 |  |  | 263,209 |
2022 |  |  | 228,596 |
2023 |  |  | 200,776 |
2024 |  |  | 167,130 |
Thereafter |  |  | 558,655 |
Total minimum lease payments |  | $ | 1,712,893 |

The Company, through its wholly-owned subsidiary, Anthropologie, Inc., is party to a ground lease (the “Lease”) with Waterloo Devon, L.P. (the “Landlord”). Wade L. McDevitt was a minority owner of the Landlord and its general partner and is the brother-in-law of Scott Belair, one of the Company’s former directors. Pursuant to the Lease, the Company rented approximately 6 acres located in Devon, Pennsylvania to develop a lifestyle center, which includes an expanded format Anthropologie store, a Terrain store, several restaurant concepts under the Food and Beverage division and a boutique event space. The Lease, which commenced on June 14, 2017, has an initial term of 40 years with two options to extend, each for an additional ten-year term. The initial rental rate is $1,087 per year, and rent increases 10% every five years during the initial term. The aggregate amount of rental payments payable under the initial term of the Lease is approximately $62,135. Real estate taxes, insurance, construction costs and other third-party expenses will also be paid by the Company. If the Company exercises its option to extend the Lease, rental payments during such extension term will be 90% of the market rental rate. An independent committee of the Board of Directors retained a national commercial real estate services firm to provide an appraisal of the initial market rental value of a portion of the property, which confirmed that the proposed initial rental rate per acre was consistent with market rates. The Lease and appraisal were reviewed by a committee of disinterested members of the Company’s Board of Directors and the Lease was approved by such committee and by the Company’s Board of Directors.

8. Share-Based Compensation

The Company maintains stock incentive plans pursuant to which it can grant restricted shares, unrestricted shares, incentive stock options, non-qualified stock options, restricted stock units (“RSU’s”), performance stock units (“PSU’s”) or stock appreciation rights (“SAR’s”). A Black-Scholes model was used to estimate the fair value of stock options. The fair value of the PSU’s awarded during fiscal 2020 equaled the fair value of the stock price on the date of the grant. The fair value of the PSU’s awarded during fiscal 2019 was determined using a Monte Carlo simulation. A different methodology was used to value fiscal 2020 grants due to the removal of market-based conditions in the grant provisions. Share-based compensation expense included in “Selling, general and administrative expenses” in the Condensed Consolidated Statements of Income, for the three months ended April 30, 2019 and 2018 was as follows:

|  | Three Months Ended |
|  | April 30, |
|  | 2019 |  |  | 2018 |
Stock Options |  | $ | 585 |  |  | $ | 217 |
Stock Appreciation Rights |  |  | — |  |  |  | 4 |
Performance Stock Units |  |  | 1,077 |  |  |  | 2,021 |
Restricted Stock Units |  |  | 3,891 |  |  |  | 3,282 |
Total |  | $ | 5,553 |  |  | $ | 5,524 |

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Share-based awards granted and the weighted-average fair value of such awards for the three months ended April 30, 2019 was as follows:

|  | April 30, 2019 |
|  |  |  |  |  | Weighted- |
|  | Awards |  |  | Average Fair |
|  | Granted |  |  | Value |
Stock Options |  |  | — |  |  | $ | — |
Stock Appreciation Rights |  |  | — |  |  | $ | — |
Performance Stock Units |  |  | 140,000 |  |  | $ | 30.19 |
Restricted Stock Units |  |  | 832,000 |  |  | $ | 30.19 |
Total |  |  | 972,000 |  |  |  |  |

During the three months ended April 30, 2019, 40,000 stock options were exercised, 139,999 PSU’s vested and 383,990 RSU’s vested.

The total unrecognized compensation cost related to outstanding share-based awards and the weighted-average period in which the cost is expected to be recognized as of April 30, 2019 was as follows:

|  | April 30, 2019 |
|  | Unrecognized |  |  | Weighted- |
|  | Compensation |  |  | Average |
|  | Cost |  |  | Years |
Stock Options |  | $ | 236 |  |  |  | 0.1 |
Stock Appreciation Rights |  |  | — |  |  |  | — |
Performance Stock Units |  |  | 8,079 |  |  |  | 2.2 |
Restricted Stock Units |  |  | 39,174 |  |  |  | 2.5 |
Total |  | $ | 47,489 |  |  |  |  |

9. Shareholders’ Equity

Share repurchase activity under the Company’s share repurchase programs was as follows:

|  | Three Months Ended |
|  | April 30, |
|  | 2019 |  |  | 2018 |
Number of common shares repurchased and subsequently retired |  |  | 2,430,827 |  |  |  | — |
Total cost |  | $ | 71,242 |  |  | $ | — |
Average cost per share, including commissions |  | $ | 29.31 |  |  | $ | — |

On August 22, 2017, the Company’s Board of Directors authorized the repurchase of 20,000,000 common shares under a share repurchase program, of which 11,971,326 common shares were remaining as of April 30, 2019.

On June 4, 2019, the Company’s Board of Directors authorized the repurchase of 20,000,000 common shares under a new share repurchase program.

Subsequent to April 30, 2019, the Company repurchased and subsequently retired a total of 5,637,369 common shares for approximately $146,180, at an average price of $25.93 per share, including commissions. All fiscal 2020 share repurchases were funded with available cash, cash equivalents and marketable securities.

During the three months ended April 30, 2019, the Company acquired and subsequently retired 176,081 common shares at a total cost of $5,383 from employees to meet minimum statutory tax withholding requirements.

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During the three months ended April 30, 2018, the Company acquired and subsequently retired 138,310 common shares at a total cost of $5,047 from employees to meet minimum statutory tax withholding requirements.

10. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss

The following tables present the changes in “Accumulated other comprehensive loss,” by component, net of tax, for the three months ended April 30, 2019 and 2018:

|  | Three Months Ended April 30, 2019 |
|  |  |  |  |  | Unrealized Gains |  |  |  |  |
|  | Foreign |  |  | and (Losses) on |  |  |  |  |
|  | Currency |  |  | Available-for- |  |  |  |  |
|  | Translation |  |  | Sale Securities |  |  | Total |
Balance at beginning of period |  | $ | (26,925 | ) |  | $ | (178 | ) |  | $ | (27,103 | )
Other comprehensive income (loss) before reclassifications |  |  | (3,800 | ) |  |  | 179 |  |  |  | (3,621 | )
Amounts reclassified from accumulated other comprehensive income (loss) |  |  | — |  |  |  | 7 |  |  |  | 7 |
Net current-period other comprehensive income (loss) |  |  | (3,800 | ) |  |  | 186 |  |  |  | (3,614 | )
Balance at end of period |  | $ | (30,725 | ) |  | $ | 8 |  |  | $ | (30,717 | )

|  | Three Months Ended April 30, 2018 |
|  |  |  |  |  | Unrealized Gains |  |  |  |  |
|  | Foreign |  |  | and (Losses) on |  |  |  |  |
|  | Currency |  |  | Available-for- |  |  |  |  |
|  | Translation |  |  | Sale Securities |  |  | Total |
Balance at beginning of period |  | $ | (10,340 | ) |  | $ | (311 | ) |  | $ | (10,651 | )
Other comprehensive income (loss) before reclassifications |  |  | (7,969 | ) |  |  | (80 | ) |  |  | (8,049 | )
Amounts reclassified from accumulated other comprehensive income (loss) |  |  | — |  |  |  | (13 | ) |  |  | (13 | )
Net current-period other comprehensive income (loss) |  |  | (7,969 | ) |  |  | (93 | ) |  |  | (8,062 | )
Balance at end of period |  | $ | (18,309 | ) |  | $ | (404 | ) |  | $ | (18,713 | )

All unrealized gains and losses on available-for-sale securities reclassified from accumulated other comprehensive loss were recorded in “Other income, net” in the Condensed Consolidated Statements of Income.

11. Net Income per Common Share

The following is a reconciliation of the weighted-average common shares outstanding used for the computation of basic and diluted net income per common share:

|  | Three Months Ended |
|  | April 30, |
|  | 2019 |  |  | 2018 |
Basic weighted-average common shares outstanding |  |  | 104,437,460 |  |  |  | 108,490,926 |
Effect of dilutive options, stock appreciation rights, performance stock units and restricted stock units |  |  | 902,688 |  |  |  | 1,252,751 |
Diluted weighted-average shares outstanding |  |  | 105,340,148 |  |  |  | 109,743,677 |

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For the three months ended April 30, 2019 and 2018, awards to purchase 380,000 common shares ranging in price from $35.85 to $46.42 and 267,500 common shares ranging in price from $37.02 to $46.02, respectively, were excluded from the calculation of diluted net income per common share because the impact would be anti-dilutive.

Excluded from the calculation of diluted net income per common share as of April 30, 2019 and 2018 were 711,418 and 1,713,773 performance-based equity awards, respectively, because they did not meet the required performance criteria.

12. Commitments and Contingencies

The Company is party to various legal proceedings arising from normal business activities. Management believes that the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

13. Segment Reporting

The Company offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands. The Company has three reportable segments – “Retail,” “Wholesale” and “Subscription.” 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, 2019, there were 245 Urban Outfitters stores, 228 Anthropologie Group stores, 136 Free People stores, 12 restaurants under the Food and Beverage division, four Urban Outfitters franchisee-owned stores, one Anthropologie Group franchisee-owned store and one Free People franchisee-owned store. Each of Urban Outfitters, the Anthropologie Group and Free People, including their Company-owned and franchisee-owned stores and digital channels, and the restaurants operated under the Company’s Food and Beverage division, are considered an operating segment. Net sales from the Retail segment accounted for approximately 90.5% and 90.6% of total consolidated net sales for the three months ended April 30, 2019 and 2018, respectively. The remaining net sales are derived from the Company’s Wholesale segment which consists of the Free People, Anthropologie and Urban Outfitters brands that sell through approximately 2,200 department and specialty stores worldwide, digital businesses and the Company’s Retail segment. The Wholesale segment primarily designs, develops and markets young women’s contemporary casual apparel, intimates, FP Movement activewear and shoes under the Free People brand, home goods including gifts, tabletop and textiles under the Anthropologie brand and the BDG apparel collection under the Urban Outfitters brand. The Urban Outfitters wholesale division was established in the third quarter of fiscal 2019. The Subscription segment consists of the “Nuuly” brand and is a monthly women’s apparel subscription rental service that is planned to launch in the summer of 2019.

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, and 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 Company-owned 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

16

for the omni-channel and not the separate store or digital 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 locat ion if an item is not available at the original store. Digital 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 th e availability of particular item s. Digital orders may also be picked up at a store location, and customers may also return certain merchandise purchased through digital channels at store locations. As the Company’s customers continue to shop across multip le 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 dema nd 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. The Company ma nages and analyzes its performance based on a single omni-channel rather than separate channels and believe that the omni-channel results present the most meaningful and appropriate measure of its 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, 2019. 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:

|  | Three Months Ended |
|  | April 30, |
|  | 2019 |  |  | 2018 |
Net sales |  |  |  |  |  |  |  |
Retail operations |  | $ | 782,563 |  |  | $ | 775,564 |
Wholesale operations |  |  | 84,365 |  |  |  | 82,941 |
Intersegment elimination |  |  | (2,515 | ) |  |  | (2,817 | )
Total net sales |  | $ | 864,413 |  |  | $ | 855,688 |
Income from operations |  |  |  |  |  |  |  |
Retail operations |  | $ | 34,694 |  |  | $ | 51,872 |
Wholesale operations |  |  | 16,761 |  |  |  | 14,805 |
Subscription operations |  |  | (2,101 | ) |  |  | — |
Intersegment elimination |  |  | (63 | ) |  |  | 34 |
Total segment operating income |  |  | 49,291 |  |  |  | 66,711 |
General corporate expenses |  |  | (9,271 | ) |  |  | (12,815 | )
Total income from operations |  | $ | 40,020 |  |  | $ | 53,896 |

|  | April 30, |  |  | January 31, |  |  | April 30, |
|  | 2019 |  |  | 2019 |  |  | 2018 |
Inventory |  |  |  |  |  |  |  |  |  |  |  |
Retail operations |  | $ | 365,554 |  |  | $ | 328,783 |  |  | $ | 353,423 |
Wholesale operations |  |  | 42,808 |  |  |  | 41,724 |  |  |  | 51,194 |
Total inventory |  | $ | 408,362 |  |  | $ | 370,507 |  |  | $ | 404,617 |
Property and equipment, net |  |  |  |  |  |  |  |  |  |  |  |
Retail operations |  | $ | 819,062 |  |  | $ | 793,640 |  |  | $ | 817,277 |
Wholesale operations |  |  | 2,312 |  |  |  | 2,389 |  |  |  | 2,448 |
Subscription operations |  |  | 7,698 |  |  |  | — |  |  |  | — |
Total property and equipment, net |  | $ | 829,072 |  |  | $ | 796,029 |  |  | $ | 819,725 |

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The following tables summarize net sales and percentage of net sales from contracts with customers by merchandise category:

|  | Three Months Ended |
|  | April 30, |
|  | 2019 |  |  | 2018 |
Net sales |  |  |  |  |  |  |  |
Apparel (1) |  | $ | 588,726 |  |  | $ | 599,688 |
Home (2) |  |  | 124,548 |  |  |  | 114,348 |
Accessories (3) |  |  | 100,268 |  |  |  | 98,775 |
Other (4) |  |  | 50,871 |  |  |  | 42,877 |
Total net sales |  | $ | 864,413 |  |  | $ | 855,688 |
As a percentage of net sales |  |  |  |  |  |  |  |
Apparel (1) |  |  | 68 | % |  |  | 70 | %
Home (2) |  |  | 14 | % |  |  | 13 | %
Accessories (3) |  |  | 12 | % |  |  | 12 | %
Other (4) |  |  | 6 | % |  |  | 5 | %
Total net sales |  |  | 100 | % |  |  | 100 | %
(1) Apparel includes intimates and activewear |
(2) Home includes home furnishings, electronics, gifts and decorative items |
(3) Accessories includes footwear, jewelry and handbags |
(4) Other includes beauty, shipping and handling revenues and the Food and Beverage division |

Apparel, Home, and Accessories are sold through both the Retail and Wholesale segments. Revenue recognized from the Other category is primarily attributable to the Retail segment.

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, |  |  | January 31, |  |  | April 30, |
|  | 2019 |  |  | 2019 |  |  | 2018 |
Property and equipment, net |  |  |  |  |  |  |  |  |  |  |  |
Domestic operations |  | $ | 758,794 |  |  | $ | 723,400 |  |  | $ | 735,473 |
Foreign operations |  |  | 70,278 |  |  |  | 72,629 |  |  |  | 84,252 |
Total property and equipment, net |  | $ | 829,072 |  |  | $ | 796,029 |  |  | $ | 819,725 |

|  | Three Months Ended |
|  | April 30, |
|  | 2019 |  |  | 2018 |
Net Sales |  |  |  |  |  |  |  |
Domestic operations |  | $ | 763,089 |  |  | $ | 747,151 |
Foreign operations |  |  | 101,324 |  |  |  | 108,537 |
Total net sales |  | $ | 864,413 |  |  | $ | 855,688 |

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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain matters contained in this filing with the United States Securities and Exchange Commission (“SEC”) may contain forward-looking statements and are being made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. When used in this Quarterly Report on Form 10-Q, the words “project,” “believe,” “plan,” “will,” “anticipate,” “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Any one, or all, of the following factors could cause actual financial results to differ materially from those financial results mentioned in the forward-looking statements: the difficulty in predicting and responding to shifts in fashion trends, changes in the level of competitive pricing and promotional activity and other industry factors, overall economic and market conditions and worldwide political events and the resultant impact on consumer spending patterns, the effects of the implementation of the United Kingdom's referendum to withdraw membership from the European Union (commonly referred to as “Brexit”), including currency fluctuations, economic conditions, and legal or regulatory changes, any effects of war, terrorism and civil unrest, natural disasters or severe or unseasonable weather conditions, increases in labor costs, increases in raw material costs, availability of suitable retail space for expansion, timing of store openings, risks associated with international expansion, seasonal fluctuations in gross sales, the departure of one or more key senior executives, import risks, changes to U.S. and foreign trade policies, including the enactment of tariffs, border adjustment taxes or increases in duties or quotas, the closing or disruption of, or any damage to, any of our distribution centers, our ability to protect our intellectual property rights, risks associated with digital sales, our ability to maintain and expand our digital sales channels, response to new store concepts, our ability to integrate acquisitions, failure of our manufacturers and third-party vendors to comply with our social compliance program, changes in our effective income tax rate, the impact of the U.S. Tax Cuts and Jobs Act, changes in accounting standards and subjective assumptions, regulatory changes and legal matters and other risks identified in our filings with the SEC, including those set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 31, 2019, filed on April 1, 2019. We disclaim any intent or obligation to update forward-looking statements even if experience or future changes make it clear that actual results may differ materially from any projected results expressed or implied therein.

Unless the context otherwise requires, all references to the “Company,” “we,” “us” or “our” refer to Urban Outfitters, Inc., together with its subsidiaries.

Overview

We operate under three reportable segments – Retail, Wholesale and Subscription. Our Retail segment consists of our Anthropologie, Bhldn, Free People, Terrain and Urban Outfitters brands and our Food and Beverage division. Our Retail segment consumer products and services are sold directly to our customers through our stores, websites, mobile applications, catalogs and customer contact centers and franchised or third-party operated stores and digital businesses. The Wholesale segment consists of our Free People, Anthropologie and Urban Outfitters brands that sell through department and specialty stores worldwide, digital businesses and our Retail segment. The Wholesale segment primarily designs, develops and markets apparel, intimates, activewear and home goods. Our Subscription segment consists of the Nuuly brand, which is a monthly women’s apparel subscription rental service that is planned to launch in the summer of 2019.

Our fiscal year ends on January 31. All references to our fiscal years refer to the fiscal years ended on January 31 in those years. For example, our fiscal year 2020 will end on January 31, 2020.

Retail Segment

Our omni-channel strategy enhances our customers’ brand experience by providing a seamless approach to the customer shopping experience. All available Company-owned shopping channels are fully integrated, including stores, websites, mobile applications, catalogs and customer contact centers. Our 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 digital channels. Store sales are primarily fulfilled from that store’s inventory, but may also be shipped from any of our fulfillment centers or from a different store location if an item is not available at the original store. Digital orders are primarily shipped to our customers through our fulfillment centers, but may also be shipped from any store, or a combination of fulfillment centers and stores depending on the availability of particular items.

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Digital orders may also be picked up at a store location, and customers may also return certain merchandise purchased through digital channels at store locations. As our customers continue to shop across multiple channels, we have adapted our appr oach towards meeting this demand. Due to the availability of like product in a variety of shopping channels, we source these products utilizing single stock keeping units based on the omni-channel demand rather than the demand of the separate channels. The se and other technological capabilities allow us to better serve our customers and help us complete sales that otherwise may not have occurred due to out-of-stock positions. We manage and analyze our performance based on a single omni-channel rather than s eparate channels and believe that the omni-channel results present the most meaningful and appropriate measure of our performance.

Our comparable Retail segment net sales data is equal to the sum of our comparable store and comparable digital channel net sales. A store is considered to be comparable if it has been open at least 12 full months, unless it was materially expanded or remodeled within that year or was not otherwise operating at its full capacity within that year. A digital channel is considered to be comparable if it has been operational for at least 12 full months. Sales from stores and digital channels that do not fall within the definition of comparable store or channel are considered to be non-comparable. Franchise net sales and the effects of foreign currency translation are also considered non-comparable.

We monitor customer traffic, average unit selling price, transactions and average units per transaction at our stores, and we monitor customer sessions, average order value, conversion rates and average units per transaction on our websites and mobile applications. We believe that changes in any of these metrics may be caused by a response to our brands’ fashion offerings, our marketing campaigns, circulation of our catalogs and an overall growth in brand recognition.

Urban Outfitters targets young adults aged 18 to 28 through a unique merchandise mix, compelling store environment, websites and mobile applications through a product offering that includes women’s and men’s fashion apparel, activewear, intimates, footwear, accessories, home goods, electronics and beauty. A large portion of our merchandise is exclusive to Urban Outfitters, consisting of an assortment of products designed internally and designed in collaboration with third-party brands. Urban Outfitters stores are in street locations in large metropolitan areas and select university communities, specialty centers and enclosed malls that accommodate our customers’ propensity not only to shop, but also to congregate with their peers. Urban Outfitters operates websites and mobile applications in North America and Europe that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in its stores, offers a catalog in Europe offering select merchandise, most of which is also available in its stores, sells merchandise through franchisee-owned stores in Israel, and partners with a third-party digital marketplace to offer a limited selection of merchandise, which is available in Asia. Urban Outfitters’ North American and European Retail segment net sales accounted for approximately 29.1% and 7.4% of consolidated net sales, respectively, for the three months ended April 30, 2019, compared to 29.2% and 8.5%, respectively, for the comparable period in fiscal 2019.

The Anthropologie Group consists of the Anthropologie, Bhldn and Terrain brands. Merchandise at the Anthropologie brand is tailored to sophisticated and contemporary women aged 28 to 45. The product assortment includes women’s casual apparel, accessories, intimates, shoes, home furnishings, a diverse array of gifts and decorative items and beauty and wellness. The Bhldn brand emphasizes every element that contributes to a wedding. The Bhldn brand offers a curated collection of heirloom quality wedding gowns, bridesmaid frocks, party dresses, assorted jewelry, headpieces, footwear, lingerie and decorations. The Terrain brand is designed to appeal to women and men interested in a creative and sophisticated outdoor living and gardening experience. Merchandise includes lifestyle home, garden and outdoor living products, antiques, live plants, flowers, wellness products and accessories. In addition to individual brand stores, we operate expanded format stores that include multiple Anthropologie Group brands that allow us to present an expanded assortment of products in certain categories. Anthropologie Group stores are located in specialty centers, upscale street locations and enclosed malls. The Anthropologie Group operates websites and mobile applications in North America and Europe that capture the spirit of its brands by offering a similar yet broader selection of merchandise as found in its stores, offers catalogs in North America and Europe that market select merchandise, most of which is also available in Anthropologie brand stores, sells merchandise through franchisee-owned stores in Israel, and partners with a third-party digital marketplace to offer a limited selection of merchandise, which is available in Asia. The Anthropologie Group’s North American and European Retail segment net sales accounted for approximately 39.1% and 1.7% of consolidated net sales,

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respectively, for the three months ended April 3 0, 201 9, compared to 3 8.7% and 1.6%, respectively, for the comparable period in fiscal 201 9.

Free People focuses its product offering on private label merchandise targeted to young contemporary women aged 25 to 30 and provides a unique merchandise mix of casual women’s apparel, intimates, FP Movement activewear, shoes, accessories, home products, gifts and beauty and wellness. Free People stores are located in enclosed malls, upscale street locations and specialty centers. Free People operates websites and mobile applications in North America, Europe and Asia that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in its stores, as well as substantially all of the Free People wholesale offerings. Free People also offers a catalog that markets select merchandise, most of which is also available in our Free People stores, sells merchandise through franchisee-owned stores in Israel, and partners with third-party digital marketplaces to offer a limited selection of merchandise, which is available in Asia. We plan to open additional Free People stores in Europe that will allow us to expand the presence of the brand internationally. Free People’s North American Retail segment net sales accounted for approximately 12.4% of consolidated net sales for the three months ended April 30, 2019, compared to approximately 12.1% for the comparable period in fiscal 2019. Free People opened its first European retail stores in the fourth quarter of fiscal 2019. European Retail segment net sales accounted for less than 1.0% of consolidated net sales for the three months ended April 30, 2019.

The Food and Beverage division focuses on a dining experience that provides excellence in food, beverage and service. The Food and Beverage division net sales accounted for less than 1.0% of consolidated net sales for the three months ended April 30, 2019 and the comparable period in fiscal 2019.

Store data for the three months ended April 30, 2019 was as follows:

|  | January 31, |  |  | Stores |  |  | Stores |  |  | April 30, |
|  | 2019 |  |  | Opened |  |  | Closed |  |  | 2019 |
Urban Outfitters |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States |  |  | 178 |  |  |  | — |  |  |  | — |  |  |  | 178 |
Canada |  |  | 17 |  |  |  | — |  |  |  | — |  |  |  | 17 |
Europe |  |  | 50 |  |  |  | — |  |  |  | — |  |  |  | 50 |
Urban Outfitters Global Total |  |  | 245 |  |  |  | — |  |  |  | — |  |  |  | 245 |
Anthropologie Group |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States |  |  | 204 |  |  |  | — |  |  |  | (1 | ) |  |  | 203 |
Canada |  |  | 12 |  |  |  | — |  |  |  | — |  |  |  | 12 |
Europe |  |  | 11 |  |  |  | 2 |  |  |  | — |  |  |  | 13 |
Anthropologie Group Global Total |  |  | 227 |  |  |  | 2 |  |  |  | (1 | ) |  |  | 228 |
Free People |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States |  |  | 127 |  |  |  | 1 |  |  |  | (1 | ) |  |  | 127 |
Canada |  |  | 6 |  |  |  | — |  |  |  | — |  |  |  | 6 |
Europe |  |  | 2 |  |  |  | 1 |  |  |  | — |  |  |  | 3 |
Free People Global Total |  |  | 135 |  |  |  | 2 |  |  |  | (1 | ) |  |  | 136 |
Food and Beverage |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States |  |  | 13 |  |  |  | — |  |  |  | (1 | ) |  |  | 12 |
Food and Beverage Total |  |  | 13 |  |  |  | 0 |  |  |  | (1 | ) |  |  | 12 |
Total Company-Owned Stores |  |  | 620 |  |  |  | 4 |  |  |  | (3 | ) |  |  | 621 |
Franchisee-Owned Stores (1) |  |  | 5 |  |  |  | 1 |  |  |  | — |  |  |  | 6 |
Total URBN |  |  | 625 |  |  |  | 5 |  |  |  | (3 | ) |  |  | 627 |

| (1) | Franchisee-owned stores are located in Israel.

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Selling square footage by brand as of April 30, 2019 and 2018 was as follows:

|  | April 30, |  |  | April 30, |  |  |  |  |
|  | 2019 |  |  | 2018 |  |  | Change |
Selling square footage (in thousands): |  |  |  |  |  |  |  |  |  |  |  |
Urban Outfitters |  |  | 2,196 |  |  |  | 2,208 |  |  |  | -0.5 | %
Anthropologie Group |  |  | 1,782 |  |  |  | 1,733 |  |  |  | 2.8 | %
Free People |  |  | 304 |  |  |  | 291 |  |  |  | 4.5 | %
Total URBN (1) |  |  | 4,282 |  |  |  | 4,232 |  |  |  | 1.2 | %

| (1) | Food and Beverage restaurants and franchisee-owned stores are not included in selling square footage.

Within the United States and Canada, we are at or close to our desired maximum store count for the Urban Outfitters, Anthropologie and Free People brands. We plan for future store growth for all three brands to come from expansion internationally, which may include opening stores in new and existing markets or entering into additional franchise or joint venture agreements. We plan for future digital channel growth to come from expansion domestically and internationally, including enhancing our presence in third-party digital marketplaces, such as Tmall in China and through our franchise partners. The Company is currently party to a franchise agreement for franchise locations in Israel and in fiscal 2019 signed a second franchise agreement to open stores in other Middle Eastern countries in fiscal 2020.

Projected openings and closings for fiscal 2020 are as follows:

|  | January 31, |  |  | Projected |  |  | Projected |  |  | January 31, |
|  | 2019 |  |  | Openings |  |  | Closings |  |  | 2020 |
Urban Outfitters |  |  | 245 |  |  |  | 8 |  |  |  | (6 | ) |  |  | 247 |
Anthropologie Group |  |  | 227 |  |  |  | 6 |  |  |  | (7 | ) |  |  | 226 |
Free People |  |  | 135 |  |  |  | 10 |  |  |  | (2 | ) |  |  | 143 |
Food and Beverage |  |  | 13 |  |  |  | — |  |  |  | (2 | ) |  |  | 11 |
Total Company-Owned Stores |  |  | 620 |  |  |  | 24 |  |  |  | (17 | ) |  |  | 627 |
Franchisee-Owned Stores |  |  | 5 |  |  |  | 2 |  |  |  | — |  |  |  | 7 |
Total URBN |  |  | 625 |  |  |  | 26 |  |  |  | (17 | ) |  |  | 634 |

Wholesale Segment

Our Wholesale segment consists of the Free People, Anthropologie and Urban Outfitters brands that sell through approximately 2,200 department and specialty stores worldwide, third-party digital businesses and our Retail segment. The Wholesale segment primarily designs, develops and markets young women’s contemporary casual apparel, intimates, FP Movement activewear and shoes under the Free People brand, home goods including gifts, tabletop and textiles under the Anthropologie brand and the BDG apparel collection under the Urban Outfitters brand. The Urban Outfitters wholesale division was established in the third quarter of fiscal 2019. Our Wholesale segment net sales accounted for approximately 9.5% of consolidated net sales for the three months ended April 30, 2019, compared to 9.4% for the comparable period in fiscal 2019.

Subscription Segment

Our Subscription segment consists of the Nuuly brand, which is a monthly women’s apparel subscription rental service that is planned to launch in the summer of 2019. For a monthly fee, Nuuly subscribers will select from a robust offering of the Company’s own brands, third-party labels and one-of-a-kind vintage pieces for rent via a custom-built, digital platform. Subscribers will also be able to purchase the product being rented.

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Critical Accounting Policies and Estimates

Our Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States. These generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses during the reporting period.

Our senior management has reviewed the critical accounting policies and estimates with the Audit Committee of our Board of Directors. Our significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the Notes to our Consolidated Financial Statements for the fiscal year ended January 31, 2019, which are included in our Annual Report on Form 10-K filed with the SEC on April 1, 2019. Critical accounting policies are those that are most important to the portrayal of our financial condition, results of operations and cash flows and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. If actual results were to differ significantly from estimates made, the reported results could be materially affected. We are not currently aware of any reasonably likely events or circumstances that would cause our actual results to be materially different from our estimates. We adopted the new accounting standards related to leases on February 1, 2019, which changed certain accounting policies (see Note 2, “Recent Accounting Pronouncements,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q). Other than the adoption of the new accounting standards, there have been no significant changes to our critical accounting policies during the three months ended April 30, 2019.

Results of Operations

As a Percentage of Net Sales

The following table sets forth, for the periods indicated, the percentage of our net sales represented by certain income statement data and the change in certain income statement data from period to period. This table should be read in conjunction with the discussion that follows:

|  | Three Month Ended |
|  | April 30, |
|  | 2019 |  |  | 2018 |
Net sales |  |  | 100.0 | % |  |  | 100.0 | %
Cost of sales |  |  | 68.9 |  |  |  | 67.2 |
Gross profit |  |  | 31.1 |  |  |  | 32.8 |
Selling, general and administrative expenses |  |  | 26.5 |  |  |  | 26.5 |
Income from operations |  |  | 4.6 |  |  |  | 6.3 |
Other income, net |  |  | 0.3 |  |  |  | 0.0 |
Income before income taxes |  |  | 4.9 |  |  |  | 6.3 |
Income tax expense |  |  | 1.1 |  |  |  | 1.5 |
Net income |  |  | 3.8 | % |  |  | 4.8 | %

Three Months Ended April 30, 2019 Compared To Three Months Ended April 30, 2018

Net sales in the first quarter of fiscal 2020 were $864.4 million, compared to $855.7 million in the first quarter of fiscal 2019. The $8.7 million increase was attributable to a $7.0 million, or 0.9%, increase in Retail segment net sales and a $1.7 million, or 2.2%, increase in our Wholesale segment net sales. Retail segment net sales for the first quarter of fiscal 2020 accounted for 90.5% of total net sales compared to 90.6% of total net sales in the first quarter of fiscal 2019.

The increase in our Retail segment net sales during the first quarter of fiscal 2020 was due to an increase of $5.4 million, or 0.7%, in Retail segment comparable net sales, which includes our digital channel, and an increase of $1.6 million in non-comparable net sales, including the impact of foreign currency translation and new store net sales. Retail segment comparable net sales increased 2.1% at Free People and 1.1% at the Anthropologie Group and

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were flat at Urban Outfitters. The increase in Retail segment comparable net sales was driven by double-digit growth in the digital channel, partially offset by mid single-digit negative comparable store net sales. Retail segment comparable net sales increased 1.3% in North America offset by a decline of 4.6% in Europe due to a difficult macroeconomic environment. The digital channel net sales increase was driven by an increase in sessions, conversion rate and units per transaction, while average order value decreas ed. Negative comparable store net sales resulted from a decrease in transactions, average unit selling price and traffic, partially offset by a n increase in units per transaction. The increase in net sales attributable to non-comparable sales was primarily due to the impact of opening 22 new Company-owned stores and restaurants and closing 14 Company-owned stores and restaurants since the prior comparable period.

The increase in Wholesale segment net sales in the first quarter of fiscal 2020, as compared to the first quarter of fiscal 2019, was due to a 0.9% increase for the Free People brand and $1.1 million in the Urban Outfitters brand, which was launched in the third quarter of fiscal 2019, partially offset by a 3% decrease for the Anthropologie brand due to a decline in Europe.

Gross profit percentage for the first quarter of fiscal 2020 decreased to 31.1% of net sales, from 32.8% of net sales in the comparable quarter in fiscal 2019. Gross profit decreased to $269.1 million in the first quarter of fiscal 2020 from $280.7 million in the first quarter of fiscal 2019. The decrease in gross profit percentage was driven by lower gross profit in the Retail segment while gross profit in the Wholesale segment increased. The decrease in Retail segment gross profit rate was driven by higher markdowns and deleverage in delivery and logistics expenses. The higher markdowns were largely driven by underperforming women’s apparel at the Anthropologie and Urban Outfitters brands. The deleverage in delivery and logistics expenses is primarily due to the increase in penetration of the digital channel. Retail segment store occupancy deleveraged due to negative store comparable net sales, partially offset by a benefit or leverage in store occupancy resulting from the increased penetration of the digital channel. The improvement in Wholesale segment gross profit rate was due to a higher penetration of sales to full price customers versus closeout customers.

Total inventory at April 30, 2019 as compared to April 30, 2018, increased by $3.7 million, or 0.9%, to $408.4 million. Comparable Retail segment inventory increased 0.8% at cost.

Selling, general and administrative expenses increased by $2.3 million, or 1.0%, in the first quarter of fiscal 2020, compared to the first quarter of fiscal 2019. Selling, general and administrative expenses as a percentage of net sales was flat, representing 26.5% of net sales for both the first quarter of fiscal 2020 and the first quarter of fiscal 2019. The dollar growth in selling, general and administrative expenses was partially due to increased marketing expenses used to support the digital channel sales growth.

Income from operations decreased to 4.6% of net sales, or $40.0 million, for the first quarter of fiscal 2020 compared to 6.3% of net sales, or $53.9 million, for the first quarter of fiscal 2019.

Our effective tax rate for the first quarter of fiscal 2020 was 23.7% of income before income taxes compared to 23.6% of income before income taxes in the first quarter of fiscal 2019. The effective tax rate for the three months ended April 30, 2019 and 2018 was favorably impacted by approximately 140 basis points and 120 basis points, respectively, due to equity activity.

Liquidity and Capital Resources

Cash, cash equivalents and marketable securities were $614.3 million as of April 30, 2019, as compared to $694.8 million as of January 31, 2019 and $515.2 million as of April 30, 2018. During the first three months of fiscal 2020, we generated $25.9 million in cash from operations and invested $37.7 million in property and equipment. Our working capital was $491.1 million at April 30, 2019 compared to $816.1 million at January 31, 2019 and $682.0 million at April 30, 2018. Working capital as of April 30, 2019 was negatively impacted by $214.4 million for the current portion of operating lease liabilities due to the adoption of an accounting standards update that amended the accounting standards for lease accounting (see Note 2, “Recent Accounting Pronouncements,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further discussion).

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During the last two years, we have satisfied our cash requirements primarily thro ugh our cash flow from operating activities. Our primary uses of cash have been to repurchase our common shares, open new stores, purchase inventory, fund store operations and expand our home offices and fulfillment centers.

Cash Flows from Operating Activities

Cash provided by operating activities during the first three months of fiscal 2020 decreased by $28.2 million to $25.9 million from $54.1 million in the first three months of fiscal 2019. For both periods, our major source of cash from operations was merchandise sales and our primary outflow of cash from operations was for the payment of operational costs. The period over period decrease in cash flows from operations was primarily due to the timing of disbursements.

Cash Flows from Investing Activities

Cash used in investing activities during the first three months of fiscal 2020 decreased by $3.6 million to $15.9 million from $19.5 million in the first three months of fiscal 2019. Cash used in investing activities in both periods primarily related to purchases of marketable securities and property and equipment, partially offset by the sales and maturities of marketable securities. Cash paid for property and equipment in the first three months of fiscal 2020 and 2019 was $37.7 million and $24.6 million, respectively, which was primarily used to expand our fulfillment center network in fiscal 2020 and expand our store base in fiscal 2019.

Cash Flows from Financing Activities

Cash used in financing activities during the first three months of fiscal 2020 was a cash outflow of $75.7 million compared to a cash inflow of $0.2 million in the first three months of fiscal 2019. Cash used in financing activities in the first three months of fiscal 2020 primarily related to repurchases of our common shares under our share repurchase program. Cash provided by financing activities in the first three months of fiscal 2019 related to proceeds from the exercise of stock options, partially offset by share repurchases related to taxes for share-based awards.

Credit Facilities

See Note 6, “Debt,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding the Company’s debt.

Capital and Operating Expenditures

During fiscal 2020, we plan to construct and open approximately 24 new Company-owned retail locations, open our new European home office, expand or relocate certain existing retail locations, upgrade our systems, improve and expand our digital capabilities, invest in omni-channel marketing, expand our fulfillment capabilities, invest in new products, markets and brands (including the launch of the apparel subscription rental service Nuuly), purchase inventory for our new and existing operating segments at appropriate levels to maintain our planned sales growth and repurchase common shares. We believe that our new brand initiatives, new store openings, merchandise expansion programs, international growth opportunities and our marketing, social media, website and mobile initiatives are significant contributors to our Retail segment sales growth. During fiscal 2020, we plan to continue our investment in these initiatives for all brands. We anticipate our capital expenditures during fiscal 2020 to be approximately $260 million, a significant portion of which will be to support new and expanded fulfillment and distribution centers in Bristol, Pennsylvania, Indiana, Pennsylvania and Europe. All fiscal 2020 capital expenditures are expected to be financed by cash flow from operating activities. We believe that our new store investments have the potential to generate positive cash flow within a year. We may also enter into one or more acquisitions or transactions related to the expansion of our brand offerings, including additional franchise and joint venture agreements. We believe that our existing cash and cash equivalents, availability under our current credit facilities and future cash flows provided by operations will be sufficient to fund these initiatives.

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Share Repurchases

See Note 9, “Shareholders’ Equity,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding the Company’s share repurchases.

Off-Balance Sheet Arrangements

As of and for the three months ended April 30, 2019, we were not party to any material off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

Other Matters

See Note 2, “Recent Accounting Pronouncements,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a description of recently adopted and issued accounting pronouncements.

Item 3. | Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our quantitative or qualitative disclosures found in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2019.

Item 4. | Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed by us in our Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported on a timely basis and that such information is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate, to allow timely decisions regarding the required disclosure. As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of our management, including the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the design and operation of these disclosure controls and procedures. Based on that evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures were effective.

During the quarter ended April 30, 2019, we implemented changes to our controls as part of the adoption of the accounting standards update that amended the existing accounting standards for lease accounting. These changes included new processes to evaluate and account for leases. There were no other changes in our internal controls over financial reporting during the quarter ended April 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II

OTHER INFORMATION

Item 1. | Legal Proceedings

We are party to various legal proceedings arising from normal business activities. Management believes that the ultimate resolution of these matters will not have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. | Risk Factors

There have been no material changes in our risk factors since January 31, 2019. Please refer to our Annual Report on Form 10-K for the fiscal year ended January 31, 2019, filed with the SEC on April 1, 2019, for our risk factors.

Item 2. | Unregistered Sales of Equity Securities and the Use of Proceeds

Issuer Purchase of Equity Securities

A summary of the repurchase activity under the Company’s share repurchase programs for the quarter ended April 30, 2019 is as follows:

Period |  | Total Number of Shares Purchased (1) |  |  | Average Price Paid per share |  |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |  |  | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2) |
February 1, 2019 through February 28, 2019 |  |  | 424,852 |  |  | $ | 29.98 |  |  |  | 424,852 |  |  |  | 13,977,301 |
March 1, 2019 through March 31, 2019 |  |  | 2,005,975 |  |  | $ | 29.17 |  |  |  | 2,005,975 |  |  |  | 11,971,326 |
April 1, 2019 through April 30, 2019 |  |  | — |  |  | $ | — |  |  |  | — |  |  |  | 11,971,326 |
Total Fiscal 2020 First Quarter |  |  | 2,430,827 |  |  |  |  |  |  |  | 2,430,827 |  |  |  | 11,971,326 |

(1) | In addition to the shares repurchased under the share repurchase program, for the quarter ended April 30, 2019, the Company acquired and subsequently retired 176,081 common shares from employees to meet minimum statutory tax withholding requirements. These shares do not reduce the number of shares that may yet be purchased under our publicly announced share repurchase programs.

(2) | On August 22, 2017, the Company’s Board of Directors authorized the repurchase of 20,000,000 shares under a share repurchase program.

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Item 6. | E xhibits

Exhibit Number |  | Description
3.1 |  | Amended and Restated Articles of Incorporation are incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q (file no. 000-22754) filed on September 9, 2004.
3.2 |  | Amendment No. 1 to Amended and Restated Articles of Incorporation is incorporated by reference to Exhibit 3.2 of the Company’s Quarterly Report on Form 10-Q (file no. 000-22754) filed on September 9, 2004.
3.3 |  | Amendment No. 2 to Amended and Restated Articles of Incorporation is incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K (file no 000-22754) filed on May 31, 2013.
3.4 |  | Amended and Restated By-laws are incorporated by reference to Exhibit 3.4 of the Company’s Quarterly Report on Form 10-Q filed on December 12, 2016.
31.1* |  | Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer.
31.2* |  | Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer.
32.1** |  | Section 1350 Certification of the Principal Executive Officer.
32.2** |  | Section 1350 Certification of the Principal Financial Officer.
101.INS* |  | XBRL Instance Document.
101.SCH* |  | XBRL Taxonomy Extension Schema.
101.CAL* |  | XBRL Taxonomy Extension Calculation Linkbase.
101.LAB* |  | XBRL Taxonomy Extension Label Linkbase.
101.PRE* |  | XBRL Taxonomy Extension Presentation Linkbase.
101.DEF* |  | XBRL Taxonomy Extension Definition Linkbase.

* | Filed herewith

** | Furnished herewith

Attached as Exhibits 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the three months ended April 30, 2019, filed with the Securities and Exchange Commission on June 10, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Income; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statement of Shareholders’ Equity; (v) the Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements.

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SIGNAT URES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|  | URBAN OUTFITTERS, INC.
Date: June 10, 2019 | By: |  | /s/ RICHARD A. HAYNE
|  |  | Richard A. Hayne
|  |  | Chief Executive Officer

|  | URBAN OUTFITTERS, INC.
Date: June 10, 2019 | By: |  | /s/ FRANCIS J. CONFORTI
|  |  | Francis J. Conforti
|  |  | Chief Financial Officer

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