Segment Reporting

6 Months Ended

Jul. 31, 2019

13. Segment Reporting

The Company offers lifestyle-oriented general merchandise and consumer products and services through a portfolio of global consumer brands. The Company operates 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 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’s Retail segment omni-channel strategy enhances its customers’ brand experience by providing a seamless approach to the customer shopping experience. All available Company-owned Retail segment shopping channels are fully integrated, including stores, websites, mobile applications, catalogs and customer contact centers.

The Company’s Wholesale segment consists of the Free People, Anthropologie and Urban Outfitters brands. The Wholesale segment sells through department and specialty stores worldwide, digital businesses and the Retail segment. The Urban Outfitters wholesale division was established in the third quarter of fiscal 2019.

The Subscription segment, consisting of the “Nuuly” brand, is a monthly women’s apparel subscription rental service that launched on July 30, 2019. Expenses classified as “General corporate expenses” in the prior fiscal year have been reclassified to the Subscription segment as a result of the establishment of the Subscription segment in the first quarter of fiscal 2020. Property and equipment related to the Subscription segment have also been reclassified from the Retail segment.

The Company evaluates the performance of each segment based on the net sales and pre-tax income from operations (excluding intercompany charges) of the segment. The Company accounts for intersegment sales and transfers as if the sales and transfers were made to third parties making similar volume purchases. 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.

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						Six Months Ended
	July 31,						July 31,
	2019			2018			2019			2018
Net sales
Retail operations	$	878,693		$	902,027		$	1,661,256		$	1,677,591
Wholesale operations		86,153			93,293			170,518			176,234
Intersegment elimination		(2,517	)		(2,866	)		(5,032	)		(5,683	)
Total net sales	$	962,329		$	992,454		$	1,826,742		$	1,848,142
Income from operations
Retail operations	$	78,997		$	106,423		$	113,691		$	158,295
Wholesale operations		15,354			19,815			32,115			34,620
Subscription operations		(3,536	)		(550	)		(5,637	)		(550	)
Intersegment elimination		312			48			249			82
Total segment operating income		91,127			125,736			140,418			192,447
General corporate expenses		(13,066	)		(8,884	)		(22,337	)		(21,699	)
Total income from operations	$	78,061		$	116,852		$	118,081		$	170,748

	July 31,		January 31,		July 31,
	2019		2019		2018
Inventory
Retail operations	$	376,050	$	328,783	$	328,551
Wholesale operations		64,037		41,724		47,106
Total inventory	$	440,087	$	370,507	$	375,657
Property and equipment, net
Retail operations	$	841,013	$	791,648	$	804,625
Wholesale operations		2,637		2,389		2,459
Subscription operations		23,784		1,992		—
Total property and equipment, net	$	867,434	$	796,029	$	807,084

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

	Three Months Ended						Six Months Ended
	July 31,						July 31,
	2019			2018			2019			2018
Net sales
Apparel ⁽¹⁾	$	642,914		$	690,447		$	1,231,640		$	1,290,135
Home ⁽²⁾		144,962			135,262			269,510			249,610
Accessories ⁽³⁾		116,613			118,335			216,881			217,110
Other ⁽⁴⁾		57,840			48,410			108,711			91,287
Total net sales	$	962,329		$	992,454		$	1,826,742		$	1,848,142

As a percentage of net sales
Apparel ⁽¹⁾		67	%		70	%		67	%		70	%
Home ⁽²⁾		15	%		13	%		15	%		13	%
Accessories ⁽³⁾		12	%		12	%		12	%		12	%
Other ⁽⁴⁾		6	%		5	%		6	%		5	%
Total net sales		100	%		100	%		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:

	July 31,		January 31,		July 31,
	2019		2019		2018
Property and equipment, net
Domestic operations	$	774,378	$	723,400	$	730,024
Foreign operations		93,056		72,629		77,060
Total property and equipment, net	$	867,434	$	796,029	$	807,084

	Three Months Ended				Six Months Ended
	July 31,				July 31,
	2019		2018		2019		2018
Net Sales
Domestic operations	$	840,316	$	865,517	$	1,603,405	$	1,612,668
Foreign operations		122,013		126,937		223,337		235,474
Total net sales	$	962,329	$	992,454	$	1,826,742	$	1,848,142