Segment Reporting

9 Months Ended

Oct. 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. Prior year expenses related to the Subscription segment that were classified as “Retail operations” and “General corporate expenses” 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 the Retail and Wholesale segments are inventory and property and equipment. The principal identifiable asset for the Subscription segment is 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. All of the Company’s 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						Nine Months Ended
	October 31,						October 31,
	2019			2018			2019			2018
Net sales
Retail operations	$	897,130		$	878,869		$	2,558,386		$	2,556,460
Wholesale operations		93,311			97,732			263,829			273,966
Subscription operations		2,032			—			2,032			—
Intersegment elimination		(5,004	)		(3,068	)		(10,036	)		(8,751	)
Total net sales	$	987,469		$	973,533		$	2,814,211		$	2,821,675
Income from operations
Retail operations	$	83,687		$	88,633		$	197,378		$	246,928
Wholesale operations		10,204			19,150			42,319			53,770
Subscription operations		(6,320	)		(1,472	)		(11,957	)		(2,022	)
Intersegment elimination		300			216			549			298
Total segment operating income		87,871			106,527			228,289			298,974
General corporate expenses		(12,602	)		(10,170	)		(34,939	)		(31,869	)
Total income from operations	$	75,269		$	96,357		$	193,350		$	267,105

	October 31,		January 31,		October 31,
	2019		2019		2018
Inventory
Retail operations	$	468,810	$	328,783	$	413,102
Wholesale operations		62,755		41,724		38,557
Total inventory	$	531,565	$	370,507	$	451,659
Property and equipment, net
Retail operations	$	863,234	$	791,648	$	806,387
Wholesale operations		2,496		2,389		2,431
Subscription operations		24,808		1,992		65
Total property and equipment, net	$	890,538	$	796,029	$	808,883

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

	Three Months Ended						Nine Months Ended
	October 31,						October 31,
	2019			2018			2019			2018
Net sales
Apparel ⁽¹⁾	$	671,142		$	663,995		$	1,902,782		$	1,954,130
Home ⁽²⁾		146,249			136,483			415,759			386,093
Accessories ⁽³⁾		124,760			124,966			341,641			342,076
Other ⁽⁴⁾		45,318			48,089			154,029			139,376
Total net sales	$	987,469		$	973,533		$	2,814,211		$	2,821,675

As a percentage of net sales
Apparel ⁽¹⁾		68	%		68	%		68	%		69	%
Home ⁽²⁾		15	%		14	%		15	%		14	%
Accessories ⁽³⁾		13	%		13	%		12	%		12	%
Other ⁽⁴⁾		4	%		5	%		5	%		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, the Food and Beverage division and the Subscription segment

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:

	October 31,		January 31,		October 31,
	2019		2019		2018
Property and equipment, net
Domestic operations	$	779,018	$	723,400	$	734,622
Foreign operations		111,520		72,629		74,261
Total property and equipment, net	$	890,538	$	796,029	$	808,883

	Three Months Ended				Nine Months Ended
	October 31,				October 31,
	2019		2018		2019		2018
Net Sales
Domestic operations	$	865,586	$	854,347	$	2,468,991	$	2,467,015
Foreign operations		121,883		119,186		345,220		354,660
Total net sales	$	987,469	$	973,533	$	2,814,211	$	2,821,675