Urban Outfitters, Inc. (the “Company” or “Urban Outfitters”), which was founded in 1970, was incorporated in the Commonwealth of Pennsylvania in 1976. The principal business activity of the Company is the operation of a general consumer product retail, wholesale and subscription business selling to customers through various channels including retail locations, websites, catalogs and mobile applications. As of January 31, 2021 and 2020, the Company operated 644 and 634 stores, respectively. Stores located in the United States totaled 527 as of January 31, 2021 and 522 as of January 31, 2020. Operations in Europe and Canada included 83 stores and 34 stores as of January 31, 2021, respectively, and 78 stores and 34 stores as of January 31, 2020, respectively. In addition, the Company’s Wholesale segment sold and distributed apparel to department and specialty stores worldwide, digital businesses and to the Company’s Retail segment. The Company’s Subscription segment consists of the Nuuly brand, which is a monthly women’s apparel subscription rental service that launched on July 30, 2019.

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide, causing public health officials to recommend precautions to mitigate the spread of the virus, including warning against congregating in heavily populated areas, such as malls and shopping centers. On March 14, 2020, the Company announced that it temporarily closed all stores globally; however, the Company continued to fulfill digital orders from its stores where permitted by local authorities. The Company’s distribution and fulfillment centers remained open to support the digital business and the Wholesale segment operations but have done so with additional safety procedures and enhanced cleaning to protect the health of employees. The Company closed its offices and showrooms globally with the exception of location dependent employees. All other corporate and showroom employees are working remotely. The COVID-19 pandemic continues to materially impact the Company’s operations in the United States and globally, and related government and private sector responsive actions have and will continue to affect its business operations. Because it is impossible to predict the effect and ultimate impact of the COVID-19 pandemic, current financial information may not be necessarily indicative of future operating results and the Company’s plans as described below may change.

In response to the COVID-19 pandemic, the Company has taken many additional measures to protect its financial position and increase financial flexibility during this challenging time period. Those included:

•

Furloughing a substantial number of store, wholesale and home office associates through July 31, 2020, with some furloughs resulting in layoffs as of the same date,

•

Limiting all new hiring commensurate with the operational needs of the Company,

•

Temporarily suspending and since reinstating at a reduced value, all performance bonuses for fiscal 2021 and delaying merit increases for five months until September 2020,

•

Borrowing $220,000 under its Amended Credit Facility (as defined herein) to further protect its cash reserves, and subsequently repaying $100,000 on June 17, 2020 and $120,000 on September 16, 2020 (see Note 8, “Debt”),

•

Reducing fiscal 2021 capital budget by over $100,000 from approximately $260,000 to approximately $160,000 by delaying or cancelling projects,

•

Adjusting inventory levels by cancelling or delaying many orders, asking for price concessions on those remaining and maintaining tighter management of inventory overall as stores reopened,

•

Reducing all discretionary expenses, including creative and travel, among others,

•

Extending payment terms for both merchandise and non-merchandise vendor invoices by 30 days,

•

Reducing certain occupancy and occupancy related expenses,

•

Reducing investments in two Company growth initiatives: Nuuly and expansion into China,

•

Temporarily reducing senior leadership compensation through September 2020,

•

Temporarily suspending Board of Directors’ cash compensation, which has since been reinstated, and

•

Temporarily suspended share repurchases during fiscal 2021 (see Note 12, “Shareholders’ Equity”).

As a result of the COVID-19 pandemic, during fiscal 2021, the Company recorded certain additional reserves and non-cash charges. The Company assessed the value of its inventory in the Retail and Wholesale segments and recorded an increase in inventory obsolescence reserves during the first quarter of fiscal 2021, and as a result of disciplined inventory control and better than planned product performance, during the remainder of fiscal 2021, the Company decreased a portion of its inventory obsolescence reserves. During the first quarter of fiscal 2021, the Company recorded an increase in allowance for doubtful accounts for Wholesale segment customer accounts receivables as a result of the significant disruption and uncertainty in the wholesale macro environment, and during the remainder of fiscal 2021, the Company reduced the allowance for doubtful accounts due to the collection of certain outstanding accounts receivables. Finally, during fiscal 2021, the Company determined that certain long-lived assets at the Company’s retail locations were unable to recover their carrying value primarily due to the impact of the mandated store closures as a result of the

COVID-19 pandemic and lower store productivity once opened. These assets were written down to their fair value resulting in impairment charges of $15,496 across 42 retail locations.

As a result of the global COVID-19 pandemic, governments in the United States, United Kingdom (“U.K.”), Canada and various other jurisdictions implemented programs to encourage companies to retain and pay employees that are unable to work or are limited in the work that they can perform in light of closures or a significant decline in sales. The Company qualified for certain of these programs, which partially offset related expenses. The Company continued to pay all employees through at least April 1, 2020. On March 31, 2020, the Company announced it furloughed a substantial number of store, wholesale and home office employees beginning April 1, 2020. The furlough period continued through July 31, 2020, with some furloughs resulting in layoffs as of the same date. Furloughed employees continued to receive enrolled benefits during the furlough period. The Company recorded the cumulative benefit of the programs implemented by the United States and Canada in selling, general and administrative expenses during fiscal 2021. Benefits related to the programs implemented by the U.K. and other European countries were recorded as an offset to store occupancy expenses in cost of sales during fiscal 2021.

Beginning April 25, 2020, the Company started to reopen stores in select states and countries in accordance with local government guidelines. As of July 31, 2020, substantially all of the Company’s stores had reopened. However, during the fourth quarter of fiscal 2021 and into the first quarter of fiscal 2022, our store operations have been impacted by temporary store closures, primarily in Europe, and reduced customer traffic in reopened store locations globally due in part to local government guidelines that have imposed certain operating restrictions, including capacity limits. The Company cannot reasonably estimate the duration and severity of the COVID-19 pandemic, which has had and may continue to have a material impact on our business.