By Neil Saunders
Although growth has slowed since the last quarter, this is another good set of numbers from Urban Outfitters. The total and comparable sales gains are broad-based, with all brands contributing to the uplift. Equally, both store and digital channels posted growth, with the former benefitting from continued gains in traffic and higher transaction values.
Self-checkouts are appealing to the younger demographic and help to increase store efficiency.
At the brand level, Free People led the way with an 11.9% increase in total sales and similar growth in comparables. While revenue at the brand has been ticking up for a while, a focus on performance wear through the FP Movement assortment has given the division a healthy sales boost. And a renewed denim collection has proved to be popular with consumers and has helped to drive up conversion rates and transaction values. On top of both of these trends, sales of the brand through department stores have benefitted from a tick up in traffic. Free People goes into the holiday period as a focused brand with a compelling offer.
Anthropologie shows global growth
Anthropologie also posted a good set of numbers, with a 9% uplift in total sales, supported by 8% growth in underlying comparables. The Anthropologie assortment is now much more cohesive than it has been for some time, which is one reason why all categories are delivering good growth. The offer is still eclectic, but it is now a more exciting mix of compelling product as opposed to the more random assortment that characterized Anthropologie a year ago. There is also a good balance between branded and own-brand product, which has made Anthropologie more of a destination for shoppers.
The outlook for Anthropologie in the U.S. is positive, but we are most excited about the opportunity for overseas growth. The new store in Dusseldorf, Germany, is performing solidly, and this bodes well for further expansion. Opening new stores abroad is always risky; however, the appointment of Peter Ruis, who previously ran Jigsaw and directed the brand at John Lewis, gives us confidence that Anthropologie will succeed in is European venture.
Urban Outfitters widens appeal
The Urban Outfitters brand posted a solid 7% uplift in total sales with an identical rise in comparable revenue. This is a good result, especially as Urban Outfitters is exposed to a more competitive part of the market. There is some truth that the core demographic has more money to spend on apparel thanks to the strong economy. However, Urban Outfitters also deserves credit for a more on-trend fashion assortment, which is pulling in shoppers. This includes some third-party brand partnerships that have helped widen the appeal of Urban Outfitters. There are also some nice innovations going into shops, such as self-checkouts, which are appealing to the younger demographic and help to increase store efficiency.
One of the good things about the elevated performance across the entire business is its positive impact on markdowns. There are now fewer reductions than a year ago, which is protecting margins. This, along with good store growth, is helping to offset some of the margin pressure from the continued rapid expansion of online.
Neil Saunders is managing director of GlobalData Retail.