Urban Outfitters, Inc.

Good day, ladies and gentlemen, and welcome to the Urban Outfitters Inc. Fourth Quarter Fiscal 2022 Earnings Call. At this time, all participants are in the listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star, then zero on your touch-tone telephone. And as a reminder, this conference call is being recorded. I would now like to introduce Una McCullough, Director of Investor Relations. Ms. McCullough, you may begin.

Good afternoon, and welcome to the URBN fourth quarter fiscal 2022 conference call. Earlier this afternoon, the company issued a press release outlining the financial and operating results for the three and 12-month periods ending January 31, 2022. The following discussions may include forward-looking statements. Please note, for the last three quarterly calls, we have compared our results to two years ago, fiscal 2020, or what we refer to as double LY. As we transition into a new fiscal year, fiscal 2023, we will return to comparing our results to the prior year, or fiscal 2022. To avoid confusion on today's call, we will use the fiscal year designation when referring to the comparisons rather than LY or double LY. It's important to note at this time the global COVID-19 pandemic has had and continues to have a significant impact on URBN's business. Given the uncertainty about the duration and extent of the virus's impact to the global retail environment, content discussed on today's call could change materially at any time. Accordingly, future results could differ materially from historical practices and results or current descriptions, estimates, and suggestions. Additional information concerning factors that could cause actual results to differ materially from projected results contained in the company's filings with the Securities and Exchange Commission. On today's call, you will hear from Richard Hain, Chief Executive Officer, Frank Conforti, Co-President and COO, and Melanie Moraine-Effron, Chief Financial Officer. Following that, we will be pleased to address your questions. For more detailed commentary on our quarterly performance and the text of today's conference call, please refer to our investor relations website at www.urbn.com. I will now turn the call over to Dick.

Thank you, Ona, and good afternoon, everyone. Today I'll begin the call with some brief remarks regarding our fourth quarter results and some observations on the consumer and implications for our spring season. I will then turn the call over to Frank and Melanie, who will provide more detail by brand and total company. URBN produced strong sales gains in the fourth quarter with total comp retail segment sales jumping 14% compared to FY20. Each brand posted positive retail segment comps, led once again by the Free People Group, which posted mid-double-digit comps. All brands on both sides of the Atlantic delivered strong regular-priced sales versus FY20. Favorable sales, however, came amidst a very difficult operating environment where we were forced to expedite product shipments into the U.S. to secure sufficient inventory in time for holiday selling. In addition, both air and ocean cargo rates reached unprecedented levels. These factors resulted in higher than planned transportation expenses, which hurt our merchandise margins and lowered fourth quarter profitability. We believe these costs should level off or potentially recede somewhat by summer. In the meantime, there are a number of actions we will take to boost margins and help mitigate increased freight costs. Some, like raising retail prices, can have an immediate positive impact on margins. For instance, in Q4, price adjustments offset almost a third of the total freight increases. Some other actions to bolster our initial merchandise margins can take a little longer to yield results. One example is to place orders for products the merchants have high confidence in a month earlier than normal so we can utilize ocean rather than air freight. Given the ultra-high freight cost URBN experienced during Q4, we are conducting a complete review of our business practices with an eye to finding margin builders, including logistics efficiencies. Our goal is to improve our initial merchandise margins, or IMU, by 500 basis points over the next three years. Frank will provide greater detail on the initiatives we will be implementing to accomplish this goal. Demand in Q4 remains strong, and we are optimistic this trend will continue through spring. In the first four weeks of Q1, total retail segment comp sales jumped more than 20% above the same period in both FY22 and FY20. All brands in both geographies are nicely positive. We've been pleasantly surprised by the resilience of the consumer given the headwinds of surging inflation, the remnants of COVID-related restrictions, and a stock market correction. These obstacles have pushed consumer sentiment to decade lows, but we see continued strength in our customer spending habits. Our customers are anxious for a return to normal life, and they're shopping to support that goal. They want to be out and about with family and friends, traveling, dining out, and going to entertainment venues. Fashion and newness are resonating more than price and driving strong full-price sales of dresses, shoes, including heels, pants, and blouses. Although comparisons get more difficult throughout the quarter, as we begin to lapse some of the stronger months of last year. Given customer reaction to our spring assortments, we believe total company comp sales can increase in the mid-teens for the quarter. With that, I will now turn the call over to Frank.