Urban Outfitters, Inc.

Good day, ladies and gentlemen, and welcome to the Urban Outfitters Inc. second quarter fiscal 24 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this conference is being recorded. I would now like to introduce Ona McCullough, Executive Director of Investor Relations. Ma'am, you may begin.

Good afternoon and welcome to the URBN second quarter fiscal 2024 conference call. Earlier this afternoon, the company issued a press release outlining the financial and operating results for the three and six month period ending July 31st, 2023. The following discussions may include forward-looking statements. Please note that actual results may differ materially from those statements. Additional information concerning factors that could cause actual results to differ materially from projected results is 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, URBN, Tricia Smith, Global CEO, Anthropology Group, Frank Conforti, Co-President and COO, URBN, and Melanie Moraine-Effron, Chief Financial Officer, URBN. 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. I'll begin with some brief remarks regarding our second quarter results and then make a few observations concerning our view of the customer. and the macro environment. After that, I'll turn the call over to Tricia Smith, who will provide greater detail about Anthropologie's stellar second quarter results. Then Frank and Melanie will add to the analysis of our Q2 results, along with thoughts about our future business. Simply put, URBN's Q2 results were outstanding. In total, they topped our optimistic expectations. four of our five brands posted record second quarter revenues. The Anthropologie, Free People, and FP Movement brands produced double-digit sales growth in stores and online, with FP Movement leading the way with comp sales of plus 57%. This more than offset a negative comp at the Urban Outfitters brand. Total URBN delivered 8% revenue growth, while total retail segment comp sales increased by 5%. The newly brand, our apparel rental service, continued to enjoy strong positive response to its business concept and product offering, with year-over-year revenues almost doubling in Q2, driven by an 85% increase in active subscribers. Newly contributed $27 million in additional revenues versus last year's second quarter. Total wholesale segment revenues declined by 5% as some of our larger partners continued to write smaller orders as they seek to operate with leaner inventory levels and grow their penetration of internally generated product. Customer demand for fashion at the Anthropologie Free People and FP Movement brands remained strong throughout Q2. The customer continued to respond positively to fashion newness. and within women's apparel, accessories, and shoe categories. Effective brand marketing drove robust traffic increases to our website and stores, including strong growth in new customers. Clearly, these brands were pleasing existing customers and capturing additional market share. So far in August, total retail segment comps are in line with first half results. and we believe total retail segment comps in Q3 could look very similar to both previous quarters. During the July and August back-to-school period, the Urban Outfitters team in North America succeeded in improving women's and men's apparel comps, especially in stores. But unfortunately, the comp improvement fell short of our goals. In Q2, the apparel teams also improved full price sales, lowered markdown rates, and enhanced IMU and MMU. But total brand comp sales remained disappointingly weak. We've made some progress, but the teams know there is still much work to be done to right the urban ship. That work is underway, but could take longer than we originally expected. Let me now focus your attention on URBN's bottom line results. In Q2, we enjoyed the continued benefit of a pre-COVID-like operating environment. Supply chain speed and reliability returned to pre-COVID levels. A speedier supply chain allowed the merchants to keep inventories tight, thus lowering markdowns. At the same time, our IMU improvement initiatives, especially the reduction in inbound freight costs, exceeded expectations. Combining better IMU with lower markdown rates resulted in a 400-plus basis point improvement in gross margins and led to the anthropology, free people, and FB movement brands posting very strong second quarter operating results. Total URBN operating income soared 54% versus the prior year to $132 million, and earnings jumped 72% to $1.10 per share. All indicators currently point to a combination of the robust business we've seen in the first half. Our customer is favoring fashion over price, and she is responding nicely to our brand concepts, our assortment, and our marketing. With that, I will now turn the call over to Tricia to discuss Anthropologie's second quarter. Tricia?