Philly-based Urban Outfitters gets a boost from online sales during the pandemic

One day, shoppers will resume buying dresses for weddings and parties. But for now, cozy clothes and home decor are helping to drive sales at Urban Outfitters Inc., as the company attracts more online shoppers during the pandemic.

The Philadelphia-based retailer announced Monday that it earned $76.7 million in net income for the third quarter — a 38% jump in profits compared with the same period in 2019.

Even though sales fell 1.8%, compared with a year ago, executives said the company’s large brands controlled inventory and expenses well, and delivered record-low rates of marking down items, meaning that more items sold at full price. The retailer houses brands including Anthropologie, Free People, and its namesake Urban Outfitters.

Brick-and-mortar stores are still struggling under pandemic conditions, CEO Richard Hayne said on an investor earnings call. Out of the company’s global 641 stores, 68 were closed to the public as of Monday, mostly in Europe. But 158 stores, nearly a third of its stores in North America, “are operating with capacity restrictions under 50% of legal occupancy,” Hayne said.

In large cities, in particular — such as New York, London, and San Francisco — stores faced “punishing traffic declines,” he said. And since the third week of October, Hayne said, stores have also seen “lighter traffic as viral caseloads spiked and restrictions were re-installed.”

But digital growth is helping to make up for that. During the third quarter, the number of new digital customers grew by 45%. The fulfillment centers that fill those online orders “have experienced nonstop holiday-level workloads” since May, Hayne said.

With the holidays approaching, Hayne said, “we do anticipate a surge in digital demand in the coming weeks.”

As for what customers were drawn to in late summer and early fall, home-related products “experience the highest growth rates,” said Trish Donnelly, global CEO for the Urban Outfitters brand.

The brand’s young core customers — 18- to 26-year-olds — turned their attention to “furniture and storage to set up work-from-home spaces,” as well as bakeware and drink-ware, and games and puzzles, Donnelly said.

Anthropologie’s brand, however, with its apparel typically suited to going out and being social, “has been most harshly impacted by the pandemic,” Hayne said.

Even so, “we believe there’s a big demand building up for either weddings, or the people who did get married during COVID to have follow-up parties where they can invite lots of people,” Hayne said. “So we think there’s going to be a lot of events once it’s safe, and we think that Anthropologie is well-positioned to take advantage of those events.”

Urban’s shares closed down $1.54 or 4.9% to $30.12 on Tuesday.