ICRX Report: Urban Outfitters sees growth opportunities in the downturn

Urban Outfitters remains in growth mode, even as competitors are retrenching. "We're pretty excited about the future," CFO John Keyees told the ICR Xchange this afternoon.

That's not to say the company isn't making cost controls, Keyees said. But the recession "in our minds is not a question of survival, but how can we take advantage of an opportunity to grow?"

"We think we are one of the most interesting and viable concepts in the market right now," he said.

Some highlights:

Published: May 13, 2013

Urban Outfitters remains in growth mode, even as competitors are retrenching. “We’re pretty excited about the future,” CFO John Keyees told the ICR Xchange this afternoon.

That’s not to say the company isn’t making cost controls, Keyees said. But the recession “in our minds is not a question of survival, but how can we take advantage of an opportunity to grow?”

“We think we are one of the most interesting and viable concepts in the market right now,” he said.

Some highlights:

The company will end the fiscal year with $500 million in cash and no debt. “We don’t expect to borrow, ever,” Keyees said.

It sees store count growth opportunity in each of its four retail concepts – Urban Outfitters, Anthropologie, Free People and Terrain. It is proceeding with plans to open 50 stores this year, and expects to get significant concessions from landlords, contractors and vendors who are happier to deal with an expanding company than others who are contracting, Keyees said.

At build out, U.O. could grow to 300 stores, from 122 now; Anthropologie to 300 from 108; Free People to 200 from 15 and Terrain to 50, from 1.

Other growth opportunities include adding new concepts, such as the 15Twenty urban mall it opened in a 30,000-square-foot space in L.A. and a potential “small acquisition.”

Even while funding that growth, a doomsday scenario of two-year, double-digit negative comps would still make cash. “So I can invest my $140 million of Cap-Ex in Treasuries and get 1 percent on it, or open stores and get a 40 percent return,” Keyees said.

The Terrain garden store concept store drew a loyal customer base, “but they aren’t spending as aggressively as we hoped,” Keyees said.

U.O. drives retail differentiation by treating each store as a boutique. They are designed, built out and refreshed individually, rather than by a plan developed at the home office. “It drives the financial people crazy that we’re not following a cookie-cutter method … but that’s how we create a boutique environment,” Keyees said.

It has its first customer management system in place, and has captured 1 million customer names. Direct marketing will follow. U.O. knows that “our customers never wants to look like anyone else. She’s never interested in shopping at the Gap or Abercrombie + Fitch,” Keyees said.

It keeps strong relationships with its vendors, including a standard to pay on time. “Our vendors know they can rely on us,” Keyees said.

U.O. sees itself apart from other retailers. The U.O. and Anthropologie stores are “mini-department stores” for younger consumers. “People ask who our competitors are. We have competition for share-of-wallet, but we don’t see that we have any direct competitors,” Keyees said.