Urban Outfitters Inc. - University of Oregon Investment Group

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Urban Outfitters Inc. - University of Oregon Investment Group
May 26, 2015
Consumer Goods
Urban Outfitters Inc.
Ticker: URBN
Recommendati on: Outperform
Current Price: $34.61
Investment Thesis
Key Statistics
52 Week Price Range
50-Day M oving Average
$27.89 - $47.25

The expanding number of retail stores of Urban Outfitters brands will continue
to drive revenue as well as the brand value proposition especially in foreign
markets. This will allow the company to capitalize on demand for high fashion
products and increased consumer disposable income.

Urban Outfitters increased investment in supply chain initiatives will help to
respond to ever changing consumer tastes and fashion trends. In addition, Urban
brands are now importing their products from thousands of different vendors in
order to maintain a wide variety of merchandise that still fits to each store’s
brand.

As Urban continues to import products from thousands of different vendors and
the world price of cotton continues to face downward pressure, the company will
be able to maintain a slow decline in future costs of sales. In addition, the
opening of the new fulfillment center in Gap Pennsylvania will lower delivery
costs and also transportation costs as it is significantly closer to their retail
distribution center.

Urban Outfitters Wholesale merchandise is expanding into international
department stores worldwide. Increased demand for intimate and footwear lines
will help to drive future wholesale revenue as the company continues to produce
new merchandise.
$41.43
Estimated Beta
0.90
Dividend Yield
0.00%
M arket Capitalization
4.31B
3-Year Revenue CAGR
6.02%
Trading Statistics
Diluted Shares Outstanding
134,078
Average Volume (3-M onth)
7.67mm
Institutional Ownership
Insider Ownership
EV/EBITDA (LTM )
Price Target: $40.51
100%
0%
8.12x
Five-Year Stock Chart
$50.00
400,000,000
$45.00
Margins and Ratios
350,000,000
$40.00
300,000,000
$35.00
Gross M argin (LTM )
EBITDA M argin (LTM )
41.66%
15.08%
250,000,000
$30.00
$25.00
200,000,000
$20.00
Net M argin (LTM )
8.67%
150,000,000
$15.00
100,000,000
Debt to Enterprise Value
.08X
$10.00
50,000,000
$5.00
Covering Analysts:
Phoebe Hsieh: [email protected]
Rebecca Katzen: [email protected]
$0.00
Feb-08
0
Feb-09
Feb-10
Volume
1
Feb-11
Feb-12
Adjusted Close
Feb-13
50-Day Avg
Feb-14
Feb-15
200-Day Avg
University of Oregon Investment Group
University of Oregon Investment Group
Business Overview
Figure 1: Revenue Breakdown by Segment
7.87%
92.3%
In 1970, the first Urban Outfitters store was opened near the University of
Pennsylvania in Philadelphia. Urban Outfitters then opened their first
Anthropologie store in 1992 and another Urban Outfitters in London during 1998.
Urban Outfitters Inc. is a specialty retail company that operates under the brand
names of Urban Outfitters, Anthropologie, Free People, Terrain, and Bhldn. The
Urban Outfitters Company aims to provide unified environments that establish
emotional bonds with the consumer through a unique store environment. In
addition to retail locations, Urban Outfitters offers products and markets their
brands to consumers through e-commerce websites, mobile apps, Urban
Outfitters, Anthropologie, and Free people Catalogs. Urban Outfitters fiscal year
ends on January 31, all references to fiscal years refer to the fiscal years ended on
January 31 in those years.
In 2015 the company hit a milestone in recording its first $1 billion quarter. The
total sales increase was driven by an increase in comparable stores, non comparable store sales, and an increased 21% growth in wholesale sales.
Retail Segment
Source: UOIG Projections
Figure 2: Terrain Garden Center
Urban Outfitters
Urban Outfitters targets young adults ages 18-28 through its unique merchandise
mix and compelling store and website environment. Currently, Urban Outfitters
offers products to both men and women including fashion apparel, intimates,
footwear, beauty and accessories, active wear and gear, electronics, as well as a
mix of apartment wares. Stores average approximately 9,000 square feet of
selling space and are usually located in large metropolitan areas, select university
communities, specialty centers and enclosed malls.
Anthropologie Group
Anthropologie Group includes the Anthropologie, Terrain, and Bhldn brands.
The Bhldn brand was originally created to operate as a standalone store however
it has now become part of the Anthropologie Group. Launched in 2011, Bhldn
brand represents an extension of Anthropologie, emphasizing every element that
contributes to a wedding. Bhldn offers a collection of wedding gowns,
bridesmaid frocks, party dresses, assorted jewelry, headpieces, footwear,
lingerie and decorations. Dresses range from $160 to over $3,000 dollars.
Anthropologie
Anthropologie sells women’s casual apparel and accessories, intimates, shoes,
beauty, home furnishings and decorative items. Tailored to market to women
ages 28 to 45, Anthropologie stores average approximately 7,000 square feet of
selling space. Anthropologie also offers registry services through their website
and mobile applications and in all of their stores throughout the United States.
Source: Google Images
In 2015 Anthropologie earned both record sales and profits. Record sales were
driven by new stores and strong direct-to-consumer growth. Anthropologie
direct orders grew by more than 23%, traffic by 17%, and the average order
value increased by 4%. Anthropologie also saw a significant shift to mobile
devices, which accounted for over 40% of online traffic.
UOIG 2
University of Oregon Investment Group
Figure 3: Revenue Retail by Brand
Terrain
Terrain Garden Centers offer home furnishings and decorative items, garden
products including live plants and flowers, outdoor living furnishings and
entertainment products. Terrain was designed to appeal to both men and women
interested in a creative, sophisticated outdoor living and gardening experience.
Terrain operates through its large freestanding sites and also thro ugh its website.
Both Terrain Garden Centers operate with an average of approximately 18,000
square feet. In addition, both Terrain locations offer a restaurant and coffee bar.
Free People
Free People’s retail stores offer merchandise targeted to women ages 25 to 30.
Free People offers casual women’s apparel, intimates, shoes, accessories, active
wear and gifts. Retail store locations average approximately 1,600 square feet of
selling space. Merchandise can also be purchased online and through Free
people catalogs.
Free people earned record fourth quarter results in 2015. This is the third year in
a row that the Free People brand has reported record setting fourth quarter
results, registering double digit sales gains and record operating profits.
Wholesale Segment
Source: UOIG Projections
Figure 4: Anthropologie Revenue Retail
by Brand
In 1984, the Free People wholesale segment was established to develop private
label apparel in women’s casual wear that could then be sold at attractive prices
in Urban Outfitters stores. Free People wholesale later began selling to other
retailers throughout the United States. Free People products are sold in certain
department stores using a shop-within-shop sales model. Throughout 2015, Free
People’s range of merchandise was sold through approximately 1,600
department and specialty stores worldwide, including Macy’s, Nordstrom,
Bloomingdale’s, Lord & Taylor, Selfridge’s, and Free People stores.
During 2015 wholesale continued to grow by double digits , growing at 21%.
The increase in wholesale sales was driven by product expansion, international
growth, and stronger relationships with domestic partners. 40% of wholesales
came from expanded product offerings in intimates and footwear. After
launching in Nordstrom’s last year, Free People footwear is now in 80
Nordstrom stores and other department stores around the globe.
Industry
Overview
Source: UOIG Projections
During the recession the retail industry experienced a lot of revenue declines as
consumers found themselves with less disposable income. However, in the
recent years, demand for premium priced products has increased due to
increased consumer disposable income and consumer sentiment. The number of
high-income households is forecast to increase thus driving demand for fashion
based apparel from women’s clothing stores.
The market for Women’s Clothing Stores is currently strong, despite declining
mall traffic and competition from superstores. Total revenue is expected to grow
at an average annual rate of 2.7% over the next five years. The main driver
UOIG 3
University of Oregon Investment Group
Figure 5: Per Capita Disposable Income
behind this industry, in the years following the recession, has been the
willingness of higher-income consumers to spend on luxury clothing and
accessories. While price-conscious consumers do affect industry sales, they do
not have as much an impact as higher-income consumers.
Macro Factors
Consumer Disposable Income
Per capita disposable income determines an individual’s ability to purchase
goods and services. As employment rises combined with improved housing
consumers are able to spend more money on purchases that were delayed during
the recession. Inexpensive energy prices, a strong U.S. dollar, and little inflation
provide a positive environment for consumer spending. For the next five years
per capita disposable income is expected to grow at a rate of 2.4%.
Source: IBIS World
Figure 6: World Price of Cotton
$1.00
$0.80
$0.60
$0.40
$0.20
$2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: IBIS World
Urban Outfitters stands in a position to capitalize on this steady growth in
consumer disposable income. As the economy continues to reach prerecessionary levels and consumer sentiment continues to grow shoppers will
increasingly purchase clothes for fashion rather than just function. Urban
Outfitters offers high quality clothing along numerous fashion trends at
attractive prices thus driving future revenue growth and market share.
Seasonality
Like most retail businesses, Urban Outfitter’s brands are subject to seasonal
fluctuations in net sales. A significant portion of revenue is usually realized
from August through December of each year. In order to capture the effect of
holiday return items within the same year period, the fiscal year is set to end
January 31st rather than December 31st.
Fashion
There are many industry specific factors that can determine the demand for retail
clothing sales. Brand recognition, fashion trends, and seasonal weather trends,
can affect a consumer’s purchasing patterns. Customer tastes are volatile and
can change rapidly and many retailers’ success depends on their ability to
predict and respond to changing fashion tastes and consumer demands.
Urban Outfitters takes great detail in monitoring current fashion trends in order
to best serve retail customers. In addition Urban Outfitters brands market an
ever-changing mix of products in order to encourage customers to visit stores
more frequently. The wholesale segment is at the biggest risk to changing
fashion trends because of longer lead times in manufacturing and sale of its
apparel.
Figure 7: Future Ecommerce Growth
Price of Cotton
The price of cotton effects Urban Outfitters because most of Urban’s products
contain cotton. If the world price of cotton were to decrease than this would
likely affect the price that Urban Outfitters would pay for inputs. Year to year
price of cotton is expected to face downward pressure due to oversupply issues,
and genetically modified seeds that will continue to create high yields even if
weather conditions are below average.
Competition
Specialty retail and wholesale businesses are extremely competitive in both
domestic and international markets. While there are many major players in the
retail industry they often face strong competition from independently owned
retailers who operate on a local scale.
Source: IBIS World
UOIG 4
University of Oregon Investment Group
Figure 8: Urban Outfitters Mobile App
Urban Outfitter’s retail segment competes on the location of their stores,
website, mobile application and catalog presentation, website design, quality,
style, price and availability of merchandise. In addition, Urban Outfitters also
competes with other retailers through their direct to consumer channel, including
their success and effectiveness of merchandise delivery, website and mobile
application availability, and customers lists.
Online Shopping
While online retail takes away revenue from brick-and-mortar stores, it does not
diminish the profit retailers can use towards supporting on sight stores. Online
sales enable companies to capture sales from consumers who prefer not to go to
a store.
Source: Google Images
All of Urban Outfitters brands are Omni channel retailers, providing in-store and
online shopping to consumers. Monthly catalogs are also created and distributed
to consumers in order to feature new merchandise and fashion trends. These
catalogs help to encourage both online and foot traffic.
Strategic Positioning
Business Strategy
Figure 9: Urban Outfitter Stores NA
Fiscal year 2015 saw a lot of improvement related to management’s business
strategy. Lower markdown rates, improved product execution, better inventory
control, and improved initial markups help to grow both sales and profits year
over year. After a reorganizing and the adding some new talent, the concept,
design and merchant groups are much stronger today and are working more
collaboratively. This has resulted in better, and a more elevated product that is
less duplicative and more appropriate for the target consumer. The product
styling is fresher, the fabrics and materials are better and there is more make in
the products.
Consumer Taste
Source: URBN 10-K
Figure 10: Free People Store Count
Customer tastes and fashion trends are volatile and can change rapidly . Urban
Outfitters success depends on their ability to effectively predict and respond to
changing fashion tastes and consumer demands, and to translate market trends
into appropriate, saleable product offerings.
Urban Outfitter’s brands focus on the core business apparel first then branch out
to grow their extension lines. Urban Outfitters understands the volatile change in
fashion trends and seasonality. In order to serve target customers best the
company purchases merchandise from numerous vendors both foreign and
domestic. In addition, Urban Oufitter’s brands have arrangements with agents and
contract manufacturers to produce private label merchandise. In 2015 the
company purchased merchandise from approximately 5,000 vendors. No vendor
accounted for more than 10% of merchandise purchased during that time and the
loss of any one vendor would not have a material effect on the business. In order
to try and maintain current fashion trends Urban is working to improve the speed
of its supply chain.
2014 markdowns were driven by redundant style offerings rather than fashion
failure. Today, management works hard to oversee focus on style count, while
still offering the assortment of fashion that customers expect, designers are more
focused on editing the redundancy out of some of the pieces.
Source: URBN 10-K
UOIG 5
University of Oregon Investment Group
Extension lines have proved to be extremely popular among consumers. There
are extremely positive trends in home goods, both electronic and decorative,
intimates, women’s accessories, and beauty. Within wholesale, intimates and
footwear are driving a lot of the sales growth.
Figure 11: U.S. Market Statistics
U.S. Apparel Market Key Statistics
Size of US Apparel Market
$225B
Sales of Women's Apparel in U.S. $110,826M
Price Per Apparel Article in U.S.
$19.00
Clothing Store Sales in U.S.
$178.52B
Source: Statista
6-8 Weeks
12 Weeks
20 Weeks
10%
20%
30%
40%
50%
60%
Value Proposition
While many retailers are lowering their price in order to try to attract more
consumers, Urban Outfitters isn’t trying to match these bottom line prices. Urban
Outfitters considers a product’s value proposition when pricing a product. For
example while many consumers can go to Forever 21 and buy a striped top for
$11, they could also probably find that Michael Kors has a similar top for $50.
While these two tops probably cost relatively the same to make, Michael Kors can
get the $50 because of their value proposition. Urban Outfitters strives to create
that emotional link with the customer in order to increase value proposition that
will help to support full priced items.In order to effectively increase and maintain
value proposition Urban Outfitters works hard to maintain direct to consumer
marketing, store experience, association in the music world, all while staying true
the Urban brand.
Figure 12: Supply Chain Speed of
Product
0%
In order to also combat the change in consumer tastes Urban Outfitters Inc. has
been working towards increasing the supply chain speed . The company now
experiences lesser lead times when receiving inventory getting 60% of the
product within 20 weeks, 25% in 12 weeks and the remaining 15% in just 6 to 8
weeks.
70%
Source: Company 10-K
The company is currently enhancing communication with customers through the
use of various online interfaces, including "#UOonyou" online community and
FP Me app for mobiles. These online communities allow customers to share
experiences with the company such as uploading photos, which attracts future
visits, and ultimately boosts online visibility of the company. The company also
has an online blog named "Dreamers + Doers" in order to attract people who
have innovative business ideas and to share achievements of what they’ve
dreamt of, and then publish their stories on the company website. Thus, using
this blog, the company is harmonizing people's emotions and lives with the
URBN brand, which is key to building a brand loyal customer base and
increasing conversion rates on the website.
Business Growth Strategies
Unique Positioning
Figure 13: Price Points By Brand
Price Points By Brand
Anthropologie
Min Price Max Price
$18.00
$4,000.00
BHLDN
$24.00
$3,000.00
Free People
$10.00
$4,000.00
Terrain
$10.00
$4,000.00
Urban Outfitters
$12.00
$2,200.00
Source: Urban Outfitters Websites
Unlike many other brands for young adults, Urban Outfitters is not just selling
products. Urban Outfitter’s brands are inviting audiences to be part of a culture
though product offerings, music, photography, and other creative outlets. Urban
Outfitter’s brands have elevated their product offering, imagery, and content,
and also increased social engagement. Through the end of the last year the
company has seen strong results in both sales and customer participation.
Expansion
In fiscal 2015 Urban Outfitters brands opened 38 new stores. 15 of these stores
were under the Anthropologie brand, 12 were represented by the Free People
brand, and there were 11 new Urban Outfitters branded stores opened. Stores
were opened in Brooklyn, Manhattan, and Honolulu, representing the first store
to be opened in Hawaii. The culture that the Urban Outfitters brand has
UOIG 6
University of Oregon Investment Group
Figure 14: Without Walls Logo
established allowed for the Hawaii opening to be the second largest opening day
in company history. The opening of new stores helps to drive not only revenue
but also brand awareness and equity. As the Free People and Anthropologie
brands continue to grow they are quickly gaining traction among North
American teens. This increased awareness allows for even greater success
potential in future store openings.
In 2015 the company completed the launch of Without Walls, an active lifestyle
brand and a new business opportunity whose experiential marketing and unique
performance products have developed a community of athletic advocates,
providing the company with an entry into a new market
Technology
Source: Google Images
Figure 15: Total Stores 2016
The direct to consumer channels need to be easy and efficient for a consumer to
navigate in order promote high traffic and sales activity. The Urban Outfitters
team continually updates the direct to consumer experience in order to
complement a lot of customers accessing direct to consumer channels through
mobile devices. In Q4 2015, Urban brands welcomed 50 million visitors to their
North American website with the majority of those consumers using mobile
devices.
By marketing through social media, Urban outfitters is able to reach more
customers on a daily basis. In 2015 it was common to see six figure likes on
Instagram posts, with followers growing significantly year-over-year on a
monthly basis.
Anthropologie launched its registry app late las t year, through Q4 2015, the app
had 11,000 registries with an average of 15 items per registrant. In addition,
40% of registrants are also first time Anthropologie customers, creating a new
entry point for the brand.
Extension Lines
Source: UOIG Projections
Figure 16: Wholesale Revenue
Projections
Urban Outfitter’s Brands have created extension lines aside from their general
apparel. Urban Outfitters, Free People, and Anthropologie, all have footwear and
intimate lines. In addition some brands have home goods, workout apparel,
beauty, and technology lines.
Anthropologie is currently working to expand its home product cat egory. During
third quarter 2015, Anthropologie released a home-goods only catalog and
received a very positive customer reaction. Year over year sales of home -good
products increased continuing through the fourth quarter. Anthropologie will
continue to create these home books throughout the year.
As previously states, in 2015 Urban Outfitters released the launch of another
extension, Without Walls.
Wholesale Business
Source: URBN
Urban Outfitters operates its wholesale business under the Free People name,
which currently sells in 36 countries. While wholesale currently only represents
6% of total revenue it is growing rapidly and expanding every year. In order to
encourage further growth Urban Outfitters plans to expand the categories in the
wholesale business. Throughout fiscal 2015 and first quarter 2016, the wholesale
segment has increased its intimates line. In addition, at the end of fiscal 2015
wholesale segment released its footwear line in Nordstrom. Currently, footwear
lines are selling in department stores in the US, Japan, China, and Canada.
UOIG 7
University of Oregon Investment Group
Fulfillment Center
Figure 17: URBN New Fulfillment Center
Urban Outfitters plans to shift a lot of product to their new Fulfillment Center
from Trenton, to Gap, Pennsylvania in July of 2015. This new fulfillment center
will be 1 million square feet and help to hold inventory. This center is located near
the company’s retail distribution center, allowing for a decreased lead time and
lower transportation costs.
Management and Employee Relations
Richard A Hayne – Chairman of the Board, Chief Executive
Officer
Richard Hayne co-founded Urban Outfitters with his former wife Judy Wicks in
1970 and has been Chairman of the Board of Directors and President since the
Company’s incorporation in 1976. Hayne has been the CEO of Urban Outfitters
since the retirement of Glen Senk in 2012. Hayne graduated from Lehigh
University in 1969.
Source: Google Images
Francis J. Conforti – Chief financial officer
Figure 18: Executive Compensation vs.
EBITDA
600000
14000
12000
500000
10000
400000
8000
Francis Conforti originally joined Urban Outfitters in March 2007 as director of
Finance and SEC reporting. After being promoted to Controller and then to Chief
Accounting Officer, he was appointed Chief Financial Officer in April 2012.
Before Urban Outfitters, Conforti worked for Allied Barton Security Services
LLC as Controller. Prior to that Conforti began his career working at KPMG as a
certified public accountant where he held various audit roles.
300000
6000
200000
4000
100000
2000
0
0
2012
2013
EBITDA
2014
Executive compensation
Source: Morning Star & UO 10-K
Glen A. Bodzy- General Counsel and Secretary
Mr. Bodzy joined Urban Outfitters as General Counsel in December 1997 and
was appointed Secretary in February 1999. On November 17, 2014, Mr. Bodzy
notified the Board of Directors that he will retire from the Company effective
June 15, 2015.
Margaret A Hayne – President of Free People Brand, Chief
Creative Officer.
Margaret Hayne joined the company in August 1982. She has served as President,
Free People Brand since March 2007 and as Chief Creative Officer, Urban
Outfitters, Inc. since November 2013. Richard A. Hayne, the Company’s current
Chairman, Chief Executive Officer and President, is Ms. Hayne’s spouse.
Figure 19: One Year Stock Chart
Management Guidance
One-Year Stock Chart
$50.00
30,000,000
$45.00
25,000,000
$40.00
$35.00
20,000,000
$30.00
$25.00
15,000,000
$20.00
10,000,000
$15.00
$10.00
5,000,000
$5.00
$0.00
May-14
Urban Outfitter’s management has historically been very detailed and relatively
accurate with regards to guidance. Over the past five years, management has given
very descriptive expectations, giving analysts strong information to forecast off
of. For fiscal year 2016, management gave explicit guidance for capital
expenditures, stores opening, strong and lackluster brands, as well as gross
margins and we have considered all of these in our evaluation.
Portfolio Strategy
0
Jul-14
Sep-14
Volume
Nov-14
Adjusted Close
Jan-15
50-Day Avg
Mar-15
200-Day Avg
Source: Yahoo Finance
Urban Outfitters is being pitched s olely to the Tall Firs portfolio. Although Tall
Firs is currently overweight in both mid cap and consumer goods companies, we
are confident that Urban Outfitters would provide significant upside for our group
UOIG 8
University of Oregon Investment Group
Figure 20: Comparables Revenue Growth
2016
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
going forward. Furthermore, many of the underperforming stocks currently in the
portfolio are in the process of being updated, which will likely create room for
Urban Outfitters in the portfolio. Urban Outfitters is not being pitched to the
Alumni Fund because it is too large to be listed on the Russell 2K. We are not
pitching to DADCO because it is too large and we do not see Urban Outfitter’s
growth being significantly large during the next year, we believe it is more likely
to grow steadily over a longer period of time. For those reasons, we decided not
to pitch Urban Outfitters to the Alumni Fund or DADCO. Urban Outfitters is not
currently held by the UOIG nor has it ever been pitched to any UOIG portfolios.
Recent News
2.00%
0.00%
UO
LB
AEO
EXPR
LULU
JWN
Source: Fact Set and UOIG Projections
Urban Outfitters starts recruiting for June opening of new
$106M Gap Facility –
Lancaster Online – Tim Mekeel
Urban Outfitters is constructing a new e-commerce fulfillment center at Lincoln
Highway East and Brackbill Road in Gap. The facility is being created so Urban
Outfitters can respond faster and more efficiently to rapidly growing volume of
purchases made by customers through direct to consumer channels.
Figure 21: Comparables Price Chart
$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
Hits And Misses From My Recent Trip To Urban Outfitters
Yahoo News - May. 7, 2015
Urban Outfitters has effectively captured a niche in the teen market. However
after looking at some of the product a case can be made that Urban Outfitters has
moved beyond the 20-something/teen market by expanding their range of
merchandise and also marketing towards adults.
$40.00
Urban Outfitters Stock is Looking Pretty Stylish to Investors –
$30.00
$20.00
$10.00
$0.00
URBN
AEO
JWN
LB
LULU
Source: Yahoo Finance
Real Money Preview - May 20, 2015
Urban Outfitters has situationally the best game in town, and has always been
profitable. The retail chain remains debt free and when first-quarter earnings came
in at 25 cents per share vs 26 cents the stock decreased 16% in after-hours trading.
Estimates focused on $2 per share. Is it justifiable for a 1.7billion decrease in
market value over a 20 cent decrease in EPS?
Catalysts
Upside
Figure 22: EBITDA Margins
 Expanding the number of retail stores increases brand awareness and drives
revenue.
 Increased wholesale exposure to the market will drive top line growth,
especially with the addition of new intimate and footwear lines.
 Investment in direct to consumer marketing and improved digital experience
will continually grow online exposure.
 Lower supply lead times and new fulfillment capabilities will help to
successfully meet consumer demand.
 The use of the new fulfillment center will help to reduce delivery costs and also
increase inventory accessibility leading to increased margins.
Downside
Source: Fact Set and UOIG Projections
 Increased appreciation of the US dollar will magnify foreign currency
translation risk
 Increased appreciation of the US dollar will act as a foreign currency headwind
for international sales.
UOIG 9
University of Oregon Investment Group
 Shifting fulfillment centers will increase SGA costs until the new center is fully
integrated.
 Change in consumer taste and fashion trends can negatively impact sales of
existing inventory
Figure 23: Net Margins
Comparable Analysis
Overview
Comparable companies were screened for a variety of metrics including market
cap, growth grates, industry, capital structure, margins and shared risk factors. We
were looking for companies that were closest to Urban Outfitters quantitatively
and qualitatively. After evaluating various metrics, we assigned weightings based
upon which companies we felt like satisfied the various criteria the b est.
L Brands (LB) – 35%
Source: Fact Set and UOIG Projections
Figure 24: EV/EBITDA Multiples
EV/EBITDA Multiples
Urban Outfitters
L Brands
American Eagle
Express
Lululemon
Nordstrom
2.92x
4.74x
2.12x
.93x
8.96x
3.8x
Source: UOIG Projections and Factset
Figure 25: Comparable Margins
Gross
EBIT
EBITDA
NET
URBN
41.95%
12.50%
16.37%
9.48%
Comparable Margins
LB
AEO
EXPR
42.83%
36.45% 52.14%
16.78%
12.61% 6.61%
20.15%
16.40% 10.93%
9.18%
5.03% 4.02%
LULU
JWN
50.02% 35.94%
22.41% 12.90%
25.73% 18.88%
13.58% 4.99%
Source: UOIG Projections and Factset
Founded in 1963 in Ohio, L Brands is the parent company of Victoria’s Secret,
PINK, Bath and Body Works, Henri Bendel and La Senza. Victoria’s Secret and
La Senza are primarily high quality lingerie and female sleepwear companies
while Bath and Body Works offers frangrances, lotions, and shower gels. Henri
Bendel is a retailer of high quality handbags. As of January 31, 2015, L Brands
operates 2,685 retail stores in the United States and hundreds more internationally.
L Brands has very similar growth expectations and margins to Urban Outfitters.
Although a very mature company who is much larger in size, L Brands is the
strongest comparable to Urban Outfitters when comparing quantitative and
qualitative factors. They cater primarily to the same consumer base of customers
looking for high quality products who are willing to pay the premium for them.
Therefore, customers who shop at L Brand stores are very likely to shop at Urban
Outfitters as well. For those reasons, we gave L Brands a 35% weighting in our
comparable analysis.
American Eagle Outfitter (AEO) – 25%
Founded in 1977, American Eagle Outfitters, Inc is a global apparel and accessory
retailer. With over 1,000 stores worldwide, American Eagle is a well-recognized
global retailer. They offer denim pants, sweaters, graphic T’s and even have their
own intimate’s line, Aeries.
Qualitatively, American Eagle is extremely comparable to Urban Outfitters. They
share a target market with the Urban Outfitters division of Urban Outfitters,
catering to millennials, although their product offering differs greatly from Urban
Outfitter’s. Previously being one of the most popular retailers for young men and
women, American Eagle is not only a competitor, but also a strong comparable.
With similar revenue growth going into the next year as well as very similar
profitability margins, American Eagle is also quantitatively comparable to Urban
Outfitters. Because some of their growth expectations do not line up as well to
Urban Outfitters, we thought it reasonable to give American Eagle a 25%
weighting.
Express (EXPR) – 15%
Express was founded in 1980 in Columbus, Ohio and operates as a specialty
apparel and accessories retailer. They sell casualwear, jeanswear, work clothes,
as well as apparel for various occasions.
Express is growing at a slower rate than Urban Outfitters, however their margins
are relatively comparable. They also cater to the same consumer base as the
UOIG 10
University of Oregon Investment Group
Anthropology segment of Urban Outfitters, targeting women in their twenties and
thirties. They are also more similar in size to Urban Outfitters than some of their
other competitors. However, their style and consumer base is pretty different fro m
Urban Outfitter’s. After considering all these factors, we decided to give Express
a 15% weighting.
Figure 26: EV/EBIT Multiples
EV/EBIT Multiples
Urban Outfitters
L Brands
American Eagle
Express
Lululemon
Nordstrom
Lululemon (LULU) – 15%
9.8x
12.62x
6.12x
7.37x
20x
10.58x
Source: UOIG Projections and Factset
Founded in 1998 in Vancouver, Canada, Lululemon is a designer, manufacturer
and distributor of men’s and women’s athletic apparel. They sell various styles of
yoga pants, sports bras and other fitness and dance-inspired apparel. As of
February 1, 2015, Lululemon operates 302 stores globally.
Lululemon operates in a different segment of the retail industry and with a
different product offering. However, Lululemon does cater to a similar consumer
base to Urban Outfitters, attracting consumers who want premiu m products even
at high price. They are growing at a little more of an aggressive pace than Urban
Outfitters, however, it is our belief that their qualitative similarities combined with
their quantitative measures deem them worthy of a 15% weighting.
Nordstrom (JWN) – 10%
Nordstrom, Inc., is a specialty retailer who offers apparel, shoes, cosmetics and
accessories in over 300 stores throughout the United States and Canada. They
offer primarily brand name and some private label merchandise through their
various retail channels and emphasize customer service as part of the Nordstrom
experience.
Figure 27: Implied Price From Forward
Comparables
Multiple
Implied Price
Weight
EV/Revenue
49.54
0.00%
EV/Gross Profit
47.29
0.00%
EV/EBIT
38.34
50.00%
EV/EBITDA
39.96
50.00%
EV/(EBITDA-Capex)
40.84
0.00%
Market Cap/Net Income = P/E
53.25
0.00%
Price Target
$39.15
Current Price
34.61
Undervalued
13.11%
Source: UOIG Projections
Nordstrom is qualitatively similar to Urban Outfitters because they also offer high
quality retail products. However, their price point for some of their merchandise
is far above Urban Outfitter’s and they are much larger. Quantitatively, most of
their margins are well in line with Urban Outfitter’s and they do retail a large
portion of their clothing at prices and in styles that are extremely comparable to
Urban Outfitters. For those reasons, we decided to give Nordstrom a 10%
weighting.
Discounted Cash Flow Analysis
Revenue Model:
Revenue was initially segmented into two categories, retail operations and
wholesale operations. Retail was then further broken out by both continent and
brand.
Retail sales: projected off of revenue per square foot and store openings .
Urban Outfitters North American Retail Operations
For fiscal 2016 management predicts Urban Outfitters to open a net total of 4
new stores. Urban Outfitters brand has put a lot of focus this past year in
correcting the use of repetitive inventory and has successfully increased Q1
revenue per square foot by 1.81 percent. This trend was projected to continue
throughout the year until 2017 when revenue per square foot will grow at a
steady projected rate of 1.5% year over year. Projected store openings are lower
than the historical average in order to account for unpredictable store closings.
Urban Outfitters projected store openings is 4 every year until 2023 when the
brand will continue to open only 3 stores a year.
UOIG 11
University of Oregon Investment Group
Anthropologie Group North American Retail Operations
For fiscal 2016 management predicts Anthropologie to open 14 new stores.
Projected store openings are trended down compared to historical average. Due
to poor choice and women’s dress and accessories Q1 2016 revenue per square
foot only increased by 1% year over year. Management has already discussed
and put in a plan to expedite the shipment of new inventory in order to increase
sales throughout the rest of the year. Going forward revenue per square foot is
expected to increase year over year growth to 2.5% due to management ’s active
involvement of assessing problems and rapidly addressing how to fix them. In
addition, Terrain and Bhldn sales will also be included in Anthropologie group
revenue.
Figure 28: Free People Revenue
Projections
25%
20%
15%
10%
5%
0%
Free People North American Retail Operations
Free People is Urban Outfitters fastest growing brand. In addition, Free people
also has the highest margins of all Urban Outfitters brands. Management
predicts to open 15 new stores in fiscal 2016 and Q1 sales were up 17% year
over year. While management predicts growth and store openings to continue
this trend, we projected future revenue per square foot growth down along with
the number of store openings. This allows us to account for possible store
closings and also unsuccessful store openings.
Source: UOIG Projections
Figure 29: Cost of Goods Sold
Projections
Urban Outfitters and Anthropologie European Retail Operations
Unfortunately not very much guidance was given regarding the European
operations of Urban Outfitters brands so we projected Revenue Per Square foot
and Store Expansion relatively lower than historical averages. Currently, both
Urban Outfitters brands are selling extremely well in Europe especially through
direct to consumer channels.
58.50%
58.00%
Free People European Retail Operations
The company has announced plans to open its Free People stores in Europe
however has given no guidance as to how big the stores will be or when. We
thought it was important to capture this addition so we projected future revenue
growth based upon other store openings and still lowered the revenue per square
foot substantially.
57.50%
57.00%
Source: UOIG Projections
Intersegment Elimination:
Intersegment elimination is the buying and selling of URBN products to
different retail segments within the company. Because these are varying and
cannot be predicted, we planned it to be stable as a percent of revenue.
Cost of Goods Sold:
Figure 30: Free People Historical
Revenue
The company intends to move a part of its production operation from Southeast
China to some different region within China, and will also run production in
Vietnam. Due to this operational shift, it will be getting rid of hig h market pressure
in Southeast China, specifically the growing labor cost there. Altogether, it will
have improved margins, including IMU boost.
350000
Moreover, URBN will also increase the use of boat freight instead of using air
freight as an inbound logistic. By doing so, the company will get a prominent
saving in inventory transportation cost, which will ultimately help in margin
expansion in the upcoming period.
300000
250000
200000
150000
Because they have such a wide breadth of producers who they source their
products from, they have relatively strong control over who they buy their
products from. This being said, they will be in a good position to negotiate
100000
50000
0
2011
2012
2013
2014
2015
Source: URBN 10-K
UOIG 12
University of Oregon Investment Group
prices and drive cost of goods down. The price of cotton will also affect input
prices which may lead to a slight decrease in costs as well.
Selling General and Administrative:
Figure 31: Beta Calculations
WFM
Beta
SE
Weighting
1 Year Daily
0.54
0.17
1 Year Daily Hamada-Comps
0.75
0.00%
3 year daily
0.92
0.09
50.00%
3 year weekly
1.15
0.19
0.00%
3 Year Daily Vasicek- Comps
1.01
7.00%
3 Year Daily Vasicek-ETF
0.78
7.00%
3 Year Daily Hamada
0.94
7.00%
3 Year Daily Hamada- Comps
1.06
7.00%
3 Year Daily Hamada-ETF
0.77
7.00%
3 Year Weekly Hamada
0.88
5 year daily
0.89
5 Year Daily Hamada
0.95
URBN Beta
0.90
10.00%
5.00%
0.06
0.00%
0.00%
Source: UOIG Projections
Selling General and Administrative Expenses are projected to increase
significantly in Q1 and Q2 due to increased integration costs of the new
fulfillment center opening in Q3 2016. Once the fulfilment center is open for use
SG&A costs are projected to be above historical averages but less than previous
quarters. SG&A expenses are projected to hold steady around 25% of total
revenue, however in 2018 SG&A costs will increase due to the opening of the
European free people.
Beta:
Urban Outfitter’s beta was calculated using various linear regressions in
comparison with the S&P 500. We also used the Hamada and Vasicek methods
to compare Urban Outfitters against its comparable companies. Upon obtaining a
series of betas to evaluate, we weighted my betas according to standard of errors
and which companies would reflect Urban Outfitter’s risk going forward. We
weighted my three year daily the highest due to its low standard of error and
relevance to Urban Outfitter’s current state. From there we weighted the 1 yea r
Hamada 10% and gave an equal weighting to the rest of my three year daily
calculations and a 5% weighting to my three year weekly beta.
Capital Expenditures:
Figure 32: Final Implied Price
Final Implied Price
Price Target
Weight
DCF
$41.87
50.00%
Forward Comparable Analysis
$39.15
50.00%
Price Target
$40.51
Current Price
$34.61
Undervalued
17.05%
Source: UOIG Projections
Capital expenditures for 2016 were based off of management guidance. They will
be opening their new fulfillment center in Gap, Pennsylvania later this year and
most of their capital expenditures are attributed to the cost of opening this
fulfilment center. Being close in proximity to their retail distribution center, this
new fulfillment center will enable Urban Outfitters to decrease their delivery costs
and hold inventory more easily. As Urban Outfitters continues to grow through
2017 capital expenditures will increase however because we projected Urban
Outfitters to grow at a slower rate after 2017 Capital expenditures will stay steady
year over year.
Recommendation
Based on a 50/50 weighting of our DCF and Forward Comparable Analysis, a
comprehensive price target of $40.51 was reached.
With its strong brand loyalty and recognition, increasing growth in brick and
mortar stores as well as growing ecommerce, Urban Outfitters is well positioned
to capture market share and return significant value to its shareholders.
UOIG 13
May 26, 2015
University of Oregon Investment Group
Appendix 1 – Relative Valuation
Comparables Analysis
(In Thousands)
Stock Characteristics
Current Price
Beta
Max
$88.46
1.90
Min
$15.74
0.35
Median
$63.00
1.25
Weight Avg.
$54.37
1.30
Size
Short-Term Debt
Long-Term Debt
Cash and Cash Equivalent
Non-Controlling Interest
Preferred Stock
Diluted Basic Shares
Market Capitalization
Enterprise Value
0.00
4,765,000.00
1,681,000.00
309,405.73
26,021,833.40
29,105,833.40
258,804.00
84,144.00
1,443,069.60
1,296,437.60
199,527.00
664,479.00
192,802.00
9,704,864.40
9,040,385.40
Growth Expectations
% Revenue Growth 2016E
% Revenue Growth 2017E
% EBITDA Growth 2016E
% EBITDA Growth 2017E
% EPS Growth 2016E
% EPS Growth 2017E
12.24%
14.77%
30.40%
18.14%
50.70%
20.73%
3.40%
2.20%
3.00%
7.40%
1.10%
10.70%
Profitability Margins
Gross Margin
EBIT Margin
EBITDA Margin
Net Margin
52.14%
22.41%
25.73%
13.58%
35.94%
6.61%
10.93%
4.02%
Credit Metrics
Interest Expense
Debt/EV
Leverage Ratio
Interest Coverage Ratio
Operating Results
Revenue
Gross Profit
EBIT
EBITDA
Net Income
Capital Expenditures
Multiples
EV/Revenue
EV/Gross Profit
EV/EBIT
EV/EBITDA
EV/(EBITDA-Capex)
Market Cap/Net Income = P/E
Multiple
EV/Revenue
EV/Gross Profit
EV/EBIT
EV/EBITDA
EV/(EBITDA-Capex)
Market Cap/Net Income = P/E
Price Target
Current Price
Undervalued
0.16
1.72
-
-
URBN
LB
Urban Outfitters
L Brands
AEO
American Eagle
Outfitters Inc.
EXPR
Express Inc.
LULU
Lululemon
Athletica Inc.
JWN
Nordstrom Inc.
$34.61
0.92
35.00%
$88.46
1.90
25.00%
$15.74
1.05
15.00%
$17.15
1.30
15.00%
$63.00
0.35
10.00%
$74.47
1.25
0.00
2,009,979.05
925,319.95
218,985.17
13,295,252.12
14,380,711.22
258,804.00
134,078.25
4,563,815.98
4,305,011.98
4,765,000.00
1,681,000.00
294,855.00
26,021,833.40
29,105,833.40
410,697.00
192,802.00
3,034,703.48
2,624,006.48
199,527.00
346,159.00
84,144.00
1,443,069.60
1,296,437.60
664,479.00
160,155.00
9,704,864.40
9,040,385.40
0.00
3,123,000.00
827,000.00
309,405.73
17,567,444.64
19,871,444.64
5.40%
6.30%
7.20%
8.30%
7.10%
12.60%
6.38%
6.35%
12.38%
9.37%
20.03%
13.43%
5.82%
8.55%
17.02%
11.97%
21.43%
16.67%
5.30%
6.30%
7.20%
7.40%
7.10%
12.60%
5.40%
2.20%
30.40%
8.40%
50.70%
10.70%
3.40%
3.80%
8.90%
7.50%
29.60%
14.30%
12.24%
14.77%
4.15%
18.14%
2.12%
20.73%
8.30%
8.10%
3.00%
8.30%
1.10%
10.90%
42.83%
12.90%
18.88%
5.03%
43.02%
14.67%
18.54%
7.61%
41.95%
12.50%
16.37%
9.49%
42.83%
16.78%
20.15%
9.18%
36.45%
12.61%
16.40%
5.03%
52.14%
6.61%
10.93%
4.02%
50.02%
22.41%
25.73%
13.58%
35.94%
12.90%
18.88%
4.99%
0.15
0.69
-
0.10
0.82
-
-
0.16
1.72
-
-
0.15
0.69
-
-
0.16
1.14
-
$14,553,000
$5,890,000
$2,307,000
$2,771,000
$1,262,000
$1,161,000
$2,017,000
$1,009,000
$176,000
$291,000
$107,000
$93,000
$3,402,000
$1,388,000
$452,000
$558,000
$274,000
$150,000
$7,820,850
$3,254,150
$1,196,700
$1,505,650
$614,200
$475,300
$3,516,485
$1,475,244
$439,510
$575,719
$333,539
$160,000
$13,752,000
$5,890,000
$2,307,000
$2,771,000
$1,262,000
$824,000
$3,402,000
$1,240,000
$429,000
$558,000
$171,000
$150,000
$2,662,000
$1,388,000
$176,000
$291,000
$107,000
$93,000
$2,017,000
$1,009,000
$452,000
$519,000
$274,000
$129,000
$14,553,000
$5,231,000
$1,878,000
$2,748,000
$726,000
$1,161,000
4.48x
8.96x
20.00x
17.42x
23.18x
35.42x
0.49x
0.93x
6.12x
4.46x
6.43x
13.49x
1.37x
3.80x
10.58x
7.23x
12.52x
20.62x
1.82x
4.12x
11.11x
8.86x
12.55x
21.41x
1.22x
2.92x
9.80x
7.48x
10.36x
13.68x
2.12x
4.94x
12.62x
10.50x
14.95x
20.62x
0.77x
2.12x
6.12x
4.70x
6.43x
17.75x
0.49x
0.93x
7.37x
4.46x
6.55x
13.49x
4.48x
8.96x
20.00x
17.42x
23.18x
35.42x
1.37x
3.80x
10.58x
7.23x
12.52x
24.20x
Implied Price
Weight
49.55
0.00%
47.29
0.00%
38.34
50.00%
39.96
50.00%
40.85
0.00%
53.26
0.00%
$39.15
34.61
13.12%
UOIG 14
May 26, 2015
University of Oregon Investment Group
Appendix 2 – Discounted Cash Flows Valuation
Discounted Cash Flow Analysis
(in thousands)
Total Revenue
% YoY Growth
Cost of Goods Sold
% Revenue
Gross Profit
Gross Margin
Selling General and Administrative Expense
% Revenue
Depreciation and Amortization
Q1
2011A
2012A
$2,274,102.00
$2,480,686.00
2013A
$2,794,925.00
2014A
$3,086,608.00
2015A
Q2
Q3
Q4
04/30/2015A 07/31/2015E 10/31/2015E 01/31/2016E
Q1
2016E
Q2
Q3
Q4
04/30/2016E 07/31/2016E 10/31/2016E
$3,323,077.00 $739,010.00 $862,445.60 $916,624.39 $998,404.90 $3,516,484.90 $807,824.74 $939,116.74
01/31/2017E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
$993,231.22 $1,076,964.39 $3,817,137.09 $4,200,572.57 $4,508,444.70 $4,809,431.46 $5,142,265.50 $5,480,125.58 $5,799,230.41 $6,125,976.45 $6,407,580.97
23.96%
9.08%
12.67%
10.44%
7.66%
7.68%
6.31%
12.54%
(1.25%)
5.82%
9.31%
8.89%
8.36%
7.87%
8.55%
10.05%
7.33%
6.68%
6.92%
6.57%
5.82%
5.63%
4.60%
1,245,079.00
1,512,526.00
1,650,006.00
1,803,534.00
2,016,733.00
458,909.15
536,009.94
566,015.56
616,515.03
2,041,241.07
497,216.12
578,965.47
612,327.05
662,333.10
2,210,432.15
2,430,023.39
2,605,498.31
2,776,639.11
2,965,796.82
3,157,462.28
3,337,938.56
3,522,436.46
3,684,359.06
60.97%
59.04%
58.43%
60.69%
62.10%
62.15%
61.75%
61.75%
58.05%
61.55%
61.65%
61.65%
61.50%
57.91%
57.85%
57.79%
57.73%
57.67%
57.62%
57.56%
57.50%
57.50%
54.75%
$1,029,023.00
$968,160.00 $1,144,919.00 $1,283,074.00 $1,306,344.00 $280,100.86 $326,435.66 $350,608.83 $381,889.88 $1,475,243.83 $310,608.61 $360,151.27 $380,904.17 $414,631.29 $1,606,704.94 $1,770,549.18 $1,902,946.38 $2,032,792.35 $2,176,468.67 $2,322,663.30 $2,461,291.84 $2,603,539.99 $2,723,221.91
45.25%
39.03%
40.96%
41.57%
39.31%
37.90%
37.85%
38.25%
38.25%
41.95%
38.45%
38.35%
38.35%
38.50%
42.09%
42.15%
42.21%
42.27%
42.33%
42.38%
42.44%
42.50%
42.50%
522,417.00
575,811.00
657,246.00
734,511.00
809,545.00
193,367.00
224,235.86
229,156.10
249,601.23
896,360.18
203,975.75
237,126.98
248,307.81
269,241.10
958,651.63
1,071,146.01
1,127,111.17
1,202,357.87
1,285,566.37
1,370,031.40
1,449,807.60
1,531,494.11
1,601,895.24
22.97%
23.21%
23.52%
23.80%
24.36%
26.17%
26.00%
25.00%
25.00%
25.49%
25.25%
25.25%
25.00%
25.00%
25.11%
25.50%
25.00%
25.00%
25.00%
25.00%
25.00%
25.00%
25.00%
92,403.00
100,739.00
113,388.00
121,732.00
131,414.00
33,679.85
33,926.34
34,173.98
34,428.43
136,208.60
34,731.10
34,838.74
35,192.13
35,647.62
140,409.59
146,473.47
154,635.23
164,035.87
174,467.63
186,042.52
198,658.99
212,051.81
226,194.74
% Revenue
4.06%
4.06%
4.06%
3.94%
3.95%
4.56%
3.93%
3.73%
3.45%
3.87%
4.30%
3.71%
3.54%
3.31%
3.68%
3.49%
3.43%
3.41%
3.39%
3.39%
3.43%
3.46%
3.53%
% Net PP&E
15.76%
15.08%
15.78%
15.77%
15.22%
3.90%
3.90%
3.90%
3.90%
15.30%
3.80%
3.80%
3.80%
3.80%
15.36%
15.36%
15.36%
15.36%
15.36%
15.36%
15.36%
15.36%
15.36%
Other Expense
2,150.00
1,567.00
1,701.00
3,114.00
4,834.00
2,011.00
809.18
807.76
898.56
3,164.84
858.86
881.24
881.24
881.24
3,435.42
3,780.52
4,057.60
4,328.49
4,628.04
4,932.11
5,219.31
5,513.38
5,766.82
.09%
.06%
.06%
.10%
.15%
.27%
.09%
.09%
.09%
.09%
9.00%
.09%
.09%
.08%
.09%
.09%
.09%
.09%
.09%
.09%
.09%
.09%
.09%
$412,053.00
$290,043.00
$372,584.00
$423,717.00
% Revenue
Earnings Before Interest & Taxes
$360,551.00 $51,043.00 $67,464.29 $86,470.99 $96,961.66 $439,510.21 $71,042.91 $87,304.31
$96,523.00 $108,861.34 $504,208.30 $549,149.19 $617,142.38 $662,070.13 $711,806.63 $761,657.27 $807,605.95 $854,480.69 $889,365.11
% Revenue
18.12%
11.69%
13.33%
13.73%
10.85%
6.91%
7.82%
9.43%
9.71%
12.50%
8.79%
9.30%
10.11%
13.21%
13.07%
13.69%
13.77%
13.84%
13.90%
13.93%
13.95%
Interest (Income)
4,669.00
5,120.00
2,126.00
2,713.00
2,319.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
% Revenue
.21%
.21%
.08%
.09%
.07%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other Income
486.00
553.00
862.00
1,088.00
580.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
% Revenue
.02%
.02%
.03%
.04%
.02%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
417,208.00
295,716.00
375,572.00
427,518.00
363,450.00
51,043.00
67,464.29
86,470.99
96,961.66
439,510.21
71,042.91
87,304.31
96,523.00
108,861.34
504,208.30
549,149.19
617,142.38
662,070.13
711,806.63
761,657.27
807,605.95
854,480.69
18.35%
11.92%
13.44%
13.85%
10.94%
6.91%
7.82%
9.43%
9.71%
12.50%
8.79%
9.30%
9.72%
10.11%
13.21%
13.07%
13.69%
13.77%
13.84%
13.90%
13.93%
13.95%
13.88%
144,250.00
103,580.00
138,258.00
145,158.00
131,022.00
18,157.00
23,612.50
30,264.85
33,936.58
105,970.93
24,865.02
30,556.51
33,783.05
38,101.47
127,306.05
192,202.22
215,999.83
231,724.54
249,132.32
266,580.05
282,662.08
299,068.24
311,277.79
36.05%
35.57%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
$232,428.00 $32,886.00 $43,851.79 $56,206.14 $63,025.08 $333,539.28 $46,177.89 $56,747.80
$62,739.95
Earnings Before Taxes
% Revenue
Less Taxes (Benefits)
Tax Rate
Net Income
34.58%
35.03%
36.81%
33.95%
$272,958.00
$192,136.00
$237,314.00
$282,360.00
9.72%
13.88%
889,365.11
$70,759.87 $376,902.25 $356,946.97 $401,142.55 $430,345.58 $462,674.31 $495,077.23 $524,943.87 $555,412.45 $578,087.32
Net Margin
12.00%
7.75%
8.49%
9.15%
6.99%
4.45%
5.08%
6.13%
6.31%
9.49%
5.72%
6.04%
6.32%
6.57%
9.87%
8.50%
8.90%
8.95%
9.00%
9.03%
9.05%
9.07%
9.02%
Add Back: Depreciation and Amortization
92,403.00
100,739.00
113,388.00
121,732.00
131,414.00
33,679.85
33,926.34
34,173.98
34,428.43
136,208.60
34,731.10
34,838.74
35,192.13
35,647.62
140,409.59
146,473.47
154,635.23
164,035.87
174,467.63
186,042.52
198,658.99
212,051.81
226,194.74
$365,361.00
$292,875.00
$350,702.00
$404,092.00
16.07%
11.81%
12.55%
13.09%
10.95%
9.01%
9.02%
9.86%
9.76%
13.36%
10.02%
9.75%
9.86%
9.88%
13.55%
11.98%
12.33%
12.36%
12.39%
12.43%
12.48%
12.53%
12.55%
347,300.00
361,865.00
398,471.00
471,109.00
550,313.00
574,721.10
579,667.89
590,559.87
596,261.26
607,458.18
530,225.94
597,039.77
630,228.31
631,775.86
648,445.60
702,332.73
748,780.04
796,200.90
848,560.00
901,395.60
950,801.51
998,482.32
1,044,444.48
Operating Cash Flow
% Revenue
Current Assets
% Revenue
Current Liabilities
% Revenue
Net Working Capital
% Revenue
Change in Working Capital
Capital Expenditures
% Revenue
Unlevered Free Cash Flow
Discounted Free Cash Flow
$363,842.00 $66,565.86 $77,778.13 $90,380.13 $97,453.50 $469,747.88 $80,908.99 $91,586.55
$97,932.08 $106,407.49 $517,311.84 $503,420.45 $555,777.77 $594,381.45 $637,141.94 $681,119.75 $723,602.85 $767,464.26 $804,282.06
15.27%
14.59%
14.26%
15.26%
16.56%
77.77%
67.21%
64.43%
59.72%
17.27%
65.64%
63.57%
63.45%
58.66%
16.99%
16.72%
16.61%
16.55%
16.50%
16.45%
16.40%
16.30%
16.30%
211,024.00
219,399.00
250,195.00
331,830.00
353,740.00
320,641.00
358,121.16
374,022.60
407,392.61
407,392.61
342,068.39
387,559.19
404,979.23
429,849.27
429,849.27
476,704.60
506,057.16
539,608.88
576,703.05
614,328.35
649,819.26
684,260.34
717,706.12
10.64%
43.39%
41.52%
40.80%
40.80%
11.59%
42.34%
41.27%
40.77%
39.91%
11.26%
11.35%
11.22%
11.22%
11.21%
11.21%
11.21%
11.17%
11.20%
9.28%
8.84%
8.95%
10.75%
$136,276.00
$142,466.00
$148,276.00
$139,279.00
$196,573.00 $254,080.10 $221,546.72 $216,537.27 $188,868.65 $200,065.57 $188,157.55 $209,480.58 $225,249.07 $201,926.60 $218,596.34 $225,628.13 $242,722.88 $256,592.01 $271,856.95 $287,067.25 $300,982.25 $314,221.98 $326,738.35
5.99%
5.74%
5.31%
4.51%
5.92%
34.38%
25.69%
23.62%
18.92%
5.69%
23.29%
22.31%
22.68%
18.75%
5.73%
5.37%
5.38%
5.34%
5.29%
5.24%
5.19%
5.13%
5.10%
-
6,190.00
5,810.00
(8,997.00)
57,294.00
57,507.10
(32,533.38)
(5,009.45)
(27,668.62)
3,492.57
(11,908.02)
21,323.03
15,768.49
(23,322.48)
18,530.76
7,031.79
17,094.75
13,869.13
15,264.93
15,210.30
13,915.00
13,239.73
12,516.37
147,490.00
190,010.00
168,875.00
186,101.00
229,804.00
40,000.00
40,276.21
40,698.12
41,833.17
160,000.00
37,563.85
44,138.49
47,178.48
51,155.81
180,036.63
199,609.89
215,837.36
231,950.93
249,825.03
268,180.95
285,851.83
304,128.20
320,379.05
6.49%
7.66%
6.04%
6.03%
6.92%
5.41%
4.67%
4.44%
4.19%
4.55%
4.65%
4.70%
4.75%
4.75%
4.72%
4.75%
4.79%
4.82%
4.86%
4.89%
4.93%
4.96%
5.00%
$217,871.00
$96,675.00
$176,017.00
$226,988.00
$76,744.00 ($30,941.25) $70,035.30 $54,691.46 $83,288.96 $306,255.31 $55,253.17 $26,125.03
$34,985.11
$78,574.15 $318,744.45 $296,778.76 $322,845.67 $348,561.39 $372,051.98 $397,728.49 $423,836.02 $450,096.32 $471,386.64
30,537.72
67,266.35
(30,346.08)
67,366.90
51,595.73
77,063.10
50,139.62
23,251.20
235,076.93
236,608.98
236,360.35
233,430.73
230,887.37
227,651.44
223,685.11
216,754.41
UOIG 15
May 26, 2015
University of Oregon Investment Group
Appendix 3 – Revenue Model
Revenue Model
($ in thousands)
Retail Operations
2011A
2,153,792.00
% Growth
8.68%
13.05%
2015A
2,908,981.00
3,097,274.00
9.93%
Q2
Q3
Q4
07/31/2015E
10/31/2015E
01/31/2016E
$686,564.19
6.47%
7.20%
790,521.01
838,947.11
5.11%
2016E
931,185.57
6.00%
3,247,217.88
1.96%
Q1
Q2
Q3
Q4
04/30/2016E
07/31/2016E
10/31/2016E
01/31/2017E
746,613.57
4.84%
855,370.82
8.75%
902,978.16
8.20%
998,992.41
7.63%
7.28%
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
3,503,954.96
3,840,532.63
4,098,972.84
4,349,004.47
4,630,539.63
4,917,963.29
5,188,829.89
5,471,045.66
5,713,173.45
7.91%
9.61%
6.73%
6.10%
6.47%
6.21%
5.51%
5.44%
4.43%
94.36%
94.68%
94.25%
93.21%
92.90%
91.66%
91.53%
93.27%
92.34%
92.42%
91.08%
90.91%
92.76%
91.80%
91.43%
90.92%
90.43%
90.05%
89.74%
89.47%
89.31%
89.16%
140,657.00
154,957.00
185,792.00
237,491.00
54,001.00
73,739.54
79,606.24
69,320.40
276,667.18
62,911.17
85,722.22
92,343.24
80,238.36
321,214.98
368,879.71
418,959.52
470,548.06
522,547.35
573,694.77
622,604.53
667,822.42
707,891.76
14.18%
12.73%
10.17%
19.90%
27.83%
17.70%
19.00%
19.00%
20.00%
16.50%
16.50%
16.25%
16.00%
15.75%
16.10%
14.84%
13.58%
12.31%
11.05%
9.79%
8.53%
7.26%
6.00%
5.49%
5.67%
5.54%
6.02%
7.15%
7.31%
8.55%
8.68%
6.94%
7.87%
7.79%
9.13%
9.30%
7.45%
8.42%
8.78%
9.29%
9.78%
10.16%
10.47%
10.74%
10.90%
11.05%
(4,458.00)
(765.00)
(6,316.00)
(8,165.00)
(11,688.00)
(1,555.19)
(1,814.95)
(1,928.96)
(2,101.06)
(7,400.16)
(1,700.00)
(1,976.30)
(2,090.17)
(2,266.38)
(8,032.86)
(8,839.77)
(9,487.66)
(10,121.06)
(10,821.48)
(11,532.48)
(12,204.01)
(12,891.62)
(13,484.24)
.20%
.03%
.23%
.26%
.35%
.21%
.21%
.21%
.21%
.21%
.21%
.21%
.21%
.21%
.21%
.21%
.21%
.21%
.21%
.21%
.21%
.21%
.21%
$2,274,102.00 $2,480,686.00 $2,794,925.00
$3,086,608.00
$3,323,077.00
$739,010.00
$862,445.60
$916,624.39
$998,404.90
$3,516,484.90
$807,824.74
$939,116.74
$993,231.22 $1,076,964.39
$3,817,137.09
$4,200,572.57
$4,508,444.70
$4,809,431.46
$5,142,265.50
$5,480,125.58
$5,799,230.41
$6,125,976.45
$6,407,580.97
10.44%
7.66%
7.68%
6.31%
12.54%
(1.25%)
5.82%
9.31%
8.89%
8.55%
10.05%
7.33%
6.68%
6.92%
6.57%
5.82%
5.63%
4.60%
% of Total Revenue
% Growth
17.35%
9.08%
12.67%
UO North American Retail Operations
Q1
2011A
Total Stores
2012A
2013A
2014A
2015A
Q2
04/30/2015A
Q3
07/31/2015E
Q4
10/31/2015E
Q1
01/31/2016E
2016E
8.36%
Q2
04/30/2016E
7.87%
Q3
07/31/2016E
Q4
10/31/2016E
01/31/2017E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
154.00
167.00
180.00
190.00
195.00
195.00
196.00
197.00
199.00
199.00
200.00
201.00
202.00
204.00
204.00
208.00
212.00
216.00
220.00
224.00
227.00
230.00
233.00
12.41%
8.44%
7.78%
5.56%
2.63%
2.63%
2.08%
1.55%
2.05%
2.05%
2.56%
2.55%
2.54%
2.51%
2.51%
1.96%
1.92%
1.89%
1.85%
1.82%
1.34%
1.32%
1.30%
1,416,800.00
1,503,000.00
1,602,000.00
1,672,000.00
1,755,000.00
1,755,000.08
1,764,000.08
1,773,000.08
1,791,000.08
1,791,000.08
1,800,000.00
1,809,000.00
1,818,000.00
1,836,000.00
1,836,000.00
1,872,000.00
1,908,000.00
1,922,400.00
1,958,000.00
1,993,600.00
2,020,300.00
2,047,000.00
2,073,700.00
% Growth
Total Square Feet
Q1
04/30/2015A
94.71%
% of Total Revenue
Total Revenue
2,646,284.00
2014A
124,768.00
% Growth
Intersegment Elimination
2013A
2,340,794.00
17.45%
% of Total Revenue
Wholesale Operations
2012A
% Growth
12.41%
6.08%
6.59%
4.37%
4.96%
4.96%
4.88%
2.96%
2.05%
2.05%
2.56%
2.55%
2.54%
2.51%
2.51%
1.96%
1.92%
.75%
1.85%
1.82%
1.34%
1.32%
1.30%
Average Square Feet Per Store
9,200.00
9,000.00
8,900.00
8,800.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
8,900.00
8,900.00
8,900.00
8,900.00
8,900.00
8,900.00
-
(2.17%)
(1.11%)
(1.12%)
2.27%
1.12%
1.12%
1.12%
1.12%
-
(1.11%)
% Growth
Revenue Per Square Foot
Stores Opened
-
-
-
-
-
-
-
-
-
-
-
0.52
0.52
0.67
0.62
0.13
0.15
0.16
0.19
0.64
0.13
0.15
0.17
0.20
0.65
0.65
0.66
0.67
0.68
0.69
0.70
0.71
0.72
-
1.53%
.32%
28.89%
(7.04%)
1.81%
2.00%
2.15%
2.50%
2.65%
1.00%
1.00%
1.00%
1.00%
1.00%
1.09%
1.19%
1.28%
1.38%
1.47%
1.56%
1.66%
1.75%
17.00
Stores Closed
Total UO Revenue
-
0.51
% Growth
13.00
13.00
11.00
8.00
1.00
1.00
1.00
2.00
5.00
1.00
1.00
1.00
2.00
5.00
4.00
4.00
4.00
4.00
4.00
3.00
3.00
3.00
-
-
-
1.00
3.00
1.00
-
-
-
1.00
-
-
-
-
-
-
-
-
-
-
-
-
-
$723,164.44
$778,935.40
$832,887.65
$1,120,438.70
$1,093,292.33
$225,132.19
$269,892.01
$289,779.13
$348,797.27
$1,133,600.60
$233,213.85
$279,544.77
$300,105.26
$361,136.61
$1,174,000.49
$1,222,283.65
$1,260,582.85
$1,286,369.79
$1,328,206.59
$1,372,218.53
$1,412,324.52
$1,454,690.37
$1,499,453.72
% Growth
10.74%
7.71%
6.93%
34.52%
(2.42%)
-
-
-
-
3.69%
3.59%
3.58%
3.56%
3.54%
3.56%
4.11%
3.13%
2.05%
3.25%
3.31%
2.92%
3.00%
3.08%
% of Total Revenue
31.80%
31.40%
29.80%
36.30%
32.90%
30.46%
31.29%
31.61%
34.94%
32.24%
28.87%
29.77%
30.22%
33.53%
30.76%
29.10%
27.96%
26.75%
25.83%
25.04%
24.35%
23.75%
23.40%
Anthropologie North American Retail Operations
Q1
2011A
Total Stores
2013A
2014A
2015A
Q2
04/30/2015A
Q3
07/31/2015E
Q4
10/31/2015E
Q1
01/31/2016E
2016E
Q2
04/30/2016E
Q3
07/31/2016E
Q4
10/31/2016E
01/31/2017E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
165.00
177.00
183.00
197.00
199.00
202.00
206.00
211.00
211.00
214.00
217.00
220.00
224.00
224.00
235.00
246.00
257.00
268.00
278.00
288.00
298.00
11.03%
9.27%
7.27%
3.39%
7.65%
8.74%
6.32%
6.19%
7.11%
7.11%
7.54%
7.43%
6.80%
6.16%
6.16%
4.91%
4.68%
4.47%
4.28%
3.73%
3.60%
3.47%
1.68%
1,102,300.00
1,188,000.00
1,256,700.00
1,299,300.00
1,379,000.00
1,393,000.00
1,414,000.00
1,442,000.00
1,477,000.00
1,477,000.00
1,498,000.00
1,519,000.00
1,540,000.00
1,568,000.00
1,568,000.00
1,645,000.00
1,722,000.00
1,799,000.00
1,876,000.00
1,946,000.00
2,016,000.00
2,086,000.00
2,121,000.00
% Growth
Total Square Feet
2012A
151.00
% Growth
-
Average Square Feet Per Store
5.78%
3.39%
6.13%
8.74%
6.32%
6.19%
7.11%
7.11%
7.54%
7.43%
6.80%
6.16%
6.16%
4.91%
4.68%
4.47%
4.28%
3.73%
3.60%
3.47%
1.68%
7,300.00
7,200.00
7,100.00
7,100.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
-
(1.37%)
(1.39%)
-
(1.41%)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
% Growth
Revenue Per Square Foot
7.77%
0.72
% Growth
Stores Opened
303.00
15.00
Stores Closed
-
0.68
0.66
0.95
0.95
0.21
0.25
0.26
0.26
0.97
0.22
0.25
0.26
0.26
0.99
1.01
1.03
1.05
1.08
1.10
1.13
1.15
1.18
(5.42%)
(3.56%)
43.14%
.04%
1.21%
2.20%
2.50%
3.00%
2.93%
2.50%
2.00%
1.50%
1.50%
1.85%
1.93%
2.01%
2.09%
2.17%
2.25%
2.34%
2.42%
2.50%
14.00
14.00
8.00
12.00
2.00
3.00
4.00
5.00
14.00
3.00
3.00
3.00
4.00
13.00
11.00
11.00
11.00
11.00
10.00
10.00
10.00
5.00
-
-
2.00
2.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$798,209.80
$813,665.01
$830,092.73
$1,228,469.98
$1,304,307.72
$298,881.00
$346,825.92
$369,512.50
$380,327.50
$1,395,546.92
$329,444.96
$380,031.93
$400,544.38
$409,816.40
$1,519,837.66
$1,662,573.46
$1,775,373.83
$1,893,552.16
$2,017,510.60
$2,139,980.77
$2,268,759.65
$2,404,306.34
$2,505,763.22
% Growth
14.10%
1.94%
2.02%
47.99%
6.17%
-
-
-
-
7.00%
10.23%
9.57%
8.40%
7.75%
8.91%
9.39%
6.78%
6.66%
6.55%
6.07%
6.02%
5.97%
4.22%
% of Total Revenue
35.10%
32.80%
29.70%
39.80%
39.25%
40.44%
40.21%
40.31%
38.09%
39.69%
40.78%
40.47%
40.33%
38.05%
39.82%
39.58%
39.38%
39.37%
39.23%
39.05%
39.12%
39.25%
39.11%
Total Anthropologie Revenue
Free People North American Retail Operations
Q1
2011A
Total Stores
% Growth
Total Square Feet
% Growth
Average Square Feet Per Store
% Growth
Revenue Per Square Foot
% Growth
Stores Opened
Stores Closed
Total Free People Revenue
% Growth
% of Total Revenue
2012A
2013A
2014A
2015A
Q2
04/30/2015A
Q3
07/31/2015E
Q4
10/31/2015E
Q1
01/31/2016E
2016E
Q2
04/30/2016E
Q3
07/31/2016E
Q4
10/31/2016E
01/31/2017E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
42.00
62.00
77.00
90.00
102.00
105.00
109.00
113.00
117.00
117.00
120.00
123.00
126.00
129.00
131.00
142.00
153.00
163.00
173.00
183.00
188.00
193.00
7.30%
47.62%
24.19%
16.88%
13.33%
14.13%
13.54%
14.14%
14.71%
14.71%
14.29%
12.84%
11.50%
10.26%
11.97%
8.40%
7.75%
6.54%
6.13%
5.78%
2.73%
2.66%
1.55%
58,800.00
86,800.00
107,800.00
135,000.00
163,200.00
168,000.00
174,400.00
180,800.00
187,200.00
187,200.00
192,000.00
196,800.00
201,600.00
206,400.00
209,600.00
227,200.00
244,800.00
260,800.00
276,800.00
292,800.00
300,800.00
308,800.00
313,600.00
196.00
-
47.62%
24.19%
25.23%
20.89%
-
-
-
-
14.71%
14.29%
12.84%
11.50%
10.26%
11.97%
8.40%
7.75%
6.54%
6.13%
5.78%
2.73%
2.66%
1.55%
1,400.00
1,400.00
1,400.00
1,500.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
1,600.00
-
-
-
7.14%
6.67%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.89
0.77
0.86
1.76
1.87
0.46
0.49
0.50
0.57
2.02
0.49
0.52
0.54
0.60
2.15
2.29
2.43
2.57
2.71
2.84
2.97
3.10
3.23
-
(13.25%)
10.88%
105.77%
6.41%
3.12%
3.50%
4.50%
5.00%
7.78%
6.61%
6.87%
6.75%
6.61%
6.71%
6.37%
6.03%
5.69%
5.35%
5.02%
4.68%
4.34%
4.00%
15.00
20.00
15.00
13.00
12.00
3.00
4.00
4.00
4.00
15.00
3.00
3.00
3.00
3.00
14.00
11.00
11.00
10.00
10.00
10.00
5.00
5.00
3.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$52,304.35
$66,978.52
$92,232.53
$237,668.82
$305,723.08
$77,958.00
$84,836.88
$90,689.28
$106,142.40
$359,626.56
$94,984.03
$102,310.24
$107,948.33
$124,764.40
$430,007.01
$520,682.23
$594,849.25
$669,800.98
$748,952.22
$831,977.54
$894,682.68
$958,324.91
$1,012,150.00
10.74%
28.06%
37.70%
157.68%
28.63%
-
-
-
-
17.63%
21.84%
20.60%
19.03%
17.54%
19.57%
21.09%
14.24%
12.60%
11.82%
11.09%
7.54%
7.11%
5.62%
2.30%
2.70%
3.30%
7.70%
9.20%
10.55%
9.84%
9.89%
10.63%
10.23%
11.76%
10.89%
10.87%
11.58%
11.27%
12.40%
13.19%
13.93%
14.56%
15.18%
15.43%
15.64%
15.80%
UOIG 16
May 26, 2015
University of Oregon Investment Group
Appendix 3 – Revenue Model
UO European Retail Operations
2011A
Total Stores
% Growth
Total Square Feet
2013A
2014A
2015A
Q1
Q2
Q3
Q4
04/30/2015A
07/31/2015E
10/31/2015E
01/31/2016E
2016E
Q1
Q2
Q3
Q4
04/30/2016E
07/31/2016E
10/31/2016E
01/31/2017E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
22.00
30.00
35.00
40.00
43.00
43.00
43.00
43.00
43.00
43.00
43.00
43.00
44.00
45.00
45.00
47.00
49.00
51.00
53.00
55.00
57.00
59.00
22.22%
36.36%
16.67%
14.29%
7.50%
-
-
-
-
-
-
-
2.33%
4.65%
4.65%
4.44%
4.26%
4.08%
3.92%
3.77%
3.64%
3.51%
3.39%
202,400.00
270,000.00
311,500.00
352,000.00
387,000.00
387,000.00
387,000.00
387,000.00
387,000.00
387,000.02
387,000.00
387,000.00
396,000.00
405,000.00
405,000.00
423,000.00
441,000.00
453,900.00
471,700.00
489,500.00
507,300.00
525,100.00
542,900.00
% Growth
Average Square Feet Per Store
2012A
-
13.00%
9.94%
-
-
-
-
-
-
2.33%
4.65%
4.65%
4.44%
4.26%
2.93%
3.92%
3.77%
3.64%
3.51%
3.39%
9,200.00
9,000.00
8,900.00
8,800.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
9,000.00
8,900.00
8,900.00
8,900.00
8,900.00
8,900.00
8,900.00
-
(2.17%)
(1.11%)
(1.12%)
2.27%
-
-
-
-
-
-
-
-
-
-
-
-
(1.11%)
-
-
-
-
-
0.60
0.54
0.59
0.71
0.76
0.19
0.20
0.20
0.21
0.79
0.19
0.20
0.20
0.21
0.81
0.83
0.85
0.87
0.90
0.92
0.94
0.97
0.99
2.50%
% Growth
Revenue Per Square Foot
% Growth
33.40%
15.37%
61.00
-
(8.97%)
9.24%
19.94%
6.39%
4.00%
4.00%
4.00%
4.00%
4.48%
3.20%
3.20%
2.00%
2.00%
2.58%
2.57%
2.56%
2.55%
2.54%
2.53%
2.52%
2.51%
4.00
8.00
5.00
5.00
3.00
-
-
-
-
-
-
-
1.00
1.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$120,527.41
$146,360.47
$184,465.05
$250,015.25
$292,430.78
$72,098.00
$76,471.20
$76,471.20
$80,496.00
$305,536.40
$74,405.14
$78,918.28
$79,814.59
$85,924.80
$328,008.10
$351,401.22
$375,742.77
$396,604.08
$422,633.21
$449,683.51
$477,783.83
$506,963.50
$537,252.42
% Growth
0.00%
21.43%
26.03%
35.54%
16.97%
-
-
-
-
4.48%
3.20%
3.20%
4.37%
6.74%
7.35%
7.13%
6.93%
5.55%
6.56%
6.40%
6.25%
6.11%
5.97%
% of Total Revenue
5.30%
5.90%
6.60%
8.10%
8.80%
9.76%
8.87%
8.34%
8.06%
8.69%
9.21%
8.40%
8.04%
7.98%
8.59%
8.37%
8.33%
8.25%
8.22%
8.21%
8.24%
8.28%
8.38%
Stores Opened
Stores Closed
Total UO Revenue
Anthropologie European Retail Operations
2011A
Total Stores
2012A
2013A
2014A
2015A
Q1
Q2
Q3
Q4
04/30/2015A
07/31/2015E
10/31/2015E
01/31/2016E
2016E
Q1
Q2
Q3
Q4
04/30/2016E
07/31/2016E
10/31/2016E
01/31/2017E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2.00
2025E
2.00
3.00
3.00
4.00
7.00
7.00
7.00
7.00
8.00
8.00
8.00
8.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
15.00
16.00
17.00
% Growth
100.00%
50.00%
-
33.33%
75.00%
-
-
-
14.29%
14.29%
14.29%
14.29%
14.29%
12.50%
25.00%
10.00%
9.09%
8.33%
7.69%
7.14%
6.67%
6.25%
5.88%
Total Square Feet
14,600.00
21,600.00
21,300.00
28,400.00
49,000.00
49,000.00
49,000.00
49,000.00
56,000.00
56,000.00
56,000.00
56,000.00
56,000.00
63,000.00
70,000.00
77,000.00
84,000.00
91,000.00
98,000.00
105,000.00
112,000.00
119,000.00
126,000.00
% Growth
100.00%
47.95%
(1.39%)
33.33%
72.54%
-
-
-
14.29%
14.29%
14.29%
14.29%
14.29%
12.50%
25.00%
10.00%
9.09%
8.33%
7.69%
7.14%
6.67%
6.25%
5.88%
7,300.00
7,200.00
7,100.00
7,100.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
7,000.00
(1.37%)
(1.39%)
Average Square Feet Per Store
% Growth
Revenue Per Square Foot
% Growth
Stores Opened
Stores Closed
Total Anthropologie Revenue
% Growth
% of Total Revenue
-
-
-
1.25
1.03
1.05
1.30
1.02
0.26
0.26
0.26
0.28
1.04
0.26
0.26
0.26
0.28
1.06
1.07
1.09
1.10
1.12
1.13
1.15
1.16
1.18
-
(17.05%)
1.56%
24.24%
(22.00%)
2.00%
2.00%
2.00%
2.00%
2.27%
2.00%
2.00%
2.00%
-
1.47%
1.46%
1.44%
1.43%
1.41%
1.40%
1.38%
1.37%
1.35%
1.00
1.00
-
-
1.00
(1.41%)
3.00
-
-
-
-
-
-
-
1.00
-
1.00
-
-
-
-
-
1.00
-
1.00
-
1.00
-
1.00
-
1.00
-
1.00
-
1.00
-
18.00
1.00
-
1.00
-
1.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$18,192.82
$22,326.17
$22,359.40
$37,039.30
$49,846.16
$12,495.00
$12,495.00
$12,495.00
$15,422.40
$52,907.40
$14,565.60
$14,565.60
$14,565.60
$17,350.20
$61,047.00
$82,472.07
$91,265.49
$100,280.22
$109,517.12
$118,976.92
$128,660.24
$138,567.58
$148,699.32
-
22.72%
.15%
65.65%
34.58%
-
-
-
-
6.14%
16.57%
16.57%
16.57%
12.50%
15.38%
35.10%
10.66%
9.88%
9.21%
8.64%
8.14%
7.70%
7.31%
.80%
.90%
.80%
1.20%
1.50%
1.69%
1.45%
1.36%
1.54%
1.50%
1.80%
1.55%
1.47%
1.61%
1.60%
1.96%
2.02%
2.09%
2.13%
2.17%
2.22%
2.26%
2.32%
UOIG 17
May 26, 2015
University of Oregon Investment Group
Appendix 4 – Working Capital
Working Capital Model
(in thousands)
Total Revenue
Current Assets
Accounts Receivable
Days Sales Outstanding A/R
% of Revenue
Inventory
Days Inventory Outstanding
% of Revenue
Prepaid Expenses & Other Current Assets
Days Prepaid Expense Outstanding
% of Revenue
Deferred Income Taxes
% of Revenue
Total Current Assets
% of Revenue
Long Term Assets
Net PP&E Beginning
Capital Expenditures
Depreciation and Amortization
Net PP&E Ending
Total Current Assets & Net PP&E
% of Revenue
Current Liabilities
Accounts Payable
Days Payable Outstanding
% of Revenue
Accrued Charges
Days Charges Outstanding
% of Revenue
Accrued Compensation
Days Compensation Outstanding
% of Revenue
Total Current Liabilities
% of Revenue
2011A
2012A
2013A
2014A
$2,274,102.00 $2,480,686.00 $2,794,925.00 $3,086,608.00
36,502.00
5.86
1.61%
229,561.00
67.30
10.09%
66,886.00
46.73
2.94%
14,351.00
.63%
$347,300.00
15.27%
36,673.00
5.40
1.48%
250,073.00
60.35
10.08%
69,876.00
44.29
2.82%
5,243.00
.21%
$361,865.00
14.59%
39,519.00
5.18
1.41%
282,411.00
62.64
10.10%
61,827.00
34.43
2.21%
14,714.00
.53%
$398,471.00
14.26%
55,161.00
6.52
1.79%
311,207.00
62.98
10.08%
75,968.00
37.75
2.46%
28,773.00
.93%
$471,109.00
15.26%
539,961.00
586,346.00
668,244.00
718,455.00
147,490.00
190,010.00
168,875.00
186,101.00
101,105.00
108,112.00
118,664.00
132,664.00
586,346.00
668,244.00
718,455.00
771,892.00
$933,646.00 $1,030,109.00 $1,116,926.00 $1,243,001.00
41.06%
41.53%
39.96%
40.27%
82,904.00
24.30
3.65%
107,908.00
75.39
4.75%
20,212.00
14.12
.89%
$211,024.00
9.28%
95,754.00
23.11
3.86%
122,082.00
77.39
4.92%
1,563.00
0.99
.06%
$219,399.00
8.84%
% of Accounts Receivable Quick
85%
% of Inventory Quick
65%
Current Ratio
1.65
2015A
Q1
Q2
Q3
Q4
04/30/2015A
07/31/2015E
10/31/2015E
01/31/2016E
2016E
Q1
Q2
Q3
Q4
04/30/2016E
07/31/2016E
10/31/2016E
01/31/2017E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
$3,323,077.00
$739,010.00
$862,445.60
$916,624.39
$998,404.90 $3,516,484.90
$807,824.74
$939,116.74
$993,231.22 $1,076,964.39 $3,817,137.09 $4,200,572.57 $4,508,444.70 $4,809,431.46 $5,142,265.50 $5,480,125.58 $5,799,230.41 $6,125,976.45 $6,407,580.97
70,458.00
7.74
2.12%
358,237.00
64.84
10.78%
102,863.00
46.38
3.10%
18,755.00
.56%
$550,313.00
16.56%
54,283.00
6.54
7.35%
397,998.00
77.19
53.86%
119,083.00
54.81
16.11%
3,357.10
.45%
$574,721.10
77.77%
65,620.86
7.00
7.61%
407,833.65
70.00
47.29%
102,368.54
42.00
11.87%
3,844.83
.45%
$579,667.89
67.21%
69,743.16
7.00
7.61%
412,206.98
67.00
44.97%
104,614.74
42.00
11.41%
3,994.99
.44%
$590,559.87
64.43%
75,911.33
7.00
7.60%
402,075.02
60.00
40.27%
113,948.39
42.00
11.41%
4,326.53
.43%
$596,261.26
59.72%
63,536.78
7.00
7.87%
368,722.07
66.00
45.64%
93,966.35
41.00
11.63%
4,000.74
.50%
$530,225.94
65.64%
71,454.53
7.00
7.61%
415,344.79
66.00
44.23%
105,676.15
41.00
11.25%
4,564.29
.49%
$597,039.77
63.57%
75,571.94
7.00
7.61%
439,278.10
66.00
44.23%
110,658.91
41.00
11.14%
4,719.36
.48%
$630,228.31
63.45%
75,911.33
7.88
4.32%
402,075.02
71.90
11.43%
113,948.39
46.40
3.24%
15,523.45
0.57%
$607,458.18
17.27%
81,942.94
7.00
7.61%
424,757.10
59.00
39.44%
119,987.88
41.00
11.14%
5,087.94
.47%
$631,775.86
58.66%
81,942.94
7.84
2.15%
424,757.10
70.14
11.13%
119,987.88
45.68
3.14%
21,757.68
.57%
$648,445.60
16.99%
88,844.99
7.72
2.12%
465,174.16
69.87
11.07%
124,370.32
42.38
2.96%
23,943.26
.57%
$702,332.73
16.72%
95,356.69
7.72
2.12%
496,856.80
69.60
11.02%
130,868.42
42.38
2.90%
25,698.13
.57%
$748,780.04
16.61%
101,722.77
7.72
2.12%
527,459.09
69.34
10.97%
139,605.28
42.38
2.90%
27,413.76
.57%
$796,200.90
16.55%
108,762.44
7.72
2.12%
561,220.07
69.07
10.91%
149,266.58
42.38
2.90%
29,310.91
.57%
$848,560.00
16.50%
115,908.41
7.72
2.12%
595,176.69
68.80
10.86%
159,073.78
42.38
2.90%
31,236.72
.57%
$901,395.60
16.45%
122,657.70
7.72
2.12%
626,751.64
68.53
10.81%
168,336.56
42.38
2.90%
33,055.61
.57%
$950,801.51
16.40%
129,214.59
135,524.73
7.72
7.72
2.11%
2.12%
657,014.37
686,401.14
68.27
68.00
10.73%
10.71%
177,335.30
185,995.40
42.38
42.38
2.89%
2.90%
34,918.07
36,523.21
.57%
.57%
$998,482.32 $1,044,444.48
16.30%
16.30%
771,892.00
863,586.00
869,906.15
876,256.02
882,780.15
890,184.89
913,976.29
916,809.04
926,108.78
938,095.13
913,976.29
953,603.33
1,006,739.75
1,067,941.88
1,135,856.94
1,211,214.34
1,293,352.77
1,380,545.62
1,472,622.01
229,804.00
40,000.00
40,276.21
40,698.12
41,833.17
160,000.00
37,563.85
44,138.49
47,178.48
51,155.81
180,036.63
199,609.89
215,837.36
231,950.93
249,825.03
268,180.95
285,851.83
304,128.20
320,379.05
138,110.00
33,679.85
33,926.34
34,173.98
34,428.43
136,208.60
34,731.10
34,838.74
35,192.13
35,647.62
140,409.59
146,473.47
154,635.23
164,035.87
174,467.63
186,042.52
198,658.99
212,051.81
226,194.74
863,586.00
869,906.15
876,256.02
882,780.15
890,184.89
913,976.29
916,809.04
926,108.78
938,095.13
953,603.33
953,603.33
1,006,739.75
1,067,941.88
1,135,856.94
1,211,214.34
1,293,352.77
1,380,545.62
1,472,622.01
1,566,806.32
$1,413,899.00 $1,444,627.25 $1,455,923.90 $1,473,340.03 $1,486,446.15 $1,521,434.47 $1,447,034.98 $1,523,148.55 $1,568,323.44 $1,585,379.19 $1,602,048.93 $1,709,072.48 $1,816,721.92 $1,932,057.83 $2,059,774.34 $2,194,748.37 $2,331,347.12 $2,471,104.33 $2,611,250.79
42.55%
195.48%
168.81%
160.74%
148.88%
43.27%
179.13%
162.19%
157.90%
147.21%
41.97%
40.69%
40.30%
40.17%
40.06%
40.05%
40.20%
40.34%
40.75%
99,059.00
21.97
3.54%
120,041.00
66.85
4.29%
31,095.00
17.32
1.11%
$250,195.00
8.95%
137,036.00
27.73
4.44%
153,709.00
76.38
4.98%
41,085.00
20.42
1.33%
$331,830.00
10.75%
156,090.00
28.25
4.70%
152,643.00
68.82
4.59%
45,007.00
20.29
1.35%
$353,740.00
10.64%
145,379.00
28.19
19.67%
145,467.46
66.95
19.68%
29,794.54
13.71
4.03%
$320,641.00
43.39%
163,133.46
28.00
18.92%
160,864.85
66.00
18.65%
34,122.85
14.00
3.96%
$358,121.16
41.52%
172,265.61
28.00
18.79%
166,885.42
67.00
18.21%
34,871.58
14.00
3.80%
$374,022.60
40.80%
187,635.01
28.00
18.79%
184,487.86
68.00
18.48%
35,269.74
13.00
3.53%
$407,392.61
40.80%
187,635.01
33.55
5.34%
184,487.86
75.12
5.25%
35,269.74
14.36
1.00%
$407,392.61
11.59%
1.59
1.42
1.56
1.79
1.62
1.58
1.46
1.49
156,427.54
28.00
19.36%
153,554.77
67.00
19.01%
32,086.07
14.00
3.97%
$342,068.39
42.34%
176,206.88
28.00
18.76%
175,267.76
68.00
18.66%
36,084.54
14.00
3.84%
$387,559.19
41.27%
186,360.41
28.00
18.76%
180,832.86
67.00
18.21%
37,785.97
14.00
3.80%
$404,979.23
40.77%
201,579.64
28.00
18.72%
190,224.69
65.00
17.66%
38,044.94
13.00
3.53%
$429,849.27
39.91%
201,579.64
33.29
5.28%
190,224.69
72.43
4.98%
38,044.94
14.49
1.00%
$429,849.27
11.26%
221,625.12
33.29
5.28%
212,145.60
72.29
5.05%
42,933.88
14.63
1.02%
$476,704.60
11.35%
237,650.30
33.29
5.27%
223,229.77
72.29
4.95%
45,177.09
14.63
1.00%
$506,057.16
11.22%
253,283.00
33.30
5.27%
238,132.74
72.29
4.95%
48,193.14
14.63
1.00%
$539,608.88
11.22%
270,562.15
33.30
5.26%
254,612.58
72.29
4.95%
51,528.32
14.63
1.00%
$576,703.05
11.21%
288,073.20
33.30
5.26%
271,341.29
72.29
4.95%
54,913.86
14.63
1.00%
$614,328.35
11.21%
304,566.45
33.30
5.25%
287,141.35
72.29
4.95%
58,111.47
14.63
1.00%
$649,819.26
11.21%
320,551.41
33.31
5.23%
302,491.01
72.29
4.94%
61,217.92
14.63
1.00%
$684,260.34
11.17%
336,235.62
33.31
5.25%
317,263.03
72.29
4.95%
64,207.47
14.63
1.00%
$717,706.12
11.20%
1.51
1.47
1.48
1.48
1.47
1.47
1.46
1.46
1.46
UOIG 18
May 26, 2015
University of Oregon Investment Group
Appendix 6 –Sensitivity Analysis
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
42
2.0%
2.5%
3.0%
3.5%
4.0%
0
2.0%
2.5%
3.0%
3.5%
4.0%
0.95
36.25
37.85
39.71
41.89
44.47
0.91
8.70%
13.76%
19.65%
26.62%
34.96%
0.85
40.13
42.17
44.58
47.46
50.96
0.90
9.80%
14.98%
21.04%
28.19%
36.79%
0.75
44.84
47.52
50.72
54.65
59.55
0.89
10.92%
16.23%
22.45%
29.81%
38.67%
0.65
50.71
54.29
58.70
64.25
71.46
0.88
12.06%
17.51%
23.89%
31.46%
40.60%
0.55
58.20
63.16
69.46
77.73
89.05
0.87
13.23%
18.81%
25.37%
33.16%
42.58%
Adjusted Beta
Adjusted Beta
Terminal Growth Rate
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
2.3%
2.5%
3.0%
3.8%
4.5%
0
2.3%
2.5%
3.0%
3.8%
4.5%
9.92%
37.4
38.3
40.4
44.3
49.5
9.92%
8.03%
10.72%
16.77%
28.01%
43.01%
8.92%
38.2
39.1
41.2
45.1
50.3
8.92%
10.25%
12.94%
18.98%
30.22%
45.23%
7.92%
39.0
39.9
42.0
45.9
51.1
7.92%
12.64%
15.32%
21.37%
32.61%
47.62%
6.92%
39.9
40.8
42.9
46.8
52.0
6.92%
15.21%
17.90%
23.94%
35.18%
50.19%
5.92%
40.8
41.8
43.9
47.7
52.9
5.92%
17.98%
20.67%
26.72%
37.96%
52.96%
WACC
WACC
Terminal Growth Rate
42
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
42
2.3%
2.5%
3.0%
3.8%
4.5%
0
2.3%
2.5%
3.0%
3.8%
4.5%
8.21%
3885.0%
39.78
41.87
45.76
50.96
8.21%
12.25%
14.94%
20.98%
32.22%
47.23%
7.21%
3885.0%
39.78
41.87
45.76
50.96
7.21%
12.25%
14.94%
20.98%
32.22%
47.23%
6.21%
3885.0%
39.78
41.87
45.76
50.96
6.21%
12.25%
14.94%
20.98%
32.22%
47.23%
5.21%
3885.0%
39.78
41.87
45.76
50.96
5.21%
12.25%
14.94%
20.98%
32.22%
47.23%
4.21%
3885.0%
39.78
41.87
45.76
50.96
4.21%
12.25%
14.94%
20.98%
32.22%
47.23%
Terminal Year
Capex and
Acquisitions
Terminal Year
Capex and
Acquisitions
Terminal Growth Rate
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
42
2.3%
2.5%
3.0%
3.8%
4.5%
0
2.3%
2.5%
3.0%
3.8%
4.5%
37.00%
38.85
39.78
41.87
45.76
50.96
37.00%
12.3%
14.9%
21.0%
32.2%
47.2%
36.00%
38.85
39.78
41.87
45.76
50.96
36.00%
12.3%
14.9%
21.0%
32.2%
47.2%
35.00%
38.85
39.78
41.87
45.76
50.96
35.00%
12.3%
14.9%
21.0%
32.2%
47.2%
34.00%
38.85
39.78
41.87
45.76
50.96
34.00%
12.3%
14.9%
21.0%
32.2%
47.2%
24.00%
38.85
39.78
41.87
45.76
50.96
24.00%
12.3%
14.9%
21.0%
32.2%
47.2%
Tax Rate
Tax Rate
Terminal Growth Rate
UOIG 19
University of Oregon Investment Group
May 26, 2015
Appendix 8 – Sources
Earnings call transcripts
Factset
Google Finance
Google Images
IBIS World
Morningstar
Nasdaq
SEC Filings
Seeking Alpha
Statica
Yahoo Finance
UOIG 20

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