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annual report 2015
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Terrain transforms the local garden center into a celebration of nature. Inspired by the idea of merging house and garden, we create an experience for the senses.
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Financial Highlights 7
Letter From The Chairman 9
Our Mission 11
The Journey 10
Financials 33
Corporate Information 38
table of contents
financial highlights T
he following table sets forth selected consolidated income statement and balance sheet data for the periods indicated. The selected consolidated income statement and balance sheet data for each of the five fiscal years presented below is derived from our consolidated financial statements. The data presented below should be read in conjunction with Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements of the Company and the related notes thereto, which appear elsewhere in this Annual Report on Form 10-K. The results of operations for past accounting periods are not necessarily indicative of the results to be expected for any future accounting period. Our omni-channel strategy enhances our customers’ brand experience by providing a seamless approach to the customer shopping experience. We have substantially integrated all available shopping channels, including stores, websites (online and through mobile devices) and catalogs. Our investments iareas such as marketing campaigns and technology advancements are designed to generate demand for the omni-channel and not the separate store or directto-consumer channels. Store sales are primarily fulfilled from that store’s inventory, but may also be shipped from any of our fulfillment centers or from a different store location if an item is not available at the original store. Direct–to–consumer orders are primarily shipped to our customers through our fulfillment centers, but may also be shipped from any store, or a combination of fulfillment centers and stores depending on the availability of a particular item. Direct–to–consumer
orders may also be picked up at a store location. As our customers continue to shop across multiple channels, we have adapted our approach towards meeting this demand. Due to the availability of like product in a variety of shopping channels, we now source these products utilizing single stock keeping units based on the omni-channel demand rather than the demand of the separate channels. These and other technological capabilities allow us to better serve our customers and help us complete sales that otherwise may not have occurred due to out-of-stock positions. As a result of changing customer behavior and the substantial integration of the operations of our store and direct– toconsumer channels, we manage and analyze our performance based on a single omni-channel rather than separate channels and believe that the omnichannel results present the most meaningful and appropriate measureof our performance. Our comparable Retail segment net sales data is equal to the sum of our comparable store and comparable direct–to–consumer channel net sales. A store is considered to be comparable if it has been open at least one full fiscal year, unless it was materially expanded or remodeled within that year or was not otherwise operating at its full capacity within that year. A direct-to-consumer channel is considered to be comparable if it has been operational for at least one full fiscal year.
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three year overview Total sales over a three-year period.
2015 $1,363,888 2014 $434,684 2013 $333,296
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letter from the chairman Dear Shareholder, You are cordially invited to attend the 2013 Annual Meeting of Shareholders of Terrain. to be held at 10:30 a.m., on Tuesday, May 28, 2013, at our corporate headquarters, 5000 South Broad Street, Building 543, Philadelphia, Pennsylvania 19112. The matters to be considered and voted upon are described in the 2013 Notice of Annual Meeting of Shareholders and the Proxy Statement that accompany this letter. It is important that your shares be represented and voted at the Annual Meeting. Kindly read the attached Proxy Statement and vote your shares over the Internet or, if you received one, by signing and dating the paper copy of the proxy card and returning it promptly. I look forward to seeing you at the meeting where we will review the business and operations of Urban Outfitters. The accompanying proxy is solicited by the Board of Directors of Urban Outfitters, Inc. (the “Company”) for use at the Annual Meeting of Shareholders (the “Annual Meeting”) to be held on Tuesday, May 28, 2013 at 10:30 a.m., at the Company’s corporate headquarters, 5000 South Broad Street, Building 543, Philadelphia, Pennsylvania 19112, and any adjournments or postponements thereof. The Company is making its proxy statement (this “Proxy Statement”) and its annual report to shareholders available electronically via the Internet. Shareholders who receive the Notice will not receive a printed copy of the proxy materials in the mail. Sincerely,
Richard A. Hayne Chairman of the Board
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our mission Founded in 2008, Terrain transforms the local garden center into a celebration of nature. Inspired by the idea of merging house and garden to create an experience for the senses, our garden centers in Glen Mills, Pennsylvania and Westport, Connecticut cater to our customer with a curated assortment of plants for all seasons, as well as inspired items for the home and garden. Situated on luxurious indoor-outdoor environments, our on-site nurseries are each flanked by a cafe and garden terrace, providing the ideal environment to host events and workshops. Take a look around.
I recently visited Terrain for he first time. wanted to try heir brunch menu and do a little plant shopping. I was mmedietely in awe by the beauty of the place. It was like a giant greenhouse filled with lights MY FAVORITE TYPE OF FLOWER IS THE hydrangea, BECAUSE IT’S THE FIRST SIGN OF SPRING.
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journey terrain
the through
I
recently visited Terrain for the first time. I wanted to try their brunch menu and do a little plant shopping. I was immedietely in awe by the beauty of the place. It was like a giant greenhouse filled with lights and beautiful, earthy decor. They were very packed but we were still able to squeeze in a reservation. When you talk about Terrain you have to mention the fact that you’re eating inside a beautiful greenhouse filled with live plants and crafted wooden furniture. The whole place has many unique features and it’s great to browse before and after dining. What is not to love about Terrain? The ambiance is awesome and the garden and home decor is fresh and fun! It is owned by Urban, Inc. but does not have the same hipster vibe! Garden-wares are very high
end shabby chic finds! Everything you want, but nothing you need! It is an awesome place to find a unique wedding, birthday, or housewarming gift and a fun place to spend a summer weekend afternoon. The whole place has many unique features and it’s great to browse before and after dining. It was like a giant greenhouse filled with lights and beautiful, earthy decor. The ambiance and cuteness of terrain is what keeps me a fan. The atmosphere just automatically puts you in a good mood. Throughout the store I felt many different emotions. In this annual report I describe each feeling as it pertains to different parts of my experience.
-abby
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ing into rden as truly perience
my goat cheese omelette and lavander spritzer were amazing.
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satisfied in the garden cafĂŠ S
tepping into the garden cafe was truly an experience in itself. Like the rest of the store, the place is undeniably charming with an elegantly rustic feel. First up, the amazing bread in a flower pot—I would eat this out of a used trowel, it was so good. Although I can drink a lot of tea in one sitting, my Moroccan Mint Tea came in a generously sized pot. Think about splitting a pot between two people. I ordered the Organic Omelette, which was very fresh and nicely balanced with a salad and a small serving of potatoes. My friend also enjoyed her pork belly and eggs. My friend and I each ordered homemade spritzers. I got elderflower and she got lavender. They were both delicious. The entire experience was unforgettable and delicious and I definitely left with my palette and belly satisfied. It was definitely satisfying for both the body and mind! Stepping into the garden cafe was truly an experience in itself. Like the rest of the store, the place is undeniably charming with an elegantly rustic feel. First up, the amazing bread in a flower pot—I would eat this out of a used trowel, it was so good.
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Assortments of colorED glass vases and various flowers make tables unique.
I felt relaxed as all of the beautiful p as though I was clos
I was among plants. I felt se to nature.
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relaxed in the garden many different varieties of plants filled the space, giving it a greenhouse effect.
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his is the most wonderful place around. The setting amidst the garden shop and retail shopping is unique and wonderful. You pull up to a big parking lot, there’s always have some creative pot arrangements out front, very artisan. From all the different kinds of berries, sticks, grasses,wreaths, trees, stone pots, and a bonfire. That’s only outside! They have a hugh selection of plants, trees and shrubs, also. You walk through the barndoor into an amazing smelling and looking arrangment of the most unique items ever: cotton picks, gorgeous
ornaments, wooden stars, lights like you’ve never seen before. They had these little shawdow boxes to make a scene with mini lights, and dish gardens in really cool glass. Beautiful poinsettia, amaryllis, paperwhites, candles you need to buy because you want your house to smell this good, household gadgets, books, face creams, essential oils, hand lotion, all smell so good, you immediately get into a better mood. A banquet room outback in another barn. It’s the perfect place for a pick me up in the middle of the week.
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flower pots perfect for both in the home and landscaping.
d aesthetic were h plants and here. Not only nd at ease, but I ed by the design ecorating the n mind for the
The arrangements of the various household items reflected what i want my future home to look like.
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inspired by houseware T
errain is a true delight to all of the senses. As an artist and designer, it was especially a treat to my eyes. After finishing brunch, we began to explore in the main part of the store. We began at the home and cosmetic section. Amazing. I want to move in without anybody noticing. Just kidding. No, but really. I love interior design and all that, and this was literally what I want my future home to look like. I would love to live in such a wonderful environment and so close to nature. The beauty and aesthetic were captivating, with
plants and flowers everywhere. Not only was I relaxed and at ease, but I felt very inspired by the design and interior decorating the designer had in mind for the home section. I felt my creative juices flowing and felt truly inspired by the rustic, natural design and homegood items. They were both ornate and simple. Not only was I relaxed and at ease, but I felt very inspired by the design and interior decorating the designer had in mind for the home section. I felt my creative juices flowing and felt truly inspired by the rustic, natural design and homegood items. Amazing. I want to move in without anybody noticing. Just kidding. No, but really. I love interior design and all that, and this was literally what I want my future home to look like. The beauty and aesthetic were captivating and inspiring with attention to detail.
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package and all
the product design was unlike anything i had ever seen before. they were both ornate and simple, with attention to details.
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creativity T through designs
errain is a true delight to all of the senses. As an artist and designer, it was especially a treat to my eyes. After finishing brunch, we began to explore, beginning in the beauty supply section. We began at the home and cosmetic section. Amazing. I want to move in without anybody noticing. Just kidding. No, but really. I love interior design and all that, and this was literally what I want my future home to look like. The beauty and aesthetic were captivating, with plants and flowers everywhere. Not only was I relaxed and at ease, but I felt very inspired by the design and interior decorating the designer had in mind for the home section. I felt my creative juices flowing and felt truly inspired by the rustic, natural design and homegood items.
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glass arrangements with and without terraniums.
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We have an established ability to understand our customers and connect with them on an emotional level.
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management’s discussion & analysis of financial condition & results of operations W
e are an omni-channel retailer operating two reportable segments: a leading lifestyle specialty Retail segment and a Wholesale segment. Our Retail segment consists of our Urban Outfitters, Anthropologie, Free People, Terrain and Bhldn brands, whose merchandise is sold directly to our customers through retail stores, websites, mobile applications, catalogs and customer contact centers. Our Wholesale segment consists of the Free People wholesale division that primarily designs, develops and markets young women’s contemporary casual apparel. Our fiscal year ends on January 31. All references to our fiscal years refer to the fiscal years ended on January 31 in those years. For example, our fiscal year 2014 ended on January 31, 2014. Our omni-channel strategy enhances our customers’ brand experience by providing a seamless approach to the customer shopping experience. We have substantially integrated all available shopping channels, including stores, websites (online and through mobile devices) and catalogs. Our investments in areas such as marketing campaigns and technology advancements are designed to generate demand for the omni-channel and not the separate store or direct-to-consumer channels. Store sales are primarily fulfilled from that store’s inventory, but may also be shipped from any of our fulfillment centers or from a different store location if an item is not available at the original store. Direct-to-consumer orders are primarily shipped to our customers through our fulfillment centers, but may also be shipped from any store, or a combination of fulfillment centers and stores depending on the availability of a particular item.
selected financial data
2015
2014
2013
2012
2011
100.0% 63.1 36.9 23.5 13.4 0.1 — .1 13.3 4.9 8.5%
100.0% 65.4 35.8 23.3 13.2 0.1 — .2 13.6 5.1 7.8%
100.0% 66.7 33.3 24.5 13.0 0.1 — .2 13.8 5.2 7.9%
100.0% 69.9 31.2 25.4 12.9 0.2 — .3 14.3 5.4 8.1%
13.0% 19.9% 31.5% 28.1%
15.3% 21.2% 43.6% 29.9%
17.6% 23.3% 47.0% 33.3%
18.9% 25.5% 52.2% 36.6%
Statement of Income Net sales 100.0% Cost of sales 62.4 Gross profit 37.6 Admin expenses 23.8 Income from operations 13.8 Interest income 0.1 Other income — Other expenses – Income before income taxes 13.9 Income tax expense 4.7 Net income 9.2%
period over period change Net sales Gross profit Income from operations Net income
10.4% 12.6% 14.0% 19.0%
The following table sets forth selected consolidated income statement and balance sheet data for the periods indicated. The selected consolidated income statement and balance sheet data for each of the five fiscal years presented below is derived from our consolidated financial statements. The data presented below should be read in conjunction with Item 7: Management’s Discussion and Analysis of Financial Condition. and Results of Operations and the Consolidated Financial Statements of the Company and the related notes thereto, which appear elsewhere in this Annual Report on Form 10-K.
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results of operations
2015
2014
2013
2012
2011
Net sales 100.0% Cost of sales 62.4 Gross profit 37.6 Admin expenses 23.8 Income from operations 13.8 Interest income 0.1 Other income — Other expenses – Income before income taxes 13.9 Income tax expense 4.7 Net income 9.2%
100.0% 63.1 36.9 23.5 13.4 0.1 — .1 13.3 4.9 8.5%
100.0% 65.4 35.8 23.3 13.2 0.1 — .2 13.6 5.1 7.8%
100.0% 66.7 33.3 24.5 13.0 0.1 — .2 13.8 5.2 7.9%
100.0% 69.9 31.2 25.4 12.9 0.2 — .3 14.3 5.4 8.1%
13.0% 19.9% 31.5% 28.1%
15.3% 21.2% 43.6% 29.9%
17.6% 23.3% 47.0% 33.3%
18.9% 25.5% 52.2% 36.6%
wholesale segment Net sales Gross profit Income from operations Net income
10.4% 12.6% 14.0% 19.0%
The following table sets forth, for the periods indicated, the percentage of our net sales represented by certain income statement data and the change in certain income statement data from period to period. This table should be read in conjunction with the discussion that follows.
total compensation
2015
Net sales 100.0% Cost of sales 62.4 Gross profit 37.6 Admin expenses 23.8 Income from operations 13.8 Interest income 0.1 Other income — Other expenses – Income before income taxes 13.9 Income tax expense 4.7 Net income 9.2%
2014
2013
2012
2011
100.0% 63.1 36.9 23.5 13.4 0.1 — .1 13.3 4.9 8.5%
100.0% 65.4 35.8 23.3 13.2 0.1 — .2 13.6 5.1 7.8%
100.0% 66.7 33.3 24.5 13.0 0.1 — .2 13.8 5.2 7.9%
100.0% 69.9 31.2 25.4 12.9 0.2 — .3 14.3 5.4 8.1%
13.0% 19.9% 31.5% 28.1%
15.3% 21.2% 43.6% 29.9%
17.6% 23.3% 47.0% 33.3%
18.9% 25.5% 52.2% 36.6%
rate development Net sales Gross profit Income from operations Net income
10.4% 12.6% 14.0% 19.0%
The following table sets forth selected consolidated income statement and balance sheet data for the periods indicated. The selected consolidated income statement and balance sheet data for each of the five fiscal years presented below is derived from our consolidated financial statements. The data presented below should be read in conjunction with Item 7: Management’s Discussion and Analysis of Financial Condition. and Results of Operations and the Consolidated Financial Statements of the Company and the related notes thereto, which appear elsewhere in this Annual Report on Form 10-K.
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rows and rows of plants and succulents.
board of directors
contact
Wendy McDevitt
Headquarters
President
Francis Conforti
Chief Financial Officer
Calvin Hollinger
Chief Administrative Officer
Glen Bodzy
General Council
Margaret A. Hayne
Chief Creative Officer
5000 S Broad St. Philadelphia, PA 19112
Contact
Phone: (215) 648 2237 Fax: (215) 648 2230
Website
www.ShopTerrain.com
PA address
914 Baltimore Pike Glen Mills, PA 19342
CT address
561 Post Road East Westport, CT 06880
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