FINANCIAL ANALYSIS

NAME: Urban Outfitters, INC

EXECUTIVE SUMMARY:

Urban Outfitters is a clothing store for women and men founder in 1970 by Richard Haynes. Urban Outfitters is a public trade company and have over 400 retail locations. This financial overview will show Urban Outfitters company important segments, financial statement, ratios and analyze of the company’s cash flow. Urban Outfitters two major competitors are Abercrombie and Fitch and J Crew. Urban Outfitters is able to increase their sales every year because they focus of the differential of product, brand prestige and customer loyalty. Over the past five years, Urban Outfitters has experience an increase of sales from $349 million to $1,092 which average grow of 33.43% per year. Urban has out performance their competitor’s sales by near 29% and the industry by 22%. The two main competitors for Urban, ANF has an average of sales growth of 20% and JCG has growth of sales of 5%. As an overall evaluation, URBN’s operating efficiency has increased during this time period due primarily to this: operating costs declined while gross profit increased. Asset turnover decreased slightly which indicates their asset basis generated fewer sales. However, this is minimal when compared to return on assets which increased every year.

SWOT ANALYSIS:

Strengths: • Email customers when it is a new merchandize • Recommend product based on what the customer has previous buy • Online access, social media, shopping 24/7 and customer services chat. • Customers has full access of the shopping experiences.

Weaknesses: • Blog are not well advertise • Once the customers add items to their cart, it doesn’t go away until it is pay or remove manually. • Can’t chat with other users • It will be better if the customer have more notification of when the product in on back order.

Threats: • Other websites that already have credibility to their blog. • Other websites that have better communication with their customers • Other websites that let customer to communicate with each other. • Other retailers created an app to shop on the go buy using their cell phone.

Opportunities: • Make blog a better future on website. • Email customer when merchandize is available again (back order) • Customer be able to chat and comments about the product. • Create an app that will help customer to shop whenever and however they want.

RECOMMENDATIONS AND JUSTIFICATIONS:

1. RECOMMENDATION #1: Should the firm increase their capital expenditures to increase competitiveness? This will almost always be true but what segments of the business get the most capital allocated to them and why?

Urban Outfitters has been in the negative for the past two years. The firm primary cost consist in store related improvements, buildings and furniture and fixtures. Urban Outfitters has three to ten years for other operation equipment and 39 years for buildings. The firm reviews long-lived assets for possible circumstances that could change and may not be recoverable. Most of the capital is allocated to this account, because the firm evaluate future asset utilization and future net undiscounted cash flows.

2. RECOMMENDATION #2: Should the firm increase growth by acquiring other companies for synergies or grow internally? Do they have the infrastructure to grow internally? If they by a competitor, how will the merger be integrated in regards to culture, overlapping businesses, etc.

In 2008 Urban Outfitters bought a garden center, it is a totally different business as it does not relate to clothing. Urban Outfitter wanted to transform the business of garden center to a full services of landscape design and construction.

Urban Outfitters operate under Anthropologie, Free People and Terrain brands. Urban Outfitters has a distinguish collection of fashion appeal, accessories and home goods. The company main strategy is to provide unified store environment that establish emotion bonds with the customer. If they by a competitor, the culture will have to change to what Urban Outfitters vision and mission stand for it.

3. RECOMMENDATION #3: Should the firm risk increasing their leverage (debt) to increase earnings and return on capital or keep the leverage the same (or even decrease it). If so, why and by how much.

The firm seems to be doing really well with the amount of debt. In the past three years the firm has increase their profit for more than 10%. In my opinion the company should keep the retail and expand in their online services. It is important to connect with customers whenever or however they choose to shop with the firm.

4. RECOMMENDATION #4: Should they increase marketing spending? If so, by how much and where should it be allocated. Should online marketing spending and international marketing increase by more than print ads? Justify any additional spending that is recommended.

Technology is advancing rapidly in this day. The firm should continue with TV, Radio, and some printing ad, however as we know the future generation fast forward TV commercial, do not read the print newspaper and only listen the music or program already record. The firm recognize it and in the past 5 years, they are moving away from catalog to online catalog, which has increase the visibility of the firm not only in the states, but also international. They are spending the right amount of money and getting a positive return.

5. RECOMMENDATION #5: Should the firm increase/decrease R&D spending? If so, by how much. At what level do you feel your chose firm would be spending too much on R&D.

My recommendation is to resource and develop online shopping. The firm is already spending the money to improve this area, and understand it is important part of the business. The firm should continue spending the time and money on improving online shopping and find way of how to fulfill the orders while the customers shop from anywhere and anytime.

6. RECOMMENDATION #6: How should they go about controlling costs including labor, health care, and pension liabilities? (GM and Ford need help in this department).

Urban Outfitters has season periods. The firms control cost by hiring seasonal labor that will help for few months, because they are seasonal, it is not necessary to offer health care and pension plans. This method will lower the cost and let the firm to control the expenses relating to labor.

7. RECOMMENDATION #7: Should the firm expand overseas? If so, which markets should be focused on first and why?

The firm is already overseas, they have distribution centers and online market in Europe, Canada and United States. Most of their products and ideas come from foreign countries. Any disturbance like war, terrorism or restrictions to import/export will cause an adverse impact to the firm. While it is important to have a presence overseas, it is always a lot of risk and factors to take in consideration.

CONCLUDING THOUGHTS ON THE FUTURE OF YOUR CHOSEN COMPANY

Urban Outfitters in the past years has been growing, and continue to establish themselves. The firm are doing some things right as for example controlling their biggest expenses, by hiring seasonal labor and only retain the best in retail, that give the firm an opportunity to offer and invest more training, health care and pension plans to the personal who really wants to stay with the firm and make it successful. Another good example is the realization of the internet, the firm realize that it is important to adapt to their customers, while this is also something that the firm needs to continue to work on they understand the important and give resources and development time to make it better. The firm understand that having a brick and mortar store is important, however the customers are shopping on the go and developing an app, allow the customers to shop whenever, whatever they wants.

It is great that the firm has operation under other brands and their vison and mission are really define, however this will make it hard for them to buy a competitor, since it will have to change their culture and how the customers pensive them. The firm will be better off expanding and continue with their beliefs.