What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-04-01 compared with 2021-04-01 · 165 added, 172 removed, 300 unchanged (53% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

We operate under three reportable segments – Retail, Wholesale and Subscription.

We operate under three reportable segments – Retail, Wholesale and Nuuly.

Our Retail segment consists of our Anthropologie, Bhldn, Free People, FP Movement, Terrain, Urban Outfitters and Menus & Venues brands.

Our Retail segment consumer products and services are sold directly to our customers through our stores, websites, mobile applications, catalogs and customer contact centers and franchised or third-party operated stores and digital businesses.

Our Retail segment consumer products and services are sold directly to our customers through our retail locations, websites, mobile applications, catalogs and customer contact centers and franchisee-owned stores.

The Wholesale segment consists of our Free People, FP Movement and Urban Outfitters brands that sell through department and specialty stores worldwide, digital businesses and our Retail segment.

The Wholesale segment primarily designs, develops and markets apparel, intimates and activewear.

Our Subscription segment consists of the Nuuly brand, which is a monthly women’s apparel subscription rental service that launched on July 30, 2019.

Our Nuuly segment, formerly known as the Subscription segment, consists of the Nuuly brand, which offers customers with a more sustainable way to explore fashion.

Nuuly Rent is a monthly women’s apparel subscription rental service that launched in July 2019.

Nuuly Thrift, which launched in October 2021, is a peer-to-peer resale marketplace where customers can buy and sell women’s, men’s, and kids’ clothes, shoes and accessories from any brands.

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 2021 ended on January 31, 2021.

Impact of the Coronavirus Pandemic

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide, causing public health officials to recommend precautions to mitigate the spread of the virus, including warning against congregating in heavily populated areas, such as malls and shopping centers.

On March 14, 2020, the Company announced that it temporarily closed all stores globally;

however, the Company continued to fulfill digital orders from its stores where permitted by local authorities.

The Company’s distribution and fulfillment centers remained open to support the digital business and the Wholesale segment operations but have done so with additional safety procedures and enhanced cleaning to protect the health of employees.

The Company closed its offices and showrooms globally with the exception of location dependent employees.

All other corporate and showroom employees are working remotely.

The COVID-19 pandemic continues to materially impact the Company’s operations in the United States and globally, and related government and private sector responsive actions have and will continue to affect its business operations.

Because it is impossible to predict the effect and ultimate impact of the COVID-19 pandemic, current financial information may not be necessarily indicative of future operating results and the Company’s plans as described below may change.

In response to the COVID-19 pandemic, the Company has taken many additional measures to protect its financial position and increase financial flexibility during this challenging time period.

Those included:

Furloughing a substantial number of store, wholesale and home office associates through July 31, 2020, with some furloughs resulting in layoffs as of the same date,

Limiting all new hiring commensurate with the operational needs of the Company,

Temporarily suspending and since reinstating at a reduced value, all performance bonuses for fiscal 2021 and delaying merit increases for five months until September 2020,

Borrowing $220.0 million under its Amended Credit Facility (as defined herein) to further protect its cash reserves, and subsequently repaying $100.0 million on June 17, 2020 and $120.0 million on September 16, 2020 (see Note 8, “Debt,” of the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information),

Reducing fiscal 2021 capital budget by over $100 million from approximately $260 million to approximately $160 million by delaying or cancelling projects,

Adjusting inventory levels by cancelling or delaying many orders, asking for price concessions on those remaining and maintaining tighter management of inventory overall as stores reopened,

Reducing all discretionary expenses, including creative and travel, among others,

Extending payment terms for both merchandise and non-merchandise vendor invoices by 30 days,

Reducing certain occupancy and occupancy related expenses,

Reducing investments in two Company growth initiatives:

Nuuly and expansion into China,

Temporarily reducing senior leadership compensation through September 2020,

Temporarily suspending Board of Directors’ cash compensation, which has since been reinstated, and

Temporarily suspended share repurchases during fiscal 2021 (see Note 12, “Shareholders’ Equity,” of the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information).

As a result of the COVID-19 pandemic, during fiscal 2021, the Company recorded certain additional reserves and non-cash charges.

The Company assessed the value of its inventory in the Retail and Wholesale segments and recorded an increase in inventory obsolescence reserves during the first quarter of fiscal 2021, and as a result of disciplined inventory control and better than planned product performance, during the remainder of fiscal 2021, the Company decreased a portion of its inventory obsolescence reserves.

During the first quarter of fiscal 2021, the Company recorded an increase in allowance for doubtful accounts for Wholesale segment customer accounts receivables as a result of the significant disruption and uncertainty in the wholesale macro environment, and during the remainder of fiscal 2021, the Company reduced the allowance for doubtful accounts due to the collection of certain outstanding accounts receivables.

Finally, during fiscal 2021, the Company determined that certain long-lived assets at the Company’s retail

locations were unable to recover their carrying value primarily due to the impact of the mandated store closures as a result of the COVID-19 pandemic and lower store productivity once opened.

These assets were written down to their fair value resulting in impairment charges of $15.5 million across 42 retail locations.

As a result of the COVID-19 pandemic, governments in the United States, United Kingdom (“U.K.”), Canada and various other jurisdictions implemented programs to encourage companies to retain and pay employees that are unable to work or are limited in the work that they can perform in light of closures or a significant decline in sales.

The Company qualified for certain of these programs, which partially offset related expenses.

The Company continued to pay all employees through at least April 1, 2020.

On March 31, 2020, the Company announced it furloughed a substantial number of store, wholesale and home office employees beginning April 1, 2020.

The furlough period continued through July 31, 2020, with some furloughs resulting in layoffs as of the same date.

Furloughed employees continued to receive enrolled benefits during the furlough period.

The Company recorded the cumulative benefit of the programs implemented by the United States and Canada in selling, general and administrative expenses during fiscal 2021.

Benefits related to the programs implemented by the U.K.

and other European countries were recorded as an offset to store occupancy expenses in cost of sales during fiscal 2021.

Beginning April 25, 2020, the Company started to reopen stores in select states and countries in accordance with local government guidelines.

As of July 31, 2020, substantially all of the Company’s stores had reopened.

However, during the fourth quarter of fiscal 2021 and into the first quarter of fiscal 2022, our store operations have been impacted by temporary store closures, primarily in Europe, and reduced customer traffic in reopened store locations globally due in part to local government guidelines that have imposed certain operating restrictions, including capacity limits.

The Company cannot reasonably estimate the duration and severity of the COVID-19 pandemic, which has had and may continue to have a material impact on our business.

As we have reopened stores, we have followed newly established health protocols, provided personal protective equipment to our employees, and implemented social distancing working practices.

Additionally, we have implemented occupancy limits, reduced operating hours, and instituted new cleaning regimens, including enhanced cleaning of high-touch surfaces throughout the day and making hand sanitizer available to our customers and employees.

As a result, the Company has incurred incremental costs for personal protective equipment and additional payroll and other costs associated with implementing these health protocols in our stores, distribution and fulfillment centers, and corporate offices.

The Company has not changed its remote work arrangements for its corporate employees.

For example, our fiscal year 2022 ended on January 31, 2022, our fiscal year 2021 ended on January 31, 2021, and our fiscal year 2020 ended on January 31, 2020.

Current Trends

Impact of the Coronavirus Pandemic on Fiscal 2021

In March 2020 the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic.

Consequently, the Company announced that it temporarily closed all stores, offices and showrooms globally, but began to reopen stores in late April 2020.

The Company’s distribution and fulfillment centers remained open to support the digital business and the Wholesale segment operations.

During the fourth quarter of fiscal 2021, certain store operations were again impacted by an additional round of temporary store closures and occupancy restrictions, primarily in Europe and Canada.

In response to the COVID-19 pandemic, the Company took measures to protect its financial position and increase financial flexibility.

During fiscal 2021, the Company recorded certain additional reserves, including inventory obsolescence reserves and an allowance for doubtful accounts for Wholesale segment customer accounts receivable, and non-cash charges, primarily store impairment charges.

Impact of the Coronavirus Pandemic on Fiscal 2022

The COVID-19 pandemic continued to negatively impact the Company’s store operations during fiscal 2022 with residual impacts on store traffic and store sales resulting from store closures primarily in Europe and Canada, occupancy restrictions and reduced store hours globally.

During the second quarter of fiscal 2022, all remaining COVID-19 government mandated store closures in Europe and Canada expired, although some capacity restrictions continued in certain European and Canadian stores.

The COVID-19 pandemic and general unfavorable macro-economic conditions have also disrupted the Company’s global supply chain in fiscal 2022, leading to COVID-19 related factory closures, continued port congestion and shipping delays, which have resulted in inventory receipt delays and an increase in inbound freight costs.

The Company made a strategic decision to bring certain product categories in earlier in the third and fourth quarters of fiscal 2022 in an attempt to minimize the impact of such disruptions on customer demand.

The Company continued to qualify for certain government assistance programs that partially offset related expenses in locations impacted by closures during fiscal 2022.

As of the end of the second quarter of fiscal 2022, however, the programs either expired or the Company no longer qualified for such programs in the United States and Canada, and as of the end of the third quarter of fiscal 2022, the Company no longer qualified for the majority of such programs in Europe.

The Company recorded the benefit of the government assistance programs as an offset to selling, general, and administrative expenses or store occupancy expenses in cost of sales based on the nature of the related expenses offset by such programs.

Impact of the Coronavirus Pandemic and Macroeconomic Uncertainties on Future Operations

The COVID-19 pandemic continues to impact the Company’s operations and related government and private sector responsive actions could continue to affect its business operations.

The Company is also experiencing COVID-19 supply chain disruptions resulting in inventory receipt delays.

Furthermore, the Company expects that our operations will continue to be influenced by general economic conditions resulting from COVID-19, such as labor shortages and the impact of inflation including higher wages, increased merchandise costs and higher inbound transportation costs.

The Company cannot reasonably estimate the duration and severity of the COVID-19 pandemic, which has had and may continue to have a material impact on its business.

As a result, current financial information may not be necessarily indicative of future operating results and the Company’s plans to address the impact of the COVID-19 pandemic may change.

Additionally, ongoing global issues may affect our business and the global economy, including the geopolitical impact of Russia’s invasion of Ukraine and any related economic or other sanctions.

Retail Segment

Our Retail segment omni-channel strategy enhances our customers’ brand experience by providing a seamless approach to the customer shopping experience.

All available Company-owned Retail segment shopping channels are fully integrated, including stores, websites, mobile applications, catalogs and customer contact centers.

All available Company-owned Retail segment shopping channels are fully integrated, including retail locations, websites, mobile applications, catalogs and customer contact centers.

Our investments in areas such as marketing campaigns and technology advancements are designed to generate demand for the Retail segment omni-channel and not the separate store or digital channels.

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A store is considered to be comparable if it has been open at least 12 full months, unless it was materially expanded or remodeled within that year or was not otherwise operating at its full capacity within that year due to store specific closures from events such as damage from fire, flood and natural weather events.

The Company did not remove stores that were closed due to the COVID-19 pandemic from the comparable stores net sales calculations.

The Company did not remove stores that were closed or operating for an extended period of time at a reduced capacity due to the COVID-19 pandemic from the comparable stores net sales calculations.

A digital channel is considered to be comparable if it has been operational for at least 12 full months.

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Franchise net sales and the effects of foreign currency translation are also considered non-comparable.

We monitor Retail segment metrics including customer traffic, conversion rates, average units per transaction at our stores and on our websites and mobile applications and average unit selling price at our stores and average order value on our websites and mobile applications.

We monitor Retail segment metrics including customer traffic, conversion rates, average units per transaction at our stores and on our websites and mobile applications and average unit retail price at our stores and average order value on our websites and mobile applications.

We believe that changes in any of these metrics may be caused by a response to our brands’ fashion offerings, our marketing campaigns, circulation of our catalogs and an overall growth in brand recognition.

Urban Outfitters targets young adults aged 18 to 28 through a unique merchandise mix, compelling store environment, websites and mobile applications and a product offering that includes women’s and men’s fashion apparel, activewear, intimates, footwear, accessories, home goods, electronics and beauty.

Urban Outfitters targets young adults aged 18 to 28 through a unique merchandise mix, compelling store environment, social media and third-party digital platforms, websites and mobile applications and a product offering that includes women’s and men’s fashion apparel, activewear, intimates, footwear, accessories, home goods, electronics and beauty.

A large portion of our merchandise is exclusive to Urban Outfitters, consisting of an assortment of products designed internally and designed in collaboration with third-party brands.

Urban Outfitters stores are in street locations in large metropolitan areas and select university communities, specialty centers and enclosed malls that accommodate our customers’ propensity not only to shop, but also to congregate with their peers.

Urban Outfitters operates websites and mobile applications in North America and Europe that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in its stores, sells merchandise through a franchisee-owned store in the United Arab Emirates, and partners with third-party digital businesses to offer a limited selection of merchandise, which is available globally.

Urban Outfitters’ North American and European Retail segment net sales accounted for approximately 31.3% and 8.2% of consolidated net sales, respectively, for fiscal 2021,

compared to 29.5% and 7.9%, respectively, fo r fiscal 202 0 .

Asian Retail segment net sales accounted for less than 1.0% of consolidated net sales for fiscal 2021 and fiscal 2020.

Urban Outfitters operates websites and mobile applications in North America and Europe that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in its stores and sells merchandise through franchisee-owned stores in the United Arab Emirates.

Urban Outfitters’ North American Retail segment net sales accounted for approximately 27.5% of consolidated net sales for fiscal 2022, compared to 31.3% for fiscal 2021.

European and Asian Retail segment net sales accounted for approximately 9.1% of consolidated net sales for fiscal 2022, compared to approximately 8.5% for fiscal 2021.

The Anthropologie Group consists of the Anthropologie, Bhldn and Terrain brands.

Merchandise at the Anthropologie brand is tailored to sophisticated and contemporary women aged 28 to 45.

The product assortment includes women’s casual apparel, accessories, intimates, shoes, home furnishings, a diverse array of gifts and decorative items and beauty and wellness.

The internally designed and third-party brand product assortment includes women’s apparel, accessories, intimates, shoes, home furnishings, a diverse array of gifts and decorative items and beauty and wellness.

The Bhldn brand emphasizes every element that contributes to a wedding.

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Anthropologie Group stores are located in specialty centers, upscale street locations and enclosed malls.

The Anthropologie Group operates websites and mobile applications in North America and Europe that capture the spirit of its brands by offering a similar yet broader selection of merchandise as found in its stores, offers a catalog in North America that markets select merchandise, most of which is also available in Anthropologie brand stores, and partners with third-party digital businesses to offer a limited selection of merchandise, which is available globally.

The Anthropologie Group’s North American and European Retail segment net sales accounted for approximately 36.5% and 1.7% of consolidated net sales, respectively, for fiscal 2021, compared to 39.2% and 1.7%, respectively, for fiscal 2020.

Asian Retail segment net sales accounted for less than 1.0% of consolidated net sales for fiscal 2021 and fiscal 2020.

The Anthropologie Group’s North American Retail segment net sales accounted for approximately 37.4% of consolidated net sales for fiscal 2022, compared to 36.5% for fiscal 2021.

European and Asian Retail segment net sales accounted for approximately 2.0% of consolidated net sales for fiscal 2022, compared to approximately 1.7% for fiscal 2021.

The Free People Group consists of the Free People and FP Movement brands.

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Free People Group stores are located in enclosed malls, upscale street locations and specialty centers.

We opened two FP Movement stores during fiscal 2021 and expect to open additional stores in fiscal 2022 and thereafter to further capitalize on the growth opportunity and unique position that FP Movement has in the fitness and wellness space.

The Free People Group operates websites and mobile applications in North America, Europe and Asia that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in its stores, as well as substantially all of the Free People and FP Movement wholesale offerings.

The Free People Group also offers catalogs that market select merchandise, most of which is also available in our Free People and FP Movement stores, and partners with third-party digital businesses to offer a limited selection of merchandise, which is available globally.

The Free People Group operates websites and mobile applications in North America and Europe that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in its stores, as well as substantially all of the Free People and FP Movement wholesale offerings.

The Free People Group also offers catalogs that market select merchandise, most of which is also available in our Free People and FP Movement stores.

The Free People Group’s North American Retail segment net sales accounted for approximately 16.3% of consolidated net sales for fiscal 2022, compared to approximately 14.6% for fiscal 2021.

European and Asian Retail segment net sales each accounted for less than 1.0% of consolidated net sales for fiscal 2021 and fiscal 2020.

European and Asian Retail segment net sales accounted for less than 1.0% of consolidated net sales for fiscal 2022 and fiscal 2021.

The Menus & Venues brand focuses on a dining experience that provides excellence in food, beverage and service .

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Franchisee-Owned Stores (2)

Franchisee-owned stores in fiscal 2021 were located in Israel and the United Arab Emirates.

The Company had agreed with its Israeli franchise partner to end franchise store operations in Israel.

The Company closed four Urban Outfitters franchisee-owned stores, one Anthropologie Group franchisee-owned store and one Free People franchisee-owned store in fiscal 2021.

The Company does not plan to close the franchisee-owned store in the United Arab Emirates.

18 FP Movement stores were opened during the year ended January 31, 2022.

20 FP Movement stores were open as of January 31, 2022.

Franchisee-owned stores are located in the United Arab Emirates.

Selling square footage by brand as of January 31, 2022 and January 31, 2021 was as follows:

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Total URBN (2)

Selling square footage for FP Movement was 25 and 2 as of January 31, 2022 and 2021, respectively.

Menus & Venues restaurants and franchisee-owned stores are not included in selling square footage.

We plan for future store growth for all three brands to come from expansion domestically and internationally, which may include opening stores (including standalone FP Movement stores) in new and existing markets or entering into additional franchise or joint venture agreements .

We plan for future store growth for all three brands to come from expansion domestically and internationally, which may include opening stores in new and existing markets or entering into additional franchise or joint venture agreements.

We plan for future digital channel growth to come from expansion domestically and internationally.

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Franchisee-Owned Stores

Includes 16 FP Movement stores.

Includes 16 FP Movement projected store openings.

Wholesale Segment

Our Wholesale segment consists of the Free People, FP Movement and Urban Outfitters brands that sell through department and specialty stores worldwide, third-party digital businesses and our Retail segment.

Our Wholesale segment consists of the Free People, FP Movement and Urban Outfitters brands that sell through department and specialty stores worldwide, digital businesses and our Retail segment.

The Wholesale segment primarily designs, develops and markets young women’s contemporary casual apparel, intimates, FP Movement activewear and shoes under the Free People brand and the BDG and other own brand apparel collections under the Urban Outfitters brand.

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Net sales from the Wholesale segment accounted for approximately 5.5%, 5.7% and 8.2% of total consolidated net sales for fiscal 2022, 2021 and 2020, respectively.

Subscription Segment

Our Subscription segment consists of the Nuuly brand, which is a monthly women’s apparel subscription rental service that launched on July 30, 2019.

For a monthly fee, Nuuly subscribers can select rental product from a wide selection of the Company’s own brands, third-party labels and one-of-a-kind vintage pieces via a custom-built, digital platform.

Nuuly Segment

Our Nuuly segment, formerly known as the Subscription segment, consists of the Nuuly brand, which includes Nuuly Rent and Nuuly Thrift.

Nuuly Rent is a monthly women’s apparel subscription rental service that launched in July 2019.

For a monthly fee, Nuuly subscribers can select rental product from a wide selection of the Company’s own brands, third-party market brands and one-of-a-kind vintage pieces via a custom-built, digital platform.

Subscribers select their products each month, wear them as often as they like and then swap into new products the following month.

Subscribers are also able to purchase the rented product.

Net sales from the Subscription segment accounted for less than 1.0% of consolidated net sales for fiscal 2021 and fiscal 2020.

Nuuly Thrift, which launched in October 2021, is a peer-to-peer resale marketplace where customers can buy and sell women’s, men’s, and kids’ apparel, shoes, and accessories from any brands.

Sellers on Nuuly Thrift can transfer their earnings to their bank account or convert them to “Nuuly Cash,” a gift card with a bonus to be used at any of the Company’s brands.

The Company earns a commission based on sales made in the marketplace.

Our Nuuly segment net sales accounted for approximately 1.1% of consolidated net sales for fiscal 2022 and less than 1.0% of consolidated net sales for fiscal 2021 and 2020.

Critical Accounting Policies and Estimates

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If actual results were to differ significantly from estimates made, the reported results could be materially affected.

Other than the impact of the COVID-19 pandemic on our inventory obsolescence reserves in the Retail and Wholesale segments, the allowance for doubtful accounts on our Wholesale segment accounts receivable and the obsolescence reserves on our Subscription segment rental product, we are not currently aware of any reasonably likely events or circumstances that would cause our actual results to be materially different from our estimates.

We are not currently aware of any reasonably likely events or circumstances that would cause our actual results to be materially different from our estimates.

Revenue Recognition

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We have elected to treat shipping and handling as fulfillment activities and not a separate performance obligation.

Accordingly, we will recognize merchandise revenue for the Retail segment for our single performance obligation at the point of sale or at the time of shipment, which is when transfer of control to the customer occurs.

A Subscription segment customer may purchase merchandise in her possession that was included in the order that was delivered as part of the monthly subscription rental service.

We recognize merchandise revenue for the Subscription segment for our single performance obligation when the customer purchases the merchandise

through the website or mobile application.

Accordingly, we will recognize merchandise revenue for the Retail segment for our single performance obligation at the point of sale, when furniture is delivered or at the time of shipment for non-furniture merchandise, which is when transfer of control to the customer occurs.

A Nuuly Rent customer may purchase merchandise in her possession that was included in the order that was delivered as part of the monthly subscription rental service.

We recognize merchandise revenue for Nuuly Rent for our single performance obligation when the customer purchases the merchandise through the website or mobile application.

Revenue does not include taxes assessed by governmental authorities, including value-added and other sales-related taxes, that are imposed on and concurrent with revenue-producing activities.

Revenue is recognized net of estimated customer returns.

Retail segment return policies vary by brand, but generally provide for no time limit on returns and the refund to be issued in either the form of original payment or as a gift card.

Retail segment return policies vary by brand,

but generally provide for no time limit on returns and the refund to be issued in either the form of original payment or as a gift card.

Payment for merchandise is tendered primarily by cash, check, credit card, debit card, gift card or alternative payment method s .

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Subscription Fees:

Revenue for the Subscription segment is generated through monthly subscription fees and the purchase of merchandise in a customer’s possession.

Revenue for Nuuly Rent is generated through monthly subscription fees and the purchase of merchandise in a customer’s possession.

The monthly subscription rental fee is recognized as revenue on the date the customer is billed.

A customer may pause the monthly subscription, at which point the customer will not be billed for future months until the subscription is no longer on hold.

Merchandise sales to Subscription segment customers are discussed above under Merchandise.

Merchandise sales to Nuuly Rent customers are discussed above under Merchandise.

We account for a gift card transaction by recording a liability at the time the gift card is issued to the customer in exchange for consideration from the customer.

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Rental Product

The cost of our Subscription segment rental product is amortized to cost of sales based on the cost of each unit rented, which is estimated based on the number of times the unit is expected to be rented and the cost of the rental product.

The cost of our Nuuly segment rental product is amortized to cost of sales based on the cost of each unit rented, which is estimated based on the number of times the unit is expected to be rented and the cost of the rental product.

Lost, damaged and retired rental product is also charged to cost of sales.

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Events that result in an impairment review include plans to close a retail location, distribution or fulfillment center, a significant decrease in the operating results of a long-lived asset or significant adverse changes in the business climate.

Our retail locations are reviewed for impairment at the retail location level, which is the lowest level at which individual cash flows can be identified.

Our retail locations are reviewed for impairment at the retail location level, which is the lowest level at which

individual cash flows can be identified.

Newly opened retail locations may take time to generate positive operating and cash flow results.

Factors such as store type (e.g., mall versus free-standing), location (e.g., urban area versus college campus or suburb), current marketplace awareness of our brands, local customer demographic data and current fashion trends are all considered in determining the time frame required for a retail location to achieve positive financial results.

When events indicate that an asset may be impaired and the estimated undiscounted cash flows are less than the carrying amount of the asset, the impaired asset is adjusted to its estimated fair value and an impairment loss is recorded.

When events indicate that an asset may be impaired and the estimated undiscounted cash flows (based on forecasts of sales and gross profit) are less than the carrying amount of the asset, the impaired asset is adjusted to its estimated fair value and an impairment loss is recorded.

The estimated fair value of the asset or asset group is based on future cash flows of the asset or asset group.

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During fiscal 20 20 , we recorded impairment charges for eight retail locations, totaling $ 14.6 million , with a carrying value after impairment of $51.9 million primarily related to the right-of-use assets .

During fiscal 2019, we recorded impairment charges for four retail locations, totaling $3.5 million.

On February 1, 2019, we adopted the Financial Accounting Standards Board (“FASB”) accounting standards update that amended the existing accounting standards for lease accounting.

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Valuation allowances are based on evidence of our ability to generate sufficient taxable income in certain foreign and state jurisdictions.

In the future, if enough evidence of our ability to generate sufficient future taxable income in these jurisdictions becomes apparent, we

would be required to reduce our valuation allowances, resulting in a reduction in “Income tax expense” in the Consolidated Statements of Income.

In the future, if enough evidence of our ability to generate sufficient future taxable income in these jurisdictions becomes apparent, we would be required to reduce our valuation allowances, resulting in a reduction in “Income tax expense” in the Consolidated Statements of Income.

On a quarterly basis, management evaluates the likelihood that we will realize the deferred tax assets and adjusts the valuation allowances, if appropriate.

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Accounting for share-based compensation requires measurement of compensation cost for all share-based awards at fair value on the date of grant and recognition of compensation over the service period.

A Black-Scholes model was used to determine the fair value of our stock options granted in the fiscal years ended January 31, 2020 and 2019.

A Black-Scholes model was used to determine the fair value of our stock options granted in the fiscal year ended January 31, 2020.

This model uses assumptions including the risk-free rate of interest, expected volatility of our stock price and expected life of the awards.

There were no stock options granted in the fiscal year ended January 31, 2021.

The fair value of the performance-based awards granted during fiscal 2021 and fiscal 2020 equaled the stock price on the date of the grant.

A Monte Carlo simulation was used to determine the fair value of performance-based awards granted during fiscal 2019.

A different methodology was used to value fiscal 2021 and fiscal 2020 grants due to the removal of certain conditions in the grant provisions.

There were no stock options granted in the fiscal years ended January 31, 2022 and 2021.

The fair value of the performance-based awards granted during fiscal 2022, 2021 and 2020 equaled the stock price on the date of the grant.

We review our assumptions and the valuations provided by independent third-party valuation advisors in order to determine the fair value of share-based compensation awards at the date of grant.

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As a Percentage of Net Sales

As a result of the COVID-19 pandemic, our stores were closed for a portion of the first half of fiscal 2021 (see further details under Impact of the Coronavirus Pandemic above).

In addition to lost revenues, we incurred expenses that were not commensurate with the current level of sales.

Because of the material impact COVID-19 had on our business operations in fiscal 2021, including mandated store closures, the following financial highlights have been provided as a comparison of fiscal 2022 results to fiscal 2020.

Management views the comparison of fiscal 2022 results to fiscal 2020 as a meaningful measurement of the Company’s business performance.

Total net sales increased 14.2% compared to the year ended January 31, 2020, reaching record net sales in dollars.

The increase was driven by an increase in comparable Retail segment net sales, partially offset by a decline in Wholesale segment net sales.

Gross profit rate improved to 32.8% for the year ended January 31, 2022, compared to 31.1% for the year ended January 31, 2020.

The improvement was primarily driven by the lowest merchandise markdown rates for a fiscal year and improved leverage in store occupancy expense due to the increased penetration of the digital channel in Retail segment net sales, partially offset by an increase in delivery and logistics expenses and lower initial merchandise markups resulting from higher inbound transportation expenses.

During fiscal 2020, we also recorded impairment charges for eight retail locations, totaling $14.6 million.

As of January 31, 2022, total inventory increased by $160.2 million, or 39.1%, compared to total inventory as of January 31, 2020, primarily due to the Company continuing to bring certain product categories in earlier to protect against ongoing supply chain disruptions and delays and increasing inbound shipping costs.

Selling, general and administrative expenses expressed as a percentage of net sales decreased to 23.8% for fiscal 2022, compared to 25.0% for fiscal 2020.

The leverage was primarily related to disciplined store payroll management and overall expense control and the increased penetration of the digital channel in Retail segment net sales, partially offset by deleverage in digital marketing and creative expenses to drive overall customer growth and the strong digital sales.

During the year ended January 31, 2020, the Company recorded a charge of approximately $13.9 million related to goodwill impairment of the Menus & Venues division.

Income from operations expressed as a percentage of net sales improved to 9.0% for the year ended January 31, 2022, compared to 5.8% for the year ended January 31, 2020.

The tables below set forth, for the periods indicated, the results of operations and the percentage of our net sales represented by certain statement of operations data.

The tables should be read in conjunction with the discussions that follow.

As a result of the COVID-19 pandemic, all of our stores were closed for a portion of the first half of fiscal 2021.

In addition to lost revenues, we incurred expenses in fiscal 2021 that were not commensurate with the level of sales.

As a result, comparisons of expense ratios and year-over-year trends were impacted in a meaningful way.

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:

(amounts in millions)

Fiscal Year Ended

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Interest expense

Other (expense) income

Other expense

Income before income taxes

Income tax expense

AS A PERCENTAGE OF NET SALES

Cost of sales (excluding store impairment)

Store impairment (1)

Selling, general and administrative expenses

Goodwill impairment (2)

Income from operations

Interest income

Interest expense

Other expense

Income before income taxes

Income tax expense

Period over Period Change:

2 unchanged sentences

During fiscal 2020, we recorded store impairment charges for eight retail locations, totaling $14.6 million.

During fiscal 2019, we recorded store impairment charges for four retail locations, totaling $3.5 million.

During fiscal 2020, we recorded a charge of $13.9 million related to goodwill impairment of the Menus & Venues brand.

* Not meaningful.

Fiscal 2022 Compared to Fiscal 2021

Net sales in fiscal 2022 increased by 31.9% to $4.55 billion, from $3.45 billion in fiscal 2021.

The $1.10 billion increase was attributable to a $1.02 billion, or 31.6%, increase in Retail segment net sales, a $55.1 million, or 28.0%, increase in Wholesale segment net sales and an increase in Nuuly segment net sales of $23.4 million.

Retail segment net sales for fiscal 2022 accounted for 93.4% of total net sales compared to 93.6% of total net sales during fiscal 2021.

The increase in our Retail segment net sales during fiscal 2022 was due to an increase of $906.6 million, or 28.7%, in Retail segment comparable net sales, and an increase of $113.9 million in non-comparable net sales, including the net impact of store openings and closings since the prior comparable period and the impact of foreign currency translation.

Retail segment comparable net sales

increased 42.5% at the Free People Group, 34.5% at the Anthropologie Group and 17.2% at Urban Outfitters.

Retail segment comparable net sales increased in North America and Europe.

The increase in Retail segment comparable net sales for fiscal 2022 was driven by high double-digit growth in retail store sales and high single-digit growth in digital channel sales.

Retail segment comparable net sales for fiscal 2021 were significantly impacted by lower retail store sales due to store closures , reduced store traffic in reopened store locations and significant growth in our digital channel.

As a result, for fiscal 2021 the relative proportion of sales attributable to store and digital channels changed significantly.

Positive comparable store net sales in fiscal 2022 resulted from an increase in store traffic, transactions and average unit retail price, while units per transaction and conversion rate declined.

The digital channel net sales increase was driven by an increase in average order value, while sessions and units per transaction decreased and conversion rate was flat.

The increase in non-comparable net sales during fiscal 2022 was primarily due to net new store openings and a recovery from the negative impact of the COVID-19 pandemic in fiscal 2021, which resulted in reduced store traffic and lower store productivity in the 76 new Company-owned stores opened and 28 Company-owned stores and restaurants closed since the prior comparable period.

The benefit from foreign currency translation in fiscal 2022 also contributed to the increase in non-comparable net sales.

The increase in Wholesale segment net sales in fiscal 2022 as compared to fiscal 2021 was primarily due to a $46.5 million, or 24.9%, increase in sales for the Free People Group, due to a significant number of the brand’s wholesale partners having had a meaningful portion of their businesses negatively impacted by the COVID-19 pandemic during fiscal 2021.

The segment increase was also due to an increase of $9.2 million in Urban Outfitters wholesale sales.

Gross profit percentage for fiscal 2022 increased to 32.8% of net sales, from 25.0% of net sales in fiscal 2021.

Gross profit increased to $1,494.0 million for fiscal 2022 from $861.9 million in fiscal 2021.

The increase in gross profit rate was due to the significant negative impact of COVID-19 related store closures on the Company’s Retail segment and its partners in the Wholesale segment in the prior year period.

Additionally, during the prior year period, the Company recorded a $15.5 million store impairment charge and a meaningful increase in inventory obsolescence reserves due to the impact the store closures had on the aging of the Company’s inventory.

Finally, all three brands achieved record low merchandise markdown rates in the Retail segment during fiscal 2022, further contributing to the improvement in the current year.

Total inventory at January 31, 2022 increased by $180.1 million, or 46.2%, to $569.7 million from $389.6 million at January 31, 2021.

This increase was driven by the increase in net sales and by the Company continuing to bring certain product categories in earlier to protect against ongoing supply chain disruptions and delays and increasing inbound transportation costs.

Selling, general and administrative expenses increased by $227.5 million, or 26.5%, to $1,085.4 million in fiscal 2022 compared to fiscal 2021.

Selling, general and administrative expenses as a percentage of net sales decreased in fiscal 2022 to 23.8% of net sales, compared to 24.9% of net sales for fiscal 2021.

The increase in selling, general and administrative expenses was primarily related to increased direct selling and digital marketing expenses in the current year to support the increase in net sales, higher incentive-based compensation due to the impacts of COVID-19 on the prior year period and the benefit of COVID-19 related government relief packages recorded in the prior year period.

The leverage in selling, general and administrative expenses in fiscal 2022 is primarily due to the increase in retail store sales, as store operations for fiscal 2021 were significantly impacted by store closures and reduced store traffic in reopened locations.

Income from operations for fiscal 2022 was 9.0% of net sales, or $408.6 million, compared to 0.1% of net sales, or $4.0 million, for fiscal 2021.

Our effective tax rate for fiscal 2022 was 23.2% compared to 64.8% in fiscal 2021.

See Note 10, “Income Taxes,” in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K, for a reconciliation of the statutory U.S.

federal income tax rate to our effective tax rate.

Fiscal 2021 Compared to Fiscal 2020

Net sales in fiscal 2021 decreased by 13.4% to $3.45 billion, from $3.98 billion in fiscal 2020.

The $534.0 million decrease was attributable to a $420.7 million, or 11.5%, decrease in Retail segment net sales and a $129.6 million, or 39.7%, decrease in Wholesale segment net sales, partially offset by a $16.3 million increase in Subscription segment net sales.

Retail segment net sales for fiscal 2021 accounted for 93.6% of total net sales compared to 91.6% of total net sales during fiscal 2020.

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Negative comparable store net sales resulted from a decrease in store traffic, transactions and average unit selling price, while units per transaction and conversion rate increased.

The digital channel net sales increase was driven by an increase in conversion rate and sessions, while average order value and units per transaction decreased.

The digital channel net sales increase was driven by an increase in conversion rate and sessions, while average order value

and units per transaction decreased.

The decrease in non-comparable net sales was primarily due to the store closures and lower store productivity as a result of the COVID-19 pandemic at the 46 new Company-owned stores opened and 22 Company-owned stores and restaurants closed since the prior comparable period.

The decrease in Wholesale segment net sales during fiscal 2021, as compared to fiscal 2020, was primarily due to a 40.1% decrease in sales for the Free People brand, due to most of the brand’s wholesale partners having a meaningful portion of their businesses closed during the year due to the COVID-19 pandemic and lower customer demand once reopened.

The segment decrease was also due to a decrease of $10.1 million in Anthropologie Home sales due to the brand’s exit of the wholesale business in the third quarter of fiscal

2021 and the impact of the COVID-19 pandemic on the brand’s wholesale partners’ operations, partially offset by an increase of $5.3 million in Urban Outfitters wholesale sales.

The segment decrease was also due to a decrease of $10.1 million in Anthropologie Home sales due to the brand’s exit of the wholesale business in the third quarter of fiscal 2021 and the impact of the COVID-19 pandemic on the brand’s wholesale partners’ operations, partially offset by an increase of $5.3 million in Urban Outfitters wholesale sales.

Gross profit percentage for fiscal 2021 decreased to 25.0% of net sales, from 31.1% of net sales in fiscal 2020.

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The increase in the effective tax rate for fiscal 2021 was primarily due to the ratio of foreign taxable losses to global taxable profits and lower income before income taxes as compared to the prior year comparable period.

See Note 10, “Income Taxes,” in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K, for a reconciliation of the statutory U.S.

federal income tax rate to our effective tax rate.

Fiscal 2020 Compared to Fiscal 2019

Net sales in fiscal 2020 increased by 0.8% to $3.98 billion, from $3.95 billion in fiscal 2019.

The $33.2 million increase was attributable to a $44.8 million, or 1.2%, increase in Retail segment net sales and $8.0 million in Subscription segment net sales, partially offset by a $19.6 million, or 5.7%, decrease in Wholesale segment net sales.

Retail segment net sales for fiscal 2020 accounted for 91.6% of total net sales compared to 91.2% of total net sales during fiscal 2019.

The growth in our Retail segment net sales during fiscal 2020 was due to an increase of $41.5 million, or 1.2%, in Retail segment comparable net sales, which includes our digital channel, and an increase of $3.3 million in non-comparable net sales, including new store and franchise net sales partially offset by the negative impact of foreign currency translation.

Retail segment comparable net sales increased 6.6% at the Free People Group and 2.2% at the Anthropologie Group and decreased by 1.4% at Urban Outfitters.

Retail segment comparable net sales increased in North America but declined in Europe.

The increase in Retail segment comparable net sales was driven by continued growth in the digital channel, partially offset by negative comparable store net sales.

The digital channel net sales increase was driven by increases in sessions and conversion rate, while average order value and units per transaction decreased.

Negative comparable store net sales resulted from a decrease in average unit selling price and transactions, partially offset by an increase in units per transaction.

Store traffic for fiscal 2020 decreased.

The increase in net sales attributable to non-comparable sales was primarily due to the net impact of opening 44 new stores and restaurants and closing 23 stores and restaurants since the prior comparable period and an increase in franchise net sales due to the opening of two franchisee-owned stores during fiscal 2020 and the impact of full year operations of franchisee-owned stores opened during fiscal 2019, partially offset by the negative impact of foreign currency translation.

The decrease in Wholesale segment net sales during fiscal 2020, as compared to fiscal 2019, was due to a decrease of 7.7% for the Free People brand, primarily resulting from lower sales to North American department stores.

This decrease was partially offset by an increase of $3.8 million in Urban Outfitters BDG sales and $2.6 million in Anthropologie Home sales.

The Urban Outfitters wholesale division was launched in the third quarter of fiscal 2019.

Gross profit percentage in fiscal 2020 decreased to 31.1% of net sales, from 34.1% of net sales in fiscal 2019.

Gross profit decreased to $1.24 billion in fiscal 2020 compared to $1.35 billion in fiscal 2019.

The decrease in gross profit percentage was primarily driven by higher Retail segment markdowns and deleverage in delivery and logistics expenses.

The higher Retail segment markdowns were largely driven by underperforming product at the Urban Outfitters and Anthropologie brands.

The deleverage in delivery and

logistics expenses was primarily due to the increase in penetration of the digital channel.

Additionally, store impairment charges were $14.6 million in fiscal 2020 related to eight retail locations and $3.5 million in fiscal 2019 related to four retail locations.

Total inventory at January 31, 2020 increased by $39.0 million, or 10.5%, to $409.5 million from $370.5 million at January 31, 2019.

Comparable Retail segment inventory was flat at cost.

The total inventory increase was primarily related to an increase in Wholesale segment inventory.

Selling, general and administrative expenses increased by $28.6 million, or 3.0%, to $994.0 million, in fiscal 2020, from $965.4 million in fiscal 2019.

Selling, general and administrative expenses as a percentage of net sales increased in fiscal 2020 to 25.0% of net sales, compared to 24.4% of net sales for fiscal 2019.

The dollar growth and deleverage in selling, general and administrative expenses was primarily driven by increased marketing expenses supporting our digital sales growth and new business initiatives.

During fiscal 2020, we recorded a charge of approximately $13.9 million related to goodwill impairment of the Menus & Venues brand.

Income from operations decreased to 5.8% of net sales, or $231.9 million, for fiscal 2020 compared to 9.7%, or $381.3 million, for fiscal 2019.

Our effective tax rate for fiscal 2020 was 29.9% of income before income taxes compared to 22.7% of income before income taxes in fiscal 2019.

The increase in the effective tax rate for fiscal 2020 was primarily due to the ratio of foreign taxable profits to global taxable profits and an increase in valuation allowances attributable to net losses of certain foreign operations.

See Note 10, “Income Taxes,” in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K, for a reconciliation of the statutory U.S.

federal income tax rate to our effective tax rate.

Liquidity and Capital Resources

Cash, cash equivalents and marketable securities were $694.0 million as of January 31, 2021, as compared to $530.4 million as of January 31, 2020 and $694.8 million as of January 31, 2019.

During fiscal 2021, we generated $285.8 million in cash from operations, invested $159.2 million in property and equipment and repurchased $7.0 million in common shares under our share repurchase programs.

The shares repurchased during fiscal 2021 were prior to the known spread of the COVID-19 pandemic in the United States, which forced the Company to close its stores for an extended period of time.

Additionally, during fiscal 2021, and in response to the COVID-19 pandemic, we had borrowings of $220.0 million under our Amended Credit Facility to further protect our cash reserves and subsequently repaid the entire $220.0 million during fiscal 2021.

Our working capital was $317.2 million at January 31, 2021 compared to $414.6 million at January 31, 2020 and $816.1 million at January 31, 2019.

Working capital as of January 31, 2021 and 2020, was negatively impacted by $254.7 million and $221.6 million, respectively, for the current portion of operating lease liabilities due to the February 1, 2019 adoption of an accounting standards update that amended the accounting standards for lease accounting (see Note 2, “Summary of Significant Accounting Policies,” in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion).

Working capital at January 31, 2021 was also negatively impacted by the extension of supplier payment terms in response to the COVID-19 pandemic and the timing of certain accrued expenses and other current liabilities.

Working capital at January 31, 2020 was also negatively impacted by the use of cash and cash equivalents and marketable securities to repurchase our common shares and fund our capital projects.

During the last three years, we have satisfied our cash requirements primarily through our cash flow from operating activities.

The following tables set forth certain balance sheet and cash flow data for the periods indicated.

These tables should be read in conjunction with the discussion that follows:

(amounts in millions)

Cash, cash equivalents and marketable securities

Working capital

Fiscal Year Ended

Net cash provided by operating activities

Net cash used in investing activities

Net cash used in financing activities

The decrease in working capital at January 31, 2022, as compared to January 31, 2020, was primarily due to the increase in certain accrued expenses, accrued compensation and other current liabilities (such as accrued incentive-based compensation, accrued capital expenditures and other accrued operational expenses) partially offset by the net increase in inventory less accounts payable, both due to the continued growth of the Company’s operations since fiscal 2020.

During the last three years, we have satisfied our cash requirements through our cash flow from operating activities.

Additionally, during fiscal 2021, and in response to the COVID-19 pandemic, we had borrowings of $220.0 million under our Amended Credit Facility to protect our cash reserves.

We subsequently repaid the entire $220.0 million during fiscal 2021.

Our primary uses of cash have been to fund business operations, purchase inventory, expand our home offices and fulfillment centers, open new stores and repurchase our common shares.

Cash Flows from Operating Activities

Cash provided by operating activities for fiscal 2021 increased by $11.9 million to $285.8 million from $273.9 million in fiscal 2020.

Cash provided by operating activities for fiscal 2020 decreased by $172.7 million from $446.6 million in fiscal 2019.

For all periods, our major source of cash from operations was merchandise sales and our primary outflow of cash from operations was for the payment of operational costs.

The increase in cash flows from operations for fiscal 2022 compared to fiscal 2021 was primarily due to increased net income, partially offset by the net increase in inventory less accounts payable to support the continued growth of the Company’s operations.

The increase in cash flows from operations for fiscal 2021 compared to fiscal 2020 was primarily due to an increase in accounts payable and accrued expenses, accrued compensation and other current liabilities due to timing of payments, in addition to decreased inventory levels, partially offset by lower merchandise sales in fiscal 2021 as a result of store closures and lower store productivity caused by the COVID-19 pandemic.

Although the Company’s stores were closed for part of fiscal 2021, the Company continued to incur various store operational costs, such as employee costs and costs for a large portion of its regional and store management teams despite store closures and reduced sales during the COVID-19 pandemic.

The decrease in cash flows from operations in fiscal 2020 compared to fiscal 2019 was primarily due to lower net income.

Although the Company’s stores were closed for a part of the first six months of fiscal 2021, the Company continued to incur various store operational costs for a large portion of its store employees.

Cash Flows from Investing Activities

Cash used in investing activities during fiscal 2021 decreased by $84.2 million to $101.9 million from $186.1 million in fiscal 2020.

Cash used in investing activities during fiscal 2020 decreased by $58.4 million from $244.5 million in fiscal 2019.

Cash used in investing activities in fiscal 2021 and 2020 primarily related to purchases of marketable securities and property and equipment, partially

offset by the sales and maturities of marketable securities.

The Company initially liquidated its marketable securities portfolio earlier in fiscal 2021 primarily to preserve financial flexibility and maintain liquidity in response to the COVID-19 pandemic, but reinvested in a marketable securities portfolio in the fourth quarter of fiscal 2021.

Cash paid for property and equipment for fiscal 20 2 1 , 20 20 and 201 9 was $ 159.2 million, $ 217.4 million and $ 114.9 million, respectively , which was primarily used to expand our fulfillment center network in fiscal 202 1 and 2020 and expand our store base in fiscal 2019 .

Cash used in investing activities in fiscal 2022 and 2021 was primarily related to purchases of marketable securities and property and equipment, partially offset by the sales and maturities of marketable securities.

The Company initially liquidated its marketable securities portfolio earlier in fiscal 2021 to preserve financial flexibility and maintain liquidity in response to the COVID-19 pandemic, but reinvested in a marketable securities portfolio in the fourth quarter of fiscal 2021.

Cash paid for property and equipment for fiscal 2022, 2021 and 2020 was $262.4 million, $159.2 million and $217.4 million, respectively, which was primarily used to expand our fulfillment center network in fiscal 2022, 2021, and 2020.

Cash Flows from Financing Activities

Cash used in financing activities during fiscal 2021 decreased by $211.6 million to $10.4 million from $222.0 million in fiscal 2020.

Cash used in financing activities during fiscal 2020 increased by $104.0 million from $118.0 million in fiscal 2019.

Cash used in financing activities in fiscal 2021, 2020 and 2019 was primarily related to $7.0 million, $217.4 million and $121.4 million, respectively, of repurchases of our common shares under our share repurchase programs.

The shares repurchased during fiscal 2021 were prior to the known spread of the COVID-19 pandemic in the United States, which forced the Company to close its stores for an extended period of time.

Cash used in financing activities in fiscal 2022, 2021 and 2020 was primarily related to $55.8 million, $7.0 million and $217.4 million, respectively, of repurchases of our common shares under our share repurchase programs during each of those years.

During fiscal 2021, we also borrowed $220.0 million under our Amended Credit Facility in order to preserve financial flexibility and maintain liquidity and flexibility in response to the COVID-19 pandemic.

We subsequently repaid the entire $220.0 million during fiscal 2021.

Credit Facilities

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The funds available under the Amended Credit Facility may be used for working capital and other general corporate purposes.

The Amended Credit Facility provides for interest on borrowings, at our option, at either (i) adjusted LIBOR, CDOR or EURIBOR plus an applicable margin ranging from 1.125% to 1.375%, or (ii) an adjusted ABR plus an applicable margin ranging from 0.125% to 0.375%, each such applicable margin depending on the level of availability under the Amended Credit Facility.

Currently, there has not been a replacement reference rate identified for LIBOR in the Amended Credit Facility.

The Amended Credit Facility provides for interest on borrowings, at our option, at either (i) adjusted LIBOR, CDOR, SONIA or EURIBOR plus an applicable margin ranging from 1.125% to 1.375%, or (ii) an adjusted ABR plus an applicable margin ranging from 0.125% to 0.375%, each such applicable margin depending on the level of availability under the Amended Credit Facility.

Depending on the type of borrowing, interest on the Amended Credit Agreement is payable monthly, quarterly or at the end of the interest period.

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Outstanding stand-by letters of credit, which reduce the funds available under the Amended Credit Facility, were $13.1 million.

Interest expense for the Amended Credit Facility for the year ended January 31, 2021, was $2.7 million, which was included in “Interest Expense,” in the Consolidated Statements of Income.

Interest expense for the Amended Credit Facility for the years ended January 31, 2022, January 31, 2021 and January 31, 2020, was $1.0 million, $2.7 million and $1.0 million, respectively, which was included in “Interest expense,” in the Consolidated Statements of Income.

Capital and Operating Expenditures

During fiscal 2022, we plan to continue construction on a new omni-channel fulfillment center in Kansas City, Kansas, finalize setup of material handling equipment at our new omni-channel fulfillment center in Europe, open approximately 55 new Company-owned retail locations, expand or relocate certain existing retail locations, invest in new products, markets and brands, purchase inventory for our operating segments at levels appropriate to maintain our planned sales, upgrade our systems, improve and expand our digital capabilities and invest in omni-channel marketing when appropriate and may repurchase common shares.

During fiscal 2023, we plan to complete construction on a new omni-channel fulfillment center in Kansas City, Kansas (which will be fully operational in fiscal 2024), open approximately 46 new Company-owned retail locations, expand or relocate certain existing retail locations, invest in new products, markets and brands, purchase inventory for our operating segments at levels appropriate to maintain our planned sales, upgrade our systems, improve and expand our digital capabilities and invest in omni-channel marketing when appropriate.

We may also repurchase common shares.

We believe that our new brand initiatives, new store openings, merchandise expansion programs, international growth opportunities and our marketing, social media, website and mobile initiatives are significant contributors to our sales.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis