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PHILADELPHIA-Fueled by an 18%-jump in the combined comp-store sales of its three store brands, an 85%-spike in direct-to-consumer sales, and a 58%-gain in wholesale sales to other retailers in the third-quarter alone, Urban Outfitters Inc. plots a restrained course for expansion. “Urban Outfitters is doing something different,” said Dana Telsey, retail analyst and a senior managing director at Bear Stearns, during a recent meeting of the Urban Land Institute. She called the company’s namesake Urban Outfitters units a “must have” store and praised its mix of home goods and apparel.

The phrase “something different” precisely describes the niche the locally based retailer plans to continue to occupy as it steps up expansion plans for its Urban Outfitters, Anthropologie and Free People brands. CFO John Kyees is quoted as saying, “Big is the enemy of cool.” With that in mind, the company plans to grow, but not too fast, and never too big.

A company spokesperson tells GSR the company plans to expand the number of stores, excluding Free People, by about 20% a year, with an ultimate goal of 450 in the US and abroad. According to a report by Jeff Black of Lehman Brothers, of those, about 250 will be Anthropologie units, and from 150 to 200 will be Urban Outfitters stores.

At present, there are 71 Urban Outfitters stores in the US, Canada and Europe; 62 Anthropologie units in the US, and a single Free People store, which has been in operation in Paramus, NJ since 2002. Free People is the company’s wholesale division, which sells product to approximately 1,100 specialty stores, department stores and catalogs as well as its own website, which began in late October this year.

The little and lone Free People outlet racked up a 49%-increase in sales during third-quarter compared with the same quarter a year ago. According to Black of Lehman Brothers, sales per sf in the approximately 1,800-sf unit, average about $800 per sf.

Initially created to showcase Urban’s Free People wholesale line, which sells under shop-within-a-shop concepts at such upscale department stores as Bloomingdale’s and Nordstrom and some trendy boutiques, it is now being tested as a third Urban Outfitters’ store concept. The Urban Outfitters’ spokesperson says preliminary plans, “unconfirmed,” call for eight Free People stores by 2006. She declined to disclose any potential locations.

Third-quarter comp-store sales at Anthropologie units increased 22% over the same quarter a year ago. Currently there are 62 units of this brand in the US. They average about 8,500 sf and, according to Black, generate just over $600 sales per sf. They target primarily women between the ages of 30 and 45 with romantic, updated vintage apparel and a mix of tabletop, bed linens, and carefully edited vintage furniture pieces.

There are now 71 Urban Outfitters stores in the US, Canada and Europe. Slightly larger than Anthropologie, they range in size from about 9,000 sf to 10,000 sf, and, according to Black, average roughly $500 in sales per sf. These target a younger demographic, age 18 to 30, and are located primarily in metro areas, often near universities. They contain a mix of about 60% women’s apparel, 20% men’s apparel, and 20% home furnishings. Third-quarter comp-store sales for this division rose 15% over the same quarter of 2003.

In his newly released report, Black gives thumbs up to the company’s expansion plans. Urban Outfitters, he says, has reached about 30% of its potential,” and also applauds its shift from unconventional retail spaces to malls. “Mall stores are 14% more productive,” he says. Furthermore, he thinks the growing base of US lifestyle centers “underpin strong unit growth for Anthropologie for at least several years.”

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