Urban Outfitters sees European expansion

Philadelphia-based Urban Outfitters is opening of its 100th store next month. And the fact the 100 mark will be achieved in Copenhagen underscores the growing importance of Urban's international business. "The international business produces a positive bottom line," said Tedford Marlow, president of Urban Outfitters. "It's been productive for us." The company opened its first store overseas in 1997 in London. It now operates three units in the capital, and one each in Dublin, Glasgow, Manchester and Birmingham,.

"With the foothold we have in the U.K., we decided to look at other opportunities in the European market," Marlow said. "We decided the best way would be to cross the Channel." In addition to the Copenhagen store, Urban Europe will open a unit in Stockholm in September. The company is also considering locations in Sweden and Belgium. "We have a location in Antwerp that we're excited about."

Many specialty retailers have store fleets in the 500 to 1,000 range. Urban, which has been in business for 35 years, takes a deliberately restrained approach. "We've grown dramatically over the last five years and doubled our store count," Marlow said. "There are opportunities for continued expansion in the U.S. We feel comfortable opening 15 stores a year worldwide. This year, we're going to open 13 to 15 stores in the U.S. and two to three in Europe."

Martin Parker, managing director of Urban Europe, said the company tailors the product mix to local tastes. "It's important that you don't plunk everything down" that sells in the U.S., he said. "We have a wish to work with local designers and local brands to add that Scandinavian flavor. We're not assuming that the mix in Copenhagen will be the same as in the U.K. There's only a 50 percent overlap between the U.K. and the U.S. When we move to Scandinavia, we're looking for a 25 percent twist."

Urban in the U.K. features Anglomania by Vivienne Westwood, Girbaud, Erotokritos, Paul & Joe, Sister and Sonia Rykiel. "We sell brands equivalent to those at Selfridges," Parker said, adding that Urban's closest competitor is Topshop. The Web site for Urban Europe features frilly blouses, while the U.S. site shows plaid tops.

"The seismic shift in fashion began about two quarters earlier in Europe than it did in the U.S.," Richard Jaffe, a retail analyst at Stifel Nicolaus, said in a research note. "European customers' acceptance of the fashion change, evident in an 11 percent comp-store sales increase at Urban Europe, bodes well for future customer acceptance in the U.S., possibly in the second half of 2006." Urban's disappointing results in the first quarter were blamed in part on consumers' ambivalence about the new fashion silhouette, which caused Jaffe to trim his 2007 earnings per share estimate to $1.15 from $1.25.

Urban Europe's prospects seem bright. The five-year objective calls for 30 to 40 stores across the Continent. There will be 10 locations operating by yearend. "The long-term ambition is to be in all the major capitals and second cities," Parker said. "We approached Scandinavia and Benelux because we thought they were the closest to us fashion-wise. We could look at Oslo and Helsinki if the Scandinavian stores work well. We want to look at the German and Spanish markets and Eastern Europe."