Good afternoon, and welcome to the URBN Third Quarter Fiscal 2016 Conference Call. Earlier this afternoon the company has issued a press release outlining the financial and operating results for the three and nine month period ending October 31, 2015. The following discussions may include forward-looking statements. Please note that actual results may differ materially from those statements. Additional information concerning factors that could cause actual results to differ materially from projected results is contained in the company’s filings with the Securities and Exchange Commission. We will begin today’s call with Frank Conforti, our Chief Financial Officer, who will provide financial highlights for the third quarter. Trish Donnelly, President, Urban Outfitters North America will provide a brief update on the Urban Outfitters Brand in North America. Richard Hayne, our Chief Executive Officer, will then comment on our broader strategic initiatives. Following that, we will be pleased to address your questions. As usual, the text of today’s conference call will be posted to our corporate website at www.urbanoutfittersinc.com. I’ll now turn the call over to Frank

Thank you, Oona, and Good afternoon, everyone. I will start my prepared commentary discussing our recently completed fiscal year 2016 third quarter results versus the prior comparable quarter. Then I will share our thoughts concerning the fourth quarter. Total company or URBN sales for the quarter increased by 1% to a third quarter record of $825 million. This sales increase included a 1% retail segment comp, a $9 million increase in non-comparable sales, including the opening of ten net new stores which more than offset a 5% decline in wholesale sales. Addionally, please note that our sales growth was negatively impacted by approximately 130 basis points of currency translation. Our wholesale segment sales were negatively affected by transition delays at our new distribution facility in Gap, Pennsylvania. These delays resulted in approximately $9 million of third quarter shipments being delayed into the fourth quarter. Had we been able to fulfill these orders during the third quarter, our wholesale sales growth would have been 9%. As we enter into the fourth quarter, we continue to see strong demand in both department and specialty stores and based on several measures put into place we do not anticipate further sales misses due to delayed shipments. Within our retail segment comp, the direct to consumer channel continues to outperform stores, forcing double digit sales increases driven by increases in sessions, average order value and session conversion. Negative comp store sales, resulted from decreased transactions and units per transaction, partially offset by higher average unit selling prices. The negative transaction could have been affected by traffic which was down at our comp stores during the quarter although we did benefit from an increase in conversion rate. By brand, our retail segment comp rate increased by 3% and 1% at Free People and Urban Outfitters while…

Thank you Frank, and good afternoon everyone. We are incredibly proud of the progress that UO brand has made this past quarter. The teams focused on assortment planning and allocation on creating, compelling trend right products, on delivering unique shopping environments and improved four wall productivity and on communicating our brand messaging through creative inventory and social engagements has given us solid quarterly results and a successful and stable foundation from which to continue to build. Starting with assortment planning and allocation, the teams major focus in discipline around inventory control and management has resulted in significantly improved marked down rates and historically fast inventory turns. The collaboration between planners and merchants has been examplanary. The teams work together to add at redundant styles and offerings while funding emerging businesses based on current trends. This balance and focus has resulted in positive rate price comps in both retail and direct. And the businesses into which we’ve intentionally restored it are seeing very exciting double digit full price comp results. We came into this year knowing we had a lot of work to do around IMU. Although it is still the work in progress with great focus, discipline and collaborative efforts with Barbara Rozsas, our Chief Sourcing Officer and her team we are proud to report our IMUs for the quarter showed nice improvement versus last year. Our design and merchants team have worked closely with Barb's group on increasing our internal design penetration which has also proven beneficial to improved IMU. In addition, the design team is executing more in-house trade which allow us to get samples right the first time resulting in faster production turnaround and speed to stores. The last time we spoke I talked about our focus on driving four walls productivity and the initiation of a…

Thank you, Trish good afternoon everyone. The Urban team has made excellent progress in re-energizing its brand over the last two years and that progress continues in this year’s first quarter. AS Trish explained the team made a decision to go back on promotional acvity while including the fashion and the quality of the offering, despite a lean year. Although top line growth in the third quarter was just 1% the improvement in regular price selling grows healthy double digit increases grow [Indiscernible] profit dollar. The Brand team also improved greater messaging with better imagery and more robust social engagement. Many on today’s call should have received a copy of the Urban holiday book, this is but one example of the improved market. I hope you agree with me that [Indiscernible] as Trish said, similar books with be distributed next year as the team believes this will help drive digital sales on a slower track. After two years of rebuilding the brand it is now positioned for growth, we believe there is considerable opportunity to -- new market, expand the direct to consumer channel and build more projects, like space 24, 28 North Sea Texas. I’ll talk about that exciting project in a few minutes. I congratulate and thank Trish, Meg and the entire Urban Brand team for a job well done. Before I turn your attention to the other brands, let me say a few words about the macro climate in which we currently operate. The policy has been disciplined from the traffic and sales perspective. Combined North American slow traffic for the quarter versus the same period last year was down 6% while conversion results were well based. Meanwhile combined North American direct traffic or specials grew by 4% and conversion was up 20 basis points. However, even…

Thank you ladies and gentlemen. [Operator Instructions] Our first question is from Kimberly Greenberger of Morgan Stanley. Your line is open.

Great. Thank you so much. Good evening. I think we're all just trying to figure out what's going on in the external environment and you talked about that a little bit tonight on the a call. Do you have obviously a lot more data as you look at your store businesses than your different concepts and performance by category, maybe you can just help us with your early diagnoses and obviously this is a dynamic situation but your early diagnosis is some of the things that are causing business to be a little software or store traffic to be a little softer and was there something that changed materially in October and I guess November year to-date that would suggest that there could be something beyond the weather happening in your business?

Hi, Kimberly, thanks for the question. I don't necessarily think there is anything that happened in October, as you say, beyond the weather. Of course weather is always a factor and we have had significant decreases in some of our weather related classics, but as you know having been associated with the Urban brand for many, many years now, we never ever blame weather for anything. So I want to discount that. We have seen lower traffic as I said in my prepared remarks that you could hear them. We've had lower traffic throughout the quarter and traffic got a little bit worse in October. I think that from our analysis the primary thing driving is a lack of newness in fashion. I think the current fashion look is getting a little long in the tooth and I wouldn't be surprised that we start to see some signs of it changing a little bit more radically than it have let's say over the last four or five years. We do think that we do see a number of areas in our business that we're excited about with the new fashion, but those – it’s pretty early to start saying that it’s a trends because there are items here, there are items there. But what we have seen outside of the apparel and accessory areas and why I don't believe that it is the lack of traffic is let's a precursor of recession area environment as we seen real strength in a number of our categories. I'd mentioned the home category in Anthropologie which has been really off the charge, so they've done a great job of providing more products and with the journals that they've issued, I think the customers are responding very well to that. Across all three of the concepts we've seen intimates and we've seen beauty respond very well. So there are number of categories that are doing very well and so I don't think customer is without money. I think she's without fashion newness.

Great. Thanks Dick.

Thanks, Kimberly.

Thank you. Our next question is Lorraine Hutchinson of Bank of America. Your line is open.

Thank you. I just wanted to focus on SG&A for a minute. Where there incentive comp reversals in this quarter and what's the reason for the reacceleration in the SG&A dollar growth rate in 4Q? And then just following up on that, are there cuts you can make for 2016 or fiscal 2017 if sales trends don't pick back up?

Lorraine, this is Frank, I'll take that question. So, yes, the third quarter benefited from first and foremost strong control at the brands related to variable spending specifically direct store controllable as comp there were negative, the brand mange to payroll appropriately. Secondly, there was a benefit in the quarter due to lower incentive based as well as share based compensation as the company is no longer on pace to hit it where we'd originally hope to land for the year. There were some appropriate reversals there. That is why you see the growth rate come back up a bit into the fourth quarter, although we originally planning for the fourth quarter to be in the high single digit range. Right now we have revise that down into the mid single digit range. Again that's spend will be focused primarily on technology and marketing initiatives to continue to support growth that we're continuing to see in the direct-to-consumer channel. As it relates to fiscal 2017, we have a little bit more commentary on that when we get on our next call. Thank you.

Our next question is from Paul Lejuez of Citi. Your line is open.

Hey, thanks guys. I'm just curious, what sort of AUR increases? Are you seeing at Urban Outfitters brand and I guess same question, I mean, Anthropologie and Free People side in terms of the decrease and how long do you assume that these trends will continue? Is there a point that you can see in the future where we should expect AUR to start moving higher at all three brands? Thanks.

Hi, Paul, it's Trish. I'll take that question for Urban brands. In terms of AUR increases, we're not seeing anything material. We are able to get better IMUs through some strategies and also by focusing on internal design product and we're close to production, but in the Urban brand we're not seeing any material AUR increases.

Paul, its David. I have to eco Trish's comments. AUR has been relatively steady. We're seeing a great response from our – solid response from our existing core customers and working on seeing the traffic decreases coming mostly from new customer trends. And as Dick indicated the appetite doesn't seem in the products rate as we're at home, she is willing to buy larger ticket items from us at a greater [Indiscernible].

Thank you. The next question is from [Indiscernible].

Good afternoon and congrats on the successes at UO. They look fantastic, so good luck there. Dick, I guess my question – I have two quick questions. One is can you talk about the differences in sort of the uptake, if there are emerging trend at UO and successes of fall today or season to date versus this 35 year old customer perhaps at Anthro, are these trends less in her kind of wheel house in other wheel house, maybe that's for David actually. And then on the wholesale channel, do you think it’s all for this notion or the company specific got Pennsylvania move? Or do you think it has something to do with what may see the north -- the department are saying about over inventory and just slowing in their channel? Thank you.

Okay. Let me take the last part of you one question first. As far as wholesale is concerned, it has absolutely nothing to do with our customers. I've had conversations with the wholesale folks as recently as Thursday of last week and they assured me that all of our partners are still enthusiastic about the Free People brand and are enthusiastic about receiving the product. It had everything to do with exactly what I said, which was a combination of some errors on our part in not accurately projecting the quantity of merchandize where we're going to have to ship. Having a few – more than a few actually system bugs both hardware and software and then as I said inadequate training. So, those three things combined to cause them real problems. I believe that the majority of those problems are now behind us and I believe that we will be shipping wholesale product and our direct-to-consumer product on time to our various fulfillment and distribution centers. Now I think I'll ask Trish to take the first part of your question and David, you take the other part of that one question.

Hey, Adrian, thanks for the comment about the look book. We're really excited about as well. In terms of emerging trends we're seeing great growth particularly dresses and skirts. In additional to the emerging business we talked about – I talked in the commentary which intimate and beauty. So, I think I'll refer to David on the second part of your question about how that relates to Anthro.

Hi, Adrian. Yes. When we look at Anthro's comparables against LYY positive comps in the apparel space, as Dick said, when we look at it, there's no news of the macro fashion side where we've had some early reads on new fashion propositions, they tended to be short lived. We get a week or two by, so probably our earliest and fast factors, the proposition still seems to be big over little for us. The categories that are checking and when we look at the items they sort of reinforce that. We are seeing some movement in long over slim at a proportion, but that being again that being said there is sufficient traffic and brand engagement or had we executed better and had a little more appeal in styling, we think we could still had better results when we actually delivered. We have looked at our approach to design our lead time as Dick has talked about across all of URBN and like where we're headed for spring of next year in terms of being even more nimble and linear and working with Meg and done a same approach of concepts to customer, so we're hoping that will yield better results.

Thank you. Our next question is from Lindsay Drucker Mann of Goldman Sachs. Your line is open.

Thanks. Good evening everyone. I just wanted to see as you think about the deceleration comp churn that we've observed and you talked about specifically in the quarter across successive months. Is the key factor that surprised you on the deterioration in traffic trends? Was that the big sort of comp lever that disappointed you? And can you square the comp shortfall with how down your inventories are in the quarter? Would you have expect if comps have gone to plan, inventory to be down even further than what they ultimately materialized, or you able to cut orders back or is there another timing issue there? Thank you.

Okay, Lindsay, I'll try to answer that. I think that traffic definitely was the biggest surprise. However, I'd say that, we have been experiencing lower traffic in stores now for a number of quarters. It just happen to be a little bit more intense in this quarter and it also manifested itself in the direct business which we really haven't seen before. So, I would say it was – traffic was a bit of surprised. As far as inventories are concern, I think we've really have a very good group of people now in each brand controlling inventories. And they've reacted extremely quickly to the business and that's the way we did it many years ago and it's the way I like to do it, so that we react to the current business and going forward, so we don't get caught with the excess inventory. So, I think you're right, as the sales materialized where we had plan them to materialized, we may have been a little bit lighter in inventory, but I think the teams did a great job in cutting back when they saw the trend.

Thank you. Thank you. Our next question is from Janet Kloppenburg of JJK Research. Your line is open.

Hi, everybody. I have clarification question. It sounds like the Urban Outfitters' business women's is performing well. Trish, you done a great job there, Trish, Meg, the whole team, and I was just wondering if you same slowdown there and if you're worried about fashion trends to that customer, because it feels like you actually performed better there than most. So I want you to talk about the women's outlook or the trend in women's at Urban Outfitters' and if the trend – if slowdown occur to the same magnitude there? Secondly, Frank, I'm little unclear on the gross margins for the fourth quarter, you say, they maybe down, which I understand relates to the top line, but is there also some one-time impact coming there from the gap, Pennsylvania issue, the DC issues and gap Pennsylvania and can you give us a magnitude of what you're thinking in terms of the one-time fulfillment issues? Thank you.

Okay, Janet, I'm going to start off and then ask Trish to come in and then Frank. I think that Urban Outfitters' women's did recently well during the quarter. I would congratulate Trish and women's team and Meg for really giving the customer what I think is extremely good product. When I go into the stores and I take a look at the products and compare it to two or three years ago, I think it just spectacularly better. Now having said that, overall sales were up 1%, so I think while the women's apparel had much better full price, it shows that it wasn't enough to offset the markdown group of product. So, I think that, again, traffic is an important element of this and we're sort of fighting against the wind as it were, when it comes to the offering. I think that there are still opportunities for the urban brand to do it better in some classification, but overall I give the Urban brand in women's a solid A for their efforts and their offering. So, I do think traffic affected Urban as well as the other two brands. I just think that Urban had a better fashion presentation. Trish, do you want to add anything to that.

Sure. Hi, Janet. As Dick said, our focus in women's is really on right price and delivering compelling trend right products at better quality at really good prices and we saw that payoff in number of categories. Now it's because that they are some categories that were still – we're still working on it and we'll continue to do that through the quarter. So, overall happy with where we were for Q3 understanding we have a lot more work to do going forward.

Hi, Janet, this is Frank. So first let me just say, obviously based on the current sales trend, it’s very hard to predict where the fourth quarter gross profit margin is going to come in and we certainly that it is appropriate to be planning the quarter conservatively right now. You are correct, there are some one-time items hitting the fourth quarter that will affect us in a similar way to the third quarter. Those being the fulfillment center transitions which we do anticipate the leverage in the fourth quarter similar to that what happened in the third quarter as well as the currency translation negatively effecting us in the fourth quarter similar to what hurt in the third quarter as well.

Thank you. Our next question is from Dana Telsey of Telsey Advisory Group. Your line is open.

Good afternoon everyone.

Hi, Dana.

Hi. As you spoken about the other categories beyond apparel and accessories that are working, what do you see and what is your envision is as the percentage of the store that is allocated to those categories going forward, what the percentage of sales should be in the future? And how does this impact gross margin long term. Is there a new normalized gross margin that we should be look forward? Thank you.

Okay, Dana. Sorry about that. I think that one of the things that the Urban brand had a lot of success with this quarter, was putting a right penetration of the product into the store and rearranging the stores so that it is grouped categories as oppose to product categories being hashed throughout the store. So that has helped us a lot. When you think about and say, what is the right penetration of these various product category? The answer is, the right penetration is what the customer deems it to be. Our job is to figure out what the customer wants and what is the percentage of a certain product category that she wants and then you give it to her. So I don't think there's any necessary long term affect on gross margin, because I believe as I said before, when the fashion changes or as the fashion changes I was full expect apparel and accessories to come back. And whatever margin it has, it will have. Meanwhile the other categories may carry higher or lower margin. So I don't think there's any particular long-term effect of margin on these other categories. And I would say the one exception to that is probably the home area and home traditionally has a lower initial margin, but are they enough. It usually have a very similar maintain margin because the markdowns are typically much less. So that shouldn't really have much effect on gross margin. Thank you.

Thank you. Our next question is from Brian Tunick of Royal Bank of Canada. Your line is open. Brian, I believe you disconnected. Can you re-queue [Operator Instructions] Your line is open.

All right, super. Thanks. I guess Frank just when you thought you were at the end of the IMU questions, now I guess you'll start hearing questions about cheese prices, but my question really was on the Anthro margin this quarter. Lots of worry there about where gross margins will normalized, can you maybe talk about where does the third quarter shakeout versus your plans and maybe David talks about how either changing the open to buy or lead times today is different versus previous cycles for the company? Thanks very much.

So, Brian, this is Frank. I'll answer as much as I can and then certainly David is open to add in as well. So the Anthropologie margins for the third quarter were down from what we had originally planned. With that being said due to how well the brand has managed inventory not just this quarter but over the last several years and how quickly they react that deleverage in margin was not as significant as what we've seen many years ago that would have driven Anthropologie to a much lower level of profitability.

Following on Frank's comments we look for those early reads and adjust. We are working on trying, as Dick talked about our go-to-market strategies and working with Barbara Rozsas and our supply chain partners to shrink that even closer. We're underway – I would say most of that gain we're going to start to see in next fiscal year and this year was when we got early reads and indication we work with our vendor partners to reduce orders and so we cut back. But we're excited about the nimbleness we have for three plus years and I believe worked on speeding our churn. This year churn will probably slightly flat. We're not expecting to see a faster churn, but we do believe there is plenty of opportunity to lower inventories going forward without sacrificing rate price.

This is Frank. Just to jump in and provide a little more clarity. When I was speaking of plan I was talking about what we would budgeted originally for this year as it relates to the third quarter and the last time we spoke, Anthropologie's margin actually came in very consistent with what we expected.

Thank you. Our next question is from Marni Shapiro of The Retail Tracker. Your line is open.

Hey, guys. If you can just get a quick update on your international business, and then I guess a big picture question. It feels that the Meg has the magic touch her e and I see first around, I guess waving you magic wand, Meg, she's done some impressive things as she partners with each of the groups. And she's one person obviously. So can you help us understand short of Meg coming back and helping Anthro. How should we think about if the company as far as are there new people working in Anthro has they're been turnover or has it changed and Free People and I guess overtime how doesn’t that look?

Marni, I would never speak for my wife, so I'm going to ask Meg to answer that question.

Hey, Marni. Thanks for the compliment and it’s been nice talking to you throughout this time, but we worked really hard at very brand to develop talent if needed to be able to do the job. And when I came over to Urban there was a lot of creative talent within that perhaps and we just gave them a strong reporting and we also hired some externally to support that. I feel very confident with the creative talent in the branch. I am with Trish, and she recognizes how that creativity is important to support all of our initiatives. And with Anthropologie, there are several very creative people there too. I'd like to promote someone that's working directly under me that managing design and concept that's been with the brand. I think for over 10 years and we're building there team there as well and working with image team who we had someone that works for Anthropologie and left and came back. So I feel pretty confident with all the people underneath me working for these brands with the creative talent and then we're just working and supporting the process and procedure as David has said and Trish has said, the trend that customers incredibly important and getting that right process in place and making sure the people in place have the strong voice to be able to carry through original vision. So, so I know I'm busy putting round from place to place but our goal is to always for creative talent in each brands to be able to choose a job that's needed to be done. Thank you.

Our next question is from Anna Andreeva of Oppenheimer. Your line is open.

Great. Thanks so much. Good afternoon and thanks for taking our question. I guess the question to Frank, looking at the spread between sale and comp, it had narrowed pretty significantly during the quarter even after we adjust four delayed shipments, is there anything to call out from our new store productivity performance during the quarter and should we expect that spread to return to more kind of normalize levels in the fourth quarter. And just to double check on the fulfillment issues. Should we expect those to be contained to the fourth quarter or could they continue into 2016? Thanks.

Yes, Anna, this is Frank. That spread has actually been declining a bit over the last several quarters. Do you think there is opportunity for to recover a little bit in the fourth quarter, but certainly the spread would be down from where we've been historically. I would say that our new store productivity, although we are building a lower number of stores as we've always talked about the Anthropologie and our Urban Outfitters' brands in North America been capped internal our own doing around 250 stores. We're getting closer to that caps, you're seeing a lower number of new stores and that's part of the effect that you seeing there. Additionally please remember that this is – the spread is also being negatively affect by foreign exchange. We've about 130 basis points negative affect on sales related to FX in the third quarter. I do anticipate that to be fairly similar in the fourth quarter and then we'll start to anniversary that as we move in to next years.

And to discuss again the fulfillment center issues, I do believe that we've have taken a lot of corrective actions, I can’t promise we have discovered each and every one of bug in the hardware and software and we believe that we certainly have the ones that know about, fixed I believe that we have, I know we have hired extra people, that’s why Frank has suggested that the delivering might occur in the fourth quarter as well and I know that we have instituted a much more vigorous training program. So with all those things combined, we are pretty confident that we have this under control and I don’t expect to see any additional problems in the fourth quarter.

And your last question comes from Simeon Siegel of Nomura Securities. Your line is open.

Hey thanks guys, just two quick one. So Frank just when thinking about your expenses, do you know what percent of variable versus mix and then sorry if I missed it, but just given kind of the acquisition announcement and the buyback just [Indiscernible] update thoughts on capital allocation and strategies at this point? Thanks.

Sure, Simeon. So the reason we don’t typically give out our percent of variable versus fixed is because as the direct to consumer channel continues to increase at varying rates from quarter to quarter but continuous to outpace the slower growth. That number actually changes from quarter to quarter. So essentially as soon as I would give it out it would be different in the following quarter and it’s just difficult and I don’t want the modeling to be relied on the number that’s continually moving. As it relates to capital allocation consistent with each quarter next week we have our board meeting and certainly as share buyback and capital allocation will be a topic of our conversation and we will then act accordingly.

Thank you all very much for joining and I look forward to talking with you in three months.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Have a wonderful day.