Urban Outfitters Inc: Form 10-Q for the period ended Jul 31, 2026

Certain matters contained in this filing with the United States Securities and Exchange Commission (“SEC”) may contain forward-looking statements and are being made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. When used in this Quarterly Report on Form 10-Q, the words “project,” “believe,” “plan,” “will,” “anticipate,” “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Any one, or all, of the following factors could cause actual financial results to differ materially from those financial results mentioned in the forward-looking statements: overall economic and market conditions (including current levels of inflation) and worldwide political events and the resultant impact on consumer spending patterns and our pricing power, the difficulty in predicting and responding to shifts in fashion trends, changes in the level of competitive pricing and promotional activity and other industry factors, currency fluctuations, economic conditions and legal or regulatory changes, the effects of war and geopolitical instability, including impacts of the conflicts in the Middle East and impacts of the war between Russia and Ukraine and from related sanctions imposed by the United States, European Union, United Kingdom and others, terrorism and civil unrest, natural disasters, severe or unseasonable weather conditions (including as a result of climate change) or public health crises, labor shortages and increases in labor costs, raw material costs and transportation costs, availability of suitable retail space for expansion, timing of store openings, risks associated with international expansion, seasonal fluctuations in gross sales, response to new concepts, our ability to integrate acquisitions, risks associated with digital sales, our ability to maintain and expand our digital sales channels, any material disruptions or security breaches with respect to our technology systems, our effective utilization of technological advancements, including in artificial intelligence, the departure of one or more key senior executives, import risks (including any shortage of transportation capacities or delays at ports), changes to U.S. and foreign trade policies (including the enactment of tariffs such as retaliatory tariffs), border adjustment taxes or increases in duties or quotas, the unexpected closing or disruption of, or any damage to, any of our distribution centers, our ability to protect our intellectual property rights, failure of our manufacturers and third-party vendors to comply with our social compliance program, risks related to environmental, social and governance activities, changes in our effective income tax rate, changes in accounting standards and subjective assumptions, regulatory changes and legal matters and other risks identified in our filings with the SEC, including those set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 31, 2026, filed on April 1, 2026. We disclaim any intent or obligation to update forward-looking statements even if experience or future changes make it clear that actual results may differ materially from any projected results expressed or implied therein.

Unless the context otherwise requires, all references to the “Company,” “we,” “us” or “our” refer to Urban Outfitters, Inc., together with its subsidiaries.

Overview

We operate under three reportable segments – Retail, Subscription and Wholesale. Our Retail segment primarily includes our Anthropologie, Free People, FP Movement and Urban Outfitters brands. Our Retail segment products and services are sold directly to our customers through our retail locations, websites, mobile applications, social media and third-party digital platforms, customer contact centers and franchisee-owned stores. Our Subscription segment includes the Nuuly brand, which offers customers a more sustainable way to explore fashion primarily through a monthly women’s apparel subscription rental service. Our Wholesale segment includes our 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 primarily designs, develops and markets apparel, intimates, activewear and shoes.

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 2027 will end on January 31, 2027 and our fiscal year 2026 ended on January 31, 2026.

As used in this document, unless otherwise defined, "Anthropologie Group" refers to our Anthropologie, Terrain and Maeve brands and "FP Group" refers to our Free People and FP Movement brands.

Macroeconomic Environment and Other Recent Developments

Beginning in early 2025, the U.S. government enacted significant changes to its tariff regime that increased rates on a substantial number of imports. In February 2026, the U.S. Supreme Court invalidated tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"). In March 2026, the U.S. Court of International Trade ("CIT") issued an order directing U.S. Customs and Border Protection to process refunds for IEEPA tariffs. We filed for refunds for previously paid IEEPA tariffs in April 2026 and received substantially all of the refund payments in the second quarter of fiscal 2027. We recognized a one-time financial benefit of $100.1 million during the second quarter of fiscal 2027, of which $95.7 million was recorded as a reduction of "Cost of sales" and $4.4 million was recorded as interest income included in "Other income, net" in the Condensed Consolidated Statements of Income.

In response to the U.S. Supreme Court decision, in February 2026 the government instituted temporary global tariffs under Section 122 of the Trade Act of 1974 ("Section 122"). In May 2026, the CIT ruled that the Section 122 tariffs were unauthorized, but we were required to continue paying them through their expiration on July 24, 2026. We continue to monitor the legal challenges to Section 122 tariffs and whether we will be eligible for additional refunds. Effective July 24, 2026, the government instituted new tariffs under Section 301 of the Trade Act of 1974 ("Section 301") as a result of investigations into forced labor practices of various foreign countries. The government indicated that additional Section 301 tariffs may be implemented in the coming months upon the conclusion of its investigation into excess manufacturing capacity.

The potential for additional tariff increases, increased reciprocal tariffs, other restrictive trade measures by the U.S. or foreign jurisdictions and continuing legal challenges to current and proposed tariff regimes may continue to contribute to uncertain global economic conditions, which may impact our operations and financial results throughout fiscal 2027.

We have been and continue to regularly evaluate global trade policies and take appropriate actions when necessary to mitigate the risks associated with tariffs. These actions include:

• Negotiating better terms with our vendors;
• Shifting our countries of origin (where possible) to enable the dual sourcing most of our own branded products (we currently have no single country that represents the majority of our production);
• Shifting our mode of transportation from air to ocean; and
• Gently raising prices in a strategic fashion where we believe we could without affecting the overall customer experience.

The current conflict in the Middle East, which began during the first quarter of fiscal 2027, has contributed to increased geopolitical uncertainty and disrupted global supply chains and energy markets. In response, we are actively employing supply chain strategies to mitigate higher inbound and outbound freight costs and higher delivery expenses driven by the fuel surcharges associated with the ongoing conflict. We will continue to monitor the conflict, the duration and magnitude of which remains highly unpredictable and may continue to negatively impact our operations and financial results throughout fiscal 2027.

On July 4, 2025, the United States enacted legislation commonly referred to as the One Big Beautiful Bill Act which includes various tax provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions like bonus depreciation. The legislation has multiple effective dates, with certain provisions effective in 2025 through 2027. This legislation did not have a material impact on the Company's fiscal 2026 income tax provision nor the Company's interim period income tax provision for the three and six months ended July 31, 2026. The Company continues to assess the impact of the legislation on our financial statements. Based on current guidance, we do not expect a material impact to our financial statements for the fiscal year ending January 31, 2027, however, additional guidance from the Internal Revenue Service and U.S. Treasury may affect the interpretation and application of certain provisions.

Retail Segment

Our Retail segment omni-channel strategy enhances our customers’ brand experience by providing a seamless approach to the customer shopping experience. All Company-owned Retail segment shopping channels are closely integrated, including retail locations, websites, mobile applications, social media and third-party platforms 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. We manage and analyze our performance based on a single Retail segment omni-channel rather than separate channels and believe that the Retail segment omni-channel results present the most meaningful and appropriate measure of our performance.

Our comparable Retail segment net sales data is equal to the sum of our comparable store and comparable digital channel net sales. 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. A digital channel is considered to be comparable if it has been operational for at least 12 full months. Sales from stores and digital channels that do not fall within the definition of comparable store or digital channel are considered to be non-comparable. 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 and average units per transaction at our stores and on our websites and mobile applications. We also monitor average unit selling price and transactions 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 and an overall growth in brand recognition.

Net sales from the Retail segment accounted for approximately 83.1% of consolidated net sales for the six months ended July 31, 2026, compared to 85.4% for the comparable period in fiscal 2026.

Anthropologie Group consists of the Anthropologie, Terrain and Maeve brands. The Anthropologie brand tailors its merchandise and inviting store environment to sophisticated and contemporary women aged 28 to 45. The internally designed and third-party brand product assortment includes women’s apparel, accessories, intimates, shoes, furniture, home decor and beauty and wellness. The brand also has a bridal collection consisting of wedding, bridesmaid and party dresses, accessories and decor. The Terrain brand is designed to appeal to women and men interested in a creative and sophisticated outdoor living and gardening experience. Merchandise includes lifestyle home, garden and outdoor living products, antiques, live plants, flowers, wellness products and accessories. The Maeve brand is designed to appeal to the modern woman seeking a versatile wardrobe by offering a comprehensive range of women's apparel, shoes and accessories. We are in the early stages of testing Maeve as a standalone brand which we will continue to evaluate over the coming years. Anthropologie Group stores are located in specialty centers, upscale street locations and enclosed malls. Anthropologie Group operates websites and mobile applications that capture the spirit of its brands by offering a similar yet broader selection of merchandise as found in its stores and sells merchandise through franchisee-owned stores in the Middle East. Anthropologie Group's North American Retail segment net sales accounted for approximately 45.1% of total Retail segment net sales for the six months ended July 31, 2026, compared to approximately 46.8% for the comparable period in fiscal 2026. European Retail segment net sales accounted for approximately 1.7% of total Retail segment net sales for the six months ended July 31, 2026, compared to approximately 1.8% for the comparable period in fiscal 2026.

FP Group consists of the Free People brand and the FP Movement brand. The Free People brand focuses its product offering on private label merchandise targeted to young contemporary women aged 25 to 30 and provides a unique merchandise mix of casual women’s apparel, intimates, activewear, shoes, accessories, home products, gifts and beauty and wellness. The FP Movement brand offers performance-ready activewear, beyond-the-gym staples and wellness essentials. FP Group stores are located in enclosed malls, upscale street locations and specialty centers. FP Group operates websites and mobile applications that capture the spirit of its brands by offering a similar yet broader selection of merchandise as found in its stores, as well as substantially all of the FP Group's wholesale offerings. FP Group's North American Retail segment net sales accounted for approximately 25.9% of total Retail segment net sales for the six months ended July 31, 2026, compared to approximately 24.4% for the comparable period in fiscal 2026. European Retail segment net sales accounted for approximately 1.4% of total Retail segment sales for both the six months ended July 31, 2026, and the comparable period in fiscal 2026.

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 or designed in collaboration with third-party brands. Urban Outfitters stores are located 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 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 Middle East. Urban Outfitters’ North American Retail segment net sales accounted for approximately 14.6% of total Retail segment net sales for the six months ended July 31, 2026, compared to approximately 15.2% for the comparable period in fiscal 2026. European Retail segment net sales accounted for approximately 10.5% of total Retail segment net sales for the six months ended July 31, 2026, compared to approximately 9.6% for the comparable period in fiscal 2026.

Menus & Venues focuses on a dining and event experience that provides excellence in food, beverage and service. Menus & Venues net sales accounted for less than 1.0% of total Retail segment net sales for both the six months ended July 31, 2026, and the comparable period in fiscal 2026.

Store data for the six months ended July 31, 2026 was as follows:

(1) FP Movement brand stores are all located in North America.

(2) Menus & Venues includes various casual restaurants and event venues, all of which are located in North America.

(3) Franchisee-owned stores are located in the Middle East.

Selling square footage by brand as of July 31, 2026 and 2025 was as follows:

(1) Menus & Venues locations and franchisee-owned stores are not included in selling square footage.

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

Projected store openings and closings for fiscal 2027 are as follows:

Subscription Segment

Our Subscription segment includes the Nuuly brand, which is primarily a monthly women’s apparel subscription rental service. For a monthly fee, Nuuly subscribers can rent product from a wide selection of the Company’s own brands, third-party 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 rental product in their possession that was delivered as part of the customer's monthly subscription rental order or through the Nuuly website or mobile application, which will ship along with their next monthly subscription rental order. Our Subscription segment net sales accounted for approximately 11.0% of consolidated net sales for the six months ended July 31, 2026, compared to approximately 9.3% for the comparable period in fiscal 2026.

Wholesale Segment

Our Wholesale segment includes the FP Group and Urban Outfitters brand that sell through department and specialty stores worldwide, third-party 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 FP Group brands and the BDG and “iets frans” apparel collections under the Urban Outfitters brand. Our Wholesale segment net sales accounted for approximately 5.9% of consolidated net sales for the six months ended July 31, 2026, compared to 5.3% for the comparable period in fiscal 2026.

Critical Accounting Policies and Estimates

Our Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States. These generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses during the reporting period.

Our significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the Notes to our Consolidated Financial Statements for the fiscal year ended January 31, 2026, which are included in our Annual Report on Form 10-K filed with the SEC on April 1, 2026. Critical accounting policies are those that are most important to the portrayal of our financial condition, results of operations and cash flows and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. If actual results were to differ significantly from estimates made, the reported results could be materially affected. 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. There have been no significant changes to our critical accounting policies during the six months ended July 31, 2026.

Results of Operations

As a Percentage of Net Sales

The tables below set forth, for the periods indicated, certain income statement data and the percentage of our net sales represented by such data. The tables should be read in conjunction with the discussion that follows.

Three Months Ended July 31, 2026 (Fiscal 2027) Compared To

Three Months Ended July 31, 2025 (Fiscal 2026)

(amounts in millions)

Net sales for the second quarter of fiscal 2027 were $1.66 billion, compared to $1.50 billion in the second quarter of fiscal 2026. The $157.2 million increase was attributable to a $103.3 million, or 8.0%, increase in Retail segment net sales, a $39.7 million, or 28.6%, increase in Subscription segment net sales and a $14.2 million, or 18.6%, increase in Wholesale segment net sales.

The increase in our Retail segment net sales during the second quarter of fiscal 2027 was due to an increase of $76.8 million, or 6.2%, in Retail segment comparable net sales and an increase of $26.5 million in non-comparable net sales. Retail segment comparable net sales increased 10.0% at FP Group, 8.4% at Urban Outfitters and 3.0% at Anthropologie Group. Retail segment comparable net sales increased in both Europe and North America. The overall increase in Retail segment comparable net sales was driven by high single-digit positive growth in digital channel net sales and mid single-digit positive growth in retail store net sales. The digital channel comparable net sales increase was driven by increases in sessions, average order value and units per transaction, while conversion rate decreased. Comparable store net sales increased as a result of higher store traffic and average unit retail, while transactions were flat and conversion rate and units per transaction decreased. The increase in non-comparable net sales during the second quarter of fiscal 2027 was primarily due to the impact of the 57 net new Company-owned stores opened since the prior comparable period.

The increase in Subscription segment net sales was primarily driven by a 30.4% increase in the average number of active subscribers in the second quarter of fiscal 2027 as compared to the second quarter of fiscal 2026. The increase in Wholesale segment net sales in the second quarter of fiscal 2027 was driven by a $14.0 million, or 19.2%, increase in FP Group wholesale net sales due to an increase in net sales to specialty customers and department stores.

Gross profit percentage for the second quarter of fiscal 2027 increased by 580 basis points to 43.4% of net sales compared to 37.6% of net sales in the second quarter of fiscal 2026. Gross profit increased to $721.6 million in the second quarter of fiscal 2027 from $566.2 million in the second quarter of fiscal 2026. The increase in gross profit rate was due to a one-time benefit related to refunds for previously paid IEEPA tariffs of $95.7 million, or 576 basis points. The remaining increase of 4 basis points in gross profit rate was primarily due to leverage in store occupancy costs due to the increase in comparable Retail segment store net sales and leverage in delivery expense as a result of several company initiatives to offset fuel surcharges, partially offset by an increase in Retail segment markdowns driven by Anthropologie Group and the negative impacts of tariffs and inbound freight fuel surcharges on initial merchandise costs. The increase in gross profit dollars was primarily due to the IEEPA tariff refunds and higher net sales.

Total inventory at July 31, 2026, as compared to July 31, 2025, increased by $82.3 million, or 11.8%, to $778.5 million. Total Retail segment inventory increased 12.0% and Retail segment comparable inventory increased 8.4%. Wholesale segment inventory increased 10.0%. The increase in Retail segment inventory was due to the increase in net sales and timing of inventory receipts. The increase in Wholesale segment inventory was due to the increase in net sales.

Selling, general and administrative expenses increased by $41.0 million, or 10.5%, in the second quarter of fiscal 2027 compared to the second quarter of fiscal 2026. Selling, general and administrative expenses were flat as a percentage of net sales in the second quarter of fiscal 2027 compared to the second quarter of fiscal 2026. The leverage in store payroll expenses due to the growth in Retail segment store net sales was offset by the deleverage in marketing expenses to support customer growth and increased net sales in the Retail and Subscription segments, along with increased artificial intelligence technology investments benefiting the Company's current and future operations. The dollar growth in selling, general and administrative expenses was primarily due to increased marketing expenses to support customer growth and increased net sales in the Retail and Subscription segments, as well as increased store payroll expenses to support the growth in Retail segment store net sales.

Income from operations was 17.4% of net sales, or $288.7 million, for the second quarter of fiscal 2027 compared to 11.6% of net sales, or $174.4 million, for the second quarter of fiscal 2026. The increase in operating income dollars was driven by the increase in gross profit dollars. The increase in operating income rate was driven by the increase in gross profit rate.

Our effective tax rate for the second quarter of fiscal 2027 was 19.4%, compared to 21.5% in the second quarter of fiscal 2026. The decrease in the effective tax rate for the second quarter of fiscal 2027 was primarily related to the release of a valuation allowance against certain foreign net deferred tax assets of $16.2 million, or 5.4%. The remaining change in the effective tax rate was primarily attributable to the ratio of foreign taxable earnings to global taxable earnings.

Six Months Ended July 31, 2026 (Fiscal 2027) Compared To

Six Months Ended July 31, 2025 (Fiscal 2026)

(amounts in millions)

Net sales for the six months ended July 31, 2026 were $3.14 billion, compared to $2.83 billion in the comparable period of fiscal 2026. The $309.0 million increase was attributable to a $193.6 million, or 8.0%, increase in Retail segment net sales, a $82.6 million, or 31.4%, increase in Subscription segment net sales and a $32.8 million, or 21.7%, increase in Wholesale segment net sales.

The increase in our Retail segment net sales during the first six months of fiscal 2027 was due to an increase of $138.2 million, or 6.0%, in Retail segment comparable net sales and an increase of $55.4 million in non-comparable net sales. Retail segment comparable net sales increased 9.9% at FP Group, 8.8% at Urban Outfitters and 2.5% at Anthropologie Group. Retail segment comparable net sales increased in both Europe and North America. The overall increase in Retail segment comparable net sales was driven by high single-digit positive growth in digital channel net sales and mid single-digit positive growth in retail store net sales. The digital channel comparable net sales increase was driven by increases in sessions and average order value, while conversion rate and units per transaction decreased. Comparable store net sales increased as a result of higher store traffic, transactions and average unit retail, while conversion rate and units per transaction decreased. The increase in non-comparable net sales during the first six months of fiscal 2027 was primarily due to the impact of the 68 net new Company-owned stores opened since the prior comparable period.

The increase in Subscription segment net sales was primarily driven by a 31.8% increase in the average number of active subscribers in the first six months of fiscal 2027 as compared to the comparable period of fiscal 2026. The increase in Wholesale segment net sales in the first six months of fiscal 2027 was driven by a $32.3 million, or 22.6%, increase in FP Group wholesale net sales primarily due to an increase in net sales to specialty customers.

Gross profit percentage for the first six months of fiscal 2027 increased by 299 basis points to 40.2% of net sales compared to 37.2% of net sales in the comparable period of fiscal 2026. Gross profit increased to $1.26 billion in the first six months of fiscal 2027 from $1.06 billion in the comparable period of fiscal 2026. The increase in gross profit rate was due to a one-time benefit related to refunds for previously paid IEEPA tariffs of $95.7 million, or 305 basis points. The remaining decrease of 6 basis points in gross profit rate was primarily due to an increase in Retail segment markdowns driven by Anthropologie Group and the impact of a prior year gain of $4.8 million, or 17 basis points, not repeated in the current year period, partially offset by leverage in store occupancy costs due to the increase in comparable Retail segment store net sales. The increase in gross profit dollars was due to higher net sales and the IEEPA tariff refunds.

Selling, general and administrative expenses increased by $83.1 million, or 11.0%, in the first six months of fiscal 2027 compared to the comparable period of fiscal 2026. Selling, general and administrative expenses deleveraged 4 basis points as a percentage of net sales in the first six months of fiscal 2027 to 26.6% compared to the comparable period of fiscal 2026. The deleverage in selling, general and administrative expenses as a percentage of net sales was primarily related to deleverage in marketing expenses to support customer growth and increased net sales in the Retail and Subscription segments, along with increased artificial intelligence technology investments benefiting the Company's current and future operations. The deleverage was partially offset by a discrete benefit of $6.9 million, or 22 basis points, in the current year period resulting from the reversal of a litigation accrual, as well as leverage in store payroll expenses due to the growth in Retail segment store net sales. The dollar growth in selling, general and administrative expenses was primarily due to increased marketing expenses to support customer growth and increased net sales in the Retail and Subscription segments, increased store payroll expenses to support the growth in Retail segment store net sales and increased artificial intelligence technology investments benefiting the Company's current and future operations.

Income from operations was 13.6% of net sales, or $428.4 million, for the first six months of fiscal 2027 compared to 10.7% of net sales, or $302.6 million, for the comparable period of fiscal 2026. The increase in operating income dollars was driven by the increase in gross profit dollars. The increase in operating income rate was driven by the increase in gross profit rate.

Our effective tax rate for the first six months of fiscal 2027 was 19.8%, compared to 21.5% in the first six months of fiscal 2026. The decrease in the effective tax rate for the first six months fiscal 2027 was primarily related to the release of a valuation allowance against certain foreign net deferred tax assets of $16.2 million, or 3.7%. The remaining change in the effective tax rate was primarily attributable to the ratio of foreign taxable earnings to global taxable earnings.

Liquidity and Capital Resources

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)

The increase in working capital as of July 31, 2026, as compared to January 31, 2026, was primarily due to an increase in inventory. The increase in working capital as of July 31, 2026, as compared to July 31, 2025, was primarily due to a net increase in cash and cash equivalents and current marketable securities and an increase in inventory.

During the last two years, we have satisfied our cash requirements primarily through our cash flow from operating activities and through the sales and maturities of marketable securities. Our primary uses of cash have been to fund business operations, purchase inventory and rental product, repurchase our common shares, expand and improve our distribution network and open new stores.

Cash Flows from Operating Activities

Our primary recurring source of cash from operations was merchandise sales and our primary outflow of cash from operations was for the payment of operational costs. Cash provided by operating activities in the first six months of fiscal 2027 also benefited from the receipt of refunds for previously paid IEEPA tariffs which was a significant driver in the year-over-year increase in operating cash flows.

Cash Flows from Investing Activities

Cash provided by investing activities in the first six months of fiscal 2027 and fiscal 2026 primarily related to the net sales and maturities of marketable securities which were primarily used to fund the repurchases of our common shares under our share repurchase program, partially offset by the purchases of property and equipment. Cash paid for property and equipment in the first six months of fiscal 2027 was $268.1 million, which was primarily used to expand and improve our distribution network including our purchase of the Nuuly fulfillment center in Raymore, Missouri in March 2026 that we previously leased, as well as expand our store base. Cash paid for property and equipment in the first six months of fiscal 2026 was $107.5 million, which was primarily used to expand our store base and distribution network.

Cash Flows from Financing Activities

Cash used in financing activities in the first six months of fiscal 2027 and fiscal 2026 primarily related to repurchases of our common shares under our share repurchase program and from employees to meet payroll tax withholding requirements on vested share-based awards.

Credit Facilities

See Note 5, “Debt,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding the Company’s debt.

Capital and Operating Expenditures

During fiscal 2027, we plan to open approximately 54 new Company-owned retail locations, expand or relocate certain existing retail locations, expand our fulfillment center network, invest in logistics capabilities, expand our home office to support our growing business, invest in new products, markets and brands, purchase inventory and rental product for our operating segments at levels appropriate to maintain our planned sales volumes, upgrade our systems, invest in artificial intelligence, improve and expand our digital capabilities, invest in omni-channel marketing at appropriate levels and repurchase our 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 growth and plan to continue our investment in these initiatives for all brands. We anticipate our capital expenditures during fiscal 2027 to be approximately $475 million. All fiscal 2027 capital expenditures are expected to be financed by cash flow from operating activities and existing cash, cash equivalents and marketable securities. We believe that our new store investments generally have the potential to generate positive cash flow within a year. We may also enter into one or more acquisitions or transactions related to the expansion of our brand offerings, including additional franchise agreements. We believe that our existing cash, cash equivalents and marketable securities, availability under our current credit facility and future cash flows provided by operations will be sufficient to fund these initiatives.

Share Repurchases

See Note 8, “Shareholders’ Equity,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding the Company’s share repurchases.

Other Matters

See Note 1, “Basis of Presentation,” Recent Accounting Pronouncements, of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements.

There have been no material changes to our quantitative or qualitative disclosures found in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2026.

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed by us in our Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported on a timely basis and that such information is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate, to allow timely decisions regarding the required disclosure. As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of our management, including the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the design and operation of these disclosure controls and procedures. Based on that evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures were effective.

There have been no changes in our internal controls over financial reporting during the three months ended July 31, 2026, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II

OTHER INFORMATION

There have been no material changes in our risk factors since January 31, 2026. Please refer to our Annual Report on Form 10-K for the fiscal year ended January 31, 2026, filed with the SEC on April 1, 2026, for our risk factors.