URBN 10-K & 10-Q changes, risk factors and insider trading

Economic conditions, both on a global level and in particular markets, may have significant effects on consumer confidence and discretionary spending that would in turn, affect our business or the retail industry generally. Some of these economic conditions include inflation, wages and employment, consumer debt, reductions in net worth based on severe market declines, residential real estate and mortgage markets, taxation, grocery, fuel and energy prices, interest rates, volatility in credit markets, credit availability, political and economic crisescrises, the impact of retaliatory or reciprocal tariffs on global trade policies and other macroeconomic factors. These factors may affect consumer purchases and rentals of our merchandise and adversely impact our results of operations and continued growth. The impacts of inflation could lead us to increase prices, and if customers respond negatively to such price increases, could adversely impact our sales, gross margin and operating income. The economic conditions may also affect department stores and specialty retail businesses and impact their ability to purchase merchandise from our Wholesale segment. It is difficult to predict near term and/or future economic, capital and credit market conditions and what impact they will have on our business.

In addition, there is a risk that consumer confidence may decline as a result of market disruptions caused by severe weather conditions, unseasonable weather, or natural disasters, including as a result of climate change, health hazards, actual or threatened health epidemics and pandemics (such as COVID-19),pandemics, terrorist activities, political crises or other major events or the prospect of these events, which could negatively impact our financial position and results of operations. The recovery we receive under any insurance we maintain for these purposes may be delayed or may be insufficient to fully offset potential losses.

Customer tastes and fashion trends are volatile and can change rapidly. Our success depends in part on our ability to effectively predict and respond to changing fashion tastes and consumer demands, and to translate market trends into appropriate product offerings. If we are unable to predict or respond to changing styles or trends successfully or if we misjudge the market for products or new product lines, our sales may be impactedimpacted, and we may be faced with a substantial amount of unsold inventory or missed opportunities. In response, we may be forced to rely on additional markdowns or promotional sales to dispose of excess, slow-moving inventory, which could decrease our revenues or gross profit margins. Conversely, if we underestimate consumer demand for our merchandise, our manufacturers fail to supply quality products in a timely manner, or we experience transportation capacity constraints and delays, we may experience inventory shortages, which may negatively impact customer relationships, diminish brand loyalty and result in lost sales. In addition, we could be at a competitive disadvantage if we are unable to leverage data analytics to obtain timely customer insights to appropriately respond to customer demands.

The specialty retail and wholesale apparel industries are each highly competitive. Our Retail segment competes on the basis of, among other things, the location of our stores, website,website and mobile application and catalog presentation, website and mobile application design, the breadth, quality, style, price and availability of our merchandise and the level of customer service offered. Our Anthropologie and Free People stores also face competition from small boutiques that offer an individualized shopping experience similar to the one we strive to provide to our target customers.

Additionally, the internet and other technologies facilitate competitive entry and comparison shopping in our Retail and Subscription segments. Our digital channel competes against numerous websites,websites and mobile applications and catalogs,applications, which may have a greater volume of circulation and web traffic or more effective marketing through online media and social networking sites. We offer an omni-channel shopping experience for our customers and use social media and mobile applications as a way to interact with them to enhance their shopping experiences. Omni-channel retailing is constantly evolving, and we must keep pace with changing customer expectations and new developments by our competitors. There is no assurance that we will be able to continue to successfully maintain or expand our digital sales channels and respond to shifting consumer traffic patterns and digital buying trends. Our inability to adequately respond to these risks and uncertainties or successfully maintain and expand our digital business could have an adverse impact on our results of operations.

Impacts of ongoing conflicts around the globe (such as the hostilities in the Middle East and the war between Russia and Ukraine,Ukraine) and the related sanctions imposed by the United States, the European Union, United Kingdom and others, andas thewell conflictas inany the Middle East which could result inpotential delays in shipments through the regionregions and additional transportation costs;

War, terrorism, civil unrest, other violence, or public health crises, including pandemicsepidemics suchand as COVID-19,pandemics, may negatively impact availability of our merchandise, customer traffic to our stores or otherwise adversely impact our business.

In the event of war (including the conflictongoing hostilities in the Middle East and the war between Russia and Ukraine), terrorism, civil unrest or other violence, our ability to obtain merchandise available for sale in our stores or on our websites may be negatively impacted. A substantial portion of our merchandise is imported from other countries, see “We rely significantly on international sources of production.” If commercial transportation is curtailed or substantially delayed, our business may be adversely impacted, as we may have difficulty shipping merchandise to our distribution and fulfillment centers and stores, as well as fulfilling catalog, website and mobile application orders.

Our stores are located in public areas where large numbers of people typically gather. Terrorist attacks, threats of terrorist attacks, civil unrest, or health epidemics and pandemics (such as COVID-19) involving public areas could cause people not to visit areas where our stores are located. In addition, other types of violence in malls or in other public areas could lead to lower customer traffic in areas in which we operate stores. If any of these events were to occur, we may be required to suspend operations temporarily or for an extended period of time in some or all of our stores in the impacted areas, which could have a material adverse impact on our business, financial condition and results of operations.

The retail environment is rapidly evolving with customer shopping preferences continuing to change. We have made significant investments in capital spending and labor to develop our omni-channel strategy pursuant to which all available Company-owned Retail segment shopping channels are fully integrated, including stores, websites, mobile applications, catalogsapplications and customer contact centers. As omni-channel retailing continues to grow and evolve, our customers increasingly interact with our brands through smartphones, tablets and a variety of media, and expect seamless integration across all touchpoints. Our success depends on our ability to introduce innovative means of engaging our customers and our ability to respond to shifting consumer traffic patterns and digital buying trends. There is no assurance that we will be able to continue to successfully maintain or expand our digital sales channels and omni-channel initiatives, or that we will realize a return on our significant investments, and failure to adequately respond to these risks and uncertainties or to successfully maintain and expand our digital business may have an adverse impact on our results of operations.

To the extent we expand internationally under franchise or joint venture arrangements, we may face counterparty and/or operational risk. In addition, we are increasingly exposed to foreign currency exchange rate risk with respect to our revenue, profits, assets and liabilities denominated in currencies other than the U.S. dollar. We currently do not utilize hedging instruments to mitigate these foreign currency risks. In the future, however, we may initiate strategies to hedge certain foreign currency risks that may not succeed in offsetting all of the negative impact of foreign currency exchange rate movements on our business and results of operations.

TheChanges Unitedin Kingdom'sinternational withdrawaltrade asand acustoms memberregulations, ofincluding the Europeanimposition Union, commonly referred to as “Brexit,” resulted inof new tariffs on foreign produced goods imported into the United Kingdom and requiredor additional administrative effortrequirements tofor the import and export of goods, addingcould add friction and cost to transportation.transportation and logistics. Other countries in which we do business may adopt similar provisions. Any of these effects, among others, could materially adversely affect our business, results of operations, and financial condition.

We face an evolving threat landscape in which cybercriminals, among others, employ an increasingly complex array of techniques (including through the use of artificial intelligence) designed to access personal data and other information, including, for example, the use of fraudulent or stolen access credentials, malware, ransomware, phishing, denial of service, supply chain and other types of attacks. Our and our suppliers’ and service providers’ information technology systems also may be damaged or disrupted, or personal or sensitive information compromised, from a number of other causes, including power outages, system failures, catastrophic events, or employee inadvertence.

While, to the best of our knowledge, we have not experienced any material misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information as a result of a security breach or cyber attackcyber-attack that could materially increase financial risk to the Company or our customers, such a security breach or cyber attackcyber-attack could adversely affect our business and operations, including by damaging our reputation and our relationships with our customers, employees and shareholders, exposing us to litigation, fines, penalties or remediation costs and inhibiting our ability to accept debit and credit cards as forms of payment. Further, because many of our corporate and showroom employees maintain hybrid office and remote work schedules, our business may be more vulnerable to cybersecurity breach attempts due to offsite working by employees, increased use of public Wi-Fi and use of office equipment off premises.

If we fail to effectively utilize technological advancements, including in artificial intelligence, our business and financial performance could be negatively impacted.

Our industry is highly competitive and is undergoing rapid changes due to technological advancements in areas such as artificial intelligence (AI), data analytics and machine learning. Our future success depends in part on our ability to effectively utilize these technological advancements. Our competitors may outpace us in incorporating AI into their business and engagement with customers, which could adversely affect our competitiveness and operational outcomes. Our efforts to utilize these technological advancements may not be successful, may result in substantial integration and maintenance costs and may expose us to additional risks. These technologies are subject to evolving laws, regulations, guidance and industry standards, and the use of AI tools by our employees or our third-party service providers may expose us to legal liability or regulatory risk, including with respect to third-party intellectual property, privacy, publicity, contractual, or other rights. Personal data within any dataset, collected from our business, is vulnerable to unintentional dissemination or intentional destruction, which could lead to heightened business and security costs, reputational damage, administrative penalties or legal expenses. The content, analyses or recommendations generated by AI, if deficient, inaccurate or biased, could adversely impact our business, financial condition and operational results, as well as our reputation. Moreover, ethical concerns associated with AI could lead to brand damage, competitive disadvantages or legal repercussions. Our use of artificial intelligence systems to automate, streamline processes and increase efficiency may increase the likelihood of system failures or errors in our processes or create negative experiences for our customers. Any problems with our implementation or use of AI or other technological advancements could negatively impact our business or results of our operations.

Our retail store and distribution and fulfillment center operations are subject to laws governing such matters as minimum wages, working conditions and overtime pay. As minimum wage rates increase or related laws and regulations change, we may need to increase not only the wage rates of our minimum wage employees, but also the wages paid to our other hourly or salaried employees. Any increase in the cost of our labor could have an adverse effect on our operating results, financial condition and results of operations. In addition, we operate in a competitive labor market, in which wage actions by other retailers and companies may require us to increase salary and wage rates, bonuses and other incentives in order to attract and retain talented employees across all of our retail store, distribution and fulfillment center, showroom and home office operations. Labor shortages and increased employee turnover could also increase our labor costs. This in turn could lead us to increase prices,prices andand, if customers respond negatively to such price increases, could adversely impact our sales, gross margin and operating income. We are also subject to risks related to other store and distribution and fulfillment center expenses and operational costs. Conversely, if competitive pressures or other factors prevent us from offsetting increased labor costs by increases in our prices to customers, our profitability may decline.

We have a manufacturer compliance program that is monitored on a regular basis by our buying offices. Our production facilities are either certified as in compliance with our program, or areas of improvement are identified and corrective follow-up action is taken. All manufacturers are required to follow applicable national labor laws, as well as international compliance standards regarding workplace safety, such as standards that require clean and safe working environments, clearly marked exits and paid overtime. We believe in protecting the safety and working rights of the people who manufacture the products we sell, while recognizing and respecting cultural and legal differences found throughout the world. We require our third-party vendors to register through an online website and agree that they and their suppliers will abide by certain standards and conditions of employment. If our third-party vendors fail to comply with our social compliance program, our reputation may be adversely affected.

We maintain an Impact Committee, co-chaired by our Chief Sourcing & GTC Officer and Chief Administrative Officer and reporting to our Board of Directors, to set sustainability policies and goals, provide oversight of those policies, and track and report progress toward our goals. The Impact Committee also maintains functional working groups, which focus on three areas: Environmental & Social, Data Privacy & Security, and Governance. The working groups are comprised of operational management representatives and are responsible for recommending policies and goals to the Impact Committee, implementing policies established by the Impact Committee, and tracking and reporting to the Impact Committee on progress towards goals falling within the working groups' ambit. These policies and goals and their status are published in the Company's Impact Report. There can be no assurances that our ESG policies, goals or actions will be perceived as adequate. Any failure or perceived failure to achieve our goals or demonstrate progress towards the environmental, social and governance ideals of our customers and shareholders could harm our reputation and value of our brands, which could adversely affect our business, financial performance and growth.

We may also communicate certain ESG-related initiatives and goals in our SEC filings or in other public disclosures, such as the Company's Impact Report. These ESG-related initiatives and goals could be difficult and expensive to implement, the technologies needed to implement them may not be cost-effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of the disclosure. Further, statements about our ESG-related initiatives and goals, and progress against these goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. In addition, we could be criticized for the scope or nature of such initiatives or goals, or for any revisions to these goals, by our customers and shareholders.shareholders, including whether implementing ESG-related initiatives or goals are deemed inconsistent with our fiduciary duties or other legal or regulatory obligations. If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our ESG-related goals on a timely basis, or at all, it could harm our reputation and the value of our brands, which could adversely affect our business, financial performance, growth and stock price.

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, catalogs and customer contact centers and franchisee-owned stores. Our Subscription segment, formerly known as the Nuuly segment,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.

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

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, catalogssocial 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.

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, circulation of our catalogscampaigns and an overall growth in brand recognition.

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 stores are located in specialty centers, upscale street locations and enclosed malls. Anthropologie 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 catalogs in North America that markets select merchandise, most of which is also available in Anthropologie brand stores and sells merchandise through franchisee-owned stores in the Middle East. Anthropologie's North American Retail segment net sales accounted for approximately 42.1%47.2% of consolidatedtotal Retail segment net sales for fiscal 2025,2026, compared to 41.7%approximately 47.8% of total Retail segment net sales for fiscal 2024.2025. European Retail segment net sales accounted for approximately 1.6%1.8% of consolidatedtotal Retail segment net sales for both fiscal 20252026 and fiscal 2024.2025.

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. Free People stores are located in enclosed malls, upscale street locations and specialty centers. Free People 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, as well as substantially all of the Free People and FP Movement brands' wholesale offerings. Free People also offers catalogs that market select merchandise, most of which is also available in our Free People stores. Free People's North American Retail segment net sales accounted for approximately 20.7%23.8% of consolidatedtotal Retail segment net sales for fiscal 2025,2026, compared to approximately 20.1%23.4% of total Retail segment net sales for fiscal 2024.2025. European Retail segment net sales accounted for approximately 1.0%1.2% of consolidatedtotal Retail segment net sales for fiscal 2025,2026, compared to lessapproximately than 1.0%1.1% of consolidatedtotal Retail segment net sales for fiscal 2024.2025.

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 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 Middle East. Urban Outfitters’ North American Retail segment net sales accounted for approximately 14.3%15.3% of consolidatedtotal Retail segment net sales for fiscal 2025,2026, compared to 17.7%approximately 16.2% of total Retail segment net sales for fiscal 2024.2025. European Retail segment net sales accounted for approximately 7.9%10.0% of consolidatedtotal Retail segment net sales for fiscal 2025,2026, compared to approximately 8.2%8.9% of total Retail segment net sales for fiscal 2024.2025.

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 consolidatedtotal Retail segment net sales for fiscal 20252026 and fiscal 2024.2025.

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 or joint venture agreements. We plan for future digital channel growth to come from expansion domestically and internationally.

Our Subscription segment, formerly known as the Nuuly segment,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.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. Net sales from the Subscription segment accounted for approximately 9.2%, 6.8%, 4.6%, and 2.7%4.6% of total consolidated net sales for fiscal 2025,2026, 20242025 and 2023,2024, respectively.

Our Wholesale segment includes 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. The Wholesale segment primarily designs, develops and markets young women’s contemporary casual apparel, intimates, FP Movement activewear and shoes under the Free People and FP Movement brands and the BDG and “iets frans” apparel collections under the Urban Outfitters brand. Net sales from the Wholesale segment accounted for approximately 5.0%,5.1%, 4.6%5.0% and 5.2%4.6% of total consolidated net sales for fiscal 2025,2026, 20242025 and 2023,2024, respectively.

Merchandise: Merchandise is sold through retail stores, catalogsstores and the digital sales channel, as well as to wholesale customers, franchise partners and subscription customers. Revenue is recognized when control of the promised goods is transferred to the customer. 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, 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 subscription customer may purchase merchandise through the Nuuly website or mobile application, which will ship along with their next monthly subscription rental order, and we recognize such merchandise revenue at the time of shipment. A subscription customer may also purchase merchandise in their possession that was delivered as part of the customer's monthly subscription rental order, and we recognize such merchandise revenue 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. Uncollectible accounts receivable in the Retail and Subscription segments primarily results from unauthorized credit card transactions. We maintain an allowance for doubtful accounts for our Wholesale segment accounts receivable, which we review on a regular basis and believe is sufficient to cover potential credit losses and billing adjustments. Payment terms in our Wholesale segment vary by customer.

The cost of our Subscription segment rental product is amortized to cost of sales over the subscription period 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. We make assumptions as to the number of times each unit can be rented. If the actual number of times a unit can be rented were to vary significantly from our estimates, it could materially affect the amount of rental product amortization included in cost of sales. Rental product is included in "Other assets" in the Consolidated Balance Sheets. Purchases of rental product were $175.7$232.4 million, $150.7$175.7 million, and $103.3$150.7 million for fiscal 2025,2026, 20242025 and 2023,2024, respectively. Rental product as of January 31, 2025,2026, and January 31, 2024,2025, totaled $216.1$246.4 million and $163.1$216.1 million, representing 4.8%4.9% and 4.0%4.8% of total assets, respectively.

We review the carrying values of our definite-lived, long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. 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. 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 (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. For lease right-of-use assets, the Company determines the estimated fair value of the assets by comparing the discounted contractual rent payments to estimated market rent using an acceptable valuation methodology. During fiscal 2026, we recorded impairment charges for four retail locations, totaling $2.0 million, with a carrying value after impairment of $9.9 million related to the right-of-use assets. During fiscal 2025, we recorded impairment charges for one retail location, totaling $0.8 million, with a carrying value after impairment of $1.5 million related to the right-of-use assets. During fiscal 2024, we recorded impairment charges for 15 retail locations, totaling $3.6 million, with a carrying value after impairment of $41.0 million related to the right-of-use assets. During fiscal 2023, we recorded impairment charges for 19 retail locations, totaling $6.4 million, with a carrying value after impairment of $49.0 million related to the right-of-use assets. Additionally, during fiscal 2024 we recorded an asset impairment charge of $6.4 million related to the write-off of "Property and Equipment, net" of the Nuuly Thrift marketplace which the Company wound down in fiscal 2025.

As part of the process of preparing our Consolidated Financial Statements, we are required to estimate our income taxes in each of the tax jurisdictions in which we operate. This process involves estimating our actual current tax obligations together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences result in deferred tax assets and liabilities, which are included within our Consolidated Balance Sheets. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income. A valuation allowance is recognized if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax asset will not be realized. In making such a determination, we consider all material available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. Actual results could differ from this assessment if adequate taxable income is not generated in future periods. Net deferred tax assets as of January 31, 2025,2026, and January 31, 2024,2025, totaled $48.5$35.6 million and $46.2$48.5 million, respectively, representing less than 1.0% and 1.1% of total assetsassets, as of both January 31, 2025, and January 31, 2024.respectively.

During fiscal 2026, we recorded store impairment charges for four retail locations, totaling $2.0 million. During fiscal 2025, we recorded store impairment charges for one retail location and lease abandonment charges for one retail location, totaling $4.6 million. During fiscal 2024, we recorded store impairment charges for 15 retail locations and lease abandonment charges for 2two retail locations, totaling $11.9 million. During fiscal 2023, we recorded store impairment charges for 19 retail locations, totaling $6.4 million.

During the last three years, we have satisfied our cash requirements primarily through our cash flow from operating activities, and additionally, during fiscal 2023, through the sales and maturities of marketable securities. Our primary uses of cash have been to fund business operations, purchase inventory and rental product, expand and improverepurchase our fulfillmentcommon centers,shares, open new stores and repurchaseexpand and improve our commondistribution shares.network.

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 2026 compared to fiscal 2025 was primarily due to higher net income in fiscal 2026. The decrease in cash flows from operations for fiscal 2025 compared to fiscal 2024 was primarily due to higher inventory purchases in fiscal 2025 and the timing of disbursements, partially offset by higher net income in fiscal 2025. The increase in cash flows from operations for fiscal 2024 compared to fiscal 2023 was primarily due to higher net income, the timing of disbursements and lower inventory purchases in fiscal 2024.

For all periods, cash used in investing activities was primarily related to the purchases of marketable securities and property and equipment, partially offset by the sales and maturities of marketable securities. Cash paid for property and equipment for fiscal 2025,2026, 2025 and 2024 and 2023 was $182.6$260.2 million, $199.6$182.6 million and $199.5$199.6 million, respectively, which was primarily used to expand our store base and fulfillment center network and store base in all fiscal years.years, as well as expand our home office in fiscal 2026 to support our growing business.

Cash used in financing activities in fiscal 2026 was primarily related to $153.9 million of repurchases of our common shares under our share repurchase program. Cash used in financing activities in fiscal 2025 was primarily related to $52.3 million of repurchases of our common shares under our share repurchase program. Cash used in financing activities in fiscal 2024 was primarily related to repurchases of our common shares from employees to meet payroll tax withholding requirements on vested share-based awards. Cash used in financing activities in fiscal 2023 was primarily related to $112.0 million of repurchases of our common shares under our share repurchase program.

During fiscal 2026,2027, we plan to open approximately 5857 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, improve and expand our digital capabilities and invest in omni-channel marketing whenat appropriate.appropriate levels. We may also 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 20262027 to be approximately $240$475 million forwhich retailhas storeincreased expansionfrom andprior support,estimates technologyprimarily and logistics investments and home office expansiondue to supportthe purchase of our growingNuuly business.fulfillment center in Raymore, Missouri in March 2026 that we previously leased. All fiscal 20262027 capital expenditures are expected to be financed by cash flow from operating activities and existing cash, cash equivalents and cashmarketable equivalents.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 and joint venture agreements. We believe that our existing cash, cash equivalents and cashmarketable equivalents,securities, availability under our current credit facilitiesfacility and future cash flows provided by operations will be sufficient to fund these initiatives.

Excluded from the amounts above are $92,989 of operating lease payments related to the Nuuly fulfillment center in Raymore, Missouri, which we purchased in March 2026. Refer to Note 9, “Leases,” in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

Refer to Note 10,15, "Income“Commitments Taxes,"and Contingencies,” in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

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.

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 manytariffs ofimposed under the existing International Emergency Economic Emergency Powers Act ("IEEPA") tariffs.. 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 estimatereceived tosubstantially realizeall approximatelyof $100.0the refund payments in the second quarter of fiscal 2027. We recognized a one-time financial benefit of $100.1 million during fiscal 2027. Due to uncertainty regarding the timingsecond and amountquarter of refunds,fiscal we will recognize a financial benefit when the refunds are realized or deemed realizable using a gain contingency accounting model. The principal portion2027, of thewhich refunds$95.7 willmillion bewas reflectedrecorded as a reduction of cost"Cost of sales" forand amounts$4.4 relatedmillion towas goods already sold or rented, orrecorded as a reduction of inventory or rental product for goods remaining on hand. Any associated interest income receivedincluded on the tariff refunds will be recognized withinin "Other income, net" in the Condensed Consolidated Statements of Income.

In response to the U.S. Supreme Court invalidating many of the IEEPA tariffs,decision, in February 2026 the government instituted incrementaltemporary global tariffs on all imports under Section 122 of the Trade Act of 1974 ("Section 122") and signaled it may seek higher tariffs.. In May 2026, a ruling by the CIT statedruled that the Section 122 tariffs arewere unauthorized by the statute,unauthorized, but we arewere required to continue paying them untilthrough their expiration on July 24, 2026. We arecontinue monitoringto monitor the legal challenges to theseSection 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 may continue to result inincreases, increased reciprocal tariffs ortariffs, other restrictive trade measures by the U.S. or foreign jurisdictions.jurisdictions Thereand also continues to becontinuing legal challenges to current and proposed tariff regimes. These factorsregimes may continue to contribute to uncertain global economic conditions (including inflationary costs, consumer spending patterns and volatility in foreign currencies),conditions, which may impact our operations.operations and financial results throughout fiscal 2027.

The current conflict in the Middle East, which began during the first quarter of fiscal 2027, has contributed to increased geopolitical uncertainty includingand impacts todisrupted global supply chains and energy prices.markets. WeIn 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 and others implemented through 2027. This legislation, enacted during the second quarter of fiscal 2026,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 AprilJuly 30,31, 2026. The Company continues to assess the impact of the legislation on our financial statements. WeBased 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.

Net sales from the Retail segment accounted for approximately 82.4%83.1% of consolidated net sales for the threesix months ended AprilJuly 30,31, 2026, compared to 85.0%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'sAnthropologie Group's North American Retail segment net sales accounted for approximately 46.5%45.1% of total Retail segment net sales for the threesix months ended AprilJuly 30,31, 2026, compared to approximately 48.6%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 threesix months ended AprilJuly 30,31, 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 GroupGroup's wholesale offerings. FP Group's North American Retail segment net sales accounted for approximately 25.2%25.9% of total Retail segment net sales for the threesix months ended AprilJuly 30,31, 2026, compared to approximately 23.8%24.4% for the comparable period in fiscal 2026. European Retail segment net sales accounted for approximately 1.3%1.4% of total Retail segment net sales for both the threesix months ended AprilJuly 30,31, 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 14.3%14.6% of total Retail segment net sales for the threesix months ended AprilJuly 30,31, 2026, compared to approximately 14.8%15.2% for the comparable period in fiscal 2026. European Retail segment net sales accounted for approximately 10.3%10.5% of total Retail segment net sales for the threesix months ended AprilJuly 30,31, 2026, compared to approximately 8.9%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 threesix months ended AprilJuly 30,31, 2026, and the comparable period in fiscal 2026.

Store data for the threesix months ended AprilJuly 30,31, 2026 was as follows:

Selling square footage by brand as of AprilJuly 30,31, 2026 and 2025 was as follows:

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 11.3%11.0% of consolidated net sales for the threesix months ended AprilJuly 30,31, 2026, compared to approximately 9.4%9.3% for the comparable period in fiscal 2026.

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 6.3%5.9% of consolidated net sales for the threesix months ended AprilJuly 30,31, 2026, compared to 5.6%5.3% for the comparable period in fiscal 2026.

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 threesix months ended AprilJuly 30,31, 2026.

Three Months Ended AprilJuly 30,31, 2026 (Fiscal 2027) Compared To

Three Months Ended AprilJuly 30,31, 2025 (Fiscal 2026)

Net sales for the firstsecond quarter of fiscal 2027 were $1.48$1.66 billion, compared to $1.33$1.50 billion in the firstsecond quarter of fiscal 2026. The $151.8$157.2 million increase was attributable to a $90.4$103.3 million, or 8.0%, increase in Retail segment net sales, a $42.9$39.7 million, or 34.5%,28.6%, increase in Subscription segment net sales and ana $18.5$14.2 million, or 24.8%,18.6%, increase in Wholesale segment net sales.

The increase in our Retail segment net sales during the firstsecond quarter of fiscal 2027 was due to an increase of $61.7$76.8 million, or 5.6%,6.2%, in Retail segment comparable net sales and an increase of $28.7$26.5 million in non-comparable net sales. Retail segment comparable net sales increased 9.8%10.0% at FP Group, 9.3%8.4% at Urban Outfitters and 1.9%3.0% at Anthropologie.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 andsessions, average order value, while conversion ratevalue and units per transactiontransaction, 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 firstsecond quarter of fiscal 2027 was primarily due to the impact of the 5957 net new Company-owned stores opened since the prior comparable period.

The increase in Subscription segment net sales was primarily driven by a 33.3%30.4% increase in the average number of active subscribers in the firstsecond quarter of fiscal 2027 as compared to the firstsecond quarter of fiscal 2026. The increase in Wholesale segment net sales in the firstsecond quarter of fiscal 2027 was driven by ana $18.3$14.0 million, or 26.2%,19.2%, increase in FP Group wholesale net sales due to an increase in net sales to specialty customers.customers and department stores.

Gross profit percentage for the firstsecond quarter of fiscal 2027 decreasedincreased by 16580 basis points to 36.6%43.4% of net sales compared to 36.8%37.6% of net sales in the firstsecond quarter of fiscal 2026. Gross profit increased to $542.6$721.6 million in the firstsecond quarter of fiscal 2027 from $489.1$566.2 million in the firstsecond quarter of fiscal 2026. The decreaseincrease in gross profit rate was due to a non-recurringone-time gainbenefit related to refunds for previously paid IEEPA tariffs of $4.8$95.7 million, or 36576 basis points,points. recordedThe remaining increase of 4 basis points in thegross priorprofit yearrate quarterwas notprimarily repeateddue to leverage in store occupancy costs due to the currentincrease yearin quarter.comparable ThisRetail wassegment store net sales and leverage in delivery expense as a result of several company initiatives to offset fuel surcharges, partially offset by aan 20 basis point improvementincrease in the underlying gross profit rate primarily due to improved Retail segment markdowns driven by lower markdowns at FPAnthropologie Group and Urbanthe Outfitters,negative partiallyimpacts reducedof bytariffs deleverageand ininbound freight fuel surcharges on initial merchandise costs due to tariffs.costs. The increase in gross profit dollars was primarily due to the IEEPA tariff refunds and higher net sales.

Total inventory at AprilJuly 30,31, 2026, as compared to AprilJuly 30,31, 2025, increased by $63.1$82.3 million, or 9.5%,11.8%, to $726.9$778.5 million. Total Retail segment inventory increased 10.6%12.0% and Retail segment comparable inventory increased 10.0%.8.4%. Wholesale segment inventory decreasedincreased 1.2%.10.0%. The increase in Retail segment inventory was due to the increase in net sales asand well as early receipts to reduce the potential risktiming of shippinginventory delaysreceipts. The increase in Wholesale segment inventory was due to the Middleincrease Eastin conflict.net sales.

Selling, general and administrative expenses increased by $42.0$41.0 million, or 11.7%,10.5%, in the firstsecond quarter of fiscal 2027 compared to the firstsecond quarter of fiscal 2026. Selling, general and administrative expenses deleveragedwere 5 basis pointsflat as a percentage of net sales in the firstsecond quarter of fiscal 2027 to 27.2% compared to the firstsecond quarter of fiscal 2026. The deleverageleverage in selling,store general and administrativepayroll expenses as a percentage of net sales includes a discrete benefit of $6.9 million, or 47 basis points, in the current year quarter due to the reversalgrowth ofin aRetail litigationsegment accrual,store net sales was offset by 52 basis points ofthe deleverage primarily related toin marketing expenses to support customer growth and increased net sales in the Retail and Subscription segments, along with increased artificial intelligence technology investments tobenefiting supportthe AICompany's initiatives.current and future operations. The dollar growth in selling, general and administrative expenses was primarily due to increased store payroll expenses to support the growth in Retail segment store net sales, as well as increased marketing expenses to support customer growth and increased net sales in the Retail and Subscription segments.segments, as well as increased store payroll expenses to support the growth in Retail segment store net sales.

Income from operations was 9.4%17.4% of net sales, or $139.7$288.7 million, for the firstsecond quarter of fiscal 2027 compared to 9.6%11.6% of net sales, or $128.2$174.4 million, for the firstsecond quarter of fiscal 2026. The increase in operating income dollars was driven by the increase in gross profit dollars. The decreaseincrease in operating income rate was driven by the deleverageincrease in selling,gross generalprofit and administrative expenses.rate.

Our effective tax rate for the firstsecond quarter of fiscal 2027 was 20.7%,19.4%, compared to 21.4%21.5% in the firstsecond quarter of fiscal 2026. The decrease in the effective tax rate for the firstsecond 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 favorable impactratio of equityforeign activitytaxable inearnings theto currentglobal yeartaxable quarter.earnings.

The decreaseincrease in working capital as of AprilJuly 30,31, 2026, as compared to January 31, 2026, was primarily due to a decrease in cash, cash equivalents and current marketable securities resulting from the repurchases of our common shares under our share repurchase program in the first quarter of fiscal 2027, partially offset by the timing of disbursements and an increase in inventory. The increase in working capital as of AprilJuly 30,31, 2026, as compared to AprilJuly 30,31, 2025, was primarily due to ana net increase in inventorycash and the timing of disbursements, partially offset by a decrease in cash, cash equivalents and current marketable securities.securities and an increase in inventory.

Our majorprimary recurring source of cash from operations was merchandise sales and our primary outflow of cash from operations was for the payment of operational costs. The decrease in cashCash provided by operating activities in the first threesix months of fiscal 2027 comparedalso tobenefited from the first three monthsreceipt of fiscalrefunds 2026for previously paid IEEPA tariffs which was primarilya duesignificant todriver in the timingyear-over-year ofincrease disbursements.in operating cash flows.

Cash provided by investing activities in the first threesix 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 threesix months of fiscal 2027 was $193.2$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.leased, as well as expand our store base. Cash paid for property and equipment in the first threesix months of fiscal 2026 was $46.2$107.5 million, which was primarily used to expand our store base.base and distribution network.

Cash used in financing activities in the first threesix 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.

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.