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URBAN OUTFITTERS, INC. (URBN)
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URBAN OUTFITTERS : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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09/06/2017 | 10:20pm CET

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: 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, overall economic and market conditions and worldwide political events and the resultant impact on consumer spending patterns, any effects of war, terrorism and civil unrest, natural disasters or severe weather conditions, increases in labor costs, availability of suitable retail space for expansion, timing of store openings, risks associated with international expansion, seasonal fluctuations in gross sales, the departure of one or more key senior executives, import risks, changes to U.S. and foreign trade policies, including the enactment of tariffs, border adjustment taxes or increases in duties or quotas, the closing or disruption of, or any damage to, any of our distribution centers, our ability to protect our intellectual property rights, risks associated with internet sales, response to new store concepts, our ability to integrate acquisitions, failure of our manufacturers and third-party vendors to comply with our social compliance program, 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, 2017, filed on April 3, 2017. 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 two reportable segments: a leading lifestyle specialty Retail segment and a Wholesale segment. Our Retail segment consists of our Anthropologie, Bhldn, Free People, Terrain and Urban Outfitters brands and our Food and Beverage division. Our Retail segment consumer products and services are sold directly to our customers through our stores, websites, mobile applications, catalogs and customer contact centers. Our Wholesale segment consists of the Free People wholesale division that primarily designs, develops and markets young women's contemporary casual apparel, including intimates and activewear, and shoes sold through department and specialty stores worldwide, third-party websites and our Retail segment.

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 2018 will end on January 31, 2018.

Retail Segment

Our omni-channel strategy enhances our customers' brand experience by providing a seamless approach to the customer shopping experience. All available shopping channels are fully integrated, including stores, websites, mobile applications, catalogs and customer contact centers. Our investments in areas such as marketing campaigns and technology advancements are designed to generate demand for the omni-channel and not the separate store or direct-to-consumer channels. Store sales are primarily fulfilled from that store's inventory, but may also be shipped from any of our fulfillment centers or from a different store location if an item is not available at the original store. We also allow customers to view in-store inventory from our websites and mobile applications. Direct-to-consumer orders are primarily shipped to our customers through our fulfillment centers, but may also be shipped from any store, or a combination of fulfillment centers and stores depending on the availability of particular items. Direct-to-consumer orders may also be picked up at a store location. Customers may also return certain merchandise purchased through direct-to-consumer channels at store locations. As our customers continue to shop across multiple channels, we have adapted our approach towards meeting this demand. Due to the availability of like product in a variety of shopping channels, we source these products utilizing single stock keeping units based on the omni-


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channel demand rather than the demand of the separate channels. These and other technological capabilities allow us to better serve our customers and help us complete sales that otherwise may not have occurred due to out-of-stock positions. As a result of changing customer behavior and the substantial integration of the operations of our store and direct-to-consumer channels, we manage and analyze our performance based on a single omni-channel rather than separate channels and believe that the omni-channel results present the most meaningful and appropriate measure of our performance. Over the next several years we plan to continue to shift investment to the direct-to-consumer channel to align with changing customer preferences.

Our comparable Retail segment net sales data is equal to the sum of our comparable store and comparable direct-to-consumer 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. A direct-to-consumer channel is considered to be comparable if it has been operational for at least 12 full months. There is no overlap between comparable store net sales and comparable direct-to-consumer net sales. Sales from stores and direct-to-consumer channels that do not fall within the definition of comparable store or channel are considered to be non-comparable. The effects of foreign currency translation are also considered non-comparable.

We monitor customer traffic, average unit selling price, transactions and average units per transaction at our stores, and customer sessions, average order value and conversion rates 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 and digital marketing campaigns, circulation of our catalogs and an overall growth in brand recognition.

As of July 31, 2017, we operated 245 Urban Outfitters stores of which 181 were located in the United States, 18 were located in Canada and 46 were located in Europe. For the six months ended July 31, 2017, we opened four new Urban Outfitters stores, one located in the United States and three located in Europe, and we closed one store located in the United States. Total store selling square footage increased 2.0% over the prior year period to 2.2 million square feet. 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. Urban Outfitters offers a catalog in Europe offering select merchandise, most of which is also available in our Urban Outfitters stores. Urban Outfitters targets young adults aged 18 to 28 through a unique merchandise mix, compelling store environment, websites and mobile applications. Urban Outfitters' product offering 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 product designed internally and designed in collaboration with third-party brands. Urban Outfitters' North American and European Retail segment net sales accounted for approximately 30.1% and 7.1% of consolidated net sales, respectively, for the six months ended July 31, 2017, compared to 32.0% and 7.5%, respectively, for the comparable period in fiscal 2017.

The Anthropologie Group consists of the Anthropologie, Bhldn and Terrain brands. As of July 31, 2017, we operated 225 Anthropologie Group stores, of which 201 were located in the United States, 13 were located in Canada and 11 were located in Europe. For the six months ended July 31, 2017, we opened one new Anthropologie Group store, and we closed one store, both located in the United States. Total store selling square footage increased 5.9% over the prior year period to 1.7 million square feet driven mainly by the opening of expanded format stores. The Anthropologie Group 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. The Anthropologie brand offers registry services through its website and mobile application and in all of its stores throughout the United States, allowing our customers to create gift registries for any occasion. In addition, the brand offers catalogs in North America and Europe that market select merchandise, most of which is also available in Anthropologie brand stores. Merchandise at the Anthropologie brand is tailored to sophisticated and contemporary women aged 28 to 45. Product assortment includes women's casual apparel and accessories, intimates, shoes, home furnishings, a diverse array of gifts and decorative items and beauty. The Bhldn brand emphasizes every element that contributes to a wedding. The Bhldn brand offers a curated collection of heirloom quality wedding gowns, bridesmaid frocks, party dresses, assorted jewelry, headpieces, footwear, lingerie and decorations. 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. We plan to open additional Anthropologie Group stores, some of which may be


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expanded format stores that include multiple Anthropologie Group brands and that allow us to present an expanded assortment of products in certain categories such as petites, jewelry and accessories, footwear, intimates, beauty and home furnishings. The Anthropologie Group's North American and European Retail segment net sales accounted for approximately 39.6% and 1.6% of consolidated net sales, respectively, for the six months ended July 31, 2017, compared to 39.7% and 1.5%, respectively, for the comparable period in fiscal 2017.

As of July 31, 2017, we operated 130 Free People stores, of which 124 were located in the United States and six were located in Canada. For the six months ended July 31, 2017, we opened six new Free People stores, and we closed three stores, all located in the United States. Total store selling square footage increased 21.0% over the prior year period to 277,000. The increase in selling square footage compared to the prior year period was a result of operating 9 net new stores, including expanded format stores, that were not in operation during the prior 12 month period. Free People operates websites and mobile applications in North America, Europe and Asia that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in its stores, as well as substantially all of the Free People wholesale offerings. Free People also offers a catalog that markets select merchandise, most of which is also available in our Free People stores. Free People 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, activewear, intimates, shoes, accessories, home products, gifts and beauty and wellness. We plan to open additional stores over the next several years, some of which will be expanded format stores that allow us to present an expanded assortment of intimates, shoes, party dresses and activewear. Free People's Retail segment net sales accounted for approximately 11.4% of consolidated net sales for the six months ended July 31, 2017, compared to approximately 10.4% for the comparable period in fiscal 2017.

As of July 31, 2017, we operated 12 restaurants under our Food and Beverage division, all of which were located in the United States. For the six months ended July 31, 2017, we opened one new restaurant, and we closed one restaurant. The Food and Beverage division focuses on a dining experience that provides excellence in food, beverage and service. The Food and Beverage division net sales accounted for less than 1.0% of consolidated net sales for the six months ended July 31, 2017 and the comparable period in fiscal 2017.

We plan to open approximately 18 new stores during fiscal 2018, including four Urban Outfitters stores, four Anthropologie Group stores, nine Free People stores and one restaurant. We plan to close approximately nine stores during fiscal 2018, including two Urban Outfitters stores, two Anthropologie Group stores, four Free People stores and one restaurant. Within the United States and Canada, future new store growth will be driven by the Free People brand, as both Urban Outfitters and Anthropologie brands are at or close to our currently planned total store count. Our net store growth strategy for the Anthropologie Group will focus on relocation or the conversion of existing stores into expanded format stores. In the future, we plan for new store growth for the Urban Outfitters, Anthropologie and Free People brands to come from modest expansion internationally, which may include franchise and joint venture agreements.

Wholesale Segment

Our Wholesale segment consists of the Free People wholesale division that designs, develops and markets young women's contemporary casual apparel. Free People's range of tops, bottoms, sweaters, dresses, intimates, shoes and activewear are sold through approximately 1,900 department and specialty stores worldwide, third-party websites and our Retail segment. Our Wholesale segment net sales accounted for approximately 9.4% of consolidated net sales for the six months ended July 31, 2017, compared to 8.3% for the comparable period in fiscal 2017.

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 senior management has reviewed the critical accounting policies and estimates with the Audit Committee of our Board of Directors. Our significant accounting policies are described in Note 2, "Summary of Significant


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Accounting Policies," in the Notes to our Consolidated Financial Statements for the fiscal year ended January 31, 2017, which are included in our Annual Report on Form 10-K filed with the SEC on April 3, 2017. 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. We adopted the new accounting standard related to share-based compensation on February 1, 2017, which changed our accounting policy for forfeitures. (See Note 2, "Recent Accounting Pronouncements," of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q). Other than the adoption of the new accounting standard, there have been no significant changes to our critical accounting policies during the six months ended July 31, 2017.

Results of Operations

As a Percentage of Net Sales

The following table sets forth, for the periods indicated, the percentage of our net sales represented by certain income statement data and the change in certain income statement data from period to period. This table should be read in conjunction with the discussion that follows:



                                           Three Months Ended             Six Months Ended
                                                July 31,                      July 31,
                                           2017           2016           2017          2016
Net sales                                    100.0 %        100.0 %        100.0 %       100.0 %
Cost of sales                                 65.9           61.5           67.1          63.4
Gross profit                                  34.1           38.5           32.9          36.6
Selling, general and administrative
expenses                                      25.5           25.2           27.0          26.4
Income from operations                         8.6           13.3            5.9          10.2
Other income (expense), net                    0.2            0.1            0.1           0.0
Income before income taxes                     8.8           13.4            6.0          10.2
Income tax expense                             3.1            4.8            2.2           3.8
Net income                                     5.7 %          8.6 %          3.8 %         6.4 %



Three Months Ended July 31, 2017 Compared To Three Months Ended July 31, 2016

Net sales in the second quarter of fiscal 2018 were $872.9 million, compared to $890.6 million in the second quarter of fiscal 2017. The $17.7 million decrease was attributable to a $25.1 million, or 3.1%, decrease in Retail segment net sales, partially offset by a $7.4 million, or 10.0%, increase in our Wholesale segment net sales. Retail segment net sales for the second quarter of fiscal 2018 accounted for 90.6% of total net sales compared to 91.6% of total net sales in the second quarter of fiscal 2017.

The decline in our Retail segment net sales during the second quarter of fiscal 2018 was due to a decrease of $38.1 million, or 4.9%, in Retail segment comparable net sales, which includes our direct-to-consumer channel, partially offset by an increase of $13.0 million in non-comparable net sales, including new store net sales. Retail segment comparable net sales increased 2.9% at Free People, but decreased 4.0% at the Anthropologie Group and 7.9% at Urban Outfitters. The decrease in Retail segment comparable net sales was driven by negative comparable store net sales, which were partially offset by continued growth in the direct-to-consumer channel. Negative comparable store net sales resulted from decreased transactions, average unit selling price and units per transaction. Store traffic was flat, with declines in North America offsetting growth in Europe. The direct-to-consumer net sales increase was driven by an increase in sessions and conversion rate, which more than offset a decrease in average order value. The increase in net sales attributable to non-comparable sales was primarily the result of operating 40 new stores and restaurants during the second quarter of fiscal 2018 that were not in operation for the full comparable quarter in fiscal 2017. Thus far during the third quarter of fiscal 2018, comparable Retail segment net sales are low single-digit negative.


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The increase in Wholesale segment net sales in the second quarter of fiscal 2018 was due to domestic and international growth at department stores, specialty stores and third-party websites. Wholesale sales growth was driven by an increase in units that was partially offset by a decrease in average unit selling price.

Gross profit percentage for the second quarter of fiscal 2018 decreased to 34.1% of net sales, from 38.5% of net sales in the comparable quarter in fiscal 2017. Gross profit decreased to $297.3 million in the second quarter of fiscal 2018 from $342.5 million in the comparable quarter in fiscal 2017. The decline in gross profit percentage was driven by higher markdowns due to underperforming women's apparel and accessories at the Anthropologie and Urban Outfitters brands, increase in delivery and logistics expenses primarily due to the increased penetration of the direct-to-consumer channel and decrease in initial merchandise mark-ups at the Anthropologie and Urban Outfitters brands due to a change in product mix. Total inventory at July 31, 2017 decreased by $2.0 million, or 0.6%, to $365.2 million from $367.2 million at July 31, 2016. Comparable Retail segment inventory decreased 4.6% at cost, which was partially offset by inventory to stock non-comparable stores.

Selling, general and administrative expenses as a percentage of net sales increased during the second quarter of fiscal 2018 to 25.5% of net sales, compared to 25.2% of net sales for the second quarter of fiscal 2017, primarily due to the negative comparable Retail segment net sales and increased spending in digital marketing. Selling, general and administrative expenses decreased by $2.1 million, or 1.0%, to $222.2 million, in the second quarter of fiscal 2018, from $224.3 million in the second quarter of fiscal 2017, primarily due to the net benefit of our store organization project. During the second quarter of fiscal 2018, we recorded approximately $2.2 million, or 0.3% of net sales, of nonrecurring expenses related to severance and fees associated with our store organization project which were more than offset by savings from the project. This project streamlined our store leadership structure starting in the first quarter of fiscal 2018.

Income from operations decreased to 8.6% of net sales, or $75.2 million, for the second quarter of fiscal 2018 compared to 13.3%, or $118.2 million, for the second quarter of fiscal 2017.

Our effective tax rate for the second quarter of fiscal 2018 was 35.1% of income before income taxes compared to 35.5% of income before income taxes in the second quarter of fiscal 2017. The decrease in the effective tax rate was due to the ratio of foreign taxable profits to global taxable profits in the quarter, partially offset by the prospective adoption of the new accounting standard related to share-based compensation (See Note 2, "Recent Accounting Pronouncements," of the Notes to our Condensed Consolidated Financial Statement included in this Quarterly Report on Form 10-Q).

Six Months Ended July 31, 2017 Compared To Six Months Ended July 31, 2016

Net sales for the six months ended July 31, 2017 were $1.63 billion, compared to $1.65 billion in the comparable period of fiscal 2017. The $19.0 million decrease was attributable to a $35.0 million, or 2.3%, decrease in Retail segment net sales, offset by a $16.0 million, or 11.6%, increase in our Wholesale segment net sales. Retail segment net sales for the six months ended July 31, 2017 accounted for 90.6% of total net sales compared to 91.7% of total net sales in the six months ended July 31, 2016.

The decline in our Retail segment net sales during the first six months of fiscal 2018 was due to a decrease of $56.5 million, or 4.0%, in Retail segment comparable net sales, which includes our direct-to-consumer channel, partially offset by an increase of $21.5 million in non-comparable net sales, including new store net sales. Retail segment comparable net sales increased 2.4% at Free People, but decreased 3.9% at the Anthropologie Group and 5.7% at Urban Outfitters. The decrease in Retail segment comparable net sales was driven by negative comparable store net sales, which were partially offset by continued growth in the direct-to-consumer channel. Negative comparable store net sales resulted from decreased transactions and average unit selling price, while units per transaction were flat. Store traffic decreased, with declines in North America offsetting growth in Europe. The direct-to-consumer net sales increase was driven by an increase in sessions and conversion rate, which more than offset a decrease in average order value. The increase in net sales attributable to non-comparable sales was primarily the result of operating 44 new stores and restaurants during the first half of fiscal 2018 that were not in operation for the full comparable first half of fiscal 2017.


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The increase in Wholesale segment net sales during the first six months of fiscal 2018, as compared to the first six months of fiscal 2017, was due to domestic and international growth at department stores, specialty stores and third-party websites. Wholesale sales growth was driven by an increase in units that was partially offset by a decrease in average unit selling price.

Gross profit percentage for the first six months of fiscal 2018 decreased to 32.9% of net sales, from 36.6% of net sales in the comparable period in fiscal 2017. Gross profit decreased to $537.1 million for the first six months of fiscal 2018 from $604.4 million in the comparable period in fiscal 2017. The decline in gross profit percentage was driven by higher markdowns due to underperforming women's apparel and accessories at the Anthropologie and Urban Outfitters brands, increase in delivery and logistics expenses primarily due to the increased penetration of the direct-to-consumer channel and decrease in initial merchandise mark-ups at the Anthropologie and Urban Outfitters brands due to a change in product mix.

Selling, general and administrative expenses as a percentage of net sales increased during the first six months of fiscal 2018 to 27.0% of net sales, compared to 26.4% of net sales for the first six months of fiscal 2017. Selling, general and administrative expenses increased by $5.2 million, or 1.2%, to $440.9 million, in the first half of fiscal 2018, from $435.7 million in the first half of fiscal 2017. The deleverage and dollar increase versus the prior year primarily related to approximately $8.1 million, or 0.5% of net sales, of nonrecurring expenses related to severance and fees associated with our store organization project.

Income from operations decreased to 5.9% of net sales, or $96.2 million, for the first half of fiscal 2018 compared to 10.2%, or $168.7 million, for the first half of fiscal 2017.

Our effective tax rate for the first half of fiscal 2018 was 37.1% of income before income taxes compared to 36.7% of income before income taxes in the first half of fiscal 2017. The increase in the effective tax rate was due to the ratio of certain foreign taxable losses to global taxable profits and the prospective adoption of the new accounting standard related to share-based compensation (See Note 2, "Recent Accounting Pronouncements," of the Notes to our Condensed Consolidated Financial Statement included in this Quarterly Report on Form 10-Q).

Liquidity and Capital Resources

Cash, cash equivalents and marketable securities were $412.9 million as of July 31, 2017, as compared to $403.5 million as of January 31, 2017 and $328.3 million as of July 31, 2016. Our working capital was $567.5 million at July 31, 2017 compared to $528.5 million at January 31, 2017 and $502.0 million at July 31, 2016. The increase in working capital as of July 31, 2017 compared to January 31, 2017 was primarily due to the increase in accounts receivable attributable to the seasonality of the Wholesale segment and the timing of credit card receivables settlements. The increase in working capital during the first half of fiscal 2018 compared to the first half of fiscal 2017 was primarily due to the increase in cash, cash equivalents and marketable securities.

During the last two years, we have satisfied our cash requirements primarily through our cash flow from operating activities. Our primary uses of cash have been to repay our long-term debt, repurchase our common shares, open new stores, purchase inventory and expand our fulfillment facilities. We have also continued to invest in our omni-channel capabilities and technology.

Cash Flows from Operating Activities

Cash provided by operating activities during the first half of fiscal 2018 decreased by $37.7 million to $123.3 million from $161.0 million in the first half of fiscal 2017. For both 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 period over period decrease in cash flows from operations was primarily due to lower net income.


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Cash Flows from Investing Activities

Cash used in investing activities during the first half of fiscal 2018 decreased by $69.1 million to $6.8 million from $75.9 million in the first half of fiscal 2017. Cash used in investing activities in both periods primarily related to purchases of marketable securities and property and equipment, partially offset by the sales and maturities of marketable securities. Cash used in investing activities in the first half of fiscal 2017 also included $15.3 million used to acquire the Vetri Family group of restaurants. Cash paid for property and equipment in the first half of fiscal 2018 and 2017 was $43.0 million and $74.4 million, respectively, which was primarily used to expand our store base in fiscal 2018 and to expand our store base and fulfillment facilities in fiscal 2017.

Cash Flows from Financing Activities

Cash used in financing activities during the first half of fiscal 2018 decreased by $16.1 million to $91.7 million from $107.8 million in the first half of fiscal 2017. Cash used in financing activities in the first half of fiscal 2018 primarily related to $90.5 million of repurchases of our common shares under the share repurchase program approved by the Board of Directors in February 2015. Cash used in financing activities in the first half of fiscal 2017 primarily related to $100.0 million in debt repayments and $10.7 million of repurchases of our common shares under the share repurchase program approved by the Board of Directors in February 2015.

Credit Facilities

See Note 6, "Debt," of the Notes to our Condensed Consolidated Financial Statement included in this Quarterly Report on Form 10-Q for additional information regarding the Company's debt.

Capital and Operating Expenditures

During fiscal 2018, we plan to construct and open approximately 18 new stores, including one restaurant, expand or relocate certain existing stores, repurchase common shares, upgrade our systems, improve our capabilities in the digital channel, invest in omni-channel marketing and purchase inventory for our Retail and Wholesale segments at levels appropriate to maintain our planned sales growth. We believe that new store openings, merchandise expansion, and our marketing, social media, website and mobile initiatives are a significant contributor to our Retail segment sales growth. During fiscal 2018, we plan to continue our investment in these initiatives for all brands. We anticipate our capital expenditures during fiscal 2018 to be approximately $90 million, all of which are expected to be financed by cash flows provided by operating activities. We believe that our new store investments 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 franchise and joint venture agreements. We believe that our existing cash and cash equivalents, availability under our current credit facilities 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.

Off-Balance Sheet Arrangements

As of and for the six months ended July 31, 2017, except for operating leases entered into in the normal course of business, we were not party to any material off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.


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Other Matters

See Note 2, "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 recently issued accounting pronouncements.

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