Urban Outfitters’ net sales increased 10.1% to a company-record $1.6 billion for its fiscal Q4, which ended on Jan. 31, delivering a new milestone for the company’s rental business Nuuly.

The record quarter was part of a record year for the Philadelphia-based retailer. It saw total company net sales increase 7.7% to $5.6 billion.

During its earnings call, Frank Conforti, the co-president and chief operating officer at Urban Outfitters, credited success to the Anthropologie, Free People, FP Movement and Nuuly brands. Of those brands, Nuuly also distinguished itself by becoming profitable for the retailer’s full fiscal year.

“The strong revenue growth in the fourth quarter resulted in expense rate leverage in almost every expense line item, which helped deliver a record fourth quarter operating profit and another Nuuly first, its first full year of profitability,” he stated.

Urban Outfitters is No. 29 in the Top 2000, which is Digital Commerce 360’s database ranking North America’s largest online retailers by their annual ecommerce sales. In the Top 2000, Digital Commerce 360 categorizes Urban Outfitters as an Apparel & Accessories retailer. Digital Commerce 360 projects Urban Outfitters’ online sales will reach $3.54 billion in 2025.

Urban Outfitters web sales by year

Urban Outfitters’ Q4 earnings highlights, including Nuuly results

Other highlights from the earnings report included:

• Urban Outfitters posted a 17% increase in gross profit dollars, hitting a record $528 million.
• Strong sales at Urban Outfitters brands Anthropologie and Free People; Comparable Retail segment net sales increased 8.3% at Anthropologie and 8.0% at Free People.
• Wholesale segment net sales increased 15.5%, driven by a 17.9% increase at Free People.

As for Nuuly, the clothing rental brand’s contribution came as the result of a half-decade of work under its parent company.

Urban Outfitters was started as a business class project by some University of Pennsylvania students in 1970. It launched Nuuly in 2019 as a subscription-based clothing rental company. The concept has caught on, especially with younger consumers, and is now delivering profits for the company.

On the recent earnings call, Conforti said Nuuly added over 20,000 active subscribers in Q4, bringing Nuuly’s total active subscriber count to 300,000. Conforti said the increased subscriber count powered the brand to 56% year-over-year growth in brand revenue for the quarter.

According to the earnings report, Nuuly racked up $13 million in operating profit for the year. Conforti said Q1 is already off to a strong start.

“Historically, Nuuly experiences the most significant growth in subscribers during the seasonally strong first and third quarters,” Conforti stated. “An already strong start in February bodes well for the Nuuly brand to continue to deliver health revenue and profit growth in the first quarter and full year of fiscal 2026.”

How Urban Outfitters found success with Nuuly

Michael Zakkour, founder and chief analyst at the retail consultancy 5 New Digital, told Digital Commerce 360 that clothing rental is the right fit for Urban Outfitters.

“It appeals to younger consumers who love variety in their wardrobes but are concerned about sustainability,” Zakkour said.

He added that younger consumers understand that of every 10 items bought from a low-cost fashion house, seven end up in a landfill.

“At the same time, they are cost-conscious, and Nuuly checks both boxes for them with a fun variety of styles,” Zakkour explained.

He noted that because Nuuly curates on-trend styles from Urban Outfitters, Anthropologie, Free People and their other popular brands, renters get a trendy selection of clothes.

To add to the sustainability of the program, Zakkour mentioned that — on top of rentals — Nuuly also sells previously rented garments at a discount, providing the company with another revenue stream. Zakkour said a single item can generate revenue multiple times before being resold at a discount. Moreover, there’s another way in which clothing rental helps Urban Outfitters. It can help drive down the cost of pesky returns.

Impact of the rental business on the environment and Urban Outfitters’ business

“The rental model eliminates the high costs of returns,” Zakkour assessed. “Unlike traditional ecommerce, where returns are 30% to 60% on sales, rentals don’t suffer from this issue similarly.”

Terran Fielder is a Gen Z fast-fashion follower and media specialist with environmental advocacy organization EarthDay.org. She said clothing rental is good for the environment and an apparel business’s bottom line. As an example of impact, she cited the amount of waste in the industry from unsold inventory.

“Instead of discarding these garments, more retailers could repurpose them for rental,” Fielder stated. “This would prevent clothing from ending up in landfills, being burned, clogging the ocean, drains and waterways or contaminating soil with harmful chemicals.”

There is a business case to be made as well.

“At the same time, retailers can avoid losing money on unsold stock and can end up making way more money on each item,” Fielder said. “The ROI is significantly better.”

Do you rank in our databases? 

Submit your data and we’ll see where you fit in our next ranking update.

Sign up

Stay on top of the latest developments in the online retail industry. Sign up for a complimentary subscription to Digital Commerce 360 Retail News. Follow us on LinkedIn, X (formerly Twitter), Facebook and YouTube. Be the first to know when Digital Commerce 360 publishes news content.