Operator: And that will come from the line of Dana Telsey with Telsey Advisory Group.
Dana Telsey: Dick, if you talked about the study that the Urban Outfitters division is undergoing, are you using an external firm to do that strategic study with you? What’s the time frame of when you expect to have the results of that study? And is it holistic in examining every part of the business? And then just lastly on the margins and inventory levels, what are you seeing from any issues in the Red Sea, is that delayed? Is it particularly home? Or how are you thinking about it?
Richard Hayne: Okay, Dana. The Urban Outfitters brand, as I said, we’ve begun a comprehensive brand review. We’re looking at all aspects of the business from who the target customer is to the store footprint and fleet size and all aspects of brand marketing. There are a number of other topics that we’re doing under the review. I think we’ve listed about 9 or 10 so far. And we think the study will take the better part of a few months, and we’re more than happy to update you on our progress in future calls.
Frank Conforti: And Dana, this is Frank. As it relates to the Red Sea, just — I want to note that we have included the impact — estimated impact of the Red Sea in our planned expenses for fiscal ’25. So those impacts are baked into our plan for the 50 to 100 basis points of gross profit margin improvement. I think right now, what we’re seeing is reliability in the region, which is good. And what that means is that we know where our ships are and what our costs are. That wasn’t the case when things first went down over there. What I would say, unfortunately, though, is the ships are obviously taking extra time and costing a bit more as most are currently taking the long way around the southern tip of Africa.
Operator: And that will come from the line of Marni Shapiro with The Retail Tracker.
Marni Shapiro: I have a couple of quick Nuuly questions. I guess, how quickly — you talked about the new fulfillment center. I’m curious how quickly you think you will come up to speed so that it’s really kind of chugging along. And then could you talk a little bit about the Nuuly shopper? Are you seeing a lot of cross between the shopper of Free People, Anthro, I’m guessing a little bit less Urban, or are they new to the company? If you could just talk a little bit about that? Are they driving — is it easier to kind of grab them from the other brands? Or are these new people coming to you that have not shopped with you before?
David Hayne: Yes, Marni, thanks for the Nuuly questions. I’ll start with the customer first. We do see some overlap with customers that come in to Nuuly from the — from our sister brands, it’s a reasonably healthy overlap, but we do see a fair amount of customers that come into URBN for the first time, which has been a really nice surprise. So it’s a little bit of both. It’s a good healthy mix of customers that come in from the brand as well as come in new to URBN. In regards to the Missouri building, it’s actually up and operational now. The building has been operating for the better part of the last 4 or 5 weeks, in terms of actually processing inventory, getting units out the door and actually shipping Nuuly’s to customers.
It’s a tricky process in that we have to move a fair amount of inventory ahead of the subscribers that are being moved to that building. But now that, that has occurred, we’re in the process of migrating subscribers to the Missouri building and actually shipping customer orders out from there. So that transition will happen through the better part of Q1. By the end of Q1, we anticipate we’ll be operating about 1/4 of our subscriber base out of that building. And we think we’ll see some of the incremental costs that we saw in Q4 carry through into Q1 and slightly into Q2 as we ramp up that building. But I do want to reiterate that we just — we feel very excited about this growth opportunity at Nuuly, that the building is a big milestone for the brand.
We feel even more encouraged about the opportunity at Nuuly to be a very sizable business. We think there is a large and growing market for rental apparel in the United States that we are tapping into. And we do think, as we’ve said before, that this could be the next URBN $1 billion brand. And this building is really a testament. The investment in this building is really a testament to that resolved and that excitement. So as we’ve said before, we’re going to be tripling our network capacity up to 600,000 subscribers. Our new building will be much more automated than our existing building, which should lead to efficiencies. And we think we’ll see some delivery expense improvement as we operate more out of this building, as well as a faster delivery experience for customers.
So it should result in a much improved situation and a lot of headroom for the brand.
Operator: And that will come from the line of Alex Straton with Morgan Stanley.
