管理層發言
Good day, ladies and gentlemen, and welcome to the Urban Outfitters, Inc. Fourth Quarter Fiscal 2024 Earnings Call. As a reminder, this conference is being recorded. I would now like to introduce Oona McCullough, Executive Director of Investor Relations. Ms. McCullough, you may begin.
Good afternoon, and welcome to the URBN Fourth Quarter Fiscal 2024 Conference Call. Earlier this afternoon, the company issued a press release outlining the financial and operating results for the 3- and 12-month period ending January 31, 2024. The following discussions may include forward-looking statements. Please note that actual results may differ materially from those statements. Additional information concerning factors that could cause actual results to differ materially from projected results is contained in the company's filings with the Securities and Exchange Commission. On today's call, you'll hear from Richard Hayne, Chief Executive Officer, URBN; Frank Conforti, Co-President and COO URBN; and Melanie Marein-Efron, Chief Financial Officer, URBN. Following that, we will be pleased to address your questions. For more detailed commentary on our quarterly performance and the text of today's conference call, please refer to our Investor Relations website. I will now turn the call over to Dick.
Thank you, Oona, and good afternoon, everyone. Before we begin our prepared remarks, it's my pleasure to welcome Shea Jensen to today's call. As you know, Shea is our new President of Urban Outfitters North America. She comes with deep experience in the apparel and accessory categories, having spent many years at Nordstrom, and more recently as President of Good American. Shea has been in her new role here at URBN for 3 weeks, so she will not be answering any questions today, but will be happy to respond to your questions on future calls. With that, I'll turn the call over to Frank to begin our discussion. Frank?
Thank you, Dick, and good afternoon, everyone. Today, I will begin the call discussing our total company fourth quarter results versus the prior year, followed by some more detailed notes by brand. Please note, today, I will be speaking to our financial results on an adjusted basis, which does not include nonrecurring adjustments for asset impairments, lease abandonments and a change in the revenue recognition method at Nuuly. Each of these items is detailed in our press release as well as the investor presentation that is posted to our Investor Relations website. Now on to our results. The fourth quarter performed largely in line with our thoughts as discussed on the third quarter call. Total company sales grew by 8% to a fourth quarter record of $1.5 billion, driven by a total Retail segment comp increase of 5%, and Nuuly segment revenue increase of 69%, and Wholesale segment revenue increase of 3%.
The Retail segment comp was driven by a high single digit positive digital comp and a low single digit store comp. Comps in both channels were primarily the result of higher traffic and transactions. January, and in particular, the second and third weeks of the month, were the weakest of the quarter as we saw a negative impact on store traffic and sales comp trends due to the winter storms and below average temperatures across the country. It was nice to see sales trends bounce back when the weather became more favorable. For the quarter, the Anthropologie, Free People and FP Movement brands all produced double-digit Retail segment comp sales, with FP Movement leading the way with a 45% increase. Nuuly also delivered robust double-digit revenue growth due to a significant increase in subscribers versus the prior year. All 4 of these brands achieved record fourth quarter revenue, which was partially offset by a negative comp at the Urban Outfitters brand.
The growth in Wholesale segment revenue was due to an increase in regular price channel sales at Free People, which was partially offset by a decline in sales at Urban Outfitters. Gross profit dollars increased 20% to $452 million, while our gross profit rate increased by 293 basis points to 30.2%. The improvement in the gross profit rate was primarily due to increased initial margins at Free People and Anthropologie. In fiscal year '24, all 3 brands made significant progress towards our 500 basis points improvement goal, and now have their sights set on completing the goal by Q4 of fiscal '25. Markdowns were flat for the quarter versus last year but were higher than planned in the month of January as Urban Outfitters needed to promote more aggressively than planned to clear through excess inventory. As a result of the additional clearance at Urban Outfitters, their comp inventory is now down 3% on a year-over-year basis and in a better position heading into the spring selling season.
Now moving on to SG&A expenses. For the quarter, SG&A increased 11% versus the prior comparable quarter and deleveraged by 58 basis points. The increase in expense and deleverage was primarily related to an increase in marketing and creative expense to support increased sales and continued customer growth, as well as higher incentive-based compensation costs due to improved company performance. URBN's profit results were even more impressive than our strong sales growth. Total URBN operating income soared 90% above the prior year to $81 million, and earnings jumped 84% to $66 million or $0.69 per diluted share. I will now provide more details by brand, starting with Anthropologie. The Anthropologie team delivered a strong 12% Retail segment comp in Q4. This increase was driven by high single digit positive store comps and low double digit digital comps. By category, apparel and accessories delivered nicely positive Retail segment comps in the quarter, while home was flat.
The strong fourth quarter completed an impressive full year of low double digit sales comps for the brand. The impressive sales growth and healthy margin expansion drove record operating profit dollars for the fourth quarter and full year. As we enter fiscal year 2025, the Anthropologie consumer remains optimistic and continues to respond positively to a broad range of occasion and casual categories. The teams transitioned into spring early in January, and the customer is responding well to the fashion newness. The home category continued to see strength in the gift and entertainment category, which was partially offset by a decline in furniture and decor. During the quarter, the team's execution of the brand strategy to target a slightly younger customer continued to gain traction. New customers in the quarter in North America increased by a remarkable 26%. The strength in apparel, accessories and gift entertainment, along with the new customer acquisition, has us optimistic that the Anthropologie brand can continue to drive nicely positive comps in fiscal year '25.
Now I will call your attention to Free People. Once again, the Free People team produced an outstanding quarter, with Retail segment comps achieving an impressive 19% gain versus last year. Retail segment comp was driven by double-digit comp growth in both the digital and store channels. During the quarter, the brand achieved strong double-digit growth across apparel, accessories and movement. The FP Movement brand delivered another remarkable quarter, achieving 45% Retail segment growth. Record sales and improved margins helped Free People deliver record fourth quarter and full year operating profit dollars. Early customer response to the brand spring trends has been strong, and new and total customer counts continue to grow at a double-digit rate. We believe the brand's Retail segment performance could be nicely positive in fiscal year 2025. The Free People Wholesale segment sales increased 8% during the quarter, driven by sales gains in department stores.
Segment profitability improved significantly from the prior year when the brand had elevated closeout channel sales to reduce inventory levels. We believe Wholesale segment sales could be near-flat in fiscal year 2025, while delivering improved profitability. Now moving on to the Urban Outfitters brand. Urban recorded a 14% Retail segment comp decline in the quarter. UO's negative comp was the result of disappointing performance in both North America and Europe. Global Retail segment comp declines were driven by double-digit declines in both the digital and store channels, and all product categories were negative. When we last spoke, we noted the UO brand had excess inventory entering into the holiday season. This led to significantly higher markdowns during the fourth quarter. The brand made significant improvement on these inventory levels and is entering fiscal year 2025 with leaner inventories than the prior year.
With new leadership in place and better inventory control, we believe the brand could deliver gradual comp sales improvements as the year progresses with the first quarter of fiscal 2025 likely looking similar to the fourth quarter of fiscal year 2024. Finally, I will touch on the Nuuly business. Revenue and subscriber growth continued to outperform our expectations. For our rental business, we see the most significant growth in subscribers during the seasonally strong first and third quarters. During the fourth quarter, average subscribers ended at 195,000, growing 56% versus the prior year, and 6% versus the third quarter. As you know, we have reached full capacity in our Pennsylvania fulfillment center. The team began the process of transitioning to our second facility in Raymore, Missouri, in the fourth quarter. This transition led to incremental and some nonrecurring costs in logistics, which will continue into the first quarter and abate in the second quarter.
This facility will support future subscriber growth by tripling the brand's capacity. We are pleased to announce the first totes have now shipped out of Raymore, and the brand will continue to ramp up capacity as the first quarter progresses. Let me now review the many milestones we achieved in fiscal year 2024. We delivered 8% sales growth, resulting in a new record of $5.2 billion in sales. Gross profit margin expanded by 370 basis points, culminating in operating profit growth of 70% or $162 million, which drove 86% growth in earnings per diluted share. Four of our five brands delivered double-digit sales gains as well as customer growth and our newest brand and concept, Nuuly, delivered its first ever profitable quarter. We know there is always more work to be done and improvements to be made, but I would be remiss if I didn't congratulate and thank all of our employees for their extraordinary performance in fiscal year 2024. Thank you for your time. I will now turn the call over to Melanie Marein-Efron, our Chief Financial Officer.
Thank you, Frank, and good afternoon, everyone. On today's call, I will discuss our thoughts on the first quarter and full fiscal year '25. As we begin FY '25, we believe we could deliver low single digit comps for the full year and first quarter, driven by nicely positive comps at Anthropologie and Free People, and mid-double-digit revenue growth at Nuuly. We believe that the UO brand first quarter comp will look similar to the fourth quarter, with gradual improvement as the year progresses. We believe that first quarter total company sales growth could be mid-single digits. Sales growth in Q1 could result from mid-double digit growth of Nuuly segment sales versus last year, and Retail segment comp sales growing in the low single digits. Our growth in the Retail segment and Nuuly segments is likely to be partially offset by a slight sales decline in our Wholesale segment. Based on the current sales performance and plan, we believe our gross profit margins for the first quarter could improve by approximately 25 basis points versus first quarter fiscal year '24.
The increase in gross profit rate could be primarily due to higher initial product margins from cross-functional initiatives which will favorably impact initial product margins. We believe that improvements in the initial product margin could be largely offset by higher logistics costs in the first quarter. The planned increase in logistics costs is primarily driven by the transition and startup of the new Nuuly rental fulfillment facility in Missouri. As Frank mentioned, this transition began at the end of fiscal year '24, and will continue into the second quarter, albeit to a lesser extent. When thinking about gross profit margins for the full year, it is important to remember our 3-year plan to recapture 500 basis points of initial product margin from the base established in the fourth quarter of fiscal year '22. This plan was announced 2 years ago on this call. This year, FY '25 is the third year of our initiative.
In FY '23 and FY '24, we made tremendous progress as a result of lower inbound freight costs and our cross-functional initiatives to improve initial product margins. and there still is more product margin opportunity to be realized. We believe that gross profit margins in FY '25 could improve by approximately 50 to 100 basis points versus the full year fiscal '24. In FY '25, improved gross profit margins could be driven by higher initial product margins at all brands and the opportunity for lower markdowns at the Urban Outfitters brand as a result of more tightly controlled inventory in the second half of the year. Based on our current sales performance and financial plan, we believe total growth in SG&A could outpace sales growth for the quarter and year. The deleverage of SG&A primarily relates to the Urban Outfitters brand. While we have reduced expenses at the Urban Outfitters brand, we do not believe it is prudent to reduce expenses at the rate of negative sales performance that we believe could occur in FY '25.
The growth in SG&A primarily relates to increases in marketing expenses to support growth in customers and sales in the Free People, FP Movement, Anthropologie and Nuuly brands. In Q1, SG&A could grow in the low double digits, while a year will be much closer to our sales growth. We believe the delta between SG&A and sales growth rates will be larger in the first half of the year than the second half of the year. As always, if sales performance fluctuates, we maintain a certain level of variable SG&A spending that we can fluctuate up and down depending on how our business is performing. Our annual effective tax rate is planned to be approximately 24% for the year and 25% for the first quarter. Now moving on to inventory. As a result of the more reliable supply chain with faster speed and increased reliability, we've been able to bring product in closer to demand in the past year. This has allowed us to speed up our product turns in FY '24, and manage to a lower weeks of supply.
In the coming year, we will continue to be focused on increasing our product turns. We believe that our inventory levels could grow at a rate below sales growth. As you may have noticed, our FY '24 capital expenditure came in approximately $35 million lower than planned spend. FY '24 capital spend was lower than planned due to timing of FY '24 project cash flows, which have shifted into FY '25. For FY '25 capital expenditure is planned at approximately $210 million, including $35 million of timing shift of capital spend from FY '24. The FY '25 capital project spend is broken down as follows: approximately 50% is related to retail store expansion and support; approximately 25% is related to logistics capacity investments, including the Nuuly rental fulfillment center in Raymore, Missouri, which Frank referenced; and the remaining 25% would be our normal capital investment supporting IT, home office and logistics operations.
We will be opening approximately 58 new stores and closing approximately 21 stores during fiscal year '25. Our net new store growth is being driven by growth in FP Movement, Free People and Anthropologie stores. During FY '25, we plan on opening 25 FP Movement stores, 13 Free People stores and 14 Anthropologie stores. Based on our current plans, we plan to repurchase shares to, at a minimum, offset the dilution in FY '25. Of course, share repurchase activity will be contingent on market conditions and Board of Director approval. As a reminder, the foregoing does not constitute a forecast but is simply a reflection of our current views. The company disclaims any obligation to update forward-looking statements. Now it is my pleasure to turn the call over to Dick Hayne, Chief Executive Officer of URBN.
Thank you, Mel. As you heard from Frank and Mel, four of our brands, Anthropologie, Free People, FP Movement and Nuuly all delivered strong Q4 performances. And given their current trends, I'm optimistic about their prospects for this year. We believe each of these brands can continue to post healthy comps, albeit at a somewhat lower rate than last year. Our fifth brand, Urban Outfitters, continued to fall short of our expectations, with double-digit negative comps in Q4. And they remain negative so far in February. Today, I'll discuss the opportunities we see for sales growth this year and say a few words about our current view of the consumer. Entering our fiscal year 2025, we enjoyed two young, fast-growing brands plus two larger brands that posted excellent comps and gained market share last year. For FY '25, we are planning a similar outcome for these four brands, but expect comp sales to moderate slightly.
In Q1, we are planning total Retail segment comps to be around 3%, and total URBN revenues to increase by mid-single digits. I'll now discuss each brand, starting with Anthropologie. The focus at Anthropologie has been on modernizing the product assortment, enhancing the store and digital selling environments and providing inspirational creative content. This has allowed the brand to grow its customer base across multiple age demographics, with a particular emphasis on capturing additional customers under 40. To reach that younger customer, the team modernized core categories like denim and dresses, elevated the market brands offered and accentuated product categories that resonate especially well with younger customers, like intimate apparel, accessories and shoes. These efforts saw great success in fiscal '24, and helped to drive a 12% comp increase and a 26% increase in new customers in Q4.
Building on this success, for spring, the team has expanded two new product concepts, with dedicated shop-in-shops inside 50 Anthropologie stores and featured these concepts on anthropologie.com. The first shop consists of vacation-ready fashion essentials like sundresses, cover-ups, sandals, shorts, accessories and skin care. The second shop features an expanded range of intimates, lounge wear, sleep and beauty essentials. These two concepts are enjoying outsized comp gains and helping to drive nicely positive Retail segment comp increases in February. Overall, we believe the Anthropologie Group can deliver mid-single digit comps for the year and the first half. Moving to the Free People brand, where FP Movement continues to lead this brand's remarkable growth. Last year, Movement achieved Retail segment growth of 53%, and has continued to deliver powerful double-digit retail segment comp growth in February this year.
Movement continues to focus on growing its brand recognition and broadening its reach across all three channels of distribution. Last year, Movement's 38 stand-alone stores far surpassed our performance expectations, with average sales per square foot exceeding those at the average Free People locations. We believe this provides an opportunity to open many additional stores and increase the size of new stores to approximately 2,600 gross square feet or 30% larger than the current fleet average. Our data confirms that opening new brick-and-mortar locations not only augments brand recognition, but also lifts digital sales in the surrounding ZIP codes. In FY '25, the team plans to open an additional 25 Movement stores, a 66% increase over the current base. We believe that Movement has the highest store count opportunity of all URBN brands, both in North America and globally. The wholesale channel provides Movement with an additional method of building name recognition.
Partnering with premiere activity-based specialty accounts gives the brand additional credibility within the activewear space and helps to drive engagement. The Free People collection business also plans to deliver solid growth. This year, the team will execute a growth strategy centered on attracting additional digital customers through more robust marketing efforts, while expanding the product offering in areas like footwear and accessories. The brand is also expanding its sub-brand, free-est, which concentrates on effortless attire with a beach sensibility. To that end, in mid-February, the brand opened a 2,800 square foot free-est pop-up shop in Palm Beach, Florida, that is generating sales significantly above our very optimistic plan. While it's still early days for this sub-brand, expanding the free-est concept might provide yet another growth opportunity for the Free People brand in the future.
Stay tuned. I now turn your attention to Nuuly, URBN's fast-growing apparel rental business. Nuuly delivered an exceptionally strong fiscal year, outpacing expectations for both top and bottom line performance and recording its first profitable quarter in Q3. Faster-than-planned subscriber growth during the year accelerated the brand's need to invest in a second fulfillment center. That center, located outside Kansas City, is now operational and will slowly ramp up fulfillment in the first quarter. Opening this facility has created additional one-time expenses. Thus in Q4, Nuuly incurred a small operating loss, and we expect a slightly larger loss in Q1. However, we plan for the brand to return to profitability in Q2, and be profitable for the full year. At full capacity, the new facility will allow the total number of subscribers to more than triple from current levels. We are acutely aware that our single largest opportunity to improve URBN's bottom line is turning around the Urban brand in North America.
To that end, we are highly focused on building the team, improving the product offering and strengthening our marketing offer. As I announced earlier, Shea Jensen has joined the UO team as President of North America. Additionally, Dmitri Siegel has rejoined the team as Chief Creative and Digital Officer. I believe these two leaders, working with their teams, and Sheila, will spearhead the brand's renaissance in North America. Our plan calls for the brand to deliver slow but steady progress over the course of this year and reach flat comps in Q4. Turning now to the health of our customers. We believe they, as a group, are in good shape. They're not as exuberant as they were when first coming out of the pandemic. They don't have as many weddings and events to attend. They are less apt to move and have recently refurbished their living spaces. So demand for categories like dressier footwear and home furnishings are trending softer.
But they do enjoy a secure job and are earning more money than ever. They tend to be optimistic, want the latest fashion and are willing to spend some of those extra earnings to enjoy them. Their mood and financial conditions create an environment conducive to our brand's success. Our job, as always, is to ensure that we give them the products and experience they exceed their expectations. We believe we are poised to do just that. In closing, I thank our brand and shared service leaders, their merchant, creative and operating teams and our 27,000 associates worldwide. They delivered an outstanding, record-setting performance in FY '24. I also recognize and thank our many partners around the globe. Finally, I thank our shareholders for their continued support. That concludes our prepared remarks, and I now turn the call over for your questions.
分析師問答
And our first question will come from Lorraine Hutchinson with Bank of America.
My question is on the Urban Outfitters brand. Now that Shea and Dmitri are on board, how quickly can they impact the product and then the marketing message?
Lorraine, I can take that. I feel like jumping in, Shea and Dmitri are highly focused on our back-to-school timeframe and being such a pivotal point for the Urban Outfitters brand. So their focus is really on a larger impact in Q3, although I can say they're dissecting all parts of the business to affect as much as they can immediately.
And that will come from the line of Matthew Boss with JPMorgan.
So Dick, could you elaborate on the positive response that you cited to early spring offering? And then larger picture, you spoke to the successful customer base expansion at Anthropologie. I guess, what do you see as key to the turnaround at the Urban brand from here?
Okay, Matthew. I'll try to do both of those things. The key to the Urban brand, as we said all along, is having the leadership in place. And secondarily, I'm happy to announce that we're undertaking a comprehensive brand review, and we're looking at all areas of the business. So I can't tell you what is going to come out of that review, but I will say, having the leadership in place is the #1 element that will help the brand turnaround. And sorry the...
Spring.
Oh, spring. Well, the way I judge that is by sales, and sales are trending reasonably in line with Q4 sales. And so I would say that she, and in Urban's case, he, are responding very much in line with what they're responding to the prior year, which was very good. So we're seeing good comps, and that's a tribute to the selection and the assortment that the brand leaders have done.
And that will come from the line of Adrienne Yih with Barclays.
Dick, my question is for you on, obviously, Urban Outfitters. Wondering if there's any thought that perhaps the usefulness or coming down in age range on Anthropologie may be impacting sort of those at the higher end of Urban. And then what would make you kind of consider maybe rationalizing the store base at Urban Outfitters? And then for Melanie, on the gross margin, can you just help us understand Anthro, Free People, they seem to be at peak operating margin profitability. So how much further do you think that's sustainable? And how much further can the overall URBN gross margins go if you get a turn at UO?
Okay, Adrienne. Even though there's more than one question there, we'll try to answer them. On Urban Outfitters' overlap with Anthropologie, we have explored that a number of times through focus groups, and we have found that there's actually very little. Now there are some categories of products like bedding that we sometimes see some overlap. But I think that's fairly minor. I think there's more overlap between Urban and Free People. And given the current fashion proclivity for femininity, I think that Free People has always been known for that femininity and we could see some bleed from Urban customers into the Free People brand. But Anthropologie, probably not.
This is Frank, Adrienne. As it relates to gross profit, as I think we did say in our prepared remarks, we think all brands have continued IMU opportunity. So obviously that would add to gross profit. And I think there's always markdown rate opportunities as it relates to better inventory control and speed, which can happen at all brands. But obviously, the biggest impact that we're looking for this year is for that to come from the Urban Outfitters brand. But yes, we still think that there's still opportunity for all brands to improve upon their rates.
And that will come from the line of Paul Lejuez with Citi.
Could you provide more details about the initiatives aimed at improving the IMU across all brands this year, particularly those that are not related to Urban Outfitters? Additionally, I would like to understand how the Free People Movement business is performing since its recent launch, including the number of locations involved and potential for expansion into other national retailers.
I'll begin by discussing the improvement in IMU. Our initiative has mostly succeeded due to lower transportation costs, which have been partially driven by reduced rates in ocean and air freight over the past two years. This change played a significant role. Additionally, we have shifted much of our air freight to ocean freight, which is considerably more cost-effective. We have also enhanced our internal brand penetration, which yields a higher IMU than what we can achieve in the broader market. We are focusing on optimizing container loads to increase the amount of product in each shipment. We are sourcing more fabric, yarn, and other raw materials directly from the mills. Moreover, we are using multiple styles with the same fabric to lower fabric expenses. Moving forward, we anticipate further process improvements through better technology and automation. These efforts are ongoing, and as Frank and Mel mentioned, we see the 500 basis points increase we aim for over three years as just a solid beginning. There is more potential for growth ahead.
I can speak about Movement. We are very satisfied with our partnership with DICK'S Sporting Goods. It has provided us with significant credibility in the active lifestyle sector, alongside other strong brands in the market. We take pride in how they manage the brand and product in their stores, and we hope this partnership will remain positive in the future. Regarding our wholesale plans for FP Movement, we are concentrating on three areas that align with the active lifestyle focus: outdoor, running, and studio space. We believe there are substantial opportunities in the wholesale channel for each of these areas to succeed and effectively represent the brand.
And that will come from the line of Dana Telsey with Telsey Advisory Group.
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 timeframe 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?
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.
And Dana, this is Frank. Regarding the Red Sea, I want to note that we have included the estimated impact of the Red Sea in our planned expenses for fiscal '25. These impacts are reflected in our plan for the 50 to 100 basis points of gross profit margin improvement. Currently, we are seeing reliability in the region, which is positive. This means we have a clear understanding of where our ships are and what our costs are. That clarity was not present when the situation initially escalated. Unfortunately, the ships are taking extra time and incurring higher costs as most are currently navigating around the southern tip of Africa.
And that will come from the line of Marni Shapiro with The Retail Tracker.
I have a couple of quick questions about Nuuly. First, how quickly do you think you will be able to ramp up operations at the new fulfillment center? Also, could you discuss the Nuuly shopper? Are you noticing much overlap between shoppers of Free People and Anthro, although possibly less with Urban, or are these customers new to your brand? Additionally, are you finding it easier to attract them from other brands, or are these newcomers who haven't shopped with you before?
Thank you for the questions about Nuuly. To start with the customer aspect, we do notice some overlap with customers who come to Nuuly from our sister brands. It's a fairly healthy overlap, but we also see a significant number of customers who are new to URBN, which has been a pleasant surprise. It's a good mix of existing customers and newcomers. Regarding the Missouri building, it's now operational. It has been processing inventory and shipping Nuuly orders to customers for the past 4 to 5 weeks. It’s a complex process because we need to move a large amount of inventory ahead of the subscribers transitioning to that facility. Now that we’ve managed that, we are migrating subscribers to the Missouri building and fulfilling customer orders from there. This transition will occur throughout the first quarter, and we expect to have about a quarter of our subscriber base operating from that facility by the end of Q1.
We anticipate some of the incremental costs we experienced in Q4 will continue into Q1 and slightly into Q2 as we ramp up operations at this building. However, we are very excited about the growth potential at Nuuly, and we view this building as a significant milestone for the brand. We are optimistic about Nuuly becoming a substantial business, as we believe there is a large and growing market for rental apparel in the United States. This could potentially evolve into the next URBN $1 billion brand. Our investment in this building reflects our commitment and enthusiasm for that vision. As we mentioned earlier, we are planning to triple our network capacity to accommodate 600,000 subscribers. The new building will feature more automation than our current facility, which should enhance efficiency. We expect to see improvements in delivery costs and provide a faster delivery experience for customers, resulting in a significantly better situation along with considerable growth potential for the brand.
And that will come from the line of Alex Straton with Morgan Stanley.
Perfect. I just have two for you. One is on Free People Movement. Can you just elaborate on the positioning of that brand from a competitive standpoint? And who do you think of the peers? And what you think about the size of that business over time? And then my second question is just on gross margin and that 500 basis points of opportunity over time. What is the ceiling? So should Urban be going to 35% gross margin over time? I'm just trying to understand where we're at exactly, and make sure that's all tied up.
Okay. I'll take the first question. Around FP Movement, we believe, as Dick alluded to, that this brand has the opportunity to be one of the largest, certainly larger than our Free People brand. We think it welcomes a great deal of consumers with being true to its roots, which is an active lifestyle, it's a merge of fashion along with performance. And I think how it differentiates itself is just that, the idea that you can be fashionable and have a performance point of view, as well as being highly female-centric brand. I think there are other brands that I think we would say we're sharing our wallet share with. But for our focus, it's around the female athlete, female consumer, and that's where we plan to stay focused to win.
And then, Alex, this is Frank. Sorry, didn't mean to interrupt you, Sheila. Regarding gross profit margin, as we mentioned, we believe there’s an opportunity of about 50 to 100 basis points this year. As Dick noted, we expect to reach that 500 basis point mark by Q4 of this year, but we still see additional opportunities for improvement in IMU through cross-functional initiatives, with technology playing a significant role. It's important to point out that we don't anticipate the Urban brand being fully optimized yet in terms of markdown rates, and we expect elevated markdown rates for the full year, with room for continued improvement. Additionally, we've been focusing on achieving a 10% operating profit and reaching that double-digit milestone. In fiscal '24, we achieved a 270 basis points improvement in rate and a 70% increase in operating profit dollars, which gives us confidence. We also discussed future gains and opportunities for fiscal '25.
In the long term, revitalizing UO represents our largest opportunity. When that business recovers, it will significantly enhance our profitability, but UO is not the only chance. FP Movement, which saw 53% retail segment growth this past year, is maintaining a strong double-digit operating profit rate. As this brand continues to expand, we believe its potential is high, which will positively impact URBN. The Free People brand remains our most profitable on a rate basis and continues to grow rapidly. If they increase their market penetration within URBN, they will also contribute to growth in both rate and dollars. Furthermore, Anthropologie achieved record operating profit dollars this year in fiscal '24 and is optimistic about delivering even more in fiscal '25. Lastly, as Dave mentioned, we believe Nuuly could post its first year of operating profit this year and continue to grow, aiding URBN’s operating profit for years to come. We see opportunities for gross profit margin growth and want to emphasize that there are many levers we can pull to increase our operating profit dollars and rate over the coming years.
And that will come from the line of Ike Boruchow with Wells Fargo.
I want to revisit the comparable guidance. I don't mean to be overly critical, but you mentioned a 3% comp guide for the first quarter, yet in your response, you indicated that spring is trending similarly to the fourth quarter. I'm trying to clarify whether you are currently on track for 3% or if you expect to exceed that with a subsequent slowdown. I want to ensure I understand what the current quarter looks like.
Okay. Ike, good catch. Our February sales results right now remain strong, and they're very similar to the fourth quarter results. But as I said before, it's a touch softer than Q4 results, both by total and by brand. We're currently running slightly ahead of our Q1 plan, which calls for a total Retail segment comp sales of 3%. So is it going to come down a bit and hit the 3% or be slightly above? I can't tell you that. If I could, I'd probably be in the investment world, not here.
We do have time for one final question. And that will come from the line of Janet Kloppenburg with JJK Research Associates.
My question is a little bit different than Adrienne. She worried about cannibalization from the high end for UO, and sometimes, Dick and Sheila, I worry about it from the low end like from SHEIN and some of these other players out there. So I wanted your thoughts there. I don't know what direction the Urban Outfitters' price points are going, but I'd love a view on that. And then for Melanie and/or Frank. I know you said gross profit up about 50 to 100, and some SG&A leverage. So are we talking about operating margins up 30% to 40%, or something higher than that for fiscal 2025?
Okay, Janet. I'll discuss SHEIN in relation to Anthropologie as it pertains to Urban Outfitters. While there is some overlap between the Urban Outfitters customer and Anthropologie, it is not significant. However, there is overlap between the Urban Outfitters customer and Free People, with Free People's price points aligning reasonably with Anthropologie. From a pricing perspective, some of our customers are moving up to higher spending levels, but they are also shopping at places like SHEIN and other lower-priced brands. To address this, we are starting a small initiative to test how we can improve our design-to-production process to better serve customers, not directly but by making our operations faster. We believe we already have one of the quickest production times in our industry, but we think we can improve it further since time equates to money. We aim to enhance efficiency and reduce costs, though we are uncertain about future retail costs. This is part of the analysis we are conducting to decide our positioning with Urban Outfitters. You are correct to mention that lower-cost competitors are gaining market share, as are some higher-priced brands. Therefore, we need to clearly define our identity and ensure our product and marketing strategies help maintain our market share.
Janet, regarding the overall operating profit margin, we anticipate that the gross profit margin could be approximately 50 to 100 basis points for the year. However, there may be a slight increase in SG&A that could slightly reduce that figure. Currently, based on our plans, SG&A might be about 1% higher than our sales projections for the year. Consequently, this slight increase in SG&A will affect the 50 to 100 basis points, and the final outcome will depend on where those figures land for the year.
Okay. I think that completes the call. I thank you all very much for joining, and I look forward to talking to you in a few months.
This concludes today's program. Thank you all for participating. You may now disconnect.