You. So we have a busy day planned for you today. So we're going to do the best we can to get started on time. Owen is very obsessive about time and she just told me it's already 2 after 1 o'clock, so we need to get started. Hello and welcome to our home office here in the Philadelphia Navy Yard.
I'm Frank Camporti, our Chief Financial Officer, and I couldn't be more proud to be standing here in front of you today and welcome you to our first ever URBN Investor Day. I thank all of you for coming today. We appreciate you spending the time and sharing your afternoon with us. I'll wait, there's a couple more people coming in. Okay.
So we have what we believe is a fantastic day planned for you today. It is going to be a busy day. Don't get comfortable. Weather permitting, we are going to move around a bit today. This is our first go around at Investor Day, so there's a lot of topics that we did want to cover.
I'm going to just speak to you real quick about our agenda and how the day is going to flow and then a couple of the goals that we would like to accomplish today, and then I'm going to hand it over to the Urban Outfitters brand. Our first goal was to share with you our incredible home office space. Hopefully, many of you had the took the opportunity to join our Chief Operating Officer, Freeman Zausner, who I believe is around somewhere on a tour that was offered earlier today. I can tell you that there's very few people that know more about the Navy Yard, more about our home office and more about urban than Freeman. As you walk around this campus, it is a direct result of the vision of our Chairman and Founder, Dick Hayne.
These were vacated old beat up buildings when Dick first came down here and his vision was to create an incredibly youthful, creative and inspirational environment to help us attract and retain the best talent in the industry. I believe you'll agree with me as you walk around today, we've done an amazing job at doing just that. 2nd goal for today, and this is an important one, is to share our brand leadership teams with the external community. All too often you end up having to speak to me and me trying to have to communicate to you what our brands are about. There's nobody better than to speak to you about the essence of the brands than the brands themselves.
I'm very excited for this opportunity. The brands will be doing a presentation today as well as are going to be available for some Q and A, each of the 3 larger brands, I should say. There will be 2 common themes that the brands are going to touch on in their presentation. First is what the brands are about, who they are, how they've evolved, who their customers are, and why we believe that we are still so very differentiated and unique in the marketplace today. 2nd topic that is a common theme that the brands will touch upon is growth.
This is going to be a common mantra for us today. They're going to speak to you about several of the growth initiatives that they're excited about and that they're currently working on. After the brand presentations, you will have the opportunity for Q and A with the brands, weather permitting. We have set up tents outside. There'll be one tent for each of the 3 larger brands for you to start and excuse me, this is set up very informally, intentionally.
You can start your Q and A with whichever brand that you would like and end your Q and A with whichever brand that you would like. We are a large group today, the tents aren't quite sufficiently sized to service all of us. There's about 80 of us here today. So we do ask that not all of us start with the same brand and end with the same brand. Just getting back to the agenda real quick.
Once I'm done speaking here, the Urban Outfitters brand will be presenting to you here in this building, followed then by the Anthropologie brand, who will be presenting to you here in this building. Then as I said, we are going to move around a bit today. We're going to get up and walk over to Building 25, which is right across the way here, the Free People building, where Free People, Meg and team will be delivering their presentation. Then as I said, I'll lead us outside to weather permitting to the tent, where we'll sit down for a Q and A session with the brands. Once the Q and A excuse me, also I wanted to remind you, there will be local refreshments available for you during the Q and A sessions as it will be a couple hours later and people may start to get a little hungry and need something to drink.
Once the Q and A sessions are finished, we're actually going to come back into this room here where we're going to touch on some technology initiatives. Our Chief Logistics and Information Officer, Calvin Hollinger, has prepared a presentation for you today on what he would call magical technology initiatives that we've been working on over the past few years. Yes, he does call them magical. Once Calvin is done speaking to you about the magic of URBN technology, he'll be handing over the, I stage, if you will, to our Chief Executive Officer, Dick Hayne, who will bring the entire day together for you with his closing remarks. Once Dick is finished with his closing remarks, myself and the rest of the presenters today will join Dick up here for your final chance for some question and answer before we finish our day.
After the Q and A is completed, we will have some cocktails and hors d'oeuvres available, again, weather permitting, right outside the building for you here today. For those of you who came via train, this is just a quick logistics note. We do have 2 shuttles running from outside of Building 12. There will be 1 at 5:15 and 1 at 6:15, and now the shuttle will be running back to 30th Street Train Station for you. Okay?
So that's our agenda. That's our day. We've got a lot to get through. Before I hand over to the Urban Outfitters brand, I just wanted to touch on our last and probably our most important goal of the day, and that's the concept of growth. I can tell you that we are we hope that you leave here today feeling the level of excitement, energy, commitment and focus that this organization has around accelerating our growth.
We believe that there are significant growth opportunities ahead of us. We believe we've got exceptional brands with dynamic leadership and an incredible strategy in place to go out there and seize those opportunities. I can tell you I've only been here for a little less than 6 years, but this is as focused as the organization has ever been from top to bottom on growth and it's truly exciting coming to work every day. So with that being said, I'm going to leave you in the good hands of Sue Otto, Executive Director of the Urban Outfitters brand. Sue was one of the very first employees ever hired by Urban Outfitters.
She exudes a certain amount of energy that I think is unparalleled. She has an incredible creative vision that has and has done an amazing job at formulating that creative vision as customers' taste has changed through the years and staying just ahead of the curve. So without further ado, Sue, thank you very much again.
Frank's right. I've actually been here 31 years and I was making a joke with Kevin earlier saying Jane Goodall only did 50 years. I think I'm going to be able to surpass that in terms of my study of my clients. I had the unique opportunity to be able to develop the creative working with Dick Hain and it's been an amazing opportunity to be able to do that and to be able to see this business grow the way it has. Ted asked me to speak to you a little bit about the customer and I want to show the first slide actually was a very small ad in University News in 1976 and that kind of was the start of it when it was officially Urban Outfitters.
Just so you know, in real life, that's probably about 2 by 3 ad and yet it still was extremely successful and lots of enthusiasm. Okay, we know our customer well and our customer however, our customer may be an enigma to most. They are intentionally contrary in order to define and separate themselves from other generations, in particular their parents. They have great confidence and unique persona and experience and they're in the process of experimenting with roles, behavior and ideologies. And I think this sort of shows in terms of customer, the '90s or it could be early '80s and then in the 2000s and fairly similar crowd.
Our customer in terms of experimentation with roles, behavior and ideologies and in terms of being intentionally contrary, I think a good example of that is we were selling a lot of glass soap dishes in Berkeley and I really couldn't understand why because I thought why would any of these kids decorate their bathroom with glass soap dishes and I asked the merchandise there at the time, Madeleine, I said, why would we sell these? And she goes, well, our customer hates the big cigarette companies, they hate cigarettes, however, they use these as ashtrays. As the truth is, we had ashtrays at the same time and they weren't selling. So that's something that we have to learn to adapt and be able to respond to in terms of being able to please this customer. Our customer is an expert on everything, exposed to new independence, cultures, ideas and environment, independence leads to great confidence and conviction.
They really believe that they are the first to experience this. They have great optimism. They feel that they can change and do anything. They are involved in travel and exploration, either real travel or local travel and at least to exposure to new cultures, food product and the like and they actively seek that out. This creates expertise as well.
One of the things that I thought was interesting, there's a culinary trend mapping report and they currently use students primarily for their trend study. They feel that the food industry needs to respond to habits of $20,000,000 when they leave campus and begin to earn their own paycheck, so that the cultures and the interest that they have at that point follow them. Our customers are from traditional homes and advantage, but this offers them the benefit of Rebellion. Rebellion is often based on the previous generation's Rebellion and aesthetic. I'm sure you've all seen like whether it's the punk studs now over the 60s fashion and the reemergence of it.
But we really feel that that speaks to a 20 year cycle because I think probably when they were little, they saw the older kids do something they thought was really cool and they weren't allowed to do it. And now they're adults, it's sort of like ice cream for breakfast, they can do whatever they want now. They're out on their own independent. So one thing that actually Urban Outfitters is selling now is Beavis and Butthead teas, which sort of surprised me because I was no fan of it, but maybe I was a little bit older then, but that was in 1992. So the chronology still speaks true to the interest they have.
They undoubtedly probably don't know anything about Beavis and Butt Head, but simply remember that being something the older cool kids did and something clearly they were denied. Our customer is exposed to new ideas and philosophies. This can be a real involvement and work or it could be just talk. Enigmatic personalities also lead to irreverence. Issues can be real or a non issue with irreverence.
Irreverence and concern can live together. We need to be sensitive to both. Often products sell well that represent the concerns they have, but also can speak to their irreverence. Our customer leaves a pretty cloistered existence, although they deem themselves worldly. They believe the way they see things personally is the correct way and everyone else feels exactly the same way.
Even more than the even with more information than ever, they still believe that they're right and they believe that everything that's happening to them is what's happening everywhere. One of my favorite stories, when I was really young and I started, Dick told me that he really believed that McGovern was going to win. And of course, you're probably surprised by that and also the fact that he was a Democrat at that time. He really thought he saw posters everywhere, everyone in the keynote was voting for McGovern, everyone with that was interested in that and campaigning for McGovern. He was genuinely surprised when Nixon won and couldn't understand because he couldn't imagine who voted for Nixon.
That was a good parable for me to understand because when you're young, you're intrinsically that customer and you first start working here, well, you tend to use words like, well, everyone likes that and you begin to open up the idea that although you deem yourself a know it all, you might actually not be. Our customer has an attachment to the local. Thoughts may be worldly, but support and emotional attachment to their college neighborhood and their experience, even the worldly, is seen through the context of this local experience. We create individualized store environments, design, products and we have local involvement and events to support this. One story I'd like to share with you on that, I was working in Georgetown on the floor a long time ago and there were these 2 girls shopping near me.
One of them said, I absolutely hate this store, naturally, I wanted to know why and I was like, what's wrong? She said, I only like the Ann Arbor store, it's the best store, I like the way it looks, I like the movie theater, I really don't like this store and then the other girl goes, you're crazy, this is my favorite urban, I can't stand this store and I really don't like this other store either, but I love this store. To be able to stand and lift a little bit longer to their conversation, obviously, the girls who loved George, the Georgetown store had gone to Georgetown and the girl who loved Ann Arbor had been at University of Michigan. So there's a strong emotional attachment not only to that neighborhood, to the Urban Outfitters in their neighborhood and that experience with them. And so in other words, we were doing our job well because we pleased them locally.
Our customer is highly involved in mating and dating behavior, shapes their motivation, decision making and is one of the primary drives for their spending behavior. They have the highest level for social interaction probably in their whole lives. We address this with product, store environment, online and events to promote social situations. Some of the things we've done, of course, are men's lounges and so that the guys could all hang out. One Mason who works with us said to me once we really need the men's lounges, it's not so much about having something for me to do, it's having something for me to do so that my girlfriend can continue shopping and so that I'm engaged.
So there's different ways we have social interaction within the store. Our customer can be from the same environment, heritage and schools as their peers and siblings, but ultimately they develop a stronger desire for rebellion and work hard to postpone adulthood in their traditional roles. And in that one story I have is there is a young girl who is on my team and she and her sister both grew up in an affluent suburb of Michigan. Her sister went to a suburban college, married her college boyfriend as soon as he got out of grad school, they got a house almost immediately, they had a child immediately, they live somewhere near her parents now. She in turn had a great desire to go to NYU, she wanted to be in an urban environment, she immediately started dating a guy named Juan who was a DJ and it probably drove her parents crazy and now she's engaged to a really nice guy and even in her 30s she goes, I just don't really want to settle down quite yet even though we're getting married, I don't want to have a kid right away or a house.
So that's more of the urban customer. Her sister spends a lot of time saying, does this match, does this look good together? Because I know her as well. She loves Anthropologie and she loves the stories they tell because they're feminine and they're coordinated. The girl that works with me really makes an effort to match and actively goes after not matching.
The more things change, the more they stay the same. The qualities that define our customer now are essentially the same at the beginning of our enterprise. Youth experience is the same for our customer in creativity, optimism, rebellion, learning and social aspects. Technology, media and fashion shape how they experience this, but their goals are the same. They are the essence of ephemeral nature of youth in experimentation, adventure, optimism and enthusiasm.
It is a great joy to study them and to create a business that serves and respects them. We have the great honor to be in part of an exceptional time in their lives. And then I'll go to the last slide. And this one is one that actually Dick showed me when I was also a young gal. And I would say I have a $15,000,000,000 probably a whole lot more now.
So, but I guess you guys would know that better than me. Thank you very much. I want to introduce Kevin Lyons. Kevin has grown up at Urban Outfitters quite like I did. Kevin has been here a little over 20 years, I think starting somewhere early in 1992.
Kevin is Executive Creative Director and represents the brand voice of Urban Outfitters. He's here to speak to you on that and the new energy he is instilling in the brand.
Switching when they keep people guessing compared to things I'm really tall. So thank you, Sue. And thank you for allowing me to speak here today. I'm dangerous with an open mic. Everyone who works in this company kind of knows that.
But and I was going to freestyle and I was going to stand out here and say something off the cuff. But I really felt like what I wanted to say today was super important because coming off of Sue's very analytic description of who the customer is which is dead on and who I basically learned the customer from both Mr. Hain and from Sue Otto and now Ted Marlow and the other people that we work with here at Urban, I thought it's super important to show you kind of what we're doing today. So we've created a sort of a video, a mood video or a kind of a conglomeration of the things that we've been doing over the last say 6 months to really re inject a lot of energy in the brand, not to say that energy was not gone from the brand, but constantly reminding ourselves of how important it is to engage with the customer that Sue was describing both over the 70s, 80s, 90s, 2000s and now into the 2010s. And so I wanted to say a few words and I did write stuff.
So I share that with Sue and I realized while Sue was talking I kind of learned how to do speeches with her because I do a bunch of stuff and I tell a story then I do a bunch of stuff and then I tell a story. So anyway, I did start with Erben 20 years ago which is surprising because I know I look in my early 30s. But I did start 20 years ago when I was basically a teenager or a little older than a teenager, but and I started in the stores and I was very much the customer when I started here. So one of the biggest things that Urban does is hires the customer and I happen to be at the time. I also wanted to eat, so that was important too.
So since then I've been with the company 20 years and I've left on numerous occasions, gone to work for other brands and have other experiences, but I've returned several times because I love the energy of this brand. And most recently, I returned when Mr. Hain reentered the business, Sue reentered the business and Ted reentered the business. I've worked for a host of other brands and I've been asked many times outside of here what makes Urban successful, what makes Urban do the things that they do that other brands can't do. So I've worked for other youth culture brands that constantly are trying to tap into like what are you doing right that we're not doing.
And I always say that at Urban Outfitters we get it. And I know that's a really general statement to make, but we get it. And then everyone asks me what's it because then they want to find out what why did I hire you? I need to know what it is. And it begs the question what it is.
And it is whatever walks through the front door. That's the easiest way to say what it is. It is the incoming freshman, the struggling art school kid, the girl who dresses differently than her friends, as Sue was pointing out, the kid who has a band, anybody who has a band is our customer, I'm dead straight on that. And the girl has not realized that quirky is sexy and that being a hipster is not simply a marketing tool, it's someone that just does something differently than others. For 40 years, Urban Outfitters has met the needs of urban youth culture.
We have very rarely strayed and since my 7 months now that I've been back in the business, it has been my goal to continue with that legacy once again and really try to re energize the brand and bring the energy that I have and that I continue to have back into the brand. Everything that you see today, even Ted's boring numbers and facts and figures is all based on the desires and habits and behaviors of our very focused customers. So everything we do is based on their habits, behaviors, everything that Sue was talking about dead on that's what we respond to on a daily basis and it can be in architecture, it can be in buying, it can be in planning, it can be in allocation and it certainly is in creative. Our job as a brand is simple, make stuff a customer wants to wear or have in their apartment. That's all it is, check.
But more importantly, we need to package and present it in an exciting, fun, humorous and highly engaging way. Our job is to hire the customer and simply pay close attention to the world they are engaged in. It seems really simple, not many brands can do it. We certainly have been able to do that. We are at a very core cultural brand who expresses ourselves through fashion.
Our other brands talk about youth culture. I've been in them. All they do is talk about youth culture. They try to name it and figure out how to market it, give it a slogan, give it a hook, put an ad around it, put a face on it, hire a model to look like it. We observe and mirror, hopefully we observe and mirror, I'm saying we do because I think we do, but you'll be the judge.
For 40 years, we've successfully done this. Yesterday in rehearsing for this very presentation, someone asked Mr. Hayne, why did you change the name of Free People? Because we're looking at the very first slide, why did you change it to the name Urban Outfitters? And his response was dead on from what I've heard from when I started 20 years ago.
He basically said that because at that time the customer had moved from the 60s where the Free People name had come from and their world culture had changed. A name like Urban Outfitters now resonated more with urban youth and culture at that particular time. So again, it was about the customer. It was responding to the customer's needs. It was not a marketing strategy.
It was about resonance and engagement. As Art Director and now doing a lot of creative, I am often asked why Urban Outfitters doesn't have a single logo, my favorite question in the whole world besides do you advertise and I always get to say no and it's really fulfilling. But why don't you have a single logo? Why is it constantly changing? This again is simple.
Our kid has no logo. Our customer has no logo. His or her worlds are constantly changing. They watch TV, they buy music, they shop for clothing, they surf online, they surf in real life, read books, go to the movies, their visual worlds are never dormant. No kid engages in a single visual world.
And I have to say this is true probably for every brand that we have. And I'm speaking for every brand we have without any authority to do so, but I believe that might be true. No kid engages in this single digital world. When I came back several months ago, an outside agency was pitching to us to help define what is going to be our loyalty program. And they asked us, how do you know who your customer is into?
How do you know what your customer is into? And then the knee jerk reaction was, we hired them. Plain and simple, we hired them. And it seems simple, but that is our differentiator when we talk about that. The two dates are on the screen.
That was a weird queue. The two dates are on the screen, that screen and now that screen. What you're about to see next is 2 videos that are smashed together that were created at 2 very different times. One reflects the culture within which Richard Haynes decided it was the right time to open a store called the Free People Store. The second really represents what we are doing with that great opportunity now, how we've taken his legacy and what he tried to start back then and molded into something that still resonates today.
It is the work that is meant to fully engage the youth of right now to make them laugh and energize them, surprise them, make them think and inspire them to rage against whatever machine they want to rage against, but have a blast doing it. And we have a blast making this stuff and that's always been really important. The stuff that you see at Urban Outfitters, when you go to an urban store, kids are having fun and it resonates in the work. People have fun here. You'll see these tents, you'll see the campus, It reflects that.
Sue is right, totally right. Technologies and circumstances change, but the 18 to 26 year old kid in whatever environment they dwell has really not. Make them turn their heads, give them something to laugh at, think about and inspire them. That is what we do and we'll continue to get better at doing. So without further ado, can we make this thing work?
Anyway, that represents sort of the work we've been doing in the last say 6 months or so and we will continue to be doing. So hopefully that speaks for itself and sort of talks about what I talked about.
Anyway, I want
to turn it over now to Mr. Ted Marlowe, who brought me back into this brand and of course was President of Urban Outfitters from 2000 to 2010 and now serves as our CEO of the global brand. So without further ado, boring numbers and facts. Queue.
I really have tried to keep the numbers at a minimum knowing Kevin was in the room. So a little prepared commentary. Thank you, Kevin. Thank you, Sue. Thank you, guests for joining us today at the yard.
It is my pleasure to speak with you this afternoon regarding our thoughts on the subject of growth at Urban Outfitters. Although 41 years of age with a track record of growth and achievement, we are confident that the best years for Urban still lie in front of us. I will spend a few minutes outlining our thoughts regarding the growth we envision. I then look forward to hearing your questions and discussing our opportunities a bit more in-depth at our breakout session. Allow me to quickly touch on the main cornerstones, which support the growth strategies we envision for UO.
1st, leveraging own brand product and concepts. Distorting the opportunity of direct to consumer globally, continuing to open stores in North America and Europe, and launching our brand in the Asian market. Our confidence in successfully building the strategies that will deliver on each of these tenants of growth lies in our demonstrated track record of execution. This is as close as I get to numbers. Before you is a bar graph reflecting that over the past 10 years, the Urban Outfitters brand has delivered a compounded annual growth rate of 20%.
Yes, there have been moments of challenge along the way just as there have been moments of flat out euphoria. But most importantly, our business model of focusing on the culture of our core constituency as the fuel for all that we do has delivered productive growth for our brand. Further, we have an outstanding senior management team with a demonstrated track record of leading the teams that are responsible for our achievement. Most have joined us here today. I think I've got right at 10 people in the room that I asked to come over and I did a quick back of envelope, another number before coming over today.
Those ten people equate to 135 years of service in this brand. To those that have joined us, I thank you for your support and accomplishment and I look forward to working with you on the growth which lies ahead. So let's review our thoughts regarding future growth. 1st, let me touch on our product strategy. First up is own brand.
While it is true that over the past number of years we have invested in design talent to build our capability in designing and developing our own brand concepts, we still have work to do. A portfolio of credible, distinct proprietary brands differentiates us from the balance of the market. In both our women's and men's apparel business, we have opportunity and desire to further up the penetration of in house designed and developed product. This increase in penetration will mainly come at the expense of private label product, which is currently developed by our buyers. As we evolve our own brand strategy, we will also improve the brand equity elements of each developed style, I.
E. Fabric, make, trim, labeling and the alignment with the own brand persona of each labelbrand. Next up, business distortionassortment expansion. We will distort the opportunities and expand the assortments in categories, which appear to be right for further development. At present, women's knits, women's shoes, women's and men's active, beauty, men's apparel and accessories, decorative home and entertainment are our focus in regard to this call out.
Leveraging the opportunity of WebEx. Throughout this year, we have been expanding our assortments in direct and realizing very good return on our investment. WebEx product is comprised of expanded style, size and color offering as well as additional branded offerings. Our learnings from the performance of this product is of great benefit building out more compelling assortments for both direct and retail. Lastly, collaborations.
Regarding collaborations, we have an opportunity to reengage our customer in unique collaboration projects. These projects are an integral part of Urban Outfitters assortment strategybrand voice. The product involved not only provides a halo effect to the total assortment, but as well can provide a good return on our inventory investment when built with specific UO attributes in mind. By that I mean customer profile, retail pricing and margin targets. I'll spend a couple of minutes now discussing our direct strategies, give you these all at once and run you through it.
As mentioned in our cornerstones, we intend to distort the opportunity of direct to consumer globally. We envision accomplishing this goal through ongoing
improvement
in our customer retention activities, ongoing improvement in our customer retention activities including the launch of a UA loyalty program, further segmentation and versioning of our marketing efforts, a robust focus on the quality of our strategies pertaining to mobile, both cell and tablet formats. Year to date, direct to consumer is experiencing strong double digit growth in North America and Europe on top of double digit growth last year. We are realizing the fruits of our labor. That said, we feel we are only scratching the surface on the opportunities which exist for Urban as it pertains to direct. The dynamic interacting with the community of customers that support the Urban Outfitters business is something which we are quite accustomed to on a store to store basis.
But direct to consumer is a game changer as our customer community suddenly becomes exponentially larger.
Stores.
As it pertains to store growth, over the next few years in North America, we are planning to open 10 to 12 stores per year and in Europe 4 to 5 stores per year. The Urban Outfitters store environment is a great differentiator for our brand in the market. The cross channel synergy of a strong differentiated brick and mortar experience combined with the voice of the brand as delivered through direct provides our customer with a distinct shopping alternative. Improving 4 wall productivity. In addition to continuing to open stores in North America and Europe, we are confident that opportunities exist to improve upon productivity and four wall contribution through cross channel initiatives.
We recently launched Pick, Pack and Ship to support direct order fulfillment through our store inventories. This program will not only turn direct order cancellations or back orders into filled orders, but as well could potentially lead to lower weeks of supply, improved inventory turn and reduced markdowns. And finally, evolution of this in store experience. The evolution of cross channel experience has also fueled our thoughts with new considerations regarding our physical store environments. Resonating with the life stage touch points of our customer in the individual markets in which they live has always been of great importance to Urban.
As we consider the potential opportunity of freeing up space in our stores due to benefit of tighter base inventories, we can realistically consider broadening our style offer, launching new businesses, incorporating more special events utilizing the store as a venue, whatever seems to be the best complement to enhance the in store experience on a market by market basis. This is exciting work and work we look forward to executing, thereby giving each store an even more unique individual personality. And just a couple of quick words related to the opportunity in international. As mentioned, we are planning to grow our presence in the European market by continuing to open stores while increasing the penetration of direct to consumer in our European business model. We are also planning to launch the Urban Outfitters business in the Asian market.
We are currently looking at opportunities in Japan and China and plan to be resolved on our market entry strategy early next year. It is our desire to enter the market with a cross channel strategy incorporating brick and mortar and direct to consumer. And to wrap up. In closing, I would like to quickly comment on the notion of competition. For you see, we feel if we are on our game creating the unique lifestyle experience we have been known to deliver, we really don't have competition.
We are 1st and foremost a customer centric cultural brand. We do sell products that cause us to be grouped with other fashion retailers. But we by no means intend to mine our brand's opportunity in the market according to the fast fashion rules of the road. Our inspiration comes 1st and foremost from the culture of our core customer, not the runways of New York, Milan and Paris. This genesis point combined with our people, our lifestyle experience, our brand voice and our entrepreneurship affords Urban Outfitters a unique differential in the market.
We are confident about the opportunities which sit in front of our brand and look forward to discussing our progress and realizing their potential. It says thank you. It's now my pleasure to introduce Mr. David McCrae, CEO of the Anthropologie Brand Group. Mr.
McRae. Thank you, sir.
Thank you, Ted, for the introduction. Wonderful to be here today. I'm looking forward to talking to you about a brand, a customer and a company and a future that I find very compelling. When I think about Anthropologie, what I think about is actually a love story. It's as much of a love story as it is a business, it's more profound than any company I've seen of this scale and experience in the 25 years in this business.
So during the time allotted with me today, what I hope to cover briefly is a quick view of the history of Anthropologie, those of you that are new to it, give you a sense of a customer of who she is, highlight some of our merchandising capabilities, review the channels through which we give her an experience, and outline steps we've taken recently to do some of the course correction and anthropology of our recent results, and finally, in a high level view, share with you some of the growth drivers that make me so optimistic about our future. So our history, we were founded in 1992 and we'll be celebrating our 20th anniversary this year. Within several years, we quickly added the direct channel. In year 'fifteen, we opened our 100th store in Madison, Wisconsin and by then the direct channel had reached 10,000,000 monthly sessions. The company grew to about $500,000,000 in revenue, but still thinking community at a time, customer at a time.
The subsequent 7 years have seen the company add over 70 more stores, seen the web fulfill over 1,000,000 orders a year and the business revenue in the past 7 years has also increased another $500,000,000 We're now operating over 1 174 stores and we have stores in Canada and 3 in the United Kingdom. And as Frank mentioned earlier and Ted talked about, Anthropologie is one of Urban Outfitters or Urban Inc. Very successful growth stories. Having been in this business for 2.5 decades, I have always been a fan professionally and personally of what's been accomplished and the CAGR and compounded annual growth rate has been very successful. But simply put, Anthropologie has been remarkable.
And I believe the next 5 years ahead of us will also be tremendous. So with whom do we have this deep connection, this love story, who is this customer that's fueled the growth and with whom we've built these strong relationships? Chronologically, the bulk of our customers range from 28 to 48 years old. Yes, she's well educated and affluent as you might expect, but neither of those things really define her. And spending time with Dick, he's actually provided me a lot of insight and I can see how he and listening to Ted and Sue and Kevin talk about how he influenced the thinking around urban, I can see the thinking around anthropology as well.
We don't think of her in terms of age or affluence or reason location. We try to think of her in her life stage and her sensibilities. She's recently wet. She's settling down. She's very interested less in the mating rituals than actually trying to build and creating an environment she wants to live in for herself or her family.
She loves art and culture as you can imagine. And clothing and her living environment to her are canvases in which she's able to express and control her life, whereas workplace and those things around her she may not control. We believe in many ways that's what's touched her and connect her to Anthropologie and why she is more loyal to us than to most retailers. Examples of that, the distance she's willing to drive far exceeds the standard for most specialty lifestyle businesses. The frequency and durations of her visits point to a deeper connection with the brand than what she spots at many other specialty retailers.
An example of that, you see the frequency of purchases, close to 60% of our customers have already enrolled in a loyalty program. Our top 10% of our purchasers purchase 12 times a year, top 25 percent 7.5 times per year. That's a testament to the brand experience, the in store experience, the merchandising, the heritage. Another way we look at our and we're beginning to measure is through analytics. We've been getting to capture this information in the store and retail side for the past 5 to 7 years and we've built a database with roughly 5,000,000 names in it.
Of those, 2,300,000 people have purchased over the last 12 months. And of those 2,300,000 people, 1,300,000 of them are Anthro members. Ted was referring to the potency of loyalty for Urban. It's already started, but it's been a very latent and soft exercise to date. And we think there's going to be tremendous opportunity ahead to build and really deepen that connection with the customer as we go forward.
Also, when we look we began to break out the net sales by customer, we're able to track right now only about 60% of the transactions. So there's a lot more insight that we're going to be able to mine go forward. But of the 60% we track, over 70% of those sales are coming from those very loyal ANTHRA members, who's which we're just beginning to understand her purchase behavior and study it. An example we're looking at it is also the effect that channels have. 69% of our customers to date we've been tracking transact solely on retail side, roughly another 12% or 13% shop only on the direct side.
But combined and like with many other people, we have 18% of our customers approaching 20 rapidly that are multi channel buyers. Those buyers are twice as profitable as any individual channel. The other things we're learning in terms of the frequency, those who enter us from the direct channel tend to migrate to multi channel buyers rather than the retail buyers. And that's important as you also understand our global initiatives. As well and interestingly and fortunately given the past couple of years at Anthropologie, we're also finding that a sale buyer has a 50% chance of matriculating to becoming a full price buyer if we do a good job with her.
That's very helpful given the amount of markdowns we've taken in the past few years and some of the merchandising things for course corrections. It's also been able to let us skew and we've actually had our customer move slightly younger. So the customers 50 and older have actually shrank as a portion and the customers 29 and under have started to grow the proportion of our business. We think that's partially due to some of the lower prices due to sale and we're seeing hoping to see them matriculate to full price buyers and become more frequent. So what is she buying and what are our capabilities as it relates to merchandising as I've seen over my 1st 9 months here?
One of the most important things that makes us unique is that while although we have several styles, many women can shop at Anthropologie and create their own aesthetic. Again, she's looking for ways not to be bland, not to be uniform, but to find a way to express her own individual style and personality. We produce roughly 9,000 unique styles a year. We have deliveries online in our stores which encourage repeat visit. We have in house design capabilities and currently produce including all product categories in home accessories and apparel roughly 50% for assortment and then we do balance the other part of the assortment with sharply edited exclusive styling that we shop from the market that allows us to stay to broaden our aesthetic beyond our capabilities in Building 10 here in the yard as well as to tap into new direction and shorten the offer.
And then we also work on exclusive collaborations that help celebrate the artists throughout the apparel and home community. So we've talked a little bit about what we sell. We've talked a little bit about our customer. What about the environments? Unlike any brand I have ever seen, we create special environments that really express the brand and its sensibilities and motivate and I believe create some of the stickiness that we've all seen Anthropologie experience over the past few years.
Why are they successful and where can we improve? It's sensorial, tactile and transportive. All of you have been through an Anthropologie store and I think even Kevin Lyons would agree we achieved that. We want to bring a sense of wonder and discovery, and we want the personal element when you walk in our stores to make it feel like she's comfortable. She's shopping amongst friends.
That's a very difficult thing to do in one store, not to mention 174, and I believe I've inherited a world class organization that's doing that right now. The site architecture and store design, localized outreach let you know that each Anthropologie store is a one of a kind gem. One way we know that's working is through some of the studies that show she spends twice the amount of time in our stores as is the case with most typical retailers. Another way we know it's working is by listening and reading and how she speaks about us. While I have all the data on unit sales, we're getting increasing data about the customer, I learn more by sitting in the dressing room with 17 year old daughter or wife and listening to the conversations between the sales associates and our customers than I do talking to our merchants.
It's incredible to hear them talk about the loyalty and the experience and the store environments are very special. This is a great example of what we do and bring to a community. We have approximately, say, 174 stores. Here's a customer quote, it's like an adventure when you go here. We change our windows 5 times a year.
That gives us the opportunity to create close to 875 art installations each year in communities throughout America, Canada and Europe. And many of them the customers help participate and build in as was the case with this Great Barrier Reef, which many of you based in New York probably saw in Rockefeller Center, Chelsea at various times and we actually invited customers and their kids to come in and help and we were over capacity with sign ups. This is an example of what you walk in and say, oh, yes, I want everything. I was scrolling through the quotes that go through the attributes and that's probably what we could do the next time we take you through. It's just to give you the incredible stickiness that's been built and the affection by touching the heart of the customer and not creating a business, but a relationship.
This is a view of Wayne, Pennsylvania, store number 1 in 1992. And then next, you can see here's a view from our Regent Street store. Each one, Anthropologie is a microcosm of all things beautiful. Regent Street, Wayne, Pennsylvania, Dallas, Rockefeller Center, each unique but yet each indelibly tied to Anthropologie. So we have a unique compelling presence in communities throughout America, Canada and the U.
K. But while we have an exceptional presence offline, I believe we need to bring that to our digital experience to a higher level. Some of the things we're doing in looking digitally and we talked about what we've learned about the customer purchase behavior and why it's important as we go forward. We're looking to redesign our website that's coming up soon, but it's going to be a very iterative process. We've had great support from shared services, the executive offices, and we're going to begin to build the fluency that we have in retail we want to match online and digitally.
We're not there yet. We're going to be improving usability, easier navigation, optimizing the experience across devices for us probably emphasizing tablet and then understanding the role of the phone and the handheld devices, bringing a richer, more impactful visual presence to our product and canceling the outfitting, which we've just yet begun to tap into as a brand, and permitting us to deliver more tailored personalized content, address tracking, predictive modeling, some of the things that make it natural for us. And we also want to move away from a static site, one where we're just presenting outward and make it open to much more of a community presence through our artisans, vendors, and you'll see what happens when we start to invite our customers to impact the site versus the controlled centralized approach we've had to date. And so you'll see us redesign shortly. You're going to see it be iterative and continual and adaptive.
We're also going to be emphasizing digital marketing in a way we've yet to do so, enhancing search engine optimization. We're going to be looking at search engine marketing in a much more different way, personalizing the email campaigns, expanding our brand presence to referral sites. Social media is something we're also just beginning to understand as a brand. In many ways, the interest has been so organic, it's been brought to our attention rather than my own design. Pinterest is the number one referring site to Anthropologie, and Anthropologie is one of the top 3 sites of retailers that Pinterest refers to.
That was not by design, that was by a collision of 2 brands, but we believe we have opportunities to take that and begin to move it in a more thoughtful direction. We're also working with bloggers throughout America, Europe Canada to begin to get our voice and to learn how to take that very special experience we do in stores and to move it throughout online. Ironically, as you talk about what's gone socially, we heard the stories that when we were talking with the folks with Pinterest, when Pinterest was asked what kind of store they would be, they said they would be Anthropologie if they were a store. You can see the natural organic collision of the 2 brands and how we're going to begin to adapt that with our great store experience. Here's some examples of some of the upcoming redesign.
You can see the large images which will carousel between alternate views. There'll be 3, 4, 5 views. In some cases, we'll be inviting customers. Customers' photographs of their own favorite items will also start to appear. You'll start to hear their commentary become much more alive because we believe ultimately we're the brand that brings artists and a community together and we're the conduit we're sitting at the beginning.
It will be better organized, clear, the core information will be very accessible, plenty of other additional information below the fold. Other ways, we're starting to work on outfitting by allowing us to still have the fantasy and aspirational shots and this is an area that Anthropologie will continue to build on is moving away from merchandising as a classification and outfitting, having the image shot and also being able to shop across the associated items and beginning to move our captivating content and literary voice more into the mainstream of our shopping as opposed to allocating at certain hidden tabs that are getting much less visitation. So this is a quick example of some of the things that we've been looking at. What have we done recently? What have I been involved in over the past 9 months in some of the course corrections in the business?
Much of this sounds like blocking and tackling, but in joining this brand, the things that were apparent to me were we had an incredibly strong brand that was very relevant, we had a world class store operation and experience, and that many of the things recently we needed to work on course correction were all within our 4 walls in Building 10. I spent time evaluating and looking to shape the organization for near and future initiatives, putting the customer, not the runways, center in terms of our consideration in our editorial voice, our photography, as well as our merchandising building stronger merchandising design, e commerce and customer engagement capabilities, which will support what we talk about for future growth redirecting the product aesthetic to our roots, while still understanding trends and beginning to expand our view of that and adjusting the price value relationship to recent very successful historic levels where we've gone off in terms of our price, allotments and buckets. And we're making real progress there and there's a lot more work to go. So let's talk about growth and future growth for Anthropologie. Product expansion, moving from an apparel focused classification business where most of the team designs or merchandises across product categories to moving to a life stage lifestyle merchant.
While we believe we have plenty of growth ahead of us within existing categories to grow near and far, we have a great deal of growth ahead by thinking of her less of an item in a classification and more think of her from her moments in life. Anthropology has a sensibility people tend to associate with where to work with special occasion. We believe we've done that historically relatively well, recently not so well. But if you start to think about other moments of the day, we have incredible opportunity to think about what is she wearing on the weekends, what is she wearing before noon when she's not working and she's not in public. We believe we've got brand permission to move into more weekend casual while still developing our wear to work dressy event occasion opportunities and you'll see us do that in a different way in store than we do online.
We've got incredible opportunities to actually think about outfits which is not really something that happens naturally when you're thinking about classifications, making it easier for her to pull looks together. In countless cocktail parties, I've actually gone to the point where I don't tell people where I work because it is such an attractive brand and so many people want to actually talk to you about their perspective on Anthropologie. But what I found in my conversations with people and women over time is that some women have the confidence and sensibility to pull Anthropologie together. Many want to be shown how to do it. They want us to help them find their expression and outfitting is a great way to do that.
So we're going to begin to think about how to outfit our customer every hour of the day, every day of the week. And we're also going to build a global web platform that's going to allow us to think a little differently about how we merchandise. To date, our web platform has been more of an extension of an assortment based on the stores. When you think about the brand and the brand permission and the brand categories we play in and what we can do in the home category, for example, instead of being an editor of an eclectic merchandising is take the strategic white space we have in the home business and where we offer compared to many others and represent it digitally in a way that we haven't done before, not having it being derivative of the store, but being understanding of the space and technology. And we're ultimately going to see us do that in apparel, accessories as well.
And you're going to see us continue to grow our own brand penetration when we think the product's right and when we have it dialed in. Otherwise, we'll continue to balance very thoughtfully with the market. So that was product. As we think about channels and environment, we're going to move from a U. S.
Store focused business and mentality in Building 10 to a multinational omnichannel enterprise. We're going to fill in existing U. S. Retail markets, we'll increase our digital reach worldwide and we'll expand into new markets across the globe. So we have a very successful physical footprint.
You've heard us talk about how much we can grow. Without changing our format, we believe we can easily add over 35% more square footage at retail without a new model that involves filling in existing markets as well as expanding into some new that we haven't touched to date. Also, we believe we're going to begin to merge and introduce technology into our store environment. What we've watched is we were not very thoughtful and proactive about approaching technology in the store, our customer was. She brought technology into the store and by watching her, we've watched her use her mobile devices to photograph, to send to friends, what she's doing with her handheld, with her smartphone.
And we're working with our shared services team to craft a vision where technology merging with loyalty and these are important customers will be moving forward in the stores as well. On digital, we're going to move from a U. S. Centric to a global platform. We'll be evaluating our shipping economics and what that does within the business model and how competitive we are.
And then as I mentioned earlier, we're going to move from a very tight editor, a very tasteful and artisanal items to one where we can have a full range of assortment online and begin to broaden and really expand into the product categories and mind space, share of home, share of closet that we know our brand has permission to do. And then globally, we'll move that globally, continue to look at the opportunities to grow in Europe, focusing primarily right now in the U. K. And then within the U. K.
We're focusing on London. We've talked to the team, don't think right now in this next year or 2 about you thinking about even the U. K, win London, be best at London in the space. We started and we have a long way to go, but tremendous opportunities both in the U. K, Europe and internationally.
So moving from channel to customer relationships, we're going to move from one that's been largely very successful but instinctive to one that still retains emotional connections, but that's based on deep analytic insight. We want to better understand about each customer has touch points and influences behavior. We want a deeper knowledge of our customer lifetime value. And we want to continue to grow the share of closet or share of home from our brand fans while enriching our loyalty program. Existing customers alone can fuel our growth for years.
We also are going to look to reengage our very valuable lapsed buyers for the past few years who may who still consider themselves part of Anthropologie, still are shopping us, but we've not been able to she hasn't transacted recently. In speaking to her and doing focus groups in 3 different cities and 9 different sets across all age groups, laps buyers, loyal buyers, there is no sense of we're not part of Anthropologie anymore. She's still coming through and circulating through the brand, but we believe we have some product merchandising and marketing stories that are going to reengage our laps buyers. And then we're also going to look at targeting new acquisitions smartfully with what we've learned and using multi channel to begin clienteling. So we've talked a bit about products, we've talked about what we're going to do within channels and we've talked about for our customer.
So in summary, we have a unique and appreciated brand that resonates with a targeted customer. We have brand equity that's already latent and product expertise from which to grow for the next 5 years and beyond. We're going to grow materially. We're going to go through product expansions, style extensions, categories, understanding her lifestyle more importantly and looking at the times of day and end usage that we know she wants us to fulfill. We have the world class channels and touch points and we have some that we're going to continue to build and move on from there.
And we're going to build the team in building 10 and in the U. K. To go further. Thank you very much for your time. I look forward to the Q and A future.
Thank you, David. Great presentation. So now we're going to get up and walk over to Building 25 for the Free People presentation. Ona has quickly gone to the back of the room. She will lead you on our walk over there.
Okay? Thank you very much. Ona has quickly gone to the back of the room. She will lead you on our walk over there. Mona has quickly gone to the back of the room, she will lead you on our walk over there.
Okay. Thank you very much.
Let me tell you a little bit about our Free People customer to fill in what you just saw on the screen. The Free People customer is happy. She loves life. She is independent, but yet loves being with her friends, her family and her mate. She is free spirited and loves an adventure.
She travels every spring to festivals, Coachella and Wanderlust being her favorite. She runs and practices yoga to stay fit and balanced. She is influenced by fashion, but yet seeks inspiration from all over the world to put together a look that is her own. She is a mix of sweet, cool and boho and everything in between. We target age 26, but Free People has endless possibilities and appeals to women of all ages.
We love our customer. We strive to make her happy and confident in her wardrobe and in her life. We have made a tremendous amount of progress in the past few years promoting our brand image through our web, our catalog, our videos and our social media. The fantasy of our shoot inspires her. She wants to be that girl.
She is inspired by the outfits. We sell the look head to toe. Free People is a company that encourages ownership and innovation. With over 200 people in this building, we are committed to create a compelling culture. We attract and retain curious, creative, passionate people who love the brand.
Through communication and collaboration, we are able to deliver a unified message. We have 3 businesses: wholesale, retail and direct. Wholesale takes up about 48% of the total. I see you're all taking notes. It's the first number I've given you and it's probably the only one.
And the retail and direct take up the rest of the business. We have on an average of the past 5 years run 22% growth rate and we plan on continuing that rate if not better. We believe our future growth is an expanded product both internationally and domestic for all of our businesses. The team that will be speaking today will go through that in a little more depth than me. We also have a tenured team at Free People.
All of my direct reports have been with us from 10 to 23 years. We have a very talented team that has worked closely together for at least a decade. I myself have been with Urban Inc. For 30 years. Sue Otto has 1 year ahead of me.
I am a passionate leader. I love product. I love branding. I love developing people, and I also am very passionate about pleasing the customer. As I stated earlier, we strive to make our customer confident in both her wardrobe and her life.
In conclusion, I want to share a letter with you that I received just yesterday from a customer. She has cancer. She has breast cancer and has metastasized to her liver. She has lost her hair, and she has been looking for something for her head to hide her baldness. She wrote to me when she found the scarves in our store, I have fully embraced my hair loss and no longer don my wig.
Free People has empowered me to feel free to be me wherever I go. You have really made a significant impact in my acceptance of my hair loss and ability to move forward with strength, beauty and confidence. It doesn't get any better for us here at Free People. We feel we've done our job well. I would like to there are 3 people that are going to get up to speak.
The first one is Shelly Harrington, Director of Merchandising and Planning. She will speak to you about expanding product.
Okay. Good afternoon. Free People's brand strength is in the uniqueness and creativity of its product and our attention to our customer and her lifestyle. The Free People aesthetic combines feminine, boho, boy and sensual details. Individual pieces have a very crafted hand touch that defines the brand identity.
We place a tremendous amount of importance in the originality of our artwork, silhouette, wash and the smallest attention to detail. We are focused not only on trending categories, fashion pieces and key items, but also completing a look for our customer from head to toe that she wants to wear for the season. We strongly believe it's the evolution and continued development of our product that has allowed us to build our success. I'd like to highlight today 3 product expansions that touch all three channels of distribution and we have strong indications for future growth in. The first is our intimate label highlighted in the middle.
This label includes slips, camisoles, bras, undies and loungewear. Over the past 5 years, we've been organically growing this line. It's the organic growth that we've had a lot of fun with. We've been able to experiment with our products, to find the correct channels and the correct product mix, that are viable businesses. We've established several foundation pieces that continue to grow in volume and popularity with our customer and has pushed us to evolve the line further.
Recently in direct and our select Free People stores, we've expanded the range of foundations to include a breadth of underwire bras and undies, and we've been really pleased with the results. We believe this product fills a void in the marketplace, and we're excited to bring the Free People brand aesthetic to a whole different product category. Additionally, we've been exploring a yoga inspired line called FP Movement and the response from our direct to consumer has been very strong. We're excited to continue to develop this and with a free people hand. Secondly, I'd like to draw attention to the last category over to your right, it's our dress business.
In dress, we've experienced the ability to grow our dress business by expanding the offering online. We've expanded the assortment to include special occasion dressing, which we were referring to as FP party and have been wildly surprised by the results. These pieces fill into another need for our customer and are at a higher retail ranging from $200 to $700 The dresses have an amazing amount of detail and creativity and we're excited to wow our customer with them. The 3rd area of growth is our shoe business. In 2004, when we launched our direct business, we started the development of our shoe assortment to continue to create the look from head to toe of the Free People brand and expand our offerings.
This business is consistently amongst the top for our direct business. Our selection speaks strongly to the Free People customer. The range stretches from sandals to twisted classic shoes to ankles to tall boots. We've discussed the importance in the Free People line of the special details that define the brand. This applies to shoes as well.
It's at the heart of its success. Our customers' responsiveness to this business combined with our Free People brand identity creates a large validity for this in all of our channels of distribution. I'd like to turn over the presentation now to Krissy Mihan Mashinsky, the Director of Wholesale. Thanks so much.
Hello and welcome everybody. We're going to start the wholesale presentation with a customer video.
People has existed for 20 years. They're the 3rd largest resource in the entire division. I think that's pretty incredible that a resource has had a 20 year history with Bloomingdale. That doesn't happen.
What we love most about
the line was they're very, very cool and you can't find it anywhere else. Pieces. Always something cool. Always something I can't find somewhere else.
You manufacture a certain type of school, a grill that I like to look at in my store. I'm pretty stoked about it overall. I like the overall vibe and consistency of my people. It's really been the same from day 1. It's just a big loving, and it kind of goes hand in hand with
Our store's been open since May of 1998. We're actually celebrating our 13 year anniversary this month, and we've been buying Free People for 11 of those 13 years. The thing that first drew me to Free was the fact that the clothes were different. There was just like embellishments and embroideries and materials and it's just different than anything else that was out there. And honestly, that's still what attracts us to the brand.
It's always been special and eclectic and unique, but I think that what makes me so excited about the brand personally is just how it evolves, continuing to add on new customer personalities and to see it grow as a life style brand. The brand is incredibly important to us and quite honestly, since about Q2 of this year, our number one brand in the department. We installed the shop last week and results have been incredible. And we were up 15% week the week prior, and we're up 150% post installation. So it's been pretty fantastic.
And it's all about kind of a fashion attitude. It's not really about a customer age. We know that the customer who shops the brand is unique and wants to reflect her personality through her fashion wardrobe.
And Sheila's product review, our focus is on building a global lifestyle brand. The history of our brand started about 29 years ago in 1984 as a top resource for Urban Outfitters, our own stores. We have since evolved into a young contemporary brand, shipping to approximately 1500 external accounts and improving upon our top to bottom ratio. Our future are the new product categories. This will embrace an entire Free People lifestyle, so the customer cannot only enjoy the head to toe look, but including shoes, intimates and our special occasion dresses.
We are excited about the product categories being added to our wholesale assortment and the opportunities this allows us. It opens up the potential for new domestic accounts, global partnerships and increased square footage with our existing accounts. In September, we successfully launched our 1st concept shop in Nordstrom in downtown Seattle. We are very excited about this new concept. We believe this concept will provide growth in square footage and productivity in our existing domestic major accounts.
Additionally, we are working with several of our larger e commerce partners on new ways to present and expand our brand online. In addition to our domestic opportunities, we feel strongly about answering the needs of our global international business. We are focused on increasing our resources in Europe, specifically the U. K, to build upon the early successes our brand has already experienced. Additionally, we are excited about and currently exploring global partnerships, especially in Asia.
I'd like to now turn this over to David Hain, who is our Managing Director of Retail, Direct Marketing and Finance. Thank you.
Thank you, Chrissy. Can you hear me? Good afternoon, everyone. My name is David Hayne. I'd like to touch upon today some of the opportunities we have related to store growth and the continued penetration of our direct to consumer channel.
We think there's no better place to experience the essence of Free People than in our stores. When walking through our doors, we want to overwhelm our customer with uniqueness, texture and detail in everything she sees. And our stylists pay careful attention to giving her great customer service and providing a great experience. We believe it's this combination of unique product, creative atmosphere and customer service that's the core of why she comes back again and again. This November will mark the 10th anniversary of our first store in Pramas, New Jersey.
Early on, we grew our store counts relatively conservatively. We were learning the ropes and building our team. More recently, we have accelerated our store openings with 13 stores opened this year, including our first two Canadian stores, Yorkville Avenue in Toronto and Chaddock Centre in Calgary. And we are on track to close this year with 77 stores and we believe that we have a lot more opportunity here in particular with retail. In addition to new stores, we are we intend to begin to test larger store formats.
We believe this expanded space will help more impactfully communicate the brand message and the brand vision. And the new product lines that Sheila just talked about will add to the variety of the assortment that we can carry in our stores in these large spaces. So all in all, we're really excited about what's going on in retail and what this means for the future of the brand. Now moving on to the web channel. While we strive to create the same level of connection with customers in the stores as we do on the web, we believe the web has different qualities.
And so here we march towards different goals. On the web, we seek to provide scale and selection, convenience, information and education, entertainment and connections. The web assortment is our largest and most diverse. We carry web exclusives, extended sizes, vintage one of a kinds and more depth than in any of our stores or wholesale doors. And we strive to make our site as easy as possible to shop, but we also want to be fun to shop and fun to browse.
As with our stores, we want our web shoppers to be stimulated and entertained. So we put a lot of effort into site merchandising for visually compelling features and experiences, such as lookbooks, videos, style guides, outfits and online catalogs. And we love to give our customers a way to interact and to be a part of this merchandising. So we give them ways and we're looking to give them more ways to contribute with user generated content, such as product reviews, questions and answer, collections and actual customer uploaded photos of their outfits. It's also very important that all of the merchandise is attractively styled on model so that our customers can learn how they might want to outfit it and how they might want to and how they can picture themselves in our product.
We believe that we succeed when we educate our customer on fashion trends as well as deliver those fashion trends. That's our strength. Our site is also constantly updated. So we are constantly putting new merchandise live and we believe this brings her back often. She is very intrigued about coming back often and seeing new products.
So year to date right now our site visits are up almost or actually in excess of 80% from last year. Additionally, we feel she comes back often because we can remind her to come back often. Our e mail list is up 75% from last year and our catalog house file is nearing on 800,000 names. We're also very aggressive and we've extensively utilized the explosion in social media. We think of ourselves as very good at this and we'd like to think of ourselves as pioneers in this space.
Facebook has become a very, very strong communication channel and a customer service channel. Our 800,000 fan count is up over 130% from last year and we're active daily almost hourly on Twitter and Pinterest at this point with a very strong team that's focused on those. And we just passed 310,000 followers on Instagram which is compared to our peer group very strong. We're also very excited about some of the new technology that we have linking our stores in the web and I think Calvin is going to speak a little bit about this later. Right now our store associates can better service our customers by selling merchandise from the web inventory using an iPad in stores.
This is a very impactful thing that we have rolled out this year and it's been incredible for us. And vice versa, the web can now sell merchandise that's from our stores. So customers can be shipped items from their local store, which is resulting in fewer broken styles on the web, better use of slow turn merchandise in the stores and faster delivery times for the customers. So all in all, a happier customer. So as we're excited about these solutions, we are excited about these solutions because they more effectively utilize that cross channel inventory, which is excellent for us.
But ultimately, what ends up happening is that the customer wins because she can get what she wants when she wants it. So very strong thing for us. The Internet for us though is most powerful when we can use its massive scale to grow international growth. We began shipping internationally in 2,009. Today, non U.
S. Sales account for about 11% to 12% of our online sales. And so far this year, we've shipped to 112 different countries across the world. So it's pretty amazing that just by enabling international shipping, we are finding that customers are finding us and shipping to themselves. In the back half of this year, we plan to launch a U.
K. Site to more effectively service this market with unique merchandising, marketing and fulfillment capabilities. And then following the U. K. And Europe, we have ambitions in the next 2 years for Japan and China localized sites that will allow us to break into these markets in a more cost effective and exciting manner.
All of this is our goal or initiatives that we have that's helping us support our goal of becoming a global lifestyle brand. So that's it folks. That's a little bit about our retail and e com businesses. And thank you for coming and thank you very much for your time.
I'll stand here. Thank you, Dave, Sheila, Meg and Chrissy. Fantastic presentation. Now I'm sure everyone is excited for a little Q and A. So we're going to head down the same stairs and go out to where we have 3 tents set up for each of the larger brands who have presented today, and we'll do a little Q and A.
For those of you in a practical sense who need to use the restrooms because I just did, there are restrooms down the hallway to the right or on 543 where we came, if you need to do that. Okay? Thank you very much. We'll see you shortly.
Good afternoon. Welcome back. Welcome back. Oona has asked me to go ahead. My name is Calvin Hollinger.
I'm responsible for Information Technology and Logistics for Urban. I'm thrilled to be here. So As you can imagine, it is a daunting task for me to be presenting after the brands, but bear with me. In the next 20 minutes or so, although I may not be as inspirational on my subject at least, I think you'll hear a lot of interesting facts about what we're doing on the shared services side to support Urban's rapid growth. Before I begin, I was asked to remind you in case you missed in the beginning of the presentations of the Safe Harbor regulations.
And the second reminder is that the shuttle bus only says 445,545, the shuttle bus will be picking you guys up to make the 530 and 630 All right, let's begin. So all the things we could be talking about today, all the magical things, Frank, thank you very much. We decided that the things which are most pertinent to you, most current for you would probably be omni channel, So how we interact with our customer across channels and then mobility, what we're doing on the mobile devices specifically within our store environment. Okay. So omni channel, a while ago we implemented systems to 1, get us a single SKU across retail and direct 2, combine inventory across retail and direct.
But from a customer perspective, there's no such thing now as a retail inventory or direct inventory. We now have total inventory available to the customer. And then 3, that we can have real time visibility to where product is throughout the enterprise at any given point in time. So where is the product coming into our DC? Is it probably within our 4 DCs on the way to the store or in the stores?
So with that capability now, we can take an order from the website, from the call center, from a customer's mobile device or from an out of stock situation in the store and we can fulfill that order from any point we have inventory vendor managed inventory, our DC inventories or now even our whole store inventory. And this is all based on very flexible business rules. An example of a business rule would be based on product types. There are certain products which are not available in all stores. I think you heard from all the brands today that we have the web exclusive strategy.
By definition, web exclusives are not always carried in the store. Or Anthropologie, David's team would have shoes which aren't carried in all the stores. So when we have a return of a web exclusive or a shoe into a store which doesn't carry that item, what we did in the past is you have to take that product and send it all the way back to Trenton, South Carolina, which was our Eastern fulfillment center. So not only was it cost involved, it could take us days or weeks to get the product back and make it available for sale. Again, we're a fashion retailer, so having weeks of product not available for sale is a big deal to us.
With this new rule, if a web exclusive comes back into the store, it immediately becomes available for sale again and the very next order that comes in will pull the web exclusive and fulfill it from that store. Another rule would be based on customer service. If a customer orders 2 items, only one item is in the DC and the second item is on back order. Instead of waiting for that second item, we will find the closest store to the customer, which has both the units and we will ship it to the customer. So not only does the customer get the order faster, we avoid having split shipments.
And the final rule which we're going to go live in 2 weeks is a rule based on sales velocity. So we'll have products selling well online. We have products selling well in certain stores. But if that product isn't turning fast in a certain store or certain region like Pacific Northwest, we can now direct the very next order to pick that product from a store which isn't turning, again looking at reducing markdowns. So back in June and Ted spoke to it briefly, back in June we implemented the ability to be able to ship from stores what we call pick pack and ship.
So let's see what the results have been so far. First of all, I'm going to talk some numbers here. First of all, we've seen an increase in overall sales. And the reason for that is we now can have total inventory. So a store doesn't only sell inventory within its 4 walls.
A store has now access to inventory across the enterprise, all the other stores inventory and the web inventory. The websites have access to the web inventory and all the stores inventory. So by exposing more inventory, we see an increase in demand. Last week, for example, we shipped $1,400,000 from stores. Now there's nothing special about last week.
This is just a number I had handy. The weeks before then, the weeks before that was roughly about the same. So about $1,400,000 were shipped from stores. Again, it's a capability we've only had since June. But I want to be very clear here.
I'm not inferring that all this is incremental sales. Because of our rules, we may have shipped some product from stores, the web exclusives or to avoid a split shipment. So this is not $1,400,000 of weekly incremental sales, but I think it's fair to say that a meaningful portion is incremental. The other benefits we see is as I mentioned is markdown and die mark reductions. So a lot of these web exclusives coming back into the store, some will be sent back to South Carolina.
But even worse, some of them, the one off pieces would be put aside and then dimed out or put on the side and marked down. So web exclusives, we expect to see a reduction in markdowns and dime outs. And also as we begin turning inventory more effectively from stores not selling that should reduce the markdowns in those stores. As we turn inventory more efficiently, we also expect to see a reduction in weeks of supply. And by definition, by reducing the weeks of supply, we can begin strategically looking at our total inventory levels.
Can we reduce total inventory? So in the past, we would order 75 units for retail, 25 units for direct, 400 units in total buy. Can we now that we combine inventory, can we now buy 90 units, 95 units? Not quite sure. This gives us a strategic opportunity to look into that.
And as all of you know, inventory carrying costs is the biggest line item in a P and L. And then finally, the market improvement we've seen is in delivery times to our customer. This slide shows delivery to our West Coast customers. Back in May, our e commerce fulfillment center being in South Carolina only fulfilled our orders from South Carolina. Now we can always expedite shipments overnight to the West Coast.
Our West Coast demand is 30% of our total demand. We could always expedite, but if we looked at standard delivery services to the 13 West Coast states, we couldn't get there in under 2 days. As you'll see now in August, because we're now shipping from the stores, we can get to our customers in under 2 days 20% of time to the West Coast, again, it's the West Coast slide only. And this is a big deal to us. In fact, we strategically believe that fast delivery is such a big deal that we invested $55,000,000 to build a West Coast fulfillment seller.
This is a work of art. It is breathtaking. It is almost magical. But it's in the backdrop of the Sierra Nevada Mountains, Reno, Nevada is absolutely beautiful. It is LEED certified, which is a energy and environmental certification, which we got here, LEED Silver certified.
It is almost 5,000 square feet, expandable to 1,000,000 square feet. And between the Reno facility and Trenton, South Carolina, we can now we will be able to get to 2 day delivery and less than 2 day delivery to over 80% of our customers, again a big, big deal for us. And in fact from this facility, we can get to one day, so next day delivery to the 7 Western states including all of California, which is an important market for us. The other benefit of this facility is obviously as our direct business grows, we have additional capacity. Between this building and Trenton, South Carolina, we now have the ability to process 100,000 orders per day, so significant capabilities.
And then from a business continuity perspective, if we would ever lose strength in South Carolina through hurricane, fire, massive mechanical failure, this facility to fulfill all the customer demand are the West Coast. And then from an IT perspective, we've built a state of the art data center in here, which replicates the data center we have on the East Coast and runs all of our critical systems in parallel at the same time. Let me be clear about that. The greatest fear that every IT professional has and shares with the skydivers is will your backup system deploy on time if your primary fails. Now we've all had examples where the backup system is down standby.
We think it's going to work, but it doesn't work. We can't afford that. Our direct business is too important. So in here, this is not a backup facility. We are running our critical systems, our e commerce systems in parallel.
So in the cloud, we direct some of the traffic to Reno and some of the traffic to our East Coast data center. If we ever lost one or the other, we would fail over seamlessly within seconds with no impact to the customer. So it gives us again, gives us business continuity, scalability and it's again, it's a beautiful building. In fact, if you fly from San Francisco to Reno and you sit on the left hand side of the plane and you look out the window, you'll see it from the sky. You guys are hard to impress.
All right. So last piece of the omni channel story I have to tell today is in the next couple of months, we will be deploying the ability to order online and pick up in store on the same day. I think we'll probably get it done towards let me say sometime early next year, because you guys are typing. So early next year, we'll have that ability because again we think it is critical that a customer gets the merchandise very quickly. And if we see that there's huge demand, the customers want to come in, pick up in the same day, we can begin with this capability that we have, begin exploring providing same day delivery services in certain metropolitan areas.
We'll begin exploring that again if there is a need for that. One of the great things we have now with all of our stores being distribution points, we think we have a competitive advantage over pure play e tells which do not have store locations. Okay. So that was omni channel. Now for something completely different.
2 years ago, we deployed iPod point of sale into all the stores. An iPod point of sale is pretty much it looks like your iPhone, has a little case around it, you can scan barcodes, you can swipe the credit card And it does everything that a normal point of sale system does except you can't take cash obviously. And we don't have a debit device. You can't take debit transaction and you can't take checks. But it's everything else that a point of sale device can do.
When we deployed again 2 years ago, it was very well received by our customers because it's a very personal interaction between a sales associate and the customer. It was well received by a sales associate. They had fun having the customer sign a signature with their thumb. And it was especially well received by Frank Conforti, our CFO, because this device fully loaded, fully installed is about $500 It registers about $5,000 So it also made financial sense. And for the first time 2 years ago, we didn't have to add in any holiday registers.
These devices would suffice. And in fact, we told the stores give us back your fixed register that we can refurbish and use somewhere else. Give us back one register, we'll give you 5 of these devices. I don't have the exact numbers, John, you may correct me. Between the brands, I think we'll be sending out about 1100 of these devices for peak of this year.
But although it was well received, it was a line busting, everyone loved the device. At the end of the day, we just replaced one technology, the fixed register, with another technology, the mobile register. And these devices can do so, so much more. So we began to look at other capabilities that we can deploy on these devices. Now one challenge that all multichannel retailers have are direct returns back into the store.
A normal retail return comes back in with a little price hang tag. For direct return, it doesn't come back with a price. It's not only the sales associates have to work out what did they pay originally on the e commerce side, what's the current price, go and then hand write a little price label, attach it. And John said it's a nightmare in the stores and that would actually then back up the whole cash rep space, the customers returning items or even worse, would just take all the online returns, put it to the side and within days or weeks or never they get to it and return back into inventory and again the hang tag looked horrible. So what we built on this mobile device is a returns application.
So when you come into our stores, you either have receipt from a retail, you have a collate from a direct purchase or you have none. We come in, we scan the receipt, it pops up what you have, it instantly refunds the customer, but more importantly, it instantly puts that inventory back in available for sale back into our system, right? And then lo and behold, it says print ticket. On the wireless ticket printer, it prints the little tickets are very neat and we attach the ticket. So your stores love that, again an additional feature beyond just a mobile point of sale.
The next natural progression was obviously a re ticketing application. You go in select the SKU, find the color size, is that the right product and it prints a ticket. Very briefly, you'll see in the next couple of slides all of our applications now have an image in color of the product. That's a great advantage in a store environment to now have images being displayed to help them actually find the product, make sure it's the right product. Another challenge that all retailers face is if the product isn't on the sales floor, it doesn't sell, right?
So we knew intuitively we are losing sales or walking sales because the product is in the backroom, in the back stock and on the sales floor. So about 1.5 years ago, we did an RFID pilot. So RFID, little radio frequency verification tag and we tagged the denim category. So all the jeans were tagged. And then throughout the day as we're selling, we have real time visibility to sales, we would tell the store you sold all these items, go find in the back room and go restock the sales floor.
And we did see a lift in those stores. We did see a lift in sales. There were other benefits. We had the whole cycle count was improved and this little RFID kind of like a Geiger count, you can go find and locate the merchandise and view it and here it is. There were many benefits for RFID.
But for many reasons, we decided that RFID was not ready for us and we were not ready for RFID. So we built a poor man's version of RFID on the mobile device. It's called a restocking application. So at any time during the day, the sales associates can go in, select the department, women, select the class, women's shorts and again showing the image, you have sold 6 units of the women's shorts, go restock. They take a device, they see the image, they go in the back room and they scan, this is the right one and they restock the floor.
So in addition to helping the restocking, at corporate, we can now begin tracking the stores, which stores have a lot of restocking to do and which stores have to restock, but they say, sorry, I didn't find, which gives an indication, do we have some bad stockroom practices, operational practices in the store which need to be improved or do we have a shrink issue in the store? Now the one application the stores absolutely love and this is where the term magic first came from is the out of stock application.
If you
come into a store and we don't have your color or your size, the sales associates can find the color or the size again somewhere in the enterprise. The associate doesn't care where it is or will show the closest three stores. We can print out the closest three stores or you can say, well, I would like to have an item. So within one transaction, we can check you out with 2 or 3 physical items and fulfill from somewhere in the enterprise another item with one simple transaction. The stores love this.
And again looking at last week's numbers, 12,000 units were fulfilled were out of stock in the stores fulfilled by this device. Now again, I'm not saying that all 12,000 units were incremental because I'm sure that if it didn't find the size and we couldn't have fulfilled it, they may have bought something else different color, different size. But again 12,000 times last week we did not disappoint the customer because we had an out of stock application in all tied into the whole rule based fulfillment. We believe that in the very near future all of our sales associates will have one of these devices that are very, very powerful. In fact, we're now building a messaging and texting capability on these devices, especially for the urban stores.
Those kids text. They don't want to have the walkie talkies, right? So we'll build a texting that the sales associates can text to each other that we can text messages down from corporate, hey, big sale coming, hey, go find this item, hey, we have a recall, whatever the case may be. So, we can begin texting, sending messages through these devices and these devices will pretty much be the de facto device in the store. We'll no longer have those big guns to be receiving and this will be device in the store.
Then the final part of our mobility strategy, device in the store is the iPad point of sale. I noticed that many of you have iPads, so you know the power of the iPad. The iPad point of sale does everything that the mobile point of sale does, which I mentioned and does everything that the cash register does, including debit and including cash. So we're widely connected to the peripheral devices as well. Now you may argue, hang on, Calvin, didn't you just say you're replacing one technology with another technology?
That is not the case. The iPad is a very, very powerful device. So in addition to being a register, we can download a lot of content down to the stores, maybe training videos, maybe, hey, this product sells this product, the whole market basket, all the reports, sales reports, a lot of information because it's a very, very powerful device and it's very, very easy to use, a big screen, very, very intuitive. And just important, it changes the way we can look at the cash wrap. This is a Free People store.
We have the iPads in a handful of stores. I think it's Free People Walnut Street. Again, very clear clean. Now, although it's a mobile device, an iPad is a mobile device, we have decided for the pilots to have it on a swivel arm. That's very clean.
If it's not in use, you can take the swivel arm and put the iPad away and you can use this as a packing space or maybe to display more items to sell etcetera. And then from a customer's point of view, this is the customer, we turn the iPad to the customer, she is confirming her shipping address. We could also use it to when it used to be for example a gift registry, a very, very powerful device. 2 or 3 weeks ago, we placed our very last register order. We are out of the register business.
Going forward, we had placed the orders to get some new stores coming up. But once we successfully make sure that this iPad works in all the stores, all stores will be designed and equipped with iPad Touches and iPads. And Frank's again happy because the iPad is $1,000 fully installed versus $5,000 but all our stores going forward will have iPads and Itouches. In fact, after the Q and A session, if you guys are still interested and as you walk out the door over here just towards the right, we've set up a station which has some of the iPad, I touches and all the mobile devices which we have. Despite the fact that inflation technology is extremely, extremely strategic for Urban Ink, De Kain still refused to give us our own tent.
So we had to improvise with a rickety little wooden table out over here, but we'd be glad to answer any questions back there. So with that, I thank you for your attention. Thank you for your time. It'd be my pleasure. And I hand it back over to Dukane.
Thank you, Calvin. That was a very powerful, powerful presentation. And I guess it confirms to all of you what we know here and that is that we're committed to using technology to enhance the customer experience and or make it more efficient. And Calvin has done an excellent job at doing that. So good afternoon, everyone.
I'm very pleased to have you here. The question I get asked the most is, are you having fun being back? And the answer is, I'm having a blast. And you can see why. There is such energy and creativity in this space and it's so much fun day in and day out.
I love seeing the tents out there, all the different varieties of what the brands come up with. I had no idea that we're going to have an army tent, the MASH tent out there from Ervin, but good job. And it's just it's great on an ongoing basis. For those of you who are visiting here for the first time, I hope you can detect the tremendous energy and creativity that this building and this campus generates. It is truly what keeps this company going, not necessarily this building, it's the people in the building.
But this campus of ours really helps in that way of encouraging creativity and brand creativity. And that's what keeps us going. It also delivers we think it's a major asset because it allows us to better recruit talent and retain talent. I have a little story with that. About 2 years ago, an entourage of folks from 1 of the premier design and art schools in colleges in the country came down here and they wanted to see what we're doing because a lot of their students were either taking interns here during the summer or after college, after graduation were coming to work here.
So they wanted to see what we're doing. And I had the pleasure of assisting the President on a tour. And so I'm walking around showing them what we're doing. We walk into this building and if you came in the front way, you make a left into the sort of what we call the Grand Allet, where all the bamboo is. And he just sort of stopped and he turned and he looked at me and he had a smile on his face.
He said, well, now I know where I want to work after I retire from the college. And so that's an example of what I'm talking about. And I think this book says it all. This is a book that came out about 2 years ago or 3 years ago. And the title is I Wish I Worked There, A Look Inside the Most Creative Spaces in Business.
And we happen to be one of 11 that are mentioned in there in a photo essay and we're in good company with people like Nike and Google. So suffice it to say this has been a great investment, this campus and every day I'm very pleased with the outcome of it. Now earlier this afternoon you got to talk to all the brand leaders and they demonstrated to you who what the brand was and who the customers are. Of course, I think you're kind of aware of who the customers were, but let me just remind you in case you don't. The urban customer we always talk about is the upscale homeless person who have a slight degree of angst and is probably in the life stage of 18 to 26.
As a matter of fact, I think about 80% of our customers are between the ages of 18 30 at Urban. The Anthropologie customer is a bit more polished, a bit older, and she has much less angst. So that's that customer. She tends to be a homeowner and she tends to be in a relationship and more likely than not married with children. The Free People customer, as Meg talked about, is the person that has is free spirited and really enjoys that sort of personal communication that Clothes give you.
So they're roughly and the Free People customer is probably the one that is least life stage and more lifestyle. So those are the sort of the 3 and the manifestation of those 10ths, I think, tells you just about everything you need to know, because they really do represent the customer. You also heard from the brand leaders about and I think somebody even used the word, Frank, I think mantra of growth. And this is clearly what this company is about. It's what this company has always been about.
42 years, we've been in business now. We opened in November of 1970. And since then, that time to present, our compound annual growth rate is about 20% approximately. It's actually a little bit higher, but not much. And our goal and what I've tried to communicate to everyone since I've been back is we got to get back to that.
We want to be a 20% grower. And that's when you're really having fun in my estimation. There's that the just the energy and the happiness of growing somewhere around that. Now if it's 'nineteen, it's no big deal. But we last couple of years, we have not grown fast enough.
And my job, as I see it, is to just sort of get everybody excited and get everybody doing the things that we've done over the last 9 months, which is outline those paths to growth. And you heard a lot of them today, but I want to give you sort of an overview. So our plan to reaccelerate the growth is pretty straightforward. It's simple, because this is a simple business. Now it's simple conceptually, what the brand leaders have to do every day, day in and day out, extremely complex.
So the execution is complex, but the strategy is actually simple. So let me review it. There are 2 basic ways to grow our business and they shouldn't come as any surprise to you. The first is to sell more things to existing customers. I guess you folks would all call that share of wallet or increasing the share of wallet.
And it's not particularly difficult to think how that would happen. And it's going to be by giving customers more product that they want in their particular lifestyle. So for instance, we're expanding our assortments by size and color. A couple of examples of that are the Anthropologie Petites, different sizes. All of the brands are selling jeans now in expanded waist sizes online.
And I don't mean just expanded bigger, expanded smaller and bigger, but more importantly expanded by inseam. For those of you in the audience who might be a little shorter than average or a little taller than average and like myself shorter, smaller inseam, you know what a pain in the neck it is to get pants, jeans that are in your size and you don't have to take it to a tailor to be fixed, blah, blah, blah. So this was a big thing and we've seen sales go up when we start to offer these extended size assortment. Color is the same way where we may offer 2 or 3 or 4 colors in the stores, we might offer an extra 2 or 3 online. So extra product, we've also significantly expanded our style count online.
And let me explain this chart. I hope you can all see it in the back. The yellow bars are multi channel retailers. The white bars are what are called pure plays or e commerce only. And this represents a number of dress choices and believe it or not we had somebody actually go in and count all the dress choices that were available.
I think it was sometime in July. So this is the number of choices available. As you can see, the white pure plays have consistently more choices than the multi channel people. We're sort of right in the middle. So we have these are our 3 brands here in the yellow.
We have more choices than the multi channel people for the most part, but we have fewer choices than the pure play. And what we have found and the reason that everybody today has been talking about WebEx, by the way, stands for web exclusive items. Everybody has been talking about that is we found that larger assortments are one of the key drivers of our web business. So we are expanding our web assortments relative to what we our assortments are in stores. As a matter of fact, right now, 40% of our web offering is web exclusive products.
And I think that will only increase. And I know there can be a question afterwards, so I'll answer it now. What's the top? What's the limit there? And the answer to that question is, the customer will tell us when the limit is reached, but we don't think that we've even come close yet.
Another way to sell more things to existing customers and this is very important is to add new product categories. I see the company as sort of a collection of brands and I see the brands as a collection of product categories. And because I've had it drilled in my mind for 40 years as a bricks and mortar retailer that the store is a certain size and it always has to become more and more productive. That productivity has led us to sell the most productive items, which believe it or not is women's apparel. Thank you, women.
So what has done is pushed some of the other categories that we had out somewhat. So if we take Anthropologie as an example, I think when we opened the Anthropologie store in 'ninety two, it was almost 50% home and 50% apparel and accessories. And today, that's more like seventythirty. And that's purely a factor of it's more productive in the square footage to sell apparel than it is home. But there's no reason now that I've sort of had the chains broken and my mental ability to conceive of a bigger store as it were called the web is now allowing us to think about things like, well, why don't we bring the home back because it's very successful and now we don't have to have it as productive to pay the rent because the rent instead of being $40 to $50 a square foot is $3 or $4 a square foot because it's a fulfillment center.
So we're adding new product categories, many of those are being added online. And here you see 3. Oops, Free People Movement, Innomately Free People and Anthropologie MaidenKind. And these are just three examples of some that we've done recently. We will do more product categories in the future.
And it's just a question of how quickly we're going to do it, because I think all of the brand leaders are extremely excited about this concept. Offering additional products, whether it's size and color, whether it's new styles or whether it's wholly new product categories is one way to expand. The other way is to add new customers. These customers may live anywhere. They can live in North America, they live in Europe, they can live in Asia.
And so now I'm going to get into the scary thing, international global expansion. And somebody already pre warned me, I don't think we're going to like this. Let me tell you that our company has been an international company, a global company now for 16 years. We opened our first store in London in 1996. Now some of you may have actually been covering this back then.
I don't think many, but some of you may. And if you were, you were probably yelling at me back then, what are you doing over in London? So I'm just saying that we did this. It's turned out very well. Urban Outfitters currently has 34 stores in Europe, across Europe.
We like them very much. They're adding a lot to our top line and they're adding less than in these states, but they're adding to our bottom line as well. So we're very pleased with it. We've also are operating in Europe with Urban, a very robust and fast growing direct to consumer business. And as David told you, Anthropologie has 3 stores in U.
K. Currently. They're looking to expand that and the direct to consumer Anthropologie business is really growing rapidly and looks like it's going to be a home run. Now the balance between the two businesses, the stores and the direct might change a bit versus what we're doing here because the rents are higher in Europe and so it's less profitable. But there's not a rent factor with direct to consumer.
So we think that we want to have a higher penetration of direct to consumer in Europe than we do here. So we've grown this store count in Europe. I've said we've been there for 16 years and we only have 34 stores, so you can do the math. We've grown it cautiously, conservatively, and that's on purpose and I'll tell you why. We have a very different model than our competitors.
Our competitors like to think about creating product centrally. So whether they're in Columbus, Ohio, they're in New York, they're in San Francisco or here in Philadelphia, they think about, well, we have designers creating product and then we're just going to distribute this product. And we don't really care if it's Frankfurt, Germany or Cleveland, Ohio. We're distributing it. Well, I would suggest that there is a fairly market difference between Frankfurt, Ohio I mean Frankfurt, Germany and Cleveland, Ohio in terms of fashion.
And it's very difficult to sit here in Philadelphia or in New York or anywhere and try to figure out what a woman in Frankfurt, Germany is going to want to wear. So our notion is that our concept is right on target, meaning that it's very exportable. We have not really gone anywhere where people go, I just don't like your concept. Our format is very transportable, anywhere from 6,000 feet for the 2 larger brands, 6,000 feet to 12,000 square feet has resonated well wherever we've gone. The product really has to be tailored and it has to be tailored locally.
So what we've done is take and built teams. We've built merchant and design teams in Europe. And as we progress, as we build out in Asia, we will look to do the same thing. It's important from my point of view because the local customer wants what the local look is. That doesn't mean to say that all the product is going to be local, it won't.
But the person who's making the decision, do I want to buy the product that is being created in the United States, they have a local eye. So they'll say, yes, I want that. No, I don't want this. Instead of this, I'm going to replace it with something I'm getting locally. So building these teams is a slower process and that's why it's taken us a while to build that European group.
But we believe in the end it's going to be much more compelling and the brand equity that we build over time is going to be much greater and it's a sustainable business as opposed to one that's sort of a flash in the pan. People get the concept and then they go, oh, I don't like a year or 2 later, I don't like that, I don't shop there anymore. Here you can see the relative sizes of the markets. I don't know if you can see it in the back, but it's no surprise to any of you, you probably know these statistics already, Asia with the biggest population, Europe with the biggest GDP. And then if you can forward, this is the apparel and accessory market opportunity.
Yellow is North America, gray is Europe and white is Asia. You can see the relative spend on apparel and accessories, which is pretty even amongst the groups. And then you get over to Urban's revenue sales penetration to our total. You can see that we're 90 plus percent based in North America with a sliver in Europe and a slight, slight sliver in Asia. And this is what we want to rectify.
Our goal is to have each brand have a strong presence and significant sales in each one of the geographic markets. How do we do that? I'm still a pretty firm believer that stores are the basis for creating this kind of presence. And the good news is I think we have significant opportunity in all three brands to expand the number of stores we have in all three geographies. How long have we said this?
Probably 10 to 15 years. We've said that both Urban and Anthropologie have 2 to 250 store capability in North America. We're still saying that. As long as I'm here, we're going to say that unless something dramatically happens dramatic happens. I am not going to go the way of some of our competitors who overexpanded because I think that's the death of brands.
And I think one of the things that drives particularly women's apparel is scarcity. So we do not want to over penetrate the market. So 200 to 250 stores domestically. The Free People opportunity, we believe, is north of 100 stores. We're not quite sure exactly how far north.
But as was mentioned today, because Free People has added so much product both at wholesale and through the web, they can add to retail and expand the store size of the stores they already have. So of the 70 plus stores they already have, I think they can probably almost double most of them, if not all of them, in terms of size. So in general, what I'm saying is, I think we have at least twice as much retail square foot growth at Free People here in North America. Now as far as outside of North America, all three brands have enormous opportunity for store growth. We think that both the Urban and the Anthropologie brands can have north of 100 stores in store growth.
We think that both the Urban and the Anthropologie store growth. We think that both the Urban and the Anthropologie brands can have north of 100 stores in Europe and Free People we haven't quantified yet because we haven't opened one there and so we don't really know. And it's way too early for us to try to quantify the opportunity for store growth in Asia. As Ted said, we're planning on opening an Urban Outfitters store. We'd like to do that sometime in calendar year 2014, but Ted's going has been making trips to Asia along with some other folks to set the groundwork for that.
So exactly when it will happen, I don't know, but plan is 2014. Let me go to direct to consumer, one of my favorite subjects. It's our fastest growing channel. Now there are a few of you who really got on my case for saying that direct to consumer would be 50% of our entire retail sales 5 years from now. Well, I'm going to say it again.
I believe that Urban Outfitters, URBN retail sales will be 50% direct to consumer within 5 years. So that gives you, I hope, some idea that I have confidence in this. We are making many investments right now. We're making them in systems. We're making them in people, marketing, fulfillment capacity.
You heard Calvin talk about fulfillment capacity. All of these things coming together, I believe, will allow us to reap the benefit of what I think you all understand is a tremendous brand equity that has been built up here with our 3 brands. The customers like us. We've got to give them more channels, more ways, and more product to buy from us. So write that down, right Kimberly?
5 years. We'll meet back here in September of 2017 and we'll see. Just as an example, Q2 year over year unique visitors across all brands was up 32% and this quarter so far they're up even more. So we are attracting and driving more and more people to our websites and mobile apps, don't forget mobile apps, a lot of people coming that way. And that's by offering a broader product assortment and it's through better marketing.
And what do I mean by better marketing? I mean that we are spending more and being more intelligent about paid search, more affiliate marketing, search engine optimization and the use of various social media like Facebook, Twitter and Pinterest. Another just stat for you, last month, now this is just 1 month, last month we had over 1,300,000 visitors, users visit us through Pinterest. And I think that's a pretty big number and it's growing. So this is the kind of traffic that we're generating.
We're very excited about it. Now we're just beginning to make better use of our customer database, customer segmentation, customer analytics. And we have recently hired someone and we are going to continue to hire a few folks to come in and be experts in this area and we're going to invest in systems because we believe in it strongly and we believe that it's going to also help move the needle in terms of sales. Now as we expand our direct to consumer globally, we're very aware of the need to have localized content. So what you see up here is the Urban Outfitters landing page for Germany.
And I want to impress upon you that this is not just a rehash of what we're doing in U. K, but this is definitely it contains localized content and some localized product and is tailored for the German market obviously with at least 90% German language. If we can go on to fulfillment, there's that magical space again, Calvin. Calvin is very proud of that and he should be. It's really very impressive.
I landed and we did a ribbon cutting and when I landed it had just rained and the entire place smells like sage and that was magical. Okay. I don't know how Calvin arranged for that little aerosol can. So last year we opened our fulfillment center in Europe. And as Calvin said, this year we opened a fulfillment center in Reno, Nevada.
We continue to invest and believe in adding more fulfillment capacity as needed. We think our fulfillment center in Europe will probably carry us through the next 3 to 5 years in terms of what kind of capacity we will need. And we think this one in Reno will probably be about the same 3 to 5 years before we need additional fulfillment capacity.
Onward?
Okay, the final method of increasing our customer base is through expanding wholesale globally. To this end, the Free People wholesale folks are in the process of adding the sales force in UK, which will sell and distribute the product throughout Europe and we're also in talks with a Japanese group to help us distribute the Free People product in Japan. So I hope our goal is quite clear to you. It's we want to accelerate our rate of growth. We do that by offering more products to existing customers and we also plan to acquire new customers in the methods that I discussed.
Now none of this is possible without the right people in the right places. And I think you've all had an opportunity today to meet our management teams. We have very, very established and knowledgeable and experienced merchants at the head of all of the brands. And that's what allows me to have confidence that we are going to reach these goals. And with that, I thank you very much.
And I'll ask the urban folks to come on up here and open the floor for questions and we'll try to give you an answer. Okay. So any questions? No? All
right. Thank you. And team, it's John Morris with BMO Capital Markets. My question relates to the potential goal that you have incorporating your plans for accelerated growth. What can you get to over the next 3 to 5 years or longer term your goal for operating margin?
And how do you get there? What are the components to that?
Okay. I used to be focused, as you recall, we used to talk about 20% top line growth, 20% bottom line growth or greater than 20% bottom line growth. And that was when we had a very simple rollout strategy. It's very difficult for me right now to completely get my arms around what the mix of the businesses are going to be. They have different bottom line implications and how much it's going to cost us to do some of this global initiatives that we've talked about.
So the way I'm looking at it is if we get back to 20% top line growth and this is what I've expressed to the entire team, my goal is to add dollars to the bottom line. If the rate goes down slightly, it's not going to be the end of the world to me. And if this goes up, that's great. But what I'm really trying to do is add to the top line as a growth company and eventually the bottom line will come if it doesn't come right away. Now having said that, we believe that we will continue to be one of the top performers in terms of bottom line profitability.
I don't want to give you an exact number. I don't want to lock us into 20% or 18% or whatever that's going to be. I just want to be in the top decile of our group. And we've been that way for many, many years, not last year, but before that, many years before that. And we believe we will continue to be.
The one thing I do want to add into, sorry, Dick, is our largest margin degradation over the last year and a half has been due to markdowns. And we think a lot of that towards the back half of last year unfortunately was self inflicted. So when Dick is thinking about operating margin and about growth, he's thinking about where our model runs and where we've historically run at as an organization. So when we think about the opportunity to improve our margin, we think about markdowns as a great opportunity for us going forward and when we see significant opportunity for that in the next 2 years. And then Dick is talking about where we would end once we recovered from where we've been from where we've fallen from a markdown perspective.
Okay.
I just want to impress that our goal right now is really to drive top line. And I'm not trying to do it by not making any money or having a loss. This is not Amazon. What we're trying to do is grow our top line and improve out that model and we're pretty convinced that we can make the bottom line work. Next.
Paul Lejuez at Nomura.
Just wondering about CapEx levels relative to this year. What should we expect as we go forward to kind of make all this happen? And then similar lines, I guess, Frankie's point to you, inventory turns, what should we expect? And if you can maybe parcel that out by brand, is there a certain goal that you have by brand?
Thanks. I think we can get back to you by brand. Let me tell you my overall goal is to bring our inventory levels down. Some of the work that Calvin talked about and I think one of the reasons we had the markdowns that we had is that we probably had too much inventory. Now there is a point at which the stores don't look good, meaning that it just looks like that sense when you go into the store and say, my God, are they going out of business?
So we have to make sure that we have enough inventory in the stores, but I'm quite convinced that we can decrease the amount of inventory we have in the stores. Now it might be in the supply chain, it might be on the water, it might be something else. But in the stores, I think we can decrease the amount of inventory. CapEx?
How does that tie in?
Well, the inventory levels at direct are up, but they're not up as much as sales. So actually when you look at the ratio, we're doing better. Yes. It's important
to know when we talk about web exclusive and we talk about expanding styles, we are incredibly rigorous about the productivity of that style increase and of that expansion. And as Dick said, it's growing and it's incredibly productive investment for us, which is why you're seeing sales actually accelerate faster than the inventory investment. As it relates to capital, Calvin did mention we had a DC that was in the numbers this year or part of the numbers this year because construction actually started last year. So this year we're looking at around $190,000,000 to $200,000,000 for capital and that's fiscal our fiscal 'thirteen. I think the number will be close to that next year.
We haven't formalized it yet, might be down just slightly. The DC investment will be replaced by we are investing in additional building here at the Navy Yard to expand to meet the expansion needs of our headcount.
Yes. Calvin needs more space, more room. He's an Empire builder. Magic building. That magic building is coming here on campus soon.
Dick, can you talk about the competitive environment mostly maybe from a high level view first of all with a lot of these international players coming to end Topshop, H and M, Uniqlo, I know not direct competitors. And then maybe if each of the brand presidents or brand heads could talk about the changes in the competitive environment for their particular brands? Thank you.
Well, let me start first by saying that we welcome all this competition. That's what makes us better. And I've always loved competition. So to the degree they come in, I think there's going to be a bunch that go out, but it isn't going to be us. So we want this competition, but I would phrase your question a little bit differently if I were I wouldn't look to the competition so much from the H and Ms of the world or the top shops of the world.
I'd look at it from the pure plays. I've said this to a couple of you, but I'll repeat it in general. I look at when I first started in 1970 and it's not accidental that the 3 companies that started within 12 months of each other, the gaps are limited enough. We're 12 months apart. And it was really the age of specialty stores.
And those specialty stores more or less replaced or displaced department stores, right? So think of the 1,000 and 1,000 of department stores across the country that closed or merged and consolidated because of the specialty stores eating into their what was their business. I think the same thing is true right now with the Internet. I think it's going to cause an awful lot of these specialty stores to have to merge or disappear. We are aware of this, we're discussing it, and we are taking steps to ensure that we don't become the department store of the next generation.
So I enjoy the competition from stores. It doesn't frighten me. I think it's great to have competition. We have to learn from the pure plays how to maneuver. You saw that one slide I just showed about the number of choices.
Well, we pay attention to things like that because what happens is organically the pure plays start to add more choices because they find out it's successful. And yet there's this constraint with bricks and mortar in terms of how many choices you can have before the store just looks messy. So it's a very different world. And that's one of the things that I will speak for David and for Ted. It's one of the great things as you're getting a little older and you've been around for a long time, but man, this is new and this is fun.
So learning about this keeps us going. Hi, Oliver Chen, Citigroup. Regarding your slide about the number of styles, is that a permanent change in the consumer in terms of the number of styles increasing? I think well, let me just answer that one first and you have another one. I think it's the way women have always shopped.
They love choices. They want to have more and more choices because they're very individual. For a woman, the way she dresses, that self expression is a huge deal. That's very difficult for men to understand. If we are all sitting around throwing down a beer like we are going to be in a little bit and we all had denim on and an OctraClaw shirt, first, the men wouldn't even notice it.
And then secondly, if they did notice it, they'd laugh and say that's great, because they feel comfortable in it. Take 2 women, put them in the same room at a party and have the same dress on, one of them leaves. So women want to have this specialness. They want they're very concerned about looking individual. It's important to them.
So they want choice. Now, as I said before, the reason that you can't give too much choice in a store is because it just starts to look messy. You can't do it. But you search a different way when you're online versus in a store. So you can get to what you want.
Does the evolution of that have implications for the risk profile in terms of fashion execution? And how do you think about your supply chain with respect to speed and maybe your migration of that SKU count? Supply chain. Well, right now we are supplying a lot of that, not additional sizes or colors, but in terms of additional styles, a lot of that's coming from the market. So what it does do is affect slightly our gross profit because the IMU is slightly less.
Does that make any sense? But it's profitable, very profitable.
Hi, it's Roxanne Meyer from UBS.
Hello, Roxanne.
Hi. I've got two questions for you.
For me? For you.
In your quest to get to 50% of sales from DTC and even identifying the pure plays is really the competition to look out for, are you concerned at all longer term about your exposure to the 3rd party brands, which do ultimately have the risk of being marked down more online and just being more present and widespread across the world?
I didn't put up here the pure plays that were off price, if that's your question. Now they have enormous, enormous selection of choices. And there are other online folks that are aggregators, so they don't really hold in any inventory, they just collect they have on their site different brands and they have enormous number of choices as well. I'm not particularly worried about them because I think one of the things that we've always been good at is this sort of edit and understanding the customer and her lifestyle. An awful lot of these pure plays, not all of them, but most of them, I find are sort of technology people.
And they don't really get fashion. And a lot of what they're doing is just throwing everything up and seeing what the customer selects. Amazon is, I think, a great example of that. And we've always been more about the edit and taking and curating the product to be right for this woman, this lifestyle that we've chosen, whether it's urban, whether it's anthropology or whether it's free people. So I think of all the romancing that we do around that is what's going to keep us special.
Okay, great.
Did you have one more? I do, yes.
Okay, go ahead.
So my second question is, a few years ago, you would when you thought about the company growing, it certainly was about keeping the scarcity value of your core brands. But at that point, there was a lot of conversation about incubating new brands every few years and growing those. And there was no mention of those today. So I'm just wondering
how you feel about those. Well, how you
feel about those?
I've gotten older and wiser. No, what's changed is the concept of what we're adding. So I want to continue to add product categories and some of those categories could be businesses in and of themselves. A wonderful example is in Anthropologie is beholden. It's really an offshoot of Anthropologie.
It's almost it functions as Anthropologie wedding. They use the same e mail list, they go back and forth and it's curated very much the same way. So that's an example of a category that we have taken out and built up, but it could very easily be put back together as part of what Anthropologie does. And you can go from one website to the other. So the way I'm looking at it now, I don't want some random brand, okay?
And believe me, we probably see one random brand a month because we don't send anybody away. We want to see what's for sale and what it's about. So, Matt really is in charge of looking at those potential acquisitions. And so there have been a lot of brands. We just acquisitions.
And so there have been a lot of brands,
we just don't
want them. And we don't see any strategic purpose for them. It almost becomes adding brands or adding brands like because you need a top line growth mechanism. The way I'm looking at it is we have these things called lifestyle brands and they truly are lifestyle. And our value add is that we know the customer.
So if that's the case, let's add things and call them a brand, call them a potential company or call it just a product category. But let's add things to the existing lifestyle groups that make sense. That's the strategic concept behind what we're doing.
Finally. Laura Champine and Canaccord. And thank you for the Pac Man poncho.
You enjoy that. Sure. I've got a
2 part question. Does adding Wendy to the leadership team at Terrain indicate that you'll step up growth there? And then secondly, I believe the gating mechanism for growing Terrain locations was finding the right locations. Is that still an issue in that brand?
Well, I don't think it's the right thing to say that it's an issue. We want to make sure that there's a proof of concept there before we go expanding it. And in terms of growth, we just doubled. We added a store in Westport, Connecticut, which is doing very nicely. And we are still in the process of getting that concept correct.
It's taken a little bit longer than I would have liked. So yes, we're still in the process of growing it and massaging it so that it's one of the so that Wendy can have her own tent. Any other questions? Yes.
Hi, Erica Nashmeyer from Baird. This is a longer term conceptual question about your 50% DTC vision. I guess how
25 years, that's not
too long term.
In this business, that's a century.
Okay. Touche.
How important is WebEx in that? And I guess how much of that is sort of new and organic? Or how much of it is cannibalizing the stores and coming out of that box?
I don't think a lot of it is cannibalizing stores. I think that there is some of that, okay. And I had this discussion earlier. I think what we need to do as a company is understand that as the web grows, it's likely to start to cannibalize more. Now our comps and our store comps right now include all the direct returns.
So if you take a brand like Meggs, Free People, and we might be 1% or 2% negative comp. It's not really that because with a 50% penetration of web, the amount of stuff that is returned into the stores is about 500 or 600 basis points. So you have to adjust for that. And this is one of the reasons why we went to the reporting mechanism of combining the 2, because it's just so difficult to separate the two things. So I think that longer term as the web grows more and more with all the brands, we'll likely see a little bit of cannibalization.
I think that that's probable. And our job as retailers is to figure out how to manipulate the retail experience so that doesn't happen. And what is the experience that you can have in person in a bricks and mortar space that you can't possibly have online. Start to think about it in those terms and add those types of things to the experience. So that's the way we're thinking about it.
And I think you can tell by being here today that we're pretty good at manipulating space. So I think we'll succeed at that.
You talked a little bit or quite a
bit about the opportunities You mean I went on and on?
From pooled inventory and I know others have done it. It seems like a huge opportunity from a markdown perspective for a business as fashion and SKU intensive as yours is. I was wondering if you could give us any kind of relative sense of what a markdown depth looks like on average in store versus what it looks like online?
Depth. You mean how many No, meaning like how deep
the mark is to clear it in the store versus how deep the mark is online?
I don't have that information. Do any of you have it? Yes, I don't have that information, but I'd be glad to try to get back to you. Okay, will do.
Hey, John Hirsch from Sheffield. You've obviously you're starting to do a very good job stabilizing the ship here. Would your ultimate goal if you saw things continue to improve be to find a successor for your position and move back to where you were? Or are you very happy and energized?
No, I told you I'm pretty happy where I am. Someday I won't be able to do this. I'll be in my little walker and you guys will say, hey, don't you think it's time? But right now I'm having fun. But the serious answer to your question is, yes, it's time to start planning.
Yes, that's one of the major issues that I have in front of me. And the Board knows that. The Board has been quite explicit. And I think rightfully so that it's time to figure out a succession.
Hi, Dick, Loreen, hi, Jason.
How important will same day shipping be for your direct business and what does that do to the profitability of that revenue stream?
Same day shipping, Dave, you want to take it?
I think the short answer is that we don't know. We haven't really done same day shipping yet, but we hope, as Calvin said, to begin to be able in a position to experiment with that as we begin to ship more and more from our stores. I think you have to imagine there would be some profitability degradation just because there's going to be a higher expense rate to that, but we just actually don't
know yet.
I think our belief is that Amazon sort of setting the bar in this whole thing and the bar they've set is essentially 2 day shipping And we plan to get there fairly soon where we can ship today. And we want to be in the next 3 years to be able to ship today by ground because that's important. That reduces our cost enormously rather than shipping by air. But eventually, I think when we get to that bar, the bar will have moved and it will be one day shipping. Same day, I think we're still a bit away from that.
I'm not sure. I can't wait to see if somebody gets there. I think it's going to be very difficult. Kimberly?
Dick, do you know what percentage of your online orders are getting returned in store? And do you know what do you have any quantification of the impact on your markdown rate historically? And it sounds like now your tools are such that those items won't be marked down as much.
Well, as I said, Free People, it's about 500 or 600 basis points of their sales, our returns. So another way of saying that is they have 5 to 6 percentage points better comp store sales. I can go back and quantify it. I don't have it on the top of my head. And there's no question, as Calvin mentioned, an awful lot of those returns are either marked down, some of them are sent back, I would guess less than half of them are sent back to the fulfillment center, They get put in the back room, they're forgotten about.
Finally, when we have our big end of season sales, they're put out onesies. What's the probability someone's going to come in and want that shoe that just happens to be that one size? So and then we dime them out. So this is a fantastic way that the technology folks Calvin, I'll give you credit there, buddy. The technology folks have come up with to help us relieve that situation.
It's very, very powerful.
It's not in the capital budget. We have time for about one more. That's okay.
I just wanted to quickly follow-up on that. Do you expect a change in behavior when you February 1 next year when you can actually change the accounting for those returns so that the returns are being transferred?
Yes, I don't think I've talked to that, everyone, so I'll let everyone know. Because Kimberly and I were talking outside about this. One of the things that we're doing is starting on February 1, where we are now going to take those returns and debit them against the direct business that day and not the store business. The results will be that the store comps will be elevated and the direct comp will be less. Do I think it will affect behavior?
Yes. I think that the stores right now are feeling a little, we're swimming upstream and all of a sudden they won't be. So I think that they're going to be happier and happier sales associates have always translated into happier customers and more sales. So that's what that's one of the reasons we're doing it, but the real reason is that it's just the right way to account for it.
I was wondering if you could talk a little bit about SG and A. I think this year we saw it increase a little bit more because of some
catch up investments that the company wanted to make.
We also heard upcoming years that would be really helpful? Thanks. Mike? Yes. Thank you.
Thank you. Thank you. Thank you. Thank you. Thank you.
Thank you. Thank you. Thank you. About upcoming years that would be really helpful?
So we haven't given out our SG and A growth yet for how we're thinking about it next year. Much the brands love the time of the season that we're in. We're in the budgeting time right now. So we're putting together those numbers. So I wouldn't feel comfortable committing to a number yet for you.
But you can look for that towards the 3rd Q4 for us to speak to that SG and A growth. I mean, this will be a continued period of investment for us. The other item too that affects SG and A, whereas I'm not comfortable giving you a number quite yet, is the mix of our business. So as the direct to consumer channel increases as a penetration of our business, that affects actually the gross profit to SG and A mix. DTC is a more profitable channel when you look at it from an operating profit standpoint, but it does come with a higher rate of SG and A, a lower rate of gross profit because we put our gross profit or excuse me, our store expense in gross profit.
And obviously, the DTC doesn't have that expense, but yet it has marketing expense tied to it. And we do credit the marketing expense to SG and A.
Okay? Okay. Is that it? Well, thank you all very much. Before you leave, I have two things to discuss.
One is I want to recognize and thank Meredith Boyce for helping Ona. Both of them put this conference together. They did a fantastic job. For those of you who have interactions with Meredith, you know she's actually the person who runs the company. And if you need something talk to her.
Ona, thanks again. Ona is going to contact most of you probably by phone, but also she's going to send out a SurveyMonkey and we would appreciate very much your feedback so we can make the next conference even more productive from your point of view because that's what we're trying to do. Thank you all very much to be here today. If you want a beer, if you want a glass of wine, if you want some hors d'oeuvres, just join us right outside. If not, thank you.