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Francis Conforti

Thank you, Dick, and good afternoon, everyone. Today, I'm excited to share our company's first quarter results compared to last year, and then I'll dive into some detailed notes by brand. Overall, our teams delivered another outstanding quarter. exceeding our plans as we discussed on the recent fourth quarter conference call.
Total URBN sales grew by 11%, hitting a Q1 record of $1.3 billion. All of our brands delivered positive sales comps and four of our five brands performed exceptionally well, posting record first quarter sales. Urban Outfitters also continued to make significant strides as the brand posted the first positive sales comp in quite some time and delivered continued progress in reducing its operating loss compared to last year.
Our sales growth was partly driven by a 5% increase in the Retail segment comp. URBN comps were positive in both channels with stores outperforming digital. Newly delivered impressive 60% revenue growth with a 53% increase in average active subscribers. Additionally, the wholesale segment saw a 24% revenue increase driven by a healthy rise in full-price sales at Free People.
Now let's talk about gross profit. URBN saw a 20% increase in gross profit dollars reaching a record $489 million. The gross profit rate also improved nicely by 278 basis points, which includes nonrecurring benefits of 74 basis points rising to 36.8%. The remaining 204 basis point increase was due to better gross margins across all segments. The improvement in gross margins was due to leverage on occupancy and delivery expenses and lower markdowns, largely driven by the Urban Outfitters brand.
In the quarter, SG&A increased by 8.1%, leveraging by 65 basis points. The growth in SG&A dollars was primarily driven by increased marketing spend which fueled sales growth for all brands. The marketing efforts drove increases in traffic and transactions both in stores and online for total URBN while new lease campaigns resulted in healthy double-digit growth in average active subscribers.
Overall, total URBN operating income rose by 72% compared to last year, reaching $128 million, while the operating profit rate improved by over 340 basis points to 9.6%. Net income saw a 75% increase to $108 million or $1.16 per diluted share.
Moving on to brand performance, starting with Anthropologie. The Anthropologie team had another fantastic quarter, achieving a 7% increase in their retail segment comp, which marks four years of consecutive quarterly positive comps. This success was fueled by equal strength in the digital and store channels, both of which benefited from increased traffic. Every category saw positive regular price and total sales comps with strong performance across all apparel categories in addition to shoes, accessories, beauty and home accessories.
The team at Anthropologie continues to do an excellent job with their strategy to expand their product offerings to fit their customers' full lifestyle. As mentioned on the last call, the brand recently launched Celandine, an exclusive in resort wear label that offers year-round vacation-ready styles. This category's growth has exceeded our expectations. Onsite Celandine, daily practice, and the expanded assortments of intimates and loungewear are also seeing impressive growth, and we believe these could become significant categories in the future.
Turning to the home category. The brand saw impressive growth driven by the increase in home accessories and textiles, both of which are benefiting from consumers' desire to refresh their homes. The team is focused on incorporating more newness into these categories, catering to consumers' desire for more frequent updates for their homes.
The brand's ability to create compelling product assortments in conjunction with strategic marketing investments and exceptional creative content have enabled them to succeed in their goal of attracting new, younger customers, while deepening engagement with their existing ones. The brand drove growth across new retained and reactivated customers in the quarter. These efforts led to strong traffic increases in both stores and digital during the first quarter.
The Anthropologie brand delivered exceptional top line growth and the tenth straight quarter of double-digit operating profit growth, resulting in a record first quarter operating income. Based on our current plans, we believe the Anthropologie Group could deliver a mid-single-digit positive Retail segment comp in Q2.
Next, I want to highlight the fantastic performance of the Free People team this quarter. They delivered an 11% increase in total retail and wholesale segment sales and double-digit operating profit growth for the brand. Their double-digit sales growth was driven by a 3% retail segment comp, a 26% rise in Free People Wholesale segment revenues and over 200% increase in noncomp sales. The positive Retail segment comp was driven by low single-digit comp in both the stores and digital channel. Throughout the quarter, Free People saw positive comp sales growth across all major categories.
The FP Movement brand also delivered robust total retail and wholesale segment sales growth of 29%, driven by total retail segment growth of 16%, a 6% retail segment comp and explosive 78% growth in FP Movement wholesale segment revenue. Non-comp sales growth was boosted by the opening of 43 new stores, including 14 Free People brand and 29 FP Movement brand locations over the past 12 months. Based on our current plans, we believe the Free People Group's Retail segment could deliver a mid-single-digit positive comp in Q2.
Free People Wholesale revenues increased by 26% during the quarter, driven by full price sales gains in specialty and department stores. The profitability of Free People Wholesale improved significantly from the prior year.
Now let's move on to the Urban Outfitters brand. Urban Outfitters recorded a positive 2% global Retail segment comp for the quarter. Congratulations to the team on much improved business and the first positive comp in some time. North America recorded a negative 4% Retail segment comp an exceptionally strong positive 14% retail segment comp. The total global comp was driven by positive store comps, partially offset by negative digital comp in North America.
The digital business in North America continues to anniversary heavy promotional activity from the prior year, which will begin to abate after the second quarter of this year. Positive global comps were a result of strong regular price business in most categories in both channels, which to a significant reduction in markdowns versus last year and an improvement in profitability levels for the brand.
In North America, the teams continue to focus on the pillars of transformation strategy Chase spoke to last year. Focus on the customer, evolving the product assortment, rebuild our customer base, adapt our channels to offer a more relevant experience and deliver profitable growth. The teams have evolved the product assortment to be more relevant for the customer. Denim, lounge, accessories and home sales were all comp positive in the quarter. Notable market brands have been added to the assortment, including a successful Bague collaboration and the recent addition of the NIKE brand currently available online and in 40 stores.
Regular priced sales for the brand were positive for the second consecutive quarter and accelerated from Q4 last year, showing continued improvement in the product offering, inventory management and marketing campaigns. Marketing and creative efforts have improved significantly. Our focus on acquiring new customers has been successful with positive growth in new customers entering the brand in the right demographic. Lastly, as mentioned before, the brand showed an improvement in profitability versus last year, largely due to a lower markdown rate.
Now turning to Europe. Our European business delivered a 14% comp driven by double-digit comp increases in the digital and store channels. During the quarter, the brand achieved positive comps across apparel, home and accessories. Strong sales comps and improved maintained margins fueled a healthy increase in operating profit for the European team. Based on our current plans, we believe the global Urban Outfitters brand could deliver a low single-digit positive comp for the second quarter.
Finally, let's touch on the Nuuly business, which delivered another exceptional quarter. Nuuly added over 40,000 average active subscribers since the end of the fourth quarter and has grown average active subscribers by over 110,000 compared to the prior year. This beat even our most optimistic expectations. This growth in average subscribers contributed to a 60% increase in brand revenue and added nearly 400 basis points of revenue growth to total URBN top line. The strong revenue growth in the first quarter resulted in leverage in almost every expense line item, helping to deliver a record first quarter operating profit of over 5%.
The current momentum in the Nuuly business has continued into May, where we now sit above 380,000 active subscribers. The performance at Nuuly over the past year has fortified our confidence that our business model is strong and the rental market opportunity is very large. We are thrilled that Nuuly now appears to be a leading industry with an opportunity to continue to see significant growth. Based on our current plans, we believe Nuuly could deliver a healthy double-digit revenue and profit growth in the second quarter.
Now moving on to tariffs. We would like to give you as much clarity as possible, but unfortunately, you all know this is not possible given the continued uncertainty with news on tariffs changing daily. We can only offer our perspective based on what we know today. Our current assumptions are based on a 10% global tariff on all items entering US except for items from China, where we are assuming a 30% tariff.
First, I want to acknowledge the amazing work our sourcing, brand and logistics teams have done. Over the last several years, the teams have worked hard to diversify of origin as well as dual source most of our own brand products. This means many of our products are made in two different origins, enabling us to shift production from one country to another if needed. We currently have no single country that accounts for more than 25% of our production. India, Vietnam and Turkey are our three largest countries of origin, while China represents less than 5%.
Quickly, after the announcement of tariffs, our team started working on how to mitigate the impacts with a primary focus on the customers' experience. We are working hard towards minimizing the impact on the consumer. We have several mitigation tactics that we've been working on. First, negotiating better terms with our vendors. Second, shifting our countries of origin where possible. Third, shifting our mode of transportation from air to boat. And lastly, gently and sparingly raising some prices. Please note that any price increases will be very strategic, protecting opening price points and only targeting areas where we believe we could raise prices without affecting the overall customer experience.
As of today, based on the previously stated assumptions, we believe that tariffs could have a minimal negative impact on gross margins in the second quarter and potentially a negative 20 basis points impact in the back half of the year. Although tariffs present a temporary headwind to our business, we are confident in our ability to manage through this environment and still achieve 50 to 100 basis points of gross margin improvement for fiscal year 2026. Again, I want to stress that this plan is based on what we know today.
In summary, it was an exceptional quarter. All brands delivered positive sales comps. Both the wholesale and subscription segments drove double-digit sales growth and all brands and geographies recorded healthy operating income improvement. We could not be prouder of the teams and their amazing execution.
I will now turn the call over to Melanie.

Melanie Marein-Efron

Thanks, Frank, and good afternoon, everyone. Let me walk you through how we're thinking about our second quarter financial performance. We're off to a solid start this quarter. And based on what we're seeing so far, we're planning for total company sales to grow in the high single digits. In our Retail segment, comp sales could grow mid-single digit driven by mid-single-digit positive Retail segment comps at Anthropologie and Free People brands while Urban Outfitters brand could be low single-digit positive comp. At Nuuly, the brand could deliver mid-double-digit revenue growth driven by continued subscriber momentum. Finally, our wholesale segment could produce low double-digit growth.
As Frank mentioned, we believe gross profit margins could improve by about 50 to 100 basis points compared to last year, both for the second quarter and the full fiscal year. This improvement could come from lower markdowns at Urban Outfitters and occupancy leverage, partially offset by lower initial product margins due to higher US tariffs. Our current assumptions on tariffs are based on 10% global tariff on all items entering the US, except for items from China where we are assuming a 30% tariff.
Turning to SG&A. We expect expenses to grow roughly in line with sales based on current sales performance and plans. The planned growth in SG&A is mainly driven by higher marketing spend to support customer and sales growth along with increased store labor costs related to new store locations. As always, if sales performance fluctuates, we maintain a certain level of variable SG&A spending that we can adjust up and down depending on how our business is performing. We're planning for an effective tax rate of about 23.5% for Q2 and the full year.
Now on to inventory. While our teams continue to focus on increasing inventory turns, the uncertainty around tariffs means we are likely to bring in fall products a bit earlier. Because of that, inventory growth in Q2 may grow at a rate above sales growth.
For FY26 capital expenditures are planned at approximately $240 million, the FY26 capital project spend is broken down as follow approximately 50% is related to retail store expansion and support, approximately 25% is related to supporting technology and logistics investments, and the remaining 25% is for home office expansion to support our growing businesses.
Lastly, we're planning to open approximately 64 new stores and close approximately 17 this fiscal year. Most of our net new store growth will come from FP Movement, Free People and Anthropologie. Specifically, we're planning 25 new FP Movement stores, 15 new Free People stores and 16 new Anthropologie stores. As a reminder, the foregoing does not constitute a forecast but is simply a reflection of our current views. The company disclaims any obligation to update forward-looking statements.
With that, I'll hand it back over to Dick.

Richard Hayne

Thanks, Melanie. What a fantastic start to the year. Operating profit came in just shy of our ambitious 10% goal, an incredible achievement. Huge congratulations to all URBN teams for delivering such impressive results. Despite the noise in the headlines and the broader economic uncertainty, our customers continue to show resilience in Q1. We haven't seen any signs of a demand slowdown. In fact, customers were eager for fresh spring fashion and our teams delivered from compelling assortments to standout store experiences and inspiring marketing. We exceeded their expectations. The result, positive comps across every brand and every segment.
This performance speaks volumes about the strength of our strategies, the quality of our execution and the appeal of our brands. Most of all, it affirms the talent of our leaders and their teams. We're attracting new customers, keeping our loyal ones and growing our market share across the board. Each brand is playing a valuable role in the URBN portfolio. Anthropologie and Free People are two larger brands continue to grow revenue and deliver healthy mid-teen operating margins. FP Movement is growing faster than the sister brand and thanks to new store openings and strong wholesale demand.
And Nuuly, our women's apparel rental business is one of the most exciting high-growth concepts in the market today. Both FP Movement and Nuuly are nicely profitable, gaining brand awareness and showing real potential to scale. Urban Outfitters North America is making steady progress. Stores were comp positive for the quarter, and the number of new full-price customers grew nicely. In Europe, after a solar started in Q1 last year, Urban delivered powerful comp sales gains that led to a jump in profitability.
All in all, I'm delighted with how our brands are performing. Yes, we're keeping a close eye on supply chain risk and global uncertainty. But as Frank said, based on what we know today, we believe we can continue to grow revenue and expand margins, not just in Q2, but for the full year and beyond. We're confident URBN is well positioned for continued success.
Before we move to Q&A, I want to thank our co-presidents, Meghan Frank, our brand leaders, Tricia Sheila, and Dave and their incredible teams across merchandising, creative and operations. I also want to recognize our shared service teams and our 28,000 associates around the world. Your hard work made this record quarter possible. So thank you. To our global partners, thank you for your cooperation as we work together to navigate the new trade rules. And to our shareholders, thank you for your continued support.
That wraps up our prepared remarks. Now let's take your questions.

Question and Answer Session

Operator

(Operator Instructions)
Lorraine Hutchinson, Bank of America.

Lorraine Hutchinson

I was hoping you could talk about some of the key drivers of success at UO Europe. Was it branded products, different label products? And which of these learnings can you apply to help bolster the US UO business?

Richard Hayne

Okay. Lorraine, I'll provide that and then ask Sheila to back me up. I'm going to ascribe much of the progress to -- They have a number of really strong bottoms that are propelling their business in that area. And now they have added great tops to that. To your question, the Urban brand in North America, is also sharing in a number of those items, and it's helping them very much as well. So product is number one. Number two, I think they have a very strong marketing group and some of their marketing initiatives have proven to be very successful in growing the customers. And I think that about does it. Sheila, anything you want to add?

Sheila Harrington

Yes. I would add just that the women's wear in Europe has continued to find momentum over the quarter. Starting in Q3 last year, they had tremendous growth Q4 and that accelerated in Q1 very nicely. Do you think the strong partnership between Europe and North America that I'm quite excited about with Shay and Emma's leadership. So I think we're only at the beginning.

Operator

Adrienne Yih, Barclays.

Adrienne Yih

I have to say, I don't think I've seen all of the brands look is spot on at the same time in years. So really take, like you said, congrats to like all the brand leads. You're welcome. So a couple of quick ones. Urban Outfitters. The I know at one point, you were talking about kind of a different format, perhaps making them smaller, to be more productive. Has that actually happened yet?
And then on -- Melanie, on the early inventory, is that to avoid tariffs because I know you're on a shorter cycle than most? Or is it to kind of anticipate congestion? So just curious about that. And my final one would be you're always on air and to try to kind of cut some costs by going to boat increases sort of some uncertainty. So I'm wondering if that is consistent with the speed model?

Melanie Marein-Efron

I can answer the inventory question, and then we can answer the other ones that you have, Adrienne. So our inventory position at the end of the first quarter really reflects the fact that inventory transit times were faster than planned. We also probably had some early receipts to bring in inventory ahead of the uncertain tariff outlook, but a lot of it had to do with the inventory arriving earlier than planned.
In the second quarter, this changes a little bit. I think -- while there is some fashion risk of bringing product in early, we believe that -- it is prudent planning to bring in fall inventory, which is less sensitive to fashion early, given the uncertain tariff outlook and any potential fine disruptions that could occur in the future. So those are our current plans for Q2, again, that we would likely have inventory ahead of our sales growth.

Richard Hayne

Adrienne, to your last question, going from air to boat definitely adds about 30 days to delivery time. And you're right, there is always a risk as you go out in time that the fashion might not be as accurate as we would like it to be. So to offset that, we are working very hard to use some of the advanced technologies to shorten that time period. And Shea, I think, Adrienne, you wanted to know about the smaller

Shea Jensen

Adrienne, we have not per se, made any adjustments yet, but we have a ton of flexibility over the next couple of years with our fleet as leases become available. And so even as soon as a couple of this year. And so as we look at we'll be looking either to relocate and downsize where we think we're over spaced are potentially downsize in place. Our goal is to make sure that we are positioned close to our customers. And so as we have the flexibility, I think we'll be looking to do that where, again, we feel like we're over spaced.

Richard Hayne

You may want to talk a little bit about the Houston store -- size of.

Shea Jensen

Yes. One of those examples is -- one of our Houston stores where we'll be downsizing a couple of thousand square feet and also applying our new store concept. We're really excited about that, and that will open later this fall.

Operator

Matthew Boss, JPMorgan.

Matthew Boss

Congrats on the nice quarter. So Dick, could you elaborate on performance by brand, what you've seen in May, maybe your larger picture view on consumer spending on apparel in the back half of the year, just all of the moving parts right now? And then Melanie, on sustainable top line growth at the Urban brand, what's a reasonable operating margin you think for the Urban brands multiyear?

Richard Hayne

I'll take your first question. May to date, we see the comp sales being very similar to the Q1 print. When we look at comparison to same period last year, we believe total Retail segment comps could register in the mid-single digits for Q2. I think that went over that, but I'll reiterate it. We think it might include mid-single-digit comps for both Anthropologie and Free People brands a low single-digit positive comp for the Urban brand and strong double growth in average active subscribers and revenues from Nuuly. And double-digit sales growth for the wholesale segment. When you combine all of those, we believe that total URBN Q2 sales could increase in the high single-digit range.

Francis Conforti

And then, Matt, I'll take your question on us return to profit. And first, I just want to give Irvine more congratulations in airtime here. We're just really excited the continued progress that the team is making. First positive comp in some time, first positive store comp in North America and sometimes continued reduction in their markdown rate based on improved product performance, marketing and inventory management. the creative execution and marketing continues to improve, which has seen a new customer acquisition, just a ton of boxes being checked there, which is great to see. I don't know that we've landed exactly on a number to where Urban should operate from an operating profit, just yet.
I think we're over focused on turning the business back to profitability. We know that, that won't happen this year. I think in order to do it right, it's about slow and steady progress, capturing that right customer and really improving all those different metrics that I talked about. I think when you think about mid- to high singles being a reasonable opportunity for the brand. But again, that's going to take some time, and it's not going to happen this year. We're just focused on continuing to make the progress continue to flow back on that loss and doing it right.

Operator

Paul Lejuez, Citi.

Paul Lejuez

Maybe just to go back to margins for a second. deframe for us where rents and occupancy is today for the UO brand versus where it was, let's say, pre-pandemic, '18, '19, whatever is a good year you think to you same question for SG&A in that net brand. Just want to get an idea of how much recapture opportunity there is on the margin as sales increase?

Francis Conforti

Yes. Those with rates, Paul, changed a lot as it relates to the mix of the business between stores and digital. As you know, we're going to follow the customer wherever they are. As Shea talked about, store formats are going to be shrinking from a square footage perspective, that's going to affect your occupancy leverage. So I don't think those rates are as important from a focus right now. I think the important focus is on maintained margin improvement, which the brand is seeing driven by lower markdowns.
And where we are is we've made a ton of progress, but we're not at historical averages just yet. We've bought back a lot, but there is still remaining opportunities this year, and there will still be opportunity next year. I think the next leg after maintained is that they've now started to as a total brand had positive comps and Urban North America is its positive store comps and is inching even closer to positive total comps. And so leveraging that occupancy and those fixed expenses. I think we think we have opportunity to do that in the back half of this year and then continue that progress next year, which would be the next leg in calling back that operating profit loss and turning the brand back into profit.

Operator

Alex Straton, Morgan Stanley.

Alex Straton

Perfect. Just a couple for me. One just on guidance. You outperformed our gross margin quite a bit, but maintaining the full year guidance. So just curious kind of what's holding you back from flowing that through and the puts and takes as you see it on that line item for the rest of the year. And then just on the tariff mitigation tactic of very selectively taking price. I'm just curious what types of categories you see as having the biggest opportunity? And also how quickly you can implement that?

Francis Conforti

I can take those, Alex. I just want to stress on price. You're right, it is different from one category to the next. But I want to stress that we're being extremely thoughtful and careful about protecting things like opening price points targeting areas where we believe we could gently and sparingly raised some price points, but we're extremely focused on protecting that consumer experience. You're right, it's different from one category to the next, but it is not the biggest piece of our mitigation strategies by any means. And I just want to stress that with a high level of importance.

Richard Hayne

And let me add to that, Frank, before you go to the rest of it. We are definitely consider this raising of prices as the last item that we will try in our portfolio of tricks to try to offset this tax. I think that what you'll see, Alex, is that a product that has a little bit more make in it, has a little bit more embellishment and it's a little bit -- probably a little bit higher priced would be where we would try to get, a little bit extra if we need to. If we don't need to, we won't make the change.

Francis Conforti

And Alex, to your first part of your question, as it relates to the plans for the year, certainly, we're really proud of the Q1 execution and how the business continues to perform. It seems like the customer has held up. And certainly, our brands are likely gaining some market share and performing at a high level. I think planning the business right now in total at high single digits given the continued uncertainty all over the news and all over the media, feels like an appropriate place to be and a conservative, hopefully -- a conservative place to be. The lion's share of the beat in Q1 was because we did exceed our top line performance and deliver almost 11% top line growth. I hope that opportunity continues to persist. But I think just given the constant news around the uncertainty on the consumer, we feel like it makes sense to play it conservative, and I hope that our plans are conservative.

Operator

Dana Telsey, Telsey Advisory Group.

Dana Telsey

And I echo the fact that seeing all three brands do such positive results. So nice to see with the path. Nuuly is very exciting. And would love to hear how you're thinking about the profitability profile of Nuuly compared to the base business and how you're thinking of pricing on Nuuly in regard to tariffs versus the other brands business? Is there a difference? And are you seeing anything different in the customer in this environment with Nuuly and attracting new customers? And also, is there any carryover any cannibalization? Or are they the same customers in the brands?

Dave Hayne

Great. Thanks, Dana. I will try and hit each of those, if I can call them. The -- yes, the business has been very exciting. We've been very, very encouraged with the first quarter to grow active subscribers, almost 23% within the quarter. It was just a really amazing feat for the team. We're feeling very good about it. From a pricing standpoint, we are aware, obviously, of all the tariff motion that is occurring. We have not seen any sort of impact at this moment yet. In terms of taking price, it's a different proposition, obviously, for a subscription business to take price versus retail brands. We don't have any intentions to take price at the moment. And we're going to be navigating the cost pressures and the cost prices that may occur the same way the other brands are here at the business.

Francis Conforti

Dana, I just wanted to jump in on the Nuuly profitability at I think three of your four to gave. What we said from the start, obviously, we felt like we could get this business to profitability and congratulations to Dave and team doing it so quickly hitting their first full year profitability last year, hitting above 5% in Q1 this year. We've also said that we didn't feel like it would be dilutive to our 10% URBN goal. And what that implies is that we think that business can run at 10% operating profit. I don't think we've set a goal beyond that, but I don't think that's appropriate for a brand that's still so young. And still has so much growth opportunity ahead of it and so much for us to learn. But we don't think that Nuuly would be dilutive to URBN going forward, and we feel like 10% is an achievable target for ore down the road. And continued congratulations to Dave and team at [60%] growth is pretty damn aggressive.

Operator

Mark Altschwager, Baird.

Mark Altschwager

Congrats on the great results here. For Melanie and or Frank, I guess, first, could you quantify the markdown benefit in Q1, just of the 200 basis point kind of core gross margin improvement more than half roughly have any help there and how to think about that for the rest of the year? And then just bigger picture. Q1, as you mentioned, you're nearing the 10% operating margin goal. I think it would be unusual for the fiscal year to not exceed the Q1 rate, just looking at historical trends.
And yet it seems like there are some big levers ahead still on margin with UO profitability increasing over time, Nuuly scaling. So maybe you can just speak bigger picture to how you're thinking about the long-term algo. Do you think you can take EBIT margins higher than the 10% rate? Or do you choose to reinvest the upside and drive a faster top line through increased marketing spend as you approach that 10% goal? Just be great to hear how you're thinking about that.

Francis Conforti

So Mark, taking here giggling a little bit because we know once we get near our target, we know the expectations always the bar gets raised and The Street wants more. So certainly, we are still targeting a 10% operating profit rate and confident we can achieve it. We delivered 100 basis points of improvement last year, reaching 8.6% in fiscal '25 based on our plans of $500 this year that would put us at 9.6%. And certainly, we have the opportunity to beat that.
What I would say is, before we set a new goal, let's hit the first one. And then let's prove we can operate at that. I think you're absolutely correct in that with Urban's turnaround and then once that business turns into profitability, with Nuuly having opportunity to continue to grow that rate. Yes, there is upside. But for us right now, before we set any new targets, I'd like to hit the first target. And then we can get back to you with what we think the upside is. As it relates to markdowns for the first quarter, it was about half of the 204 basis points that you mentioned.

Operator

Marni Shapiro, The Retail Tracker.

Marni Shapiro

Congrats to all the teams and say, congrats to you on the Urban improvements. The site looks amazing that Georgia like everyone looks like they want to hook up, it's amazing. I wonder if you can touch on the changes you've made in marketing, specifically social media because the brand has suddenly been in my feed very regularly with halls and in a very positive light, which is fantastic to see. And then if you could also just talk a little bit about on rotation, I guess, like what was the thinking behind this? Why NIKE is a partner, though I love it. I'm just kind of curious what you're thinking was behind all of that.

Shea Jensen

Yes. First of all, thank you for the compliment. Great to hear. To your first question on social, it's a very keen observation, and I'll answer that really in two parts. Our team has been really working hard, and I would describe it as -- it's not really enough to just post on social anymore. And we've really taken a multi-platform approach. It's not just about Instagram. It's not just about Pinterest. And the team is really trying to get the right content, the right platform, the right product and showing up in a truly authentic way and really optimizing for the algorithm. And that really means trying to get into the feed. So in your case, it sounds like we're being successful at this year.
And secondly, I think we're really trying to engage with customers, be an authentic part of the conversation. Sometimes that means jumping into the conversation. Sometimes that means clapping back, really talking about a lot of user-generating content and allowing our customers voice to be amplified. And so I think it's great to hear that it seems to be working. We're really proud of the creative assets that are showing up out there. You mentioned the site. That's great to hear as well.
Secondly, you talked about on rotation. Obviously, the NIKE launch that happened last week. We're excited to have launched with NIKE, of course, a peek brand out there, one of the most popular brands with our customer. I would take this concept really back to our strategy. And a great example of our teams really focusing on the customer. We know that brands matter a lot to our customer. And essentially, brands are really how they identify themselves. It's also how they sort of create community. And so the idea that brands are important is really what drives us to partner with great brands.
Secondly, we've talked about this before. These customers did not grow up as mall rats. They didn't grow up discovering retailers in the mall. And they grew up or intend in their house. And in many cases, brands found them on their phone, and they were targeted. And so they really value in real-life discovery. And so on rotation is really about taking those two things and bringing it to life in the platform of our store. And so we're really excited to have launched on rotation with NIKE, think you can expect another brands to show up and on rotation in different stores and different ways. And just a great example of our team really focusing on giving the customer what they want.

Operator

Ike Boruchow, Wells Fargo.

Ike Boruchow

Let me add my congrats. Two from me. First, maybe Frank or Melanie. On the SG&A rate, I believe three months ago, you said you expected flat for the year. Is that reiterated? Core you going to reinvest more? Or should you expect a little scale given the momentum on the top line? And then just on UO, the turnaround is working. I guess the question is, do you expect this to be linear? Would you expect the comp to take a step back because you battled for margin in a certain quarter. Just kind of curious how you kind of envision this term playing out over the next 12 months?

Melanie Marein-Efron

So I'll take the first part of your question, Ike. As it relates to SG&A for the full year, I would say I am reiterating our guidance that we believe that full year rate of sales could be in line with sales rate of sales would grow in line with sales growth. Now by quarter, then the relationship between sales and expense growth could be uneven as a result of marketing campaigns and other SG&A expense timing shift.

Shea Jensen

Yes. And it's Shea, I can take that answer. I would say that we certainly hope that this is a sequential build. I think what you see in retail is an example of the inflection point coming a bit sooner because of the nature of the price type in that business. In retail, it's a much larger penetration of regular full price. And so as the full-price business and the health of that business returned a bit sooner because there's a larger penetration of full price.
In the digital channel, we have had a larger penetration of discounting and promotional business. And as we face those headwinds, going to take a bit longer for us to see that inflection point. We think as we get through the second quarter and through the back half of this year, we should see those trends play forward as we have seen in the retail channel.

Operator

Janet Kloppenburg, JJK Research.

Janet Kloppenburg

Congratulations. It's remarkable. Frank or Dick, I think if you reach the high end of the gross margin guidance, you'll be pretty much near historic levels on gross margin. So maybe you could talk a little bit about the opportunity for the historical levels to move higher. And I also wanted to talk about the new occasion businesses at Anthropologie. Feels very much like what happened at Movement where the products perform well in the Free People stores and then it was spun out. And I'm just wondering, is there an opportunity for that to happen at Anthropologie as well.

Francis Conforti

Janet, I think on the gross profit margin, the historical levels is probably not the right bar for us. I think we have had the Urban Outfitters brand sort of masking a little bit of what the great improvement and consistent improvement has been going on in Anthropologie and Free People for some time now. We've done a great job as a company sort of lowering what our historical averages have been in markdown rates. And it's seen by the consistent mid- to high-teens operating profit that Anthropologie and Free People have been running at for the last several years. So I do think, yes, you're right. We're close to eclipsing that. But I do think that there's a new bar that is being said. And it's been a little hard to see that over the last couple of years, which where Urban has been. And you're starting to see that come to fruition as that brand is starting to really -- that turnaround is really starting to take hold.

Richard Hayne

Tricia?

Tricia Smith

Janet, this is Tricia. Thanks. We're super excited about our new businesses, selling and daily practice as well as our lingerie. And sleeper businesses are all significantly outperforming the total. We don't really have any plans currently to spin off stand-alone stores. But I think as we continue to grow those brands over time. We'll continue to assess the opportunity. We've had tremendous success with some pop-up location experiences with our Celandine brand. So we'll continue to monitor that over time. But no plans currently. But yes, very pleased with the growth of those brands and what they're contributing to the overall growth of Anthropologie.

Operator

Simeon Siegel, BMO Capital Markets.

Simeon Siegel

Great job, everyone. So the wholesale EBIT margin looks more and more attractive like each quarter. Any thoughts to how large the wholesale business can become and how high is high for the margins for the channel? And then just two quick ones. What's the right way to think about the impact from carrier costs and broader delivery expense going forward? And then I think there was a comment about reduction in packages per order helping gross margin. Could you just elaborate on what that was as well.

Francis Conforti

I'll take the one first and then let Sheila talk about wholesale. Packages per order, yes, we've done a good job at reducing those I think there's a lot that goes into planning inventory and having it in the right place. So certainly, thanks to the logistics team. Thanks to Dave and the tech team for supporting that effort. A lot of moving pieces behind that and trying to get that right and can have a meaningful impact and improvement from a delivery expense perspective. So we've seen some of those benefits and hope that they will continue, and I think there's still opportunity to come there.
As it relates to carriers, we haven't seen really any challenges right now, as Melanie mentioned. We've been faster. I think inbound has been faster than the brands anticipated, which you've seen in their inventory numbers and has not been a challenge. What happens in the back half of the year as it relates to congestion and maybe a lot of companies bringing stuff in earlier. Your guess is as good as mine is something that we'll continue to monitor, but we're not experiencing any cost or speed pressures right now, but it's something we'll continue to monitor closely.

Sheila Harrington

And I can jump in with wholesale. Yes, we are very pleased with our wholesale, both sales as well as profit. And I think we're committed to our profit. I think that was a goal coming out of the pandemic of how to get this channel to be consistently profitable with the right partners. And that is continues to be our strategy in wholesale is to work and align with brands with -- to have the same value proposition as us in terms of care of product and brand.
And with that, we're seeing nice growth with those brands and continue to see a really good outlook. What I would also say is, without saying how big the wholesale business for Free People and FP Movement could be is on top of that partnership, we've been able to see some of our new labels with some wholesalers that we're really proud of. Whether that's our freest label or we the free denim brand, and that's allowing us to grow into new account base, which we're quite excited about for the future.

Richard Hayne

Okay. Well, I think that concludes the session for today. I thank you very much for joining, and I hope to see you in a few months.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.