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Urban Outfitters Inc. (URBN - Analyst Report) in a recent regulatory filing stated that so far in the third quarter of fiscal 2014, it has been witnessing mid single-digit growth in comparable retail segment net sales.

Urban Outfitters’ initiatives to optimize inventory level and focus on increasing customer count through store expansion, online and mobile marketing endeavors and expansion of direct-to-consumer business have paid off well amid the sluggish economic environment.

This Zacks Rank #3 (Hold) stock posted better-than-expected second-quarter fiscal 2014 earnings. The quarterly earnings of 51 cents a share surpassed the Zacks Consensus Estimate of 48 cents and jumped 21.4% year over year due to a rise in sales and higher merchandise margins.

Total net sales of Urban Outfitters climbed 12.2% to $758.5 million during the quarter, reflecting robust performance of its Direct-to-Consumer business coupled with sturdy sales through new store openings and double-digit growth at its wholesale operations. Despite robust sales results, the company missed the Zacks Consensus Estimate of $767 million.

Going forward, Urban Outfitters is optimistic that fiscal 2014 will present considerable opportunity for gross-margin improvement. The company expects to enhance margins by at least 50 basis points through improvements in brands and lower markdowns.

We expect Urban Outfitters to sustain its growth momentum, going forward, on the back of new store openings, increase in direct penetration, expanding wholesale operations, technology advancements and merchandising improvements.

Other Stocks to Consider

Until any further upward revision in the Zacks Rank of Urban Outfitters,  the other stocks worth considering in the retail sector include Citi Trends, Inc. (CTRN - Analyst Report), Fortune Brands Home & Security, Inc. (FBHS - Snapshot Report) and Lumber Liquidators Holdings, Inc. (LL - Snapshot Report), all sporting a Zacks Rank #1 (Strong Buy).

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