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Urban Outfitters Prospects Look Attractive: Time to Hold?
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Urban Outfitters Inc.’s (URBN - Free Report) has not only outperformed the Zacks categorized Retail-Apparel/Shoe industry but also the broader sector in the past one year. The stock has increased 29.6%, while the industry has witnessed a decline of 11%. While the broader Retail-Wholesale sector of which they are part of gained 12.9% in the same time frame. Additionally, the stock’s long-term earnings growth rate of 13.2% and a Value Score of “A” reflect its inherent strength.
The company looks attractive from the valuation perspective. We observe that this lifestyle specialty retail company possesses a P/E of 14.02x and P/CF of 9.83x. Compared with the industry at large, this is pretty favorable as the overall space has an average P/E and P/CF of 15.17x and 10.74x, respectively.
Let’s Take a Closer Look
We believe Urban Outfitters’ commitment toward improving comparable sales, investing in direct-to-consumer business, enhancing productivity in existing channels as well as adding new brands, and optimizing the inventory level will help bring itself back on growth trajectory. A reflection of this was clearly visible in the company’s holiday sales results, wherein comparable retail segment net sales, including the comparable direct-to-consumer channel, gained 1.5%. (Read: Urban Outfitters Holiday Comps Up, Lower Traffic a Worry)
Going forward, we expect the company to drive growth riding on the back of new store openings, increase in direct penetration, growing wholesale operations, technology advancements and merchandising improvements. Further, management is making all possible efforts to enhance the performance of its brands through store refurbishment and by bringing in more compelling assortments.
Being a multi-brand and multi-channel retailer, it offers flexible merchandising strategy. Further, it has a significant domestic and international presence with rapidly expanding eCommerce activities. Urban Outfitters also made an unprecedented move by acquiring Philadelphia’s The Vetri Family group of restaurants, including the Pizzeria Vetri chain. The attempt is seen as a part of the company's strategy to target and attract millennials to the stores.
However, recently the stock has come under pressure following a dismal third-quarter fiscal 2017 performance. After registering a positive earnings surprise of 17.9% in the second quarter, Urban Outfitters witnessed a negative earnings surprise of 9.1% in the third quarter. Further, the company’s top-line fell short of the Zacks Consensus Estimate in the quarter, after surpassing the same in the preceding two quarters.
Given the pros and cons embedded, the stock currently carries a Zacks Rank #3 (Hold).
Best Buy delivered an average positive earnings surprise of 25.7% in the trailing four quarters and has a long-term earnings growth rate of 11.9%.
The Children's Place delivered an average positive earnings surprise of 36.3% in the trailing four quarters and has a long-term earnings growth rate of 10.3%.
Burlington Stores delivered an average positive earnings surprise of 25.6% in the trailing four quarters and has a long-term earnings growth rate of 19.9%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Urban Outfitters Prospects Look Attractive: Time to Hold?
Urban Outfitters Inc.’s (URBN - Free Report) has not only outperformed the Zacks categorized Retail-Apparel/Shoe industry but also the broader sector in the past one year. The stock has increased 29.6%, while the industry has witnessed a decline of 11%. While the broader Retail-Wholesale sector of which they are part of gained 12.9% in the same time frame. Additionally, the stock’s long-term earnings growth rate of 13.2% and a Value Score of “A” reflect its inherent strength.
The company looks attractive from the valuation perspective. We observe that this lifestyle specialty retail company possesses a P/E of 14.02x and P/CF of 9.83x. Compared with the industry at large, this is pretty favorable as the overall space has an average P/E and P/CF of 15.17x and 10.74x, respectively.
Let’s Take a Closer Look
We believe Urban Outfitters’ commitment toward improving comparable sales, investing in direct-to-consumer business, enhancing productivity in existing channels as well as adding new brands, and optimizing the inventory level will help bring itself back on growth trajectory. A reflection of this was clearly visible in the company’s holiday sales results, wherein comparable retail segment net sales, including the comparable direct-to-consumer channel, gained 1.5%. (Read: Urban Outfitters Holiday Comps Up, Lower Traffic a Worry)
Going forward, we expect the company to drive growth riding on the back of new store openings, increase in direct penetration, growing wholesale operations, technology advancements and merchandising improvements. Further, management is making all possible efforts to enhance the performance of its brands through store refurbishment and by bringing in more compelling assortments.
Being a multi-brand and multi-channel retailer, it offers flexible merchandising strategy. Further, it has a significant domestic and international presence with rapidly expanding eCommerce activities. Urban Outfitters also made an unprecedented move by acquiring Philadelphia’s The Vetri Family group of restaurants, including the Pizzeria Vetri chain. The attempt is seen as a part of the company's strategy to target and attract millennials to the stores.
However, recently the stock has come under pressure following a dismal third-quarter fiscal 2017 performance. After registering a positive earnings surprise of 17.9% in the second quarter, Urban Outfitters witnessed a negative earnings surprise of 9.1% in the third quarter. Further, the company’s top-line fell short of the Zacks Consensus Estimate in the quarter, after surpassing the same in the preceding two quarters.
Given the pros and cons embedded, the stock currently carries a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Better-ranked stocks in the retail sector include Best Buy Co., Inc. (BBY - Free Report) , The Children's Place, Inc. (PLCE - Free Report) and Burlington Stores, Inc. (BURL - Free Report) , all flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Best Buy delivered an average positive earnings surprise of 25.7% in the trailing four quarters and has a long-term earnings growth rate of 11.9%.
The Children's Place delivered an average positive earnings surprise of 36.3% in the trailing four quarters and has a long-term earnings growth rate of 10.3%.
Burlington Stores delivered an average positive earnings surprise of 25.6% in the trailing four quarters and has a long-term earnings growth rate of 19.9%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>