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Bull of the Day: Urban Outfitters (URBN)

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Based in Philadelphia, Urban Outfitters Inc. (URBN - Free Report) is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gifts products through its brands Urban Outfitters, Anthropologie, Free People, FP Movement, BHLDN, Nuuly and Terrain. URBN has operations in the U.S., Canada, and Europe.

Q2 Earnings Recap

Total company sales grew by more than 20% to hit a record of $1.16 billion, while total retail segment comps increased 40% year-over-year.

CEO Richard A. Hayne said that Urban saw “powerful demand” across the majority of its product categories, especially apparel, and all of its brands recorded positive double-digit comps during the quarter.

Net income came in at $127 million, or earnings per diluted share of $1.28, also a record for the retailer.

One of URBN’s fastest growing brands is FP Movement, a division of Free People that’s focused on activewear and accessories. Q2 was a standout quarter for Movement, with revenue soaring over 200%. The brand now operates 54 shop-in-shop locations inside Free People stores and 13 standalone stores.

Nuuly is another new addition to the retailer’s portfolio; it operates a subscription rental service for women’s apparel. Urban also recently launched Nuuly Thrift, a peer-to-peer, resale marketplace that can help the company capitalize on the growing resale fashion space.

Can URBN Break Out?

Urban Outfitters, Inc. Price and Consensus

 

Year-to-date, shares of URBN have jumped 19.4%, which is roughly in-line with the S&P 500’s 20% increase. Earnings estimates have been rising too, and URBN is a Zacks Rank #1 (Strong Buy) right now.

For fiscal 2022, seven analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 94 cents to $3.32 per share. Earnings are expected to grow considerably compared to the prior year period. Fiscal 2023 looks strong too; eight analysts have upped their outlook and our consensus estimate has climbed 36 cents to $3.05 per share.

Looking ahead, management said that consumer demand for its products continues to be robust, and that the current third quarter will show healthy sales improvement across the board. The retailer expects retail segment comps growth to land in the mid-teens range and gross profit margins to improve over 100 basis points.

Urban hasn’t been the only retailer enjoying a rebound in demand, and if the current trend continues, shareholders could be in store for even more gains.

If you’re an investor searching for a retail sector stock to add to your portfolio, make sure to keep URBN on your shortlist.


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