Back to top

Image: Bigstock

Urban Outfitters (URBN) Up 62% on Bourses: What's Aiding It?

Read MoreHide Full Article

Urban Outfitters, Inc. (URBN - Free Report) looks promising, thanks to robust business strategies and digital strength. The company is steadily witnessing sturdy consumer demand across majority of its product categories, which has been boosting the comparable store sales (comps) for a while now. Also, its strategic growth initiative FP Movement bodes well.

These efforts helped the lifestyle-specialty retail company deliver a sturdy first-quarter fiscal 2022 performance wherein both the top and the bottom line outshone the Zacks Consensus Estimate and also improved year over year. We note that sales across the company’s all brands and segments grew year over year in the quarter. Impressively, shares of this Philadelphia, PA-based company have soared 62.1%, outperforming the industry’s 34.4% rally in the past six months.

Detailing Strategies

Being a multi-brand and multi-channel retailer, Urban Outfitters offers a flexible merchandising strategy. The company remains committed to improve its comps performance, make investments in direct-to-consumer business, enhance productivity in existing channels, add products and optimize its inventory level. Additionally, the company’s store-growth endeavors appear impressive. For fiscal 2022, management plans to open about 54 stores and close 18 outlets.

Zacks Investment ResearchImage Source: Zacks Investment Research

With respect to the FP Movement initiative, management is consistently making investments in the Movement across digital and creative brand prospects. Notably, the FP Movement initiative appears encouraging with strength in activewear. Management believes that the FP Movement will lure a wider base of customers at the Free People brand. Having a differentiated position in the fitness and wellness space, the FP Movement offers a major growth opportunity and is expected to boost Free People’s brand revenues. Moving on, the company intends to add about 16 Free People Movement stores in fiscal 2022.

During the first quarter of fiscal 2022, net sales were up 97.6% to $212.8 million at Free People. The Free People’s product category showed a robust comp increase, buoyed by the FP Movement brand of activewear that registered about a 300% sales rise from the fiscal 2020 actuals. The overall Free People brand delivered triple-digit direct comps that countered the negative store comps. Notably, comparable Retail segment net sales at Free People grew 77% in the quarter.

Management also remains optimistic about the prospects of Nuuly. Apparently, Nuuly contributed $7.8 million to net sales during the fiscal first quarter, up 23.8% from the year-ago period.

What’s More?

Buoyed by the aforesaid initiatives and a stellar first-quarter performance, management expects the second quarter of fiscal 2022 to continue witnessing a steady sales improvement from the fiscal 2020 reading. It believes that the retail segment comp sales will grow in the mid-teens range, contributing to the overall company’s sales in the low double-digit range. We note that the Anthropologie brand's positive momentum was sustained in the fiscal second quarter with store traffic and sales exhibiting a substantial advancement.

Given the current sales performance and projection, gross profit margins for the period might improve above 100 basis points from the fiscal 2020 actuals. This growth can mainly be driven by lower markdown rates on improving consumer demand, solid product performance and a disciplined inventory control.

For fiscal 2022, the Zacks Consensus Estimate for earnings stands at $2.47 compared with a penny per share earned in fiscal 2021. The consensus estimate for the current fiscal year’s sales is pegged at $4.28 billion, reflecting growth of about 24% from the last fiscal. An expected long-term earnings growth rate of 11.5% for this presently Zacks Rank #1 (Strong Buy) stock further highlights strength. You can see the complete list of today’s Zacks #1 Rank stocks here.

3 More Key Retail Stocks

Abercrombie & Fitch (ANF - Free Report) has a long-term earnings growth rate of 18% and a Zacks Rank #1, presently.

Boot Barn (BOOT - Free Report) has a trailing four-quarter earnings surprise of 51.7%, on average, and a Zacks Rank of 1.

L Brands has a long-term earnings growth rate of 13% and a Zacks Rank #2 (Buy), currently.

Bitcoin, Like the Internet Itself, Could Change Everything

Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.

Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.

See 3 crypto-related stocks now >>

In-Depth Zacks Research for the Tickers Above

Choose a ticker to receive a FREE report - normally $25 each:

Abercrombie & Fitch Company (ANF) - free report >>

Urban Outfitters, Inc. (URBN) - free report >>

Boot Barn Holdings, Inc. (BOOT) - free report >>