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Here's Why Urban Outfitters (URBN) is Ahead of Industry YTD

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Shares of Urban Outfitters, Inc. (URBN - Free Report) have been tracking up the charts, given its solid business strategies and a continued digital strength. The company remains committed to strengthen its direct-to-consumer business, enhance productivity in the existing channels, expand product assortment and optimize inventory level. Its strategic growth initiative FP Movement and store-growth endeavors also appear fruitful. So far this year, shares of this Philadelphia, PA-based player have surged 44.4%, outperforming its industry’s 18.8% rally.

Let’s Delve Deeper

Being a multi-brand and multi-channel retailer, Urban Outfitters offers a flexible merchandising strategy. Recently, the company teamed up with Hims & Hers Health, Inc. (HIMS - Free Report) , which operates as a multi-specialty telehealth platform. The latter provides modern health and wellness solutions to consumers, and therefore this collaboration will allow Urban Outfitters to provide personalized wellness offerings with initial availability of select Hims products on urbanoutfitters.com.

Through this collaboration, the company looks to bolster Hims solutions and introduce select Hers items on urbanoutfitters.com in the future months. This planned offering will include skin care, hair loss and more personal care items. We note that Urban Outfitters will foray into men’s makeup territory with Hims’ recently-introduced Blur Stick Concealer for Men.

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Detailing Urban Outfitters’ strategic actions, its FP Movement initiative is worth a mention. Management is consistently making investments in the Movement across digital landscape. The FP Movement initiative appears encouraging with strength in activewear. During first-quarter fiscal 2022, net sales were up 97.6% year over year and comparable Retail segment sales grew 77% at Free People brand.

Having a differentiated position in the fitness and wellness space, the FP Movement offers a major growth opportunity. Moving on, the company intends to add about 16 Free People Movement stores in fiscal 2022. Thus, management believes that the FP Movement will lure a wider base of customers for the Free People brand, boosting its growth.

More Strengths

Sturdy consumer demand across majority of the company’s product categories along with solid execution of its strategies is steadily boosting the retail segment comparable sales. Management anticipated a steady sales improvement for the second quarter of fiscal 2022 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 band.

Gross margin for the period is expected to 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.

Wrapping up, we expect Urban Outfitters to carry on with the solid momentum on all the aforesaid tailwinds. This presently Zacks Rank #1 (Strong Buy) stock’s expected long-term earnings growth rate of 11.5% appears impressive. You can see the complete list of today’s Zacks #1 Rank stocks here.

More Key Picks in Retail Space

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

L Brands , presently a Zacks #1 Ranked stock, has a long-term earnings growth rate of 13%.


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