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How Urban Outfitters (URBN) is Poised Ahead of Q3 Earnings

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We expect Urban Outfitters, Inc. (URBN - Free Report) to register growth in its top and bottom-line performances from the respective year-ago quarter’s reported figures when it releases third-quarter fiscal 2022 results on Nov 22, after market open.

The Zacks Consensus Estimate for quarterly earnings currently stands at 83 cents, implying an improvement of 6.4% from 78 cents per share earned in the year-ago quarter. The consensus mark has increased a couple of cents over the past seven days.

A glance at this specialty lifestyle products retailer’s performance over the trailing four quarters shows that it delivered an earnings surprise of 93.2%, on average.
 
For quarterly revenues, the consensus estimate is currently pegged at $1,112 million, indicating an increase of 14.8% from the year-ago period’s tally.

Key Aspects to Note

Urban Outfitters’ third-quarter performance is most likely to have benefited from its strategic efforts including technological advancements, store rationalization and merchandising improvements. URBN has been strengthening its direct-to-consumer business, enhancing productivity in the existing channels, expanding product assortment and optimizing inventory level for a while now. Its strategic FP Movement initiative to boost the Free People brand appears encouraging.

During its last earnings call on Aug 24, management pointed out that comp sales in August at the Free People and Anthropologie brands were almost in line with the respective second-quarter levels. Urban Outfitters had anticipated the third quarter to continue witnessing a healthy sales improvement from the fiscal 2020 level. Management expects comp sales in the retail segment to grow in the mid-teens. These positives might have led to overall sales growth in low double-digits in the to-be-reported quarter.

Urban Outfitters’ gross margins for the same quarter of fiscal 2022 are likely to have improved 100 basis points from the fiscal 2020 figure, given the current sales performance and forecast. Lower markdown rates on solid consumer demand, robust product performance and a disciplined inventory control might have aided the gross margin. Favorable markdowns are likely to have offset reduced initial mark-ups, and deleveraged delivery and logistics expenses.

On the flip side, management had forecast SG&A for the fiscal third quarter to increase at a rate just below the sales growth rate. Higher marketing and creative spend to boost digital growth might have escalated SG&A.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Urban Outfitters this reporting cycle. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Urban Outfitters, Inc. Price and EPS Surprise

Urban Outfitters, Inc. Price and EPS Surprise

Urban Outfitters, Inc. price-eps-surprise | Urban Outfitters, Inc. Quote

Urban Outfitters currently has a Zacks Rank #3 and an Earnings ESP of +6.67%.

More Stocks With Favorable Combination

Here are a few other companies worth considering from the same sector as our model shows that these too have the right combination of elements to beat on earnings:

Macy's (M - Free Report) currently has an Earnings ESP of +9.77% and a Zacks Rank #2. M is likely to register top and bottom-line growth when it reports third-quarter fiscal 2021 numbers. The Zacks Consensus Estimate for quarterly earnings has moved 19.2% up in the past seven days to 31 cents per share, suggesting a substantial rebound from a loss of 19 cents reported in the year-ago quarter.

The Zacks Consensus Estimate for Macy's quarterly revenues is pegged at $5.3 billion, which suggests growth of 32.6% from the figure reported in the prior-year quarter. M delivered an earnings surprise of 269.8%, on average, in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Foot Locker (FL - Free Report) currently has an Earnings ESP of +11.56% and a Zacks Rank of 3. FL is expected to register a top- and bottom-line increase when it reports third-quarter fiscal 2021 numbers. The Zacks Consensus Estimate for quarterly earnings has moved 0.8% north in the past seven days to $1.32 per share, suggesting 9.1% growth from the year-ago reported number.

The Zacks Consensus Estimate for Foot Locker’s quarterly revenues is pegged at $2.1 billion, suggesting a rise of 0.8% from the figure reported in the prior-year quarter. FL delivered an earnings surprise of 73.1%, on average, in the trailing four quarters.

Burlington Stores (BURL - Free Report) currently has an Earnings ESP of +9.63% and a Zacks Rank of 3. It is likely to register top and bottom-line increases when it reports third-quarter fiscal 2021 numbers. Although the Zacks Consensus Estimate for quarterly earnings has moved 0.8% down in the past seven days to $1.26 per share, the same suggests significant growth from 29 cents earned in the year-ago period.

The Zacks Consensus Estimate for Burlington Stores’ quarterly revenues is pegged at $2.3 billion, suggesting an increase of 37.7% from the figure reported in the prior-year quarter. BURL delivered an earnings surprise of 69.2%, on average, in the trailing four quarters.