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Here's Why Urban Outfitters (URBN) Stock Looks Promising

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Urban Outfitters, Inc. (URBN - Free Report) appears quite encouraging, thanks to its robust business strategies and sound fundamentals. The company has been strengthening its direct-to-consumer business, enhancing productivity across the existing channels and optimizing inventory levels. Its strategic growth initiative FP Movement and store-growth endeavors are also impressive.

Buoyed by such initiatives, shares of this Philadelphia, PA-based player have increased 34.9% outperforming its industry’s 11.2% rise over the past six months.

In addition, analysts seem optimistic about the stock. The Zacks Consensus Estimate for URBN’s fiscal 2024 sales and earnings per share (EPS) is currently pegged at $4.92 billion and $2.26, respectively. These estimates suggest growth of 3.1% and 29.2%, respectively, from the year-ago fiscal quarter’s corresponding figures.

Let’s Delve Deeper

Being a multi-brand and multi-channel retailer, Urban Outfitters offers a flexible merchandising strategy. The company also has a significant domestic and international presence with rapidly expanding e-commerce activities. In addition, the company’s FP Movement and AnthroLiving initiatives hold promise. Management had earlier said that AnthroLiving has the potential to become at least a $1-billion business with the size of Anthro's apparel business.

Regarding the FP Movement, management believes that this initiative will lure a wider customer base to its 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.

The FP Movement brand witnessed an outstanding third-quarter fiscal 2023, generating 28% retail segment growth. The new and existing FP Movement stores continue to outperform expectations in the reported quarter. We note that the early holiday trends were positive for the Free People Group and management believes the brand's Retail segment performance in the fiscal fourth quarter to be similar to the fiscal third quarter.

In addition, management remains optimistic about the prospects of Nuuly. Nuuly comprises the Nuuly Rent and Nuuly Thrift brands. During the fiscal third quarter, Nuuly contributed $35.3 million to net sales, reflecting an increase from $12.7 million recorded in the earlier fiscal year’s comparable period, backed by a sharp rise in subscribers.

On a quarter-over-quarter basis, active subscribers increased 37%, outpacing the 100,000 sub milestone in early October. Currently, the number of active subscribers is in excess of 120,000. This is likely to keep fueling the company’s overall sales.

What’s More?

Urban Outfitters reported higher sales for the holiday period. Total net sales for the two months ended Dec 31, 2022, jumped 2.3% from the level recorded in the two months ended Dec 31, 2021. The total Retail segment net sales also grew 1%, with comparable Retail segment net sales rising 2%, partly offset by a 1% foreign currency translation impact. Growth in the Retail segment comparable net sales was backed by a low single-digit increase in digital channel sales and a low single-digit rise in retail store sales.

By brand, comparable Retail segment net sales rose 15% at Free People and 7% at the Anthropologie Group while dipping 10% at Urban Outfitters. Further, the Wholesale segment’s net sales declined 22% on lower Free People Group wholesale sales stemming from decreased department store sales. Nuuly segment sales surged a whopping 150% year over year on a 153%-increase in its subscribers in the two months ended Dec 31, 2022.

All in all, Urban Outfitters looks well poised for growth in the future. An impressive long-term projected growth rate of 18% coupled with a Value Score of A further highlights the strength of this current Zacks Rank #2 (Buy) stock.

More Solid Picks in Retail

We highlighted three other top-ranked stocks, namely Tecnoglass (TGLS - Free Report) , Chico's FAS (CHS - Free Report) and Boot Barn (BOOT - Free Report) .

Tecnoglass manufactures and sells architectural glass,windows and aluminum products for residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and EPS suggests growth of 11.2% and 9%, respectively, from the year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 26.9%, on average.

Chico's FAS, an omnichannel specialty retailer, currently sports a Zacks Rank of 1. CHS has a trailing four-quarter earnings surprise of 87.5%, on average.

The Zacks Consensus Estimate for Chico's FAS’s current financial-year sales and EPS suggests growth of 19.6% and 127.5%, respectively, from the year-ago reported figures.

Boot Barn, a fashion retailer of apparel and accessories, currently carries a Zacks Rank of 2 . The company has a trailing four-quarter earnings surprise of 11.7%, on average.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales suggests growth of 11.8% from the year-ago reported figure.

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