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Analyst Blog

Urban Outfitters Inc.’s (URBN - Free Report) commitment toward improving comps, investing in direct-to-consumer business, enhancing productivity in existing channels as well as adding new brands, and optimizing the inventory level is making it a favorable pick for investors. Additionally, the stock sports a Zacks Rank #1 (Strong Buy) with a long-term earnings growth rate of 15% and a VGM Score of “A”.  Let’s delve a little deeper into the reasons behind such a performance.  

Going forward, we expect Urban Outfitters to drive growth riding on the back of new store openings, increase in direct penetration, growing wholesale operations, technology advancements and merchandising improvements. We also believe that better product execution and effective inventory management will help augment performance. Further, management is making all possible efforts to enhance the performance of its brands through store refurbishment and by bringing in more compelling assortments.

Since 2011, the company has been continually focused on store expansion program. Additionally, in a bid to increase customer count, the company plans to open stores in North America and Europe, launch retail outlets in Asia, enhance online and mobile marketing endeavors, increase wholesale distribution in Europe and Asia alongside considerably expanding direct-to-consumer business worldwide.

A look at the company’s surprise history reveals that it outpaced the Zacks Consensus Estimate by an average of 6.7% in the trailing four quarters. Moreover, the Zacks Consensus Estimate of $2.07 and $2.26 for fiscal 2017 and fiscal 2018 has increased 14 cents and 11 cents, respectively, over the past 60 days.

Furthermore, shares of Urban Outfitters have gained more than 22% in the past three month period. If you haven’t yet taken advantage of the share price appreciation, then the time might be right to add this stock to your portfolio.

Stocks to Consider

Other favorably ranked stocks in this sector include American Eagle Outfitters, Inc. (AEO - Free Report) , The Children's Place, Inc. (PLCE - Free Report) and Tilly's, Inc. (TLYS - Free Report) . All these stocks sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Eagle Outfitters has surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 9.3%.

The Children's Place has a long-term earnings growth rate of 10.3%.

Tilly's shares have gained more than 60% in the past three months. Also, the stock has a long-term earnings growth rate of 15.5%.

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