Urban Outfitters, Inc. (URBN Quick QuoteURBN - Free Report) reported strong first-quarter fiscal 2027 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Also, both metrics improved from the prior-year quarter’s reported figures. The company delivered record first-quarter sales and profits, marking its seventh consecutive quarter of record performance.

Management highlighted that broad-based momentum across the Retail, Subscription and Wholesale segments, along with disciplined execution and strong customer engagement, supported the quarter’s performance.

During the quarter, all Retail segment brands posted positive comparable sales growth, led by standout performances at FP Group and Urban Outfitters. Nuuly continued to scale rapidly with strong subscriber growth and improving profitability, while the Wholesale segment delivered robust gains, driven by specialty account strength. Management also noted that investments in AI initiatives, customer acquisition and platform diversification are supporting long-term growth opportunities.

URBN’s Quarterly Performance

This lifestyle specialty retailer delivered earnings per share of $1.30, rising 12.1% year over year and surpassing the Zacks Consensus Estimate of $1.20 by 8.3%.

Net sales increased 11.4% year over year to $1,481.3 million, beating the consensus mark of $1,456 million by 1.7%. Strength spanned Retail, Wholesale and Subscription, supported by positive comparable sales at all retail brands and continued subscriber growth at Nuuly.

URBN Delivers Record Revenues on Segment Momentum

Total Retail segment net sales rose 8% year over year to $1.22 billion, while comparable Retail segment sales increased 5.6%. Growth in comparable sales was driven by high-single-digit gains in digital channel sales and mid-single-digit growth in retail store sales. The Comparable Retail segment sales increased 9.8% at FP Group, 9.3% at Urban Outfitters and 1.9% at Anthropologie. We estimated the Retail segment’s sales to increase 5.8% year over year.

Within the FP Group, total sales increased 16.6% year over year to $411.7 million due to continued momentum across both Wholesale and Retail segments. Free People brand sales increased 12%, while FP Movement brand sales jumped 32% during the quarter.

The Wholesale segment posted net sales growth of 24.8% to $93.2 million, driven by a 26.2% increase in FP Group wholesale revenues due to higher sales to specialty customers.

Nuuly, the company’s women’s apparel subscription rental service, continued to witness strong momentum. Subscription segment net sales increased 34.5% year over year to $167.3 million, driven by a 33.3% increase in average active subscribers from the prior-year quarter. We estimated the Nuuly segment’s sales to rise 29.5% year over year.

Urban Outfitters Sees Gross Margin Dip on Prior-Year Benefit

Gross profit rose 10.9% year over year to $542.6 million in the fiscal first quarter, mainly driven by higher net sales during the period. However, the gross margin declined 16 basis points year over year to 36.6%, which beat our estimate of 36.4%. This decrease was largely due to a one-time gain of $4.8 million, or 36 basis points, recognized in the prior-year quarter that did not repeat this quarter. Excluding this item, the underlying gross margin expanded by 20 basis points, supported by lower markdowns at FP Group and Urban Outfitters, partly offset by deleveraging in initial merchandise costs related to tariffs.

The Retail segment gross profit increased 7% year over year to $460.9 million, though the segment gross margin slipped 18 bps to 37.7%. The Wholesale segment’s gross profit rose 31% to $33.8 million, with the gross margin expanding 178 bps to 36.3%, driven by higher sales to regular-price customers. Subscription segment gross profit climbed 39% to $47.9 million, while the segment gross margin improved 85 bps to 28.7%.

Selling, general and administrative (SG&A) expenses increased 11.7% year over year to $402.9 million. The increase was primarily driven by higher store payroll expenses to support the Retail segment sales growth, increased marketing investments to support customer acquisition and sales growth in the Retail and Subscription segments, and higher technology investments tied to AI initiatives. Our model estimated SG&A expenses to increase 11.1% year over year in the fiscal first quarter.

As a percentage of net sales, SG&A expenses deleveraged 5 bps to 27.2%, which lagged our estimate of 27.8%. The quarter included a benefit of $6.9 million, or 47 bps, related to the reversal of a litigation accrual, partially offset by deleverage from higher marketing and technology spending.

URBN reported operating income of $139.7 million, up 8.9% from $128.2 million in the prior-year quarter. However, the operating margin contracted 22 bps year over year to 9.4%, reflecting SG&A deleverage despite higher gross profit dollars.

Urban Outfitters Showcases Store Growth

In the first quarter of fiscal 2027, this Zacks Rank #2 (Buy) company opened 11 stores and closed three stores. Store openings included two Anthropologie, three Free People and six FP Movement stores, while closures included one Free People, one Urban Outfitters and one Menus & Venues location.

As of April 30, 2026, URBN operated 252 Urban Outfitters stores across North America and Europe, along with associated digital platforms. The company also operated 256 Anthropologie stores and 276 FP Group stores, including 94 FP Movement locations. In addition, URBN operated eight Menus & Venues restaurants, seven Urban Outfitters franchisee-owned stores and two Anthropologie franchisee-owned stores.

The company plans to open 54 stores and close around 19 stores in fiscal 2027. Net new store growth will be primarily driven by the expansion of FP Movement, Free People and Anthropologie locations. Specifically, the company intends to open 21 FP Movement, 12 Free People, 13 Anthropologie and eight Urban Outfitters stores in fiscal 2027.

Urban Outfitters’ Financial Health Snapshot

As of April 30, 2026, Urban Outfitters had cash and cash equivalents of $301.4 million compared with $189.4 million in the prior-year period. Total shareholders’ equity stood at $2.61 billion as of the quarter-end.

As of April 30, 2026, total inventory increased 9.5% from the prior-year period. The Retail segment’s inventory rose 10.6%, while comparable Retail segment inventory increased 10%. In contrast, the Wholesale segment’s inventory declined 1.2%. The increase in the Retail segment inventory was primarily driven by higher net sales and early inventory receipts aimed at mitigating potential shipping disruptions related to the Middle East conflict.

During the first quarter of fiscal 2027, the company repurchased and retired 4.6 million shares for approximately $300 million. As of April 30, 2026, 10 million common shares remained authorized for repurchase under the existing program.

URBN Lays Out Q2 Targets

Urban Outfitters’ management expects second-quarter fiscal 2027 total company sales to grow in the high-single-digit range, supported by continued momentum across the Retail, Wholesale and Subscription businesses.

The Retail segment’s comparable sales are projected to increase in the mid-single-digit range, driven by high-single-digit positive comparable sales growth at Urban Outfitters and FP Group, while Anthropologie is expected to deliver low to mid-single-digit positive comparable sales growth. Nuuly is expected to post mid to high-20% revenue growth on the back of continued subscriber momentum, while the Wholesale segment is projected to generate mid-teens growth.

For the fiscal second quarter, URBN expects the gross profit margin to be flat to decline 25 basis points year over year. The anticipated pressure primarily reflects lower initial merchandise margins due to higher tariffs than the last year, along with elevated fuel surcharge costs tied to the Middle East conflict.

Management noted that current oil surcharges are expected to remain in place for the remainder of fiscal 2027 and are estimated to create a 70-basis-point unfavorable impact per quarter through higher inbound freight and delivery expenses.

Management expects fiscal second-quarter SG&A growth to be at or slightly ahead of sales growth due to higher marketing investments across brands to support customer acquisition, along with increased technology and AI-related investments.

URBN’s FY27 Outlook

For fiscal 2027, management continues to expect positive high-single-digit total company sales growth. This outlook is expected to be supported by mid-single-digit Retail segment comparable sales growth, mid-20% revenue growth at Nuuly and high-single-digit growth in the Wholesale segment.

URBN expects the fiscal 2027 gross profit margin to increase by 25 basis points year over year, with the second half anticipated to benefit from improved initial merchandise margins. The company also expects to receive $100 million in tariff refunds in the fiscal second quarter related to previously imposed IEEPA tariffs, which management plans to record as a one-time benefit.

For the full year, SG&A growth is expected to be in line with sales growth, while inventory growth is projected to remain at or below the pace of sales growth as the company focuses on improving product turns.

Capital expenditure for fiscal 2027 is planned at approximately $475 million. About 35% of the spending is expected to support retail store expansion and store-related investments, nearly 50% will be allocated toward logistics investments and automation capabilities, while the remaining 15% will support technology initiatives and home office expansion.

Management also expressed confidence in the underlying health of the business, highlighting strong momentum at Free People and FP Movement, continued progress at Urban Outfitters in North America and Europe, improving trends at Anthropologie and Nuuly’s path toward its long-term $1 billion revenue opportunity. The company believes its diversified portfolio positions URBN for continued positive comparable sales growth, margin expansion and record profitability in fiscal 2027.

URBN Stock Past 3-Month Performance

Image Source: Zacks Investment Research

Shares of this company have gained 8.7% in the past three months against the industry’s 16.7% decline.

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