It has been about a month since the last earnings report for Urban Outfitters (URBN Quick QuoteURBN - Free Report) . Shares have lost about 5.1% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Urban Outfitters due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent drivers for Urban Outfitters, Inc. before we dive into how investors and analysts have reacted as of late.

Urban Outfitters Q2 Earnings Meet Estimates, Sales Rise Y/Y

Urban Outfitters reported strong second-quarter fiscal 2027 results, with earnings matching the Zacks Consensus Estimate, while revenues surpassed the consensus mark. Also, both metrics improved from the prior-year quarter’s reported figures. The company delivered record second-quarter sales and profits, marking its eighth consecutive quarter of record performance.

URBN’s Quarterly Performance

This lifestyle specialty retailer delivered adjusted earnings per share of $1.72, in line with the Zacks Consensus Estimate. Adjusted earnings increased 8.9% year over year. The company’s earnings per share were $2.78 compared with $1.58 in the prior-year quarter.

Net sales increased 10.4% year over year to $1,661.9 million, beating the consensus mark of $1,648 million. The sales performance benefited from strength across Retail, Wholesale and Subscription operations.

URBN Delivers Record Revenues on Segment Momentum

Total Retail segment net sales rose 8% year over year to $1.39 billion, while comparable Retail segment sales increased 6.2%. Growth in comparable sales was driven by high-single-digit gains in digital channel sales and mid-single-digit growth in retail store sales. Comparable Retail segment sales increased 10% at FP Group, 8.4% at Urban Outfitters and 3% at Anthropologie. 

Within the FP Group, total sales increased 15% year over year to $478.1 million, driven by continued momentum across both Retail and Wholesale operations. Free People and FP Movement continued to benefit from strong customer demand, while the FP Group Wholesale segment delivered a 19% increase in revenues. Urban Outfitters posted an 8% comparable-sales increase, supported by strength across North America and Europe.

The Wholesale segment posted net sales growth of 18.6%, driven by a 19.2% increase in FP Group wholesale sales due to higher sales to specialty customers and department stores.

Nuuly, the company’s women’s apparel subscription rental service, continued to witness strong momentum. Subscription segment net sales increased 28.6% year over year to $178.6 million, primarily driven by a 30.4% increase in average active subscribers. Average active subscribers reached 484,000 during the quarter, while the subscriber base crossed 500,000 in early June.

Urban Outfitters Expands Gross Margin on Sales Growth

Gross profit rose 27.4% year over year to $721.6 million in the fiscal second quarter. However, the reported gross margin increased 580 basis points year over year to 43.4%, benefited from a $95.7-million IEEPA tariff refund. 

Adjusted gross margin increased 4 basis points to 37.7%. The improvement was primarily driven by benefits from store occupancy costs from higher comparable Retail store sales and leverage in delivery expenses from initiatives that helped offset fuel-surcharge costs. These benefits were partly offset by higher Retail markdowns at Anthropologie and the negative impacts of tariffs and inbound freight fuel surcharges on initial merchandise costs.

Selling, general and administrative (SG&A) expenses increased 10.5% year over year to approximately $433 million. The increase was primarily driven by higher marketing investments to support customer growth and increased sales in the Retail and Subscription segments, along with higher store payroll expenses. These increases were partly offset by leverage in store payroll expenses resulting from higher Retail store sales. The company continued to invest in artificial intelligence technology to support its current and future operations. As a percentage of net sales, SG&A expenses remained flat at 26%.

URBN reported adjusted operating income of $193.1 million, up 11% from $174.4 million in the prior-year quarter. The adjusted operating margin improved 3 basis points year over year to 11.6%, reflecting the increase in adjusted gross margin.

Urban Outfitters Showcases Store Growth

In the first six months of fiscal 2027, the company opened 23 stores and closed six stores. Store openings included four Anthropologie, seven Free People, 10 FP Movement and two Urban Outfitters stores, while closures included one Anthropologie, one FP Movement, three Urban Outfitters and one Menus & Venues location.

As of July 31, 2026, URBN operated 252 Urban Outfitters stores, 257 Anthropologie stores and 284 FP Group stores, including 97 FP Movement locations. The company operated eight Menus & Venues restaurants and nine franchisee-owned stores.

Urban Outfitters’ Financial Health Snapshot

As of July 31, 2026, Urban Outfitters had cash and cash equivalents of $598.8 million, up from $332.2 million in the prior-year period. Marketable securities totaled $346.8 million, while total shareholders’ equity stood at $2.85 billion at the quarter-end.

As of July 31, 2026, total inventory increased 11.8% year over year to $778.5 million. Total Retail segment inventory rose 12%, while comparable Retail segment inventory increased 8.4%. Wholesale segment inventory increased 10%. The increase in Retail inventory was primarily due to higher net sales and the timing of inventory receipts, while the increase in Wholesale inventory reflected higher sales.

During the first six months of fiscal 2027, the company repurchased and retired 4.6 million shares for approximately $300 million. As of July 31, 2026, 10 million common shares remained authorized for repurchase under the existing program.

URBN Lays Out Q3 2027 Targets

Urban Outfitters’ management expects third-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 growth at FP Group, mid-single-digit growth at Urban Outfitters and low-to-mid-single-digit growth at Anthropologie. Nuuly is expected to post high-twenties revenue growth, while the Wholesale segment is projected to generate low-teens growth.

For the fiscal third quarter, URBN expects the gross profit margin to increase 25-50 basis points year over year. The anticipated improvement primarily reflects higher initial merchandise margins due to lower tariffs and leverage in occupancy costs, partly offset by higher fuel surcharges.

Management anticipates fuel surcharges to continue affecting the business through the remainder of fiscal 2027. The company noted that these surcharges are expected to create an unfavorable impact through higher inbound freight and delivery expenses.

Management expects third-quarter SG&A expenses to grow slightly below sales growth, reflecting continued investments in marketing, technology and AI initiatives while benefiting from leverage in store payroll and occupancy expenses.

URBN’s FY’27 Outlook

For fiscal 2027, management maintains its expectation for positive high-single-digit total company sales growth. The outlook reflects continued momentum across the portfolio, with Retail comparable sales expected to grow in the mid-single-digit range, Nuuly revenues projected to increase in the high-20% range and Wholesale revenues anticipated to grow in the low-teens range.

URBN expects fiscal 2027 gross margin to expand by approximately 25 basis points year over year. Management sees an incremental margin opportunity in the second half, primarily from improved initial merchandise margins as tariff pressures moderate. However, fuel surcharges are expected to remain a headwind through the remainder of the fiscal year.

For the full year, SG&A is expected to grow in line with sales, while inventory growth is expected to remain at or below sales growth as the company continues to focus on improving product turns. Management also plans to continue investing in marketing, technology and AI initiatives to support customer acquisition and long-term growth.

Capital expenditures for fiscal 2027 are planned at approximately $475 million. Approximately 35% of spending is expected to be allocated to retail store expansion and support, 50% to logistics investments and the remaining 15% to technology investments and home-office expansion. The logistics investments are intended to expand capacity and automation across the Subscription and Retail businesses.

URBN expects to open approximately 54 new stores and close approximately 18 stores during fiscal 2027. Net new store growth is expected to be primarily driven by FP Movement. The company plans to open 21 FP Movement, 12 Free People, 12 Anthropologie and eight Urban Outfitters stores during the year.

Management expressed confidence as it enters the second half, citing double-digit sales and profit growth at Free People and FP Movement, positive comparable sales at Anthropologie and high-single-digit comparable sales at Urban Outfitters in both North America and Europe. Management also emphasized URBN’s multi-brand strategy and structural diversification across brands, demographics, product categories, distribution channels and geographies.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in estimates revision.

VGM Scores

Currently, Urban Outfitters has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Urban Outfitters has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Urban Outfitters is part of the Zacks Retail - Apparel and Shoes industry. Over the past month, Fossil Group (FOSL Quick QuoteFOSL - Free Report) , a stock from the same industry, has gained 8.7%. The company reported its results for the quarter ended June 2026 more than a month ago.

Fossil Group reported revenues of $209.7 million in the last reported quarter, representing a year-over-year change of -4.9%. EPS of -$0.13 for the same period compares with -$0.10 a year ago.

Fossil Group is expected to post earnings of $0.03 per share for the current quarter, representing a year-over-year change of +104.8%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

Fossil Group has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.