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Urban Outfitters (URBN) to Report Q1 Earnings: What Awaits?

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Urban Outfitters, Inc. (URBN - Free Report) is scheduled to release first-quarter fiscal 2020 results on May 21, after the bell. We note that in the trailing four quarters, the company has outperformed the Zacks Consensus Estimate, recording average positive earnings surprise of 13.7%. In the last quarter, the company delivered a positive earnings surprise of 6.4%. Let’s see what awaits this quarterly release.

How Are Estimates Faring?

The Zacks Consensus Estimate for the first quarter is pegged at 26 cents, reflecting a decline of 31.6% from 38 cents per share registered in the year-ago quarter. Notably, the consensus mark has been stable in the past 30 days. For revenues, the consensus estimate stands at $857.4 million, almost in-line with $855.7 million reported in the year-ago quarter.

Urban Outfitters, Inc. Price, Consensus and EPS Surprise

Factors at Play

Urban Outfitters has been witnessing comparable sales (comps) growth for a while now. However, the trend is likely to reverse in the first quarter of fiscal 2020. Management anticipates first-quarter comps in the range of flat to down low-single-digits in the Retail segment. Based on the comps projection, gross margin is likely to contract about 150 bps in the first quarter. This can be attributed to increased markdown rates, escalated logistic costs and store occupancy expense deleverage.

Also, this lifestyle products and services company is grappling with increased SG&A expenses for a while now. SG&A expenses are likely to increase roughly 3% in the first quarter, owing to elevated digital investments to aid digital channel sales. Together, these downsides might hurt the company’s bottom line in the quarter to be reported.

Nevertheless, the company remains focused on increasing digital penetration, growing wholesale operations, making technological advancements and merchandising improvements. All these are likely to cushion its top line performance. The company remains committed to sustain investments in the direct-to-consumer business, enhance productivity in existing channels, add new brands and optimize inventory level.

What Our Model Says

Our proven model does not conclusively show that Urban Outfitters is likely to beat estimates this quarter. This is because a stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.

Though Urban Outfitters has a Zacks Rank #3, its Earnings ESP of -0.88% makes surprise prediction difficult.

Stocks with Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat.

Boot Barn Holdings, Inc. (BOOT - Free Report) has an Earnings ESP of +2.62% and a Zacks Rank #2.

Target Corp. (TGT - Free Report) has an Earnings ESP of +0.42% and a Zacks Rank #2.

Dollar General (DG - Free Report) has an Earnings ESP of +1.51% and a Zacks Rank #3.

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