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Earnings Preview: Urban Outfitters

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Urban Outfitters Inc. (URBN - Free Report) , the retailer of apparel, footwear and accessories, and an S&P 500 company, is scheduled to report its third quarter financial results for fiscal year ending January 2013, on Monday, November 19.

The current Zacks Consensus Estimate for the quarter is pegged at 41 cents a share that reflects year-over-year growth of 24.2% from the prior-year quarter’s earnings. The estimates in the current Zacks Consensus range between a low of 36 cents and a high of 45 cents a share. The Zacks Consensus estimates revenue to be at $695 million for the quarter.

Recap of Second-Quarter

Urban Outfitters posted better-than-expected second quarter fiscal 2013 results. The quarterly earnings of 42 cents a share, surpassed the Zacks Consensus Estimate of 33 cents, and surged 20% from 35 cents delivered in the year-ago quarter. Lower shares outstanding as well as top-line growth benefited the bottom line.

After registering revenue growth of 8.6% in the first quarter of 2013, Urban Outfitters said that total net sales climbed 11% to $676.3 million during the second quarter, and also came ahead of the Zacks Consensus Estimate of $673 million on the back of new store openings, healthy Direct-to-Consumer sales and strong wholesale operations. The company is also managing inventory effectively, resulting in lower merchandise markdowns.

Net sales by brands grew 14.1% to $310.7 million at Urban Outfitters, 3.4% to $281.8 million at Anthropologie and 25.7% to $73.8 million at Free People.          

Zacks Agreement & Magnitude

The Zacks Consensus Estimate remained stable over the last 30 days, as only one out of 26 analysts covering the stock, made upward revisions and none made downward revisions. Also in the last 7 days, no movement was noticed in the Zacks Consensus Estimate, as none of the analysts revisited their estimates in the absence of any major news having a direct or an indirect impact on the company.

Mixed Earnings Surprise History

With respect to earnings surprises, Urban Outfitters missed as well as topped the Zacks Consensus Estimate over the last four quarters in the range of negative 10% to positive 27.3%. The average remained at 9.7%, suggesting that Urban Outfitters has outpaced the Zacks Consensus Estimate by the same magnitude in the trailing four quarters.

Let’s Conclude

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. It remains committed to improve comparable-store sales performance, adding new brands and optimizing inventory levels.

Further, to increase customer count, the company plans to augment store openings in North America and Europe, open retail outlets in Asia, enhance online and mobile marketing endeavors, increase wholesale distribution in Europe and Asia, and considerably expand direct-to-consumer business worldwide. Moreover, the company’s debt-free balance sheet also augurs well for future growth.

Currently, we have a long-term Outperform recommendation on the stock. Moreover, Urban Outfitters, which competes with Gap Inc. (GPS - Free Report) and Abercrombie & Fitch Co. (ANF - Free Report) , retains a Zacks #2 Rank that translates into a short-term Buy rating.

In-Depth Zacks Research for the Tickers Above

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