Back to top

Image: Bigstock

Factors Likely to Affect Urban Outfitters' (URBN) Q1 Earnings

Read MoreHide Full Article

Urban Outfitters, Inc. (URBN - Free Report) is scheduled to release first-quarter fiscal 2021 results on May 19, after the closing bell. It reported a negative earnings surprise of 20.6% in the preceding quarter. However, the company has a positive earnings surprise of 0.5%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for the fiscal first quarter is pegged at a loss of 12 cents per share, whereas it reported earnings of 31 cents in the year-ago quarter. Moreover, the loss estimate has significantly widened in the past 30 days. The consensus mark for revenues is pegged at $743.8 million, indicating a decline of 14% from the figure reported in the year-ago quarter.

Key Factors to Note

Urban Outfitters’ global retail stores have been temporarily shuttered since Mar 14 in response to the coronavirus outbreak. Further, it has delayed capital projects and lowered investments in growth initiatives such as Nuuly and expansion into China, owing to the outbreak. Although the company’s e-commerce business has remained operational, store closures and lower demand have led to lowering workforce to support the business.

The company has been lowering non-payroll costs, adjusting inventory levels and extending payment terms for vendor invoices. It also carried out temporary suspension of rent payment, the cancellation or delay of a few store openings, the elimination of bonuses for fiscal 2021 and delay in all merit increases. Driven by the hardships, the company expects significant impacts of the coronavirus outbreak to get reflected on its first-quarter fiscal 2021 results.

Urban Outfitters Inc Price and EPS Surprise

 

Urban Outfitters Inc Price and EPS Surprise

Urban Outfitters Inc price-eps-surprise | Urban Outfitters Inc Quote

Further, it has been witnessing SG&A expense deleverage due to higher marketing expenses to drive digital sales and new business initiatives. This has been hurting operating margins for the past few quarters. Moreover, additional costs in the wake of the coronavirus pandemic are expected to have hurt margins.

What Does the Zacks Model Say?

Our proven model does not conclusively predict an earnings beat for Urban Outfitters this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Urban Outfitters carries a Zacks Rank #4 (Sell) and an Earnings ESP of -261.30%.

Stocks With a Favorable Combination

Here are a few companies you may want to consider, as our model shows that these have the right combination to post an earnings beat:

GameStop Corp (GME - Free Report) has an Earnings ESP of +56.70% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Kroger Co (KR - Free Report) currently has an Earnings ESP of +8.48% and a Zacks Rank #2.

Dollar General Corporation (DG - Free Report) currently has an Earnings ESP of +1.25% and a Zacks Rank #3.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Published in