This site requires a more recent version of Adobe Flash Player to function properly.
Go here to get Flash.
Trefis's graphical modelling tools require Flash, but here's a preview of some of the content you'll see once
Flash is enabled:
Investment Overview for Urban Outfitters (NASDAQ:URBN)
- Internet & Catalog Orders EBITDA Margin: Though Internet & Catalog Orders EBITDA Margin declined in 2011 due to an increase in cotton costs, we expect the figure to improve gradually as cotton prices decline and the company realize higher full-priced merchandise sales. We expect the figure to reach 38.3% by the end of the Trefis forecast period.
However, if the apparel market continues to be exceptionally promotional and margins plummet further to 33.2% by the end of the Trefis forecast period, there could be a downside of 5% to our Trefis price estimate. Conversely, if the macro-economic conditions improve and the promotional environment ceases to continue and margins increase to 43.5%, there could be an upside of 5% to our Trefis price estimate.
- Urban Outfitters Revenue per Square Foot: Though Urban Outfitters revenue per square foot declined sharply to $545 in 2011 due to company's slow moving women's apparel business, we expect the figure to improve gradually as Urban Outfitters improves the balance in its women's apparel merchandise mix and expands the brand internationally. We expect the figure to reach $595 by the end of the Trefis forecast period.
However, in the current weak macro-economic conditions the competition among teen apparel retailers is exceedingly fierce and any further merchandise goof-ups can cost the company its market share. If the revenue per square foot declines to $500 by the end of the Trefis forecast period, there can be a downside of 5% to our price estimate. On the other hand if Urban Outfitters carry forward the improvement in its product mix, as reflected by its spring season's product offering, the company can gain market share in key women's apparel categories. If the revenue per square foot increases to $685 by the end of the Trefis forecast period, there can be an upside of 5% to our price estimate.
Urban Outfitters Inc. is a leading lifestyle specialty retail company that operates under its Urban Outfitters, Anthropologie, Free People, Terrain and BHLDN brands, and sells collections of fashion apparels, accessories and home goods in inviting and dynamic store settings. Its core strategy is to provide unified store environments that establish emotional bonds with the customer. It also operates a wholesale segment under the Free People and Leifsdottir brands. In addition to retail stores, the company offers its products and markets its brands directly to consumers through its e-commerce websites and catalogs.
Internet & Catalog Orders business generates the most value for the company, followed by Urban Outfitters and Anthropologie stores.
Internet & Catalog Orders business profit margin nearly twice that of AEO stores
Profit margins for the Internet & Catalog business is higher at 36% compared to 19% for Urban Outfitters or Anthropologie stores. The merchandise sold through the Internet & Catalog Orders segment is sent directly to the consumer from the distribution center. As this merchandise does not go through stores, it incurs no store operating expenses and very low SG&A expenses to the company. As a result, the margins on merchandise sold through this channel is significantly greater than that for merchandise sold through retail stores.
Ratio of Internet & Catalog Orders Revenues to store revenues is increasing rapidly
The ratio of Internet & Catalog Orders Revenues to store revenues has increased from around 17% in 2007 to 27% in 2011, driven by Urban Outfitters' investments into e-commerce technology and successful online marketing strategies. With the company planning to expand its e-commerce operations, the Internet & Catalog Orders business is expected to generate considerable amount of value to the company's revenue stream in the future.
Higher Revenue Per Square Foot for Anthropologie is Offset by a higher number and average size of Urban Outfitters stores
The Anthropologie stores have revenue per square foot of around $716, which is higher than revenue per square foot of $545 for the Urban Outfitters stores. Anthropologie's high revenue is offset by Urban Outfitters' greater number of stores and higher average retail space. The store count for Urban Outfitters was 187 versus 161 for Anthropologie as of 2011.
Continuing promotional environment in teen apparel market
The U.S. teen apparel market is currently highly promotional, where each retailer is trying to outsmart the other one with a broader and deeper set of promotions. The trend is expected to continue until the U.S. economy recovers fully.
Lack of presence in Asia can affect Urban Outfitters' growth
The company still doesn't have any significant expansion plans in the Asian market, which is becoming a focal point of the global apparel industry. This essentially implies that it is missing out on a chance to capitalize on a growing market, in addition to staying at the mercy of US economic cycles.
Trefis Forecast Rationale for Internet & Catalog Orders Revenues
This refers to the company's revenues from its Internet & Catalog Orders business.
The Internet & Catalog Orders revenues increased from nearly $205 million in 2007 to $505 million in 2011 driven by growth in online sales due to increasing internet penetration. We expect it to increase to around $1.42 billion by the end of our forecast period as the company further increases the reach of its direct (online) channel and growing popularity of its e-commerce business.
Trefis considered the following factors for its forecast:
Back to Company Overview
- Urban Outfitters is gaining popularity through web-based channels
- The company has a growing following on social networking sites like Facebook and a growing customer base on its mobile commerce channel.
- The company is making significant investments in new marketing initiatives, which include offering engaging offers and promotions through its direct channels.
- Urban Outfitters is using the core products of Adobe Flex and the e-commerce expertise of Allurent to enhance its service offerings to customers.
- Additionally, the company also runs separate websites for its Urban Outfitters' and Anthropologie's European customers. These website captures the spirit of its European stores by offering a similar yet broader selection of merchandise as found in its European stores.
- The benchmark KPIs for the direct to consumer channel are expected to become more competitive
- In order to remain competitive in the direct to consumer segment, the company would need to continuously optimize its supply chain to keep in line with industry benchmarks for Key Performance Indicators (KPI) like lead time, turnaround time, etc.
How Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
See more on: DCF Methodology
View All Help Topics