Urban Outfitters’ Sales Growth Set To Continue

-18.92%
Downside
43.42
Market
35.20
Trefis
URBN: Urban Outfitters logo
URBN
Urban Outfitters

Apparel retailer Urban Outfitters (NASDAQ:URBN) is set to announce its third quarter results, for the period ending October 2016, on November 22, 2016. According to consensus estimates, the company will report a growth in sales and EPS, over the same period last year.

URBN Q3 2017 Consensus

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Urban Outfitters’ stock price has been soaring since the beginning of the year, rising over 66%. Till the third quarter of last year, the company was failing to meet the earnings expectations, which wreaked havoc on its share price. Further in the third quarter of last year, the unexpected purchase of a pizza chain sent the stock price tumbling further to $20. The company has turned around its business subsequently, and this is reflected in the rising share price of the company. This has been primarily driven by the improving comparable sales and operating margin.

URBN Stock Price

In the second quarter, the company continued its streak of positive comparable sales, when it increased 1%, with those if its namesake brand soaring 5%. However, this was offset by flat comps at Free People, and a 3% decline at Anthropologie. The latter brand has been pulling the company down in recent times, and if the company wants to continue to do well in the future, further steps need to taken to reinvigorate the brand.

URBN Comps

Urban Outfitters has also been working hard to improve its gross margins. This has been done by cutting back on the promotions and discounts it had been offering to consumers. This was reflected in the second quarter results, wherein the company announced a 179 basis points improvement in the margin. This, coupled with a rise in comps, has been quite impressive, as it is usually difficult to increase sales without offering the markdowns the customers are used to.

URBN Gross Margin

Amidst the doom and gloom of the apparel industry, signified by the collapse of American Apparel and Aeropostale, the one thing working in Urban Outfitters’ favor may be its relatively smaller store count. Foot traffic at malls has declined considerably, owing to a weak economy and the rise of omnichannel retailing, which is expected to grow to $1.8 trillion in the US by 2017, according to research firm Forrester. While several retailers have been undertaking store closures, Urban Outfitters still seems to be in an expansion phase. According to the CEO Richard Hayne, the US is overstocked in the apparel category, with approximately ten times more retail space per capita than in Europe. A cautious approach undertaken by Urban Outfitters is serving them well now. The company has also been a first mover in the omnichannel retail space, catering to the demands of its target market – younger people who tend to be more comfortable shopping from their smartphones.

URBN Store Count

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Urban Outfitters
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