What Is Urban Outfitters’ Revenue Breakdown?

by Trefis Team
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URBN
Urban Outfitters
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Urban Outfitters (NASDAQ: URBN) delivered a strong financial performance in fiscal 2018. The apparel retailer’s revenue surged by 9.3% year-over-year to reach approximately $4 billion. Trefis’ model for the company breaks it down into two key components of this revenue figure:

  • Retail Segment (91% of total revenues)
  • Wholesale Segment (9% of total revenues)

As we summarize below, we expect total revenues for Urban Outfitters to grow at 3.5% to reach $4.1 billion in 2019. We currently have a price estimate of $37 per share for URBN, which is ahead of the current market price. We have summarized our revenue expectations for URBN, based on the company’s guidance and our own estimates, on our interactive dashboard Summarizing Urban Outfitters’ Revenue Breakdown. You can modify any of our key drivers to gauge the impact changes would have on its valuation, and see all Trefis Consumer Discretionary Services company data here.

Total Revenue:

  • Urban Outfitters saw a total revenue increase of more than $400 million from 2016 to 2018 (CAGR of 5.6%) while recording $3.9 billion in revenue in FY 2018.
  • Revenue growth was driven by sustained comps growth for all three brands (Free People, Urban Outfitters and Anthropologie) and continued growth in the digital channel.
  • Trefis forecasts the Retail segment to grow at 3% to $3.7 billion, while the Wholesale segment is expected to grow at 5% in 2019.

Retail Segment:

  • Urban’s Retail Segment consistently contributes a majority of its revenues, with an average revenue share of more than 90% in the last 3 years.
  • The segment grew by 9.2% year-over-year in fiscal 2018, contributing $305 million of total incremental revenues.
  • The growth in the Retail segment was primarily achieved due to growth in Retail segment comparable net sales. Retail segment comparable net sales increased 11.4% at Free People, 8.0% at Urban Outfitters and 7.5% at Anthropologie.
  • We expect the segment to continue its growth trajectory and record $3.7 billion in revenues in FY 2019, with revenue per square foot increasing to $846.
  • The segment’s percentage contribution to total revenue has marginally declined over the years due to the faster growth in the Wholesale segment.

Wholesale Segment

  • This segment has grown steadily over recent years, adding approximately $70 million of revenue over 2015-2018 (CAGR of 8.2%).
  • The growth has been achieved due to growth in domestic sales to department stores, specialty stores and digital businesses due to growth in several categories, including women’s apparels and intimates.
  • We expect similar trends going forward, with 2019 revenues of $365 million, growing at an average rate of 5% in next 3 years.
  • The segment’s contribution to total revenues has marginally increased over the years, which is expected to continue in the foreseeable future.

Although the company doesn’t report its digital channel revenues separately, it is worth looking at separately as the channel has been a major driver of growth for the company in the past few years.

Digital Channel 

  • The digital channel posted double-digit sales growth across brands in Q4.
  • This growth was driven by increases in average order value, sessions and conversion rate, while units per transaction was flat.
  • Digital penetration of total retail segment sales increased to around 40% in FY 2018, while digital penetration for Free People and Anthropologie has increased to well over 50%.
  • Digital contribution to respective segment revenues has significantly increased over the years, which should continue in the foreseeable future.

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