Urban Outfitters Stock To Trade Higher Post Fiscal Q1?

Urban Outfitters (NASDAQ: URBN), a lifestyle retailer focusing on young adults and teenagers under brands Anthropologie, Bhldn, Free People, Terrain, Urban Outfitters, and Nuuly, is scheduled to report its first-quarter fiscal 2022 (year ending January) results on Tuesday, May 25. We expect the company to likely beat revenue and earnings expectations, driven by improved demand in digital retail. While the Covid-19 related shutdowns decimated much of the specialty retail sector in 2020 – Urban Outfitters still managed to swing back to profit in the second half of the year. However, the company’s revenues continued to remain under pressure due to increased regulations around store capacity, lockdown in various parts of the world, and weakness in the company’s namesake brand. We expect this trend to continue in the upcoming Q1 as well.

Our forecast indicates that Urban Outfitters’ valuation is $34 a share, which is 6% higher than the current market price of around $34. Look at our interactive dashboard analysis on Urban Outfitters’ Pre-Earnings: What To Expect in Q1? for more details.

(1) Revenues expected to be marginally ahead of consensus estimates

Trefis estimates URBN’s Q1 2022 revenues to be around $910 Mil, slightly higher than the consensus estimate. While in-store revenue was heavily impacted due to Covid-related store closures, strong double-digit growth in the digital channel helped offset much of this headwind, leading to a sales decline of 13% year-over-year (y-o-y) in 2020. The company saw lower store productivity even after re-opening, and as a result, comparable retail segment net sales decreased 12% y-o-y and wholesale segment net sales also fell 36% y-0-y during this period. The coronavirus outbreak had a sizable impact on Urban Outfitters’ revenues in fiscal 2021 due to lower discretionary spending, store closures, and increased unemployment; we believe the demand for apparel and athleisure products will rebound as the spread of the virus subsides. Furthermore, the retailer’s well-established digital business is helping to mitigate the impact of store closures on the company’s top line.

Free People’s activewear – a women’s bohemian apparel, and lifestyle brand – was more successful than the overall brand as customers favored athleisure and comfortable clothing for spending more time at home. This trend will also likely continue into Q1.

2) EPS also likely to be ahead of consensus estimates

URBN’s Q1 2022 earnings per share (EPS) is expected to be 18 cents per Trefis analysis, compared to the consensus estimate of 17 cents. Urban Outfitters’ net income saw a 99% decline in 2020 to a mere $1 million, due to store closures in the first half of the year. It should be noted that a higher percentage of online sales hurts the company’s bottom line as it still has to pay for its under-utilized retail locations along with the added cost of shipping online.

For fiscal 2022, we expect a 23% y-o-y growth in Urban Outfitters’ revenues. In addition, diluted earnings per share (EPS) could likely come in at $1.88.

(3) Stock price estimate higher than the current market price

Going by our Urban Outfitters’ Valuation, with an EPS estimate of around $1.88 and P/E multiple of 19x in fiscal 2022, this translates into a price of $36, which is 6% higher than the current market price of around $34.

For further comparison among peer groups, it is helpful to see how they stack up. URBN Stock Comparison With Peers shows how Urban Outfitters compares against peers on metrics that matter.

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