What’s Happening With Urban Outfitters’ Stock?

URBN: Urban Outfitters logo
Urban Outfitters

Note: Urban Outfitters’ FY’22 ended on January 31, 2022.

After a 32% growth over the last six months, at the current price of around $29 per share, we believe Urban Outfitters (NASDAQ: URBN), a lifestyle retailer focusing on young adults and teenagers – is fairly priced in the near term. URBN stock has increased from around $22 to $29 in the last six months, outperforming the broader indices, with the S&P falling about flat over the same period. For the first nine months of FY 2023, the company’s sales grew 6% year-over-year (y-o-y) to $3.41 billion. This growth was largely driven by significant traction in their rental apparel business, Nuuly. This segment includes Nuuly Rent, a monthly women’s apparel subscription rental service, and Nuuly Thrift, a peer-to-peer resale marketplace where customers can buy and sell women’s, men’s, and kids’ clothes, shoes, and accessories from any brand. The Nuuly segment saw its revenue grow a whopping 185% y-o-y to $56.5 million, during the first three quarters of 2023. It should also be noted that continued growth in store count has also helped URBN to post increased revenues. For instance, the company had 685 stores under its Retail segment in FY 2022. By the end of the third quarter of 2023, this number had increased to 707.

Even though revenue increased, higher costs related to materials and transportation, rising inventory, and significant markdowns tempered profitability during the first nine months of FY 2023. Its net income plunged from about $270 million in the first nine months of FY 2022 to $128 million at the same time in FY 2023. The company’s SG&A (selling, general, and administrative) margin climbed 130 basis points to 25.3% during this period.

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We forecast URBN’s Revenues to be $4.8 billion for the fiscal year 2023, up 5% y-o-y. Looking at the bottom line, we now forecast EPS to come in at $1.74. Given the changes to our revenues and earnings forecast, we have revised our URBN’s Valuation to about $28 per share, based on $1.74 expected EPS and a 16.2x P/E multiple for the fiscal year 2023 – nearly 3% below the current market price.

URBN’s management mentioned that in the two months ending December 31, the company’s sales increased by 2.3% y-o-y. This was driven by a 15% rise in Free People Group sales and a 7% growth in Anthropology Group sales, offset by a 10% drop in Urban Outfitters brand. Meanwhile, Nuuly saw sales jump 150%, driven by a 153% rise in the number of subscribers to the platform.

It is helpful to see how its peers stack up. Check out how Urban Outfitters’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

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Returns Feb 2023
MTD [1]
YTD [1]
Total [2]
 URBN Return 6% 22% 2%
 S&P 500 Return 1% 8% 85%
 Trefis Multi-Strategy Portfolio 3% 15% 261%

[1] Month-to-date and year-to-date as of 2/6/2023
[2] Cumulative total returns since the end of 2016

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