Urban Outfitters (URBN) Gains 25% in 6 Months: What’s Ahead?


Urban Outfitters, Inc. (URBN Quick QuoteURBN ) seems to be on a roll, thanks to its robust business strategies and continued digital strength. The company has been strengthening its direct-to-consumer business, enhancing productivity in the existing channels, expanding product assortment and optimizing inventory level for a while now. Its strategic growth initiative FP Movement and store-growth endeavors are also yielding results. Markedly, the company is experiencing strong growth across both its retail stores and digital channels.

Gaining from such catalysts, shares of this Philadelphia, PA-based player have rallied 25.1% against its industry’s 2.3% dip in the past six months.

Let’s Delve Deeper

Being a multi-brand and multi-channel retailer, Urban Outfitters boasts a flexible merchandising strategy. The company is also forging a partnership to enhance its assortments. It teamed up with Hims & Hers Health, Inc. (HIMS Quick QuoteHIMS ) , which operates as a multi-specialty telehealth platform. The latter provides modern health and wellness solutions to consumers, and therefore this collaboration will allow Urban Outfitters to provide personalized wellness offerings with the initial availability of select Hims products on urbanoutfitters.com. Through this collaboration, the company looks to bolster skin care, hair and more personal care items.
Now coming to Urban Outfitters’ FP Movement initiative, management is consistently making investments across the digital landscape with strength in activewear. The company believes that the FP Movement will lure a wider base of customers for the Free People brand, boosting its growth. Having a differentiated position in the fitness and wellness space, the FP Movement offers a major growth opportunity. Moving on, the company intends to add about 16 Free People Movement stores in fiscal 2022.

Encouragingly, the company is witnessing sturdy consumer demand across majority of its product categories. This coupled with the solid execution of growth strategies continues to fueling its retail segment comparable sales. Management anticipated a steady sales improvement for the second quarter of fiscal 2022 from the fiscal 2020 reading. It believes that the retail segment comp sales will grow in the mid-teens range, contributing to the overall company’s sales in the low double-digit band. Also, lower markdown rates on improving consumer demand, solid product performance and a disciplined inventory control are likely to aid margins.

What’s More?

Urban Outfitters will come up with its second-quarter fiscal 2022 results next week. The company is looking quite favorable from earnings point of view as our Zacks model shows that it has a perfect combination to beat on earnings. Our proven model indicates that the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. Urban Outfitters currently has a Zacks Rank #2 and an Earnings ESP of +3.59%.

Well, the company is expected to report a year-over-year increase in both the top and the bottom line. The Zacks Consensus Estimate for quarterly earnings currently stands at 80 cents, indicating more than double the year-earlier quarter’s earnings of 35 cents a share. The consensus estimate of $1,034 million for quarterly revenues indicates a rise of more than 28% from the year-ago quarter’s tally.

A glance at the company’s trailing four-quarter performance reflects that it delivered an earnings surprise of 129.2%, on average. These factors together with an expected long-term earnings growth rate of 11.5% and a VGM Score of B clearly highlight the stock’s solid run on the bourses.

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Abercrombie (ANF Quick QuoteANF ) has a long-term earnings growth rate of 18% and a Zacks Rank of 1, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hibbett (HIBB Quick QuoteHIBB ) , presently a Zacks #1 Ranked stock, has a long-term earnings growth rate of 17.7%.

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