Urban Outfitters (NASDAQ:URBN) is among the top-performing companies in the retail sector this year. In the second quarter (three months ended July 2018), the company handily beat consensus expectations on both earnings and revenues, reporting a 14% improvement in sales, with growth reported across the board, and a whopping 91% increase in the EPS, spurred by reduced markdowns and a lower tax rate. Comparable sales growth for the company came in at 13%, led by a 17% improvement at Free People, followed by 15% at its namesake brand, and 11% at Anthropologie, with the company noting positive comps at each of its brands for the second quarter in a row. This growth was spurred on by higher consumer spending, as well as easier comparisons versus the same period last year. These factors have continued to aid the retailer, with the company reporting earlier this month that in the third quarter-to-date, the comparable sales growth has been 10%. However, the company expects that as the quarter carries on, the comparisons versus the previous year will get tougher, resulting in the comps improving in the high single-digits for Q3 (which is still pretty high).
We have a $52 price estimate for Urban Outfitters, which is higher than the current market price. The charts have been made using our new, interactive platform. If you don’t agree with our analysis, you can click here for our interactive dashboard on Our Outlook For Urban Outfitters In FY 2019 (year ended January 2019) to modify our driver assumptions to see what impact it will have on the company’s revenues, earnings, and price estimate.
Factors That May Have An Impact On The Future Performance
1. Strong Sales Trend Reported: In its second quarter earnings conference call, the management stated that it expects to deliver sales comps in the high single-digits. The slightly easier comparisons versus last year, together with the current sales trends seen by the company, prompted the positive outlook. Moreover, the factors that benefited the gross margin, namely reduced markdowns and leverage in store occupancy costs, are anticipated to continue in Q3, helping the company post an improvement in the metric by an expected 100 basis points.
2. Strength of Digital Segment: The shift toward the online space has been pretty evident, with the…