Urban Outfitters is fashionable again
The trendy retailer has recovered from earlier missteps, and its shares won't be heading to the discount rack.
Better products, though, have led to better results.Net income in the recent quarter rose 25% to $76.4 million, or 51 cents per share, versus $61.3 million, or 42 cents per share, a year earlier. Sales jumped 12% to $759 million, the highest in the company's history, fueled by gains across all its major brands. Analysts had expected a profit of 48 cents per share on sales of $768 million.
Investors, however, were willing to overlook the earnings miss because Urban Outfitters' results were otherwise outstanding. Sales at locations open for at least a year surged 38% at Free People, which specializes in what it calls Bohemian fashions. Those sales rose 9% at Anthropoligie, whose offerings include apparel and housewares. And they gained 5% at its namesake brand.
Fewer markdowns enabled Urban Outfitters to post gross margins of 39.3% in the latest quarter, an improvement from 37.6% a year earlier.
Speaking on the earnings conference call, CEO and co-founder Richard Hayne struck a confident note, saying changes in retail industry "present us with unparalleled opportunities for growth" and that the company had the capital to take advantage of them.
Urban Outfitters is planning to open 35 to 40 new stores during the year, 16 of which will be outside the U.S., as it bets that its well-heeled customers won't hold back on spending the way the less wealthy have been doing. Some on Wall Street are betting that the retailer’s stock has more room to run.
Although the average 52-week price target on Urban Outfitters is $47.31, analysts at Wedbush are forecasting that the stock could reach $52, roughly 19% above where it recently traded. Its price-to-earnings multiple is about 22.3, well under its five-year high of 26.45, according to Reuters.
The time to buy Urban Outfitters is now because the stock doesn’t appear headed to the discount rack anytime soon.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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