Urban Outfitters earnings 'cheat sheet'

The retailer's margins contract as its profit drops.

By Wall St. Cheat Sheet Mar 13, 2012 2:03PM

Image: Jewelry store (© Baerbel Schmidt/Getty Images/Getty Images)Rising costs hurt S&P 500 component Urban Outfitters Inc. (URBN) in the fourth quarter as profit dropped from a year earlier. Urban Outfitters is engaged in the general consumer product retail and wholesale business, selling to customers through various channels including retail stores, catalogs and websites.

Here is the "cheat sheet" for Urban Outfitters fourth-quarter earnings report:

Results: Net income for Urban Outfitters fell to $39.3 million (27 cents per share) vs. $75.2 million (45 cents per share) a year earlier. This is a decline of 47.8% from the year-earlier quarter.

Revenue: Rose 9.3% to $730.6 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Urban Outfitters fell short of the mean analyst estimate of 30 cents per share. Analysts were expecting revenue of $741.4 million.

Quoting Management: "I am pleased that we managed our inventories to appropriate levels at year end even though our margins during the quarter suffered as a result," said Chief Executive Officer, Richard Hayne. "Our rate of full-priced selling has improved from fourth- quarter levels as we seek to re-establish our historic full-price selling penetration."

Key Stats: Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 9.5 percentage points to 30.1% from the year-earlier quarter. Over that time, margins have contracted on average 5.4 percentage points per quarter on a year-over-year basis.

Revenue has risen for the last four quarters. Revenue increased 6.3% to $610 million in the third quarter. The figure rose 10.3% in the second quarter from the year earlier and climbed 9.2% in the first quarter from the year-ago quarter.

The company fell short of forecasts after beating estimates in the previous two quarters. In the third quarter, it topped the mark by 2 cents, and in the second quarter, it was ahead by 3 cents.

Net income has dropped 25.9% year-over-year on average across the last five quarters. Performance was hurt by a 47.8% decline in the most recent quarter from the year-earlier quarter.

Looking Forward: Expectations for the company's next-quarter results are lower than they have been. Over the past 60 days, the average estimate for first quarter of the next fiscal year has fallen from 26 cents per share to 22 cents. For the fiscal year, the average estimate has moved down from $1.29 a share to $1.22 over the last ninety days.

Competitors to Watch: Abercrombie & Fitch Co. (ANF), The Gap Inc. (GPS) and American Eagle Outfitters (AEO).

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Derek Hoffman is an editor at Wall St. Cheat Sheet. As of this writing, he did not own a position in any of the aforementioned stocks.
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