Buoyed by impressive second-quarter 2013 results and strategies
undertaken to reposition itself in an economy that is witnessing an
uneven recovery, we have adopted a bullish stance on
Urban Outfitters Inc.
), the retailer of apparel, footwear and accessories. We upgrade
our recommendation to Outperform from Neutral with a target price
Urban Outfitters posted better-than-expected second-quarter 2013
results. The quarterly earnings of 42 cents a share, surpassed the
Zacks Consensus Estimate of 33 cents, and surged 20% from 35 cents
delivered in the year-ago quarter. Lower shares outstanding as well
as top-line growth benefited the bottom line.
After registering revenue growth of 8.6% in the first quarter of
2013, total net sales climbed up 11% to $676.3 million during the
second quarter, and also came ahead of the Zacks Consensus Estimate
of $673 million on the back of new store openings, healthy
Direct-to-Consumer sales and strong wholesale operations.
Additionally, the company is effectively managing its inventory,
resulting in lower merchandise markdowns.
Net sales increased 10.7% to $639 million at the Retail Segment
and 16.7% to $37.2 million at the Wholesale Segment. Within Retail
Segment, Retail Stores sales rose 7.9% to $501.3 million, whereas
Direct-to-Consumer sales increased 22.3% to $137.7 million.
The Company Counts Upon
Being a multi-brand and multi-channel retailer, Urban Outfitters
offers flexible merchandising strategy. The company also has a
significant domestic and international presence with rapidly
expanding ecommerce activities. The company remains committed to
improve comparable-store sales performance, sustain investments in
direct-to-consumer business, enhance productivity in existing
channels, add new brands and optimize inventory levels.
Further, to increase customer count, the company plans to
augment store openings in North America and Europe, open retail
outlets in Asia, enhance online and mobile marketing endeavors, and
increase wholesale distribution in Europe and Asia. Moreover, the
company's debt-free balance sheet augurs well for future
The company remains rationale in opening new stores, having
opened 33, 46 and 57 stores in fiscal 2010, 2011 and 2012,
respectively. Urban Outfitters, which competes with
Abercrombie & Fitch Co.
), plans to open 51 stores in fiscal 2013. With a total store count
of 456, there still exists room for more.
Uphill Estimate Revision
Following Urban Outfitters' second-quarter 2013 results, the
Zacks Consensus Estimates have been portraying an upward trend.
The Zacks Consensus Estimate for the third quarter of 2013
remained constant at 41 cents in the last 30 days. However, the
Zacks Consensus Estimate for the fourth quarter moved up by a penny
to 51 cents in the same time frame. For fiscal 2013 and 2014, the
Zacks Consensus Estimate jumped by 11 cents and 9 cents to $1.58
and $1.91, respectively, in the last 30 days.
The above analysis supports our unbiased view, and advocates our
bullish stance on the Urban Outfitters, which is well defined
through our Zacks #1 Rank that translates into a short-term Strong
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