Urban Outfitters Inc.
), the retailer of apparel, footwear and accessories, posted its
second-quarter 2013 results on August 20. Here we will discuss the
company's scorecard, based on the recent earnings announcement,
subsequent estimate revisions by analysts as well as the Zacks Rank
and long-term recommendation for the stock.
Last Quarter Synopsis
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, Urban Outfitters said that total net sales climbed 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. The company is also managing inventory
effectively, resulting in lower merchandise markdowns.
Net sales by brands grew 14.1% to $310.7 million at Urban
Outfitters, 3.4% to $281.8 million at Anthropologie and 25.7% to
$73.8 million at Free People.
The company now plans to open 51 stores during fiscal 2013,
including 18 Urban Outfitters, 15 Free People, 16 Anthropologie and
1 BHLDN and 1 Terrain. For the third quarter, the company expects
to open 11 stores.
(Read our full coverage on this earnings report:
Urban Outfitters Tops Estimate
Agreement of Estimate Revisions
The agreement of estimate revisions indicates that majority of
the analysts were unidirectional, following Urban Outfitters'
second-quarter 2013 results.
In the last 30 days, 10 out of 26 analysts covering the stock
raised their estimates, whereas 9 analysts lowered the same for the
third quarter of 2013. For the fourth quarter, 17 analysts made
upward revisions, whereas only 3 analysts trimmed their
For fiscal 2013 & 2014, 25 and 22 analysts, respectively,
revised their estimates upward, and none lowered the same in the
last 30 days.
What Drives Estimate Revision
Clearly, a positive sentiment is palpable among most analysts,
who remain optimistic on Urban Outfitters' performance. Following
the earnings release, the Zacks Consensus Estimate has been
portraying an upward trend with majority of the analysts remaining
bullish on the stock.
Analysts remained confident about the stock outperforming in the
near term betting on the company's strategy. Management remains
committed to sustain investments in direct-to-consumer business in
order to drive growth. The company has undertaken initiatives such
as customer retention and acquisition, fulfillment of online or
in-store orders through any store and expansion of online
merchandise offerings to spur growth. Direct-to-Consumer
penetration augmented 190 basis points to 20% during the second
Magnitude of Estimate Revisions
The magnitude of estimate revisions by the analysts is clearly
reflected through changes in the Zacks Consensus
The Zacks Consensus Estimate for the third quarter of 2013
remained constant at 41 cents in the last 30 days, as the revisions
made by the analysts had a neutral impact on the Zacks Consensus.
The Zacks Consensus Estimate for the fourth quarter moved up by a
penny to 51 cents in the same time frame.
For fiscal 2013 & 2014, the Zacks Consensus Estimate jumped
by 10 cents and 8 cents to $1.57 and $1.90, respectively, in the
last 30 days.
Being a multi-brand and multi-channel retailer, Urban Outfitters
offers a flexible merchandising strategy. The company also has a
significant domestic and international presence with rapidly
expanding e-commerce activities. It remains committed to improving
comparable-store sales performance, adding new brands and
optimizing inventory levels.
Further, to strengthen its customer base, the company plans to
augment store openings in North America and Europe, open retail
outlets in Asia, enhance online and mobile marketing endeavors,
increase wholesale distribution in Europe and Asia, and
considerably expand direct-to-consumer business worldwide.
Moreover, the company's debt-free balance sheet also augurs well
for future growth.
Fashion obsolescence remains the key concern for Urban
Outfitters business model, which includes a sustained focus on
product and design innovation. This may adversely impact the
company's comparable-store sales and margins.
Currently, we have a long-term "Neutral" recommendation on the
stock. However, Urban Outfitters, which competes with
Abercrombie & Fitch Co.
), retains a Zacks #1 Rank that translates into a short-term
"Strong Buy" rating, and well defines the company's
better-than-expected results, initiatives undertaken to keep afloat
in this sluggish environment, and store expansion plans.
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that
earnings estimate revisions are the most powerful force impacting
stock prices. He turned this ground breaking discovery into two
of the most celebrating stock rating systems in use today. The
Zacks Rank for stock trading in a 1 to 3 month time horizon and
the Zacks Recommendation for long-term investing (6+ months).
These "Earnings Estimate Scorecard" articles help analyze the
important aspects of estimate revisions for each stock after
their quarterly earnings announcements. Learn more about earnings
estimates and our proven stock ratings at
ABERCROMBIE (ANF): Free Stock Analysis Report
GAP INC (GPS): Free Stock Analysis Report
URBAN OUTFITTER (URBN): Free Stock Analysis
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