Rise in sales and higher merchandise margins facilitated
Urban Outfitters Inc
) to post better-than-expected second-quarter fiscal 2014
earnings. The quarterly earnings of 51 cents a share surpassed
the Zacks Consensus Estimate of 48 cents and jumped 21.4% year
Total net sales of Urban Outfitters climbed 12.2% to $758.5
million during the second quarter, reflecting robust performance
of its Direct-to-Consumer business coupled with sturdy sales
through new store openings and double-digit growth at its
wholesale operations. Despite robust sales results, this Zacks
Rank #4 (Sell) stock missed the Zacks Consensus Estimate of $767
Urban Outfitters' net sales increased 11.9% to $715 million at
the Retail Segment and 16.9% to $43.5 million at the Wholesale
Segment. Net sales by brands grew 8.3% to $336.6 million at Urban
Outfitters, 11.8% to $315.1 million at Anthropologie and 31.8% to
$97.2 million at Free People. Other revenue decreased 3.6% to
Comparable retail segment net sales, including the comparable
direct-to-consumer channel, escalated 9%, reflecting healthy
sales across all brands.
Comparable retail segment net sales rose by 5% and 9% at Urban
Outfitters and Anthropologie respectively, while it jumped 38% at
Supported by strong sales, gross profit for the quarter soared
17.2% to $298.2 million, whereas gross margin expanded 169 basis
points to 39.3%, reflecting lower merchandise markdowns.
Urban Outfitters is optimistic that fiscal 2014 will present
considerable opportunity for gross-margin improvement. The
company expects to enhance margins by at least 50 basis points
for the second half of fiscal 2014 through improvements in brands
and lower markdowns.
Operating income marked a significant improvement during the
quarter and surged 24.4% to $119.3 million, while operating
margin escalated approximately 150 basis points to 15.7%.
During the first half of fiscal 2014, it opened 17 new stores,
including 8 Urban Outfitters stores, 3 Anthropologie stores and 6
Free People stores. The company closed 1 Urban Outfitters store
and 1 Anthropologie store.
For fiscal 2014, Urban Outfitters plans to open 35-40 new
stores, including 16 Urban Outfitters stores, 14 Free People
stores, 9 Anthropologie stores.
Other Financial Aspects
Urban Outfitters ended the quarter with cash and cash
equivalents of $298.5 million, marketable securities of $232.3
million and shareholders' equity of $1,519.1 million. Management
expects capital expenditure in the range of $190 million - $210
million for fiscal 2014.
Other Stocks to Consider
Until any further upgrade in Urban Outfitters' Zacks Rank,
other well performing stocks in the non-food retail, wholesale
The Gap, Inc
L Brands, Inc
), all of which carry a Zacks Rank #2 (Buy).
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