A solid year-to-date return of 40.1%, strong second-quarter
fiscal 2013 results and rising estimates aided
Urban Outfitters Inc.
) to attain a Zacks #1 Rank (Strong Buy) on August 23, 2012. This
apparel, footwear and accessories retailer has outperformed the
Zacks Consensus Estimates in 4 out of 5 quarters and missed in one.
The company has topped the Zacks Consensus Estimates by an average
of 9.6% over the last five quarters.
The Rank Drivers
Better-than-expected second quarter results, flexible
merchandising strategy, investments in direct-to-consumer business
and effective inventory management are the rank drivers for this
Urban Outfitters posted second quarter earnings of 42 cents a
share on August 20 that surpassed the Zacks Consensus Estimate of
33 cents by 27.3%, and year-ago earnings of 35 cents by 20%. Lower
shares outstanding as well as top-line growth benefited the bottom
After registering revenue growth of 8.6% in the first quarter of
fiscal 2013, Urban Outfitters' total net sales climbed 11% year
over year to $676.3 million during the second quarter, and also
came ahead of the Zacks Consensus Estimate of $673 million. Sales
improved on the back of new store openings, healthy
Direct-to-Consumer sales and strong wholesale operations.
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. Gross profit climbed 10.1% to $254.5
million. However, gross margin contracted 30 basis points to 37.6%.
Operating income rose 9% to $95.9 million, while operating margin
shriveled 20 basis points to 14.2%.
Earnings Estimate Revisions
The Zacks Consensus Estimate for fiscal 2013 rose 7.5% to $1.58
per share on the back of the upward revision of 5 out of 26
estimates in the last 60 days. The current estimate implies a
year-over-year growth of 32.7%.
For fiscal 2014, 5 out of 26 estimates were revised higher over
the same time frame, eventually lifting the Zacks Consensus
Estimate by 5.5% to $1.92 per share. The current estimate suggests
a year-over-year growth of
Urban Outfitters currently trades at a forward P/E of 24.62x,
reflecting a 71.6% premium to the peer group average of 14.35x.
Also, on a price-to-book basis, the shares trade at 4.79x, a
substantial premium to the peer group average of 2.60x. Given the
company's strong fundamentals, the premium valuation is justified,
and is well reflected through long-term earnings growth projection
of 18.7%. The company has a trailing 12-month ROE of 16.9%, which
is 120 basis points above its peer group average.
Founded in 1970 and based in Philadelphia, Pennsylvania, Urban
Outfitters is a lifestyle specialty retailer that offers fashion
apparel and accessories, footwear, home décor and gifts products.
The company's merchandises are generally sold directly to consumers
through stores, catalogs, call centers and e-commerce platforms.
The company has operations in the United States, Canada and Europe.
As of July 31, 2012, Urban Outfitters operated 456 retail stores -
207 Urban Outfitters stores, 173 Anthropologie stores, 72 Free
People stores, 2 Terrain stores and 2 BHLDN stores. The company has
a market cap of $5.66 billion.
Other Zacks #1 Rank retail stocks include
American Eagle Outfitters, Inc.
Stage Stores Inc.
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