Urban Outfitters' Online Sales Continue to Charge Ahead

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Urban Outfitters' ( URBN ) internet & catalog order business has been performing considerably well. Internet sales helped drive sales growth for the year, representing about 32% of the incremental $340 million in annual revenues for 2010. The company believes that, at this rate, the internet business can double in size over the next three years. Urban Outfitters competes with J.Crew Group (NYSE:JCG), Ann Taylor ( ANN ), Gap ( GPS ) and Abercrombie & Fitch ( ANF ) in the retail apparel market.

Growing Online Sales

For the fiscal year ended Jan. 31 2011, Urban Outfitters' internet sales were up 34%, with net sales increasing 18%. Internet sales grew from 17% of net sales in 2009 to 19% in 2010.

To enhance its internet business, Urban Outfitters is investing in the growth of this channel. It is working to improve assortment, site functionality, marketing, social media, and fulfillment capabilities. It is also looking to improve analytical tools and launch sites in other languages.

Outlook for Internet & Catalog Orders

Urban Outfitters' revenues from internet & catalog orders has seen steady growth over the past few years, increasing from about $130 million in 2005 to $434 million in 2010. The success is largely a function of increased internet penetration. We anticipate that the pace of growth in this channel will continue going forward, towards $1.2 billion by the end of our forecast period.

Despite the encouraging outlook, Urban Outfitters actually missed out on some key fashion trends towards the end of the last fiscal year. This, coupled with still-pressured consumer spending habits, caused some difficulty in clearing inventory. The retailer resorted to markdowns, which adversely impacted margins.

Going forward, it may take time for Urban Outfitters' margins to recover. The success of its Spring collection could go a long way in setting the tone for future trends.

See our complete analysis for Urban Outfitters stock



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: ANF , ANN , GPS , URBN

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