If gross margin holds on reasonably well and inventory remains at moderate levels in relation to sales, this could be a positive in terms of assessing demand strength and operational efficiency.
Urban Outfitters has considerable room for growth. The company plans to open between 35 and 40 new stores during the current year, versus a total store base of 516 locations at the end of the last quarter. This includes approximately 12 new Urban Outfitters stores globally, 15 new Anthropologie stores globally, and 12 new Free People stores in North America.
Free People is also expanding in Asia, which could provide exposure to exciting growth opportunities in the medium term. The company's partner in Japan, World Co., opened five new shops in the country during the last quarter.
In Hong Kong, Free People has partnered with Lane Crawford to open a 700-square-foot shop-in-shop in their LAB Concept. Free People is also launching a new Chinese language e-commerce site, which could open the doors toward wholesale expansion in Mainland China.
In addition, in March the company launched Without Walls, an active lifestyle category extension of its Urban Outfitters brand. Sports and fitness-related apparel has been a winning category in retail over the last few years, as consumers are increasingly wearing these clothes both in the gym and in their everyday life. If the company can successfully enter this promising category, this could be helpful in reversing the declining sales trend in the Urban Outfitters brand.
When evaluating Urban Outfitters' coming earnings report, investors should keep an eye on sales growth at the company's different brands, gross margin and inventory trends, and signs of progress in its main growth initiatives. These variables could prove informative when determining whether Urban Outfitters is still facing a slowdown or ready to deliver improved performance over the medium term.
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The article Can Urban Outfitters Get Back in Fashion? originally appeared on Fool.com.
Andrés Cardenal has no position in any stocks mentioned. The Motley Fool recommends Urban Outfitters. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
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