Urban Outfitters (URBN) Q3 Earnings: Will Comps Woes Persist?

An image of a pen on a stock chart
Credit: Shutterstock photo

Urban Outfitters Inc.URBN is scheduled to release third-quarter fiscal 2018 results on Nov 20. In the preceding quarter, the company's earnings beat the Zacks Consensus Estimate by 18.9%. Let's see, how things are shaping up prior to this announcement.

What to Expect?

The question lingering in investors' minds is whether Urban Outfitters will be able to deliver a positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for the current quarter is pegged at 33 cents, reflecting a year-over-year decrease of nearly 18%. Notably, the consensus mark has been stable in the past 30 days. Analysts polled by Zacks expect revenues of $857 million in comparison to $862 million, reported in the prior-year period.

Factors at Play

Significantly, this Philadelphia, PA-based company is likely to benefit from new store openings, increase in direct penetration, growing wholesale operations, technology advancements and merchandising improvements. We also believe that better product execution and an effective inventory management will help augment the company's performance. Management is revamping stores and bringing in more compelling assortments. The company is also strategically investing in shop-in-shops.

However, decline in comparable retail segment net sales in fiscal 2018 has been a concern for investors and is likely to persist in the third quarter too. Analysts surveyed by Zacks expect comparable store sales at Urban Outfitters and Anthropologie Group to decrease by 5% and 2.5%, respectively. However, comps at Free People are expected to increase by 2.8%. It is important to note that last quarter, comparable retail segment net sales fell 7.9% at Urban Outfitters and 4% at Anthropologie Group, respectively, but increased 2.9 % at the Free People.

Investors are also concerned about management's remark over gross margin, which is expected to decline year over year in third-quarter fiscal 2018 on account of rise in delivery as well as deleveraging in store occupancy expenditures. In the second quarter, gross margin contracted 440 basis points (bps) to approximately 34.1%, following a decline of 284 bps to roughly 31.5% in the first quarter, primarily due to deleveraging in customer delivery and logistics expense rates.

Urban Outfitters, Inc. Price, Consensus and EPS Surprise

Urban Outfitters, Inc. Price, Consensus and EPS Surprise | Urban Outfitters, Inc. Quote

What Does the Zacks Model Say?

Our proven model shows that Urban Outfitters is likely to beat estimates this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Urban Outfitters' ESP of +2.11% and a Zacks Rank #3 make us reasonably confident of an earnings beat.

Other Stocks Poised to Beat Earnings Estimates

Here are some other companies worth considering from the same space with the right combination of elements to deliver an earnings beat:

American Eagle Outfitters, Inc. AEO has an Earnings ESP of +1.04% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

The Kroger Co. KR has an Earnings ESP of +2.06% and a Zacks Rank of 3.

Signet Jewelers Limited SIG has an Earnings ESP of +27.52% and the company is Zacks #3 Ranked.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

American Eagle Outfitters, Inc. (AEO): Free Stock Analysis Report

Urban Outfitters, Inc. (URBN): Free Stock Analysis Report

Signet Jewelers Limited (SIG): Free Stock Analysis Report

Kroger Company (The) (KR): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

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

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

In This Story


Other Topics

Earnings Stocks

Latest Markets Videos


Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

Learn More