Overall, the retail sector has taken a beating this earnings season, and Urban Outfitters ( URBN ) may be no exception to the industry trend. This lifestyle specialty retail firm operates and manages five clothing lines, namely, Urban Outfitters, Anthropologie, Free People, Terrain and BHLDN.
URBN offers its brands mainly from its online store, however, it also has brick-and-mortar stores located around the US, UK, and Europe. Its largest line, Urban Outfitters caters to the youngest audience out of all the other lines, and recently has not been doing as well as expected. URBN will hold a conference call on August 18 th after market close.
Sector in Focus
URBN does not have the best of prospects right now, as its Q2 fiscal year 2015 conference call may outline the rough quarter for the company, just like how Michael Kors ( KORS ), and Kate Spade ( KATE ) and other retailers did in their recent quarterly updates. This did not go to well for KORS stock, but shares do retain a Zacks Rank #2 (Buy) right now, and could be intriguing after the sharp pull back.
When one examines companies like Aeropostale Inc. ( ARO ), and American Eagle ( AEO ), it is noticeable how these once popular retailers who catered mainly towards teens and young clientele have lost to cheaper retail brands that are quick to adapt to the changing styles of young crowds. One of these companies is Swedish brand H&M Hennes & Mauritz AB (though investors should note that this is not traded publicly on any American stock exchange).
Many on the street perceive and understand that URBN holds some sort of middle ground with reasonable prices, but does not respond very quickly to market changes. It is also important to remember that URBN has developed and invested in establishing a particularly strong e-commerce platform. According to the Wall Street Journal, Free People and Anthropologie sales have increased by 25% and 8% year over year, respectively. On the other hand, Urban Outfitters saw its sales drop by 12%.
Will Shareholders Be Surprised?
As of August 18 th , URBN has a Zacks Rank #3 (Hold), and the Zacks Consensus Estimate Trend has seen the EPS estimates revised and decreased as of late. It is also important to note that last quarter, URBN negatively surprised by 3.70% so the trend is not the company's friend right now. This is especially true when you consider that the Earnings ESP for URBN is negative, suggesting more recent estimates have been declining, and that pain might be ahead for this stock in a very competitive industry.
This shows that URBN may not be the best retail stocks to invest in, as it may have a shaky earnings report. It is a risky bet, and investors should be wary when trading this stock following the earnings release. Better stocks to invest in would be Abercrombie & Fitch Co. ( ANF ), as it currently holds a Zacks Rank #2 (Buy), or Citi Trends ( CTRN ) which has a Zacks Rank #1 (Strong Buy) and is also in URBN's industry.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.