Urban Outfitters, Inc. (URBN) sent its stock soaring on Wednesday, closing the day with an impressive 18.3% increase, reaching $47.49 per share. This dramatic rise followed the release of the company’s third-quarter earnings report, which significantly surpassed analysts’ predictions and fueled optimism about the company’s future prospects.
The stellar performance showcased strength across all three of Urban Outfitters’ business segments. The company reported earnings per share (EPS) of $1.10, easily beating the consensus estimate of $0.89. Revenue climbed to $1.36 billion, a 6.3% year-over-year increase that also exceeded expectations of $1.32 billion. Net income for the quarter reached $102.9 million, a healthy improvement compared to $83 million in the same period last year.
Analyzing the segmental performance, retail net sales saw a 3.2% increase, with comparable retail sales up 1.5%. Anthropologie and Free People, two key brands within the Urban Outfitters portfolio, showed robust growth, with comparable sales increasing by 5.8% and 5.3%, respectively. Conversely, the Urban Outfitters brand experienced a decline in sales, falling by 8.9%. However, this negative performance was overshadowed by the positive contributions of the other brands and the growth in other segments.
Nuuly, Urban Outfitters’ subscription rental service, continued its impressive growth trajectory, boasting a 48.4% surge in sales, driven by a 51% increase in active subscribers. The wholesale segment also contributed positively, with revenue rising 17.4%, primarily due to a 20.3% increase in Free People wholesale sales, offsetting a decline in Urban Outfitters wholesale revenue.
The company’s strong financial performance is reflected in its gross profit, which increased by 9.4% to $497.3 million. This improvement is partly attributed to higher merchandise markups and reduced markdowns at the Urban Outfitters brand. While operating expenses rose by 6.7% due to increased marketing and store payroll costs, the overall financial performance was more than sufficient to offset these increased expenses.
CEO Richard Hayne expressed confidence in the company’s outlook, stating, “These results were driven by outperformance across all three business segments – Retail, Subscription and Wholesale. Additionally, we’re optimistic about the outlook for Holiday demand and believe total comparable sales could be similar to our third quarter results.” This positive outlook adds to investor confidence.
Urban Outfitters ended the quarter with a strong financial position, holding $182.5 million in cash and $340.4 million in marketable securities. The company also reported a 10% increase in inventory, largely due to early holiday merchandise shipments and higher sales expectations for the coming months.
The positive earnings report prompted several prominent analysts to revise their price targets upward. Citigroup upgraded Urban Outfitters to a “Buy” rating, raising its price target from $42 to $59. Other analysts, including those from Telsey Advisory Group, BofA Securities, Barclays, and Wells Fargo, also increased their price targets, further contributing to the market’s enthusiastic response to the company’s performance.
The significant increase in Urban Outfitters’ stock price reflects investor confidence in the company’s strong financial performance and promising outlook for the holiday season and beyond.
