Facts to Know Ahead of Urban Outfitters' (URBN) Q2 Earnings
Urban Outfitters URBN is slated to report second-quarter fiscal 2019 results on Aug 21. The company outperformed the Zacks Consensus Estimate in all the trailing four quarters by an average of 19.8%. In the last reported quarter, lifestyle specialty retailer delivered a positive earnings surprise of 26.7%.
Let’s see how things are shaping up prior to this announcement.
Which Way are Top & Bottom-Line Estimates Headed?
The Zacks Consensus Estimate for the quarter under review stands at 76 cents, reflecting year-over-year growth of 72.7%. We also note that the Zacks Consensus Estimate has remained stable in the last 30 days. Moreover, Urban Outfitters has a remarkable history, at least in terms of the bottom line. The company’s first-quarter fiscal 2019 marked the fourth consecutive quarter of earnings beat.
The Zacks Consensus Estimate for revenues of $977.2 million indicates a rise of 12% from the year-ago quarter. If all goes well, this may be the fifth straight quarter of top-line beat for the company. We note that total revenues of this Pennsylvania-based company had increased 12.4% in the last reported quarter.
Well, the obvious question that comes to mind is whether Urban Outfitters will be able to sustain its positive earnings surprise streak in the second quarter of fiscal 2019. Though the past trend indicates a positive surprise, it will not be wise to jump to a conclusion without analyzing the factors at play.
Urban Outfitters, Inc. Price and EPS Surprise
Urban Outfitters, Inc. Price and EPS Surprise | Urban Outfitters, Inc. Quote
Factors at Play
We believe new store openings, increase digital penetration, merchandising improvements and international expansion bode well. Management is also making all possible efforts to enhance the performance of brands through store refurbishment and by bringing in more compelling assortments.
Urban Outfitters is gaining from strong comparable sales growth for the past few quarters. Comparable Retail Segment net sales jumped 10% buoyed by double-digit growth in the digital channel and increased retail store sales. This follows an increase of 4% and 1% in the preceding two quarters. Meanwhile, comparable retail segment net sales rose 15% at Free People, 10% at the Anthropologie Group and 8% at Urban Outfitters. Management expects second-quarter sales comps to be almost in line with first quarter rate.
The company’s rapidly expanding e-commerce activities and new store openings also bode well. In addition, Urban Outfitters’ acquisition of Philadelphia’s The Vetri Family group of restaurants is seen as a part of the company's strategy to target and attract millennials to the stores. Further, the company plans to open 18 new stores and intends to close 10 locations during fiscal 2019.
However, SG&A expenses increased 3.7% to $226.8 million during the first quarter of fiscal 2019. Moving ahead, management expects SG&A expenses to increase by approximately 6% and 5% in the second quarter and fiscal 2019, respectively, mainly attributable to higher digital-marketing investments and incentive-based compensation. This may negatively impact the company’s margins.
What Does the Zacks Model Say?
Our proven model does not conclusively show that Urban Outfitters is likely to beat estimates this quarter. 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 has a Zacks Rank #2 but an Earnings ESP of -3.12% that makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks With Favorable Combination
Here are companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Zumiez ZUMZ has an Earnings ESP of +8.84% and a Zacks Rank of #1
American Eagle Outfitters AEO has an Earnings ESP of +2.09% and a Zacks Rank of #2.
The Gap GPS has an Earnings ESP of +3.90% and a Zacks Rank of #2.
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