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Urban Outfitters Looks Lucrative Despite 15% Fall in 3 Months

Zacks Equity Research

Urban Outfitters, Inc.’s URBN dismal run on the bourses might deter you from adding the stock to your portfolio. However, a detailed analysis of the stock’s performance may change your mind. In fact, the company also recently revealed its solid holiday sales numbers for 2018, unlike many other retailers.

So, let’s take a look at the company’s holiday season performance and also check out other factors that are likely to draw investors’ attention toward Urban Outfitters.

In the past three months, shares of this Philadelphia, PA-based company have lost approximately 15% compared with the industry’s 11.5% decline. However, the company’s Zacks Rank #2 (Buy) and a VGM score of A reflect the stock’s sound fundamentals.

What Makes Urban Outfitters a Prospective Pick?

Urban Outfitters came out with strong comparable sales (comps) numbers for the two months period (ended on Dec 31, 2018), which constitutes the significant holiday season. Comparable Retail segment net sales jumped 5%, driven by robust double-digit rise in the digital channel, while Wholesale segment net sales grew 3%. On a brand-wise basis, Comparable Retail segment net sales improved 6% at Free People, 5% at Urban Outfitters and 4% at the Anthropologie Group.

Moving to Urban Outfitters’ other initiatives, the company emphasizes on store openings, increasing digital penetration, merchandising improvements and international expansion. To this end, the company intends to steadily expand its presence in Europe, Israel and China. In Europe, management plans to open approximately 10-20 outlets across all brands in each of the next two years, with a plan to operate more than 100 outlets in three years. Early next year, a Free People franchise location will be opened in Tel Aviv, Israel. The company informed that its franchisee already operates three Urban outlets in Israel. Management has entered into a franchise agreement to open outlets in other Middle East markets.

Also, management is making efforts to enhance performance of brands through store refurbishment and by bringing in more compelling assortments. Being a multi-brand and multi-channel retailer, Urban Outfitters offers flexible merchandising strategy. The company has a significant domestic and international presence with rapidly expanding e-commerce activities. The company is committed to improve comparable-store sales performance, sustain investments in direct-to-consumer business, enhance productivity in existing channels, add new brands and optimize inventory level. Urban Outfitters made an unprecedented move by acquiring Philadelphia’s The Vetri Family group of restaurants, including the Pizzeria Vetri chain. The attempt is seen as part of the company's strategy to target and attract millennials.

Further, to enhance reach, Anthropologie and Nordstrom JWN entered into a partnership, per which more than 200 items from Anthropologie Home are now available at selected Nordstrom full-line stores and on Nordstrom.com.

The aforementioned factors act as major tailwinds, which are likely to boost the company’s top-line in fiscal 2019. The Zacks Consensus Estimate for fiscal 2019 reflects a year-over-year increase of 9.9% to $3.97 billion.

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