Urban Outfitters (URBN) Gains From Business Strength Amid Risks
Urban Outfitters, Inc. URBN has been performing well, driven by its robust business strategies, store-growth endeavors and solid fundamentals. Management has been strengthening its direct-to-consumer business, enhancing productivity across existing channels and optimizing its inventory levels. URBN also remains optimistic about the prospects of its Nuuly business.
The company has been witnessing solid momentum in its Retail segment, backed by strength in the Free People Group and the Anthropologie Group. In the third quarter of fiscal 2023, net sales at the Retail unit rose 7.3% to $1,145.8 million and comparable net sales of the Retail segment grew 5.6%. By brand, the comparable Retail segment’s net sales jumped 22.5% at the Free People Group and 13.2% at the Anthropologie Group.
Management remains optimistic with the sturdy overall consumer demand at the start of the fiscal fourth quarter. It anticipates the trend to continue throughout the quarter. The company’s overall sales growth is envisioned to be in the mid-single digits in the fourth-quarter, driven by a low-single-digit increase in the Retail segment’s comparable sales and high-double-digit growth in Nuuly.
URBN has been making investments in its strategic growth initiative, FP Movement, with digital and creative brand prospects. It believes that this initiative will lure a broader customer base to the Free People brand. Having a differentiated position in the fitness and wellness space, the FP Movement offers a significant growth opportunity and is expected to boost Free People’s brand revenues.
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Shares of this Zacks Rank #3 (Hold) company have rallied 37.2% in the past year compared with the industry’s 9.8% growth.
Despite the positives, the company has been witnessing softness in its Wholesale segment. In the third quarter, net sales at the Wholesale unit dropped 3.6% to $69.9 million. The decline was attributable to a 3.5% decline in Free People Group wholesale sales on lower sales to department stores.
URBN has also been encountering rising costs and expenses of late. In the third quarter, its selling, general and administrative (“SG&A”) expenditures increased 12% year-over-year to $345.4 million. As a percentage of net sales, SG&A deleveraged 146 bps to 27%, mainly due to increased incentive-based compensation costs and elevated marketing and creative expenses. It expects fourth-quarter SG&A expenses to grow in the high-single digit range.
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MINISO Group operates as a retailer and wholesaler of lifestyle products. The Zacks Consensus Estimate for MNSO’s current financial-year earnings per share and sales suggests growth of 43.6% and 29.9%, respectively, from the corresponding year-ago reported figures.
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MarineMax is a recreational boat and yacht retailer and a superyacht services company. MarineMax’s earnings came in line with the Zacks Consensus Estimate in the last reported quarter. The Zacks Consensus Estimate for HZO’s current financial year sales suggests growth of 3.1% from the year-ago period’s figures.
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