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Urban Outfitters (URBN) to Post Q4 Earnings: Things to Note

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We expect Urban Outfitters, Inc. URBN to register year-over-year growth in its bottom line when it releases fourth-quarter fiscal 2022 results on Mar 1 after market close. The Zacks Consensus Estimate for quarterly earnings currently stands at 49 cents per share, implying an improvement of 63.3% from 30 cents per share earned in the year-ago quarter. The consensus mark has decreased 7.5% over the past seven days.

A glance at this specialty lifestyle products retailer’s performance over the trailing four quarters shows that it has delivered an average earnings surprise of 76.4%.

Factors to Note

Urban Outfitters’ fourth-quarter performance is most likely to have benefited from its strategic efforts, including technological advancements, store rationalization and merchandising improvements. URBN has been strengthening its direct-to-consumer business, enhancing productivity in the existing channels, expanding its product assortment and optimizing inventory level for a while now. Its strategic FP Movement initiative to boost the Free People brand appears encouraging.
 
On Feb 10, Urban Outfitters stated that net sales for the three months ended Jan 31, 2022 rose 13.9% from the same-period level of fiscal 2020 to $1,332.2 million. The metric also rose 22.4% from the last fiscal year’s reading.

Following the sales results, management stated that it expects a stronger-than-anticipated deleverage in gross margin for the fiscal fourth quarter due to elevated inbound transportation costs. Evidently, concerns related to inflationary pressures from freight, raw materials and wages, besides supply-chain hurdles, remain. In addition, the company is grappling with higher SG&A expenses for a while now. Higher marketing and creative spend to boost digital growth might have driven SG&A in the to-be-reported quarter.

Sales Numbers

Urban Outfitters has unveiled sales data for the fourth quarter fiscal 2022. We note that sales increased across major brands, including Urban Outfitters, Free People, Anthropologie Group and Nuuly. Sturdy digital sales were somewhat offset by soft store net sales. For the fiscal fourth quarter, net sales rose 13.9% from the same-period level of fiscal 2020 and 22.4% from the last fiscal year to $1,332.2 million.

Brand-wise, net sales were up 5.4% from the comparable period’s level in fiscal 2020 to $474.4 million at Urban Outfitters, 13.8% to $558.7 million at Anthropologie Group and 28% to $276.2 million at Free People. Nuuly, the subscription-based rental service for women’s clothes, contributed $17.3 million to net sales, reflecting an increase of 188.3% from the comparable period’s level in fiscal 2020. However, Menus & Venues’ net sales amounted to $5.6 million, down 17.6% from the comparable period’s reading in fiscal 2020.

Comparable Retail segment’s net sales grew 14% from the same-period level of fiscal 2020 on a robust double-digit rise in digital channel sales. Growth was partly offset by a low double-digit negative retail store sales due to lower store traffic. While net sales at the Retail segment improved 15% from the comparable period’s level in fiscal 2020, the metric at Wholesale unit plunged 22%, mainly due to lower Free People Group’s sales to promotional wholesale customers.

URBN’s FP Movement and AnthroLiving initiatives bode well. For the year ended Jan 31, 2022, net sales climbed 14.2% from the level as of Jan 31, 2020 and 31.9% year over year to $4,548.8 million.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Urban Outfitters this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. 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 #5 (Strong Sell) and an Earnings ESP of 0.00%, making surprise prediction difficult.

Stocks With a Favorable Combination

Here are a few companies worth considering from the same sector as our model shows that these have the right combination of elements to beat on earnings:

Casey's General Stores CASY currently has an Earnings ESP of +15.39% and a Zacks Rank #3. CASY is anticipated to register top-line increase when it reports third-quarter fiscal 2022 results. The Zacks Consensus Estimate for Casey's General Stores’ revenues is pegged at $3,081 million, indicating a rise of 53.2% from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Casey's General Stores’ quarterly earnings is pegged at $1.43 per share, suggesting an improvement of 37.5% from the year-ago quarter’s reported figure. CASY delivered an earnings beat of 20.1%, on average, in the trailing four quarters.

American Eagle Outfitters AEO currently has an Earnings ESP of +2.07% and a Zacks Rank #3. AEO is likely to register bottom-line decrease when it reports fourth-quarter fiscal 2021 numbers. The Zacks Consensus Estimate for quarterly earnings per share of 36 cents suggests a fall of 7.7% from the year-ago quarter’s reported figure.

American Eagle Outfitters’ top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $1,532 million, which indicates an improvement of 18.4% from the figure reported in the prior-year quarter. AEO has a trailing four-quarter earnings surprise of 12.7%, on average.

Costco COST currently has an Earnings ESP of +0.75% and a Zacks Rank #3. COST is likely to register an increase in the bottom line when it reports second-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for quarterly earnings per share of $2.67 suggests an increase of 24.8% from the year-ago reported number.

Costco’s top line is expected to increase year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $51.1 billion, which suggests growth of 14% from the prior-year quarter. COST has a trailing four-quarter earnings surprise of 8.3%, on average.

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American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
 
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
 
Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report
 
Casey's General Stores, Inc. (CASY) : Free Stock Analysis Report
 
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