URBN Stock: The No. 1 Reason to Be Bullish on Urban Outfitters, Inc.

URBN StockGood News for URBN Stock

From the January selloff to today, Urban Outfitters, Inc. (NASDAQ:URBN) has grown at a steady pace. Urban Outfitters stock moved from just over $20.00 to $28.00 in little over a month. Urban Outfitters suffered in 2015. URBN stock should continue gaining at a faster pace, even if the chain, after explosive growth in previous years, has slowed to focus on more quality expansion.

Analysts expect earnings per share of $0.56 on $1.02 billion in revenue. Last year, the retail chain posted earnings per share of $0.60 and $1.01 billion in revenue. While URBN stock has grown some 22% year to date, it is down almost 30% from a year ago. The company hasn’t managed to avoid the malaise that affected so many retailers in 2015.

Yet, there is optimism for significant upside. Some of URBN’s competitors, including Abercrombie & Fitch Co. (NYSE:ANF) and American Eagle Outfitters, Inc. (NYSE:AEO), showed good numbers last week. The sense is that retailers are in for a favorable turnaround. While Urban’s flagship brand has struggled, its subsidiary brands are growing faster than expected. This, combined with the company’s habit of beating earnings estimates and the rebound of clothing retailers, makes Urban an interesting proposition thanks to favorable earnings in the present and successive quarters for 2016. (Source: “Can Urban Outfitters, Inc. Make A Turnaround This Quarter?,” Value Walk, March 7, 2016.)

URBN stock was worth some $47.00, but the company did not increase sales as quickly as investors would like. But increase sales it did. Urban Outfitters relaxed its pace of growth even as it reported sales in 2015 of $3.45 billion, four percent higher than the same period of the previous year, when revenue hit $3.32 billion. (Source: Ibid.)

As far as retail chains are concerned, the “Urban Outfitters” brand used to be the core revenue generator for the company. However, the retailer has three other popular brands all within the Anthropologie Group. These brands, “Anthropologie,” “BHLDN” (a bridal specialist), and “Terrain,” contributed $1.442 billion, thus becoming the group’s new growth engine. (Source: Press release, “Urban Outfitters Reports $1 Billion in Q4 Sales,” EuroInvestor, March 7, 2016.)

Urban Outfitters continues to get more in-store than online store sales. In 2015, its online network accounted for about $260.0 million, or about seven percent of the total sales. So, the company has continued building physical stores. In 2015, Urban Outfitters opened 31 stores, of which 14 were for Anthropologie, 13 were for “Free People,” and four were for Urban Outfitters. The company also closed five stores in the last year. (Source: Ibid.)

Urban Outfitters has 240 stores in the U.S., Canada, and Europe; its Anthropologie brand group has 218 outlets. Free People, a newer more specialized merchandise store, is growing faster than the others and can already count on 114 stores in the United States and Canada. (Source: Ibid.)