Urban Outfitters (URBN) down 11.6% since last earnings report: can it bounce back?
A months have passed since the last Urban Outfitters (URBN) earnings report. Stocks lost around 11.6% over that time frame, underperforming the S&P 500.
Will the recent negative trend continue until its next results release, or is Urban Outfitters likely to have a breakthrough? Before we dive into how investors and analysts have reacted in recent times, let’s take a look at the latest earnings report to better understand the important catalysts.
Urban Outfitters Q2 Profits and Sales Beat, Increase Y / Y
Urban Outfitters posted strong results for the second quarter of fiscal 2022, in which both upper and lower results exceeded Zacks’ consensus estimate and also improved year over year. We note that sales in all brands and all segments of the business have increased year on year.
A deeper insight
The company generated earnings per share of $ 1.28, higher than Zacks’ consensus estimate of 79 cents. Net income improved significantly from the 35 cents recorded in the quarter of last year and the 61 cents earned in the quarter ended July 31, 2019.
In the reported quarter, net sales of $ 1,157.7 million climbed 44.1% year-on-year and topped Zacks’ consensus estimate of $ 1,080 million. In addition, the metric was up 20.3% from the figure reported for the quarter ended July 31, 2019. Brandwise, net sales increased 36.3% year-over-year to 441.6 million at Urban Outfitters, 52.7% to $ 450.6 million at Anthropologie Group and 40.3% to $ 249.7 million at Free People. Menus & Venues net sales were $ 5.9 million, up sharply from the $ 1.6 million recorded in the previous year quarter. Nuuly, the womenswear subscription rental service contributed $ 9.9 million in net sales, reflecting a 110.6% increase from a year earlier.
In segment terms, the company’s retail segment net sales jumped 43.8% year over year to $ 1,089 million, while the wholesale segment grew by 43.1% to $ 58.8 million. Retail segment comparable net sales increased 40% year-on-year and 22% from same quarter of fiscal 2020 level due to double-digit sales growth on the digital channel. Growth was partially offset by negative single-digit retail sales due to lower in-store traffic. Strong consumer demand in the majority of product categories, primarily apparel, along with strong execution led to double-digit retail segment lineups across all brands.
Compared to the quarter ended July 31, 2019, Retail segment comparable net sales jumped 53% at Free People Group, 14% at Anthropologie Group and 20% at Urban Outfitters.
An overview of the margins
In the quarter under review, gross profit climbed 82.9% year-on-year to $ 435.3 million from the level in the quarter of the previous year. Additionally, gross margin increased 800 basis points (bps) year-over-year and 478 basis points from the second quarter of fiscal 2020 count to 37.6%. Record markdown rates on merchandise in the Retail segment, coupled with increased store occupancy spending through higher digital channel penetration in Retail segment net sales, contributed to gross margin.
Selling, general and administrative (SG&A) expenses increased 59.8% year-on-year and 13.3% from the second quarter of fiscal 2020 level to reach $ 269.4 million. As a percentage of net sales, the metric rose 230 basis points year-over-year, while the same 140 basis point decline from the FY2020 figure to 23.3%.
The company posted operating income of $ 165.9 million, up sharply from $ 69.4 million in the prior year quarter and $ 78.1 million reported in the second quarter of Fiscal 2019. In terms of sales rate, operating margin increased 570 basis points year-over-year and 620 basis points. for the quarter ended July 31, 2019 at 14.3%.
Other financial details
Urban Outfitters ended the quarter with cash and cash equivalents of $ 464.8 million and total equity of $ 1,669.4 million. As of July 31, 2021, total inventories had increased 37.3% year-over-year to $ 483.1 million.
This Philadelphia, PA-based company generated $ 195.2 million in net cash from operations during the first half of fiscal 2022. For fiscal 2022, management is forecasting expenses capital of nearly $ 285 million, mainly related to expanding distribution and fulfillment capacity to drive digital growth and store launches.
Urban Outfitters did not repurchase any shares in the first six months of fiscal 2022. It repurchased and then removed 0.5 million shares for approximately $ 7 million in fiscal 2021. As of 31 July 2021, the company had 25.9 million shares remaining under its share buyback. programs.
Management pointed out that August model sales of the Free People and Anthropologie brands were almost in line with reported quarter levels, while sales of Urban Outfitters brands slowed in mid-July. The company expects retail segment lineups for the Urban Outfitters brand in the fiscal third quarter to moderate by strong numbers. August to date, overall sales in the Urban Outfitters retail segment are positive in the mid teens.
Urban Outfitters expects the third quarter of the fiscal year to continue to reflect a healthy improvement in sales over fiscal 2020. It estimates that retail sales in the retail segment will increase in mid-teens, while sales of the fat segment should decline at a rate similar to that of exercise. second quarter. These will translate into double-digit overall sales for the company.
How have the estimates evolved since then?
It turns out that revised estimates have trended upward over the past month. The consensus estimate has changed by 19.89% due to these changes.
Right now, Urban Outfitters has an excellent growth score of A, although it lags a lot on the Momentum score front with a D. However, the action received an A rating from the side of value, which places it in the top quintile. for this investment strategy.
Overall, the stock has an overall VGM score of A. If you’re not strategy-focused, this score is the one you should be interested in.
Estimates have trended higher for the stock, and the magnitude of these revisions looks promising. Notably, Urban Outfitters has a Zacks Rank # 3 (Hold). We expect the stock to come back online in the coming months.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.