Can Urban Outfitters Make A Turnaround This Quarter?

Urban Outfitters Inc. (URBN) Consumer Discretionary – Specialty Retail | Reports March 7, After Market Close

In the past week, both Abercrombie and American Eagle reported strong earnings, signaling a potential turnaround for teen retailers. Urban Outfitters (URBN) is hoping this positive momentum is indicative of a much larger trend in apparel when it reports fourth quarter earnings later today. The clothing retailer is coming off a weaker than expected third quarter in which it missed sales estimates by over $40 million. Its flagship brand, Urban Outfitters, continues to struggle while Anthropologie and Free People have carried the company. This quarter the Estimize community is calling for EPS of 0.57 and revenue of 1.01 billion, 1 cent lower than the Street on the bottom line and roughly $5 million less in sales. Compared to the year prior, this predicts as a 5% decline in profitability while sales are expected to remain flat. On average Urban Outfitters consistently beats EPS estimates, trumping Estimize 60% and Wall Street 70% of recorded quarters. The success of clothing retailers this season and strong initiatives from Urban Outfitters to stimulate growth, may favorably impact earnings this quarter.

Like most other retailers, Urban Outfitters has committed to developing its direct to consumer channels and improving its omni channel networks. Ecommerce and new store openings continue to be the fastest growing segments. In each of the past 2 years, the company opened 38 new stores with initial plans to open 28 new outlets in fiscal 2016. Management is making a concerted effort to enhance the customer experience through store renovations and by mixing of its product line. Ahead of their earnings call, Urban Outfitters reported its fourth quarter sales which were right in line with the Estimize consensus and flat on a YoY basis. Comparable retail sales increased 2% at Free People but fell 2% at Anthropologie and 3% at Urban Outfitters. On top of weak same store sales, Urban Outfitters is losing its market position to fast-fashion retailers such as H&M and Zara, which service the same customer demographic. Given Urban Outfitters already reported its Q4 sales, investors will be focused on whether the company was able to churn out a profit.