Urban Outfitters Soars After Q4 Profit Beats Estimates, Bullish Analyst Calls

Shares of Urban Outfitters (URBN) are soaring after the company’s fourth quarter profit surpassed analysts’ consensus estimates. The retailer also received positive commentary from several analysts.

WHAT’S NEW: After the market close on Monday, Urban Outfitters reported Q4 earnings per share of 61c, topping analysts’ consensus estimates of 56c, and revenue of $1.01B, slightly below analysts’ estimates of $1.02B. Comparable Retail segment net sales, which include comparable direct-to-consumer channel, decreased 2% in Q4, with Comparable Retail segment net sales up 2% at Free People, down 2% at the Anthropologie Group and down 3% at Urban Outfitters. Wholesale segment net sales increased 29% partially due to delayed shipments from the third quarter carrying over into Q4, the company said.

WHAT’S NOTABLE: As of January 31, total inventories decreased by $28M, or 8%, on a year-over-year basis. The decrease in total inventories is primarily related to the decline in comparable Retail segment inventories, which decreased 6% at cost and 8% in units.

EXECUTIVE COMMENTARY: Despite sales that underperformed in Q4, Chief Executive Officer Richard Hayne said he was “pleased with the merchandise margin improvement delivered by the brands,” and noted that the company’s expansion categories “performed above our expectations.” On the company’s earnings conference call, Chief Financial Officer Francis John Conforti said sales growth during the quarter was negatively impacted by approximately 160 basis points of foreign currency translation. The company plans to open 26 net new stores in fiscal year 2017 with estimated capital expenditures of approximately $160M.

STREET RESEARCH: This morning, three separate research firms, Stifel, Brean Capital, and SunTrust all raised their respective price targets on Urban Outfitters after the company reported higher than expected Q4 EPS. Another firm, Baird, said its long-term view on Urban Outfitters remained bullish despite its recent rally. The firm said it would wait for a pullback before adding to positions aggressively. The company reported better margins and an improving margins picture in 2017, noted Baird, which reiterated its Outperform rating and raised its price target to $35 from $29 on Urban shares.