Urban Outfitters (URBN 50.72, +2.98, +6.25%) is trading nicely higher today after
reporting Q2 (Jul) earnings last night. Urban Outfitters operates a portfolio
of consumer brands comprised of Anthropologie, BHLDN, Free People, Terrain, and
Urban Outfitters brands. It also has a Food and Beverage division.
In the US, Canada, and Europe it operates 246 Urban Outfitters stores, 227 Anthropologie Group stores In the US it operates 135 Free People stores and 10 Food and Beverage restaurants. Free People wholesale sells its product through approximately 2,100 department and specialty stores worldwide, third-party websites and the company's own retail stores.
it’s the flagship Urban Outfitters brand targets young adults aged 18 to 28 with its women’s and men’s apparel and home goods.
The Anthropologie Group consists of the Anthropologie, Bhldn and Terrain brands. URBN initially operated the Bhldn and Terrain brands as standalone concepts but ultimately determined that the Bhldn and Terrain brands were complementary to the Anthropologie brand and integrated them into the Anthropologie Group during FY15 and FY16, respectively.
The Bhldn brand is focused on wedding-related merchandise while The Terrain brand focuses on home and garden products, antiques, live plants, flowers, wellness products and accessories.
Its Free People retail stores offer private label branded merchandise targeted to young women aged 25 to 30.
Turning to the Q2 (Jul) results, EPS nearly doubled year/year to $0.84, which was better than expected. Revenue rose 13.7% year/year to $992.5 mln, which also was above market expectations. Comparable Retail segment sales jumped +13%, driven by strong, double-digit growth in the digital channel and positive retail store sales. By brand, comps increased +17% at Free People, +15% at Urban Outfitters and +11% at the Anthropologie Group. Wholesale segment sales increased 10%.
URBN says lower markdown rates helped drive these results. Also, the increases were fueled by both the tops and bottoms categories in each gender, as well as one-piece dressing in women's. Of note, URBN has been beefing up its speed-to-customer model, which has enabled it to better chase trends. This, in turn, is providing its 18 to 28-year-old core customer with fashion-relevant product in a timely manner. This has also allowed the Urban Outfitters brand to deliver its fastest inventory turns ever and its lowest markdown rate ever for a JulQ.
Looking ahead, URBN says it’s optimistic about the second half of the year. Management says it knows its comparisons get more difficult in 2H18, but the fall product is off to a very strong start in both the apparel and the non-apparel categories. Investors are happy to hear that. After struggling the past few years, URBN seems to be firing on all cylinders now. Those comps are very impressive. The stock has been on a nice run from the high teens in mid-2017 to around $50 in the premarket today.
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