Urban Outfitters beat profit and sales expectations for the April-ended quarter late Wednesday. Urban Outfitters stock soared more than 20% in opening trade and regained a buy point.
Sales rose 10.7% to $1.33 billion while Urban Outfitters' earnings per share jumped 78.5% to $1.16. It was the second straight quarter of strong revenue gains and the third consecutive quarter of accelerating EPS growth.
Same-store sales rose 4.8%, with a 6.9% increase at its Anthropologie stores, 3.1% at Free People and 2.1% at Urban Outfitters.
Analysts expected Urban Outfitters to report a 21% earnings per share rise to 84 cents. Sales were expected to climb 7.6% to $1.291 billion, according to FactSet. Analysts estimated that same-store sales advanced 3.6%.
"Our success was driven by positive sales growth and improved profitability across all brands and segments," CEO Richard Hayne said in the earnings release. "We believe these results demonstrate the strength of our brands and the effectiveness of our strategy, giving us confidence in URBN's continued success."
Urban Outfitters Expectations
In a call with analysts, Chief Operating Office Francis John Conforti said that while tariffs remain uncertain, they could have a "minimal negative impact" on gross margin in the current quarter and potentially deduct 20 basis points in the second half of the year. Still, Conforti said the company is confident it can still achieve 50 to 100 basis points in gross margin growth for the full fiscal year.
CEO Richard Hayne said that despite "the noise in the headlines and broader economic uncertainty, our customers continued to show resilience. We haven't seen any sign of demand slowdown." Customers were eager for spring fashion, he added, according to a transcript via FactSet.
Urban Outfitters is the No. 1 stock in IBD's apparel and shoes retailing industry group. Its Composite Rating is 96. The stock is near all-time highs, while shares of rivals such as Abercrombie & Fitch and American Eagle Outfitters remain in deep slumps.
American Eagle warned investors May 14 of a disappointing quarter that will result in an operating loss and more markdowns.
Urban Outfitters Stock Above Entry
Urban Outfitters shares jumped more than 20% in the first 20 minutes of trading Thursday. The stock climbed past a 61.16 buy point on May 15, although it topped an early entry from a trendline around 54 three days earlier.
The relative strength line has been making new highs.
Urban Outfitters — whose brands also include Nuuly — operates more than 700 stores globally. The company has a three-year EPS Growth Rate of 20% and a three-year sales growth rate of 7%.
Analysts had been sanguine ahead of the earnings report.
On Tuesday, Barclays raised its price target to 73 from 59 and reiterated an overweight rating. Analysts cited a brand promotion "inflection to positive," according to a summary from TheFly.com.
On Monday, JPMorgan raised the price target to 63 from 50 and kept a neutral rating as part of a preview of retail earnings.
Thursday, Wells Fargo and Morgan Stanley raised their price targets.
Urban Outfitters stock has a 21-day average true range (ATR) of 3.92%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior.
Stocks with higher ATRs are more prone to trigger sell rules and shake investors out. Stocks with lower ATRs tend to make more incremental moves. With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
