4 Urban Outfitters Analysts React To Q1 Earnings Miss, Rising Costs, Growing Inventory

Urban Outfitters, Inc. URBN shares traded higher by 11.6% on Wednesday, despite the company reporting disappointing first-quarter earnings numbers.

On Tuesday, Urban Outfitters reported first-quarter adjusted EPS of 33 cents on $1.05 billion in revenue. Both numbers fell short of consensus analyst estimates of 42 cents and $1.068 billion, respectively. Revenue was up 13.4% from a year ago.

Urban outfitters reported same-store Retail sales growth of 11%, including 18% Anthropologie sales growth, 15% Free People Group sales growth and 1% growth at its namesake Urban Outfitters stores.

As of April 30, Urban Outfitters' total inventory was up 31.9% to $152.2 million. The company said rising costs associated with inflation more than offset the benefit of record first-quarter revenues.

Related Link: 5 Walmart Analysts React To Mixed Q1 Earnings: 'Particularly Attractive Buying Opportunity'

Cost Pressures: Bank of America analyst Lorraine Hutchinson said cost pressures will increase in the second quarter, but Urban Outfitters has room for improvement in the second half of 2022.

"We think Urban Outfitters (URBN) is well positioned to profitably take share once cost pressures normalize," Hutchinson wrote.

BMO Capital Markets analyst Daniel Stroller said Urban Outfitters' numbers weren't as bad as some investors had feared, but the company's growing inventory and a difficult macro environment might limit near-term upside for the stock.

"Despite historically low valuation, we believe the macro will continue to weigh, and worry about the risk to margins from increased promotions," Stroller wrote.

Anthropologie A Bright Spot: Wells Fargo analyst Ike Boruchow said Urban Outfitters' earnings report was "very disappointing," including misses across the board, surging inventory levels and disappointing second-quarter guidance.

"The bright spots were Anthro and Free People— both of which continue to execute QTD; however, their strength is not enough to offset weakness at UO, along with mounting freight pressure as well," Boruchow wrote.

Telsey Advisory Group analyst Dana Telsey said slowing growth at Urban Outfitters stores was disappointing, but Anthropologie and Free People are picking up the slack.

"We continue to view URBN as well-positioned with a healthy brand portfolio that stands to benefit from improvement in occasionwear," Telsey wrote.

Ratings And Price Targets:

• Bank of America has a Buy rating and $26 target.
• BMO Capital Markets has a Market Perform rating and $21 target.
• Wells Fargo has an Equal Weight rating and $20 target.
• Telsey Advisory Group has an Outperform rating and $30 target.

Price Check: Shares of Urban Outfitters were trading up 12.26% at $20.20 on Wednesday, according to Benzinga Pro.