Urban Outfitters Tops Q4 Estimates, But Analyst Stays Neutral Amid Weather-Driven Demand Shifts

J.P. Morgan analyst Matthew R. Boss reiterated a Neutral rating on the shares of Urban Outfitters Inc URBN and raised the price target from $54.00 to $56.00.

URBN reported adjusted EPS of $1.04 for fourth-quarter, surpassing analysts’ expectations of $0.95. This was driven by a 16.8% year-over-year increase in gross profit, exceeding the 14% anticipated growth, supported by a 5.1% increase in same-store sales, said the analyst.

Additionally, adjusted gross margin expanded by 200 basis points to 32.3%, surpassing the Street’s estimate of 31.5%. SG&A expenses were 24.6%, in line with the Street’s expectation of 24.7%.

Looking forward, management provided guidance for first-quarter 2025, expecting consolidated sales growth of MSD-HSD% year-over-year versus the Street’s 7.7% forecast.

Same-store sales are anticipated to rise by LSD-MSD%, compared to the Street’s estimate of 3.4%.

Also Read: Norwegian Cruise Line Sails Past Q4 Expectations: EPS Soars, Margins Expand And Demand Stays Hot

The analyst noted that CEO Hayne clarified that any post-Holiday slowdown in consumer demand was due to “delayed demand” caused by weather, with warmer weather markets outperforming northern ones on a comp basis.

The Southeast is the best-performing region, with comps significantly ahead of other areas. Consumer sentiment remains positive and consistent, suggesting potential for delayed demand in northern regions as weather improves, potentially boosting results in March/April.

CEO Hayne’s remarks about Spring demand and weather align with TJX Companies Inc CEO Herrman’s, who noted that normal weather areas performed well, but weather disruptions impacted some regions.

The analyst’s analysis of Chase credit/debit card data indicates that weather has caused a temporary dip in discretionary spending, especially in northern regions where temperatures are significantly colder than last year.

In contrast, states without weather disruptions, like the Southwest, have seen stable.

The analyst raised FY25 EPS estimate to $4.88 (vs. Street $4.42) and FY26 EPS estimate to $5.59 (vs. Street $4.84).

The price forecast is based on 5.6x the analyst’s FY26 EBITDA (= URBN’s 3-yr pre-pandemic average), with the linear regression analysis supporting upside to a $68 equity value.

Price Action: URBN shares are trading higher by 9.02% at $57.70 at last check Thursday.

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