Urban Outfitters Stock Surged Wednesday: What Happened?

Urban Outfitters, Inc. URBN shares traded higher on Wednesday following the release of the company’s third-quarter earnings report, which exceeded expectations. Here’s what you need to know.

What To Know: Urban Outfitters reported third-quarter earnings per share of $1.10, beating estimates of 89 cents. Revenue came in at $1.36 billion, up 6.3% year-over-year and ahead of the consensus estimate of $1.32 billion.

The company posted net income of $102.9 million for the quarter, compared to $83 million a year ago. Retail net sales rose 3.2%, with comparable retail sales up 1.5%. Anthropologie and Free People brands reported comparable sales growth of 5.8% and 5.3%, respectively, while Urban Outfitters brand sales fell 8.9%.

See More: These Analysts Increase Their Forecasts On Urban Outfitters After Q3 Results

Nuuly, the company's subscription rental service, grew sales by 48.4%, supported by a 51% increase in active subscribers. Wholesale revenue increased 17.4%, driven by a 20.3% rise in Free People wholesale sales, partially offset by declining Urban Outfitters wholesale revenue.

Gross profit for the quarter rose 9.4% to $497.3 million, with a 105-basis-point improvement in gross margin due to higher merchandise markups and fewer markdowns at Urban Outfitters. Operating expenses increased 6.7%, reflecting higher marketing and store payroll costs.

“These results were driven by outperformance across all three business segments – Retail, Subscription and Wholesale. Additionally, we’re optimistic about the outlook for Holiday demand and believe total comparable sales could be similar to our third quarter results,” said Richard Hayne, CEO of Urban Outfitters.

The company ended the quarter with $182.5 million in cash, $340.4 million in marketable securities and a 10% inventory increase, largely due to early holiday merchandise shipments and higher sales expectations.

Following the print, several analysts raised price targets, which appears to have helped push shares higher on Wednesday.

• Citigroup analyst Paul Lejuez upgraded Urban Outfitters from Neutral to Buy and raised the price target from $42 to $59.

• Telsey Advisory Group analyst Dana Telsey maintained a Market Perform and raised the price target from $44 to $46.

• BofA Securities analyst Lorraine Hutchinson maintained a Buy and raised the price target from $46 to $53.

• Barclays analyst Adrienne Yih maintained an Overweight and raised the price target from $43 to $51.

• Wells Fargo analyst Ike Boruchow maintained an Equal-Weight and raised the price target from $40 to $48.

URBN Price Action: Urban Outfitters shares closed Wednesday up 18.3% at $47.49, according to Benzinga Pro.

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