Urban Outfitters Sell-Side Roundup: Retailer Shows Comp Growth Across All Brands

Urban Outfitters, Inc. URBN shares were down nearly 4 percent Thursday despite a fourth-quarter earnings and sales beat earlier in the week. With current fashion trends playing into the company’s hands, sell-side analysts weighed in on the retailer after the print. 

KeyBanc Raises Target

KeyBanc Capital Markets raised its price target for Urban Outfitters from $36 to $45 and maintained an Overweight rating after the Q4 print, calling Urban Outfitters one of the retailers best leveraged to an ongoing fashion shift.

“The fashion shift is taking hold — this is the most bullish we have heard URBN in some time,” analyst Edward Yruma said in a note. 

For the first time in five years, all three of URBN's brands delivered positive comp growth, driven by strength in e-commerce, which accounted for over 40 percent of overall sales in the fourth quarter, the analyst said. 

“We believe URBN’s strong e-commerce business, differentiated brands and reasonable store fleet position the company well in today’s retail environment. The strong brands have also driven a growing wholesale opportunity, which was further reinforced by the recent announcement of Anthropologie Home at Nordstrom," Yruma said. 

Urban Outfitters has been "thoughtful" about its international expansion, which could accelerate on the basis of success in the retailer's business, the analyst said. 

Buckingham Research Reiterates Stance

Buckingham Research analyst Kelly Crago reiterated a Buy rating on Urban Outfitters with a $42 price target.

Buckingham's thesis is driven by solid apparel demand for all three of the company’s brands, with the first instance of simultaneous growth since fiscal 2014, Crago said. 

“We continue to recommend investors add to positions of URBN shares at current levels, as we see meaningful upside to our [fiscal 2019] EPS estimates driven by both comp and GM upside." 

Urban Outfitters' first-quarter comps are trending positively thus far and are up 9 percent quarter-to-date, the analyst said. 

“Furthermore, URBN is one of the few retailers with the opportunity for meaningful margin expansion in 2018 despite 40-percent DTC penetration and investments behind digital marketing, technology and wages, which supports a premium multiple on shares relative to the peer group average, in our view.”

Morgan Stanley Takes Cautious Approach

Morgan Stanley analyst Kimberly Greenberger raised the price target for Urban Outfitters from $28 to $33 and maintained an Equal-weight rating on the stock. 

The retailer's risk-reward skews negative and earnings visibility is limited, Greenberger said. 

“If store volumes maintain their current trajectory, URBN could potentially leverage store occupancy, partially if not completely offsetting deleverage from delivery and logistics expenses with increased e-commerce penetration. Taken together, we are encouraged by strong customer response to early spring receipts and more confident in URBN's ability to deliver gross margin recovery in [the first quarter] and [first half of 2018].”

Related Links: 

Urban Outfitters Is One Of The Best-Positioned Softline Retailers, Says Bullish KeyBanc

Urban Outfitters Q4 Earnings Preview

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