Is Urban Outfitters In Fashion With The Street After Strong Q4?

Retailer Urban Outfitters, Inc. URBN reported fourth-quarter results, highlighted by a beat on the earnings line and slight miss on the revenue line.

Here is a summary of how some of the Street's top analysts reacted to the print.

RBC: Solid But Slow Q4

Urban Outfitters reported a "slower but solid" quarter, RBC Capital Market's Kate Fitzsimons said in a research report. Earnings rose 21 percent, including a 13-percent increase in EBIT while SG&A rose 4.2 percent versus a 3.7-percent increase in sales. Total comps slowed from 8 percent in the third quarter to 3 percent.

The company is seeing a slow start to 2019 with a high-single-digit traffic decline while management guided its first-quarter comps to be flat to down a low-single-digit. The analyst said the concerning start to the year "lends skepticism" about the company's ability to perform against the second quarter's tough 13-percent year-over-year compare.

Fitzsimons maintains a Sector Perform rating on Urban Outfitters with a price target lowered from $35 to $29.

BofA: 'Swing Positive' In Q2

Urban Outfitters' slow start to the first quarter could "swing positive" in the second quarter due to the company's ability to "pivot intra-season" and correct any inventory or sales mishaps, Bank of America's Lorraine Hutchinson said in a research report. As such, comps should reverse back to positive territory as soon as the second quarter.

Over the longer term, the company should outperform its peers due to its smaller store base, a unique product offering, and industry-wide leading e-commerce penetration at more than 40 percent.

Hutchinson maintains at Buy, price target lowered from $42 to $37.

KeyBanc: Near-Term Volatility A Concern

Management suggested near-term weakness could be transient in nature with weakness most notable in apparel, KeyBanc Capital Markets' Edward Yruma said in a research report. The industry-wide promotional environment adds another layer of near-term concern.

Despite posting record low markdown rates, Yruma said the poor start to the new year could see a reversal of recent progress. In fact, inventory levels rose 5 percent year over year heading into the first quarter and if the company posts negative low-single digit comps, it could translate to 150 basis points of gross margin contraction in the first quarter.

Yruma maintains at Sector Weight, no price target.

Price Action

Shares of Urban Outfitters traded around $30.19 Wednesday afternoon.
Related Links:

Q4 Retail Earnings Season: A Cheat Sheet

The Street Remains Mixed On Urban Outfitters

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