Urban Outfitters Tops Estimate - Analyst Blog

Urban Outfitters, Inc. (URBN) recently posted second-quarter 2010 results that exceeded expectations due to top-line growth and effective inventory and cost management.

Quarterly earnings for this retailer of apparel, footwear, and accessories reached 42 cents per share, surpassing the Zacks Consensus Estimate of 39 cents and surging 44.8% from 29 cents last year.

Urban Outfitters, which competes with Gap Inc. (GPS) and Abercrombie & Fitch Co. (ANF), said that total net sales gained 20.4% year over year to $552.2 million, which outpaced the Zacks Consensus Revenue Estimate of $541 million. Net sales at the retail segment advanced 20.7% to $522.2 million, whereas wholesale segment net sales ascended 15.5% to $29.9 million.

Sales grew 15.1% to $243.2 million at Urban Outfitters, 25.8% to $256.4 million at Anthropologie, 19.7% to $46.9 million at Free People and 32.1% to $5.7 million at other.

Comparable retail segment net sales climbed 11%, whereas comparable store net sales jumped 7% during the quarter. Comparable retail segment net sales by brands rose 24% at Free People, 13% at Anthropologie and 9% at Urban Outfitters.

Despite the increase in cost of sales by 16.9%, gross profit for the quarter climbed 25.5% to $234.8 million, aided by top-line growth. Urban Outfitters notified that gross profit margin expanded 170 basis points to 42.5%. Operating income also soared 36.2% to $106.9 million, whereas operating margin increased 230 basis points to 19.4%.

During the first six months of fiscal 2010, Urban Outfitters opened 16 new stores – 5 Urban Outfitters stores, 8 Anthropologie stores and 3 Free People stores. The company plans to open about 45 new stores during the year.

Urban Outfitters ended the quarter with cash and cash equivalents of $245 million and shareholders’ equity of $1,373.3 million. During the quarter, the company bought back 2,015,180 shares aggregating $68 million at $33.72 apiece. As of July 31, 2010, the company still has 4,764,820 shares remaining at its disposal for repurchase.

 
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