Urban Outfitters a Penny Ahead - Analyst Blog

Urban Outfitters Inc. (URBN), the retailer of apparel, footwear, and accessories, recently posted third-quarter 2010 earnings of 43 cents a share, a penny ahead of the Zacks Consensus Estimate, and rose 19.4% from 36 cents delivered in the prior-year quarter on the heels of a double-digit growth in the top-line and effective inventory management.

Urban Outfitters, which competes with Gap Inc. (GPS) and Abercrombie & Fitch Co. (ANF), said that total net sales came in at $573.6 million, up 13.4% from the year-ago quarter, but fell short of the Zacks Consensus Estimate of $583 million. Retail segment net sales advanced 13.4% to $539.1 million, whereas wholesale segment net sales ascended 13.1% to $34.5 million.

The company also portrayed total net sales by brands. Sales grew 10.6% to $266 million at Urban Outfitters, 14.5% to $247.5 million at Anthropologie, 24.5% to $56.1 million at Free People but tumbled 3.2% to $3.9 million at other.

The company hinted that comparable retail segment net sales climbed 6%, whereas comparable store net sales rose marginally by 1% during the quarter. Comparable retail segment net sales by brands rose – 29% at Free People, 5% at Anthropologie and 5% at Urban Outfitters.

The company also witnessed a growth in gross profit. Despite the increase in cost of sales by 14.1%, gross profit for the quarter climbed 12.3% to $236 million, aided by top-line growth. Urban Outfitters notified that gross profit margin contracted 39 basis points to 41.1%. Operating income also climbed 9.4% to $104.8 million, whereas operating margin declined 60 basis points to 18.3%.

In the first nine months of fiscal 2010, Urban Outfitters opened 29 new stores – 13 Anthropologie stores, 11 Urban Outfitters stores and 5 Free People stores. The company plans to open about 45 new stores during the year. During the quarter, the company opened 6 Urban Outfitters stores, 5 Anthropologie stores and 2 Free People stores.

Urban Outfitters ended the quarter with cash and cash equivalents of $253.5 million and shareholders' equity of $1,319.9 million. During the quarter, the company bought back 4,273,267 shares, aggregating $133 million at $31.06 per share under its share repurchase program announced in February 2006. As of October 31, 2010, the company still has 491,553 shares remaining at its disposal for repurchase.

Currently, Urban Outfitters holds a Zacks #4 Rank, which translates into a short-term ‘Sell' rating.

 
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