Wedbush maintains its Underperform rating on Urban Outfitters URBN as heavy markdown remains instrumental to sales momentum. It raises the stock's price target to $22 from $19 on updated valuation metrics.
Wedbush says, “Although investors may be excited by URBN's indication of improved sales momentum, we remain cautious, noting QTD +MSD comps are likely driven by heavy markdowns as excess inventory (+15% / sq. ft Q3-end) plagues both core UO and Anthropologie brands. Our checks suggest promotions remain instrumental to driving traffic evidenced by “up to 70% off” promotions at UO this past weekend, along with incremental markdowns… as we now anticipate Q4 gross margin deterioration to resemble the level seen in Q3.”
URBN closed at $26.46 per share on Monday.
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