Urban Outfitters Stock Falls On Q2 Earnings: 3 Takes From The Street

Investors were pulling back Wednesday after retailer Urban Outfitters Inc URBN reported second-quarter earnings. Here's what the Street has to say. 

The Urban Outfitters Analysts: MKM Partners analyst Roxanne Meyer has a Neutral rating on the stock and raised the price target from $41 to $43.

BMO Capital analyst Simeon Siegel has a Market Perform rating and raised the price target from $35 to $37.

Telsey Advisory Group advisor Dana Telsey has an Outperform rating and $47 price target.

The Urban Outfitters Takeaways: Urban Outfitters had a strong beat in the second quarter driven by more full-price item sales and higher average revenue per item, according to Meyer.

“Total sales were only modestly higher than expected, likely limited by lean inventory and perhaps outsized exposure to downtown markets,” the analyst said. 

Siegel said Urban Outfitter's gross margin growth was “meaningful.”

“We continue to expect URBN to benefit from the trifecta of stimulus-driven capacity to spend, pent-up demand-driven desire spend and supply chain bottlenecks,” the analyst said. 

Telsey said digital sales growth in the double digits helped outpace a decline from the retail stores due to falling traffic.

The company’s three brands all had double digit comp growth over the second quarter of 2019.

Related Link: Urban Outfitters Q2 Earnings Top Estimates

What’s Next For Urban Outfitters: Meyer sees Urban Outfitters as better positioned than other retailers based on its supply chain and shipping controls.

“Comp trends have moderated and gross margin gains are expected to be much smaller relative to 2Q’s record gains,” the analyst said. 

MKM raised its earnings per share estimates and sees a favorable second-half outlook.

Guidance from the company could be conservative, Siegel said. 

The launch of Nuuly Thrift, a resale marketplace to buy and sell apparel and accessories, is expected to come in the fall and is a highlight for Siegel going forward. 

Telsey said: “Momentum appears to have continued with positive early Q3 commentary.” The August numbers are in-line and could come in ahead of estimates on a strong back to school shopping season, the analyst said. 

URBN Price Action: URBN shares were down 8.45% at $37.29 at last check Wednesday.