Urban Outfitters (Nasdaq: URBN) reported its holiday sales last week, and there were some mixed messages. Although its overall same-store sales decreased, there were some bright spots during the holiday season for the retailer.
Same-store sales at Urban Outfitters decreased 5% overall, compared to an 8% increase in comps in the same period last year. By brand, Anthropologie's comps decreased 8%, Urban Outfitters decreased 4%, and Free People increased 4%. That is compared to 2%, 14%, and 21% increases in comps for each brand last year, respectively. These numbers are for November and December, and probably come as little surprise to anybody.
On the other hand, overall sales at Urban Outfitters increased 13% to $278 million for the two-month holiday period (compared to a whopping 26% increase in sales this time last year), aided by a 21% increase in total stores in operation. Urban Outfitters also experienced a 21% increase in direct-to-consumer sales (that's through its catalogs and websites) and a 19% increase in its wholesale brand Free People's sales. Gift card sales, one of the big stories of this year's holiday season as many people opted to let their recipients choose their own gifts, increased 12% on a year-over-year basis at Urban.
Anyone who follows Urban Outfitters knows that 2006 was a difficult year for the retailer, as investors fielded concerns about the state of the consumer given macroeconomic trends, and Urban's uncharacteristically disappointing results reflected what the company described as a "seismic shift" in fashion. And of course, Urban's holiday data this year is a lot less torrid than it has reported in the past; granted, it's been up against tough comparisons.
Although some youth-oriented retailers excelled during the period -- Abercrombie & Fitch (NYSE: ANF) and American Eagle Outfitters (Nasdaq: AEOS) spring to mind -- Urban flailed. However, some of us thought the market's punishment was too harsh given the retailer's long-term outlook.
As a shareholder, I take heart in Urban Outfitters' double-digit sales increase for the holiday period, which illustrates the importance of having ample opportunity for store-count growth to offset a slower sales season (all told, Urban Outfitters now has just over 200 total stores, as compared to a more mature retailer like Gap (NYSE: GPS), which has about 3,000). On the other hand, when Urban Outfitters releases its quarterly earnings on Feb. 6, we'll all be looking forward to seeing how other metrics fared -- for example, margins, seeing how many retailers found the 2006 holiday season to be a particularly promotional one.
Those of us who are Urban Outfitters shareholders are certainly glad to see 2006 and its stumbles behind us, and of course are hoping that the retailer's fashion mix will be more appealing to its clientele this year, as shoppers grow accustomed to the new looks. However, given Urban Outfitters' traditionally savvy management, its strong brands and balance sheet, and its room for growth, I still believe there's good reason for bullishness on Urban Outfitters for the long term.
For more on Urban Outfitters, please see the following Foolish articles:
American Eagle Outfitters is a
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recommendation. Gap has been recommended by both Stock Advisor and Motley Fool Inside Value.
Alyce Lomax owns shares of Urban Outfitters. The Fool has a disclosure policy that's always in fashion.
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