Why Urban Outfitters Earnings Could Look More Fashionable

Urban Outfitters (NASDAQ: URBN  ) will release its quarterly report on Monday, and in the highly competitive teen-retail market, the stock hasn't been able to make much headway lately. But the prospects for Urban Outfitters earnings growth look a lot more favorable, suggesting that strength in its core business could make investors more enthusiastic about the company going forward.

Like many of its peers, Urban Outfitters has gone through some severe ups and downs in recent years, as its fashions moved in and out of favor. Over the past two years, though, the company has done exceedingly well, doubling its stock price as it successfully engineered a turnaround. Can the good times last? Let's take an early look at what's been happening with Urban Outfitters over the past quarter and what we're likely to see in its quarterly report.

Stats on Urban Outfitters

Analyst EPS Estimate

$0.48

Change From Year-Ago EPS

14.3%

Revenue Estimate

$768.35 million

Change From Year-Ago Revenue

13.6%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Can Urban Outfitters earnings stay hot?
Analysts have barely budged on their views on Urban Outfitters earnings in recent months, keeping their July-quarter estimates constant and cutting a single penny per share from their full fiscal-year projections. The stock has struggled, though, falling 7% since mid-May.

Much of Urban Outfitters' share-price decline came following its latest earnings report in May. Despite topping estimates on earnings per share and seeing net income grow by nearly 40% on a 14% jump in sales, the company didn't deliver as much revenue as investors had expected even as it maintained more pricing discipline and resisted the inclination to resort to discounting to clear inventory.

Yet one area of strength for Urban Outfitters has come from a renewed sense of customer loyalty. Comparable-store sales gains of 9% last quarter showed strength at all three of its major brands, with a particularly encouraging rebound from its once-struggling Anthropologie concept. By contrast, Aeropostale (NYSE: ARO  ) and Abercrombie & Fitch (NYSE: ANF  ) suffered double-digit declines in comps, while American Eagle Outfitters (NYSE: AEO  ) weighed in with a 5% same-store sales drop. Moreover, Aeropostale is expected to continue to see problems holding market share this quarter, and Urban Outfitters has demonstrated a greater ability to work with suppliers and speed up product delivery -- key factors that both A&F and American Eagle could benefit from.

Urban Outfitters has also picked up on an unexpected trend in providing old-style vinyl records. With the company having added to its music collection and even selling record players, the niche gives customers another reason to come into the store and be exposed to core clothing lines.

In the Urban Outfitters earnings report, watch for comments on how the early part of the back-to-school season is going for the retailer. As a critical point in the year for teen retailers, Urban Outfitters needs to see its recent strength continue for shareholders to start seeing their stock rise in value again.

Teen retail is a tough business, and Urban Outfitters has had to be forward-looking in order to make its comeback. Similar efforts from other retailers have rewarded investors who understand the landscape. To learn more, read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

Click here to add Urban Outfitters to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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