Urban Outfitters (NASDAQ:URBN) delivered solid results on Monday, the company is not only doing better than expected by Wall Street analysts, but also outperforming competitors like Abercrombie (NYSE:ANF), American Eagle (NYSE:AEO) and Gap (NYSE:GPS) in a challenging environment. This says a lot about management quality and brand value for the company.

Looking good
Urban Outfitters delivered a 12% annual increase in revenues for the quarter ended on Oct. 31 to a record $774 million. Comparable retail segment net sales, which include comparable direct-to-consumer channel, increased 7% during the quarter. 

Free People and Anthropologie were remarkably strong with growth rates of 30% and 13% respectively in comparable retail segment sales. The wholesale segment is also doing very well with sales increasing 21% during the quarter. The Urban Outfitters brand, on the other hand, delivered a disappointing decrease of 1% in comparable sales.

Gross profit margin increased by 11 basis points versus the year-before quarter and the company produced earnings per diluted share of $0.47, an increase of 17.5% versus $0.40 per share in the previous year and better than the $0.45 estimated on average by Wall Street analysts.

Management said during the press conference that the company is planning to open approximately 10 new stores during the final quarter of the year: two Anthropologie stores, 4 Free People stores and 4 Urban Outfitters stores globally, with 2 in Europe.

CFO Francis J. Conforti was cautious about the coming quarter:

"Due to what we believe could be an increasingly promotional holiday environment, we are planning inventory conservatively"

Management has good reasons to be cautious about the outlook for the coming quarter; many companies in the sector are being hurt by a challenging environment lately. This is a considerable risk to keep in mind by investors in Urban Outfitters, but the fact that the company is clearly outperforming its peers reflects positively on management and its ability to execute even when facing economic headwinds.

The competition: Abercrombie, American Eagle and Gap
Abercrombie & Fitch will be reporting earnings in Nov. 21, but the company recently released some lackluster financial data for the quarter ended Nov. 2. Abercrombie said third-quarter sales fell 12% to $1.03 billion, below the $1.07 billion expected on average by Wall Street analysts. Total comparable sales for the quarter, including direct-to-consumer sales, decreased 14% with comparable U.S. sales decreasing 14% and comparable international sales decreasing 15%.

CEO Mike Jeffries pointed to a weak consumer environment as the main reason for the disappointing performance:

"Our results for the third quarter reflect continued top-line challenges, with overall spending among younger consumers remaining weak. Until we have seen a clear trend improvement, we are continuing to take a cautious approach into the fourth quarter and are working to end the year with appropriate levels of fall carryover inventory.

American Eagle is another fashion retailer focused on teens and young customers which is reporting declining revenues lately. The company recently said total revenues for the quarter ended Nov. 2 decreased 6% to $857 million from $910 million in the same quarter of the previous year driven in most part by a decline of 5% in comparable sales.

CEO Robert Hanson also talked about a weak environment in the press release:

"Our third quarter results are clearly unsatisfactory. Yet, in an extremely challenging environment, our bottom line results are slightly ahead of our prior expectations and we ended the period with clean inventory. We remain highly focused on strengthening our merchandising, marketing and customer service execution, while maintaining disciplined inventory and expense management."

Gap is one notable exception to the rule; the company reported sales growth of 6% for October versus the same month in the previous year on the back of a strong increase of 4% in comparable sales during the period. Comparable sales at its namesake Gap segment increased by 5% in October, while Banana Republic and Old Navy delivered increases of 1% and 2% respectively in comparable revenues.

Management provided a generally positive guidance for the coming quarter; earnings are now expected to be in the range of $0.7 to $0.71 per share, which is above the previous estimate of $0.66 per share by Wall Street analysts in average. However, the company also said that merchandise margins are expected to be below last year levels, which is likely a sign of a heavily promotional environment for the industry.

Bottom line
The economy is being tough for apparel retailers, especially the ones targeting teens and young adults. Urban Outfitters delivered some really solid numbers in this challenging environment, and this is a great indication about management quality and brand strength. This fashion retailer looks dressed for success.

Andrés Cardenal has no position in any stocks mentioned. The Motley Fool recommends Urban Outfitters. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.