What happened

Shares of Urban Outfitters, Inc. (NASDAQ:URBN) were moving higher after the apparel and lifestyle retailer posted a strong third-quarter earnings report last night. As of 11:10 a.m. EST, the stock was up 4.6%.

Riding on the tailwinds of other apparel retailers that reported promising numbers last week, Urban impressed the market with positive comparable sales at its three main businesses. Excluding the impact of hurricanes, comps rose 5% at Free People, 2% at Anthropologie, and 1% at Urban Outfitters. The company also beat estimates on the top and bottom lines. 

A model poses on a street in an Urban Outfitters sweater.

Image source: Urban Outfitters.

So what

Overall revenue increased 3.5% to $892.8 million, topping the consensus at $857.5 million, as the company benefited from double-digit growth in direct-to-consumer sales, though that was offset by a decline in retail store sales. Wholesale revenue, which comes from the Free People brand and makes up less than 10% of total revenue, increased 8.7%.

On the bottom line, earnings per share ticked up a penny to $0.41, well ahead of expectations at $0.33. Gross margin was down 142 basis points to 33.4% due to an increase an online, international, and furniture sales. However, lower selling, general, and administrative costs made up for it.

CEO Richard Hayne said he was "pleased" with the quarter, and noted "improved apparel execution across all channels and brands."

Now what

Management did not issues specific guidance for the current quarter, but Hayne said he was "cautiously optimistic," adding that this time of year can be "highly promotional and unpredictable." 

As a result, the stock was down for a period after-hours last night after the earnings call, but after such a solid quarter, shares deserve the boost they've gotten today. Urban has more momentum now than it has over several quarters, with comps rising at all three brands. While challenges remain, investors should be feeling confident going into the holiday season.