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Why Urban Outfitters Stock Popped Today

By Steve Symington – Updated Aug 21, 2019 at 4:33PM

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The retailer's latest quarter wasn't perfect. But investors are cheering an apparent return to comparable-sales growth in Q3.

What happened

Shares of Urban Outfitters (URBN) were up 6.8% as of 3:15 p.m. EDT Wednesday after the lifestyle retailer announced better-than-expected second-quarter earnings and encouraging forward guidance.

On one hand, Urban Outfitters' quarterly revenue fell 3% year over year, to $962 million, well below consensus estimates for roughly $980.6 million. But while earnings declined to $60 million, or $0.61 per share (from $0.84 per share a year ago), that was still comfortably ahead of the $0.58 per share most analysts were modeling.

Collage of various Urban Outfitters products including shirts, shoes, and hats.


So what

Urban Outfitters' top-line decline was driven by an 8% decline in wholesale segment net sales and a 3% drop in comparable retail-segment sales. Within the latter, digital growth was more than offset by Urban Outfitters' negative retail-store sales. As measured by brand, comparable-retail sales (or "comps") grew 6% at Free People locations but also fell 5% at the company's namesake stores and 3% at Anthropologie locations.

Management remained optimistic for better days ahead. "I am pleased to report that customer reaction to our early fall apparel assortments have improved significantly from our second-quarter results," added Urban Outfitters CEO Richard Hayne. "Third quarter-to-date 'comp' sales are positive at all three brands."

Now what

Put simply, that broad-based positive swing to comps growth gave bullish investors more-than-enough reason to forgive Urban Outfitters for its top-line shortfall in Q2. With shares already down nearly 60% over the past year and trading at a fresh 52-week low heading into the report, it was no surprise to see the stock rebounding today.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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