Consumers are struggling. Good jobs are hard to find, gas prices are high, the payroll tax recently increased 2%, the average rate on a three-year fixed mortgage is now at 4.6% and slowly trending higher, and most people aren't confident about our country's economic future.

While most retailers are struggling due to these circumstances, there are a few that have withstood these headwinds and managed to grow. One company that immediately comes to mind is Gap, but there's another lesser-talked-about company that also offers broad diversification and growth potential. And it's one you should at least have on your watch list.

Attention all consumers
Urban Outfitters (NASDAQ:URBN) operates in retail and wholesale but considering the wholesale segment only represents 5.7% of net sales, the focus here will be on retail. But prior to doing so, it should be noted that wholesale net sales increased 17% in the second quarter year over year.

As far as targeting a broad range of consumers, Urban Outfitters' brands accomplish this goal. Its namesake brand targets males and females between the ages of 18 and 28, offering a unique merchandising mix and a compelling store environment. Anthropologie targets sophisticated and contemporary women between the ages of 28 and 45.

Free People targets young contemporary women between the ages 25 and 30. BHLDN targets brides-to-be and party-goers. And Terrain targets mostly young homeowners, offering a unique greenhouse-themed garden center with a full-service restaurant and coffee bar.

If you pool all of these brands, you will see that Urban Outfitters is targeting many different types of consumers. This kind of diversification leads to more resiliency in weak consumer environments. While the company's strategy makes good sense, let's see if it has led to actual results in the face of one of the most challenging consumer environments in American history.

Recent results
In the second quarter, net sales jumped 12% to $759 million. Better yet, comps showed 9% growth. And the company's three top brands all performed well in the comps area, demonstrating consistent demand from loyal customers. 

  • Urban Outfitters:  up 5%
  • Anthropologie:  up 5%
  • Free People:  up 38%

So far this quarter, Urban Outfitters is seeing mid single-digit comps growth.

As if that's not enough good news, second-quarter diluted earnings per share improved 21.4% to $0.51 year-over-year. Management attributed this improvement to better margins and leveraged store-occupancy expenses. Furthermore, the board recently approved a $10 million share buyback. This will reduce share count and aid the bottom line going forward.

All of this is exciting, but it's possible that one of the company's peers presents a better investment opportunity

Urban Outfitters vs. peers
If you're looking for a more specified niche, then you might consider Abercrombie & Fitch (NYSE:ANF).

Abercrombie & Fitch sells apparel to men, women, and kids, but teens are the primary target. Unfortunately, there hasn't been much demand for teen apparel of late, which is due to reduced discretionary income. Due to this trend, Abercrombie & Fitch expects comps to fall in FY 2013. More on Abercrombie & Fitch soon.

If you would prefer to invest in a company that targets the 45-60 year-old crowd, then you might consider Christopher & Banks (NYSE:CBK). However, while Christopher & Banks has seen its stock tear 116% higher over the past year, if you look at the underlying story, it might be the weakest investment option of the three companies. And, no surprise here, Urban Outfitters is likely to be the best long-term investment option. Consider the information below.

 

Forward P/E

Net Margin

ROE

Dividend Yield

Debt-to-Equity Ratio

Short Position

Urban Outfitters

17

8.98%

19.70%

None

0.00

3.60%

Abercrombie & Fitch

12

5.55%

14.53%

2.10%

0.12

11.60%

Christopher & Banks

23

(0.02%)

N/A

None

0.00

3.30%


Urban Outfitters is trading slightly higher than the industry average of 15.3 times forward earnings, and it's clearly the best of the group at turning revenue and investor dollars into profit. Abercrombie & Fitch is also fundamentally sound, and it pays a dividend, but the elevated short position indicates investor concern due to declining demand.

As far as Christopher & Banks is concerned, despite the stock's consistent run higher, it would make little sense to invest in a company that's trading at a premium compared to peers and isn't as impressive on a fundamental basis.

To further make the case for Urban Outfitters, consider its revenue performance versus peers:

Urban Outfitters' revenue trailing-12 months data by YCharts

As well as its earnings-per-share growth performance:

Urban Outfitters EPS diluted trailing-12 months data by YCharts

The Foolish bottom line
Urban Outfitters isn't immune to weak consumer trends. But if you're looking for a diversified retailer that targets a broad range of consumers and has managed to grow in a challenging environment, then Urban Outfitters should be considered.

Dan Moskowitz 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.