Urban Outfitters’s (NASDAQ:URBN) Q2 Sales Beat Estimates
Clothing and accessories retailer Urban Outfitters (NASDAQ:URBN) announced better-than-expected results in Q2 CY2024, with revenue up 6.3% year on year to $1.35 billion. It made a GAAP profit of $1.24 per share, improving from its profit of $1.10 per share in the same quarter last year.
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Urban Outfitters (URBN) Q2 CY2024 Highlights:
- Revenue: $1.35 billion vs analyst estimates of $1.34 billion (1% beat)
- EPS: $1.24 vs analyst estimates of $1.00 (23.7% beat)
- Gross Margin (GAAP): 36.5%, in line with the same quarter last year
- EBITDA Margin: 8.2%, down from 12.2% in the same quarter last year
- Free Cash Flow Margin: 3.5%, down from 10.2% in the same quarter last year
- Total Company Same-Store Sales (across multiple brands) rose 2% year on year (4.9% in the same quarter last year) (slight miss vs. expectations of 2.3%)
- Urban Outfitters brand same-store sales fell 9.3% (miss vs. expectations of down 8.3%)
- Market Capitalization: $3.76 billion
“We are pleased to report record second quarter sales fueled by strength across all three segments – Retail, Nuuly and Wholesale,” said Richard A. Hayne, Chief Executive Officer.
Founded as a purveyor of vintage items, Urban Outfitters (NASDAQ:URBN) now largely sells new apparel and accessories to teens and young adults seeking on-trend fashion.
Apparel Retailer
Apparel sales are not driven so much by personal needs but by seasons, trends, and innovation, and over the last few decades, the category has shifted meaningfully online. Retailers that once only had brick-and-mortar stores are responding with omnichannel presences. The online shopping experience continues to improve and retail foot traffic in places like shopping malls continues to stall, so the evolution of clothing sellers marches on.
Sales Growth
Urban Outfitters is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the other hand, it has an edge over smaller competitors with fewer resources and can still flex high growth rates because it’s growing off a smaller base than its larger counterparts.
As you can see below, the company’s annualized revenue growth rate of 6.3% over the last five years was sluggish , but to its credit, it opened new stores and grew sales at existing, established stores.
This quarter, Urban Outfitters reported solid year-on-year revenue growth of 6.3%, and its $1.35 billion in revenue outperformed Wall Street’s estimates by 1%. Looking ahead, Wall Street expects sales to grow 5.8% over the next 12 months, a deceleration from this quarter.
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Same-Store Sales
A company’s same-store sales growth shows the year-on-year change in sales for its brick-and-mortar stores that have been open for at least a year, give or take, and e-commerce platform. This is a key performance indicator for retailers because it measures organic growth and demand.
Urban Outfitters’s demand within its existing stores has generally risen over the last two years but lagged behind the broader consumer retail sector. On average, the company’s same-store sales have grown by 4.3% year on year. With positive same-store sales growth amid an increasing physical footprint of stores, Urban Outfitters is reaching more customers and growing sales.
In the latest quarter, Urban Outfitters’s same-store sales rose 2% year on year. By the company’s standards, this growth was a meaningful deceleration from the 4.9% year-on-year increase it posted 12 months ago. We’ll be watching Urban Outfitters closely to see if it can reaccelerate growth.
Key Takeaways from Urban Outfitters’s Q2 Results
Although total revenue beat, same-store sales missed slightly and same-store sales for the flagship Urban Outfitters brand not only missed but also declined by a large amount on an absolute basis, which is worrisome. Operating income and EPS beat, which were bright spots. However, the areas below expectations seem to be driving the stock move, and shares traded down 3.6% to $40 immediately after reporting.
So should you invest in Urban Outfitters right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
