Bloomberg News

Urban Outfitters Soars After Profit Tops Estimates

August 21, 2012

Urban Outfitters Soars After Profit Tops Analysts’ Estimates

Shoppers enter an Urban Outfitters Inc. store at the Cherry Creek Shopping Center in Denver, Colorado. Photographer: Matthew Staver/Bloomberg

Urban Outfitters Inc. (URBN:US) surged the most since 2003 after posting second-quarter profit that topped analysts’ estimates as sales gained at all of its main brands.

The shares (URBN:US) rose 18 percent to $36.98 at the close in New York, the biggest one-day gain since March 2003. The Philadelphia-based retailer has gained 34 percent this year.

Urban Outfitters rehired co-founder Richard Hayne as chief executive officer in January to turn the chain around after increased discounts caused profit to shrink to a four-year low in its last fiscal year. The company also appointed new heads of its namesake and Anthropologie brands as it works to improve merchandise and generate a majority of its sales online.

The brands built on successful merchandise introduced earlier this year, including “colored denim, other bottoms and dresses, and executed in these categories with excellent results,” Hayne said on a conference call with analysts after the report. Direct-to-consumer sales also drove profit, with an about 30 percent increase in traffic from last year on the company’s web and mobile sites, he said.

Net income rose 8.1 percent to $61.3 million, or 42 cents a share, from $56.7 million, or 35 cents, a year earlier, the company said in a statement yesterday. Analysts’ average estimate (URBN:US) was 33 cents a share, according to data compiled by Bloomberg.

‘Very Encouraged’

Urban Outfitters trades (URBN:US) at more than twice the valuation of the Standard & Poor’s 500 Index, showing that it’s become increasingly valuable to investors relative to other U.S. companies. Its premium is higher (URBN:US) than that of Gap Inc., the biggest U.S. specialty apparel retailer, and Limited Brands Inc., the operator of the Victoria’s Secret chain.

“We’re very encouraged by results, which speak to positive customer reaction to new assortments and ability to quickly adapt/chase new trends,” Pamela Quintiliano, a New York-based analyst at Oppenheimer & Co., wrote in a note today, reiterating her outperform rating on the company. “Results illustrate that the new management team is on track, with fundamentals continuing to improve dramatically.”

Second-quarter net sales climbed 11 percent to $676.3 million, driven by the namesake, Anthropologie and Free People brands, the company said. Analysts were projecting revenue of $672.6 million. Direct-to-consumer sales rose 22 percent to $137.7 million in the quarter, according to the statement.

Urban Outfitters increased its web-exclusive offerings by 75 percent from last year, which helped boost sales, Hayne said on the call yesterday. The company increased dress styles available online by 50 percent this year from 750 across all its brands last year, Hayne said.

The namesake brand accounted for 46 percent of net sales in the quarter with $310.7 million, a 14 percent gain from a year earlier. Sales at Free People, the smallest of the three brands, jumped 26 percent to $73.8 million, while those at Anthropologie increased 3.4 percent to $281.8 million.

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net

To contact the editor responsible for this story: Kevin Orland at korland@bloomberg.net


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Companies Mentioned

  • URBN
    (Urban Outfitters Inc)
    • $34.91 USD
    • 0.98
    • 2.81%
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