Up on Urban Outfitters
I met today with David Nolan, portfolio manager of the BB&T Mid Cap Growth Fund (OVCBX). Much to my surprise, his top holding is Urban Outfitters (URBN), the hip retailer (too hip for me, that is). Its stock price is up about 500% in the past two years, but has fallen about 5% in the past month, as economic data -- particularly consumer spending and confidence -- has weakened.
Most retailers (particularly discounters) have struggled lately, but Urban Outfitters has held up relatively well. In fact, it's up $1 to $46.25 today due to strong same store sales growth posted for the quarter. In contrast, the Dow is down 70 points (at 2:30 p.m.) today. Nolan thinks the recent pullback could be an opportunity to buy.
Here's why Nolan likes Urban Outfitters so much:
- He doesn't think the American consumer (or the economy for that matter) is about to roll over and play dead.
- High end and niche retailers (he also owns Coach), have shown they can keep growing even if the economy cools.
- Urban Outfitters is a play on the popularity of super-expensive jeans.
- In terms of square footage, they have plenty of room to keep growing.
- Growth so far has come at a measured pace of about 20% a year.
- Management knows what they are doing. For one thing, they are putting in a new inventory system that should boost productivity.
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