Urban Outfitters 3Q earnings jump yet miss estimates

Urban Outfitters Inc. posted earnings of 40 cents per share on revenue of 692.9 million dollars for the period ended Oct. 31. The company reported increased sales at Anthropologie, Free People and its namesake stores, yet the group’s earnings

missed market’s estimates for a penny.

“We entered the year with a clear plan, and now we are seeing the benefits of executing that plan. Each quarter, we have delivered an acceleration of the sales growth rate versus the prior comparable quarter. In addition, we delivered significant improvement in gross profit margin and operating profit margin rate versus the prior comparable quarter,” Francis J. Conforti, Urban Outfitters’ chief financial officer summed up in the quarterly earnings conference call with investors and analysts.

Analysts polled by FactSet forecast earnings of 41 cents per share on revenue of 693.1 million dollars, compared to the registered quarterly earnings of 40 cents per title and 692.9 million dollars revenue.

Sales increased 14 percent to 692.89 million dollars while comparable retail segment net sales, which include comparable direct-to-consumer channel, increased 8 percent for the quarter, while comparable store net sales decreased 1 percent, the company reported on Monday.

Commenting the news for his clients, Randal Konik of Jefferies said that with 150 Urban Outfitters stores and more than 150 Anthropologie stores, the company's domestic store growth is near maturity. The analyst also said in a client note that the retailer still has limited international exposure, as only about 15 percent of its sales come from abroad. "We are uncertain of how well the brands can translate in a global market at this stage," Konik wrote.

Nevertheless, the analyst maintained an ‘Underperform’ rating but raised by 1 dollar Urban Outfitters' price target to 25 dollars.

Meanwhile, his peer Adrienne Tennant at Janney Capital Markets said that Urban Outfitters’ third-quarter gross margin improved as it reduced markdowns and increased full-price selling. Encouraged by Anthropologie's ability to sell more items at full price and Urban Outfitters stores' fashion-forward product selection, Tennant reaffirmed her ‘Buy’ recommendation over the stock.