Where Is Urban Outfitters stock heading?
As of May 16, Urban Outfitters (URBN) stock is up 20.7% on a YTD (year-to-date) basis. In comparison, American Eagle (AEO) and Abercrombie & Fitch (ANF) are up 19.9% and 55.6%, respectively. However, Gap (GPS) is down 7.3% on a YTD basis. The S&P 500 (SPX) is up 1.8% as of May 16 compared to the start of this year.
Urban Outfitters is expected to sustain its momentum as analysts expect the company to report strong fiscal first quarter of 2019 results. Urban Outfitters is expected to report sales growth of 10% to $837.4 million, while adjusted EPS is projected to be up more than twofold to $0.30.
Urban Outfitters remains upbeat about the company’s growth prospects as low unemployment rates, the revival of the economy, and tax cuts are likely to lead to higher disposable income. These trends could boost demand for discretionary goods like fashionable merchandise.
Strategic initiatives headed in the right direction
Most of the apparel retailers including Urban Outfitters have been in trouble, as e-commerce expansion has dented their sales and profitability. Furthermore, tough competition from fast fashion brands such as H&M and Forever 21 have impacted apparel retailers’ sales.
Retailers including Urban Outfitters had to re-assess their growth strategies to adapt better to the changing retail landscape. With consumer preferences shifting to online shopping, it had become imperative for traditional retailers to invest in building direct-to-consumer and omnichannel capabilities, and Urban Outfitters was no exception.
Urban Outfitters’ digital sales grew in the double digits in the fourth quarter of fiscal 2018, while digital sales penetration accounted for over 40% of its total retail sales in the fourth quarter. The company is investing in marketing and is working on bettering the customer shopping experience. The company introduced the speed-to-customer model last year, under which it aims to reduce product lead time and make products available at the exact location at the right time.