Strength in brands and digital business
Urban Outfitters (URBN) reported results for its fiscal second quarter of 2019 on August 21. Its sales of $992.5 million topped analysts’ consensus estimate by 1.3%.
On a YoY (year-over-year) basis, its sales rose 13.7% due to its robust digital business and strength in its three brands. Favorable forex movement helped its top line improve 50 basis points.
By segment, URBN’s retail net sales rose 14.1% to $902 million, while its wholesale sales were up 9.9% to $90.4 million. By brand, Urban Outfitters, Anthropologie, and Free People delivered sales growth of 17.1%, 10.7%, and 14.5%, respectively. The Food and Beverage segment posted a sales decline of 15.4%.
Going forward, management expects an improving economy, lower tax rates, higher consumer confidence, and changing fashion trends to bode well for fashion retailers. The company added that it’s looking to expand the presence of its brands in international territories.
After opening the first Anthropologie store in Germany, the company is looking to expand the presence of the brand in Europe. After introducing Free People and Urban Outfitters on Alibaba’s (BABA) Tmall platform, it’s also looking to add the Anthropologie brand.
Urban Outfitters’ comparable retail segment net sales rose 13%. Comps for Free People, Anthropologie, and Urban Outfitters increased in the double digits. Comps for the digital business also saw double-digit growth. Digital comps benefited from a higher average order value and conversion rate.
Moreover, each of the three brands saw positive store comps. Store comps have benefitted due to higher average unit prices and increased transactions. Management stated that for the third quarter of fiscal 2019, it expects sales comps to witness growth in the high single digits.
A look at peers’ top-line estimates
Wall Street analysts project Abercrombie & Fitch’s (ANF) sales to grow 8.5% to $845.2 million in the fiscal second quarter of 2018. Strength in international operations and DTC (direct-to-consumer) sales remain its primary growth factors.
Analysts expect American Eagle Outfitters’ (AEO) revenue to grow 11.2% to $939.5 million in the fiscal second quarter of 2018. The fast-growing Aerie brand, the inherently strong AE (American Eagle) brand, and the digital business are likely to drive its top-line numbers.