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Urban Outfitters, Inc. (URBN - Free Report) reported mixed results for third-quarter fiscal 2023, wherein the top line beat the Zacks Consensus Estimate, while the bottom line missed the same. Also, earnings declined from the prior fiscal year’s quarterly level, while sales grew from the year-ago fiscal quarter’s tally.
Management highlighted that as Urban Outfitters approaches the Black Friday/Cyber Monday weekend, it remains optimistic about sales on a fiscal quarter-to-date basis.
Shares of URBN have lost 14.5% in the past six months compared with the industry’s 19.1% decline.
Deeper Insight
This lifestyle-specialty retailer delivered earnings per share of 40 cents, lagging the Zacks Consensus Estimate by a penny. The bottom line decreased from 89 cents per share recorded in the comparable quarter of the prior fiscal year.
Urban Outfitters, Inc. Price, Consensus and EPS Surprise
Net sales for the three months ending Oct 31, fiscal 2023, rose 3.9% from the same-period level of fiscal 2022 to $1,175.3 million. The metric also beat the Zacks Consensus Estimate of $1,162 million.
Brandwise, net sales were down 11.6% from the comparable period’s level in fiscal 2022 to $367.6 million at Urban Outfitters. The metric was up 12.2% to $484.2 million at Anthropologie Group and 5.9% to $280.7 million at Free People. Nuuly, the subscription-based rental service for women’s clothes, contributed $35.3 million to net sales, reflecting an increase from $12.7 million recorded in the earlier fiscal year’s comparable period, backed by a sharp rise in subscribers. Menus & Venues’ net sales amounted to $7.7 million, up 18.5% from the level recorded in the prior fiscal year’s corresponding period.
Segmentwise, net sales at the Retail unit rose 2.3% to $1,067.5 million, while the metric at the Wholesale unit dipped 3.1% to $72.5 million. We note that the comparable Retail segment’s net sales grew 4% from the same-period level of fiscal 2022, driven by mid-single-digit positive digital channel sales and low single-digit positive retail store sales. By brand, the comparable Retail segment’s net sales jumped 8% at the Free People Group and 13% at the Anthropologie Group. The same, however, dropped 9% at Urban Outfitters.
An Insight Into Margins
In the quarter under review, gross profit fell 8.6% from the same-quarter level of fiscal 2022 to $357 million. Also, the gross margin contracted 416 basis points (bps) to 30.4%, mainly due to increased markdowns at all brands.
Selling, general and administrative (SG&A) expenses shot up 9.1% from the second-quarter fiscal 2022 level to $299.7 million. As a percentage of net sales, SG&A deleveraged 121 bps to 25.5%, mainly related to higher store-payroll costs due to increased store associate hours to aid customer traffic, elevated average wages and marketing expenses.
URBN recorded an operating income of $57.3 million, down from $115.9 million in third-quarter fiscal 2022. As a rate of sales, the operating margin decreased 530 bps to 4.9% from the level registered in the quarter ending Oct 31 in fiscal 2022.
Store Update
In the nine months of fiscal 2023, this currently Zacks Rank #3 (Hold) player inaugurated 23 retail outlets, such as five Urban Outfitters, 13 Free People (including seven FP Movement stores), four Anthropologie stores and one Menus & Venues restaurant. URBN shuttered four retail locations, including two Urban Outfitters, and one each of Anthropologie Group and Free People stores. In the aforementioned period, three franchisee-owned stores were opened, comprising two Urban Outfitters outlets and one Anthropologie Group store.
As of Oct 31, 2022, URBN operated 264 Urban Outfitters stores in the United States, Canada and Europe; 241 Anthropologie Group stores in the United States, Canada and Europe; 185 Free People stores in the United States, Canada and Europe; 11 Menus & Venues restaurants; four Urban Outfitters franchisee-owned stores and two Anthropologie Group franchisee-owned stores.
In fourth-quarter fiscal 2023, management plans to open about 10 stores (comprising four new FP Movement stores) and close 11 outlets.
Other Financial Details
Urban Outfitters ended the quarter with cash and cash equivalents of $147.4 million and a total shareholders’ equity of $1,738.4 million. As of Oct 31, 2022, total inventory increased 18.6% from the third-quarter fiscal 2022 level to $743.6 million.
URBN used net cash of $6.2 million from operating activities during the nine-month period ending Oct 31. For fiscal 2023, management projects capital expenditures of nearly $225 million.
Urban Outfitters repurchased and subsequently retired 4.7 million shares for nearly $112 million during the nine months of fiscal 2023. As of Oct 31, 2022, URBN had 19.2 million shares remaining under its share repurchase programs.
Outlook
Based on the sales expectations, management anticipates URBN Retail segment comp sales are likely to come in low single-digit positive in the fiscal fourth quarter. Growth in the Retail and Nuuly segments is likely to be somewhat offset by reduced sales in the Wholesale segment. The Wholesale unit sales are likely to decline in the fiscal fourth quarter as URBN’s department store partners are taking a conservative approach to plan future orders. Foreign exchange is likely to hurt sales growth by nearly 200 basis points. The overall sales growth is likely to come in the low single-digit range.
Gross margins for the fiscal fourth quarter are expected to decrease nearly 50 basis points from the year-ago fiscal quarter’s tally, with flat merchandise margins. Increased carrier rates stemming from higher fuel and peak surcharges could deleverage delivery expenses, squeezing gross margins. SG&A costs will likely increase at a similar rate as sales growth is expected in the low single-digit range.
Tecnoglass manufactures and sells architectural glass and windows, and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 40.5% and 76.4%, respectively, from the corresponding year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 26.9%, on average.
GMS, a distributor of wallboard and suspended ceiling systems, currently flaunts a Zacks Rank of 1. GMS has a trailing four-quarter earnings surprise of 10.8%, on average.
The Zacks Consensus Estimate for GMS’ current financial-year sales and EPS suggests growth of 10.8% and 10.2%, respectively, from the corresponding year-ago reported figures. GMS has an expected EPS growth rate of 10.7% for three-five years.
Wingstop, which franchises and operates restaurants, is currently Zacks #1 Ranked. WING has a trailing four-quarter earnings surprise of 5.8%, on average.
The Zacks Consensus Estimate for Wingstop’s current financial-year sales and earnings per share suggests growth of 25.3% and 22.2%, respectively, from the corresponding year-ago reported numbers. WING has an expected EPS growth rate of 11% for three-five years.
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Urban Outfitters (URBN) Q3 Earnings Miss, Sales Improve Y/Y
Urban Outfitters, Inc. (URBN - Free Report) reported mixed results for third-quarter fiscal 2023, wherein the top line beat the Zacks Consensus Estimate, while the bottom line missed the same. Also, earnings declined from the prior fiscal year’s quarterly level, while sales grew from the year-ago fiscal quarter’s tally.
Management highlighted that as Urban Outfitters approaches the Black Friday/Cyber Monday weekend, it remains optimistic about sales on a fiscal quarter-to-date basis.
Shares of URBN have lost 14.5% in the past six months compared with the industry’s 19.1% decline.
Deeper Insight
This lifestyle-specialty retailer delivered earnings per share of 40 cents, lagging the Zacks Consensus Estimate by a penny. The bottom line decreased from 89 cents per share recorded in the comparable quarter of the prior fiscal year.
Urban Outfitters, Inc. Price, Consensus and EPS Surprise
Urban Outfitters, Inc. price-consensus-eps-surprise-chart | Urban Outfitters, Inc. Quote
Net sales for the three months ending Oct 31, fiscal 2023, rose 3.9% from the same-period level of fiscal 2022 to $1,175.3 million. The metric also beat the Zacks Consensus Estimate of $1,162 million.
Brandwise, net sales were down 11.6% from the comparable period’s level in fiscal 2022 to $367.6 million at Urban Outfitters. The metric was up 12.2% to $484.2 million at Anthropologie Group and 5.9% to $280.7 million at Free People. Nuuly, the subscription-based rental service for women’s clothes, contributed $35.3 million to net sales, reflecting an increase from $12.7 million recorded in the earlier fiscal year’s comparable period, backed by a sharp rise in subscribers. Menus & Venues’ net sales amounted to $7.7 million, up 18.5% from the level recorded in the prior fiscal year’s corresponding period.
Segmentwise, net sales at the Retail unit rose 2.3% to $1,067.5 million, while the metric at the Wholesale unit dipped 3.1% to $72.5 million. We note that the comparable Retail segment’s net sales grew 4% from the same-period level of fiscal 2022, driven by mid-single-digit positive digital channel sales and low single-digit positive retail store sales. By brand, the comparable Retail segment’s net sales jumped 8% at the Free People Group and 13% at the Anthropologie Group. The same, however, dropped 9% at Urban Outfitters.
An Insight Into Margins
In the quarter under review, gross profit fell 8.6% from the same-quarter level of fiscal 2022 to $357 million. Also, the gross margin contracted 416 basis points (bps) to 30.4%, mainly due to increased markdowns at all brands.
Selling, general and administrative (SG&A) expenses shot up 9.1% from the second-quarter fiscal 2022 level to $299.7 million. As a percentage of net sales, SG&A deleveraged 121 bps to 25.5%, mainly related to higher store-payroll costs due to increased store associate hours to aid customer traffic, elevated average wages and marketing expenses.
URBN recorded an operating income of $57.3 million, down from $115.9 million in third-quarter fiscal 2022. As a rate of sales, the operating margin decreased 530 bps to 4.9% from the level registered in the quarter ending Oct 31 in fiscal 2022.
Store Update
In the nine months of fiscal 2023, this currently Zacks Rank #3 (Hold) player inaugurated 23 retail outlets, such as five Urban Outfitters, 13 Free People (including seven FP Movement stores), four Anthropologie stores and one Menus & Venues restaurant. URBN shuttered four retail locations, including two Urban Outfitters, and one each of Anthropologie Group and Free People stores. In the aforementioned period, three franchisee-owned stores were opened, comprising two Urban Outfitters outlets and one Anthropologie Group store.
As of Oct 31, 2022, URBN operated 264 Urban Outfitters stores in the United States, Canada and Europe; 241 Anthropologie Group stores in the United States, Canada and Europe; 185 Free People stores in the United States, Canada and Europe; 11 Menus & Venues restaurants; four Urban Outfitters franchisee-owned stores and two Anthropologie Group franchisee-owned stores.
In fourth-quarter fiscal 2023, management plans to open about 10 stores (comprising four new FP Movement stores) and close 11 outlets.
Other Financial Details
Urban Outfitters ended the quarter with cash and cash equivalents of $147.4 million and a total shareholders’ equity of $1,738.4 million. As of Oct 31, 2022, total inventory increased 18.6% from the third-quarter fiscal 2022 level to $743.6 million.
URBN used net cash of $6.2 million from operating activities during the nine-month period ending Oct 31. For fiscal 2023, management projects capital expenditures of nearly $225 million.
Urban Outfitters repurchased and subsequently retired 4.7 million shares for nearly $112 million during the nine months of fiscal 2023. As of Oct 31, 2022, URBN had 19.2 million shares remaining under its share repurchase programs.
Outlook
Based on the sales expectations, management anticipates URBN Retail segment comp sales are likely to come in low single-digit positive in the fiscal fourth quarter. Growth in the Retail and Nuuly segments is likely to be somewhat offset by reduced sales in the Wholesale segment. The Wholesale unit sales are likely to decline in the fiscal fourth quarter as URBN’s department store partners are taking a conservative approach to plan future orders. Foreign exchange is likely to hurt sales growth by nearly 200 basis points. The overall sales growth is likely to come in the low single-digit range.
Gross margins for the fiscal fourth quarter are expected to decrease nearly 50 basis points from the year-ago fiscal quarter’s tally, with flat merchandise margins. Increased carrier rates stemming from higher fuel and peak surcharges could deleverage delivery expenses, squeezing gross margins. SG&A costs will likely increase at a similar rate as sales growth is expected in the low single-digit range.
3 Top Retail Stocks
We highlighted three better-ranked stocks, namely Tecnoglass (TGLS - Free Report) , GMS (GMS - Free Report) and Wingstop (WING - Free Report) .
Tecnoglass manufactures and sells architectural glass and windows, and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 40.5% and 76.4%, respectively, from the corresponding year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 26.9%, on average.
GMS, a distributor of wallboard and suspended ceiling systems, currently flaunts a Zacks Rank of 1. GMS has a trailing four-quarter earnings surprise of 10.8%, on average.
The Zacks Consensus Estimate for GMS’ current financial-year sales and EPS suggests growth of 10.8% and 10.2%, respectively, from the corresponding year-ago reported figures. GMS has an expected EPS growth rate of 10.7% for three-five years.
Wingstop, which franchises and operates restaurants, is currently Zacks #1 Ranked. WING has a trailing four-quarter earnings surprise of 5.8%, on average.
The Zacks Consensus Estimate for Wingstop’s current financial-year sales and earnings per share suggests growth of 25.3% and 22.2%, respectively, from the corresponding year-ago reported numbers. WING has an expected EPS growth rate of 11% for three-five years.