Urban Outfitters, Inc. (URBN Quick QuoteURBN - Free Report) seems a promising bet, thanks to its solid growth strategies and sound fundamentals. Management has been strengthening its direct-to-consumer business, enhancing productivity across the existing channels and optimizing inventory levels. URBN’s strategic growth initiative, FP Movement and store-growth endeavors are also impressive. Markedly, shares of this Philadelphia, PA-based player have gained 27.2% against its industry’s 4.3% decline over the past three months.

Analysts seem optimistic about this Zacks Rank #1 (Strong Buy) stock. For fiscal 2024, the Zacks Consensus Estimate for URBN’s sales and earnings per share (EPS) is currently pegged at $5.04 billion and $2.75, respectively, suggesting 5.1% and 57.1% growth from the year-ago period’s corresponding figures. For fiscal 2025, the consensus estimate for sales and EPS is presently $5.24 billion and $2.94, respectively, indicating an increase of 3.9% and 6.9% each from the previous fiscal year’s actuals.

Strategic Discussion

Being a multi-brand and multi-channel retailer, Urban Outfitters offers a flexible merchandising strategy. The company also has a significant domestic and international presence with rapidly expanding e-commerce activities. In addition, the company’s FP Movement and AnthroLiving initiatives hold promise.

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Management has been making investments in the FP Movement with digital and creative brand prospects. It believes that the FP Movement will lure a wider base of customers to the Free People brand. Having a differentiated position in the fitness and wellness space, the FP Movement offers a major growth opportunity and is expected to boost Free People’s brand revenues.

During the first quarter of fiscal 2024, the FP Movement brand witnessed an outstanding quarter, generating 48% comp growth. Total Retail segment comps were backed by double-digit comps in the store and digital channels on strong traffic growth across both channels, due in part to solid marketing execution and average unit retail growth buoyed by higher full-price selling in all key product categories. Total customer growth reached a double-digit rise for the quarter at the Free People and FP Movement brands. Hence, management believes the Free People’s Group Retail segment’s performance will be positive in the fiscal second quarter.

In addition, management remains optimistic about the prospects of Nuuly, which comprises the Nuuly Rent and Nuuly Thrift brands. During the fiscal first quarter, Nuuly, the subscription-based rental service for women’s clothes, contributed $42.7 million to net sales. This reflected an increase from $17.3 million recorded in the earlier fiscal year’s comparable period, backed by a 149% rise in subscribers. Subscriber growth is driven by new subscribers and improvements in subscriber retention. Going forward, management remains optimistic about the prospects of Nuuly.

What Else?

Urban Outfitters reported sturdy results for first-quarter fiscal 2024, wherein the top and the bottom line beat the Zacks Consensus Estimate. Also, sales and earnings grew year over year. Brandwise, net sales were up 12.8% year over year at Anthropologie Group and 11.4% at Free People. Segmentwise, net sales at the Retail unit rose 4%, while the comparable Retail segment’s net sales grew 5% from the same-period level of fiscal 2023 backed by a low-single-digit increase in retail-store sales and a high single-digit rise in digital channel sales.

We note that management is impressed with the sturdy overall consumer demand at the start of the first quarter of fiscal 2024. This is likely to continue throughout the second quarter, wherein the total company sales growth will be in the mid-single digits. This growth will be backed by a mid-single-digit increase in the Retail segment’s comp sales and a high double-digit rise in the Nuuly segment’s sales year over year. This growth will be partly offset by lower sales in the Wholesale segment.

URBN’s gross margin rate for the second quarter is likely to improve nearly 300 basis points year over year, buoyed by increased initial product margins from lower inbound freight costs and reduced merchandise markdowns.

Other Solid Picks in Retail

We have highlighted three other top-ranked stocks, namely Abercrombie & Fitch (ANF Quick QuoteANF - Free Report) , American Eagle Outfitters (AEO Quick QuoteAEO - Free Report) and Hibbett Sports .

Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

ANF delivered a negative trailing four-quarter earnings surprise of 141.2%, on average.

The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and EPS suggests growth of 2.1% and 472%, respectively, from the year-ago reported figures.

American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). AEO delivered an earnings surprise of 23.3% in the last reported quarter.

The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year sales and EPS suggests growth of 1.4% and 15.5%, respectively, from the year-ago reported figures.

Hibbett, a sporting goods retailer, currently carries a Zacks Rank of 2. The company has a negative trailing four-quarter earnings surprise of 13.9%, on average.

The consensus estimate for Hibbett’s current financial-year sales suggests growth of 5.7% from the year-ago reported figure.