Profits Soar at Urban Outfitters, But Not as High as Expectations

Andrew Klips  |

Urban Outfitters (URBN), which operates specialty retail shops under its namesake brand as well as Anthropologie, BHLDN, Free People and Terrain, said profits doubled in its latest earnings period.  All tallied, Urban Outfitters has about 475 stores under its umbrella as well as large distribution chains placing its products on shelves at about 1,500 department stores.

For the fourth quarter, the Philadelphia-based company reported net sales of $856.8 million, a record level for the company and 17 percent higher than the $730.6 million reported in the year early quarter.  Profits surged to $82.55 million, or 56 cents per share, compared to $39.26 million, or 27 cents per share in the year prior period.

That is a mixed bag compared to analyst expectations, topping Wall Street’s call for $850 million in revenue, but coming up light on earnings per share predictions of 57 cents.

Comparable retail segment net sales, which include our comparable direct-to-consumer channel, increased 11% while comparable store net sales were flat.  Direct-to-consumer net sales jumped 44 percent in the quarter.  Returns from that segment returned to stores are charged against stores.  Excluding those returns comparable same store sales would have increased in the low single digits.

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Net sales increased across all brands for the quarter versus the year earlier quarter, including a 11 percent increase at Urban Outfitters and 7 percent for Anthroplogie, the company brands that make up the lion’s share of sales.  All segments also posted yearly increases.

"We entered the year with a plan to invest in initiatives to drive top line growth and improve margins. We succeeded on both fronts especially in the fourth quarter,” said Richard A. Hayne, chief executive at Urban Outfitters.  Haynes said a similar strategy will be used in 2013.

For all of 2012, net sales also set a new record at $2.79 billion, up from $2.47 billion for the year ended January 31, 2012.  Earnings per share for the complete year were $1.62, ahead of $1.19 the year earlier.

No guidance was provided looking ahead into 2013.

Shares are falling by about 3 percent in extended trading on Monday following the release after closing the day modestly ahead by 0.46 percent at $41.50.  Shares are ahead by about 45 percent over the past 52 weeks.

Last week, RBC Capital reaffirmed its “outperform” rating on Urban Outfitters with a $46 price target.  Credit Agricole also reaffirmed its “buy” rating with a $52 price target. Analysts at Wedbush kept their “neutral” rating, but raised their price target from $39 to $42.  BMO Capital Markets had a different view in February, downgrading URBN from “outperform” to “market perform” with a $45 price target.

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