Note: Urban Outfitters’ FY’25 ended on January 31, 2025.
Urban Outfitters (NASDAQ: URBN), a lifestyle retailer targeting young adults and teenagers, closed the year with an outstanding fourth-quarter performance, achieving record sales of $1.6 billion that exceeded expectations with a 10% year-over-year (y-o-y) increase. The company’s earnings per share also surpassed projections, coming in at $1.04 (up 51% y-o-y) compared to consensus estimates of $0.94. In addition, URBN’s gross margin expanded by 300 basis points to 32.3% in Q4, driven by improved initial merchandise margins and the effective execution of cross-functional brand initiatives across its three segments – Retail, Wholesale, and Nuuly. Furthermore, the retailer’s smaller brands, FP Movement and Nuuly, are fueling growth, with Nuuly recording a 50% surge in subscribers during the quarter. Notably, the company’s stock has risen 60% since the beginning of 2024, compared to a 23% increase in the S&P 500 index. In contrast, URBN’s peer American Eagle Outfitters(NYSE: AEO) saw its stock decline by 36% over the same period. Separately, Should You Buy AVGO Stock After A 7% Fall?
Urban Outfitters has set forth its strategic objectives for fiscal 2026, aiming for mid-single-digit sales growth and a 50-100 basis point improvement in gross margins. Key initiatives include opening 58 new stores, closing 19 underperforming locations, and executing a $240 million capital expenditure program. Moreover, the company plans to expand its Nuuly subscription service with a revenue target of $500 million. Additionally, if you prefer an investment with less volatility than an individual stock, consider the High Quality portfolio, which has outperformed the S&P and recorded returns of over 91% since inception.
Overall, URBN’s current price of $57 aligns with Trefis’ valuation for Urban Outfitters’ Valuation. This valuation is based on an expected EPS of $4.55 and a 12.7x P/E multiple for fiscal year 2026. We project URBN revenues to reach $5.9 billion in fiscal year 2026, marking a 7% year-over-year increase. Urban Outfitters’ fourth-quarter results concealed underlying challenges, with the flagship brand experiencing its eleventh consecutive quarter of negative growth. Notably, while Free People and Anthropologie posted comparable retail sales growth of 8% and 8.3%, respectively, Urban Outfitters’ comparable sales declined by 3.5%. This trend mirrors the previous quarter (Q3), during which Free People and Anthropologie recorded growth of 5.3% and 5.8%, respectively, while Urban Outfitters’ sales dropped by 8.9%. Nonetheless, the Urban Outfitters brand did show some quarter-over-quarter improvement.
URBN stock’s performance over the past four years has been inconsistent, with annual returns displaying considerably more volatility than the S&P 500. The stock achieved returns of 15% in 2021, -19% in 2022, 50% in 2023, and 54% in 2024. In contrast, the Trefis High Quality Portfolio, which comprises 30 stocks, is notably less volatile and has comfortably outperformed the S&P 500 over the past four years. Why is that?Overall, the HQ Portfolio stocks delivered better returns with lower risk compared to the benchmark index, as reflected in the HQ Portfolio performance metrics.
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