Goldman Lowers Urban Outfitters Target To $29, Still Likes The Retailer In The Second Half

Urban Outfitters, Inc. URBN released its 10-Q for 1Q16 after market close on June 9.

Goldman Sachs’ Lindsay Drucker Mann maintains a Buy rating on the company, while lowering the price target from $30 to $29.

Declining Comps

The company reported that comps had decreased 2Q to date in the mid-single digits. Mann mentioned that this was in line with the 2Q consensus forecast of 0 percent comps.

“Last year, comps increased in the mid-single digits QTD and finished the full quarter up 4 percent,” the analyst pointed out.

During its 1Q call on May 18, Urban Outfitters had stated that the May sales momentum had weakened in comparison to the 1Q rate, while attributing the weakness almost completely to the weather.

Related Link: 3 Reasons Morgan Stanley Upgraded Urban Outfitters

Constructive On 2H

According to the Goldman Sachs report, “The company had observed a roughly 10pt difference in weather-affected vs. non-affected regions. Moving past weather issues, this weakness appears to have continued.”

However, Mann expressed continued optimism regarding improvement in 2H, based on the robust full price selling at Urban Outfitters, against the backdrop of easing comparisons. The analyst also pointed to management’s “greater agility” in addressing Anthropologie’s weak product.

The EPS estimates for FY16 and FY17 have been lowered to reflect lower sales.