Urban Outfitters: Is Upbeat Sales Data Cushioning the Stock?

Urban Outfitters Inc. URBN, which has been grappling with its namesake brand, recently unveiled in a filing that its comparable retail segment net sales have improved in the low single digits so far in fourth-quarter fiscal 2015. Since the filing with the Securities and Exchange Commission last Wednesday, the shares of this Zacks Rank #3 (Hold) stock has increased roughly 7%.

In the last concluded quarter, comparable retail segment net sales, including the comparable direct-to-consumer channel, had declined 1%. We believe that the recent upbeat sales data may provide cushion to the stock that disappointed investors with its third-quarter performance.

The company posted earnings of 35 cents a share that missed the Zacks Consensus Estimate of 42 cents and also plunged 25.5% from 47 cents delivered in the year-ago quarter. Increased operating expenses, higher markdowns and fall in sales at its namesake brand were responsible for the debacle. Even healthy performance across the company's Anthropologie and Free People brands could not save the bottom line from declining.

Total net sales growth also decelerated to 5.2% in the third quarter from 7% in the second quarter, and fell short of the Zacks Consensus Estimate.

We believe that the company is trying all means to bring the brand back to the growth trajectory, and remains committed to improve comparable-store sales performance, sustain investments in its direct-to-consumer business, enhance productivity in existing channels, add new brands and optimize the inventory level. Going forward, the company intends to increase its store count, grow wholesale operations, enhance direct penetration and augment eCommerce activities.

Other Stocks That Warrant a Look

Other favorably ranked stocks worth considering in the retail sector include G-III Apparel Group, Ltd. GIII and Columbia Sportswear Co. COLM, both sporting a Zacks Rank #1 (Strong Buy), and Hanesbrands Inc. HBI, carrying a Zacks Rank #2.

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