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What Does The Street Think Of Urban Outfitters Now?

What Does The Street Think Of Urban Outfitters Now?
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Shares of Urban Outfitters, Inc. (NASDAQ: URBN) were trading lower by 4 percent Tuesday after the company released a concerning update to its holiday season performance. Specifically, total net sales for the two month period ended Dec. 31, 2017, rose 3.6 percent from the same period a year ago and comparable retail segment net sales rose by 2 percent which fell short of the consensus estimate of 3 percent.

Here is a summary of how some of Wall Street's top analysts responded to the update.

Oppenheimer: Here's What Drove The Miss

Oppenheimer's Anna Andreeva maintains a Perform rating on Urban Outfitters' stock with no assigned price target.

Urban Outfitters' 2 percent comp gains for the holiday season fell not only short of the 3 percent the Street was looking for, but also marks a deceleration from the early December trend of 4 percent, Andreeva said in a note. The shortfall in comps versus the consensus estimate can be entirely attributed to weaker-than-expected Tech and Media at the core Urban Outfitters' store as there wasn't a lot of new offerings in the category which typically doubles in sales in December.

Meanwhile, apparel in the men's and women's categories continues to be positive and this bodes well for comparisons in 2018, the analyst said.

Bottom line, expectations were high heading into the holiday season but the company's performance so far in January appears to be "strong" in stores and online.

Related Link: 5 Hot Stocks To Start 2018

Buckingham Research: Some Clarity Needed

Buckingham Research Group's Kelly Crago maintains a Buy rating on Urban Outfitters with an unchanged $32 price target, but are currently under review and may be updated shortly.

Management did explain where it fell short of expectations, but at the same time all three of the company's concepts (core Urban Outfitters, Anthropologie, Free People) decelerated by 200 to 300 basis points relative to quarter-to-date trends through the second week of December -- a point that wasn't addressed by management.

Despite a disappointing performance in the holiday season, there's still reason to remain optimistic that the company's underlying fundamentals remain strong, Crago said, and there's reason to believe the company will post both a comp acceleration in the first half of 2018 along with margin upside.

William Blair: Not As Bad As Suggested But...

William Blair's Dylan Carden maintains a Market Perform rating on Urban Outfitters.

The underlying comp performance is "not perhaps has bad" as the late December deceleration would suggest, Carden said in a note. But on the other hand, the comp deceleration highlights the top-line volatility that creates volatility in the stock -- especially when the stock is trading at around 17 times 2018 EPS versus a long-run average in the mid-teens level.

"Coming out of the holiday, we believe recapturing gross margin on promotional control will be key to supporting margins, with SG&A already planned up at a similar rate to the roughly 1% growth expected in 2017, with less room for maneuverability, in our opinion," Carden said. "Meanwhile, shares should remain susceptible to continued comp volatility further into 2018 moving past easier comparisons in the front half, with the company having been unable in recent years to sustain positive momentum across its brands."

JPMorgan: Hosting Management To Gain Insight

JPMorgan's Matthew Boss maintains an Overweight rating on Urban Outfitters with an unchanged $38 price target.

Investors may want to consider buying the dip in Urban Outfitters' stock despite the 2 percent holiday same-store-sales comp marking a deceleration from earlier trends. Bridging the gap, consolidated same-store sales (excluding the lap of tech and media at the UO brand) "held the mid-singles QTD trajectory with January trends accelerating to positive high-single digits," Boss said.

Boss noted he will be meeting with the company's CFO Frank Conforti and IR Oona McCullough and will be sharing main takeaways from the meeting in a new research report.

Image: Mike Mozart, Flickr

Latest Ratings for URBN

Mar 2018Loop CapitalInitiates Coverage OnBuy
Mar 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight
Mar 2018KeyBancMaintainsOverweightOverweight

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