Urban Outfitters, Inc. URBN has unveiled sales data for fourth-quarter fiscal 2022. Although the metric fell short of the Zacks Consensus Estimate, the same improved year over year. We note that sales increased across major brands, including Urban Outfitters, Free People, Anthropologie Group and Nuuly. Sturdy digital sales were somewhat offset by soft store net sales.
URBN provided a two-year comparison for all metrics as the pre-pandemic period reflects a more precise comparison base due to a significant impact of the outbreak on its business operations in fiscal 2021.

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Let’s Introspect

Per management of this lifestyle specialty retailer, net sales for the three months ended Jan 31, 2022 rose 13.9% from the same-period level of fiscal 2020 to $1,332.2 million. The metric also rose 22.4% from the last fiscal year’s reading. However, the metric came below the Zacks Consensus Estimate of $1,342 million.
Brand-wise, net sales were up 5.4% from the comparable period’s level in fiscal 2020 to $474.4 million at Urban Outfitters, 13.8% to $558.7 million at Anthropologie Group and 28% to $276.2 million at Free People. Nuuly, the subscription-based rental service for women’s clothes, contributed $17.3 million to net sales, reflecting an increase of 188.3% from the comparable period’s level in fiscal 2020. However, Menus & Venues’ net sales amounted to $5.6 million, down 17.6% from the comparable period’s reading in fiscal 2020.
We note that the comparable Retail segment’s net sales grew 14% from the same-period level of fiscal 2020 on a robust double-digit rise in digital channel sales. Growth was partly offset by a low double-digit negative retail store sales due to lower store traffic.
By brand, the comparable Retail segment’s net sales jumped 49% at the Free People Group, 14% at the Anthropologie Group and 3% at Urban Outfitters. While net sales at the Retail segment improved 15% from the comparable period’s level in fiscal 2020, the metric at Wholesale unit plunged 22%, mainly due to lower Free People Group’s sales to promotional wholesale customers.
Following the sales results, URBN expects a stronger-than-anticipated deleverage in gross margin for the fiscal fourth quarter due to elevated inbound transportation costs.
For the year ended Jan 31, 2022, net sales climbed 14.2% from the level as of Jan 31, 2020 and 31.9% year over year to $4,548.8 million. Further, the comparable Retail segment’s net sales grew 16% on robust digital channel sales, somewhat negated by negative retail store sales due to weak traffic. The Wholesale segment’s net sales declined 23% from the level as of Jan 31, 2020, mainly due to weak sales at the Free People Group’s sales to promotional wholesale customers.

Store Update

We note that Urban Outfitters has been rational with store openings so far. In fiscal 2022, URBN inaugurated 56 retail outlets, such as 17 Urban Outfitters, 9 Anthropologie Group and 29 Free People (including 18 FP Movement stores), and one Menus & Venues restaurant. URBN shuttered 18 retail locations including three Urban Outfitters stores, eight Anthropologie Group stores, five Free People stores and two Menus & Venues restaurants. In the aforementioned period, two franchisee-owned stores were closed, one each of Urban Outfitters and Anthropologie Group stores.

What’s More?

Management also informed that Francis Pierrel joined as the President of Urban Outfitters in North America. He will report directly to Sheila Harrington, the global chief executive officer of URBN and the Free People Group.
Shares of this Philadelphia, PA-based player have dipped 2.1% in the past six months compared with the industry’s 12.9% decline. This presently Zacks Rank #4 (Sell) entity has been witnessing inflationary pressures from freight, raw materials and wages. Also, the ongoing supply-chain disruptions remain deterrents.
Nonetheless, Urban Outfitters is constantly strengthening its direct-to-consumer business, enhancing productivity across the existing channels, expanding product assortments and optimizing inventory level. Its strategic growth initiative FP Movement endeavors are also yielding results.

Solid Picks in Retail

Some better-ranked stocks are Capri Holdings CPRI, Boot Barn Holdings BOOT and Tapestry TPR.
Capri Holdings, which offers accessories and footwear, sports a Zacks Rank #1 (Strong Buy) at present. CPRI has an expected earnings per share (EPS) growth rate of 30.9% for three-five years. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Capri Holdings’ current financial-year sales and EPS suggests growth of 36.3% and 210.5%, respectively, from the year-ago period’s corresponding figures. CPRI has a trailing four-quarter earnings surprise of 1,018.2%, on average.
Boot Barn Holdings, a lifestyle retailer of western and work-related footwear, apparel and accessories, presently flaunts a Zacks Rank of 1. BOOT has an expected EPS growth rate of 20% for three-five years.
The Zacks Consensus Estimate for Boot Barn Holdings’ current financial-year sales and EPS suggests growth of 62.6% and 220.8%, respectively, from the year-ago period’s corresponding figures. BOOT has a trailing four-quarter earnings surprise of 47.1%, on average.
Tapestry, a renowned designer of fine accessories, presently carries a Zacks Rank #2 (Buy). TPR has a trailing four-quarter earnings surprise of 29%, on average.
The Zacks Consensus Estimate for Tapestry’s current-year sales and EPS suggests growth of 15% and 18.5%, respectively, from the corresponding year-ago period’s levels. TPR has an expected EPS growth rate of 12.3% for three-five years.

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