Urban Outfitters, Inc. (Nasdaq: URBN) shares soared more than 21 percent on Wednesday after the company reported second-quarter earnings that blew Wall Street’s expectations out of the water. Like many other U.S retailers, Urban Outfitters is facing a difficult environment, but the latest numbers could be a sign the company and its stock have weathered the worst of the storm.
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URBN stock logged earnings per share of 44 cents on revenue of $873 million. Both numbers handily topped consensus analyst estimates of 37 cents and $861 million, respectively. The company also reported a 4.9 percent decline in same-store sales, well above the 6.9 percent drop Wall Street was expecting.
The Urban Outfitters brand was the company’s worst-performing brand in the quarter, with sales down 7.9 percent. Anthropologie Group sales declined 4 percent, while Free People sales dropped 2.9 percent.
Investors cheered the big earnings beat, but there’s no question market expectations were low.
“While we are disappointed in our second-quarter performance, we have a number of initiatives under way including: speed to customer, international growth, wholesale expansion and digital investments,” CEO Richard Hayne says.
Hayne says these initiatives have URBN positioned to improve sales growth in coming quarters. Jefferies analyst Randal Konik says investors willing to stomach the stock’s volatility have a major opportunity to buy it at a discounted price.
“While the [near-term] outlook remains choppy, we see [long-term opportunity], as improved execution, cost savings from the store [reorganization] project, and plans to pivot investments toward areas with a higher return … should drive a margin recovery over time,” Konik says.
BMO Capital Markets analyst John Morris says it’s still too early to get excited about Urban Outfitters stock.
“We await further evidence that both core divisions have significantly improved operations, rather than relying on one quarter of green shoots, to become more positive on the shares,” Morris says.
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Even after Wednesday morning’s big move, Urban Outfitters stock remains down more than 27 percent in 2017. This year has generally been a pretty tough one for anyone not named Amazon.com ( AMZN).
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Urban Outfitters (URBN) Stock Clears Low Earnings Bar originally appeared on usnews.com
