Urban Outfitters (NASDAQ: URBN), a lifestyle retailer targeting young adults and teenagers, is set to announce its first-quarter fiscal 2025 results on May 21. Analysts predict that the company’s stock will likely rise, with revenue and earnings surpassing market expectations for Q1. Despite weak consumer spending, Urban Outfitters saw growth in its 2023 revenue and earnings. In fiscal year 2024, sales increased by over 7% year-over-year to $5.15 billion, and earnings grew by 79% year-over-year to $3.05 per share. The company’s affluent customer base and low wholesale exposure suggest a positive outlook in the near future, especially with the momentum behind Nuuly, Urban Outfitters’ apparel rental business.
Nuuly’s expanding subscriber base is prompting Urban Outfitters to build a fulfillment network capable of serving 600,000 subscribers in the future. This in-house infrastructure development will require an increase in capital expenditure from $200 million in FY 2024 to approximately $210 million for FY 2025. However, there are execution risks that could impact the company’s return on investments, such as delays, expensive overruns, or underperformance of subscriber numbers. Additionally, Urban Outfitters has non-traditional segments like Menus & Venues and Nuuly, which may require innovative thinking from management to ensure strong growth.
Despite Urban Outfitters’ stock experiencing significant gains over the past few years, with a 60% increase since early 2021, its performance has been inconsistent. Returns for URBN stock were 15% in 2021, -19% in 2022, and 50% in 2023, underperforming the S&P 500 in 2021. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, there is speculation on whether Urban Outfitters could face a similar situation as in 2021 and underperform the S&P 500 in the next 12 months, or potentially see a strong jump.
Trefis forecasts Urban Outfitters’ valuation to be $46 per share, which is 12% higher than the current market price. The company’s revenue for Q1 2025 is estimated to be around $1.25 billion, ahead of consensus estimates. In Q4, Urban Outfitters reported an 8% year-over-year increase in sales to $1.5 billion, driven by growth in the Retail, Nuuly, and Wholesale segments. The Retail segment saw a high single-digit positive digital comp and a low single-digit store comp, with strong performance at the Free People and Anthropologie brands representing 70% of the business. Urban Outfitters’ gross profit margin also increased by 293 basis points to 30.2% in Q4 2024.
In terms of earnings per share (EPS), Urban Outfitters is expected to beat consensus estimates for Q1 2025, with a projected EPS of 54 cents according to Trefis analysis. The company’s GAAP profits for Q4 were $0.50 per share, up 50% year-over-year, while its adjusted EPS increased by 82% year-over-year to $0.69 in Q4 2024. With an EPS estimate of approximately $3.57 and a P/E multiple of 12.8x for fiscal 2025, Urban Outfitters’ price is estimated to be $46, nearly 12% higher than the current market price. Investors can also compare Urban Outfitters against its peers using the URBN Peers tool to make informed investment decisions.
