Urban Outfitters (NASDAQ: URBN), a lifestyle retailer focusing on young adults and teenagers, is scheduled to report its second-quarter fiscal 2022 (year ending January) results on Tuesday, August 24. We expect the company to likely beat revenue and earnings expectations, driven by improved demand in digital retail. With vaccinations ramping up and more people shopping in stores once again, the retailer enjoyed a rebound in demand in Q1 – fueled by a 51% jump in retail comparable-store sales. These comparable sales gains were broad-based across its three brands, Free People Group, Anthropologie Group, and Urban Outfitters growing 77% year-over-year (y-o-y), 50%, and 42%, respectively. We expect the company to continue this growth momentum into Q2 as well. Our forecast indicates that Urban Outfitters’ valuation is $39 a share, which is 8% higher than the current market price of around $37. Look at our interactive dashboard analysis on Urban Outfitters’ Pre-Earnings: What To Expect in Q2? for more details.
(1) Revenues expected to be marginally ahead of consensus estimates
Trefis estimates URBN’s Q2 2022 revenues to be around $1.10 Bil, slightly higher than the consensus estimate. Urban Outfitters Q1 revenue rose 57.6% to a record $927 Mil, beating consensus by $26.91 Mil. Going forward, the company expects retail segment sales growth to land in the mid-teens range – driving total company sales in the low double-digit range in the upcoming Q2. However, this retail comps growth is likely to be offset by negative wholesale segment sales due in part to the realignment of the Free People brand customer base to focus more on regular price selling.
In Q1, the retailer’s gross margins increased to 32.4% from 31.1% in the prior-year period. Based on the Q1 sales performance and forecast, the company expects its Q2 gross margins to also show over 100 basis points y-o-y improvement. Much like the first quarter, this improvement could be largely driven by lower markdown rates as a result of improving consumer demand, strong product performance, and disciplined inventory control.
2) EPS also likely to be ahead of consensus estimates
URBN’s Q2 2022 earnings per share is expected to be 80 cents per Trefis analysis, compared to the consensus estimate of 78 cents. Urban Outfitters’ net income saw a 99% decline in 2020 to a mere $1 million, due to store closures in the first half of the year. However, the company saw its Q1 net income at $54 Mil and recorded EPS of $0.54, compared to a loss of $1.41 per share in the year-ago period, beating consensus by $0.37.
For fiscal 2022, we expect a 29% y-o-y growth in Urban Outfitters’ revenues. In addition, diluted earnings per share could likely come in at $2.68.
(3) Stock price estimate higher than the current market price
Going by our Urban Outfitters’ Valuation, with an EPS estimate of around $2.68 and P/E multiple of 14.7x in fiscal 2022, this translates into a price of $39, which is 8% higher than the current market price of around $37.
For further comparison among peer groups, it is helpful to see how they stack up. URBN Stock Comparison With Peers shows how Urban Outfitters compares against peers on metrics that matter.