It has been a few month for the reason that final earnings report for City Outfitters (URBN). Shares have added about 14.9% in that timeframe, outperforming the S&P 500.
Will the latest optimistic development proceed main as much as its subsequent earnings launch, or is City Outfitters due for a pullback? Earlier than we dive into how traders and analysts have reacted as of late, let’s take a fast take a look at its most up-to-date earnings report in an effort to get a greater deal with on the essential catalysts.
City Outfitters’ Q3 Earnings Beat Estimates, Wholesale Gross sales Up Y/Y
City Outfitters reported spectacular outcomes for third-quarter fiscal 2025, whereby each high and backside strains surpassed the Zacks Consensus Estimate. Additionally, each metrics improved from the prior-year quarter’s reported determine.
URBN’s Quarterly Efficiency: Key Metrics and Insights
This way of life specialty retailer delivered earnings per share of $1.10, surpassing the Zacks Consensus Estimate of 85 cents. Additionally, the underside line elevated 25% from the comparable quarter of the prior fiscal yr.
Complete web gross sales elevated 6.3% yr over yr to $1,361.9 million, surpassing the consensus estimate of $1,334 million. Complete web gross sales within the Retail section rose 3.2%, with comparable web gross sales on this section growing 1.5%. This progress was primarily fueled by low single-digit optimistic positive aspects in each digital channel gross sales and gross sales from retail shops. Particularly, comparable Retail web gross sales rose 5.3% at Free Folks and 5.8% at Anthropologie however fell 8.9% at City Outfitters.
Within the Wholesale section, web gross sales grew 17.4% yr over yr, as a consequence of a 20.3% rise in Free Folks’s wholesale gross sales, which was attributed to elevated gross sales to malls and specialty clients. This was, nevertheless, considerably offset by a decline in City Outfitters’ wholesale gross sales.
The Nuuly section noticed a major 48.4% improve in web gross sales primarily as a consequence of a 51% rise in common energetic subscribers from the prior-year quarter.
Margin & Value Insights of City Outfitters
Gross revenue rose 9.4% from the prior-year quarter to $497.3 million. Additionally, the gross margin expanded 105 foundation factors (bps) to 36.5%, primarily owing to greater preliminary merchandise markups throughout all manufacturers, primarily as a result of firm’s cross-functional initiatives. Furthermore, merchandise markdowns within the Retail section confirmed enchancment, pushed by lowered markdowns at City Outfitters, although this was partially offset by greater markdowns at Free Folks.
Promoting, basic and administrative (SG&A) bills had been up 6.7% yr over yr to $368.6 million. This improve was primarily as a consequence of greater advertising and marketing bills, geared toward boosting buyer site visitors and gross sales within the Retail and Nuuly segments, in addition to elevated payroll prices to help the expansion in comparable gross sales at Retail section shops. As a proportion of web gross sales, SG&A deleveraged 11 bps to 27.1% within the quarter underneath evaluation.
URBN recorded an working revenue of $128.7 million, up 18.1% from $109 million in third-quarter fiscal 2025. As a fee of gross sales, the working margin elevated 90 bps yr over yr to 9.4%.
URBN’s Retailer Replace
Within the fiscal third quarter, the corporate opened 25 retail places, which included six City Outfitters shops, six Anthropologie shops and 13 Free Folks shops (together with six FP Motion shops). Additionally, it closed six retail places, which included three City Outfitters shops, two Anthropologie shops and one Free Folks retailer.
As of Oct. 31, 2024, URBN operated 264 City Outfitters shops in america, Canada and Europe and web sites; 242 Anthropologie Group shops in america, Canada and Europe, catalogs and web sites; 216 Free Folks shops (together with 50 FP Motion shops) in america, Canada and Europe, catalogs and web sites; 9 Menus & Venues eating places; seven City Outfitters franchisee-owned shops and two Anthropologie Group franchisee-owned shops.
City Outfitters’ Monetary Well being Snapshot
City Outfitters ended the quarter with money and money equivalents of $182.5 million and a complete shareholders’ fairness of $2.35 billion. As of Oct. 31, 2024, the overall stock was up 10% yr over yr. Complete Retail section stock elevated 8.1%, pushed by the Retail section’s comparable stock growing 3.7% and deliberate early receipts of vacation merchandise. In the meantime, the Wholesale section stock grew 41.6%, indicating the timing of receipts and the necessity to help greater gross sales.
URBN offered web money of $182.4 million from working actions as of Oct. 31, 2024. Throughout the 9 months ended Oct. 31, 2024, the corporate repurchased and subsequently retired 1.2 million shares at a complete value of roughly $52 million. As of the identical date, 18 million widespread shares remained accessible for repurchase underneath this system.
URBN’s Fiscal 2025 Outlook
The corporate anticipates complete gross sales progress within the mid-single digits for the fourth quarter. This progress may end result from low single-digit progress within the Retail section comparable gross sales and high-teen progress within the Wholesale section. Moreover, Nuuly section revenues are anticipated to develop within the mid-double digits.
The corporate expects a gross margin fee enchancment of roughly 100 bps for the fourth quarter in contrast with the prior yr, pushed by decrease markdowns, particularly on the City Outfitters model and better preliminary product margins from cross-functional initiatives.
SG&A bills are anticipated to develop within the mid-single digits, primarily as a consequence of elevated advertising and marketing efforts, geared toward boosting buyer progress and gross sales at Anthropologie, Free Folks, FP Motion and Nuuly. The corporate maintains flexibility in variable SG&A spending to regulate based on gross sales efficiency.
Stock ranges within the fourth quarter are anticipated to develop at a tempo just like gross sales progress.
Capital expenditures for fiscal 2025 are deliberate at roughly $210 million. Roughly half of this can be allotted to retail retailer growth and help, round 25% to logistics capability investments, together with the Nuuly rental success middle in Raymore, MO, which opened within the fiscal first quarter and the remaining 25% to straightforward capital investments supporting IT, residence workplace and logistics operations.
The corporate plans to open roughly 58 new shops and shut 31 shops in fiscal 2025. Internet new retailer progress can be pushed by FP Motion, Free Folks and Anthropologie, with plans to open 25 FP Motion shops, 13 Free Folks shops and 13 Anthropologie shops.
How Have Estimates Been Transferring Since Then?
It seems, recent estimates have trended upward in the course of the previous month.
VGM Scores
Presently, City Outfitters has a mean Development Rating of C, although it’s lagging a bit on the Momentum Rating entrance with a D. Nevertheless, the inventory was allotted a grade of B on the worth aspect, placing it within the high 40% for this funding technique.
General, the inventory has an mixture VGM Rating of C. For those who aren’t centered on one technique, this rating is the one you ought to be thinking about.
Outlook
Estimates have been broadly trending upward for the inventory, and the magnitude of those revisions seems to be promising. It comes with little shock City Outfitters has a Zacks Rank #1 (Robust Purchase). We count on an above common return from the inventory within the subsequent few months.
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Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report
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