Urban Outfitters Inc. URBN stands out as a compelling value play within the Retail-Apparel and Shoes industry, trading at a forward 12-month price-to-earnings ratio of 12.13, below the industry average of 20.65 and the Retail-Wholesale sector average of 25.94. This undervaluation highlights its potential for investors seeking attractive entry points in the retail space. Furthermore, URBN's Value Score of A further emphasizes its investment appeal.

Image Source: Zacks Investment Research

Shares of the company are currently trading 5.1% below its 52-week high of $52.68, reached on Dec. 4, 2024, making investors contemplate their next move. In the past three months, URBN stock has gained 45.5%, outperforming the industry’s 14.6% growth. The company’s strategic initiative and operational efficiencies have supported it to outperform the broader sector and the S&P 500 index’s respective growth of 17.5% and 11.1% in the same period.

URBN Stock Past Three-Month Performance

Image Source: Zacks Investment Research

URBN closed Friday’s trading session at $49.98. The stock is trading above its 50 and 200-day SMA of $39.01 and $40.68, respectively, highlighting a continued uptrend. This technical strength, along with sustained momentum, indicates positive market sentiment and investors’ confidence in URBN’s financial health and growth prospects.

URBN Trades Above 50 & 200-Day Moving Averages

Image Source: Zacks Investment Research

Urban Outfitters’ Strong Foundation for Growth

Urban Outfitters has built a strong foundation for expansion, driven by its diverse brand portfolio, customer-centric strategies and efficient operations. The company has effectively integrated digital and physical retail channels, boosting customer engagement and sales while adapting to evolving consumer behaviors. Its operational strategies, such as effective cost control and prudent pricing, have helped sustain profitability even amid broader economic challenges.

Urban Outfitters has also excelled in inventory management and timely markdowns, ensuring high margins and flexibility in a competitive retail environment. This approach led to a 9.4% year-over-year increase in gross profit, which reached $497.3 million, with the gross margin improving by 105 basis points to 36.5% in the third quarter of fiscal 2025.

URBN’s Strategic Brand Execution

A critical factor in Urban Outfitters’ growth is the performance of its varied brand portfolio, particularly Anthropologie. In the third quarter, the brand posted a 5.8% rise in retail comparable sales and marking its eighth consecutive quarter of positive operating income growth. This success is attributed to strong sales across both brick-and-mortar stores and digital channels, with particular growth in categories like apparel and beauty.

Furthermore, Anthropologie’s customer acquisition strategy has proven effective, achieving a 13% year-over-year increase in new and active customers. The brand’s marketing efforts, which included compelling content, played a key role in engaging both new and existing customers. With its focus on innovative products and ongoing customer engagement, Anthropologie is poised to maintain its growth trajectory, contributing significantly to Urban Outfitters’ overall performance.

What Lies Ahead for Urban Outfitters

Looking forward, Urban Outfitters is making substantial investments in its long-term growth strategy, with $210 million earmarked for capital expenditures in fiscal 2025. These investments will fund the opening of 58 new stores, focusing on expanding key brands, such as Anthropologie, Free People and FP Movement, as well as enhancing operational logistics, including the development of the Nuuly fulfillment center.

The company expects mid-single-digit sales growth in the fourth quarter, with both the Retail and Wholesale segments contributing to this increase. Retail sales are projected to rise in the low single digits, while Wholesale is anticipated to experience high-teen growth due to strong demand.

Nuuly, the company’s rental service, is also expected to see continued success, with mid-double-digit revenue growth projected for the quarter. This growth is supported by a rising subscriber base and the effective execution of strategic initiatives. Additionally, Urban Outfitters anticipates a 100-basis-point improvement in its gross margin, driven by lower markdowns at Urban Outfitters stores and higher initial product margins through improved collaboration across teams.

Estimate Favoring URBN Stock

Analysts have responded positively to Urban Outfitters’ prospects, which has been reflected in upward revisions in the Zacks Consensus Estimate for earnings per share. In the past 30 days, analysts have increased their estimates for the current fiscal year by 21 cents. The consensus estimate for earnings is pegged at $3.84 per share. The consensus estimate for earnings for the next fiscal year has been raised 25 cents to $4.17 per share. 

The Zacks Consensus Estimate for the current and next fiscal year’s sales is pegged at $5.49 billion and $5.79 billion, indicating year-over-year growth of 6.4% and 5.5%, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Image Source: Zacks Investment Research

Conclusion

Urban Outfitters offers a compelling investment opportunity due to its robust financial performance, growth initiatives and discounted valuation. The company’s operational efficiency, diverse brand portfolio and strong customer engagement have driven profitability and growth. With positive market momentum, strategic investments and a solid foundation in both physical and digital retail, URBN is well-positioned for sustained success, appealing to investors seeking value and long-term growth. The company currently sports a Zacks Rank #1 (Strong Buy).

Key Picks

Some other top-ranked stocks are The Gap, Inc. GAP, Abercrombie & Fitch Co. ANF and Steven Madden, Ltd. SHOO.

Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It presently flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Gap’s fiscal 2025 earnings and sales indicates growth of 41.3% and 0.8%, respectively, from fiscal 2024 reported figures. GAP has a trailing four-quarter average earnings surprise of 101.2%.

Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present.

The Zacks Consensus Estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 67.5% and 14.9%, respectively, from the fiscal 2024 reported levels. ANF has a trailing four-quarter average earnings surprise of 14.8%.

Steven Madden designs, sources, markets and sells fashion-forward name-brand and private-label footwear. It currently carries a Zacks Rank of 2 (Buy). 

The Zacks Consensus Estimate for Steven Madden’s 2024 earnings and sales indicates growth of 8.6% and 13.6%, respectively, from the year-ago actuals. SHOO has a trailing four-quarter average earnings surprise of 9.8%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report

Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report

The Gap, Inc. (GAP) : Free Stock Analysis Report

Steven Madden, Ltd. (SHOO) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research