Over the past six months, Urban Outfitters’s shares (currently trading at $63.70) have posted a disappointing 9.4% loss while the S&P 500 was flat. This might have investors contemplating their next move.
Following the pullback, is now the time to buy URBN? Find out in our full research report, it’s free.
Why Does Urban Outfitters Spark Debate?
Founded as a purveyor of vintage items, Urban Outfitters (NASDAQ: URBN) now largely sells new apparel and accessories to teens and young adults seeking on-trend fashion.
Two Things to Like:
1. New Stores Popping Up Gradually, Supports Growth
The number of stores a retailer operates is a critical driver of how quickly company-level sales can grow.
Urban Outfitters sported 784 locations in the latest quarter. Over the last two years, it has opened new stores quickly, averaging 3.9% annual growth. This was faster than the broader consumer retail sector.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
2. Surging Same-Store Sales Show Increasing Demand
Same-store sales show the change in sales for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year. This is a key performance indicator because it measures organic growth.
Urban Outfitters has been one of the most successful retailers over the last two years thanks to skyrocketing demand within its existing locations. On average, the company has posted exceptional year-on-year same-store sales growth of 4.6%.
One Reason to be Careful:
Long-Term Revenue Growth Disappoints
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Urban Outfitters’s 8.7% annualized revenue growth over the last three years was mediocre. This wasn’t a great result compared to the rest of the consumer retail sector, but there are still things to like about Urban Outfitters.
Final Judgment
Urban Outfitters has huge potential even though it has some open questions. With the recent decline, the stock trades at 10.9× forward P/E (or $63.70 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.
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