Urban Outfitters Beats, Profit Falls - Analyst Blog
August 16 2011 - 9:45AM
Zacks
Urban Outfitters
Inc. (URBN), the retailer of apparel, footwear, and
accessories, recently posted better-than-expected results for the
second quarter ended July 31, 2011. The quarterly earnings of 35
cents a share beat the Zacks Consensus Estimate of 32 cents, but
dropped 16.7% from 42 cents earned in the prior-year quarter.
Despite registering a growth in top
line, the company witnessed a drop in bottom line due to a 19.1%
rise in the cost of sales and an increase of 11.9% in selling,
general and administrative expenses.
Urban Outfitters, which competes
with Gap Inc. (GPS) and Abercrombie &
Fitch Co. (ANF), said that total net sales climbed 10.3%
to $609.2 million, and came ahead of the Zacks Consensus Estimate
of $605 million. Net sales increased 10.5% to $577.3 million at the
retail segment and 6.6% to $31.9 million at the wholesale
segment.
Net sales by brands are as follows
- Sales grew 11.9% to $272.2 million at Urban Outfitters, 6.4% to
$272.6 million at Anthropologie and 25.2% to $58.7 million at Free
People.
The company hinted that comparable
retail segment net sales inched up 1%, whereas comparable store net
sales dropped 2% during the quarter. Comparable retail segment net
sales by brands rose 18% at Free People and 1% at Urban Outfitters
but remained flat at Anthropologie.
Urban Outfitters noted that gross
profit for the quarter declined 1.6% to $231.1 million, whereas
gross margin contracted 459 basis points to 37.9% due to higher
merchandise markdowns to sell through slow-moving stock of women's
clothing at both Anthropologie and Urban Outfitters.
Operating income plummeted 17.7% to
$88 million, whereas operating margin shriveled 500 basis points to
14.4%.
During the quarter, Urban
Outfitters opened 10 new stores –– 2 Urban Outfitters stores, 4
Anthropologie stores and 4 Free People stores. The company plans to
open about 55–57 new stores over the year.
Urban Outfitters ended the quarter
with cash and cash equivalents of $226.4 million and shareholders’
equity of $1,304.3 million. During the quarter, the company bought
back 2.3 million shares, aggregating $67 million. The company still
has 3.3 million shares available at its disposal under its current
authorization.
Currently, Urban Outfitters holds a
Zacks #3 Rank, which translates into a short-term ‘Hold’
rating.
ABERCROMBIE (ANF): Free Stock Analysis Report
GAP INC (GPS): Free Stock Analysis Report
URBAN OUTFITTER (URBN): Free Stock Analysis Report
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