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Why Urban Outfitters is a Solid Choice for Investors Now

Zacks

Specialty retailer, Urban Outfitters Inc. URBN definitely deserves a look as this stock has all that is needed to grab a spot in one’s portfolio. It is the right choice for investors looking for growth as its stock price has jumped over 57% year to date. Notably, this Zacks Rank #1 (Strong Buy) company with a VGM Score of “A” has a long-term earnings growth rate of 15%, which clearly speaks of the stock’s inherent strength.

URBAN OUTFITTER Price, Consensus and EPS Surprise

URBAN OUTFITTER Price, Consensus and EPS Surprise | URBAN OUTFITTER Quote


What’s Driving the Stock?

As a multi-brand and multi-channel retailer, Urban Outfitters offers a flexible merchandising strategy. The company remains committed toward improving its comparable-store sales performance, investing in direct-to-consumer business, enhancing productivity in existing channels as well as adding new brands, and optimizing the inventory level.

Additionally, the company intends to improve wholesale operations and augment eCommerce activities. All these factors have helped it to deliver better top- and bottom-line results in second-quarter fiscal 2017.

A look at the company’s surprise history reveals that it outpaced the Zacks Consensus Estimate by an average of 6.7% in the trailing four quarters. Moreover, the Zacks Consensus Estimate of $2.07 and $2.26 for fiscal 2017 and fiscal 2018 has increased 14 cents and 12 cents, respectively, over the past 60 days.

Going forward, we expect Urban Outfitters to drive growth, backed by its new store openings, increase in direct penetration, improvement in wholesale operations, along with technology advancements and merchandising enhancements.

However, fashion obsolescence remains the primary concern for Urban Outfitters' business model. Moreover, the company’s expansion in regions where it already has a presence could cannibalize its sales performance and lower traffic count at its existing stores in the area.

Nonetheless, management is making all possible efforts to enhance the performance of its brands through store refurbishment and creation of compelling assortments. Also, the company is enhancing its online and mobile marketing endeavors, and considerably expanding its direct-to-consumer business worldwide.

Other Stocks to Consider

Other favorably ranked stocks in the same industry include The Children's Place, Inc. PLCE, Tilly's, Inc. TLYS and American Eagle Outfitters, Inc. AEO.

The Children's Place has a long-term earnings growth rate of 10.3%. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tilly's, a Zacks Rank #1 stock, has a long-term earnings growth rate of 15.5%.

American Eagle Outfitters, which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 11.8%.

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