Online push, full-price sales help Urban Outfitters top estimates

Urban Outfitters Inc on Tuesday topped Wall Street estimates for quarterly results, as investments to boost online sales paid off and the retailer managed to sell more apparel at full price.

Shares of Urban Outfitters rose nearly 5 percent to $50.00 in extended trading after the company said it posted its best comparable store sales in eight years.

Apparel retailers, which once struggled to draw shoppers to stores amid competition with fast fashion brands such as Inditex’s Zara, Forever 21 and H&M, revived their styles to cater to millennial tastes.

“Prominent new trends in women’s and the ‘urban revival’ trends from the late 80’s and early 90’s are right in Urban Outfitters wheelhouse,” Rebecca Duval, BlueFin Research Partners analyst said.

Retailers have responded to the shift in fashion from skinny jeans and loose-fitting tops to styles from the 1990s, by filling stores and expanding options from high-waisted jeans to fanny packs.

“(Urban Outfitters) has done an excellent job improving its fashion offering across all three of its brands - Anthropologie, Free People and Urban Outfitters - while at the same time improving its inventory levels, which has in turn led to more full price selling,” said Ken Perkins, founder of research firm Retail Metrics.

Urban Outfitters’ investments to stave off competition from online rivals such as Amazon.com Inc have paid off, with double-digit sales increases at each brand in the second quarter.

The retailer said it expects the second-quarter sales trends to follow into the current quarter, and sees comparable sales growing in high single digits. “The markdown rate improved at all brands, but we believe opportunity remains for further improvement in the back half of the year especially at the Anthropologie brands,” Chief Executive Officer Richard Hayne said on a post-earnings call with analysts.

On potential tariffs on Chinese imports, Chief Financial Officer Francis Conforti said the company anticipates “little, if any, impact” on the current year.

Sales at the company’s stores open for at least a year rose 13 percent in the second quarter, with Anthropologie and Free People posting growth of 15 percent and 17 percent, respectively.

Net income jumped 86 percent to $92.8 million, or 84 cents per share, in the quarter ended July 31. Net sales rose 13.7 percent to $992.5 million.
Analysts on average had expected a profit of 77 cents per share on sales of $979.9 million, according to Thomson Reuters I/B/E/S.