Hot Retail Stock to Watch: Urban Outfitters, Inc (NASDAQ: URBN)

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Urban Outfitters, Inc (NASDAQ: URBN) stock rose 14.6% on May 26th, 2021 (As of 11:37:34 UTC-4 · USD; Source: Google finance) after the company posted better than expected results for the first quarter of FY 21.

The Free People team produced an extraordinary quarter with retail segment comps achieving a breathtaking 44% gain on LLY. Every product category recorded a strong comp increase paced by the red hot FP Movement brand of activewear which delivered an almost 300% sales increase over LLY. The total Free People brand generated powerful, almost triple-digit direct comps which easily offset the Negative store comps. Store sales showed sequential improvement in the first quarter and have continued to improve in May. Free People’s markdown rate for the first quarter was the lowest any URBN brand has ever recorded in any quarter. This led to almost 400 basis points in merchandise margin improvement and a mid-teens operating profit, 130% above LLY’s rate. As of April 30, 2021, total inventory increased by $142.1 million, or 42.3%, on a year-over-year basis.

URBN in the first quarter of FY 21 has reported the adjusted earnings per share of 54 cents, beating the analysts’ estimates for the adjusted earnings per share of 16 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 57.6 percent to $927.42 million in the first quarter of FY 21, beating the analysts’ estimates for revenue by 3.29%. Comparable Retail segment net sales increased 51%, due to strong double-digit growth in both retail store and digital channel sales. By brand, comparable Retail segment net sales increased 77% at the Free People Group, 50% at the Anthropologie Group and 42% at Urban Outfitters.

Capital expenditures for the fiscal year are planned at about $250 million. The capex will be related to providing increased distribution and fulfillment capacity to support the growing digital business and secondarily, to opening new stores. The new highly automated distribution facility in Kansas City, Kansas, should be completed and open for operations by the Spring of 2023. The new distribution facility in the UK is planned to go live in Q2 of this year. The company is planning to open approximately 54 new stores and closing 18 stores this year. The new store opening number does not include franchise partner locations in international markets. The new store number is larger than in previous years because the company is adding approximately 16 new Free People Movement stores this year, as well as the availability of favorable lease terms that makes the store economics more attractive.

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