Urban Outfitters (NASDAQ: URBN), a lifestyle retailer catering to young adults and teenagers, is set to report its first-quarter fiscal 2025 results on May 21. Despite weak consumer spending, the company saw revenue and earnings growth in 2023. For FY 2024, sales increased by over 7% year-over-year to $5.15 billion, with earnings up 79% to $3.05 per share. With a strong customer base and minimal wholesale exposure, Urban Outfitters is expected to maintain a positive outlook. The company’s apparel rental business, Nuuly, shows promise for long-term growth, prompting Urban Outfitters to expand its fulfillment network to accommodate 600,000 subscribers in the future, increasing capital expenditure from $200 million in FY 2024 to around $210 million for FY 2025. However, there are risks associated with these investments that could impact returns.
URBN stock has seen significant gains, rising 60% from early 2021 to around $41 currently, outperforming the S&P 500. Despite inconsistent performance, with returns of 15% in 2021, -19% in 2022, and 50% in 2023, Urban Outfitters has struggled to consistently beat the S&P. With the current uncertain macroeconomic environment, including high oil prices and elevated interest rates, the company may face challenges in outperforming the market in the next 12 months. Analysts forecast a valuation of $46 per share for Urban Outfitters, 12% higher than the current market price.
In terms of revenue, Trefis estimates URBN’s Q1 2025 revenues to be around $1.25 billion, surpassing consensus estimates. In Q4, sales increased by 8% year-over-year to $1.5 billion, driven by growth in the Retail, Nuuly, and Wholesale segments. The Retail segment saw a rise in comparable sales, driven by strong performance at Free People and Anthropologie brands. Additionally, Urban Outfitters’ gross profit margin increased by 293 basis points to 30.2% in Q4 2024, driven by higher initial merchandise markups due to lower transportation costs.
Earnings per share (EPS) are expected to beat consensus estimates, with URBN’s Q1 2025 earnings per share forecasted at 54 cents by Trefis. In Q4, GAAP profits were $0.50 per share, up 50% year-over-year, while adjusted EPS rose by 82% to $0.69. With an EPS estimate of $3.57 and a P/E multiple of 12.8x in fiscal 2025, Urban Outfitters’ valuation indicates a price of $46 per share, higher than the current market price.
Overall, Urban Outfitters is expected to show strong performance in its first-quarter fiscal 2025 results, with revenue and earnings beating market expectations. The company’s strategic focus on expanding its apparel rental business, Nuuly, and strengthening its customer base position it for continued growth in the future. However, potential risks associated with these investments and the current macroeconomic environment could impact Urban Outfitters’ performance in the near term. Analysts remain optimistic about the company’s prospects and forecast a valuation that is higher than the current market price.
