Urban Outfitters delivers on sales and Wall Street applauds

Dive Brief:

Urban Outfitters on Tuesday said retail comparable net sales so far in the second quarter grew at a rate in the mid-teens, according to a filing with the Securities and Exchange Commission. Following the announcement, KeyBanc, J.P. Morgan, Telsey Advisory Group and Deutsche Bank all raised their targets for the apparel retailer, sending share prices up.
The continued growth is on top of Urban's first quarter report last month, the first time in four years the company marked positive store comps overall and at each of its brands, which include apparel and home goods brands Anthropologie, Bhldn, Free People, Terrain and Urban Outfitters, as well as a food and beverage division.
As much as its stores have recovered, the company is seeing the strongest growth online, with digital penetration of overall retail comp sales exceeding 40% for the first time last quarter.

Dive Insight:

Urban Outfitters is continuing a strong run in 2018 that started with first quarter numbers that beat out other apparel retailers that blamed lackluster sales on unseasonable weather in the spring.

Morgan Stanley analysts led by Kimberly Greenberger estimate Urban's comps will increase 14% in Q2, according to a client note emailed to Retail Dive. The analysts called the announced mid-teen growth "impressive, " adding that the second half of the year made for a more difficult comparison in stores sales but that "momentum appears strong."

"The company has been very disciplined in its store footprint and, most importantly, is well positioned given its already high e-commerce penetration," KeyBanc analyst Edward Yruma said in a note cited by Reuters. "[We] believe Urban Outfitters remains one of the best positioned companies in apparel."

During the quarter, the company opened four new locations, including two new Free People stores in North America, two new Urban Outfitters stores in Europe, and closed one Urban Outfitters store in Europe. Plans for the year are to open 18 new stores while closing 10, executives said last month.

Both the Urban Outfitters and Anthropologie brands in May launched new online marketplaces, with curated assortments from third-party sellers, with a goal of expanding the online assortment and driving site traffic. The company has also added payment options from Apple Pay and Afterpay, and the latter could boost conversion rates and average order values because of its no-interest charges and lack of credit checks, CEO Richard Hayne said last month.

The company isn't just depending on retail, though, with Free People in particular offering wholesale opportunity in athleisure, including sales to yoga studios, and denim, executives said. Urban is also working to expand overseas to push growth.