Urban Outfitters trades at $79.40 and has moved in lockstep with the market. Its shares have returned 12.6% over the last six months while the S&P 500 has gained 11.7%.
Is now a good time to buy URBN? Find out in our full research report, it’s free.
Why Does Urban Outfitters Spark Debate?
Founded as a purveyor of vintage items, Urban Outfitters (NASDAQ: URBN) now largely sells new apparel and accessories to teens and young adults seeking on-trend fashion.
Two Positive Attributes:
1. Store Growth Signals an Offensive Strategy
A retailer’s store count often determines how much revenue it can generate.
Urban Outfitters operated 792 locations in the latest quarter. It has opened new stores at a rapid clip over the last two years, averaging 4.6% annual growth, much faster than the broader consumer retail sector. This gives it a chance to become a large, scaled business over time.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
2. Surging Same-Store Sales Show Increasing Demand
Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.
Urban Outfitters has been one of the most successful retailers over the last two years thanks to skyrocketing demand within its existing locations. On average, the company has posted exceptional year-on-year same-store sales growth of 4.8%.
One Reason to Be Careful:
Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Urban Outfitters’s sales grew at a mediocre 9.2% compounded annual growth rate over the last three years. This wasn’t a great result compared to the rest of the consumer retail sector, but there are still things to like about Urban Outfitters.
Final Judgment
Urban Outfitters’s merits more than compensate for its flaws. At $79.40 per share (or 12.2× forward P/E), is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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