Urban Outfitters' Q4 Earnings Beat Estimates, Sales Rise Y/Y

Urban Outfitters, Inc. URBN reported impressive results for fourth-quarter fiscal 2025, wherein both top and bottom lines beat the Zacks Consensus Estimate and increased year over year. The fourth-quarter results showcased record sales and profits, fueled by strong performance across the Retail, Subscription and Wholesale segments. Notably, four of the company’s five brands delivered exceptional growth.URBN’s Quarterly Performance: Key Metrics and InsightsThis lifestyle specialty retailer delivered earnings per share of $1.04, surpassing the Zacks Consensus Estimate of 89 cents. Also, the bottom line increased 50.7% from 69 cents reported in the prior-year period.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Urban Outfitters, Inc. Price, Consensus and EPS Surprise Urban Outfitters, Inc. price-consensus-eps-surprise-chart | Urban Outfitters, Inc. QuoteTotal company net sales increased 10.1% to $1,636.1 million and grew 9.4% compared with adjusted net sales from the fourth quarter of fiscal 2024. The metric beat the Zacks Consensus Estimate of $1,624 million.Total net sales in the Retail segment rose 6.3%, with comparable net sales in this segment increasing 5.1%. This growth was fueled by high single-digit gains in digital channel sales and low single-digit growth in retail store sales. Specifically, comparable Retail net sales rose 8.3% at Anthropologie and 8% at Free People but fell 3.5% at Urban Outfitters. We estimated the Retail segment’s sales to increase 2.8% year over year.In the Wholesale segment, net sales grew 26.2% year over year due to a 27% rise in sales of Free People's wholesale, which was attributed to increased sales to specialty customers and department stores. We forecasted an increase of 22.6% in Wholesale segment sales.The Subscription segment (formerly known as the Nuuly segment) saw a significant 78.4% increase in net sales. The segment grew 55.6% compared with adjusted net sales from the prior-year quarter, primarily driven by a 53.5% rise in average active subscribers. Our model expected Subscription segment sales of 47.6% for the quarter.Margin & Cost Insights of Urban OutfittersAdjusted Gross profit rose 16.8% from the prior-year quarter to $527.7 million. Also, the adjusted gross margin expanded 203 basis points (bps) to 32.3%, driven by improved Retail segment markdowns, particularly lower markdowns at Urban Outfitters, partially offset by higher markdowns at Free People. We estimated the adjusted gross margin to be 31.4%.Selling, general and administrative (SG&A) expenses were up 8.6% year over year to $402.4 million. This increase was mainly due to higher marketing expenses, aimed at boosting customer traffic and sales in the Retail and Subscription segments, as well as increased payroll costs to support the Retail segment stores net sales growth. Our model estimated SG&A expenses to increase 7.1% year over year in the fiscal fourth quarter. As a percentage of net sales, SG&A deleveraged 33 bps to 24.6% in the quarter under review. As a percentage of adjusted net sales, SG&A deleveraged 18 bps, primarily indicating leverage in store payroll expenses due to Retail segment sales growth.URBN recorded an adjusted operating income of $125.3 million, up from $81.4 million reported in the year-ago period. As a rate of adjusted net sales, the operating margin increased 230 bps year over year to 7.7%.URBN’s Store UpdateIn fiscal 2025, this Zacks Rank #2 (Buy) company opened 57 retail locations, which included 37 Free People stores (including 25 FP Movement stores), 13 Anthropologie stores and seven Urban Outfitters stores. Also, it closed 30 retail locations, which included 14 Urban Outfitters stores, 11 Anthropologie stores and five Free People stores.As of Jan. 31, 2025, URBN operated 255 Urban Outfitters stores in the United States, Canada and Europe and websites, 239 Anthropologie Group stores in the United States, Canada and Europe, catalogs and websites, 230 Free People stores (including 63 FP Movement stores) in the United States, Canada and Europe, catalogs and websites, nine Menus & Venues restaurants, seven Urban Outfitters franchisee-owned stores and two Anthropologie Group franchisee-owned stores.Urban Outfitters’ Financial Health SnapshotUrban Outfitters ended the quarter with cash and cash equivalents of $290.5 million and a total shareholders’ equity of $2.47 billion. As of Jan. 31, 2025, total inventory rose 12.9% year over year, with Retail segment inventory up 10.1% and comparable inventory within the segment increasing 11.3%. Meanwhile, Wholesale segment inventory surged 43.7%. The increase in inventory for both segments supported increased sales and planned early receipts.URBN provided net cash of $502.8 million from operating activities as of Jan. 31, 2025. During the 12 months, which ended Jan. 31, 2025, the company repurchased and subsequently retired 1.2 million shares at a total cost of approximately $52 million. As of the same date, 18 million common shares remained available for repurchase under the program.URBN’s Fiscal 2026 OutlookThe company expects mid-single-digit total sales growth for the first quarter and fiscal 2026, driven by low single-digit retail segment comps. Free People is expected to achieve low to mid-single-digit positive comps, while Anthropologie anticipates mid-single-digit growth. Urban Outfitters' retail segment comp is forecasted to be low single-digit negative to flat in the fiscal first quarter, with gradual improvement throughout the year. Meanwhile, Nuuly is poised for double-digit revenue growth, fueled by an expanding subscriber base. The wholesale segment is expected to grow mid-single digits for the year, with low double-digit revenue growth estimated in the fiscal first quarter.Gross margin is anticipated to improve 50-100 basis points, supported by lower markdowns, particularly at Urban Outfitters, as well as occupancy and delivery expense efficiencies.SG&A expenses are expected to rise in the mid-single digits, primarily due to increased marketing efforts to drive customer acquisition and sales, as well as higher store labor costs from new store openings and technology investments. The company remains flexible in managing variable SG&A spending based on sales performance.Inventory levels for fiscal 2026 are expected to grow at or below the rate of sales.Capital expenditures are expected at approximately $240 million, with 50% allocated to retail store expansion, 25% for technology and logistics and the remaining 25% for home office expansion.The company plans to open 58 new stores and close 19 in fiscal 2026. Net store growth will be driven by FP Movement, Free People and Anthropologie, with 20 new FP Movement locations, 16 Free People stores and 15 Anthropologie stores planned.Shares of this Philadelphia, PA-based player have gained 11.5% in the past three months against the industry’s 9.9% decline.Image Source: Zacks Investment ResearchOther Key PicksDeckers Outdoor Corporation DECK designs, markets and distributes footwear, apparel and accessories for casual lifestyle use and high-performance activities in the United States and internationally. 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