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Anthropologie, Free People Keep This Analyst On Urban's Sidelines: 'Not Paying A Premium'

Anthropologie, Free People Keep This Analyst On Urban's Sidelines: 'Not Paying A Premium' - Urban Outfitters, Inc. NASDAQ:URBN

Following the “less positive” performance during Q2 by Anthropologie and Free People, Wunderlich’s Eric Beder believes the current valuation of Urban Outfitters, Inc. URBN 15.72% already reflects the company’s growth profile.

Beder maintains a Hold rating on the company, while raising the price target from $26 to $31.

“[W]e do not believe a quarter of +1 percent comps and further SG&A deleverage is enough of a turn for us to accord URBN a more premium multiple,” the analyst mentioned.

Q2 Results

Urban Outfitters reported same-store sales growth of 5 percent for its retail segment, representing the best comparable sales results in three years.

“All major product categories at the retailer were positive besides men's wear, with a number producing double-digit sales growth YoY. In addition, tight inventory controls produced the segments leanest quarterly mark-down rate ever, as well as near-record segment merchandise margins,” Beder stated.

Gross margins improved 180 bps year-on-year, driving meaningful bottom-line outperformance.

Free People

Following the negative comp sales in Q1, the worst recorded since 2009, the company reported flat same-store sales for Free People for Q2, driven by aggressive markdowns that helped shrink inventory by 8 percent year on year.

Urban Outfitter expects the robust early-fall sales trends to continue, and with the excess inventory having been cleared, better segment contribution is expected through the remainder of the year.


Anthropologie witnessed -3 percent same store sales in Q2, due to the negative women’s apparel segment.

“‘Anthro’ was observed to have a number of solidly performing categories, not only in apparel, but also in the expanding Home and Beauty segments,” Beder added.

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