Urban Outfitters Looks Shaky Ahead Of Earnings

Summary

  • URBN is estimated to lose $0.25 per share on revenues of ~$640 million, showing large YoY declines in both.
  • Although URBN has beat EPS in 6 of the past 8 quarters and revenues in 5 of 8, shares have closed lower 6 of the 8 times in the day following earnings.
  • Falling traffic in stores on top of more possible markdowns, increasing costs and margin pressure could make the report even worse.
  • Estimates are quite terrible, but given the retail environment, seem fair, yet a beat could still be in the cards.

Urban Outfitters (NASDAQ:URBN) posts earnings Tuesday after-hours, and shares are still down over 40% since mid-February before the market selloff began. Like most other retailers, store closures and loss of traffic in stores worldwide has impacted Urban’s sales, leaving any forecast for the first quarter out of the picture. Shares have been prone to large moves following earnings and this upcoming report should be no different as market volatility and uncertainty around results for the past quarter and lasting impacts through the current quarter guidance-wise remain large.

What to Expect

On March 11, Urban said that it had seen store sales falling in cities that were affected more heavily by the coronavirus – namely Milan, Seattle, and other undisclosed locations. Other locations did not have as much, or any, impact; digital sales also were not impacted. Urban also announced on March 14 that all stores worldwide would now be closed and would not reopen until at least March 28. E-commerce and the Nuuly subscription business would still be running. Stores did not reopen on that date, as a report on March 31 stated that stores would now be remaining closed until further notice. That report also included a list of measures taken to increase financial flexibility – furloughing employees, borrowing $220 million, reducing capital budget by $100 million, adjusting inventory by cancelling/delaying orders, extending payment terms for vendor invoices and others.

Fourth-quarter results published March 3 showed a miss in EPS on revenues in line with expectations, although management commentary highlighted some items that spooked investors - shares fell 8% intraday. Although comps in its brands (Urban Outfitters, Anthropologie, Free People) rose 4%, markdowns on items to achieve that growth and cut excess inventory were needed. This will most likely extend into the upcoming report, except comp sales will more likely than not show a decline as a result of falling in-store

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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