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URBN might have found a new niche to conquer

|Includes: Urban Outfitters, Inc. (URBN)

URBN is firing on all cylinders. The stock has been on a tear recently and analysts are waxing poetic about where the company might go next. URBN has lifted the veil and the love affair is leading to a new chain supplying brides. While it isn't clear at the outset where this might lead, URBN has recently shown its hand in two different ways.

Number 1 - Terrain does not appear to be a runaway success. Founded in 2008, the company still comprises only the flagship store. Even admitting that the current economic climate is a disaster, expansion might be expected at some point if the concept works. Perhaps URBN is still working on the concept and Terrain might not turn out to be a dud after all, but with only a single location it doesn't sound like a growth story at the moment.

Number 2 - This is the biggie, in my opinion. To a large degree, bridal wear is still a local business. Yes, chains of bridal wear stores exist, but they have not taken over the market in a major way. If URBN can figure out how to carve out a niche in this area, it might have a nice little growth story moving forward. Could this turn into a category killer?

By the way, the company does not seem to have reached saturation with its other brands in the US or with its planned expansion into Europe. Expansion abroad can be tricky because local tastes may defy expectations. Even if this fails, URBN still has room to run in North America.

In summary, even if Terrain turns out to be a mistake, URBN just might have found the next new thing for itself. Regardless of that outcome, the company has a ways to go even with the growth of its current lines.

Disclosure: No positions.