Urban Outfitters shares jump

Urban Outfitters wants to boost annual growth from last quarter's 9 pct. to 20 pct.
Urban Outfitters wants to boost annual growth from last quarter's 9 pct. to 20 pct. (Bloomberg News)
Posted: August 22, 2013

Shares of Urban Outfitters Inc. jumped about 8 percent to close at $43.19 Tuesday after the South Philadelphia-based retail group reported higher than expected profits of $76 million on sales of $759 million for the three months ended July 31.

Total sales rose 9 percent, and direct (online) sales orders rose 40 percent, analyst Adrienne Tennant told clients of Janney Capital Markets in a report Tuesday morning.

Sales by Urban's women-oriented Anthropologie brand are "gaining momentum" as the chain has improved its clothing mix while also cutting back on price discounts, Tennant said, though sales are "choppy" at Urban Outfitters-brand stores.

The company cut costs by opening fewer new Free People stores than expected, while at its Terrain division, "landscape business declined," analyst Laura Champine wrote in a report to clients of Canaccord Genuity. Total company sales were less than expected, but so were costs.

The retailer's goal is to boost total annual growth from last quarter's 9 percent toward its prerecession target of 20 percent - and to increase online business from about one-fifth to about one-half of total sales, Janney's Tennant added.

Urban plans to spend more on technology and direct sales. Online expansion could boost employment at its warehouses in Lancaster County, Nevada, and South Carolina, though that is likely bad news for retail landlords hoping to rent or sell more locations for the company's brands.

That Urban could boost sales at all may be impressive, given the recent retail environment.

"Where is that consumer spending recovery we keep hearing about?" Janney's David Strasser asked in a report last week on weaker-than-expected second-quarter sales at the nation's largest store chain, Walmart, which also predicts flat third-quarter sales.

"Home and apparel had stronger comps," but food and consumer electronics "disappointed," Strasser said.

Walmart is squeezing its vendors, and food prices are starting to fall, but overall U.S. and foreign mass-market consumption now looks like "a challenging environment" for all of retail, he concluded.

Contact Joseph N. DiStefano at 215-854-5194 or JoeD@phillynews.com.

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