Urban Outfitters Stock To Likely See Little Movement Post Q2

Note: Urban Outfitters’ FY’23 ended in January 2023.

Urban Outfitters (NASDAQ
NDAQ
: URBN), a lifestyle retailer focusing on young adults and teenagers, is scheduled to report its second-quarter fiscal 2024 (year ending January 2024) results on Tuesday, August 22. We expect the company to likely match revenue and earnings expectations with consensus in Q2. The company grew Q1 revenue and margins despite weak consumer spending. With an affluent customer base and a low wholesale exposure, the company will likely be able to maintain a positive outlook in the near future. There is a lot of momentum behind Nuuly, Urban Outfitters’ apparel rental business, and it could grow significantly in the long term. Due to Nuuly’s growing subscriber base, Urban Outfitters is expanding their fulfillment network to accommodate 600,000 subscribers in the future. This infrastructure will be built in-house by Urban Outfitters, rather than through partnerships (thereby increasing capital expenditure from $199 million in FY 2023 to over $225 million for FY2024). There are execution risks that could hinder the company’s return on investments, whether in the form of delays, expensive overruns, or underperformance of subscriber numbers. Moreover, the company has several segments that are not traditional fits, like Menus & Venues (a restaurant business) and Nuuly, and management will need to think differently to ensure strong growth.