QUOTE AND NEWS
Forbes  Jul 22  Comment 
Pinterest’s fastest growing retail brands — from Urban Outfitters to Kate Spade — all understand one thing: Image is king.
Forbes  Jul 21  Comment 
Investors eyeing a purchase of Urban Outfitters, Inc. (NASD: URBN) shares, but tentative about paying the going market price of $33.91/share, might benefit from considering selling puts among the alternative strategies at their disposal. One...
Benzinga  Jul 17  Comment 
Below are the top mid-cap apparel stores stocks on the NYSE and the NASDAQ in terms of earnings per share. The trailing-twelve-month earnings per share at The Buckle (NYSE: BKE) is $3.39. Buckle's ROE for the same period is 44.40%. The...
Motley Fool  Jul 16  Comment 
Urban Outfitters struggled in the first quarter, but is a turnaround in the cards for the company?
Motley Fool  Jul 15  Comment 
After taking a severe hit in the first quarter, Gap is on the comeback trail.
SeekingAlpha  Jul 6  Comment 
By The Value Investor: Shares of Urban Outfitters (URBN) saw some greater than normal volatility last week as analysts disagreed on the shares prospects. At the start of the week, shares got downgraded only to receive an upgrade a day...
Benzinga  Jul 2  Comment 
In a research note released Wednesday, Macquarie Research analyst Liz Dunn upgraded Urban Outfitters (NASDAQ: URBN) to Outperform from Neutral and raised its price target from $37.00 to $43.00. The analyst believes the company's brands have...
TechCrunch  Jul 1  Comment 
 Looking to build a 21st century DIY media empire? The rags-to-not-yet-riches story of Jawn McQuade and Mike Stone, the co-founders of MakersKit may have written the instruction manual. Launched in February last year, the company has already...
Forbes  Jul 1  Comment 
In early trading on Tuesday, shares of Netflix (NFLX) topped the list of the day's best performing components of the S&P 500 index, trading up 4.9%.  Year to date, Netflix registers a 25.6% gain.
TheStreet.com  Jul 1  Comment 
NEW YORK (TheStreet) -- Urban Outfitters shares are down -2.2% to $32.98 in pre-market trading on Tuesday after analysts at Wedbush downgraded the retailer to "neutral" from "outperform," while slashing its price target to $37 from $46.The firm...




 

Urban Outfitters (NASDAQ:URBN) is a clothing and accessories retailer that focuses on women between the ages of 18 and 45. URBN runs 4 different store brands: Urban Outfitters (39% of sales), Anthropologie (36% of sales), Free People and Terrain (8% of sales). In 2010, the remaining 17% of sales came from direct to consumer business.[1]

URBN has accomplished an increase in sales without excessive discounting through two key strategies: keeping its inventories lean and high product turnover (Urban Outfitters stores receive new inventory every two weeks). However, In a time when many retail companies are attempting to capitalize on new wealth growing in Asia, URBN's lack of an Asian presence can become a disadvantage. In addition, it's new retail concept, "Terrain" is a garden and home product line. As the amount of home construction has decreased due to the financial crisis it remains to be seen whether or not Terrain can stand on its own as a retail concept in this difficult environment.

Company Overview

Urban Outfitters is divided into separate business segments: retail stores, catalog, e-commerce and wholesale.

Retail Stores (89.3% of Fiscal 2010 Revenue)

The parent company operates four different store chains (revenue contribution in fiscal 2010 in parentheses)

  • Urban Outfitters (39.2%) is its eponymous store that targets 18-30 year olds. Stores average 9,500 square feet and carry between 35,000 to 40,000 different items.[2]
  • Anthropologie (26.4%) caters to 30 to 45 year old women with clothing, accessories and home furnishings. Stores average about 7,400 square feet and carry 40,000 to 45,000 different products.[3]
  • Free People (2.0%) targets women between 25 and 30 years old. URBN operates 34 of these stores, which carry 5,000 products on 1,400 square feet of space [4]
  • Terrain (<1%) sells garden equipment as well as live plants.[5]

Catalog and E-Commerce (16.7% of Fiscal 2010 Revenue)

Urban Outfitters sells directly to consumers via catalogs and online sites for each of its store brands.[6]

Wholesale (4.9% of Fiscal 2010 Revenue)

URBN sells its Free People products through wholesale channels to department stores such as Bloomingdales and Nordstrom (JWN). [7]

Business Growth

FY 2010 Results (ended January 31, 2011)

  • Compared to fiscal 2009, net sales increased 17.4% to $2.27 billion.[8]
  • URBN reported net income of $273 million which is an increase of 24.1% from last year.

Key Trends and Forces

Retail industry's focus on Asia can leave URBN in the dust

Growth at Urban Outfitters depends on the company's ability to expand and open new retail centers (it has opened more than 25 stores annually for the past three years). In recent years, URBN has opened retail locations in Europe. Many retailers have started to establish a presence in Asia in order to profit from new wealth developing in that region. H&M, one of URBN's competitors, has 13 stores in China and 2 in Japan.[9] Urban Outfitters, however, has no plans to establish a presence in Asia meaning it is missing out on a chance to capitalize on a developing market. Although URBN is already well-established in America, its lack of an Asian presence can be a disadvantage, especially since its competitors already have a head start.

Increases in Commodity Prices Will Raise Clothing Retailer Prices

Cotton consumption exceeded cotton production for the fifth year in the row, making cotton prices increase by 80.5% from last year.[10] [11] Natural disasters also severely damaged crops in many large cotton producer countries, such as China, India, and Pakistan. This led to decreases in cotton exports from these countries and increases in cotton imports as these countries sought to supplement their supply of cotton. [12][13] With limited cotton supplies and rising prices, retailers will either have to absorb these higher material costs, restructure the composition of their clothing to have less cotton, or pass these higher costs to its consumers. Higher clothing prices or lower quality clothing could discourage consumer spending, resulting in decreased net sales. However, adult or teen clothing retailers may not be too adversely affected as their clothing (which is usually 30-40% cotton based) has more flexibility in their composition and thus, costs. In addition, raising commodity prices in other areas will also raise costs for retailers. While premium price and established brands may be able to pass their higher costs to their consumers, value based companies may not fare as well and may suffer from lower profit margins.[10]

Competition

Urban Outfitters sets itself apart from most other clothing and accessory retailers with its boutique-like atmosphere and its focus on fashion (none of its store brands sell basic items).

  • Guess? (GES) primarily targets men and women between the ages of 18 and 32.[14] Outside that key demographic, URBN also has Guess? Kids, targeted to boys and girls ages 6 to 12; and Guess by Marciano. Guess's pricing is similar to that of Urban Outfitter's clothing brands and is also focused on trends. Urban Outfitters also has a wholesale segment under the Free People brand, selling Free People products to department stores such as Nordstrom (JWN). Guess? also has a wholesale segment where its products are sold to Macy's Inc. (M) and Dillard's (DDS). Guess? is an international brand like URBN, but unlike URBN it has established a presence in Asia.
  • Abercrombie & Fitch Company (ANF): Abercrombie & Fitch is the leader of the youth apparel retail market by nearly all measures. Abercrombie & Fitch also operates four brands: Abercrombie & Fitch, Hollister, abercrombie; all of which target different subsets of the 8-30 age range.
  • Gap (GPS): GPS targets customers (15-25 year-old males and females). Gap has clothing lines for the 25-40 year-old age group and a strong Baby Gap clothing line for toddlers. It has a much more extensive store network throughout the U.S. and has been an established player in the market for many years.

[15] [16] [17] [18]


References

  1. URBN Financials Hoovers
  2. Urban Outfitters 2010 Annual Report - 10k
  3. Urban Outfitters 2010 Annual Report - 10k
  4. Urban Outfitters 2010 Annual Report - 10k
  5. Urban Outfitters 2010 Annual Report - 10k
  6. Urban Outfitters 2010 Annual Report - 10k
  7. Urban Outfitters 2010 Annual Report - 10k
  8. http://investor.urbn.com/phoenix.zhtml?c=115825&p=irol-newsArticle&ID=1536569&highlight=
  9. HMB 2008 Annual Report pg. 21  
  10. 10.0 10.1 http://seekingalpha.com/article/238731-more-evidence-of-inflation-retailers-report-escalating-commodity-prices
  11. Gap, Wal-Mart Clothing Costs Rise on ‘Terrifying’ Cotton Prices
  12. http://www.thegovmonitor.com/world_news/asia/recession-drought-hail-reduce-cotton-acreage-in-china-12256.html
  13. CNN Money - Cotton Shortage Could Inflate Clothing Prices
  14. GES 2008 Annual Report pg. 1  
  15. Abercrombie and Fitch Annual Report 2009 10k
  16. Urban Outfitter Annual Report 2009 10k
  17. Guess Annual Report 2009 10k
  18. Gap Annual Report 2009 10k
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