Do URBN's Brand Strength & Expansion Plans Support a Positive Outlook?

Urban Outfitters Inc. URBN has entered the third quarter of fiscal 2026 with strong momentum, supported by record second-quarter results and continued brand strength across its portfolio. This robust performance has reinforced management’s confidence in achieving high-single-digit total sales growth for the fiscal third quarter and maintaining solid progress throughout the remainder of the fiscal year.

Within the Retail segment, comparable sales are expected to rise in the mid-single-digit range, driven by similar growth at Anthropologie, Free People and Urban Outfitters. The company’s Nuuly subscription business is forecast to deliver mid-double-digit revenue growth, fueled by continued subscriber additions. Meanwhile, the Wholesale segment is projected to post mid-single-digit revenue gains.

On the profitability front, URBN anticipates that the gross profit margin for the fiscal third quarter to be flat with the prior year. Lower initial product margins due to higher tariffs are expected to offset the positive impacts of reduced markdowns and improved occupancy leverage.

Selling, general and administrative (SG&A) expenses are projected to rise slightly faster than sales, resulting in some deleverage for the quarter. This increase is primarily driven by heightened marketing investments, including major brand campaigns for Nuuly and Anthropologie, as well as a pre-holiday promotional push aimed at boosting customer acquisition ahead of the holiday season.

For fiscal 2026, URBN expects the gross margin to improve 100 basis points from the prior year, with roughly 50 basis points of that improvement coming in the second half. Despite an estimated 75 basis points of tariff-related pressure, the fiscal fourth-quarter gross margin is projected to expand 75-100 basis points year over year.

SG&A expenses for the year are anticipated to grow roughly in line with sales, driven by marketing and labor costs associated with brand expansion and store openings. Capital expenditure is planned at $270 million, with half allocated to retail store expansion, 25% to technology and logistics, and the remaining 25% toward office expansion. 

URBN’s combination of strong brand performance, strategic investments and disciplined expansion positions the company well to drive sustained growth and profitability throughout fiscal 2026.

URBN’s Price Performance, Valuation & Estimates

Shares of Urban Outfitters have gained 32.7% year to date against the industry’s decline of 9.6%.

From a valuation standpoint, URBN trades at a forward price-to-earnings ratio of 13.14X, slightly down from the industry’s average of 18.12X. It has a Value Score of A.

The Zacks Consensus Estimate for Urban Outfitters’ fiscal 2026 earnings implies year-over-year growth of 29.1%, whereas the same for fiscal 2027 indicates an uptick of 8.7%. Estimates for fiscal 2026 and 2027 have been revised upward by 6 cents and 11 cents, respectively, in the past 30 days.

URBN currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Key Picks

Some other top-ranked stocks are Genesco Inc. GCO, Levi Strauss & Co. LEVI and The TJX Companies, Inc. TJX.

Levi Strauss designs and markets jeans, casual wear and related accessories. It has a Zacks Rank of 2 at present. 

The Zacks Consensus Estimate for Levi Strauss’ current financial-year earnings indicates growth of 4% from the year-ago actual. LEVI delivered a trailing four-quarter average earnings surprise of 25.9%.

Genesco is a Nashville-based specialty retail and branded company that sells footwear and accessories in retail stores. It currently flaunts a Zacks Rank of 1.

The Zacks Consensus Estimate for GCO’s fiscal 2026 earnings and sales implies growth of 71.3% and 3.7%, respectively, from the year-ago actuals. Genesco delivered a trailing four-quarter average earnings surprise of 28.1%.

The TJX Companies is a leading off-price retailer of apparel and home fashions. It carries a Zacks Rank #2 at present.

The Zacks Consensus Estimate for The TJX Companies’ current fiscal-year earnings and sales indicates growth of 7.5% and 5.4%, respectively, from the year-ago actuals. TJX delivered a trailing four-quarter average earnings surprise of 5.4%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research