URBN Gains 27% in the Past Six Months: Right Time to Invest in the Stock?

Shares of Urban Outfitters Inc. URBN have gained 26.9% in the past six months against the Retail-Apparel and Shoes industry’s decline of 23%. The company is well-positioned for growth, supported by its solid Retail segment, enhanced merchandising strategies and ongoing store rationalization efforts.

Urban Outfitters’ strategic initiative and operational efficiencies have helped it to outperform the Retail-Wholesale sector and the S&P 500 index’s respective decline of 5.7% and 11.4% in the same period. Shares of the company are currently trading 23.8% below its 52-week high of $61.16, reached on March 3, 2025, making investors contemplate their next move.

URBN Stock Past Six-Month Performance

Moreover, the company stands out as a compelling value play within the industry, trading at a forward 12-month price-to-earnings ratio of 9.87, below the industry average of 13.63 and the sector average of 20.79. This undervaluation highlights its potential for investors seeking attractive entry points in the retail space. URBN's Value Score of A further emphasizes its investment appeal.

URBN Looks Attractive From a Valuation Standpoint

Urban Outfitters' Strong Retail and Wholesale Performance

Urban Outfitters’ Retail segment delivered solid sales growth, with comparable sales increasing across multiple brands in fourth-quarter fiscal 2025. Anthropologie led with an impressive 8.3% comp increase, driven by strong double-digit digital sales and a mid-single-digit rise in in-store sales. Notably, the Home category achieved its first positive comp of the year.

Free People maintained strong momentum, recording healthy gains both online and in stores. The FP Movement sub-brand experienced rapid expansion, fueled by growing brand awareness and an expanding store base. We anticipate Free People Group’s net sales to increase 12.1% in fiscal 2026.

The Wholesale segment also performed exceptionally well, buoyed by robust demand from specialty retailers and department stores. Free People Wholesale was a key driver, focusing on full-price sales over markdowns. FP Movement Wholesale saw standout growth, with sales surging more than 90% year over year. The strategic shift toward full-price sales significantly enhanced profitability. We project Wholesale net sales to rise 17.5% in fiscal 2026.

Nuuly: A Rapidly Scaling Growth Engine of URBN

Urban Outfitters’ subscription-based rental platform, Nuuly, continues to emerge as a significant growth engine. Net sales in the segment surged 78.4% year over year in the fiscal fourth quarter, while the Subscription business alone posted a 55.6% increase. This growth was fueled by a 53.5% rise in average active subscribers, reaching 300,000.

Nuuly marked a milestone by achieving its first full year of profitability, generating $13 million in operating profit and a mid-single-digit margin. The addition of more than 20,000 subscribers in the fiscal fourth quarter underscores its momentum. Management aims to scale Nuuly to $500 million in revenues by fiscal 2026. We estimate Nuuly’s net sales to increase 10.4% year over year.

Urban Outfitters’ Strategic Store Expansion Initiatives

Urban Outfitters continues to invest in physical retail with an assertive expansion strategy. In the fiscal fourth quarter, the company opened seven Free People stores and 25 FP Movement locations. Anthropologie also broadened its store network. Concurrently, the company is optimizing its store footprint by closing underperforming sites and focusing on smaller-format, high-productivity locations.

In fiscal 2026, Urban Outfitters plans to open approximately 58 stores, including 20 FP Movement, 16 Free People and 15 Anthropologie locations. Management’s long-term vision includes expanding FP Movement to 300 stores across North America, strengthening its position in the activewear segment. Strong brand momentum, financial performance and strategic execution position the company well for growth.

URBN’s Positive Outlook for Fiscal 2026

Urban Outfitters’ strong fiscal fourth-quarter performance sets a positive tone heading into fiscal 2026. The company projects mid-single-digit total sales growth for both the fiscal first quarter and the full year, underpinned by low single-digit comp growth in the Retail segment. Free People is expected to deliver low to mid-single-digit comp increases, while Anthropologie is projected to see mid-single-digit growth.

Nuuly is on track for double-digit revenue gains, supported by a rising subscriber base. The Wholesale segment is forecasted to expand by mid-single digits annually, with low double-digit growth expected in the fiscal first quarter.

Gross margin is projected to improve 50-100 basis points, driven by fewer markdowns, particularly at Urban Outfitters, and improved occupancy and delivery efficiencies. Capital expenditures are estimated to be $240 million, with approximately 50% allocated to retail store expansion, 25% to technology and logistics, and the remaining 25% to home office enhancements.

Urban Outfitters Delivers Strong ROIC

Urban Outfitters has demonstrated strong capital efficiency, with its return on invested capital (ROIC) over the past year. In the trailing 12 months, URBN reported an ROIC of 11.8%, significantly outperforming the industry average of 8.2%. This robust performance reflects the company’s effective capital allocation, particularly its strategic investments in store expansion, which have contributed meaningfully to returns.

Here's How Estimates Stack Up for URBN

The positive sentiment surrounding Urban Outfitters is reflected in the upward revisions of the Zacks Consensus Estimate for earnings per share. In the past 30 days, analysts have increased their estimates for the current fiscal year, resulting in an upward revision of 11 cents to $4.65 per share. The consensus estimate for earnings for the next fiscal year has also advanced 9 cents to $5.04 per share. This indicates year-over-year growth of 14.5% and 8.4%, respectively.

The Zacks Consensus Estimate for the current and next fiscal year’s sales is pegged at $5.92 billion and $6.25 billion, respectively, implying year-over-year growth of 6.6% and 5.6%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Final Words on Urban Outfitters

Urban Outfitters presents a compelling case for investors due to a strong brand portfolio, solid performance across retail and wholesale channels, and impressive momentum in its Nuuly subscription business. The company’s ability to drive growth through strategic store expansion, digital innovation and a clear focus on full-price sales has boosted profitability and efficiency. Additionally, upward analyst revisions and a favorable valuation profile enhance its appeal. With a well-balanced approach to growth, operational discipline and evolving consumer engagement, Urban Outfitters stands out as a promising opportunity in the retail sector. The company currently holds a Zacks Rank #2 (Buy).

Other Key Picks

Some other top-ranked stocks are The Gap, Inc. GAP, Deckers Outdoor Corporation DECK and G-III Apparel Group, Ltd.  GIII.

The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It sports a Zacks Rank of 1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for The Gap’s fiscal 2025 earnings and revenues indicates growth of 7.7% and 1.6%, respectively, from fiscal 2024 reported levels. GAP delivered a trailing four-quarter average earnings surprise of 77.5%.

Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It carries a Zacks Rank #2 at present.

The Zacks Consensus Estimate for DECK’s fiscal 2025 earnings and revenues implies growth of 21% and 15.6%, respectively, from the year-ago actuals. DECK delivered a trailing four-quarter average earnings surprise of 36.8%.

G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. It currently carries a Zacks Rank of 2.

The Zacks Consensus Estimate for GIII’s fiscal 2025 earnings and revenues implies a decline of 4.5% and 1.2%, respectively, from the year-ago actuals. GIII delivered a trailing four-quarter average earnings surprise of 117.8%.

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

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