Nuuly's Strong Revenue Growth Powers Urban Outfitters Momentum

Urban Outfitters, Inc.’s URBN Nuuly, its subscription-based apparel rental platform, continued to gain strong momentum during the third quarter of fiscal 2026, delivering solid growth in both subscribers and revenue while maintaining healthy operating profitability. The company reported robust overall results, with total revenue increasing 12% and net income rising 13%.

Nuuly’s revenue jumped 49% year over year, driven mainly by a 42% increase in average active subscribers, which reached just under 400,000 compared with the prior-year period. This strength contributed roughly 3.5 percentage points to URBN’s total revenue growth. Management remains focused on scaling the Nuuly platform and strengthening brand visibility, supported by continued investments in logistics and strategic marketing. The company noted that its planned logistics expansion in Kansas City, Missouri, including increased storage capacity and new sortation automation, remains on track.

Customer engagement across Urban Outfitters stayed strong, evidenced by sharp gains in both store traffic and online sessions. Shoppers responded positively to Nuuly’s appealing merchandise selection and unique brand experience, helping propel record third-quarter results. This consistent performance highlights the strength, resilience, and scalability of URBN’s diversified business model.

Nuuly’s continued outperformance underscores the large and growing opportunity within the U.S. apparel rental market. Management believes current investments are well-positioned to sustain momentum and support further market share growth. Overall, Nuuly’s accelerating growth is becoming a significant driver of Urban Outfitters’ revenue momentum, and according to the current plans, Nuuly is expected to generate healthy double-digit revenue growth in the fourth quarter, reflecting confidence in demand trends and the platform’s long-term scalability.

URBN Faces Competition From American Eagle & Boot Barn

American Eagle Outfitters, Inc. AEO in the third quarter of fiscal 2025 delivered a total net revenue of $1.36 billion, representing a 6% increase compared with the prior year, and a 4% year-over-year increase in total comparable sales. American Eagle’s gross profit rose 5% year over year to $552 million from $527 million. However, gross margin declined 40 basis points to 40.5.

Boot Barn Holdings, Inc. BOOT in the second quarter of fiscal 2026, posted net sales growth of 18.7% year over year to $505.4 million from $425.8 million in the prior-year period, and consolidated same-store sales grew 8.4% year over year. Boot Barn’s gross profit increased to $184.1 million, representing 36.4% of net sales, from $152.9 million, or 35.9% in the prior year. The expansion in gross profit was primarily driven by higher sales volumes and improved merchandise margins.

The Zacks Rundown for URBN

Urban Outfitters’ shares have gained 8.6% in the past six months compared with the industry’s rise of 12%. URBN presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

From a valuation standpoint, URBN trades at a forward price-to-earnings ratio of 13.35, lower than the industry’s average of 16.51.

The Zacks Consensus Estimate for URBN’s current year and next year earnings estimates indicates year-over-year growth of 29.8% and 9.6%, respectively.

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

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