Urban Outfitters Q1 Earnings Beat, Retail Sales Rise Y/Y, Stock Up 18%

Urban Outfitters, Inc. URBN reported impressive results for first-quarter fiscal 2026, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Also, both metrics improved from the prior-year quarter’s reported figure. As a result, shares of this Philadelphia, PA-based player rose 17.5% in the after-market trading session yesterday.The company reported a highly successful quarter, showcasing strong performance across all its brands and business segments. The Retail segment’s comparable sales grew, with stores outperforming digital, reflecting strong in-store traffic and improved customer experiences. Anthropologie and Free People continued to deliver robust growth, supported by product expansion and effective marketing. Urban Outfitters made notable progress with improved profitability and customer engagement. The Nuuly rental business stood out with rapid subscriber growth and increasing profitability, indicating its potential for scale.Management emphasized prudent planning amid tariff uncertainties, strategic inventory and sourcing decisions, and a focus on profitability through lower markdowns and operational efficiencies.Urban Outfitters, Inc. Price, Consensus and EPS Surprise  Urban Outfitters, Inc. price-consensus-eps-surprise-chart | Urban Outfitters, Inc. QuoteURBN’s Quarterly Performance: Key Metrics & InsightsThis lifestyle specialty retailer delivered earnings per share of $1.16, surpassing the Zacks Consensus Estimate of 81 cents. Also, the bottom line increased 78.5% from the prior-year quarter. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)Total net sales increased 10.7% year over year to $1,329.5 million, surpassing the consensus estimate of $1,286 million.Total net sales in the Retail segment rose 6.4%, with comparable net sales in this segment increasing 4.8%. This growth was primarily fueled by mid-single-digit positive gains in digital channel sales and sales from retail stores. Within the segment, comparable net sales rose 3.1% at Free People, 6.9% at Anthropologie and 2.1% at Urban Outfitters. We estimated the Retail segment’s sales to increase 4.5% year over year.In the Wholesale segment, net sales grew 24.2% year over year due to a 25.6% rise in Free People's wholesale sales, which was attributed to increased sales to department stores and specialty customers. We estimated the Wholesale segment’s sales to rise 29.9% year over year.Nuuly, a women’s apparel subscription rental service, saw a significant 59.5% increase in net sales due to a 52.9% rise in average active subscribers from the prior-year quarter.Margin & Cost Insights of Urban OutfittersGross profit rose 19.8% from the prior-year quarter to $489.1 million. Also, the gross margin expanded 278 basis points (bps) to 36.8%. The gross margin benefited from a non-recurring gain of $4.8 million recorded in the current year quarter, representing 36 basis points, as well as the absence of $4.6 million in store impairment and lease abandonment charges, which represented 38 basis points in the prior-year quarter.The remaining increase of 204 basis points in the gross margin was primarily driven by improved markdown performance in the Retail segment, especially at Urban Outfitters. Additional contributions came from cost leverage in delivery expenses due to lower carrier rates and fewer packages per order, as well as improved leverage in store occupancy costs resulting from higher comparable Retail segment net sales. The rise in gross profit was driven by increased net sales and gross margin. We estimated the gross margin to be 35.4%.Selling, general and administrative (SG&A) expenses rose 8.1% year over year to $360.8 million. This increase was mainly due to higher marketing costs aimed at supporting customer growth and increased sales in the Retail and Subscription segments, along with higher store payroll expenses to support net sales growth in the Retail segment. Our model estimated SG&A expenses to increase 6.1% year over year in the fiscal first quarter. As a percentage of net sales, SG&A leveraged 65 bps to 27.1% in the quarter under review, driven by lower litigation costs in the fiscal first quarter than in the same quarter last year. URBN recorded an operating income of $128.2 million, up 71.8% from $74.6 million in first-quarter fiscal 2025. As a rate of sales, the operating margin increased 340 bps year over year to 9.6%.URBN’s Store UpdateIn the fiscal first quarter, this Zacks Rank #3 (Hold) company opened 13 retail locations, which included two Urban Outfitters stores, two Anthropologie stores and nine Free People stores (including five FP Movement stores). Also, it closed two Free People stores.As of April 30, 2025, URBN operated 257 Urban Outfitters stores across the United States, Canada and Europe, along with associated websites. The company also operated 241 Anthropologie Group stores in these regions, supported by catalogs and websites. Additionally, there were 237 Free People stores, including 68 FP Movement stores, in the United States, Canada and Europe, accompanied by catalogs and websites. URBN further operated nine Menus & Venues restaurants, seven Urban Outfitters franchisee-owned stores and two Anthropologie Group franchisee-owned stores.Urban Outfitters’ Financial Health SnapshotURBN ended the quarter with cash and cash equivalents of $189.4 million and a total shareholders’ equity of $2.43 billion. As of April 30, 2025, the total inventory grew 14.6% year over year. Total inventory in the Retail segment rose by 13.2%, whereas comparable inventory within the Retail segment increased 12.6%. Inventory in the Wholesale segment jumped 30.6%. The increase in inventory across both segments was driven by higher sales and the timing of early merchandise receipts.Urban Outfitters provided net cash of $33 million from operating activities as of April 30, 2025. In the three months ended April 30, 2025, the company repurchased and subsequently retired 3.3 million shares for $152 million. As of the same date, 14.7 million common shares were available for repurchase under the program.URBN Stock Past Three-Month Performance Image Source: Zacks Investment Research URBN’s 2Q26 OutlookUrban Outfitters expects total company sales to grow in the high-single-digit range for the fiscal second quarter. In the Retail segment, comparable sales are projected to grow in the mid-single digits, driven by mid-single-digit growth at Anthropologie and Free People, and low-single-digit growth at Urban Outfitters. Nuuly is expected to deliver mid-double-digit revenue growth, supported by continued increases in active subscribers. The Wholesale segment is projected to achieve low-double-digit revenue growth.The gross margin for the second quarter of fiscal 2026 is anticipated to improve 50-100 basis points from the prior year. This will be driven by lower markdowns and occupancy leverage, though partially offset by reduced initial product margins due to higher U.S. tariffs.SG&A expenses are expected to grow in line with sales for the fiscal 2026, based on current sales performance and plans. The projected increase in SG&A is primarily due to higher marketing investments aimed at driving customer and sales growth, as well as elevated store labor costs associated with the opening of store locations. The company maintains a target of 10% operating margin for fiscal 2026.In fiscal 2026, Urban Outfitters plans to open 64 stores and close 17. The majority of the net new store openings will come from FP Movement, Free People, and Anthropologie. Specifically, the company plans to open 25 FP Movement locations, 15 Free People stores and 16 Anthropologie stores. Capital expenditure for fiscal 2026 is expected to be 240 million, with 50% going toward retail store expansion and support, 25% toward technology and logistics investments, and the remaining 25% to fund the expansion of home office facilities to accommodate business growth.Shares of this company have gained 10.3% in the past three months compared with the industry’s 4.2% growth.Key PicksSome better-ranked stocks are Sprouts Farmers SFM, Stitch Fix SFIX and Allbirds Inc. BIRD.Sprouts Farmers is engaged in the retailing of fresh, natural and organic food products. It currently sports a Zacks Rank #1 (Strong Buy). SFM has a trailing four-quarter earnings surprise of 16.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of 13.7% and 35.5%, respectively, from the year-ago reported numbers.Stitch Fix delivers customized shipments of apparel, shoes and accessories for women, men and kids. It currently has a Zacks Rank of 2 (Buy).The Zacks Consensus Estimate for SFIX’s fiscal 2025 earnings implies growth of 64.7% from the year-ago actual. SFIX delivered a trailing four-quarter average earnings surprise of 48.9%.Allbirds is a lifestyle brand that uses naturally derived materials to make footwear and apparel products. It carries a Zacks Rank of 2 at present.The Zacks Consensus Estimate for Allbirds’ current financial year’s earnings implies growth of 16.1% from the year-ago actual. The company delivered a trailing four-quarter average earnings surprise of 21.3%.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>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 Urban Outfitters, Inc. (URBN): Free Stock Analysis Report Sprouts Farmers Market, Inc. (SFM): Free Stock Analysis Report Stitch Fix, Inc. (SFIX): Free Stock Analysis Report Allbirds, Inc. 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