KeyBanc Upgrades Urban Outfitters, Inc. (URBN) to Overweight

(Updated - March 22, 2017 2:57 AM EDT) (updated to add analyst comment)

KeyBanc upgraded Urban Outfitters, Inc. (NASDAQ: URBN) from Sector Weight to Overweight.

In a note where analyst Todd Thomas downgraded three names, URBN is the lone upgrade due to marketplace position in e-commerce/stores. As with the other three names (LB, ASNA, CBL), he offers three reasons for his view.

1. Urban Outfitters is smartly positioning itself for an even split between e-commerce and stores over the next 3-4 years. E-commerce is already ~20% of sales for both Urban Outfitters as well as Anthropologie, and at the 50% level for Free People. The Company has made significant investments in its DC footprint and future investments are likely to be less capital intensive. We also think that the Company’s target market (more affluent, style-focused) lends itself well to the e-commerce environment.
2. Fashion trends remain somewhat fickle. Anthropologie and Free People are both seeing some improvement in results. Urban Outfitters saw an unexpected deterioration in 4Q16. At this stage, we do not model gross margin improvement until 2H17.
3. Stores remain a critical component of the brands. The Company has aggressively tested and added food and services to stores. It has also embarked on the addition of larger footprint Anthropologie stores that add more furnishings and beauty. Most importantly, the Company has been very disciplined in its store opening plans and only has a mere 594 locations across all three banners.

For an analyst ratings summary and ratings history on Urban Outfitters, Inc. click here. For more ratings news on Urban Outfitters, Inc. click here.

Shares of Urban Outfitters, Inc. closed at $23.18 yesterday.

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