Urban Outfitters (URBN) Reports In-Line EPS and Restaurant Acquisition; FBR Capital Reiterates Market Perform
FBR Capital maintained a Market Perform rating on Urban Outfitters, Inc. (NASDAQ: URBN), and cut the price target to $29.00 (from $32.00), following the company's 3Q earnings report. URBN reported 3Q15 EPS of $0.42, versus consensus of $0.42. URBN also announced that it has entered into an agreement to acquire substantially all of The Vetri Family group of restaurants, including Pizzeria Vetri. FBR thinks that this acquisition is small and will not be material to EPS next year.
Analyst Susan Anderson commented, "URBN reported 3Q15 EPS of $0.42, versus FBR/consensus of $0.41/$0.42, with a lower share count adding ~$0.01 and a lower tax rate ~$0.01. The gross margin was ~+11 bps, versus FBR/consensus of +70 bps, driven by higher UO margins (+150 bps), offset by DC transition expenses (–100 bps) and FX (~–50 bps). SGA levered +23 bps, versus FBR's/consensus' estimates of –45/–25 bps, driven by lower incentive comp and FX, offset by higher tech spending. Although it is still early in 4Q, QTD comps have decelerated to negative across all brands; if the negative comp continues, expense de-leverage will pressure margins. We see potential for UO improvement in November/December (tougher comparison in early November). January, overall, is the easiest comparison of 4Q, which could help the comp. Given increased uncertainty regarding the 2015/16 outlook and a potentially lower GM/ comp trajectory, we lower our 4Q15/2015/2016 EPS estimates and our price target to $29, from $32."
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Shares of Urban Outfitters, Inc. closed at $22.67 yesterday.