UPDATE: Stifel Boosts PT on Urban Outfitters (URBN) to $34 Following Q4 Results; Sees Strong Start to Q1
Stifel reaffirms Urban Outfitters (Nasdaq: URBN) at Buy. but lifts its price target from $30 to $34 following strong Q4 earnings results issued Monday night.
Analyst Richard Jaffe noted weakness in apparel sales for the quarter driven by a lack of consumer acceptance of new fashion trends. We don’t believe this weakness was a result of the consumer cutting back on her spending due to macro-economic concerns as it appears the consumer was willing to buy if the merchandise was compelling, hence strong home and beauty sales sector-wide. Importantly, it appears there is greater consumer adoption of these new trends this spring, possibly driving spring apparel sales, in our opinion.
Jaffe also sees a strong start to Q1 driven by improved customer acceptance of current fashion trends, continued strength in expanded merchandise categories, and an improved hit rate within Anthropologie’s apparel offerings, especially the dress business. Management expects gross margin to increase approximately 50 bps in the 1Q driven by higher merchandise margins as sourcing costs have fallen due to the strong dollar, depressed cotton prices, and weak demand for apparel production. Tight inventory control will likely contribute to reduced markdowns, helping lift maintained margins as well.
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