 |
|
| Author |
Business Week on Urban Outfitters (URBN) Replies |
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11723
Location: Los Angeles, California
|
 Posted: Tue Mar 13, 2012 8:03 pm Post subject: |
 |
|
Morningstar on URBN's latest.
| Quote: | | Urban Outfitters URBN had already released its record sales numbers Feb. 9, and Monday's report of fourth-quarter revenue and comparable-store sales was as expected. What shocked us was the 955-basis-point contraction in gross margin; we had expected a 700-basis-point drop. We are maintaining our $30 fair value estimate and believe that although Urban is on the verge of turning a corner, the proof is in the pudding as the company competes in an industry that is still promotional and caters to a consumer that remains more cautious than in the past. During the quarter, comparable retail segment net sales were positive across all segments, with the smaller Free People concept performing the strongest (up 9%) and Urban Outfitters (up 3%) and Anthropologie (up 1%) posting more modest gains. Direct to consumer had another solid quarter with growth of 14%, while wholesale segment net sales decelerated sharply versus earlier quarters in the fiscal year, delivering only a 3% increase. Both the average number of units per transaction and total transactions increased, but were more than offset by a decrease in average unit selling prices, which isn't surprising considering the pressure the gross margin experienced. Selling, general, and administrative expense contracted 37 basis points to 21.3% of sales, but this improvement was largely due to a one-time nonrecurring $6 million benefit from equity compensation expense reversals. While it was nice to hear from the new leadership of the brands, the outlook left a lot to the imagination. The company plays with a close hand, and other than store openings offered very little in the way of expectations for the year ahead. Management did provide a few overarching goals, such as focusing on managing product costs and carefully managing selling, general, and administrative expenses, but failed to share specifics regarding either the near- or longer-term business impact. It also disclosed that the rate of full-price selling had improved from fourth-quarter levels, which we deem as a promising sign, but we'd like to see a trend develop. With little clarity added from the press release or the conference call, we remain cautious and believe the turnaround in the Urban Outfitters portfolio of brands may take another quarter or two to fully play out as new management re-evaluates the business with a closer eye. |
|
|
| Back to top |
|
 |
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11723
Location: Los Angeles, California
|
| Posted: Wed Jan 11, 2012 2:11 pm Post subject: |
|
|
Morningstar on URBN's CEO resignation.
| Quote: | | In advance of Urban Outfitters' URBN presentation at the annual ICR Xchange conference Thursday, the company announced that its CEO, Glen Senk, has resigned to pursue other opportunities. We believe Mr. Senk was well regarded on the Street, making some major changes recently to improve the organization, and his resignation has sent shares down 15% in after-hours trading to $25. We are maintaining our fair value estimate of $30 at this time, although we will likely reevaluate the opportunities for the firm closer to the company's year-end. For now, we believe the stock is moderately undervalued, with almost 20% upside to our current fair value estimate, but we would wait for a wider margin of safety to build a position in this no-moat name, which will also give us time to ensure some of its previous merchandising missteps will remain in the past. In Glen Senk's absence, the board of directors has elected xxx Hayne, the co-founder of Urban Outfitters, to act as CEO. As chairman of the board, Hayne has remained active in the direction and growth of the business since its inception and can lend leadership and experience to a business that is working through its recent organizational changes. We think the knee-jerk reaction to the news has been overblown, and we would expect the company to continue to operate on the same growth trajectory as before the announcement. |
|
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11723
Location: Los Angeles, California
|
| Posted: Wed May 18, 2011 8:39 am Post subject: |
|
|
Morningstar on URBN's 1Q earnings:
| Quote: | | Urban Outfitters URBN posted in-line sales growth in its fiscal first-quarter results, but margins failed to stabilize, which drove a modest shortfall in cash flow and earnings. Specifically, weakness in the women's apparel business continued this quarter, and while we still believe it will take some time for Urban to get back on track, we do not plan to adjust our fair value estimate at this time. Total revenue increased 9.2% to $524 million, aided by new store revenue contribution and a 15% lift in direct to consumer comparable net sales, which offset a 5% drop in total company same-store net sales. By concept, comparable-store sales rose 30% and 1% at Free People and Urban Outfitters, while Anthropologie posted a 6% decline. Gross margins fell 490 basis points year over year as the firm was forced (for the second quarter in a row) to clear some slow-moving women's apparel inventory. We've come to expect periodic fashion misses in specialty retail, and management acknowledged that it is aggressively working to address the issues. Importantly, while many investors will be (rightfully) concerned about the recent margin trends and mounting commodity headwinds, the firm is still self-funding and remains focused on long-term growth, which is encouraging. We expect the firm to open more than 50 stores this year and continue to gain traction in its direct-to-consumer channel. Trading at forward fiscal-year price/earnings of about 18 times and EV/EBITDA of 8 times, the shares are now fairly valued, in our view. |
|
|
| Back to top |
|
|
rffrydr
Moderator
Joined: 30 Oct 2005
Posts: 16929
Location: Sunny California
|
| Posted: Tue Mar 08, 2011 11:18 am Post subject: |
|
|
"Shift in fashion trends...." For once a negative in retail that retail can live with. 
_________________
Today is the Tomorrow you worried about Yesterday! |
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11723
Location: Los Angeles, California
|
| Posted: Tue Mar 08, 2011 11:10 am Post subject: |
|
|
Morningstar on URBN 4Q earnings. URBN down 15% as we speak:
| Quote: | | Urban Outfitters' URBN fourth-quarter results fell short of expectations, largely because of weakness in the women's apparel segment, and increased markdowns at the end of the season weighed on profit margins. Management cited that results were hurt by a shift in fashion trends, which spooked investors (shares fell more than 12% after Monday's market close), given Urban's history of fashion misses--mainly because of bringing fashion in too early--over the past decade. We estimate that it will take a few quarters for Urban to cycle through these inventories, and we will be adjusting our near-term forecasts to reflect a more promotional environment. However, we do not anticipate a change in our fair value estimate, as our valuation has accounted for cyclical shifts in the business and we remain optimistic about Urban's long-term prospects, especially in international markets. Trading at forward fiscal-year price/earnings of 16 times and EV/EBITDA of 7.7 times, the shares are now fairly valued, in our view. Total revenue increased 13.6% to $574 million, driven by new store openings and a 4% lift in comparable retail segment sales, which includes 28% direct-to-consumer sales growth. By concept, comparable-store sales at Anthropologie, Urban Outfitters, and Free People were up 1%, 5%, and 28%, respectively. Nonetheless, healthy traffic across all three concepts was partially offset by a decline in average unit retail price because of stepped-up promotional activity during the quarter. With increased markdowns and incremental investments tied to system updates and its international business, the quarterly operating margin declined 220 basis points to 18.0%. In our view, this trend will probably continue into fiscal 2012, and we project a meaningful decline in profit margins for the year, especially with higher transportation and material costs on the horizon. |
|
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11723
Location: Los Angeles, California
|
| Posted: Fri Jan 07, 2011 10:33 am Post subject: |
|
|
Morningstar on the rumored joint bid of J. Crew by URBN and SHLD:
| Quote: | | On Wednesday, rumors surfaced that Sears Holding SHLD and Urban Outfitters URBN may put in counterbids to challenge TPG Capital and Leonard Green & Partners' $3 billion (or $43.50 per share) offer for J. Crew JCG. While we acknowledge that this is a possible scenario, we think the chances are slim. With no debt and $500 million of cash and equivalents on its balance sheet, Urban Outfitters is in a good financial position and has announced that it has been looking for possible acquisitions since late 2009. Nonetheless, we find it hard to believe that there are any brand synergies between J. Crew's preppy and mainstream designs and Urban Outfitters' more bohemian, kitschy, and retro merchandise. Urban's management has mentioned that the firm would be interested in acquiring other lifestyle niche concepts similar to yogawear retailer lululemon athletica LULU, which would complement its other businesses. Additionally, we think Urban Outfitters has done a great job incubating in-house brands like Anthropologie, Free People, and Terrain and will probably continue to do so in the near future. A bid from Sears will seem like a desperate move by the firm to revive the lackluster performance in its apparel categories, in our opinion. Given the lack of success of the Lands' End acquisition in 2002, we doubt J. Crew CEO Mickey Drexler will be keen on letting the brand fade into one of Sears' myriad private labels. Furthermore, with $2.5 billion in debt on its balance sheet and $490 million in long-term debt coming due in 2011, Sears probably does not have the financial capability to acquire J. Crew at this point. The $27 million breakup fee (almost 10% of Sears' 2009 earnings) tied to the agreement made with TPG and Leonard Green should act as a good deterrent as well. Given these reasons, we believe there is a low probability of a strategic acquisition. We cannot rule out the possibility of higher offers from other private equity firms, especially since they are sitting on pools of undeployed capital. However, with less than seven business days left to the go-shop period ending Jan. 15, we believe TPG Capital and Leonard Green will most likely close the deal. Therefore, we are maintaining our fair value estimate for J. C rew at $43.50 per share. |
|
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11723
Location: Los Angeles, California
|
| Posted: Tue Nov 16, 2010 11:48 am Post subject: |
|
|
Morningstar on URBN's 3Q earnings:
| Quote: | | Urban Outfitters' URBN third quarter sales reflected continued strength, but showed slight sequential deceleration as a result of tougher year-over-year comparisons. The operating margin contracted modestly because of incremental investments in Urban's international business, but we view this as a nonevent, since the firm will be able to leverage these costs over the next few years as it starts to have a more meaningful presence in Europe. Results were in line with our expectations, and we are maintaining our fair value estimate. Total revenue increased 13% to $574 million, driven by new store openings and a 6% lift in comparable retail segment sales, which includes 31% direct-to-consumer sales growth. Traffic was healthy across all three concepts; transaction cou nts increased 1% and the number of units sold grew 1%, while the average unit retail price was down 2%--a consistent theme across the apparel retail sector because of stepped-up promotional activities. Yet, unlike its peers, Urban's merchandise margins held up for the quarter despite a lower average unit retail price, thanks to tight inventory levels, which helped prevent excessive markdowns. Nonetheless, higher preopening costs and increased shipping costs tied to international direct-to-consumer business weighed on operating margins (down 70 basis points to 18.3%) during the quarter. In our view, domestic and international expansion of brands like Anthropologie and Urban Outfitters, coupled with increased distribution of the Leifsdottir line, should boost near-term sales. We believe the firm will continue to outperform its peers, given its ability to attract consumers into its stores with a constant flow of fresh and innovative designs. However, much of the incremental gross profit on higher sales will be reinvested into operations (sourcing and new stores), which we believe will pressure margins slightly in the near term. For the full year, we project top-line growth to be in the high teens and the operating margin will be about 18.5%, up from 17.5% in 2009. |
|
|
| Back to top |
|
|
Please log in to view without the ad banners |
|
|
|
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum
|
Powered by phpBB
|
FAQ
Search
Memberlist
Usergroups
Statistics
Register
Profile
Log in to check your private messages
Log in
