Urban Outfitters' shoppers know what they like

Posted Feb 11th 2008 5:46PM by Joseph Lazzaro
Filed under: Urban Outfitters (URBN), Stocks to Buy

The choppy/consolidating (or perhaps worse) market conditions sometimes give the impression that growth plays do not exist, but that is not the case, and one growth company worth evaluating is Urban Outfitters.

Urban Outfitters, Inc. (Nasdaq: URBN) operates more than 120 specialty retail stores under the Urban Outfitters, Anthropologie, and Free People brands, and also offers clothes via a wholesale division under the Free People label.

Analysts like the fact that URBN carries in-demand, self-expressive merchandise, with differentiated retail brands. Most analysts believe the company has achieved a retail gold star: a unique brand position in the ages 18-24 customer category. Moreover, a relatively high 50/50 private label/nation brand inventory lowers inventory risk.

Sales increased an impressive 23% in FY 2008, with analysts seeing a 20-25% rise in FY 2009. Operating costs are reasonable. The Reuters FY 2008/FY 2009 EPS consensus estimates for URBN are $0.90 to $1.15.

The risks? Analysts are keeping an eye on URBN's performance at opening new stores on-time, and the company's overall productivity levels.

The First Call mean rating for URBN is: Buy [28 firms]. Mean 2008 target: $31 [high: $35, low: $18].

Stock Analysis: Urban Outfitters is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from URBN's shares. Sell/Stop Loss if you were to purchase shares in this company: $17.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Tags: apparel, marketing, retail sector, same store sales, Urban Outfitters, URBN, young adults