Urban Outfitters (NASDAQ: URBN), as one might have expected, didn't report a great fourth quarter. It's a fashionable retailer, so you can imagine that consumers, who aren't in the mood to spend top dollar on clothes and accessories, forced the company to do a lot of discounting.

Sales, though, were healthy. The top line increased by 9%, and same-store sales at the Urban Outfitters brand rose 3%. Unfortunately, Q4 wasn't so kind to the Anthropologie and Free People brands. Their comps were down 6% and 13%, respectively. And the company missed earnings estimates. The call was for 28 cents per share, but the retailer was only able to deliver 24 cents per share.

Upscale lifestyle products company Urban Outfitters, Inc. (NASDAQ: URBN) reversed the trend among its competitors and posted good 1Q earnings. Total sales for 1Q 2007 increased 16% to $314.5 million, which is a new record. Earnings increased a big 45% to $29.4 million, which works out to diluted EPS $0.17. So far so good, but ... None of Urban Outfitters three current brands posted remarkable increases. Anthropologie sales increased 2%, Free People increased sales by 8%, while its main brand, Urban Outfitters, declined 5%. The big sales increases came from a 30% increase in internet sales, and 12% increase at Free People Wholesale.

If direct-to-consumer sales are the hot ticket, then why did Urban Outfitters, Inc. open six new expensive stores during 1Q, four Urban Outfitters and two Anthropologie? Why does the company plan to open an additional 32 expensive locations during the coming year? Gross profit margins remained essentially flat, but the cost of inventory increased 19% because the new stores have to be stocked. Why not build a more sophisticated internet presence?

Urban Outfitters, Inc. plans to launch a fourth brand in early 2008. This brand will be primarily an upscale home and garden brand. It is unclear how many, if any, of the 32 new stores will belong to this as yet unnamed brand.

Urban Outfitters, Inc. was helped this quarter by one-time federal tax incentives that contributed $0.03 per share to earnings by reducing the corporate tax rate to 22.3%. The rate will return to its normal 36.2% in FY 2008. Still, Urban Outfitters is a bright spot amongst its competitors. American Eagle Outfitters' profits are below expectations, and the stocks for Aeropostale, Pacific Sunwear, and Abercrombie & Fitch are all down. Shares of Urban Outfitters, Inc. closed recently at $25.51, up $0.14.