What’s Next For Urban Outfitters’ Stock After An Upbeat Q4?

Note: Urban Outfitters’ FY’25 ended  January 31, 2025.

Urban Outfitters (NASDAQ: URBN), a lifestyle retailer focusing on young adults and teenagers, capped off the year with a stellar fourth-quarter performance, delivering record sales of $1.6 billion that eclipsed expectations with a 10% year-over-year (y-o-y) surge. The company’s earnings per share (EPS) also outpaced projections, coming in at $1.04 (up 51% y-o-y) above consensus estimates of $0.94. In addition, URBN’s gross margin increased 300 basis points to 32.3% in Q4, driven by increased initial merchandise margins, led by strong execution of cross-functional brand initiatives in all three segments – Retail, Wholesale, and Nuuly. Moreover, the retailer’s smaller brands, FP Movement and Nuuly, are driving growth, with Nuuly posting a 50% surge in subscribers during the quarter. Notably, the company’s stock is up 60% since the beginning of 2024, compared to a 23% growth in the S&P 500 index. In comparison, URBN’s peer American Eagle Outfitters (NYSE: AEO) stock is down 36% during the same period. Separately, Should You Buy AVGO Stock After A 7% Fall?

Urban Outfitters has outlined its strategic objectives for fiscal 2026, targeting mid-single-digit sales growth and a 50-100 basis point improvement in gross margins. Key initiatives include the opening of 58 new stores, alongside the closure of 19 underperforming locations, and a $240 million capital expenditure program. Additionally, the company aims to expand its Nuuly subscription service, with a revenue target of $500 million. Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

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Overall, URBN’s current price of $57 is in line with Trefis’ estimate for Urban Outfitters’ Valuation. This is based on a $4.55 expected EPS and a 12.7x P/E multiple for the fiscal year 2026. We forecast URBN revenues to be $5.9 billion for the fiscal year 2026, up 7% y-o-y. Urban Outfitters’ fourth-quarter results masked underlying challenges with the name-sake brand experiencing its eleventh consecutive quarter of negative growth. Notably, while Free People and Anthropologie delivered solid comparable retail sales growth of 8% and 8.3%, respectively, Urban Outfitters’ comparable sales declined 3.5%. This trend is consistent with the previous quarter (Q3), where Free People and Anthropologie reported 5.3% and 5.8% growth, respectively, while Urban Outfitters’ sales plummeted 8.9%. However, it’s worth noting that the Urban Outfitters brand did demonstrate some quarter-over-quarter improvement.

The increase in URBN stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 15% in 2021, -19% in 2022, 50% in 2023, and 54% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

[1] Returns as of 2/28/2025
[2] Cumulative total returns since the end of 2016

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