Telsey Advisory Group analyst Dana Telsey reiterated Outperform rating on Urban Outfitters, Inc
URBN will report 2Q23 results after the market close on Tuesday, August 22.
The analyst raises the price target on expectations of margin expansion for the full year and a healthy inventory position, supporting profitability.
For the quarter to be reported, the analyst looks for EPS of $0.90 vs. $0.64 in the prior year. The estimate compares to the consensus estimate of $0.89.
On the top line, the analyst forecasts sales of $1.25 billion, up 5.6% Y/Y and in line with the consensus estimate and guidance for sales growth in the mid-single digit range Y/Y.
Driving the topline gain, Telsey projects same-store sales growth of 4.9% compared to the consensus of 5% and on top of last year's 1% comp.
In the second quarter, the analyst projects 300 bps of gross margin expansion to 34.7%, just a touch above the consensus estimate of 34.6%.
Margins will be driven by higher initial product margins, lower inbound freight costs, and lower markdowns, mentions the analyst.
Telsey anticipates 110 bps of SG&A deleverage to 25.5% of sales vs. the consensus forecast of up 130 bps YoY to 25.7%.
This apart, FX is expected to weigh sales by 100 bps in the period.
Over the year, URBN expects to open 28 more stores (10 Anthro, 10 FP, 7 UO, and 1 Menus & Venues) while closing 19 stores (6 Anthro, 4 FP, and 9 UO), Telsey adds.
The analyst also notes that the company plans to open a new highly automated omni-fulfillment facility in Kansas City, Kansas, during the back half of FY24.
Additionally, URBN expects to add a new rental fulfillment facility in Missouri (within the Kansas City region) by the end of FY24 to support the expansion of its Nuuly rental business in North America.
Price Action: URBN shares are trading lower by 1.28% to $35.92 on the last check Tuesday.
