Urban Outfitters Inc. (NASDAQ: URBN)
Earnings Report
After the market close on Monday, Urban Outfitters reported record Q2 earnings coming in at 52 cents per share on $867 million in sales, an improvement of 7%. This beat analysts expectations of 49 cents a share, however, revenue came up short as an increase in cost of sales and administrative pay dipped into the bottom line along with decreased margins and currency exposure in Europe in Canada. Share prices traded slightly lower in the post market session and didn’t improve when the markets opened the following day.
Current market conditions resulted in a downgrade from Credit Suisse Tuesday morning following their earnings with a new price target of $38, down from $40. Credit Suisse said it remains cautious about the stock given the “volatile” nature of fashion retail and the highly targeted customer base of each of the company’s brands. Downgrades never bode will for any company and will most likely add to the selling pressure. TheStreet
Company executives were pleased with their results but also understand that they are going to have to prove themselves to investors that they can increase margins and manage their expenses better to get the stock prices moving back up. Released with the earnings report, CEO Richard Hayne stated:
“We are pleased to announce record sales for the second quarter driven by positive retail segment comp growth at each brand. . . Without question, the brands’ strong execution of our long-term strategy helped fuel that sales growth and laid the groundwork for future increases, as well.”
It looks like URBN will really need to have a stellar Q3 earnings release to get this stock turned around and until it break this downtrend it’s been in over the past few months, I would be cautious about taking a long position in this company.
URBN Technicals
URBN has been a bit of a lackluster stock so far in 2015 as share prices slip further into negative territory after the Q2 earnings release. Share prices opened down just over one percent Tuesday morning at $31.88 on higher than average volume and traded all the way down to $30.97, a year to date low, before it rebounded and closed down on the day at $31.55.
After hitting a 2015 high of $47.25 back in March, prices have steadily trended south into Q1 earnings where they gapped down 14% after a big miss and continue to slip as the buyers are few and far between. Some major resistance levels to watch for are $35 and $40 and if we get any kind of reversal in share price make sure to pay close attention to these levels and how the price action behaves around them. For support levels we’ll have to go further back in time on the daily chart to see that the $30 price range has provided support multiple times last year and could do the same this time around. URBN has a great daily chart, as levels are well defined within the peaks and valleys so make sure to watch them closely. I would expect this to trade down to the $30 level and maybe even lower before getting any kind of bounce but with market as weak as it is now you may want to wait and see how price action unfolds before making any trading decisions.
Starting the year at $35.26 per share, URBN is down over 10% for the year.
About Urban Outfitters Inc.
Urban Outfitters, Inc. engages in the operation of retail clothing stores. It operates through the Retail and Wholesale segments. The Retail segment offers merchandise directly through stores, catalogues, call centers, and websites, and consists of the brands Urban Outfitters, Anthropologie, Free People, Terrain, and Bhldn. The Wholesale segment designs, develops, and distributes women’s casual wear under the Free People brand. The company was founded by Richard A. Hayne and Scott A. Belair in 1970 and is headquartered at Philadelphia, PA. MarketWatch
