Urban Outfitters, Inc. (URBN), Abercrombie & Fitch Co. (ANF), Aeropostale, Inc. (ARO): This Best of Breed Stock Looks Set to Scale Greater Heights

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Apparel retailers have been in the midst of a bloodbath of late, but Urban Outfitters, Inc. (NASDAQ:URBN) has stood tall. While others such as Abercrombie & Fitch Co. (NYSE:ANF) and teen retailer Aeropostale, Inc. (NYSE:ARO) have been facing stiff competition from cheaper and more trendier brands, Urban Outfitters’ strategy of listening to the consumer and promoting sales through various channels have helped it perform well.

Swimming against the current
The company saw an impressive 9% increase in same-store sales in the second quarter. More importantly, Urban Outfitters, Inc. (NASDAQ:URBN)’ revenue increased 12% from the year-ago period while net income jumped 25%.  These results are very impressive as both Abercrombie & Fitch Co. (NYSE:ANF) and Aeropostale, Inc. (NYSE:ARO) had seen substantial drops in both earnings and revenue in their respective quarters.

Urban Outfitters, Inc. (NASDAQ:URBN)

Urban Outfitters, Inc. (NASDAQ:URBN) saw growth across all its brands and gross margin improved 169 basis points in the previous quarter. This is undoubtedly a strong showing by the company, but given the expansionary moves and sales-driving strategies that Urban has in place, it can continue to pull ahead of peers.

Expansion on the cards
Urban Outfitters, Inc. (NASDAQ:URBN) plans to open 35 to 40 new stores during the year and it has also been opening branded shops at Nordstrom stores. After its first branded shop at Nordstrom’s downtown Seattle location turned out to be a success, Urban Outfitters has opened another nine stores this year.

The advantage with these branded shops is that they carry a wider product assortment. They have delivered productivity increases as well and that’s why Urban Outfitters, Inc. (NASDAQ:URBN) has lined up several such stores for the remainder of the year.

Apart from opening physical stores, Urban Outfitters’ focus on strengthening its direct-to-consumer business has also been reaping results. Direct-to-consumer traffic grew 16% in the previous quarter while conversion rate of visitors also improved 51 basis points. Direct orders grew 40% in the previous quarter and there’s huge potential going forward as well.

Urban Outfitters now ships to more than 120 countries from its distribution centers in the U.S. and the U.K. Hence, the company has a pretty big market to explore and management stated that they are investing in this channel to drive further gains.

Smart strategies
Apart from expanding its reach, Urban Outfitters is also focused on staying up to speed with fashion trends. The company is looking to expand its offerings to offer more choices to customers and also plans to enter into licensing partnerships to boost sales. Management is already in negotiation with several companies regarding a partnership.

Urban Outfitters also has a well-laid out strategy of keeping customers engaged. For instance, for its Free People brand, the company regularly updates its female customers regarding the latest products through its blog, catalogs, website, events, videos, and social media. These strategies seem to be working well for the company as same-store sales at Free People had jumped 38% in the previous quarter.

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