It also assigned the responsibility of fulfilling web-based orders to the nearest brick-and-mortar retailers, which helped it generate $12 million in online orders during the quarter. However, this growth has been a double-edged sword – it also caused the aforementioned decline in same-store sales during the quarter.
Between 2008 and 2011, Urban Outfitters’ direct-to-consumer sales rose at an average annualized rate of 26%. Yet in the third and fourth quarter of fiscal 2013, that figure rose to 36% and 44%, respectively, showing that its long-term investments have paid off. Meanwhile, Gap posted 28% direct-to-consumer growth in its fourth quarter, up from 23% in the previous quarter. Abercrombie & Fitch Co. (NYSE:ANF) fared far worse with 5% growth.
New initiatives
Encouraged by strong direct-to-consumer growth that has outpaced its rivals, Urban Outfitters is also launching a mobile app for Anthropologie in fiscal 2014. It will also redesign its Urban Outfitters and Anthropologie websites and introduce a new loyalty program with cash back rewards. The company has also added a social media aspect to its Free People brand with FP Me, which allows customers to create online profiles and share favorite styles and collections with each other. All of these initiatives should have a positive impact on the growth of the direct-to-consumer channel.
Things are also looking bright for Urban Outfitters’ first quarter. In an SEC filing, the company stated that comparable store sales in the first two months of the quarter starting on Feb. 1 have risen in the “high single digits.” That means that if sales hold steady, the company is on track to at least meet the 9.1% same-store sales growth that the analysts polled by FactSet are expecting.
In contrast, Abercrombie’s same-store sales declined 14% internationally and 1% in the United States. Meanwhile, Gap’s company-wide same-store sales slid 2%. Suddenly, Urban Outfitters’ flat to high-single digit growth looks pretty robust by comparison.
Versus Competitors
Compared to Abercrombie & Fitch and Gap, Urban Outfitters, Inc. (NASDAQ:URBN) has a tiny footprint. The company owns 215 namesake stores, 180 Anthropologie stores, 77 Free People stores and two BHLDN locations for a total store count of 481. Abercrombie and Gap have over 1,000 and 3,200 locations, respectively.
In the coming year, Urban Outfitters plans to open 29 new locations in the United States and eight new stores in Europe. It is also looking to use joint ventures, partnerships or licensing agreements to penetrate global markets, where it is much less recognized than either Abercrombie or Gap’s three primary brands – Old Navy, Gap and Banana Republic.
Urban Outfitters inked an agreement last year with World Co. Ltd. to distribute its Free People label in Japan. World Co. Ltd. operates over 2,700 stores across Asia, which could help spread its brand across the region.
This final chart highlights Urban Outfitters’ strengths in comparison to its rivals.
| Forward P/E | Price to Sales (ttm) | Return on Equity (ttm) | Debt to Equity | Profit Margin | Qty. Revenue Growth (y-o-y) | Qty. EPS Growth (y-o-y) | |
| Urban Outfitters | 17.81 | 2.01 | 19.61% | No debt | 8.49% | 17.30% | 110.30% |
| Gap Inc (NYSE:GPS). | 12.23 | 1.05 | 40.18% | 43.06 | 7.25% | 10.30% | 61.00% |
| Abercrombie & Fitch | 11.26 | 0.80 | 14.47% | 3.60 | 5.84% | 10.50% | 784.50% |
| Advantage | Abercrombie | Abercrombie | Gap | Urban Outfitters | Urban Outfitters | Urban Outfitters | Abercrombie |
Source: Yahoo! Finance, 4/3/2013
In my opinion, Urban Outfitters, Inc. (NASDAQ:URBN)‘ clean balance sheet, strong margins, and robust top and bottom line growth all justify the stock’s higher P/E ratio, which is slightly higher than the industry average of 17.37. In other words, I believe Urban Outfitters will continue growing over the long term, and 2013 might just be the year that hipster clothing crushes preppy, clean cut fashions.
The article When Quirky Hipsters Crush the Preppies originally appeared on Fool.com and is written by Leo Sun.
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