Urban Outfitters profit beats as consumers ramp up spending

Apparel retailer Urban Outfitters Inc reported first-quarter profit and sales on Tuesday that handily beat analysts’ estimates, driven by strong spending at its stores despite a longer-than-usual winter season.

Tax cuts, bonuses and sizable tax refunds have been a windfall for consumers, who have responded by increasing their spending on apparel.
Apparel stores clocked their biggest jump in sales since March last year, according to the U.S. Commerce Department retail sales data for April. Households also increased spending on furniture and building materials.

However, retailers such as J.C. Penney Co Inc and home improvement chain Home Depot did not see much of the benefit from that spending, blaming the unusually long winter for weak growth in sales during the February-April period.

Earlier in the day, J.C. Penney also announced that its chief executive officer was leaving to join home improvement chain Lowe’s.

All brands under the Urban Outfitter umbrella, including Anthropologie and Free People, posted better-than-expected same-store sales growth in the quarter ended April 30.

“We saw strong demand for fashion throughout the quarter despite an unseasonably cold spring, and have seen our demand accelerate in May,” Anthropologie’s newly appointed co-President Hillary Super said.

Sales at stores open at least a year rose 10 percent in the first quarter, beating analysts expectations for a 8.8 percent rise, according to Thomson Reuters I/B/E/S.

Urban Outfitters, which competes with fast-fashion brands such as H&M and Inditex’s Zara, said offering fewer discounts as well as investing more on its website helped boost sales and margins. Gross margins rose to 32.8 percent from 31.5 percent a year earlier.

The company said it expects to post second-quarter same-store sales growth “fairly consistent” with the first quarter.

Net income rose to $41.3 million, or 38 cents per share, in the quarter ended April 30, from $11.9 million, or 1 cent per share, a year earlier.
Excluding items, the company earned 38 cents per share. Net sales rose 12.4 percent to $855.7 million.

Analysts on average had expected the company to earn 31 cents per share on revenue of $838.1 million.

However, the company’s shares were down about 1.5 percent at $40.60 in after-market trading.

“The news with J.C. Penney today is affecting everybody,” Bob Phibbs, Chief Executive Officer of consultancy firm Retail Doctor said.