Urban Outfitters Has It Finger On The Pulse Of Fashion Trends
There is a fashion component to Urban Outfitters’ business model and fashion is very fickle. Either management has its finger on the pulse of current fashion trends or it does not. When a company misses a fashion wave does it have the systems in place to catch it and is management nimble enough to react? Management spoke these issues on last quarter’s earnings call:
As we have spoken of previously, the majority of our revenue decline in recent periods was due to the execution of apparel. In a short period of time, Hillary and the apparel team focused the offer on the separates trend that echoes much of what is happening across the fashion industry. They also concentrated on delivering more color, pattern, and special details with a touch of hand for which Anthro is known.
In addition to the improved sales trajectory, feedback from listening posts in the field, social channel chatter, and online commentary indicate that customers and associates are increasingly enthusiastic about our offer. This revenue momentum has continued into November, and when combined with a shift in fashion, could create conditions for a promising holiday season.
Getting real time feedback from customers and reacting to shifts in fashion is important to drive sales. It also alleviates the need for heavy discounting to drive traffic to stores. This in turn, helps the company keeps it margins from sliding too much even as it sells more via the digital channel. Maintaining fashion trends and selling more via digital should remain keys to the company’s future success.
Conclusion
Strong holiday sales should help Urban Outfitters report strong quarterly results. Will management guide on solid revenue and sustained EBITDA margins for next quarter? This could decide whether URBN falls hard after earnings. I rate URBN a hold into earnings.
