Specialty apparel retailer Urban Outfitters (NASDAQ: URBN) stock has been selling off with the retail sector during the post-holiday hangover period. Its Free People brand suffered logistics constraints as air and ocean cargo rates hit unprecedented levels which ate into margins. However, management expects costs to recede by summer 2022. The Company implementing higher pricing to mitigate some of the effects of freight and inflationary pressures. The Company sees strong sales momentum continuing through spring 2022 as evidenced by 20% growth in the first four weeks of 2022. Prudent investors seeking exposure into niche retail apparel ahead of the clearing of headwinds can watch for opportunistic pullbacks in shares of Urban Outfitters.
Q4 Fiscal 2021 Earnings Release
On March 1, 2022, Urban Outfitters released its fourth-quarter fiscal 2021 results for the quarter ending December 2021. The Company reported earnings-per-share (EPS) of $0.41 excluding non-recurring items versus consensus analyst estimates for a profit of $0.52, a (-$0.11) per share miss. Revenues rose 22.3% year-over-year (YoY) to $1.33 billion meeting consensus analyst estimates for $1.33 billion. Comparable retail net sales increased 14% driven by digital channel sales offset by weakening retail sales stemming from reduced traffic. Comparable retail sales rose 49% for its Free People Group brand, 14% at its Anthropologie Group brand, and 3% at its Urban Outfitters brand. Total inventory rose by $160.2 million or 39.1%. Urban Outfitters CEO Richard Hayne commented, “Record fourth quarter sales were driven by positive ‘comps’ at all brands. Strong customer response to our early spring offerings bode well for continued sales growth in the first quarter,” “
Conference Call Takeaways
CEO Hayne stated each brand posted positive retail comps making up a total 14% total retail segment comp growth for 2021. He specified that Free People had an extraordinary difficult environment due logistics constraints to get product into the U.S. to meet holiday season demand. Logistics costs hurt margins. He feels the elevated shipping costs should recede by summer time. In the meantime, the Company is taking measures to mitigate some freight costs ranging from higher retail pricing to ordering hot items months ahead of time in order to use the cheaper ocean freight costs over the expensive air freight costs. The Q4 2021 demand was very strong, and he is confident this momentum will continue through spring 2022. This is evidenced by retail sales jumping 20% in first four weeks of the new year. He noted, “We’ve been pleasantly surprised by the resilience of the consumer, given the headwinds of surging inflation, the remnants of COVID-related restrictions and a stock market correction. These optics have pushed consumer sentiment to decade lows, but we see continued strength in our customer spending happens. Our customers are anxious for a return to normal life and they’re shopping to support that goal. They want to be out and about with family and friends traveling dining out and going to entertainment venues.” CEO Hayne stated that fashion and newness apparently takes precedent over pricing among consumers. This is supported by strong sales of full priced shoes, dresses, blouses, heels, and pants. As such, he expects to see total company comp sales to increase in the mid-teens for its fiscal first quarter 2022.
URBN Opportunistic Pullback Price Levels
Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for URBN stock. The weekly rifle chart peaked near the $38.21 Fibonacci (fib) level. The weekly rifle chart downtrend is stalling on the flattening 5-period moving average (MA) at $26.28 with the 15-period MA at $27.79. The weekly 200-period MA sits at $29.86 and 50-period MA at $33.26. The weekly lower Bollinger Bands (BBs) sit at $21.09. The weekly stochastic is attempting to cross up again under the oversold 20-band. The weekly market structure low (MSL) buy triggers on a breakout above $27.34. The daily rifle chart is in a breakout powered by the daily stochastic mini pup. The daily 5-period MA is rising at $26.55 as it broke through its 15-period MA at $26.36 and daily upper BBs are rising at $28.80. The daily lower BBs sit near the $23.76 fib. Prudent investors can watch for opportunistic pullback levels at the $26.08 fib, $25.52, $25.12 fib, $24.61, $23.76 fib, $22.53 fib, $20.78 fib, and the $20.22 fib level. Upside trajectories range from the $29.36 fib up towards the $34.66 fib level.