Shares of Urban Outfitters Inc. URBN have risen 37.2% in the past six months against the Retail-Apparel and Shoes industry’s decline of 19.7%. Thanks to the strategic initiatives and operational efficiencies, Urban Outfitters has also outpaced the broader Retail-Wholesale sector and the S&P 500 index’s respective decline of 3.7% and 9.3% in the same period.

URBN’s Past 6 Months’ Performance

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This growth is driven by the company’s strong Retail segment, improved merchandising strategies and ongoing store optimization efforts. The Urban Outfitters stock has also outperformed its peers, including The Gap, Inc. GAP, Skechers U.S.A., Inc. SKX and Deckers Outdoor Corporation DECK.

Shares of Gap, Skechers and Deckers have tumbled 12%, 23.8% and 31.4%, respectively, in the said period.

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Closing at $49.48 last Thursday, the URBN stock stands almost 19.1% below its 52-week high of $61.16 attained on March 3, 2025.

Decoding Urban Outfitters’ Tailwinds

URBN showcased impressive results in its Retail segment, posting solid sales growth in the fourth quarter of fiscal 2025. Comparable sales increased across its various brands, with Anthropologie leading the way with 8.3% year-over-year growth. This growth was driven by a significant rise in digital sales and a moderate increase in in-store sales. Additionally, the Home category achieved its first positive comparable sales growth of the year.

The Free People Group maintained positive momentum, experiencing notable growth online and in stores. The FP Movement sub-brand, in particular, saw rapid expansion, benefiting from heightened brand awareness and a growing number of store locations.
 
The Wholesale segment performed exceptionally well, benefiting from strong demand from specialty retailers and department stores. Free People Wholesale played a key role in this success by prioritizing full-price sales over markdowns. FP Movement Wholesale experienced remarkable growth, with sales surging more than 90% year over year. This strategic focus on full-price sales significantly boosted profitability.

Urban Outfitters' subscription-based rental platform, Nuuly, continues to be a major growth engine. In the fourth fiscal quarter, net sales for the segment surged 78.4% year over year, with the subscription business alone growing 55.6%. This rise was largely driven by a 53.5% increase in active subscribers to 300,000.

Nuuly reached a milestone by reporting its first full year of profitability, generating $13 million in operating profit with a mid-single-digit margin. The platform added more than 20,000 subscribers in the fourth fiscal quarter, demonstrating strong momentum. Management aims to scale Nuuly to $500 million in revenues by fiscal 2026.

URBN’s Store Expansion Plan

Urban Outfitters is continuing its commitment to physical retail expansion with an ambitious store-opening plan. In the fourth fiscal quarter, the company opened seven Free People stores and 25 FP Movement locations. Anthropologie also grew its footprint with additional stores. At the same time, URBN is refining its store portfolio by closing underperforming locations and focusing on smaller, higher-productivity stores.

In fiscal 2026, the company plans to open 58 stores, including 20 FP Movement locations, 16 Free People stores and 15 Anthropologie locations. Over the long term, Urban Outfitters aims to expand FP Movement to 300 locations across North America, strengthening its presence in the activewear market. With strong brand momentum, a solid financial performance and a well-executed strategy, the company is positioned for continued growth.

Urban Outfitters’ Positive Outlook for FY26

URBN's strong performance in the fourth fiscal quarter sets an optimistic tone for fiscal 2026. During its last reported quarter’s earnings call, the company projected mid-single-digit sales growth for the first quarter and the full fiscal year, driven by low-single-digit comparable sales growth in the Retail segment.

Free People is expected to see low to mid-single-digit comparable sales growth, while Anthropologie is anticipated to grow in the mid-single-digit range. Nuuly is expected to deliver double-digit revenue growth, fueled by a growing subscriber base. The Wholesale segment is forecast to see mid-single-digit annual growth, with double-digit growth expected in the first fiscal quarter.

URBN Looks Attractive From Valuation Standpoint

The company stands out as a compelling value play within the industry, trading at a forward 12-month price-to-earnings ratio of 10.45, below the industry average of 13.82 and the sector average of 21.51. This undervaluation highlights its potential for investors seeking attractive entry points in the retail space. URBN's Value Score of A further emphasizes its investment appeal.

While Gap and Skechers trade at a forward 12-month P/E of 7.96 and 10.37, respectively, Deckers trades at a P/E of 16.09.

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Here's How Estimates Stack Up for Urban Outfitters

The positive sentiment surrounding URBN is reflected in the upward revisions in the Zacks Consensus Estimate for earnings. In the past 60 days, the consensus estimate has moved up 31 cents to $4.65 per share for the current fiscal year and by 14 cents to $5.04 for the next fiscal year, indicating year-over-year growth of 14.5% and 8.5%, respectively. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

The Zacks Consensus Estimate for the current and next fiscal year’s sales is pegged at $5.92 billion and $6.25 billion, respectively, implying year-over-year growth of 6.6% and 5.7%.

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How to Play URBN Stock: Buy, Hold or Sell?

Urban Outfitters presents a compelling case for investors due to its strong brand portfolio, solid performances across retail and wholesale channels, and impressive momentum in its Nuuly subscription business. The company’s ability to drive growth through store expansion, digital innovation and a clear focus on full-price sales has boosted profitability and efficiency. 

Additionally, upward analyst revisions and a favorable valuation profile enhance its appeal. With a well-balanced approach to growth, operational discipline and evolving consumer engagement, Urban Outfitters stands out as a promising opportunity in the retail sector. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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