Nov 11, 2008
Cowen resumes Urban Outfitters with neutral
Nov 11, 2008
Nov 11 (Reuters) - Cowen & Co resumed coverage of Urban Outfitters Inc with a "neutral" rating, saying it liked the clothing and home goods retailer's long-term growth potential.
Shares of the company, which sells casual clothes, accessories, gifts, housewares and shoes, rose as much as 12 percent.
Urban Outfitters is a specialty retailer with a portfolio of intriguing growth concepts, Cowen analyst Laura Champine said. While its peers are seeing same-store sales decelerate, margins contract and earnings decline, Urban Outfitters is bucking the trend, she added.
"That coupled with returns on capital that are nearing historical peaks equates to a retailer that is firing on all cylinders in one of the toughest macroeconomic backdrops ever," Champine wrote in a note to clients.
Last week, Philadelphia-based Urban Outfitters said its third-quarter total sales rose 26 percent to $478 million, while same-store sales, a key gauge of retail performance, increased 10 percent.
The company's namesake chain sells hip apparel and accessories to teens while its second brand, Anthropologie, is more upscale and geared to adult women. A third brand, Free People, sells to other retailers and operates a small chain of stores.
According to management targets, the retail business is just 35 percent penetrated -- which suggests years of double-digit square footage growth to help drive future earnings, the analyst said.
"This leaves Urban Outfitters very well positioned, as many of its peers are resorting to slowed expansion plans and/or store closures," Champine said.
The company, whose rivals include Aeropostale Inc and American Eagle Outfitters Inc , expects to open about 47 stores during the current financial year.
Shares of Urban Outfitters were up $1.48 at $17.46 in Tuesday afternoon trade on Nasdaq. They hit a 2-year low of $14.93 earlier in the session.
Champine said the company's shares are appropriately priced and investors should look for a better entry point. (Reporting by Dilipp S. Nag in Bangalore; Editing by Himani Sarkar)
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