No-Moat Urban Outfitters Managing Well Through a Tough Environment; Shares Attractive

Urban Outfitters’ results for fiscal 2023’s third quarter were in line with our expectations, a solid outcome given concerns that inflation is affecting consumer spending on apparel and home goods. Moreover, the outlook for the holiday season looks promising, with company guidance suggesting our 1% comparable sales estimate may be slightly low. We expect to lift our $35.50 fair value estimate by a low-single-digit percentage and view its shares as attractive. Although we rate it as a no-moat company, Urban Outfitters is a high-quality operator that targets an attractive demographic. Additionally, it has no debt and about $4 per share in cash and investments.