Urban Outfitters: Momentum Continues With Strong Holiday Sales; Shares Undervalued

Overcoming concerns of slowing spending on apparel and home goods, no-moat Urban Outfitters released sales information for November and December that put it on track to beat our fiscal 2024 fourth-quarter estimates. Specifically, retail and wholesale sales increased 8% and 15%, respectively, in the two months. In addition, management provided positive commentary on the holiday period at a conference appearance. Thus, we have increased our fourth-quarter estimates for same-store sales growth to 6% from 3%, total sales growth to 8.1% from 5.3%, operating margin to 5.9% from 5%, and EPS to $0.73 from $0.61. Urban Outfitters' shares rose by a high-single-digit percentage on the holiday update, and we are increasing our fair value estimate to $42.50 from $41.50, leaving shares as attractive.