Urban Outfitters: Strong Holiday Sales Portend Fourth-Quarter Outperformance; Shares Overvalued

In conjunction with a conference appearance, Urban Outfitters revealed sales results for November and December 2024 that put it on track to beat our (January 2025-ending) fiscal 2025 fourth-quarter forecast. Specifically, it achieved 10% revenue growth over the two months, well ahead of our 6% estimate for the full quarter. Given this result, we expect to raise our fiscal 2025 adjusted EPS estimate of $3.94 to just above $4.00 and our $46 per share fair value estimate by a low-single-digit percentage. Even so, we rate Urban Outfitters’ shares, up nearly 50% over the past year, as overvalued and, as a no-moat firm, we expect that competitive pressures will cause its recent strong sales and margins to moderate. In the long run, we forecast comparable sales for Anthropologie and Free People in the midsingle digits and 8% annual operating margins, marks that are below recent levels.