Thomas Barwick/DigitalVision via Getty Images Urban Outfitters, Inc. ( NASDAQ: URBN ) is a U.S.
fashion retailer. The company owns four well-known brands: Anthropologie, Urban Outfitters, Free People, and Nuuly. These brands have been organically nurtured, each catering to a different public.
By managing several brands, the company has grown over three decades and surpassed $5 billion in revenues. The company is managed by its founders and a group of long-tenured managers. It has no debt and a significant cash reserve.
One of the brand's long-term challenges has been the consistent operating margin loss. This has been caused by poor merchandising decisions, leading to promotional activity that is difficult to recoup later. In the last two years, the company has been on a campaign to recover margins, which has been successful, but I believe the potential for further margin increases is limited.
In terms of growth, Urban is investing heavily in two of its brands: Free People (especially its activewear line FP Movement), and Nuuly, an apparel box subscription service. I do not like the perspectives of these businesses. Considering the expectations needed for the stock to generate a 10% earnings yield on an EV/NOPAT basis, I believe URBN stock is fairly valued.
However, I do not consider these prices an opportunity and would wait for lower prices before investing in Urban. Company intro Urban Outfitters Inc. is an apparel and accessories retailing group with four brands: its name.
