Urban Outfitters, Inc. (NASDAQ:URBN) sells off-beat, “hipster” style clothes that might not be your personal taste, but regardless of what kind of threads you like, you still should consider buying URBN stock.
Beating analyst estimates like Urban Outfitters recently did is always nice, but it really helps put shareholders at ease when you’re talking about a company like URBN. The company, under former CEO Glen Senk, suffered through a couple of very lean years in which the it marketed to a younger crowd who simply couldn’t afford Urban’s offerings.
The result was disappointing sales and results such as same-store sales declines of 12%, 10% and 7% in the first, second and third quarters of fiscal 2015.
However, new CEO Richard Hayne, also the founder, enjoyed a 6% improvement in comps for the fourth quarter, and now momentum appears to be on URBN’s side.
New Marketing
In the past few years, Urban Outfitters was marketing to a teenage crowd as young as 14 — a bad idea on many levels.
First, teenagers simply couldn’t afford Urban Outfitter’s prices. Moreover, URBN didn’t keep up with the same trends teens were buying from other stores.
Plus, teen retailers have absolutely been crushed in recent years. Wet Seal Inc (OTCMKTS:WTSLQ) and Delia’s recently filed for bankruptcy, and Abercrombie & Fitch Co. (NYSE:ANF) is suffering its own slide. Targeting consumers with fickle fashion taste did not bode well for Urban Outfitters — a company whose product is better fit for a more mature audience, anyway.
However, Hayne has brought marketing back to the audience that they had always meant to attract – people of college age and older. Urban Outfitters is in the process of removing childish products, like graphic tees, from their store and bringing in cool merchandise targeted toward people in their 20s.
URBN also is using better quality fabrics and charging more for its items — which its new audience can better afford.
Urban Outfitters has already seen success with these changes. In fact, the company changed its social media to match its new branding, and has seen more people interacting on its social media – especially on Instagram.
Creating a Better Image
Much of the news you’ve probably heard about Urban Outfitters probably has dealt with its controversial products. So, negative publicity. As a good for-instance, last month, URBN sold a tapestry that resembled a Nazi prisoner uniform.
However, Urban Outfitters is moving forward to change that image, too. URBN is teaming up with fashion designer Phoebe Dahl’s clothing line Faircloth & Supply for a collaboration, the proceeds of which will help girls in Nepal get an education.
Sure, people who were offended by recent controversies have already boycotted Urban Outfitters, but new philanthropic initiatives should at least stop the bleeding — and might even lure some consumers back.
Bottom Line
The question of an URBN turnaround isn’t “if,” but “how much?” URBN is already up more than 35% over the past three months to scorch the S&P 500’s flat performance.
And with a new, deeper-pocketed audience and a more positive image, URBN stock looks like it will continue to succeed in 2015.
As of this writing, Dana Kobilinsky did not hold a position in any of the aforementioned securities.
