Urban Outfitters (URBN): Underappreciated Margin Opportunity - Jefferies

Urban Outfitters, Inc. (NASDAQ: URBN) posted strong 1Q results, with comps and gross margin exceeding expectations. Jefferies analyst, Randal Konik, is encouraged by the NT momentum, and continues to like the long term story as URBN is not overstored, has high DTC penetration and has the opportunity for global growth. This combined with a low valuation present a compelling risk/reward scenario.

The analyst sees significant margin upside potential, as both UO and Anthro margins remain well off their peaks. In addition to gross margin opportunity (from continued lower markdowns and higher IMUs as private label product continues to expand), the analyst also sees a cost leverage opportunity as the top-line improves.

No change to Buy rating or $38 PT.

For an analyst ratings summary and ratings history on Urban Outfitters, Inc. click here. For more ratings news on Urban Outfitters, Inc. click here.

Shares of Urban Outfitters, Inc. closed at $24.59 yesterday.

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