Urban Outfitters (URBN) Earnings Preview

Secondary plays: ANF, BEBE, PIR, AEO, GPS...

URBN is expected to report Q4 earnings 3/6 before the market opens followed by conference call at 9:00am ET...

URBN Consensus: First Call consensus is Q4 EPS of $0.29 on revs of $462.56 mln; Q1 EPS of $0.21 on revs of $382.83 mln; FY08 EPS of $0.92 on revs of $1.51 bln; FY09 EPS of $1.16 on revs of $1.82 bln...

Guidance: After releasing same store sales results on 2/7, co preannounced Q4 revs, sees Q4 (Jan) revs of $465.41 vs. $462.56 mln First Call consensus. The stock traded up ~8% and since is trading another 9% higher...

Expectations: Since Q3 2002, co has beat or reported in-line earnings every time except once (only missed by $0.03 at most). Gross margin (estimates for Q4 is 38.44%, FY08 is 37.92% and FY09 is 39.48%) will be key issue with increased holiday promotions to boost store traffic and sales. Note the co has heavy exposure to the holiday period with ~30% of annual sales expected to be represented by Q4 period...

Briefing note: Short interest is 18%, mkt cap is $4.8 bln, float is 117.29 mln and avg volume is 3.8 mln. Co relatively high forward P/E of ~25.5 (for comparison, some competitors' forward P/E values: ANF 13.1, BEBE 14.9, AEO 11.2, GPS 16.7)...

Areas of Focus on the Call:
1) FY09 outlook
2) Gross margin (estimates for Q4 is 38.44%, FY08 is 37.92% and FY09 is 39.48%, could be margin upside as the firm continues to believe that operating margins of 20% are likely over time)
3) Update on Anthropologie and Free People brands...

Recent price movement: After reporting last qtr on 11/8 (beat EPS estimates by $0.02), stock barely reacted and closed nearly unchanged. Since reporting last qtr, stock is trading up ~18%; since preannouncing revs on 2/7, stock is trading up ~9%. Note the stock made a new 52-week high (~31.32) on 2/26 and is trading ~6% off this 52-week high...