Urban Outfitters Has Been Performing Well but Lacks Durable Edge in Crowded Apparel Retail Space
Urban Outfitters has been outperforming many peers over the past few years in a challenging environment, but we believe it lacks a brand intangible asset that would provide an economic moat and pricing power. Although its three major apparel brands—Anthropologie, Free People, and Urban Outfitters—are established in the US, we believe competition will continue to take a toll. Urban Outfitters grew into one of the larger American specialty apparel retailers on the strength of its distinctive styles. However, it has a history of inconsistent same-store sales growth and profit margins, and its namesake banner has had uneven results. Urban Outfitters, like many others, often resorts to markdowns and promotions to compete with wide-moat Amazon and other e-commerce outlet stores, discount stores, and key vendors’ direct-to-consumer efforts.
United States