Urban Outfitters Inc. (URBN) plans to announce third quarter results on Monday, November 18, 2013. A conference call is scheduled for 5:00 p.m. ET to discuss the results and business environment.
Wall Street anticipates that the specialty retailer will earn $0.45 per share for the quarter. iStock expects URBN to hit Wall Street's consensus number. The iEstimate is $0.45, too.
Urban Outfitters engages in the retail and wholesale of general consumer products in the United States. It operates in two segments, Retail and Wholesale. The company operates retail stores under the Urban Outfitters, Anthropologie, Free People, Terrain, and BHLDN brands.
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According to OptionMonster, bulls loaded up on November call options. The broker says, "Total option volume in the name topped 19,800 contracts on Friday [November 8, 2013], 12 times its daily average for the last month. Overall calls outnumbered puts by 9 to 1." The story notes that speculators focused on the $39 and $40 strike prices.
URBN closed at $39.99 yesterday, so the traders are well positioned to profit if the stock pops on EPS. Taking the bullish side would have been the winning trade 10 of last 16 earnings announcements. On average, URBN lifted by 5.87% in the three days surrounding earnings. That means shares backed up six times, falling as much as 16.50% with an average loss of 6.22%.
Nine of the 10 EPS-driven pops accompanied a bullish surprise while the six drops were split between bullish and bearish surprises. However, the November report has delivered four straight price increases, ranging from 0.50% to 9.7% and averaging 4.13% in the three-days circling the profit announcement.
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The heavy call buyers could make some $$$ based on Urban Outfitters' historic price-sensitivity for the November EPS report-card.
iStock is worried about URBN's margins after reviewing ! the company's most recent 10-Q. Inventory increases by an eye-opening 22.98% while revenue increased at a slower pace of 12.16%. In all likelihood, the merchandise build up means sales prices to get the old out the door to make room for the new, especially as the holiday shopping season approaches. Another concern, although less so, is a 36.15% jump in accounts receivables (ARs), which could mean some customers are slow to pay because sales are faltering.
The combo of rising ARs and inventory can be deadly to EPS. It may not show up on Monday, but will eventually hurt the bottom line if the pair of balance-sheet line items continues to outpace sales – keep an eye on it.
While we have our concerns for the bottom line, the top line of the income statement should continue to improve. According to the US Commerce Department's ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES SEPTEMBER 2013, sales for clothing & clothing accessories stores increased by 3.5% for the third quarter of 2013 compared to the same time frame a year ago, and rose 0.3% versus Q2 2013.
Overall: The November report has been kind to Urban Outfitters Inc. (URBN) shareholders. Retail sales should provide a boost to revenue; however, the bottom line could suffer if URBN discounted heavily to shrink expanding inventory levels.
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