Zacks Equity Research has recently updated its rating for Urban Outfitters Inc. (URBN), offering an Outperform recommendation with a price target of $42.00 over the next 6-12 months. This recommendation, issued on October 22, 2024, reflects the company’s steady growth, driven by strong performances from key brands such as Anthropologie, Free People, and the subscription-based Nuuly service. However, challenges persist within the flagship Urban Outfitters brand.

The following report breaks down the key elements behind this recommendation and provides actionable insights for investors. However, investors are encouraged to perform their own due diligence before making any investment decisions.

Current Price and Target Price

Current Stock Price (as of 10/22/2024): $36.07
Price Target (6-12 Months): $42.00
Urban Outfitters has been rated to outperform the broader market, with potential upside driven by its continued focus on growth through strong brand management, inventory control, and expansion in high-demand categories like activewear.

Key Catalysts for Growth

Strong Retail Segment Performance
Urban Outfitters demonstrated solid sales growth in the second quarter of fiscal 2025, reporting a 6.3% year-over-year increase to $1.35 billion. The company’s retail segment saw a 2% comp increase, bolstered by strong performances from the Anthropologie and Free People brands, which cater to diverse consumer demographics.
Anthropologie, in particular, posted a 7.4% increase in net sales, driven by high demand in women's apparel and accessories. The Free People brand saw a 7.1% increase in retail comps and contributed to an overall strong showing across digital and physical sales channels.

FP Movement Initiative
Urban Outfitters’ FP Movement, part of the Free People brand, continues to be a pivotal growth driver. In Q2 2025, global sales from FP Movement rose by 10.2%, with a 7.1% increase in retail sales and an impressive 18% surge in total brand sales. The brand’s success in the activewear market reflects the increasing consumer demand for lifestyle and fitness apparel.
FP Movement’s ability to resonate with consumers and capitalize on this growing market segment positions it as a key player for sustained long-term growth within the Urban Outfitters portfolio.

Nuuly Subscription Service
Nuuly, the company’s subscription-based rental business, has shown remarkable growth. In Q2 2025, Nuuly’s revenues soared by 62.6% year-over-year, driven by a 55% increase in average active subscribers. With a subscriber base exceeding 250,000, Nuuly’s profitability potential is growing, and it is on track for a full-year profit in fiscal 2025.
This business model, which combines fashion with the growing trend of circular economies, strengthens Urban Outfitters’ overall revenue diversification and appeals to consumers interested in sustainable fashion.

Strategic Expansion Plans
Urban Outfitters continues its measured retail expansion. In Q2 2025, the company opened 11 new stores, with a particular focus on growing the FP Movement and Anthropologie brands. Going forward, the company plans to open a total of 57 new stores in fiscal 2025, while closing around 25 underperforming locations. This strategy underlines the company’s goal to optimize its store footprint while tapping into the most promising consumer segments.

Risks and Challenges

Underperformance of Urban Outfitters Brand
The flagship Urban Outfitters brand continues to struggle, with a 9.3% year-over-year decline in retail segment comps. This weakness, evident in both digital and physical sales, is attributed to challenges in product categories outside of home and women's accessories, indicating possible brand fatigue. The company expects a further 10.3% decline in Urban Outfitters sales in Q3 2025, highlighting the importance of brand revitalization.

Rising SG&A Expenses
Urban Outfitters faces growing Selling, General, and Administrative (SG&A) expenses, which increased by 7.6% in Q2 2025 to $348.2 million. This rise was driven by increased marketing and payroll costs, particularly within the Retail and Nuuly segments. The inability of the Urban Outfitters brand to reduce expenses at the same pace as declining revenues is a significant challenge, and we anticipate SG&A expenses to rise further by 5% in Q3 2025.

Consumer Demand Fluctuations
Recent deceleration in consumer demand, particularly in late July and August 2024, is a cause for concern. While consumer traffic remained stable, overall purchasing activity slowed due to inflationary pressures and shifting consumer preferences. This trend poses risks to sales growth, especially if these macroeconomic factors persist.

Financial Health and Valuation

Urban Outfitters maintains a strong balance sheet, with $209.1 million in cash and $352.4 million in marketable securities as of July 31, 2024. The company’s healthy cash flow, supported by $163.8 million in net cash from operating activities, provides it with the flexibility to navigate market challenges and invest in strategic growth initiatives.

The stock is currently trading at a forward P/E ratio of 10.2, which is attractive relative to its historical average and industry peers. The company’s PEG ratio of 1.1 further highlights its potential for growth at a reasonable price.

Valuation Metrics

P/E TTM: 10.3
P/S TTM: 0.60
Price to Book (P/B): 1.50
The stock’s valuation is compelling compared to its peer group, and Urban Outfitters is well-positioned to outperform the broader market with a price target of $42.00.

Conclusion and Investment Outlook

Urban Outfitters presents a compelling investment opportunity, driven by strong growth in its Anthropologie, Free People, and Nuuly segments. The company’s strategic focus on full-price sales, inventory management, and store optimization positions it well for continued success in the 6-12 month horizon.

However, the weakness in the Urban Outfitters brand and rising SG&A expenses pose near-term risks. Investors should closely monitor the company's progress in managing these challenges, as well as broader macroeconomic factors affecting consumer demand.

Disclaimer

While Urban Outfitters demonstrates strong potential for growth, this report serves as an informational guide. Investors should conduct thorough due diligence and consult with a financial advisor before making any investment decisions based on this analysis.