Costco Wholesale Corporation (COST), Urban Outfitters, Inc. (URBN): Is It Time to Buy These Two Retailers?

Those new stores set Costco Wholesale Corporation (NASDAQ:COST) up for success heading into its new fiscal year.  Over the past decade, Costco Wholesale Corporation (NASDAQ:COST)’s shares have traded up in 9 of the past 10 3-month periods that started in September and ended in November, producing average and median returns of 9.64% and 11.55%, respectively.

There’s no more fickle shopper than a teenager
In any given season, fast changing fashion trends significantly punish or reward apparel retailers. That’s no surprise to Urban Outfitters, Inc. (NASDAQ:URBN). The company has been navigating teen fashion trends since 1970.

Urban Outfitters, Inc. (NASDAQ:URBN) entered this back-to-school sales season with tailwinds. Sales at stores open more than one year improved 9% last quarter, suggesting the company has traction with young buyers. Those buyers helped quarterly sales climb 12.2% to $758 million, generating $0.51 in earnings per share, 21.4% more than a year ago.

One of the company’s fastest growing brands is Free People, which tends to target a bit older crowd, mid to late 20’s. The company continues to open new Free People stores after seeing the brand’s sales climb more than 30% to $97 million last quarter. With only 83 Free People stores, there’s plenty of room to grow, given that there are 222 Urban Outfitters, Inc. (NASDAQ:URBN) stores and 182 Anthropologie brand stores.

This debt-free company is perennially shareholder-friendly too. Urban Outfitters, Inc. (NASDAQ:URBN) repurchased 20.5 million shares of stock in the fiscal year ending 2012. And, the company recently approved a 10 million share buyback.

Given that the retailer has $298 million in cash and short-term investments on its balance sheet, the buyback trend is likely to continue to support share prices. Over the past decade, Urban Outfitters, Inc. (NASDAQ:URBN)’s shares have moved higher in 9 of the past 10 years through November, producing an average and median return of 15.7% and 12.85%, respectively.

Conclusion
The market often makes powerful moves that can test the patience of any investor. If September proves to be challenging, keeping your hand steady and using weakness as an opportunity to buy shares in quality companies like Costco and Urban Outfitters may prove profitable.

The article Is It Time to Buy These 2 Retailers? originally appeared on Fool.com and is written by Todd Campbell.

Todd Campbell has no position in any stocks mentioned. The Motley Fool recommends Costco Wholesale (NASDAQ:COST) and Urban Outfitters. The Motley Fool owns shares of Costco Wholesale.

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