Urban Outfitters, Inc. (URBN), The Gap Inc. (GPS): What’s Driving Sales at This Retailer?

Express, Inc. (NYSE:EXPR) has focused on communicating its valued position through specified price points. It has reported better results than the consensus estimates in first quarter of 2013, but has had to compromise on margin levels due to high promotional expenditure. Its comps growth was driven by its 48% growth in online sales, above the 44% growth in the fourth quarter of 2012. The company has taken strong initiatives for online sales growth and has used apps, social media, and email to attract customers. It will increase its stores base this year and has identified 13-16 locations for new stores in the U.S. and Canada.

Source: Google Finance

Urban Outfitters, Inc. (NASDAQ:URBN) has reported an operating margin of 11.26%, but it has the highest one-year forward P/E among the three mentioned peers at 19.36. Express, Inc. (NYSE:EXPR) has the lowest P/S ratio of 0.95 and the lowest forward P/E of 12.71. The Gap Inc. (NYSE:GPS) has the highest operating margin of 14.21% and a P/S ratio of 1.40.

Conclusion

Urban Outfitters, Inc. (NASDAQ:URBN) has focused on its DTC channel to drive sales growth. It has increased its online product categories and has targeted to increase online sales up to 50% of total sales in the long term. Its Anthropologie and Urban Outfitters brands have been able to attract customers, and will continue to drive sales in future. The company has plans to increase its stores base in the U.S. and internationally. I consider Urban Outfitters a “buy.”

The article What’s Driving Sales at This Retailer? originally appeared on Fool.com and is written by Ash Sharma.

Ash Sharma has no position in any stocks mentioned. The Motley Fool recommends Urban Outfitters. Ash is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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