Urban Outfitters Q2 Earnings Call Highlights

Key Points

• Urban Outfitters delivered record Q2 results: Sales rose 10% to $1.7 billion, operating income increased 11% to $193 million, and adjusted EPS grew 9% to $1.72. All retail brands posted positive comparable sales.
• FP Group and Nuuly led growth. FP Group revenue increased 15%, while Nuuly revenue rose 29% to $179 million and reached its first quarterly operating profit, with 484,000 average active subscribers.
• Management maintained a positive outlook for high-single-digit fiscal-year sales growth and roughly 25 basis points of gross-margin improvement, despite tariff and fuel-surcharge pressures. Third-quarter sales are expected to grow in the high-single-digit range.

Urban Outfitters NASDAQ: URBN reported record second-quarter sales and earnings for fiscal 2027, extending what CEO and Chairman Dick Hayne described as the company’s eighth consecutive quarter of record sales and profits.

Net sales rose 10% to $1.7 billion in the quarter ended July 31, 2026. Operating income increased 11% to a company record of $193 million, while adjusted earnings per diluted share grew 9% to $1.72. Management’s adjusted figures exclude one-time benefits associated with refunds of previously paid IEEPA tariffs, related interest income and a tax benefit tied to foreign deferred tax assets.

All of the company’s retail brands posted positive comparable sales, while its wholesale and Nuuly subscription-rental businesses also reported record second-quarter results. Retail segment comparable sales increased 6%, with digital comparable sales slightly ahead of store performance.

Brand performance

The FP Group, which includes Free People and FP Movement, was a major contributor to growth. The group’s total revenue increased 15%, driven by a 10% retail segment comparable-sales gain, new stores and wholesale expansion. Wholesale revenue for the group rose 19%, led by FP Movement, intimates and women’s apparel.

Free People posted 11% sales growth and a 9% retail segment comp, with strength in bottoms and intimates. FP Movement delivered 26% revenue growth and a 13% retail segment comp. The activewear brand opened four stores during the quarter, bringing its standalone store count to 97.

Urban Outfitters brand sales increased 8%, including an 8% global retail segment comp. In North America, digital sales outperformed stores, while European stores outperformed the digital channel. President Shea Jensen said the brand’s momentum reflected continued demand for denim, pants, lounge, novelty items and shoes, as well as marketing efforts that drove double-digit digital growth and customer acquisition.

Anthropologie reported 5% total revenue growth, supported by a 3% retail segment comp and new stores. Apparel and accessories posted positive comps, while home was flat. Global CEO Tricia Smith said the company saw elevated markdowns as it worked through slower-turning inventory, but regular-price comps turned positive in July as early fall merchandise reached stores.

Smith said the brand is rebalancing its assortment to make room for newness and believes it can return to a more consistent mid-single-digit comparable-sales growth rate over the longer term. Anthropologie recorded its 22nd consecutive quarter of positive sales comps and its 15th consecutive quarter with a double-digit operating-income rate, according to management.

Nuuly reaches profitability milestone

Nuuly continued to expand rapidly, with revenue rising 29% to $179 million. Average active subscribers increased 30% from a year earlier to 484,000, and the business surpassed 500,000 active subscribers in early June before seasonal declines during the summer.

Nuuly President Dave Hayne said the subscription-rental business generated quarterly operating income of $18 million, or a 10% operating margin, for the first time. He said margins are expected to ease to the high-single-digit range in the second half because the second quarter is seasonally the strongest period for profitability.

For the full fiscal year, management said Nuuly could generate more than $700 million in revenue with a high-single-digit operating profit rate. The company expanded the service’s selection by 35% year over year to nearly 33,000 choices and added brands including Revolve private-label offerings, Collina Strada, Faithfull and Edikted. Nike was scheduled to join the platform in August, followed by J.Crew in October.

Nuuly is also expanding fulfillment capacity and automation. Its Kansas City facility has grown to 1 million square feet and can support up to 600,000 subscribers. The company is planning a new 1 million-square-foot facility near Philadelphia that is expected to open in late calendar 2028 and raise East Coast capacity to 600,000 subscribers. Once completed, the full network is expected to support roughly 1.2 million subscribers.

Margins, tariffs and outlook

Gross profit dollars increased 11%, and the gross margin rate rose four basis points to 37.7%. Management said sales growth helped leverage store occupancy costs and delivery expenses, though those benefits were partly offset by higher merchandise costs from tariffs, inbound freight fuel surcharges and modestly higher Anthropologie markdowns.

The company said fuel surcharges related to the Middle East war reduced initial merchandise margin by about 50 basis points and outbound delivery and freight expenses by about 20 basis points during the quarter. Urban Outfitters expects those costs to remain in place for the rest of the fiscal year, assuming oil-related surcharges do not decline.

However, management said its effective tariff rate should be favorable in the second half as the company begins to anniversary higher prior-year tariffs. CFO Melanie Marein-Efron said third-quarter gross margin could improve by 25 to 50 basis points from the prior year, despite an estimated 70-basis-point headwind from fuel surcharges in each of the third and fourth quarters.

For the third quarter, Urban Outfitters expects total company sales growth in the high-single-digit range. The outlook includes:

• Mid-single-digit retail segment comparable-sales growth;
• High-single-digit comps for the FP Group;
• Mid-single-digit comps for Urban Outfitters;
• Low- to mid-single-digit comps for Anthropologie;
• High-20% revenue growth at Nuuly; and
• Low-teens wholesale revenue growth.

For the full fiscal year, the company continues to expect high-single-digit sales growth, with gross margin improving by about 25 basis points. Capital expenditures are planned at approximately $475 million, with about half allocated to logistics investments. Urban Outfitters plans to open about 54 stores and close about 18 during fiscal 2027, with much of the net new growth coming from FP Movement.

Hayne said management sees resilient consumer demand across its brands and expects the fuller-bottom fashion trend to continue into fiscal 2028. He also highlighted ongoing investment in artificial intelligence tools across supply chain, creative, design, marketing and inventory functions, although executives said measurable efficiencies from those efforts will take time to fully develop.

About Urban Outfitters (NASDAQ:URBN)

Urban Outfitters, Inc is a global lifestyle retailer headquartered in Philadelphia, Pennsylvania. Established in 1970 by Richard Hayne, Scott Belair and Judy Wicks, the company began as a single store catering to college students in the city's historic Old City neighborhood. Over the decades, Urban Outfitters has expanded its reach and diversified its portfolio to include multiple retail concepts addressing distinct customer segments.

The company operates through several well-known brands, each offering a curated selection of apparel, footwear, accessories and home goods.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.

Continue following MarketBeat

Add MarketBeat as your preferred source on Google to see our latest stories in your feed.

Add As Preferred Source