Thursday, December 17, 2015

Analysis of Urban Outfitters


Urban Outfitters, an American retail and pizza restaurant chain

Company: Urban Outfitters

ISIN US9170471026 | WKN 888903

Business: An american retail chain with some dabbling in the food business. Their retail brand names are: Urban Outfitters, Anthropologie, Free People, BHLDN and Terrain. They have 566 stores in total and their products are being sold in around 1600 wholesale specialty stores.  In November they also decided to buy the Vetri Family which is a casual dining pizza restaurant that Mr. Hayne apparently hope to be able to expand.

Active: Mainly USA and Canada with some presence in Europe.

P/E: 13.6


This company was analysed due to a request over email.

contrarian values of P/E, P/B, ROE as well as dividend

The P/E for Urban Outfitters is very good with 13.6 but the P/B is a bit high with 2.4 which then gives us low interest from Graham. The earnings to sales are ok with 7% and the ROE is excellent with 17.5%. The book to debt ratio is also great with 2.4 and could be part of the problem with the pizza expansion.
In the last five years they have had a yearly revenue growth rate of 7.9% which is excellent and this then gives us  motivated P/E of 19 to 24 which means that Urban Outfitters are undervalued on the market today.
They pay no dividend which I do not like. They do however have massive share buyback programs running from borrowed money and they do retire these shares.

Conclusion: Graham says no to Urban Outfitters and I am confused. Mr. Haynes obviously believes that he can grow the pizza place and if one believe in Mr. Haynes and his allocation of money then I would say this can be a good investment. Already buying a, by the look of it, successful retail chain company at P/E 13.6 is in my book good considering what I have paid for my latest retail companies... I need to check out a store though and happily there are Urban Outfitters stores in Berlin and I will write a comment once I have been there.

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1 comment:

Fredrik von Oberhausen said...

I visited the store yesterday. There were selling not only a broad variety of stuff but also a broad variety of different brands.
The decoration was Urban concrete, rough and raw. There were customers in the store that was located on K-damm one of the more exclusive shopping streets in Berlin but it was not enough for me to consider to make a buy.