Urban Outfitters surges 12% after Q1 beat, Barclays upgrades

Investing.com — Urban Outfitters reported Tuesday quarterly results that topped Wall Street estimates as markups helped boost margins.

Urban Outfitters Inc (NASDAQ:) climbed more than 12.5% in pre-market Wednesday following the report.

The retailer  earnings of 56 cents on revenue of $1.11 billion, compared with estimates for 36 cents on revenue of $1.09B.

The beat on the bottom line was helped by a 260 basis points improvement in gross profit rate, driven by higher markups and a decrease in inventory levels.

“We increase in gross profit rate was primarily due to higher initial merchandise markups at all three brands primarily driven by lower inbound transportation costs. Additionally, the gross profit rate benefited from lower merchandise markdowns at the Anthropologie Group and Free People Group brands,” the company said.

Inventory decreased by $39.6M, or 6.3%, on a year-over-year basis.

Wells Fargo analysts said URBN delivered “one of the most surprising Q1 prints this EPS season.” The analysts lifted the price target by $5 to $30 per share.

“While we see many things that need to align for the company to return to their ~10% margin target, we have to give the business credit for this type of outperformance in a touch macro,” they said in a note.

Elsewhere, Barclays analysts raised the recommendation on Urban from Equal-weight to Overweight with a price target of $38.00, up from the prior $27.00.

(Additional reporting by Senad Karaahmetovic)