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Why Urban Outfitters Stock Rallied Today
Key Points
Abercrombie & Fitch reported record Q2 results before the market open on Wednesday.
The robust results also got a boost from a sizeable tariff refund.
Investors are betting the results bode well for Urban Outfitters, which reports after the market close.
Shares of Urban Outfitters (NASDAQ: URBN) charged sharply higher on Wednesday, surging as much as 8.5%. As of 2:46 p.m. ET, the stock was still up 8.4%.
The catalyst that drove the apparel retailer higher was robust results released by a competitor.
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Fashion cents
Abercrombie & Fitch (NYSE: ANF) released the results for its fiscal 2026 second quarter (ended Aug. 1), and shareholders rejoiced. The company generated record second-quarter net sales that rose 5% to $1.3 billion, marking its 15 consecutive quarter of growth. The gains were broad-based, with net sales in the Americas up 5%, sales in Asia Pacific (APAC) up 19%, and sales in Europe, the Middle East, and Africa (EMEA) up 2%. It also marked the best-ever second quarter across brands, with Abercrombie brands up 8% and Hollister up 2%.
Strong sales growth also boosted profits as adjusted earnings per diluted share (EPS) rose 79% to $4.17. It's worth noting that the results got a $100 million benefit -- or EPS of $1.75 -- from tariff refunds. The Supreme Court recently ruled that tariffs imposed by the Trump administration using the International Emergency Economic Powers Act (IEEPA) were illegal, prompting the refunds. However, even excluding the impact of the tariff refund, Abercrombie surpassed expectations.
Management also raised the company's full-year outlook to 5% sales growth, up from its previous range of 3% to 5%. Abercrombie is also guiding for EPS of $13.35 at the midpoint of its guidance, representing year-over-year growth of 28%.
So what does this have to do with Urban Outfitters?
It's no secret that Abercrombie & Fitch and Urban Outfitters vie for the same young, fashion-conscious shoppers. Abercrombie's brand portfolio is more compact, with the aforementioned Abercrombie and Hollister brands leading the charge. Urban Outfitters has built a more diversified portfolio, which includes Urban Outfitters, Anthropologie, Free People, and FP Movement.
Investors are betting that Abercrombie's record results bode well for Urban Outfitters, which is scheduled to report its second-quarter results after the market close today.
We'll know soon enough.
Danny Vena, CPA has no position in any of the stocks mentioned. The Motley Fool recommends Abercrombie & Fitch and Urban Outfitters. The Motley Fool has a disclosure policy.