How merchandising and marketing led Urban Outfitters to a successful Q3

Third-quarter results have been rolling in, but few retailers have had as good a quarter as Urban Outfitters. 

On November 25, the wider Urban Outfitters group, which operates a portfolio of global consumer brands including Anthropologie, Free People, FP Movement and Nuuly, reported that total company net sales for the three months ending in October increased 12.3 per cent to a record US$1.53 billion. 

Additionally, the corporation reported that its total retail segment net sales increased 9.6 per cent, with comparable retail segment net sales increasing 8 per cent. 

While all of the corporation’s brands experienced growth this quarter, some performed better than others, with Urban Outfitters’ comparable retail segment net sales spiking by 12.5 per cent, followed by Anthropologie (7.6 per cent) and Free People (4.1 per cent). 

Nuuly, a clothing rental subscription service that also sells some previously worn merchandise, had an especially impressive year, with net sales/subscriptions growing 48.7 per cent YoY.  

At a time when multiple retailers are struggling to stay current with today’s ever-more price-sensitive shoppers, CI&T’s global director of retail strategy, Melissa Minkow, credits the corporation for its strategic approach to creating desirable, accessible products across its portfolio of brands. 

“This market has proven that the two keys to success are assortment and price,” she said. “Urban’s brands have assortments that are finely tuned and resonant with each target audience. They’re all uniquely catering to the customer they represent.

“At a pricing level, each brand is appropriately priced – accessible to its target customer, yet reasonable enough not to have to compete against fast fashion. The brands have all discounted at levels that meet customers’ expectations.”

What experts have to say about Urban Outfitters’ Q3 results

Retail analyst Neil Saunders, managing director at GlobalData Retail, added that the heart of Urban Outfitters’ success is the fact the group is merchant-led. 

“Their teams across all brands have a deep understanding of customers and how to produce collections and assortments that resonate,” he said. “This helps sell-through; it is also why a lot of sales are made at full price rather than on discount, which is good for margins.”

Saunders also noted that the corporation has done an excellent job of producing desirable, exclusive, own-brand merchandise, which further drives customers to stores or other online shopping portals and pushes into new growth areas, such as clothing rental with Nuuly. 

Moving forward, Urban Outfitters’ trajectory should remain positive, as most of the corporation’s brands continue to attract new customers. Not to mention that with continued refreshment of the brands’ portfolio, such as Urban Outfitters’ recent rollout of a new store concept, and new owned-brand spin-offs, such as Anthropologie’s launch of Maeve as a stand-alone concept, there is further growth to be expected. 

All these factors, along with continued store expansion, should help keep growth elevated. 

“Each of the brands under the Urban Outfitters umbrella is good in its own right, but taken together, they give the company a very powerful fashion portfolio with great customer reach,” said Saunders. 

How Urban Outfitters can build momentum for a successful Q4

Minkow noted that Urban Outfitters’ marketing efforts this year, such as the digital and in-store activations for Maeve and its brand partnerships, including those with coffee chain Dunkin’ Donuts and singer Tinashe, have been very strong and have helped the brand’s overall image and profitability. 

Although she suggested that the corporation will do well to focus on digital innovation, especially for its younger-led brands, such as its namesake label, Urban Outfitters, to keep the ball rolling. 

One route the company can take is to lean into the growing consumer interest in Gen-AI-powered styling tools, which has been increasingly adopted by luxury and more price-accessible brands alike. 

Additionally, Minkow suggested that the company should take cues from Sephora’s “My Sephora Storefront” affiliate platform to build a creator-centred collaborative platform for some of its brands. 

Both Saunders and Minkow concluded that, so long as the brand continues on its current path, it should be well-positioned for a healthy fiscal quarter.

Further reading: Is Urban Outfitters’ Gen Z growth strategy behind analysts’ upbeat forecasts?

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