Executive Summary
- URBN delivered a record-breaking QQ1 2026 with total sales of $1.329 billion, up 11% year over year, underscoring a multi-brand rebound across URBN’s portfolio. Gross profit rose 20% to $489 million, lifting gross margin to 36.8% (up 278 basis points, including 74 bps of non-recurring benefits).
- Operating income expanded 72% to $128 million, driving an operating margin of 9.6% (up ~340 bps year over year). Net income rose 75% to $108 million, or $1.16 per diluted share. The quarterly performance reflects meaningful leverage from occupancy and delivery efficiencies, improved product assortments, and targeted marketing investments that boosted traffic and transactions across both physical and digital channels.
- Nuuly continued to be a standout growth engine with revenue up 60% and average active subscribers up more than 110,000 versus the prior year, contributing to a record first-quarter operating profit for the URBN group above 5%. Anthropologie and Free People also posted solid top-line growth and margin expansion; Urban Outfitters (UO) began to stabilize with the first positive global comp in some time, including a 14% Europe comp and a 2% overall global comp, though North American digital promotions remained a near-term risk. Management projects high-single-digit total company sales growth in Q2 and a full-year gross margin improvement of 50–100 basis points, supported by tariff mitigation and occupancy leverage.
- The company outlined a cautious but constructive outlook for FY2026, including capex of approximately $240 million and net store openings of ~64 with ~17 closed, predominantly to optimize format efficiency and reflect a multi-brand growth strategy. Tariff headwinds are acknowledged, with a planned minimal gross margin impact in Q2 and up to ~20 bps in H2, offset by ongoing execution and price-mixel actions as needed. Investors should monitor tariff developments, real estate optimization, and Nuuly’s continued profitability trajectory as key drivers of value creation.
Key Performance Indicators
QoQ: -18.74% | YoY:10.72%
Key Insights
Revenue: $1,329.5 million in Q1 2026, up 10.7% YoY, QoQ -18.7%. Gross profit: $489.1 million, up 18.4% YoY, QoQ -7.3%. Gross margin: 36.8% (up 278 bps YoY; includes ~74 bps non-recurring benefits). Operating income: $128.2 million, up 61.9% YoY, QoQ +2.3%. Operating margin: 9.6% (up >340 bps YoY). Net income: $108.3 million, up 75.0% YoY, QoQ -9.9%. EPS (diluted): $1.16. EPS: $1.18 (GAAP). Cash flow from operations: $33.0 million; Free cash flow: -$13.1 million. Endlan
g cash: $189.4 million;...
Financial Highlights
Revenue: $1,329.5 million in Q1 2026, up 10.7% YoY, QoQ -18.7%. Gross profit: $489.1 million, up 18.4% YoY, QoQ -7.3%. Gross margin: 36.8% (up 278 bps YoY; includes ~74 bps non-recurring benefits). Operating income: $128.2 million, up 61.9% YoY, QoQ +2.3%. Operating margin: 9.6% (up >340 bps YoY). Net income: $108.3 million, up 75.0% YoY, QoQ -9.9%. EPS (diluted): $1.16. EPS: $1.18 (GAAP). Cash flow from operations: $33.0 million; Free cash flow: -$13.1 million. Endlan
g cash: $189.4 million; Total debt: $1,140.5 million; Net debt: $951.1 million. Sub-brand performance: Anthropologie comp +7% (retail), Free People +11% total URBN segment sales; FP Movement +29% total growth; Nuuly revenue +60%; UO comp +2% globally; Europe UO +14%. Tariffs: 10% global (China 30%) with mitigations; FX and channel mix remain shaping margins.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
1.33B |
10.72% |
-18.74% |
| Gross Profit |
489.06M |
18.42% |
-7.32% |
| Operating Income |
128.23M |
61.85% |
2.32% |
| Net Income |
108.35M |
75.42% |
-9.94% |
| EPS |
1.18 |
78.79% |
-9.23% |
Management Commentary
- Strategy and execution: Management emphasized a broad-based turnaround across the URBN brands, with Anthropologie delivering continued double-digit operating-margin growth and a new product strategy (e.g., Celandine) that broadened lifestyle assortments. Quote: “The Anthropologie brand delivered exceptional top line growth and the tenth straight quarter of double-digit operating profit growth resulting in a record first quarter operating income.”
- Nuuly is a material driver of top-line growth and is approaching a sustainable profitability profile: “Nuuly added over 40,000 average active subscribers since the end of the fourth quarter... 60% revenue growth… leverage in almost every expense line item, helping to deliver a record first-quarter operating profit of over 5%.”
- UO margin recovery signals ongoing leverage opportunities: “Urban Outfitters North America is making steady progress… positive comps driven by lower markdowns and improved product, inventory management and marketing campaigns.”
- Tariff uncertainty acknowledged; mitigations outlined: diversification of origins (India, Vietnam, Turkey; China <5%), longer transit by boat, selective price actions. Guidance reflects sensitivity to tariffs: “tariffs could have a minimal negative impact on gross margins in the second quarter and potentially a negative 20 basis points impact in the back half of the year.”
"Q1 was another record-breaking quarter for URBN. Both sales and profits exceeded our expectations and easily outpaced last year’s Q1 results."
— Dick Hayne
"Nuuly added over 40,000 average active subscribers since the end of the fourth quarter and has grown average active subscribers by over 110,000 compared to the prior year. This beat even our most optimistic expectations."
— Frank Conforti
Forward Guidance
- Near-term outlook: URBN projects total company sales to grow in the high-single digits in Q2, with mid-single-digit comps at Anthropologie and Free People, and a low-single-digit comp at Urban Outfitters. Nuuly is anticipated to deliver mid-double-digit revenue growth driven by continued subscriber momentum; Wholesale is expected to grow in the low-double-digit range.
- Margins: Gross margin is expected to improve by approximately 50–100 bps in Q2 and for the full year, aided by lower markdowns (Urban Outfitters) and occupancy leverage, partially offset by higher initial product margins due to tariffs. The management emphasis remains on protecting opening price points and selectively raising prices only where feasible without harming the customer experience.
- Capital allocation and store strategy: FY2026 capex around $240 million, with plan to open ~64 stores and close ~17. Store openings prioritized for FP Movement, Free People, and Anthropologie. Monitoring tariff developments and supply chain reliability remains critical; management notes flexibility to adjust SG&A spend in response to sales performance.
- Monitoring factors for investors: trajectory of URBN’s margin expansion, Nuuly profitability trajectory toward a potential 10% operating margin, and the pace of Urban Outfitters’ turnaround, along with macro consumer spending trends and tariff policies.