Urban Outfitters Inc (URBN) Q4 2025 Earnings Report

Revenue: Q4 2025 revenue of $1.636B, up 9% YoY; Gross profit: $528M, gross margin 32.3% (up ~200 bps YoY); Operating income: $125M, operating margin ~7.66%; Net income: about $98M in management discussions (GAAP shown as $120.3M in the formal data, with adjusted figures used in communications); EPS (diluted): $1.28–$1.04 range depending on basis used in the discussion; FCF (free cash flow): $281.9M; Operating cash flow: $320.5M; Cash at end of period: $290.5M; Net debt: $807.9M; Debt/Total capitalization: ~30.8%; Inventory turnover and days on hand imply improving turns after inventory discipline; Capex: $38.5M for Q4, with FY26 guidance around $240M; Net new stores planned in FY26: ~58 openings and ~19 closures; FY26 sales guidance: mid-single-digit growth; Gross margin uplift target: 50–100 bps; Tax rate guidance: ~24% for the year and ~23% for Q1; Share repurchase planned to offset dilution.

Strategic and operational themes from management:
- Strategy and profitability focus: URBN targets a 10% operating margin long-term, with current progress toward margin expansion across brands. Frank Conforti: 'we are still targeting a 10% operating profit rate' and see multiple levers across brands contributing to margin improvement.
- Brand performance and mix: Anthropologie and Free People generated the strongest quarterly profit dollars and encouraged top-line growth, while Urban Outfitters (UO) is stabilizing and improving profitability in North America via fewer markdowns and higher regular-price selling; Europe led by digital channels also improved comps for UO.
- Nuuly growth and profitability: Nuuly added over 20,000 average active subscribers in Q4, finishing with ~300k, delivering 56% revenue growth and its first full year of profitability (operating profit of $13M).
- Real estate and store strategy: Anthropologie plans a store expansion to about 270 stores globally; URBN will open ~58 stores and close ~19 in FY26, with FP Movement, Free People and Anthropologie being the primary growth drivers. Shea Jensen emphasized store rationalization for UO to improve productivity through smaller formats.
- FY26 guidance and capital allocation: Melanie Marein-Efron outlined mid-single-digit top-line growth, gross margins up 50–100 bps, capex of ~$240M, and a plan to repurchase shares to offset dilution; tax rate ~24% for FY26, 23% for Q1, and inventory turns to improve.

URBN is transitioning from a period of volatility to a more normalized growth trajectory, anchored by a broadened brand portfolio and a disciplined approach to real estate and markdowns. The company’s FY26 guidance for mid-single-digit revenue growth, 50–100 bps gross-margin expansion, and a capex plan of ~$240M supports a constructive margin and cash-flow trajectory. The Nuuly business is a meaningful upside with its first full year of profitability and a subscriber base growth engine that could unlock substantial revenue opportunities if subscriber momentum continues. On a relative basis, URBN trades at roughly 10.6x forward earnings (per the disclosed P/E multiple), which sits below some pure-play peers like Lululemon but above some traditional fashion retailers, suggesting room for multiple expansion if its margin improvement and growth engines sustain. Investors should monitor: (1) URBN’s ability to sustain gross-margin lift and translate it into operating income uplift across UO, Anthro, and FP; (2) the pace of Nuuly profitability and its impact on consolidated margins; (3) the effectiveness of international expansion, particularly Europe; and (4) the capital allocation in timing of store openings, closures, and buybacks.