Urban Outfitters has delivered a powerful set of financial results for the second quarter of 2026, with substantial growth across its entire brand portfolio and a remarkable surge in its Nuuly rental service. The impressive figures are driving a significant stock rally, though questions remain about the long-term sustainability of this performance.
Financial Performance Exceeds Expectations
The company reported a substantial 11% increase in revenue, reaching a record-breaking $1.50 billion. Even more impressive was the net income figure, which surged by 22% to $144 million. This translates to $1.58 per diluted share, demonstrating strong profitability.
Key performance indicators for the quarter reveal broad-based strength:
– Comparable retail sales increased by 6%
– Gross margin expanded by 113 basis points to 37.6%
– Operating income climbed 20% to $174 million
Brand Portfolio Demonstrates Robust Growth
Each of Urban Outfitters’ brands contributed to the outstanding results. Anthropologie continued its remarkable streak, maintaining positive quarterly comparisons for over four consecutive years. Free People delivered particularly strong performance with 14% growth, supported by a 7% increase in comparable retail sales. The FP Movement activewear sub-brand experienced explosive expansion with 30% growth.
The standout performer was undoubtedly Nuuly, the company’s subscription rental service. Nuuly’s revenue skyrocketed by 53% to $139 million, adding 120,000 new subscribers within a single year. The service achieved a record operating margin of 9%, positioning it well toward its ambitious $1 billion revenue target.
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Strategic Expansion Amid Market Challenges
While Urban Outfitters continues its physical expansion strategy—recently opening a new location in Gateshead—the company faces ongoing tariff-related challenges. Management has recently revised its estimate of tariff impacts on gross margin upward, from 20 to 75 basis points.
The company is addressing these challenges through multiple approaches: negotiating with suppliers, diversifying its supply chain, and implementing strategic pricing adjustments. CEO Richard Hayne has indicated that the expiration of certain import tax exemptions might actually present opportunities for the retailer.
Market Response and Analyst Sentiment
Despite the strong quarterly performance, UBS maintained a neutral rating on the stock, raising its price target only marginally from $78 to $79. An interesting development emerged in short interest data, which declined by 3.81% to 20.45% of available shares. This reduction suggests that short sellers would require approximately 6.47 days to cover their positions at current trading volumes.
The central question for investors remains whether this record-breaking quarter represents the beginning of sustained momentum for Urban Outfitters shares or merely a temporary rally in the company’s ongoing market journey.
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