Conference Calls: The Good, the Bad, the Misunderstood
08/21/08 - 05:17 PM EDT
Scott Rothbort
Editor's note: Last earnings season, Scott Rothbort explained how to distinguish between good, bad and misunderstood earnings conference calls, and what each type of call sounds like. Here is a new set of examples.
Good: Urban Outfitters May 15 and August 14, 2008: In a softening economy with rising prices and a restrained consumer, Urban Outfitters (URBN Quote - Cramer on URBN - Stock Picks) has put together not one, but two excellent quarters for its fiscal 2009 accounting year. The key to these calls was to focus on how Urban Outfitters was performing during the economic slowdown. If you listen to these calls, you'll hear that the company's management was able to not only ease investor and analyst concerns, but also paint a positive picture for its expansion efforts going forward. The assumption is that once the economic clouds clear, Urban Outfitters would be poised for greater levels of growth and success. On May 15, in the company's first quarter of the year (which ended in April), Urban Outfitters reported EPS (earnings per share) of 25 cents, which beat consensus estimates by 2 cents. Net sales of $394.3 million were a record for the company and were in line with the company's pre-announced higher level of sales, and slightly ahead of analysts' estimates. Gross margins increased 444 basis points, to 40.2%. Sounds good. But how did Urban Outfitters do it? The company was able to achieve this success by reducing price markdowns. In retail slowdowns, markdowns tend to increase in order to reduce inventory. Urban Outfitters was able to avoid the markdown syndrome and, in the process, reduce its comparable store inventory by 3%. This was a testament to management's execution and the company's business model. Finally, same-store "comps" were a positive 10% (an aggregate rate). All of this took place before the federal rebate checks hit consumer pocketbooks. So what happened when it came to Urban Outfitters' second quarter (which ended in July)? A week before the earnings release, Urban Outfitters previewed their sales results by reporting a total sales jump of 30% to $454.3 million. This is significantly greater than Wall Street analysts' consensus estimate of $431.1 million. Total same-store sales rose 13% in the quarter. And when the company reported its quarter on August 14, the EPS number clocked in at 33 cents. Now compare 33 cents to 19 cents in the year-ago quarter, as well as and analysts' consensus estimates of 29 cents (with the highest estimate being 31 cents). Clearly, Urban Outfitters has the right stuff in this economy and proved itself in both of its most recent quarterly conference calls. To listen to an archive of either of these conference calls, click one of the following links:
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