2 Reasons to Like URBN and 1 to Stay Skeptical

The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Gap and the rest of the apparel retailer stocks fared in Q3.

Apparel sales are not driven so much by personal needs but by seasons, trends, and innovation, and over the last few decades, the category has shifted meaningfully online. Retailers that once only had brick-and-mortar stores are responding with omnichannel presences. The online shopping experience continues to improve and retail foot traffic in places like shopping malls continues to stall, so the evolution of clothing sellers marches on.

The 9 apparel retailer stocks we track reported a very strong Q3. As a group, revenues beat analysts’ consensus estimates by 2% while next quarter’s revenue guidance was in line.

Thankfully, share prices of the companies have been resilient as they are up 8.4% on average since the latest earnings results.

Gap

Operating under the Gap, Old Navy, Banana Republic, and Athleta brands, Gap is an apparel and accessories retailer selling casual clothing to men, women, and children.

Gap reported revenues of $3.94 billion, up 3% year on year. This print exceeded analysts’ expectations by 0.8%. Overall, it was a very strong quarter for the company with an impressive beat of analysts’ EBITDA estimates and a solid beat of analysts’ gross margin estimates.

"We are proud to report that Gap Inc.'s third quarter results exceeded our net sales and margin expectations and delivered the seventh consecutive quarter of positive comparable sales," said President and Chief Executive Officer, Richard Dickson.

Interestingly, the stock is up 16.5% since reporting and currently trades at $26.88.

Best Q3: Zumiez

With store associates called “Zumiez Stash Members”, Zumiez is a specialty retailer of street and skate apparel, footwear, and accessories.

Zumiez reported revenues of $239.1 million, up 7.5% year on year, outperforming analysts’ expectations by 2%. The business had an exceptional quarter with a beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates.

Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 9.5% since reporting. It currently trades at $24.67.

Weakest Q3: Torrid

Promoting a message of body positivity and inclusiveness, Torrid Holdings is a plus-size women’s apparel and accessories retailer.

Torrid reported revenues of $235.2 million, down 10.8% year on year, falling short of analysts’ expectations by 2%. It was a disappointing quarter as it posted full-year EBITDA guidance missing analysts’ expectations significantly and a significant miss of analysts’ EBITDA estimates.

Torrid delivered the highest full-year guidance raise but had the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 7.3% since the results and currently trades at $1.22.

Read our full analysis of Torrid’s results here.

American Eagle

With a heavy focus on denim, American Eagle Outfitters is a specialty retailer offering an assortment of apparel and accessories to young adults.

American Eagle reported revenues of $1.36 billion, up 5.7% year on year. This print beat analysts’ expectations by 3.1%. Overall, it was an exceptional quarter as it also put up a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ revenue estimates.

The stock is up 10.6% since reporting and currently trades at $23.05.

Read our full, actionable report on American Eagle here, it’s free.

Urban Outfitters

Founded as a purveyor of vintage items, Urban Outfitters now largely sells new apparel and accessories to teens and young adults seeking on-trend fashion.

Urban Outfitters reported revenues of $1.53 billion, up 12.3% year on year. This number topped analysts’ expectations by 2.6%. It was a very strong quarter as it also recorded an impressive beat of analysts’ EBITDA estimates and a solid beat of analysts’ revenue estimates.

Urban Outfitters delivered the fastest revenue growth among its peers. The stock is up 1.9% since reporting and currently trades at $69.60.

Read our full, actionable report on Urban Outfitters here, it’s free.

What Happened?

A number of stocks fell in the afternoon session after the Dow Jones Industrial Average fell as much as 0.7%, reflecting lingering uncertainty, and capping off a volatile week which saw stocks enjoy some relief as President Donald Trump reduced tensions with European allies by backing off his threat of imposing new tariffs. 

Threats of tariffs initially created uncertainty for businesses, as they can lead to higher costs for multinational corporations and disrupt global supply chains. By withdrawing the threat, the administration removed a significant headwind for the market, prompting a relief rally. This development was a key factor in helping major indexes recover from earlier losses, even as some analysts noted that underlying geopolitical risks and market volatility remain concerns for investors.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Vehicle Retailer company Lithia fell 4.2%. Is now the time to buy Lithia? Access our full analysis report here, it’s free.
• Apparel Retailer company American Eagle fell 3.2%. Is now the time to buy American Eagle? Access our full analysis report here, it’s free.
• Apparel Retailer company Urban Outfitters fell 3.1%. Is now the time to buy Urban Outfitters? Access our full analysis report here, it’s free.
• Home Furniture Retailer company Arhaus fell 3.9%. Is now the time to buy Arhaus? Access our full analysis report here, it’s free.
• Home Furniture Retailer company Williams-Sonoma fell 2.9%. Is now the time to buy Williams-Sonoma? Access our full analysis report here, it’s free.

Zooming In On Lithia (LAD)

Lithia’s shares are somewhat volatile and have had 13 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 4 months ago when the stock dropped 6.1% on the news that investor sentiment soured on the used-car retail sector as competitor CarMax reported weak second-quarter results that missed expectations. 

CarMax, a major industry player, announced that its profit and sales for the quarter ending August 31 fell short of analyst forecasts. The company's used-car sales dipped 7.2% to $5.271 billion, and same-store sales dropped by 6.3%. CarMax's earnings per share came in at 64 cents, significantly below the expected $1.04. The poor performance from a key competitor raised concerns about challenging market conditions for the entire used-car industry, weighing on shares of peer companies. Separately, it was reported that Lithia sold its BMW Portland dealership to Swickard Auto Group.

Lithia is down 3.3% since the beginning of the year, and at $321.25 per share, it is trading 16.7% below its 52-week high of $385.71 from February 2025. Investors who bought $1,000 worth of Lithia’s shares 5 years ago would now be looking at an investment worth $947.19.