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Heading into Black Friday and the holiday shopping season, retailers are primed and ready for a big final month of the year.

But it was Black Wednesday for one retailer, Urban Outfitters (Nasdaq: URBN), as its stock price soared 13% on Wednesday to near a 52-week high.

The catalyst was the clothing retailer’s third quarter earnings, which set records for revenue and earnings, and beat expectations.

• Net sales: $1.53 billion, up 12% year-over-year. This beat estimates of $1.48 billion.
• Net income: $116.4M, up 13% year-over-year.
• Earnings: $1.28 per share, up 16% year-over-year. This beat estimates of $1.19 per share.

Urban Outfitters saw revenue in its retail segment jump 10% to $1.3 billion with same store sales rising 8%. The gains in comp sales were driven by high single-digit positive growth in both digital channel sales and retail store sales.

Also, its subscription segment soared 44% to $145 million, while its wholesale business rose 7% to $88 million.

Anthropologie, Urban Outfitters and Free People

To better understand Urban Outfitters earnings, it helps to know its brands and where the revenue is coming from. It has three retail store chains — Anthropologie, Urban Outfitters, and Free People. It also has a subscription-based clothing rental business, called Nuuly. Finally, it also owns several restaurants and event spaces, called Menus and Venues. Here’s how much revenue each generated in Q3.

• Anthropologie: $634.8M, up 8% year-over-year.
• Free People: $399.3M, up 9% year-over-year.
• Urban Outfitters: $339.8M, up 13% year-over-year.
• Nuuly: $144.6M, up 48% year-over-year.
• Menus and Venues: $10.8M, up 5% year-over-year.

“These results underscore the strength of our diversified business model, which enables us to continue capturing market share, and drive consistent long-term growth,” Richard Hayne, CEO, said.

Margin expansion despite tariff headwinds

Urban Outfitters increased its gross profit margin in the quarter by 31 basis points year-over-year to 36.8%, despite tariff headwinds.

“We estimate that tariffs negatively impacted our third quarter gross margin rate by approximately 60 basis points, and we currently believe they will have an impact of approximately 75 basis points in the fourth quarter,” Frank Conforti, co-president and COO, said on the call. “Despite these headwinds, we still believe we can achieve approximately 100 basis points of gross margin improvement for the full fiscal year 2026.”

Conforti said the company has been able to mitigate the effect of tariffs by negotiating vendor terms, modifying its countries of origin, adjusting transportation modes, and strategically managing pricing.

“I want to emphasize that this plan reflects our current knowledge, and there is still a lot of uncertainty in today’s environment,” he added. “This uncertainty in addition to our ongoing mitigation efforts makes it challenging to predict the impact of tariffs beyond the fourth quarter.”

Wall Street upgrades

Along with operating margin expansion, Conforti said the company is poised for record sales and operating profits this year.

On the call, Hayne said November traffic and sales were robust with comp sales running ahead of expectations.

The company got a slew of price target upgrades from Wall Street analysts after releasing earnings. Among them, JP Morgan boosted its target to $86 per share while Morgan Stanley raised its target to $91 per share.

Urban Outfitter stock is up 39% YTD and 90% over the past 12 months. It is also cheap with a P/E ratio of 13 and a forward P/E of 12. It has also been a fantastic long-term performer with a 5-year average annualized return of 21% and a 10-year average return of 12%.

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