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Net Net: Promoting innovation and managing change

Urban Renewal on the Street

Urban Outfitters
Source: Wikimedia Commons

Even though consumers are still anxious about opening their wallets, there is a bright spot among clothing retailers.

Urban Outfitters, which also operates Anthropologie and Free People, has picked up a couple of "buy" ratings on the street this month.

Wall Street Strategies Equity Research Analyst Brian Sozzi raised his rating for Urban Outfitters to a "buy" from "sell" on Friday. He raised his price target to $36 a share from $26. He believes the retailer is regaining its composure after a rocky year.

"The crux of the problem for the company has been good old-fashioned assortment issues at the Urban Outfitters and Anthropologie divisions, ranging from sloppy fits to a lack of trendy wares that the young hipster crowd craves," said Sozzi. "Compounding the unfortunate set of circumstances is that the price/valuation equation has been wide off the mark. Merchandise that may not make it three washes and does not strike an emotional nerve with consumers is a recipe for a retail earnings disaster story."

He said Urban's selection has improved for Fall in both fit and quality. In fact, he saw two Urbans packed with young teenagers this weekend. Sozzi says this is not usually the case.

Sozzi's move comes two weeks after Morgan Stanley's Kimberly Greenberger lifted her rating for Urban to "overweight." She also raised her fiscal year 2012 earnings prediction to $1.98 a share.

Maybe this urban renewal is a sign of a new lasting fad in the retail space—just in time for back-to-school shopping season.

Stephanie is Squawk Box producer. Follow her on twitter @StephLandsman


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