Bear Of The Day: Urban Outfitters

Urban Outfitters, Inc. (URBN – Analyst Report) continues to struggle as its flagship brand, Urban Outfitters, flounders in the tough teen and young adult segment of the retail market. Will this Zacks Rank #5 (Strong Sell) be able to turn around the Urban brand?

Urban Outfitters operates 236 Urban Outfitters stores, 199 Anthropologies stores and 102 Free People stores in the United States, Canada and Europe selling apparel, accessories, shoes and home furnishings. Free People also sells its products to about 1400 specialty stores and department stores.

It also operates 7 Anthropologie wedding dress stores under the brand BHLDN in the United States. All of its brands sell online as well.

A Tale of Three Brands

On Nov 17, the company reported its third quarter results and missed on the Zacks Consensus by $0.07. Earnings were $0.35 compared to the consensus of $0.42.

Net comparable store sales fell 1% but each brand performed differently.

Free People has been killing it for well over a year and the third quarter was no exception. Comparable store sales were up 15%.

Anthropologie has been one of the company’s stronger brands, usually hitting the high single digits, but it only saw comparable store sales rise 2%.

Urban Outfitters has been the laggard for the entire year. Comparable store sales fell again by 7%.

Wholesale net sales, which is mostly Free people, soared 26%.

Gross profit rate, however, declined 295 basis points primarily due to lower initial merchandise markup followed by higher markdowns at the stores.

Total inventories also jumped 15% year over year, mainly due to the acquisition of inventory to stock new and non-comparable stores as well as an increase in the comparable retail segment inventories.

Analysts Slashed Estimates

What this all adds up to is lower earnings for fiscal 2015 and doubts about fiscal 2016.

18 estimates were cut for this year after the earnings report as the fiscal 2015 Zacks Consensus fell to $1.63 from $1.95 just 90 days ago. Earnings are now expected to decline 13.9% from fiscal 2014.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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