Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Why Is Urban Outfitters (URBN) Struggling On The Bourses?

Published 06/23/2019, 09:13 PM
Updated 07/09/2023, 06:31 AM

Shares of Urban Outfitters, Inc. (NASDAQ:URBN) are currently trading close to its 52-week low of $22.19, and have plunged roughly 15.9% in the past three months. The stock came under pressure following the company’s first-quarter fiscal 2020 results on May 21. Since then shares of this lifestyle retailer have fallen about 13%.

Further, a decline in the Zacks Consensus Estimate indicates that analysts are not very optimistic about the stock’s performance going forward. We note that the Zacks Consensus Estimate for the ongoing quarter and fiscal 2020 has decreased 21 cents and 17 cents to 60 cents and $2.43, respectively, in the past 60 days.

Let’s Introspect

Shares of Urban Outfitters have lagged the industry in the past six months. In the said period, shares of this Philadelphia, PA-based company have plunged approximately 25.9% compared with the industry’s decline of 8%. Even better-than-expected first-quarter fiscal 2020 results failed to provide any impetus to this Zacks Rank #3 (Hold) stock.

While net sales showed a marginal improvement of 1%, earnings fell sharply by 18.4% from the year-ago period. Further, gross margin shrunk year over year and rate of growth of Retail segment comps decelerated sequentially. Further, the company has been grappling with soft store traffic. These factors along with management’s remark that the company commenced second-quarter below first-quarter trend hurt investor sentiment.

Comparable Retail segment net sales jumped 1%, following an increase of 3% in the preceding quarter. Management anticipates second-quarter retail segment comps to decline in low-single-digit range.

Based on the comps projection, gross margin is likely to contract more than 300 bps in the second quarter. This can be attributed to increased markdown rates and deleverage in delivery, logistics and store occupancy expenses. During the first quarter, gross margin contracted 167 bps to approximately 31.1%, primarily due to lower gross profit in the Retail segment.

Strategic Endeavors on Track

While aforementioned factors raise concern, Urban Outfitters remains committed to sustain investments in direct-to-consumer business, enhance productivity in existing channels, add new brands and optimize inventory level. Being a multi-brand and multi-channel retailer, the company offers flexible merchandising strategy. The company also has a significant domestic and international presence with rapidly expanding e-commerce activities.

The company also introduced a subscription rental service for women’s clothes called Nuuly. It envisions roughly 50,000 subscribers within one year of operation. The subscribers will have to shell out $88 each month for one six-item box. Shoppers can choose from Anthropologie, Free People and Urban Outfitters brands, third-party brand and designer labels, and rare vintage items for rent via a custom-built, digital platform.

We hope that these endeavors help lift the company’s performance and bring the stock back on track.

3 Picks You Cant’s Miss

Children's Place (NASDAQ:PLCE) has a long-term earnings growth rate of 8% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Genesco (NYSE:GCO) , with long-term earnings per share growth rate of 5%, carries a Zacks Rank #1.

Stitch Fix (NASDAQ:SFIX) with a Zacks Rank #2 (Buy), has long-term earnings per share growth rate of 22.5%.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple (NASDAQ:AAPL) sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>



Urban Outfitters, Inc. (URBN): Free Stock Analysis Report

Children's Place, Inc. (The) (PLCE): Free Stock Analysis Report

Genesco Inc. (GCO): Free Stock Analysis Report

Stitch Fix, Inc. (SFIX): Free Stock Analysis Report

Original post

Zacks Investment Research

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.