Urban Outfitters Q1 profit falls 60%

Urban Outfitters reported disappointing results for its first quarter, weighed down by heavy promotional activity at its namesake and Anthropologie banners.



The company’s net income fell 60% to $11.94 million, or $0.10 per share, down from $29.56 million, or $0.25 per share, in the year-ago period. Analysts had expected the company to earn $0.16 per share,



Sales for the quarter ended April 30 edged down 0.2% to $761.2 million from $762.6 million last year. Same-store sales declined 3.1%, a bigger drop than expected, despite strong gains in online revenue. By brand, same-store sales rose 1.5% at Free People, but fell 3.1% at Urban Outfitters and 4.4% at Anthropologie Group. Comparable retail segment sales were driven by strong, double-digit growth in the direct-to-consumer channel, which were offset by negative retail store comparable net sales. Wholesale segment net sales increased 14%.



“During the first quarter we continued to see strong double-digit growth from our direct-to-consumer channel and our wholesale business," said Richard A. Hayne, CEO. “We believe we have significant opportunity to continue to grow both of these channels at all of our brands.”



Håkon Helgesen, analyst at GlobalData Retail, commented that Urban Outfitters growth in its direct to consumer channel came at the expense of stores.



“A particular issue here is that it costs Urban more to fulfill from its online operation than it does from a store, so the direct channel's cannibalization of sales is costing the company margin and hurting profits,” Helgesen said. “In our view, while general footfall challenges in some locations are causing pain, Urban's rather cluttered and confused approach to merchandising is also partly responsible for the decline of its stores. While Urban Outfitters and Anthropologie stores are not unpleasant places to shop, neither do they make the process of buying easy. The customer has to do a lot of work in finding the right product, which is one of the reasons increasing numbers are opting to buy online where sorting and filtering options make it easier to identify items of interest.”